Financial planning perspectives
October 18, 2022
Signing up for Medicare, the government’s health insurance program, can seem daunting. Rather than wading directly into a comparison of insurance options, a good place to start is by considering what most matters to you in terms of coverage.
Deciding what you want out of your health insurance coverage is the first of three important steps you can take in the Medicare enrollment process, according to recently updated Vanguard research. This can strengthen both your financial and emotional well-being.
Some people may be focused on overall affordability over their lifetime. Others may seek more flexibility in medical provider networks, geographical availability, or access to specialists. And some may want to prepare for worst-case scenarios or limit their maximum medical costs. Others may prioritize cost predictability; that is, not being surprised by medical bills.
Going through this prioritization exercise will help you understand the trade-offs you’re comfortable with and determine what you’re willing to pay for. Once you’ve done so, it’s time to evaluate the available plan options and start shopping for your policy.
For most Medicare enrollees, the choice will come down to either a Medicare Advantage plan (also known as Part C) or Traditional Medicare (Parts A and B) combined with a separate Part D plan (prescription drug coverage) and a Medigap policy.
Medicare Advantage plans are offered by private insurers, which provide Traditional Medicare coverage bundled with other services such as prescription drug, dental, and vision coverage, or even things such as gym memberships. Medicare Advantage plans are generally the most affordable options over a lifetime, but they come at the expense of flexibility, because they require you to conform to the limitations of a particular health network and may require preapprovals for certain treatments. It can also be difficult to navigate the system of copayments and coinsurance, which may cost you more if you experience a worst-case health scenario.
Those who are willing to spend a bit more—or are in poor health—may prefer Traditional Medicare with separate Part D and Medigap policies from private insurers. This combination will tend to offer the most comprehensive medical coverage and the flexibility to see any doctor that takes Medicare, anywhere in the country, without preapprovals. However, it generally won’t cover vision, dental, and hearing services, which may be offered by a Medicare Advantage plan.
The final step is shopping for the specific policy that fits with your priorities. Keeping some other important points in mind will also help you reach a decision:
Each year from October 15 through December 7, Medicare has an open enrollment period for current enrollees. This period enables you to review your coverage and decide whether it’s still aligned with your health care priorities.
For more details about Medicare options and other enrollment information, read To B or not to B: Making sense of Medicare’s alphabet soup.
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