The last quarter of the year is a good time to review investment portfolios to identify possible tax-loss harvesting opportunities and for working-age investors to maximize their annual retirement plan contributions. For older people, it's a crucial opportunity to review their Medicare coverage.
This last item — Medicare coverage — is one that many people tend to set and forget after their initial enrollment. But that could be a mistake in terms of both appropriate healthcare coverage and improved cash flow.
There are two important time periods for Medicare coverage: When you first become eligible for the government-provided health insurance program, and during the annual open enrollment period each year when you can review your Medicare choices.
The initial enrollment period is the seven months that begin three months before your 65th birthday, includes the month you turn 65, and extends for three months beyond your birthday. You should sign up for Medicare during your initial enrollment period unless you have group health insurance through a current employer or your spouse's current employer. Otherwise, if you miss this seven-month window, you could face a permanent late enrollment penalty.
During your initial enrollment period, you can sign up for original Medicare, which includes Medicare Parts A and B. Medicare Part A is free and covers hospital costs. Medicare Part B has a monthly premium and covers outpatient services. During initial enrollment, new Medicare beneficiaries can also enroll in a Medicare Part D prescription drug plan and select a supplemental medigap policy to pay for costs such as Medicare's annual deductibles and co-payments.
About one-third of Medicare beneficiaries forgo the original Medicare route and opt instead for a private Medicare Advantage plan, also known as Medicare C, which includes all the hospitalization and outpatient services of original Medicare and often offer prescription drug coverage, too.
Many Medicare Advantage plans also provide additional benefits that original Medicare doesn't cover such as vision, hearing or dental services and might even include a free gym membership. While less expensive than original Medicare, most Medicare Advantage plans restrict access to in-network health care providers.
Unfortunately, choosing health insurance is no longer a one-time decision for most Medicare beneficiaries. Each year, insurance companies can make changes to Medicare plans that can affect out-of-pocket costs for monthly premiums, deductibles, drug costs, and healthcare provider or pharmacy networks. Given these annual changes, it is a good idea to re-evaluate your current Medicare plan each year to make sure it still meets your needs.
At the very least, Medicare-eligible people should take advantage of the Medicare Open Enrollment period that begins Oct. 15 and runs through Dec. 7 for coverage beginning Jan. 1.
"During Medicare open enrollment, clients can move from original Medicare to a Medicare Advantage plan, switch from one Medicare Advantage plan to another, or choose a different Medicare prescription drug plan," said Nancy Cocozza, senior vice president of Aetna's Medicare business.
Medicare Advantage members can also decide to return to original Medicare during open enrollment, but when they apply for a private medigap policy, they will be subject to medical underwriting that did not exist during their initial enrollment period. "In some cases, it may be difficult to qualify for a medigap plan," Ms. Cocozza said.
The National Council on Aging offers a free online guide to Medicare Open enrollment. NCOA also provides an online questionnaire to help Medicare beneficiaries compare plans and get free, detailed information from licensed benefits advisers.
It's worthwhile to look beyond the more obvious changes to monthly premiums and scrutinize other out-of-pocket costs such as increased deductibles or a plan switching to a more expensive co-insurance cost-sharing method rather than a flat co-payment. You should pay special attention to whether your regular medications are still covered under your drug plan's formulary or if you have been placed in a more expensive drug tier.
If your health condition or prescription medications have changed over the past year, a Medicare checkup is in order. Ditto if you have moved or your current provider has discontinued your Medicare Part C or D plan.