Fee-Only Financial Advisor Rhode Island – Eliot Rose Wealth Management

Enrolling in Medicare – What You Should Know

Last updated 12/20/2023 • By Jason Siperstein, CFA, CFP®, RMA®

What to Know about Enrolling in Medicare

Every single day until 2030, roughly 10,000 baby boomers are hitting the big “6-5” milestone. While this is a cause for celebration, it’s also a reminder to start exploring your Medicare options 😉

As you may know, Medicare serves as the federal health insurance program designed for individuals 65 and older. This foundational coverage, overseen by the federal government, has two parts:

Part A: covers inpatient hospital stays, skilled nursing, and hospice. If you paid Medicare taxes while working (like most people), Part A is premium-free. In other words, you do not have to pay for this coverage.

Part B: covers doctor’s services, outpatient care, medical supplies, and preventative services. Everyone will pay a premium, but the premium that you pay is adjusted based on your income. If you make less, you pay less and if you make more, you pay more.

Every single day until 2030, roughly 10,000 baby boomers are hitting the big “6-5” milestone. While this is a cause for celebration, it’s also a reminder to start exploring your Medicare options 😉

As you may know, Medicare serves as the federal health insurance program designed for individuals 65 and older. This foundational coverage, overseen by the federal government, has two parts:

Part A: covers inpatient hospital stays, skilled nursing, and hospice. If you paid Medicare taxes while working (like most people), Part A is premium-free. In other words, you do not have to pay for this coverage.

Part B: covers doctor’s services, outpatient care, medical supplies, and preventative services. Everyone will pay a premium, but the premium that you pay is adjusted based on your income. If you make less, you pay less and if you make more, you pay more.

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OUR TAKE: The cost for Part B is based on your IRS tax return from 2 years ago. If your income has gone down due to retirement (or other qualifying events), be sure to file Form 44. This is how you request a reduction in Part B premiums.

Medicare Parts A and Part B provide good basic coverage, but they only pay about 80% of approved costs for hospitals, doctors, and medical procedures. They do not cover prescription drug costs. To fill in the gaps, you need to sign up for either a Supplemental Plan or Advantage Plan. You cannot have both.

Supplemental Plans: These plans provide coverage *on top of* Medicare. A supplemental plan is typically the more expensive option. However, you get a lot of benefits – you are covered for any hospital or doctor in the U.S. that accepts Medicare. The cost of your Supplemental premium depends on the plan you choose, but typically ranges between $50 – $250 per month.

If you chose a Supplemental Plan, you also need to get and pay for Part D to cover prescription drugs, shots, and vaccines. To get this coverage, you must join a Medicare-approved plan in addition to your Supplemental Plan. Part D plans vary in cost and the specific drugs that are covered.

Most Supplemental Plans pay 100% of your Part A and Part B coinsurance. In other words, you do not need to pay a copay when you need care. 

Lastly, there is the “out-of-pocket maximum” (OOP) consideration. Once you reach your plan’s maximum OOP limit, your plan will cover 100% of your approved Medicare healthcare costs for the remainder of the calendar year. Most Supplemental Plans do not have OOP limits because they are unnecessary due to the benefits they provide. 

If you value flexibility and predictability, a Supplemental Plan may be right for you. You can see covered doctors across state lines, and you pay a very predictable premium. They are typically a good fit for snowbirds.

Advantage Plans: While you will still have Medicare, Advantage Plans typically *replace coverage.* In an Advantage Plan, you generally need to see doctors in your network and pay more to get care outside of the plan’s network. However, nearly all Advantage Plans include Part D prescription coverage (at no cost), and most Advantage Plans are premium-free plans (you pay no premiums).

Advantage Plans, unlike Supplemental Plans, require a small copay, which could be $5 for primary care visits, $25 for specialist care, and $50 for urgent and emergency room visits.

All Advantage Plans have OOP limits with the maximum being $8,850 for 2024.

If you value cost savings and generally stay local, an Advantage Plan may be right for you.

Advantage Plans: While you will still have Medicare, Advantage Plans typically *replace coverage.* In an Advantage Plan, you generally need to see doctors in your network and pay more to get care outside of the plan’s network. However, nearly all Advantage Plans include Part D prescription coverage (at no cost), and most Advantage Plans are premium-free plans (you pay no premiums).

Advantage Plans, unlike Supplemental Plans, require a small copay, which could be $5 for primary care visits, $25 for specialist care, and $50 for urgent and emergency room visits.

All Advantage Plans have OOP limits with the maximum being $8,850 for 2024.

If you value cost savings and generally stay local, an Advantage Plan may be right for you.

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OUR TAKE: Even after you decide if a Supplemental Plan or Advantage Plan is right for you, you need to choose among 12 Supplemental Plans or around 30 Advantage Plans (It varies state by state. In 2023, Rhode Island offered 39 different Advantage Plans!). 

When you are ready to sign up for Medicare, don’t be late because if you miss key deadlines, you may face gaps in coverage and face financial penalties that last your entire life.

Your first chance to sign-up is called your Initial Enrollment Period (IEP). It lasts for 7 months, starting 3 months before you turn 65, and ending 3 months after you turn 65. There are certain situations where you can sign up later without paying any late penalties. This is know as the Special Enrollment Period (SEP)and it lasts for 8-months.  You will typically qualify for a SEP if you have group health plan coverage through your employer or if your spouse covers you through their employer. It is important to understand that your 8-month SEP starts when you stop working NOT when COBRA ends. Also, if your employer has fewer than 20 employees you may NOT qualify for a SEP.

To learn more, the Medicare website is a great starting point and wealth of information. If you are thinking about how Medicare can fit into your overall plan, we are happy to chat. Congratulation on this next chapter and good luck!

By Jason Siperstein, CFA, CFP®, RMA®

Jason Siperstein is a fee-only financial planner that specializes in retirement planning. He is based in Rhode Island and serves clients locally and across the country. Jason is called on by local and national news to share his insights.

Enrolling in Medicare

Turning 65? You are not alone…about 10,000 Americans are turning 65 every day between now and 2030. In addition to celebrating this important milestone, I would encourage you to start (if you haven’t already) thinking about Medicare.

In short, Medicare is the federal health insurance program for people who are 65 and older. Within Medicare, there is something called Original Medicare. This is coverage that is managed by the federal government and includes Parts A and B.

  • Part A covers inpatient hospital stays, skilled nursing, and hospice. If you paid Medicare taxes while working (like most people), Part A is premium-free. In other words, you do not have to pay for this coverage.
  • Part B covers doctor’s services, outpatient care, medical supplies, and preventative services. Everyone will pay a premium, but the premium that you pay is adjusted based on your income. If you make less, you pay less and if you make more, you pay more.

[chat-owl text=’OUR TAKE: The cost for Part B is based on your IRS tax return from 2 years ago. If your income has gone down due to retirement (or other qualifying events), be sure to file Form 44. This is how you request a reduction in Part B premiums.’]

Original Medicare (Parts A and B) provides good basic coverage, but it only pays about 80% of approved costs for hospitals, doctors, and medical procedures. It also does not include prescription drug costs.

There are two ways to fill in the gaps in coverage. You sign up for either a Supplemental Plan or Advantage Plan. You cannot have both.

  • Supplemental Plans complement Original Medicare coverage. In other words, they provide coverage on top of Original Medicare.
  • Advantage Plans (often referred to as Part C) provide the majority of Original Medicare coverage. That being said, you will still have Original Medicare and pay for Part B, but you’ll get the majority of your coverage from your Medicare Advantage Plan. Advantage Plans are also known as Medicare Replacement Plans.

[chat-owl text=’OUR TAKE: Medicare is complicated! Even after your decide if a Supplemental Plan or Advantage Plan is right for you, you need to choose among 12 Supplemental Plans or around 30 Advantage Plans (it varies state by state). We advise many of our client to schedule time with Doctors Choice. They are experts in Medicare and can walk through the many options to find the path that is best for you.’]

A Supplemental Plan is typically the more expensive option. However, you get a lot of benefits – you are covered for any hospital or doctor in the U.S. that accepts Medicare. The cost of your Supplemental premium depends on the plan you choose, but typically ranges between $50 – $250 per month.

If you chose a Supplemental Plan, you also need to get and pay for Part D to cover prescription drugs, shots, and vaccines. To get this coverage, you must join a Medicare-approved plan in addition to your Supplemental Plan. Unlike Parts A and B, Part D plans varies in cost and specific drugs that are covered.

In an Advantage Plan, you generally need to see doctors in your network and pay more to get care outside of the plan’s network. However, nearly all Advantage Plans include Part D prescription coverage (at no cost), and most Advantage Plans are premium-free plans (you pay no premiums).

Most Supplemental Plans pay for 100% of your Part A and Part B coinsurance. In other words, you do not need to pay a copay when you need care. Advantage Plans, on the other hand, require a small copay, which could be $5 for primary care visits, $25 for specialist care, and $50 for urgent and emergency room visits.

Lastly, there is the “out-of-pocket maximum” (OOP) consideration. Once you reach your plan’s maximum OOP limit, your plan will cover 100% of your approved Medicare healthcare costs for the remainder of the calendar year. Most Supplemental Plans do not have OOP limits because it is unnecessary due to the benefits they provide. On the other hand, all Advantage Plans have limits with the maximum being $8,300 for 2023.

[chat-owl text=’OUR TAKE: If you value flexibility and predictability, a Supplemental Plan may be right for you. You can see covered doctors across state lines and you pay a very predictable premium. If you value cost savings and generally stay local, an Advantage Plan may be right for you.’]

When you are ready to sign up for Medicare, don’t be late because if you miss key deadlines, you may face gaps in coverage and financial penalties that last your entire life.

  • Your first chance to sign-up is called your Initial Enrollment Period (IEP). It lasts for 7 months, starting 3 months before you turn 65, and ending 3 months after you turn 65.
  • There are certain situations where you can sign up later without paying any late penalties. This is know as the Special Enrollment Period (SEP) and it lasts for 8-months.  You will typically qualify for a SEP if you have group health plan coverage through your employer or if your spouse covers you through their employer. It is important to understand that your 8-month SEP starts when you stop working NOT when COBRA ends. Also, if your employer has fewer than 20 employees you will NOT qualify for a SEP.

To learn more, the Medicare website is a great starting point and wealth of information. If you are thinking about how Medicare can fit into your overall plan, we are happy to chat. Congratulation on this next chapter and good luck!

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