A Guide to Medicare Open Enrollment: Coming Soon!

With average life expectancy in the U.S. reaching nearly 80 years, the right healthcare coverage is crucial for Americans wanting to maintain quality of life. However, healthcare costs are difficult to predict, increasing at a rate well beyond inflation, and often one of the biggest financial expenditures for those over 65. Managing the uncertainties around healthcare and its costs is a key component of financial planning for older Americans.

Medicare plays a significant role in healthcare planning for Americans by providing health insurance coverage for those over 65 and becomes a vital component of ongoing financial planning. Navigating the complexities of Medicare, however, can be daunting. Utilizing tools such as Healthpilot can help simplify the process of identifying the proper Medicare plans for your personal situation and planning needs.

Understanding the various Medicare plan options, open enrollment process, and the associated costs requires knowledge and the right guidance. We’ll share comprehensive insights into Medicare open enrollment to help you make informed decisions tailored to your healthcare and financial planning needs.

Medicare Basics

Medicare, the federal health insurance program in the United States, is designed for individuals 65 and older, as well as younger individuals with certain disabilities and medical conditions. Individuals approaching age 65 have a seven-month initial enrollment period (IEP) that begins three months before they turn 65. Individuals who remain working and receive health insurance through an employer or a spouse’s employer have the opportunity to enroll in Medicare when they leave the employer plan during a special enrollment period. Regardless of how you initially enroll in Medicare, beneficiaries have the opportunity annually to review and update selections during Medicare Open Enrollment.

The Structure of Medicare

Selecting Medicare coverage should be tailored to your specific healthcare needs but should also take into account financial objectives as well, since it can ultimately impact retirement spending, income strategies and tax implications.

Selecting the appropriate coverage begins with understanding the various parts of Medicare, each with its own premiums, deductibles, copayments, and coverage limits, and how they fit together to address your specific goals.

For more information about Medicare coverage options and providers, you can explore the official government site medicare.gov.

What is Medicare Open Enrollment?

Medicare open enrollment is an annual period when current Medicare beneficiaries can make changes to their Medicare plans. This period runs from October 15 to December 7 each year. During this time, beneficiaries can:

• Switch from Original Medicare to a Medicare Advantage plan or vice versa.
• Change from one Medicare Advantage plan to another.
• Enroll in, switch, or drop a Medicare Part D prescription drug plan

Medicare open enrollment allows you to adapt your healthcare coverage to align with any changes in your health status, prescription drug needs, or financial situation. Understanding these options is vital, as the choices made during open enrollment can significantly impact your healthcare and financial well-being for the upcoming year.

Open Enrollment Key Dates and Deadlines: Make sure you’re ready

There are several critical deadlines to ensure Medicare coverage.

• October 15 - December 7: Medicare Open Enrollment Period. This is the window to make changes to your Medicare coverage.
• January 1: Coverage begins for any changes made during the open enrollment period.
• January 1 - March 31: Medicare Advantage Open Enrollment Period. If you're enrolled in a Medicare Advantage plan, you can switch to another Medicare Advantage plan or return to Original Medicare.
  
  

It’s important to review and compare your current plan’s benefits, costs, and coverage options well before October 15. The Annual Notice of Change (ANOC), delivered each September, outlines any changes to your current plan for the upcoming year, providing a starting point for your evaluation.

It is also important to note for individuals who are approaching age 65 for the first time that the Medicare Initial Enrollment period is a 7-month period that begins 3 months before the month you turn 65. It is important to sign up for Medicare during the initial enrollment period to avoid any late enrollment penalties or delayed coverage. 

Four Steps to Prepare for Open Enrollment

Medicare open enrollment is a prime opportunity to carefully consider your individual healthcare needs, financial circumstances, and preferences.

1. Review Your Current Coverage

Assess your current healthcare needs and how well your current plan, assuming you already participate in Medicare, meets them. Check the Annual Notice of Change (ANOC) to see any changes in costs or coverage for your current plan. Make a list of your current healthcare providers, medications, and any upcoming procedures or treatments to ensure your new plan covers these essentials.

2. Compare Plans

Medicare coverage options and the associated costs can be very confusing. Many individuals prior to enrolling in Medicare believe that the cost of Medicare coverage will be free. It is important to understand that Medicare coverage can have significant costs that can impact your retirement budget. Finding a trustworthy source to provide advice and guidance may be useful as you compare different coverage options and plans. Consider using a resource like Healthpilot to compare coverage options, costs, and provider networks. Look for plans that offer the best balance of premium costs, out-of-pocket expenses, and coverage for your specific health needs.

3. Consider Your Prescription Drugs

Ensure that your medications are covered under any new plan you consider. Review the formulary, which is the list of prescription drugs covered by a prescription drug plan, of the Medicare Part D or Medicare Advantage plan.

Prescription drug coverage varies significantly between plans, so it’s essential to ensure your medications are covered. Check for any restrictions such as prior authorization, quantity limits, or step therapy requirements that could affect your access to medications.

4. Evaluate Financial Implications

Evaluate how the plan’s costs fit into your retirement budget. Consider not just the premiums but also the potential out-of-pocket expenses for doctor visits, hospital stays, and medications. Balance these costs against the plan’s benefits and your expected healthcare needs.

Important Considerations for Financial Planning

Integrating Medicare plan selection with financial planning can enhance retirement readiness, ensuring that you’ve planned for your expected healthcare needs as part of your retirement income and budgeting process. The Hancock Whitney Financial Planning team recommends considering the following factors.

Healthcare Costs in Retirement

Healthcare costs can be one of the most significant expenses in retirement, with recent data showing that healthcare costs continue to rise, increasing at one-and-a-half to two times the rate of inflation. Planning for these costs involves estimating your healthcare needs and considering various scenarios, such as the need for long-term care or unexpected medical conditions.

High-income earners should be aware of Income-Related Monthly Adjustment Amount (IRMMA). IRMMA is an additional amount added to Medicare Part B and Part D premiums for beneficiaries whose modified adjusted gross income exceeds certain thresholds. Individuals impacted by this surcharge, can work with their financial advisor to develop income strategies to minimize these additional costs including managing retirement account withdrawals to stay below IRMMA limits, timing large income events like capital gains or Roth conversions, or exploring income reduction techniques such as charitable giving, or qualified distributions.

For more insights about Retirement planning, see our Insights blog – Strike a Balance for a Secure Retirement.

Tax Implications

Medicare premiums, especially for higher-income beneficiaries can significantly impact your tax situation. Understanding the tax deductibility of medical expenses and premiums can help manage your taxable income and potentially reduce your tax burden. Consult your CPA to review your individual tax implications.

Other Estate-Planning Considerations

During the Medicare selection process, it may be beneficial to develop or update healthcare directives and powers of attorney to ensure medical wishes are honored should you become incapacitated or seriously ill. Additionally, your advisor may be able to assist in planning for long-term care through the creation of specialized trusts to help ensure your well-being and secure your legacy and wishes for your loved ones. Lastly, while reviewing Medicare plans, you may also want to spend time reviewing your life insurance policy. Our Insights blog shares Four Top Reasons Why You Should Review Your Life Insurance Policy.

Let Us Help with your Financial Planning Needs

Your Hancock Whitney team can help you evaluate the impacts that health care expenses may have on your financial future and offer access to valuable tools such as Healthpilot that offer personalized plan recommendations, comprehensive comparisons, and more in-depth educational resources.