What to Know About Medicare

Sep 1, 2023

While health insurance and Medicare may not seem important to financial planning, we know that they are a very important part of planning for your future self and should be considered. Medicare, specifically, should be considered as you plan for retirement and project both your financial needs and obligations. While we do not provide Medicare services, we do advise many of our clients on the ins and outs of enrolling in Medicare and planning your coverage. Here’s what you need to know about Medicare.

What is Medicare?

Medicare is essentially a health insurance program run by the US government that specifically covers people 65 years or older, people with specific disabilities, or people with end-stage renal disease.

Medicare itself is divided into four parts:

  • Part A: hospital insurance and coverage for hospice, in-home care, and nursing facilities
  • Part B: coverage for doctor’s visits, outpatient care, home health care, medical equipment, and prevention
  • Part C (also known as Medicare Advantage): Medicare-approved plans by private insurers
  • Part D: coverage for prescriptions

Premiums for Medicare Part A premiums are free if you have made Medicare contributions through payroll taxes for at least 10 years. Additional premiums may exist for other parts of the Medicare program and these will need to be considered in your financial planning.

When can I enroll in Medicare?

If you are eligible for Medicare at age 65, you can enroll in Medicare during the Initial Enrollment Period which is a seven month period around your birthday: three months before, the month of your birth, and three months after. 

As long as you are eligible to receive social security benefits when you turn 65, you will be automatically enrolled in Medicare Part A and Medicare Part B. You will need to enroll in Medicare Part D separately, during the Initial Enrollment Period. Additionally, if you are interested in a Medicare Supplement Insurance Plan (Medigap), you’ll need to enroll during the six month open enrollment period that starts the month you turn 65.

You can also enroll in Medicare or make changes during the Annual Enrollment Period or AEP and the Open Enrollment Period or OEP.

What and when is the Annual Enrollment Period (AEP)?

Like other health insurance plans, Medicare offers a yearly enrollment period that allows for people to enroll in new plans or make changes to their existing coverage. Whether you’re new to Medicare or have had a plan for years, this Annual Enrollment Period (AEP) is an important time when it comes to coverage. 

Medicare’s Annual Enrollment Period runs from October 15th through December 7th each year. Sometimes AEP gets confused with Medicare’s Open Enrollment Period (OEP) that runs January 2nd through March 31st each year, which allows only Medicare Advantage plan enrollees the opportunity to change to a different Medicare Advantage plan or go back to Original Medicare and enroll in a stand-alone Part D plan. 

What changes can I make during AEP?

AEP is specifically designed to allow for Medicare enrollees to add coverage or make certain changes to their coverage. During AEP you can make changes to, or enroll in, a Medicare Advantage Plan (Part C) or a Medicare Prescription Drug Plan (Part D). Any changes made during AEP are effective January 1 of the upcoming year.

If you have a Medicare supplement plan (Medigap), you may be able to make changes around your birthday – though this varies by state. This is referred to as “the birthday rule” and you can switch to any other Medicare Supplement plan with equal or lesser benefits guaranteed. The birthday rule only applies in a handful of states so be sure to know your specific state’s rules before counting on this option.

What do I need to know about AEP?

While AEP happens every year, it is the one chance each year (outside of special circumstances or newly becoming eligible for Medicare) to enroll in or make plan changes for these types of plans so it’s important to plan ahead.

Medicare Advantage and Part D plans send an Annual Notice of Change (ANOC) to current members in late September. The ANOC gives a summary of any changes in the plan’s costs and coverage that will take effect January 1 of the next year. 

We know Medicare can be confusing so please contact our team if you have questions. We can help you navigate the process or point you in the right direction to connect with a resource who can.

Peninsula Wealth is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Peninsula Wealth and its representatives are properly licensed or exempt from licensure. This material is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Peninsula Wealth unless a client service agreement is in place. It is expressly understood that our firm will not provide accounting or legal advice nor prepare any accounting or legal documents for the implementation of your financial planning objectives.