Maximize the value of your Medicare health care dollar

In a recent survey, 1 in 3 retirees said their health care costs have been higher than originally expected. As saving money on health care may be on many people’s minds, it’s important to know the choice in Medicare coverage could play a big part in your overall cost of care.

Faced with what can be an overwhelming number of options, too often people fall victim to a premium-centered decision-making process, opting for the lowest-premium plan in their area. The problem with this approach is that it focuses on a single component of a Medicare plan — premium cost — without considering the plan’s overall value as well as its benefits. Although it may seem like the obvious choice to select a plan with the cheapest monthly premium, this could actually be more expensive in the long run. Sometimes a low monthly premium option can leave you exposed to higher out-of-pocket costs when you need care or without access to benefits and services that are important to you.

When evaluating your Medicare options, it’s imperative to look beyond the premium and focus instead on the overall value a plan provides. One of the best ways to do this is to give careful consideration to what’s important to you in a Medicare plan – as well as what isn’t. While this broader and more thoughtful approach to your decision-making process will likely take more time, it could help you save money and protect yourself from unexpected health care expenses. So ultimately, it’s time well spent.

Five questions to maximize your Medicare healthcare dollars

Not sure where to begin with this value-focused approach to your Medicare choices? The five questions below are designed to help you move beyond a plan’s premium and consider, instead, a host of other factors that contribute to a plan’s value. Whether you are thinking of switching Medicare plans or are choosing one for the first time, your answers to these questions can help you maximize your Medicare health care dollars by selecting a plan that provides the greatest value for you.

1. How much financial risk are you comfortable with?

All Medicare plan options cover some health care costs, but they vary in the amounts they cover and when they start covering those costs.

Original Medicare (Parts A and B) requires you to meet a Part A deductible ($1,484 per benefit period in 2021) before it pays hospital costs and a Part B deductible ($203 annually for most people in 2021; can be higher or lower based on income) for medical care before it pays 80% of costs for doctor visits and outpatient services, leaving you to pay the remaining 20%. Costs can add up quickly if you develop a serious illness or condition that requires multiple health care services and doctor visits or if you have an extended hospital stay (requiring a $371 copay/day for days 61-90). Original Medicare does not put a cap on how much you will pay for covered services in a given year, meaning a tough year from a health standpoint could leave you footing the bill for thousands of dollars in health care costs.

If the unpredictability of this equation leaves you uncomfortable, you’re certainly not alone. Many choose one of two options to help contain their health care costs: Medicare supplement or Medicare Advantage.

Medicare supplement plans can limit your financial risk because they help pay for some things not covered by Original Medicare, such as copays, coinsurance and deductibles. Medicare supplement plans typically have a higher monthly premium than other Medicare plan options but minimize your out-of-pocket expenses as you’ll have little or no costs when you access care.

The key takeaway: A Medicare supplement plan can offer some peace of mind by making your health care costs more predictable. One way to think about it is: If you’d rather pay more each month in a premium but have low or no costs when you need access to care, Medicare supplement might be a good choice.

What’s more, Medicare supplement plan coverage is guaranteed not to change for as long as you remain in the plan.

2. Do you want the choice of any health care provider, or are you willing to choose a doctor or hospital from within a network?

Access to affordable, quality care is an important consideration when choosing a plan. The good news is, Medicare’s many options all provide that access, but the way they do so differs in important ways that you should understand before selecting a plan.

Original Medicare and Medicare supplement allow you to visit any doctor or hospital as long as they accept Medicare patients.

If you were enrolled in an HMO or PPO plan through your employer, you’ve likely grown accustomed to the idea of a network, in which case you might be comfortable sticking with that type of plan once you enroll in Medicare. Especially, as many plans – including UnitedHealthcare’s Medicare Advantage plans, have nationwide networks. But if you want flexibility to see any provider of your choosing for your current and future health care needs, Original Medicare and a Medicare supplement plan may be the way to go.

3. Do you use prescription medications?

Perhaps one of the biggest considerations when evaluating Medicare plans is your need for prescription drug coverage. Original Medicare and Medicare supplement plans do not cover prescription drugs. For help with the cost of your medications, you may want to consider enrolling in Part D prescription drug coverage, and a Medicare supplement plan offers you the flexibility to choose a prescription drug plan that works best for you.

To protect your wallet, it’s best to enroll when you become eligible for Medicare, even if you don’t currently take many medications, as it will help you avoid premium penalties later on. There’s a good chance your health needs could change in the future. Consider, for example, that about 90% of people age 65+ take at least one drug weekly.

If you do not enroll in Part D when you first become eligible for Medicare, you will have to pay a premium penalty when you later enroll of one percent of the national base premium ($33.06 in 2021) for every month you delay enrollment. So for example, if you enroll in a Part D plan 12 months after you became eligible for Medicare, that adds up to a $4.20 penalty that would be tacked onto your monthly premium. The one exception to this rule is if you’re still working when you turn 65 and have what’s considered creditable prescription drug coverage through your job, meaning coverage that’s as good as what you could get through Medicare.

If you’re thinking about a Medicare Advantage plan, they typically include drug coverage so make sure your medications are covered – meaning they’re included on the plan’s drug list (formulary). Your costs could be significantly higher if you take a drug that’s not on your plan’s drug list. If you’re considering a Medicare supplement plan, you will have to choose a Part D plan separately, but you’ll have the flexibility to choose the best Part D plan for you from among all the available options.

4. Do you travel frequently or spend part of the year in a different state?

If you plan to travel often, look for a plan that can travel with you to extend the value of your Medicare dollar. Original Medicare and Medicare supplement plans pay for covered services provided by any doctor in the country who accepts Medicare. Keep in mind, though, that typically this coverage does not extend overseas or across the border. If you plan to travel overseas, you should know that some Medicare Advantage and Medicare supplement plans cover care for medical emergencies worldwide. And many Medicare Advantage plans offer a nationwide network for routine care anyway in the U.S.

5. Do you want to lock in your benefits for life or are you willing to shop for coverage each year if benefits and networks change?

Unlike some other Medicare plans, Medicare supplement plans don’t change benefits from year-to-year, except to keep up with increases in Medicare’s deductibles and copays, and they can’t be canceled as long as you pay your premium. With Medicare supplement, there is no need to check what’s changing with your plan each year and shop for alternatives for the following year.

When deciding on a Medicare plan, you are making a choice about the kind of coverage you want when you are confronted with a serious health issue.  If, in exchange for lower or no monthly premium, you are prepared to manage copays and possible limits on which providers you can see while you seek treatment for your illness, a Medicare Advantage plan may be the right choice for you. If you are willing to invest in coverage that’s there when you need it and minimizes your out-of-pocket costs while allowing you to use any doctor or hospital that accepts Medicare, then a Medicare supplement plan might be your forever plan.

Hopefully the process of answering these five questions has got you thinking about what matters most to you when it comes to your health and your Medicare coverage. This is the sort of thought process you should take when you’re ready to enroll in a plan.

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