For the millions turning 65 this year, here’s what to know about navigating Medicare
Enrollment in the retiree health plan is generally required at 65, with some exceptions. Here are some basics to know.
When Bill Saiff, 65, a management consultant in Washington, D.C., was nearing his milestone birthday in December, the anxiety over what he needed to do about signing up for Medicare was palpable.
“Medicare is so unnecessarily difficult,” he told Yahoo Finance. “My health insurance coverage is through my spouse's employer, and it offers a much better medical plan for now, so staying on her plan is a better deal for me than Medicare, but the confusion over what to do was frustrating.”
Saiff’s scenario — including his confusion — is prevalent. And with 4.1 million Americans turning 65 this year — a record number — the decision is front and center in many households.
“The transition from employer-sponsored health insurance to Medicare is really complicated and actually can be kind of treacherous,” said Mark Miller, a retirement expert and author of "Retirement Reboot: Commonsense Financial Strategies for Getting Back on Track." “Same if you’re transitioning from an Affordable Care Act plan to Medicare.”
“Medicare is my poster child for complexity in the retirement system,” Miller said. “Bar none, it’s the most complicated.”
Medicare enrollment basics
Medicare coverage begins for most Americans at 65 who are not actively covered by an employer-provided healthcare plan. The initial enrollment period is the three months before, the month of, and the three months after your 65th birthday.
Miss your sign-up and you start racking up late enrollment penalties and risk gaps in coverage.
The timing of your enrollment involves a host of factors, including whether you’re currently receiving Social Security benefits, whether you're still working and are actively covered by an employer’s plan, or whether you have coverage under your spouse’s plan, as Saiff does, and whether that insurance is required to pay claims for people who are eligible for Medicare, but not enrolled.
“Medicare provides great insurance, but it's not a ‘one-size-fits-all’ program,” Philip Moeller, a Medicare and Social Security expert and principal author of the "Get What’s Yours" book series, told Yahoo Finance.
There are exceptions to the mandatory sign-up period.
For example, if you're still working at 65, you could opt to stay on your employer’s (or your spouse’s employer’s) health insurance past age 65, as Saiff did. But you’ll need proof that you were covered when you enroll in Medicare later to avoid late enrollment penalties. Moreover, if you work for an employer with 20 or fewer employees, you must enroll in Medicare at 65.
Bottom line: Unless you are still working with employer health coverage or are covered under your spouse’s, you likely need to enroll at 65.
You also need to decide whether to enroll in traditional Medicare or Medicare Advantage, the all-in-one managed-care alternative to the traditional program that is offered by health insurance companies.
If you enroll in an Advantage plan, it’s difficult to transition back to traditional Medicare, which I will get to shortly.
How it works
Medicare has three parts that cover the essentials. Part A covers inpatient hospitalizations, skilled nursing facility services, and home health and hospice care. Part B covers preventive services, outpatient hospital and physician services, and drugs administered by doctors. Part D covers prescription drugs that you take on your own.
“Traditional Medicare has more moving parts to it, but it is the gold standard from the standpoint of the widest possible access to healthcare providers and the minimum of bureaucratic hassle from middlemen insurance companies,” Miller said.
However, if you pick traditional Medicare over Medicare Advantage, you’ll need to purchase supplemental coverage to protect from potentially high out-of-pocket costs.
Known as Medigap, these are health insurance policies sold by private insurance companies that pay part or all of certain leftover costs after Medicare pays. They can cover outstanding deductibles, coinsurance, and copayments, and may also cover healthcare costs that Medicare does not cover at all, like medical care received when traveling out of the US.
With Medicare Advantage, you agree to see health providers in the insurer’s network. Advantage plans typically combine Part A and B services and often Part D prescription drugs. These plans must cover all the services covered under traditional Medicare, but what attracts many seniors is that many offer extras, such as dental, vision, or hearing coverage. Most also include prescription drug coverage or health club memberships.
Retirees who receive health insurance benefits from former employers are typically automatically enrolled in Medicare Advantage plans. These plans often offer more extensive networks of physicians than a typical Medicare Advantage plan.
Traditional Medicare has no restrictions on the doctors who care for you.
Comparing costs
People with traditional Medicare generally pay a monthly premium for physician coverage, Part B, and for whatever prescription drug plan they choose. Some people also pay a monthly premium for inpatient hospital coverage, Part A.
Each year the Part B premium, deductible, and coinsurance rates are reset. For 2024, the standard monthly premium for Medicare Part B is $174.70. Part B premiums typically are deducted from monthly Social Security benefits. The annual deductible for all Medicare Part B beneficiaries is $240 this year.
If your income is above a certain amount — $103,000 for individuals and $206,000 for couples — you may owe extra premium amounts for Part B and Part D.
Medicare Advantage is typically cheaper because you won’t be paying for separate Medigap supplemental coverage, and you might not need a separate prescription drug plan. But you will face managed care networks that limit your choice of providers and make you struggle to get prior authorization for some procedures and treatments, and possibly be denied care.
“What trips up our clients is they went for a Medicare Advantage plan with a gym membership and the dental and the vision, and who knows what at 65,” Melinda Caughill, co-founder of the Medicare advice website 65 Incorporated, told Yahoo Finance. “Now, at 75 they have cancer, and they want to be able to pick their doctors.”
Changing plans after initial enrollment
If you join a Medicare Advantage plan during your initial enrollment period, you can change to another Medicare Advantage plan or go to traditional Medicare within the first three months.
The federal government also offers two enrollment periods every year for switching plans. Medicare Advantage enrollees can switch plans or transfer to traditional Medicare during the open enrollment period from Jan. 1 to March 31. To switch from the original Medicare to a Medicare Advantage plan, the enrollment period runs from Oct. 15 through Dec. 7.
About half of Medicare Advantage beneficiaries jumped ship from the plan they initially enrolled in after five years, according to a study published in the JAMA Health Forum.
That’s most likely due to standalone access to healthcare providers, especially specialists not included in the initial network.
The problem for people who want to switch from Medicare Advantage to traditional Medicare is that in most states, the time to buy a Medigap policy is when you first sign up for Medicare Part B.
“That's because Medicare does not permit Medigap plans from rejecting you or charging a higher premium because of a pre-existing condition,” Miller said.
After the initial sign-up period, however, Medigap plans in most states can flat-out reject you if you have a pre-existing condition, such as diabetes. The exceptions are New York, Connecticut, Maine, and Massachusetts.
Getting help
The sheer number of Medicare and Medicare Advantage plan choices can be overwhelming. The average Medicare beneficiary has a choice of close to 60 Medicare plans with Part D drug coverage in 2024, including 21 Medicare standalone drug plans and 36 Medicare Advantage drug plans, according to KFF.
The State Health Insurance Assistance Program network (SHIP) provides one-on-one counseling in every state. You can find your local SHIP here.
The Medicare Rights Center offers a free consumer helpline: (800-333-4114.) You can also contact Medicare directly at 800-633-4227 to find Medicare Advantage and Part D Plans in your area and to enroll directly.
Medicare’s online searchable Plan Finder on the Medicare.gov site allows you to review Medicare plan options.
“Health care is one of the most significant expenses in retirement,” Miller said, “and making smart choices about your Medicare enrollment can help avoid the penalties and costs that arise from the misunderstandings about when to sign up if you don’t have active employer coverage.”
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on X @kerryhannon.
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