By Janet Bodnar, Kiplinger Personal Finance
The likelihood that high-income recipients will see a major hike in their Part B premiums in 2016 is adding to the general angst and confusion that often goes along with enrolling in Medicare. Contributing editor Kim Lankford, our insurance specialist and author of our Ask Kim column, says she gets “tons” of mail from readers who often ask basic Medicare questions, beginning with whether to sign up or not.
For example, California reader Leland Sheppard enrolled in Medicare because he was eligible and out of work. Now he’s employed again and wants to switch to his employer’s plan. His concern: If he drops out of Medicare now, will he be able to re-enroll in the future? The answer: Yes, but he may have difficulty signing up for a Medigap plan.
People who are still working often want to know whether they can delay signing up for Medicare so that they can continue contributing to a health savings account. The answer: Yes, as long as their employer has 20 or more employees and they’re not taking Social Security benefits.
Once they do sign up, questions arise about how to fill the gaps that Medicare doesn’t cover. You have a choice between buying a Medigap policy along with Medicare Part D for prescription drugs, or signing up for a Medicare Advantage plan, which may be less expensive but limits you to its provider network. The key is to compare the cost of policies in your area with the type of medical expenses you have and anticipate having in the future. Prescription-drug coverage in particular can vary a lot, says Lankford, so “it’s important to look not just at premiums but at out-of-pocket costs as well.”
Readers are also concerned about paying the high-income surcharge, which in 2015 kicks in for single enrollees earning more than $85,000 and married enrollees filing taxes jointly and earning more than $170,000. Lankford points out that you don’t have to be super-rich to be hit with a surcharge if you’re on Medicare but are still working.
Once the sign-up and payment issues are resolved, recipients often run into billing snafus. That’s why it’s important to make sure that claims are filed with both Medicare and your supplemental policy or your former employer’s retiree health plan. “You have to coordinate all your plans before you get the final bill,” says Lankford.
Coverage issues aside, the 800-pound gorilla with regard to Medicare is how the system is going to be put on a sound financial footing to avoid going broke. Proposals are all over the map. To control costs, Medicare is testing “bundled care” programs that give providers a set amount of money to provide all the services needed to treat a specific condition. If it costs more to treat a patient than the agreed-upon amount, providers absorb the extra costs; if it costs less, providers benefit from the savings. Such a system raises concerns that providers might skimp on care or cherry-pick healthy patients.
On the patients’ side are proposals to offer more high-deductible Medigap plans, allow Medicare recipients to contribute to health savings accounts, and gradually replace the current system by giving future Medicare recipients vouchers with which to purchase their own insurance. One suggestion is to slowly raise Medicare’s eligibility age from the current 65 to 67. That might not be as big a deal as it first appears, especially because the age for full Social Security eligibility is also rising to 67. In fact, says Lankford, because 66 is the current age for full Social Security benefits, some people simply forget to sign up for Medicare at 65.