Tens of millions of senior citizens use Medicare to manage their healthcare expenses. Yet the vast majority treat Medicare as a "set it and forget it" benefit, rarely taking advantage of the open enrollment period that begins every year on October 15. Open enrollment can save you a lot of money, but it ends on December 7, leaving you just eight more days to reap the benefits. Let's look more closely at why you should move fast to use open enrollment to get more from your Medicare coverage.
What you can do
Medicare mimics what you see at many private employers in terms of choosing to make changes to your healthcare coverage. Just as the fall months are a good time for employees to look at their health situations and determine which of their employers' coverage options will suit them best in the year to come, the open enrollment period for Medicare is designed to let retirees and other participants assess their future healthcare needs, and make decisions that will determine their coverage throughout 2016.
The Medicare open enrollment period gives you the ability to do several different things. You can:
- Move from traditional Medicare coverage to a Medicare Advantage Plan.
- Move from a Medicare Advantage Plan back to traditional Medicare.
- Sign up for Part D prescription drug coverage.
- Move from one Part D plan to another.
- Drop your Part D coverage.
- Give up your old Medicare Advantage Plan in favor of a different Medicare Advantage Plan.
In addition, some Medicare Advantage Plans come with built-in prescription drug benefits, while others leave it up to you to find a separate Part D plan. You can use open enrollment to switch among those options to find the best combination of coverage for your situation.
What you should do
In assessing which Medicare options are best for you, the key is to make sure you include all the costs involved. Many people focus too much on monthly premiums and neglect the different amounts of coverage they'll get under different plans. In some cases, paying higher premiums is worth it if it lowers your out-of-pocket costs by more than the premium increase. For others, a less-comprehensive plan will save them enough in premium costs to offset any minor increase in out-of-pocket expenses.
Convenience can also play a factor in making the best decision. Medicare Advantage plans often include benefits that traditional Medicare doesn't. You can often replace those additional benefits by getting a Medicare supplemental policy from a health-insurance carrier, but the combined costs of that option can differ greatly from Medicare Advantage plan premiums, and it leaves you potentially having to coordinate between Medicare and your supplemental carrier. Similarly, a Medicare Advantage plan that incorporates prescription drug coverage can be easier to deal with than having two separate policies, each using a carrier that might handle things slightly differently from the other.
Customize your plan options to your needs
Finally, you should always take any health changes into account in choosing a plan. Often, a Medicare option that makes sense when you're relatively healthy no longer works once health problems arise. By being smart and replacing your Medicare coverage with better options at your first opportunity after a decline in health, you can minimize the financial impact of a sudden medical condition.
In particular, many prescription drug plans differ greatly at the individual-drug level, providing different coverage for certain types of treatments. Make sure that your plan gives you the best coverage for your current needs; if it doesn't, a change can save you a lot of money.
Make a smart choice
Most seniors forego open enrollment and just renew their plans from the previous year. It often takes an insurance company choosing to stop offering the policy they've chosen to get them to consider other options. Yet even though many retirees panic when that happens, it can actually be a blessing in disguise, forcing them to make changes that they should have done already.
Medicare is a great program for seniors, but it's not automatic. Only by making smart moves in open enrollment can you make the most of Medicare in the year to come.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.