How Medicare Could Impact Your Financial Plan

Dana Sandoval, CFP®

Sep 29, 2022

Medicare open enrollment is around the corner; it starts October 15th and runs through December 7th. Yet, how do you decipher what is important and who to trust when making your Medicare decisions? Furthermore, and perhaps most importantly for our purposes, how does Medicare fit into your financial plan? Our health is one of our biggest assets and represents one of the biggest sources of expenses as we age. Unfortunately, this figure is often somewhat unknown making it hard to prepare. So, our goal as your TCI Team is to provide you information that will help you hedge against health-related risks that could derail your financial plan.

Avoid Penalties When Delaying Medicare Enrollment

If you’re signing up for Medicare for the first time, your initial enrollment period (IEP) begins three months before your 65th birthday, includes the month of your 65th birthday and concludes three months after your 65th birthday. We recommend starting to educate yourself at least nine months before your 65th birthday to understand your coverage options and develop a plan to transition to Medicare. Missing these enrollment opportunities, if you don’t qualify for delaying enrollment, will subject you to monthly penalties which can add up over time. An example of when you may be able to delay enrollment without penalty would be if you’re covered by your or your spouse’s employer sponsored insurance and it qualifies as “creditable.” If you are eligible for employer sponsored insurance, this decision becomes a cost/benefit analysis. Does your employer’s health/prescription insurance plan offer “better” benefits for less cost than you could obtain through Medicare?

You will want to contact the insurance company and the employer’s benefit administrator to obtain the information you need to make an informed decision. You should receive or request a letter from the benefit administrator affirming the insurance qualifies as “creditable” insurance and retain a copy for each year you delay enrollment into Medicare–you will need to provide the proof when you do decide to enroll to avoid late enrollment penalties.

Once you are no longer covered by employer sponsored creditable coverage you have a Special Enrollment Period – the eight-month period that beings the month after the employer or union group health plan coverage ends or when the employment ends (whichever is first) to enroll in Medicare.

Don’t Have Too Little or Too Much Medicare Coverage

Generally, people discover inadequacies in Medicare coverage when a medical event leads them to realize that something isn’t covered. Here are a few things to consider ensuring you get the coverage you need:

  • Determine Coverage Individually –There is no one size fits all solution to Medicare coverage and separate coverage for you and your spouse might make the most sense.
  • Supplemental Coverage – An individual opting for Original Medicare can add a Medigap Policy to help pay out-of-pocket costs like deductibles and coinsurance.
  • Doctor and Hospital Choice – Do your providers accept Medicare and if so, do they accept the Plan you are considering? Some Medicare Advantage Plans have networks of providers.
  • Specialists – If you regularly see a specialist, do they accept Medicare, will you need a referral and what is the co-pay?
  • Prescription Drugs – Are your prescriptions covered and at what cost?
  • Convenience – Where are the offices of the providers? What are their hours? What pharmacies can be used? Can you receive prescriptions by mail?
  • Travel – Do you spend part of each year in another state? Will your plan cover you when you are there? What if you are traveling abroad?

Review Your Coverage Annually

Your health is continuously changing. When there are changes to your health, your Medicare coverage may need to change as well to ensure you still have adequate coverage. We recommend reviewing your coverage annually to make sure that you have the peace of mind knowing that you’re doing everything in your power to maintain proper coverage. Another reason to review annually is because the coverage offered by your current Medicare provider is continually changing. Furthermore, legislation changes can impact Medicare. For example, the recent passage of the Inflation Reduction Act includes a $2,000 cap on out-of-pocket medication costs, however, it doesn’t go into effect until 2025.

The enrollment decisions in Medicare involve a significant amount of intricacy and the conversation with your TCI Advisor should start well ahead of time. It is essential to work proactively and utilize trusted and knowledgeable resources.

At TCI, our Advisors have vetted resources and knowledge to share to help you navigate Medicare and all its intricacies. At the end of the day, our goal is to try and make this process easier for you so you can lead your purpose-filled life, however you define it.

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