Nov 3, 2016 4 min read

Every year at this time, 55 million Americans who are enrolled in Medicare make their choices for the following year. This annual enrollment period is every year between Oct. 15 and Dec. 7. Choices take effect on Jan. 1. Medicare is the government health plan for people 65 and older. Everyone must join when reaching this age unless they or their spouse are still working and covered by a creditable employer plan with 20 or more employees.

When you first reach 65, you have an initial enrollment period of three months before your birthday until three months after it. If you are over 65 and have been covered by an employer’s plan, you get a special enrollment period when you lose that coverage.

Many people think that Medicare covers all of a senior’s health care costs, but this isn’t true. While it is the centerpiece of retirees’ health care coverage, Medicare is an 80/20 plan with lots of other costs. Because of this, most recipients have some kind of supplement. There are two major types: Medigap plans and Advantage plans.

With Medigap, you have private insurance that fills in the gaps that Medicare does not cover. There are different levels of plans that are identified by a letter of the alphabet. All plans with the same letter must provide the same services, but prices can vary from company to company. Medigap plans do not cover prescription drugs. You would need to purchase a separate Part D plan for this coverage. Any doctor who accepts Medicare and is accepting new patients will take you insurance.

While there is no health underwriting during the first six months that you are eligible for coverage, there could be later for Medigap policies. Take this into consideration when making your choice.

Advantage plans have a network of providers from which to choose. Some networks stretch throughout most of the country. Whatever type of plan you have, you can always go to any doctor in an emergency. Advantage plans usually have lower premiums and offer additional benefits such as gym memberships. Many offer prescription coverage. They do tend to have more co-pays than Medigap. You would never own both a Medigap and Advantage plan at the same time.

While this has been a quick overview of Medicare, there some major considerations you must make in choosing a plan.

One of the biggest goals is to avoid mistakes when making next year’s selections, and that means paying attention to details.

Sometimes plans are discontinued by insurance companies. Even if a plan is still available in the new year, there could be other changes such as which doctors are covered and what drugs are available. Formularies, which refer to a drug’s cost, can change from year to year. This could mean incurring a big cost if one of your medicines is no longer included. There is a list of what is covered that you should study when making your choices.

You also need to compare costs for your policy. Sometimes higher cost policies do not offer differences big enough to warrant the extra expense. Different insurance companies charge different prices for the same coverage. If you are healthy and do not travel out of the area much, you best policy choice may be different than someone who expects to do a lot of travelling, or is not as healthy. Remember, if you are planning to travel out of the country, you may need a short-term policy since Medicare only covers you in the U.S. and its territories.

Medicare is vital to many seniors. Do your homework and study your options. If you have elderly parents, check to make sure they are making the best choices for their situation.

Gary Boatman is a Monessen-based certified financial planner. He is the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

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