Why the Medicare Open Enrollment Period is a Great Time to Check on your Financial Health

If you’ve been watching TV, listening to the radio or even scrolling through social media lately, you may have noticed that we’re in the midst of the annual Medicare Open Enrollment Period, which runs until December 7. This is the period where you can alter your Medicare coverage, and any changes you decide to make during this time will go into effect on January 1, 2019.

Now, you might be thinking to yourself, “Why is a wealth advisor bringing up Medicare to me?” If you’re not already aware, healthcare planning is a big factor in retirement planning.  According to a recent study done by Fidelity, an average retired couple age 65 in 2018 may need approximately $280,000 saved (after tax) to cover healthcare expenses in retirement. And unfortunately, fewer and fewer people today have access to employer-sponsored healthcare benefits after they retire. A Kaiser Family Foundation study reports a significant drop in the share of large employers (200+ workers) offering retiree health coverage, from 66 percent in 1988 to 23 percent in 2015. This means that more people will need to fund their own healthcare costs from their savings after they stop working.

The good news is that Medicare, the federal health insurance program for individuals 65 and older, covers many healthcare costs after retirement. The bad news is that it doesn’t cover everything, and without careful planning, retirees may be left with significant out-of-pocket medical expenses.

As a reminder, here are the different parts of Medicare available and the services they cover.

Medicare Part A (Hospital Insurance) covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home healthcare.

Medicare Part B (Medical Insurance) covers certain doctors’ services, outpatient care, medical supplies, and preventive services.

Medicare Part C (Medicare Advantage Plan) private insurance plans approved by Medicare that cover everything in Parts A and B and sometimes additional services such as vision and dental.

Medicare Part D (Medicare Prescription Drug Plan) adds prescription drug coverage to Medicare plans.

Signing up for Medicare for the first time can be a daunting task. Individuals need to decide on a combination of coverages that best suit their individual needs and financial situation. Thankfully, there are a lot of resources out there from organizations like AARP with in-depth information on Medicare and a healthcare cost calculator to help estimate individual expenses. You should also consult with an experienced wealth advisor to discuss your options and how they may impact your retirement funds.

One of the good things about Medicare is that every year, recipients have the opportunity during the Medicare Open Enrollment Period to change their coverage options to better meet their health and financial needs. There are several financial factors that should prompt Medicare recipients to take a look at their current plans and to consider making changes.

Insurance Companies Make Changes to Medicare Parts C and D

One of the main reasons Medicare recipients have the ability to make changes to their plans, is insurance companies make cost, benefit and service area changes to their Medicare Advantage Plans and Part D coverage every year. Medicare requires insurance companies to send enrollees an Annual Notice of Change each fall. It’s important that you take some time to review this to see if your costs (such as premiums, deductibles, and copays) will be going up, or if one of your essential prescriptions is no longer covered, resulting in an increase in out-of-pocket costs.

Deciding if Your Plan Fits Your Current Needs

Medical needs change, especially as you get older. If you are a younger, fairly healthy Medicare-recipient, a basic Medicare Advantage plan might be the right option for you so you’re not stuck paying for benefits you’re not using. As you get older or if your health starts to decline, you may need a plan with more comprehensive coverage. This can result in larger up-front premiums, but you should benefit from less out-of-pocket costs in the long run.

Your Employment Status Has Recently Changed

Almost 20% of Americans over the age of 65 report being employed full-time or part-time. This allows millions of Medicare-eligible workers to benefit from employer coverage as well as Medicare coverage. If you’ll be losing your employer’s healthcare plan after your retirement date, you’re eligible for a Special Enrollment Period for two full months after your current coverage ends, during which time you can join a Medicare Advantage Plan or Medicare Part D Plan. It’s important to keep your changing financial situation in consideration when deciding on which plan is right for you and what you might be able to afford after retirement.  But we can’t all get it right the first time. So, if you’ve misjudged your available funds or your situation has changed significantly after the SEP period, the Medicare Open Enrollment Period allows you to make any necessary changes to your current coverage.

The important thing to remember is you’re not alone in your retirement healthcare planning. In addition to the numerous educational resources available to you, guidance from an experienced wealth advisor can help ensure that your healthcare costs in retirement match up with your overall long-term financial goals.

If you have any questions about healthcare planning and Medicare, please feel free to reach out to me at [email protected].