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How to Pick the Right Medicare Plans for You

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To the uninitiated, medicare is an alphabet soup of parts and plans. Do you want your basic Medicare—parts A and B—with a dollop of Part D and a medigap side order of Plan G, or go for an all-in-one Medicare Advantage plan instead?

As if those choices aren’t cryptic and confusing enough, thanks to Medicare’s byzantine rules and draconian penalties, the decisions that newcomers make early on, including when they first enroll in the program, can have lasting effects in the form of higher premiums or coverage restrictions down the road.

“People have to make some of the most consequential decisions about Medicare right when they know the least about Medicare,” says David Lipschutz, associate director at the Center for Medicare Advocacy.

Throw in a pandemic, a struggling economy and some big changes to the program in 2020, and even seasoned Medicare beneficiaries have plenty to chew on. Rates for 2021 have yet to be announced, but over the summer, Republicans called for freezing 2021 premiums at 2020 levels in their economic stimulus bill. The freeze is no freebie; beneficiaries must repay any shortfall from the premium freeze with monthly surcharges averaging $3.

Social Security’s annual cost of living adjustments (or the lack of them) are another piece of the premium puzzle. Some beneficiaries, but not all, are protected from rising Medicare premiums in years when COLAs, which Kiplinger’s forecasts at 1.2% for 2021, are too meager to keep up with rising premiums.

The premiums in question are for Medicare Part B, which pays for physician services, diagnostic tests, physical therapy and other outpatient care. The standard Part B monthly premium is projected to rise to $148.50 in 2021, up from $144.60 this year. That base premium gradually increases depending on income because of Medicare surcharges, also known as income-related monthly adjustment amounts. Rates and income thresholds for Part B are set by the federal government and typically announced toward the end of the year for the following year.

Part B, along with Part A, which covers inpatient care at a hospital or skilled nursing facility, are the meat and potatoes of Medicare coverage. Most people don’t pay a Part A premium because they’ve been funding it through payroll taxes during their working years.

The two parts together sound comprehensive but, in fact, leave gaping holes in coverage, with prescription drugs, hearing aids and routine dental, vision and foot care not included. What’s more, when Part B kicks in, it only pays for 80% of medical costs, leaving you to shoulder the remaining 20%, and that’s after any copayments and deductibles. Part A pays for all hospital costs only for the first 60 days and that’s after a $1,408 deductible. “If you have catastrophic needs, it can get very expensive,” says Jim Blankenship, author of A Medicare Owner’s Manual: Your Guide to Medicare Benefits (independently published, $12.88) and a certified financial planner in New Berlin, Ill.

Beneficiaries can plug coverage holes and limit out-of-pocket costs with a medigap plan or abandon traditional Medicare for an all-in-one Medicare Advantage plan. Medigap plans fall under the traditional Medicare umbrella, letting you go to any doctor or hospital that........

© Kiplinger

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