Charting the Medicare Enrollment Maze

Those born in 1950 will turn age 65 next year. Confusion often reigns as these so-called “seasoned boomers” navigate various enrollment periods for Medicare and a plethora of choices. Let’s chart this maze.

People sometimes confuse rules for receiving full Social Security benefits, called “full retirement age” or FRA (you can get reduced benefits starting at 62), with Medicare sign-up periods. For those born between 1943 and 1954 FRA is 66. For those born in 1950 your FRA is still 66, but at 65 you encounter the Medicare Initial Enrollment Period (IEP), your first opportunity to enroll in Medicare parts A (hospital care) and B (other medical services like doctor visits).

Heads up babes of 1950! Except for those medically disabled prior to 65, the IEP begins three months before your 65th birthday and ends three months after your 65th birthday. Those born early in 1950 need to start planning shortly. Failure to enroll on time or follow rules may result in lifelong financial penalties.

Don’t confuse the IEP with the Open Enrollment Period (OEP), which is from Oct. 15 to Dec. 7 each year. During it, you may enroll in a Medicare Advantage plan – where private insurers cover your Medicare services and sometimes provide extra features – for the first time or change your existing plan, or change your Medicare Part D prescription drug plan.

You, if 65 or over, or you if your aging parents have designated you as the go-to child to help them with the challenges of aging, have noticed a bombardment of ads touting health-care plans. Always review your current plan as contracts and drug formularies change every year.

Plans with comparable features can have different costs. Just because a plan is blessed by a senior citizens organization does not mean it is best for you. It pays to shop. Financial planners who offer comprehensive consulting services maintain relationships with local and national resources, such as www.GoodCare.com, designed to help seniors and their caregiving children navigate the healthcare maze.

There is the Special Enrollment Period (SEP), which allows those covered under a group health plan, offered by an employer or union, to sign up for Medicare Parts A and B anytime, if they were not required to sign up during the IEP.

But there is a flag on that play. The group health plan must cover 20 or more employees. So if you are covered under a small business plan with less than 20 members, you would sign up for Medicare Part A during the IEP. There is no premium charged for Part A. However, Part A coverage would be secondary to your primary coverage under the employer plan. When you finally retire, you could sign up for Part B or other plans, providing proof of employer coverage up to that point.

There are Special Enrollment Periods for a person who moves from one service area to a new location and who needs to change plans. You move mom from Kansas to be closer to your home; her plan will need to change. Moving in or out of a nursing home may necessitate a change in coverage.

Those that did not enroll during the IEP, may do so during the General Enrollment Period (GEP) between Jan. 1 and March 31 for coverage effective on July 1 of the same year. These late enrollees get hit with financial penalties. Then there is the Medicare Advantage Disenrollment Period (MADP) from Jan. 1 to Feb. 14 each year that allows one to opt out of a Medicare Advantage Plan. A person could then enroll in a Part D drug plan during the MADP, and possibly a Medigap plan as well.

The open enrollment period for Medigap – a private plan that takes care of areas that Medicare doesn’t cover, like co-pays or deductibles – begins the month one turns 65 and runs for six months. During this time, people can buy a Medigap plan available in their state without medical underwriting.

Note that Medicare coverage is not simple, nor is it free. A couple with some ordinary health challenges, such as high blood pressure or diabetes, can easily spend $13,000 a year in premiums, co-pays and deductibles. Plus, you can pay out of pocket by entering the “donut hole” in prescription drug eligibility. That’s a temporary coverage gap when you have paid $2,850 for drugs. There is a host of items not covered by Medicare, including long-term care, as in a nursing home, for instance.

Health-care planning is a key component of retirement security. Good advice about it is one of your better investments.

Follow AdviceIQ on Twitter at @adviceiq

Written by Lewis Walker, CFP, who is president of Walker Capital Management, LCC in Peachtree Corners, Ga. Securities and certain advisory services offered through The Strategic Financial Alliance Inc. (SFA). Lewis Walker is a registered representative of The SFA, which is otherwise unaffiliated with Walker Capital Management. 770-441-2603. lewisw@theinvestmentcoach.com.

AdviceIQ delivers quality personal finance articles by both financial advisors and AdviceIQ editors. It ranks advisors in your area by specialty, including small businesses, doctors and clients of modest means, for example. Those with the biggest number of clients in a given specialty rank the highest. AdviceIQ also vets ranked advisors so only those with pristine regulatory histories can participate. AdviceIQ was launched Jan. 9, 2012, by veteran Wall Street executives, editors and technologists. Right now, investors may see many advisor rankings, although in some areas only a few are ranked. Check back often as thousands of advisors are undergoing AdviceIQ screening. New advisors appear in rankings daily.