By Sharon Egan

Now is the time to review and reconsider your Medicare choices for 2020. From now through Dec. 7, 2019, those already enrolled in Medicare can change plans. This is called the open enrollment period, or OEP. Coverage can start Jan. 1, 2020. About 61.2 million Americans are enrolled in basic Medicare insurance, known as Parts A and B. About 38.2 million of them will stick with this basic level of coverage.

There is a window of 54 days each year to review your coverage, and while it takes time and can be confusing, it's well worth the effort. Choosing the right plan will ensure that your coverage is tailored to your needs, and needs can change. Adding new medicine to your regimen, moving to a new location, or needing to lower expenses are all reasons this review is important.

Bottom line: You don't want to be charged for coverage you don't need, and you don't want to pay more for coverage under one plan when another will offer similar coverage for less. However, you need to compare coverage as well as cost when making a decision, as omitting coverage for something you need might cost more if you pay for that service independently.

Know Your Medicare Plans

Part A of Medicare is hospital insurance and is free.

Part B of Medicare is medical insurance (covers doctor visits, outpatient procedures and lab services) and has a cost. The standard monthly fee for Medicare enrollees in 2020 will be $144.30/month, up from $135.50 in 2019. This is an initial figure from Medicare's trustees. This is an increase of $8.80, a bigger jump than 2018 ($134.00) to 2019 ($135.50). Individuals with income greater than $85,000 ($170,000 for couples) will pay higher premiums. Part B deductible will be $197, up from $185 in 2019.

Part C of Medicare is sometimes called Medicare Advantage, which is offered by private companies approved by Medicare. You will get your Part A and Part B coverage from this plan, and not original Medicare. You may also get drug coverage, vision care, and/or dental coverage. About one-third of Medicare recipients use Medicare Advantage. This might be worth a look, as new government rules allow Medicare Advantage insurers to offer expanded benefits, like adult daycare, home-based care, and new rules for 2020 that include coverage of nutritional advice, ride-to-doctor appointments, acupuncture and service animal support.

Part D of Medicare is drug coverage. Plan costs vary, but the average national monthly premium is $32.50. Costs vary by plan. You want to choose the plan with the lowest premium, or lowest cost per year, including the drugs you take. You can use the Medicare Plan Finder to include the list of medications you take and it will point you to the right plan. Good to look at if your medicines have changed.

Medigap, also known as Medicare Supplement insurance, which covers items not covered by Medicare Parts A, B or D.

Penalties: If you do not enroll in Medicare in your Initial Enrollment Period, and do not have health insurance from another source, you may face penalties when you enroll later. For example, if you do not have drug coverage, Medicare multiplies 1% of the "national base beneficiary premium" ($32.74 in 2020) times the number of full, uncovered months you didn't have Part D or credible coverage. The monthly premium is rounded to the nearest $10 and added to your monthly Part D premium, and that addition, that penalty, will be permanent.

For first-time enrollees: People who turn 65 this year have a 7-month window to enroll in Medicare. That window includes the three months before their 65th birthday, their birthday month, and three months after their birthday month. This is known as the IEP (Initial Enrollment Period).

The best way to enroll in a new plan is to call 1-800-MEDICARE. Write down important points in the conversation and note the person you spoke with. At this number you can find out about Medicare Advantage programs in your area. Use Medicare's Plan Finder tool to find the best Part D coverage based on the drugs you need and the pharmacy you visit.

For those already enrolled and reviewing their plan: People who are already on Medicare should review the plan they have and make changes based on changes in health that require new medicine or additional medical support; a physical move that requires a change to a new medical group, if using Medicare Advantage; or you plan to travel and your insurance does not cover medical costs overseas.

Original Medicare

Part A, Part B and Part D are the first things to consider.

Part A has no cost, but does have deductibles:

  • In-hospital deductible is $1,420
  • Daily Coinsurance for the 61st to the 90th day is $341 in 2019
  • Skilled Nursing Facility coinsurance is $170 in 2019 (2020 numbers not yet decided)

Part B has a premium, which for most will be $144.30 per month, as noted above, and there is a deductible of $197. Once you have met the deductible, you are required to pay a coinsurance of 20% of the Medicare-approved amount to the provider.

Part D usually has the most changes. You should receive an Annual Notice of Change for your Part D coverage. Look at it carefully to see how benefits and costs are changing. In 2020 when you reach the Coverage Gap (sometimes called the "Doughnut Hole"), you will get a 75% discount. For brand name drugs, you will get a $95 credit toward getting out of the doughnut hole. In 2020 the doughnut hole for generic drugs will close. Drugs and restrictions can be removed or added, and this can make another plan more cost effective.

This is where most people could save money, but don't review their plans. Comparing drug prices is key during Medicare Open Enrollment.

Medicare Advantage

This is technically Part C and is a program similar to PPOs (preferred provider organizations) and HMOs (health maintenance organizations) in that they use a network of doctors and if you go outside of the network, you may pay more. This could be a good solution to those who plan to stay where they are, and who live in an area where the network includes their doctors and is highly ranked for efficiency and service. For those who plan to move, however, there is the risk that the network (and not all areas are covered) will not be as good. Also, if a network changes or closes, you could be facing the issue of moving to a new group. These plans can be difficult to compare, as coverage is not standard.

Medigap

This is standardized coverage, so it's easy to compare providers. There are a range of plans from Plan A to Plan N. If you enroll during your IEP, you will be guaranteed coverage even if you have a preexisting condition. If you sign up after your IEP, you may be asked to provide your medical history and can be turned down or asked to pay more. The annual cost of this coverage averages $2,200 per year. Some of these plans offer coverage on an emergency basis overseas, which may be important to some enrollees.

As there are "holes" in original Medicare, the retiree has to decide if they want to pay the co-pays that are part of Plan B. As of January 2020, no new Medigap plan will cover the Part B deductible.

Do your homework on this. If you are unable to do this alone, there is help available. Most financial planners can assist you in working through the process, and Medicare.gov has information and providers. There are also counseling services available to Medicare beneficiaries, and AARP is also a good resource. The latest edition of Medicare for Dummies by Patricia Barry is now available.

While this may seem like a monumental task, you would do well to apply yourself to understanding this. You could leave money on the table or not be adequately covered, based on your situation, and that could lead to higher costs when you least expect it or can handle it.

About the author: Sharon Egan is a certified financial planner with a practice in Chicago. She is a former president of the Financial Planning Association of Illinois, an instructor at Northwestern University, and is a frequent speaker on financial planning topics around Chicago. She holds an MBA from Indiana University.

This is not an offer to buy or sell any security. Any summaries, prices, quotes, or statistical information has been obtained from sources believed reliable but are not necessarily complete and cannot be guaranteed.