The last quarter of the year is a busy time for financial advisers. It's a time to review investment portfolios with clients to identify possible tax-loss harvesting opportunities and to encourage working-age clients to maximize their annual retirement plan contributions. For older clients, it's a crucial opportunity to review their Medicare coverage.
This last item — Medicare coverage — is one that many clients tend to set and forget after their initial enrollment and one that financial advisers often ignore. 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 clients first become eligible for the government-provided health insurance program, and during the annual open enrollment period each year when they can review their Medicare choices.
The initial enrollment period is the seven months that begin three months before their 65th birthday, includes the month they turn 65, and extends for three months beyond their birthday. Most clients should sign up for Medicare during their initial enrollment period unless they have group health insurance through a current employer or their spouse's current employer. Otherwise, if they miss this seventh-month window, they could face a permanent late enrollment penalty.
During their initial enrollment period, clients 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 for clients to re-evaluate their current Medicare plan each year to make sure it still meets their needs.
At the very least, financial advisers should remind their Medicare-eligible clients to 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.
Encourage clients 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. Clients should pay special attention to whether their regular medications are still covered under their drug plan's formulary or if they have been placed in a more expensive drug tier.
If a client's health condition or prescription medications have changed over the past year, a Medicare checkup is in order. Ditto if the client has moved or their current provider has discontinued their Medicare Part C or D plan.