What You Need To Know About Medicare Before Open Enrollment Begins

Yes, it's as confusing as ever.
An elderly woman listens to a seminar on how to sign up during a Medicare enrollment event.
Justin Sullivan via Getty Images
An elderly woman listens to a seminar on how to sign up during a Medicare enrollment event.

Medicare’s open enrollment begins Oct. 15 and ends Dec. 7. Here are some of the things you need to know about changes to the program’s alphabet soup of coverage ― and where some of the potential landmines are.

Medicare Part A will remain your best frenemy.

Part A is generally the free part of Medicare ― assuming that you or your spouse paid Medicare taxes for a good chunk of your working life. Part A covers a very big-ticket item: hospital stays, but just not all of them. Sometimes, even if you stay overnight in a regular hospital bed, eat the regular hospital gruel and use the regular hospital bedpan, you still may be considered an outpatient. And if that happens, Part A wants nothing more to do with you.

The death knell in your relationship with Part A comes when they hand you something known as a Medicare Outpatient Observation Notice. If you are admitted for observation, it doesn’t mean the doctor wants to hold you overnight just to keep an eye on you. It means you are getting outpatient observation services, and despite the hospital setting, they will not be covered by Part A. Part B will kick in.

While Part A has a $1,316 and a co-insurance if you are hospitalized for more than 60 days, Part B co-payments can add up much faster and higher.

Here it is, straight from the horse’s mouth ― the Medicare website:

Observation services are hospital outpatient services you get while your doctor decides whether to admit you as an inpatient or discharge you. You can get observation services in the emergency department or another area of the hospital.

So yes, while the ER is running up a tab of medical tests and sending in doctors of various specialties to see you, you will be covered by Part B until the decision has been made that you are sick enough to warrant a hospital admission. It behooves you to ask what your admission status is when they tell you that you are spending the night.

All of which is to say: Part B and supplemental choices are important because Part A may not cover what happens to you in a hospital setting.

Medicare Part B premiums will fluctuate again for 2018, but please don’t ask us by how much yet.

The standard Part B premium for 2017 was $134 (or higher depending on your income). But 2017 was something of a quirky year in Medicare-land. That was because the Part B premium increased more than the cost-of-living adjustment for 2017 Social Security benefits, and there is a rule that says your net Social Security check can’t decrease from one year to the next. It’s known as the “hold harmless” provision. So basically the COLA for 2017 was only large enough to cover about $4 in additional Part B premiums. This meant that the $134 a month premium for 2017 only applied to enrollees to whom the “hold harmless” provision didn’t apply. Everyone else ― the 70 percent who have their premiums deducted automatically from their Social Security ― skirted by with premiums of $109.

COLA numbers for 2018 haven’t been released as of this writing, but it’s widely expected there will be around a 2 percent increase for 2018 (as opposed to 0.3 percent for 2017, and zero percent for 2016). CMS has not yet set Part B premiums for 2018, but it’s likely that premiums will be the same for all enrollees (except those with high incomes, who always pay more) ― spread across the full population and not based on how you pay your bills.

In 2018, expect to pay more for Part B. And make sure your premiums are paid through Social Security so you, too, can be part of the hold harmless club.

Also, 2018 will bring new income brackets for Part B enrollees. Starting in 2018, in Medicare’s eyes, “high income” begins at $85,001 for a single person and $170,001 for a couple. You may not feel wealthy, but Medicare says you now are and will start charging you higher prices for Part B.

Medicare Part C: the stepchild that is becoming everyone’s favorite.

Medicare Part C, or Medicare Advantage plans as they are known, first appeared some 20 years ago, although little attention was paid to them until much more recently. Most of them can be described as a Medicare version of an HMO, although there are some Advantage plans now that allow you to see doctors outside a closed network if you pay more. Each plan is different, and has different coverage options and premiums. They also vary in different regions of the country. And each plan’s rules can and often do change every year, which makes it important to stay up to date.

In 2017, one out of every three Medicare recipients chose to be enrolled in a Medicare Advantage plan. We applaud those who were able to sort through all the choices and hopefully save themselves some money.

If it helps, Part D and Medicare Advantage plans all carry ratings of one to five stars (five being the best). It doesn’t hurt to check them. And while you’re at it, do know that all Medicare Advantage plans cap out-of-pocket costs for in-network expenses (usually at $6,500). So if your resources are limited and you can’t afford the possibility of medical costs going into the tens of thousands of dollars, keep that in mind.

Medicare Part D: How will you spend that extra $1.20 a month?

For the first time in five years, the average monthly premium for Medicare Part D prescription drug coverage will decrease next year.

The Centers for Medicare & Medicaid Services said the average basic premium for the Medicare drug benefit will drop $1.20 a month, to $33.50.

“We are committed to making prescription drug plan premiums affordable so that seniors and people with disabilities in Medicare can access the prescription drugs that they need,” said CMS Administrator Seema Verma in announcing the new projected rates. With a drop of a measly $1.20, we wonder how much more affordable that will actually be, especially when you consider that the Medicare Part D deductible will be $405 in 2018, up from $400 in 2017.

And then there is of course the so-called “donut hole” ― the gap in prescription drug coverage that starts when someone reaches the initial coverage ceiling ($3,750 in 2018), and ends when they have spent $5,000. Both these thresholds are $50 higher than they were in 2017.

The donut hole has been closing, but for 2018, Medicare enrollees who are stuck in it will pay 35 percent of the cost for brand name drugs (down from 40 percent in 2017) and 44 percent of the cost of generic drugs (down from 51 percent in 2017).

So whether drug coverage will cost you more or less in 2018 is anybody’s guess. Our only advice is to make sure the medications you currently take are covered by whichever plan you choose. Just because your 2017 plan covered them, that doesn’t mean it will in 2018. You can enter in your prescriptions at Medicare.gov to find out how different plans compare in price.

As Jack Kahn, writer and Medicare expert, notes, checking this should be an annual affair. “Just sticking with your current Part D drug plan may not pay― especially if your prescriptions have changed and the new prescriptions are in a higher price tier,” he said.

About 43 million adults age 65 and over are enrolled in Medicare Part D plans, and we venture that few of them understand it any better than you do.

Medigap policies: The Wild West of insurance

Medigap is extra health insurance that you buy from a private company to pay for health care costs not covered by original Medicare. It generally includes things such as co-payments, deductibles and health care if you travel outside the U.S. What it won’t cover is long-term or skilled nursing care, dental care, vision care, hearing aids, eyeglasses and private nurses.

The costs of Medigap policies vary widely. There can also be big differences in the premiums that different insurance companies charge for exactly the same coverage.

A big P.S.: They are rolling out new Medicare ID cards starting in April, and you really better use them.

The new cards won’t have your Social Security numbers on them, in an effort to combat identity theft and fraud (some might wonder why Medicare took so long to get around to doing this). Once the new card arrives, destroy the old one and just be glad Medicare has entered the 21st century, even if it took a while.

CORRECTION: A previous version of this story incorrectly stated that Part A carried no deductibles or co-payments.

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