insurance

3 Reasons to Consider Making Changes During Medicare Open Enrollment

Between Oct. 15 and Dec. 7, Medicare participants can make changes to their plan(s). Here are a few reasons you may want to take advantage of this open enrollment period.

Every fall, Medicare health and drug plan providers publish information on changes that will take effect the following year. As a result, people on Medicare have the opportunity to make the following types of changes to their plans during the open enrollment period, which runs from Oct. 15 to Dec. 7:

  • Switch from Original (Traditional) Medicare (Parts A and B) to Medicare Advantage (Part C), or vice versa.
  • Switch from one Medicare Advantage plan to another.
  • Switch from one drug plan (Part D) to another.

You’ll notice this list does not mention Medicare Supplement (Medigap) policy changes. The open enrollment period for Medigap is the six months following your enrollment in Medicare Part B. After this period, insurance companies generally are not required to sell you a Medigap policy. If they do offer coverage after your open enrollment period, they may charge you higher premiums. Keep in mind that Medigap policies are only available to people who have Medicare Parts A and B, not those with Medicare Advantage.

There is also an open enrollment period from Jan. 1 to March 31, when you can change your Medicare Advantage plan. During that period, however, you can’t switch from Original Medicare to Medicare Advantage, or make changes regarding drug plans. For complete details, go right to the source — the Medicare website.

Getty Images

Every Medicare participant should review their coverage at least annually. Here are three reasons you may want to seriously consider making changes:

1. You have Original Medicare and want to save money.

People enrolled in Medicare Advantage plans, on average, spend less on health care than those with Original Medicare. This includes a combination of premiums and out-of-pocket costs, along with drug coverage.

Estimated Annual Health Care Expenses for Individuals Ages 65 and Above

 Original Medicare (Parts A and B) and a Prescription Drug Plan (Part D)Medicare Advantage HMO Plan That Includes Prescription Drug CoverageOriginal Medicare (Parts A and B), a Prescription Drug Plan (Part D), and Medigap
25th Percentile$2,500$2,200$4,700
50th Percentile$3,200$2,900$5,800
75th Percentile$5,000$4,300$7,300
90th Percentile$7,300$6,400$10,200

Source: Sudipto Banerjee. “A New Way to Calculate Retirement Health Care Costs,” T. Rowe Price, February 2019. Estimates based on projected 2019 Medicare premiums and data from the Health and Retirement Study (HRS). All costs are rounded to the nearest hundred. Percentile refers to the percentage of individuals with estimated expenses below these levels. For example, the 90th percentile line indicates that only 1 in 10 retirees with Medicare Advantage has estimated annual health care expenses above $6,400.

Medicare Advantage plans aren’t for everyone. Availability and costs vary widely by geographical area. Medicare Advantage plans generally restrict your choice of service providers. It’s also important to note that the expense differences above may reflect different levels of health care consumption across the three groups. Even considering these caveats, enrollment in Medicare Advantage plans has increased sharply in recent years because of the associated potential cost savings. If available in your area, they are worth considering.

2. You enrolled in a Medicare Advantage plan and realize you made a mistake.

As mentioned earlier, the downside to a Medicare Advantage plan is the limited provider network. You may not have fully appreciated the limitations when you chose your plan. Or you may have developed a new medical issue that requires specialists who aren’t available under your plan. Out-of-network medical care can be very expensive.

If you find yourself in this situation, open enrollment will give you the opportunity to consider other insurers’ Medicare Advantage plans, which may have better network options. In addition, if you switched from Original Medicare and Medigap within the past year, you have the option to switch back to your old Medigap plan. Just don’t wait more than a year — there’s no guarantee the Medigap insurance company will offer you a policy, especially if your health has worsened.

3. Your drug prescriptions (or coverage) have changed.

It is surprising how different the cost for a specific drug can be in two different drug plans. A plan that worked well for your prescription needs a year ago may be far costlier if you’ve added a new drug to your list. In addition, the plan can change its drug list (called a formulary). Formulary changes can take effect the next year, or sooner, such as when a generic equivalent is introduced. One positive change heading into 2020 is that the Part D “doughnut hole,” a confusing and potentially expensive coverage gap, will be completely eliminated.

The Medicare website offers a Plan Finder to help you shop for drug plans (Part D) and Medicare Advantage plans. It enables you to compare costs based on your specific prescriptions. You can also see what pharmacies are in-network, as well as plan “star ratings.” There’s a lot of information on the Medicare site, so be sure to set time aside to digest it all.

Medicare is a complex topic, and it’s important to understand your options. If you’re approaching Medicare eligibility age, or just want a refresher on your choices, check out our Planning for Medicare video.

About the Author

Roger A. Young, CFP®

Senior Financial Planner, T. Rowe Price

Roger Young is Vice President and senior financial planner with T. Rowe Price Associates in Owings Mills, Md. Roger draws upon his previous experience as a financial adviser to share practical insights on retirement and personal finance topics of interest to individuals and advisers. He has master's degrees from Carnegie Mellon University and the University of Maryland, as well as a BBA in accounting from Loyola College (Md.).

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022

Recommended

What Retirees Will Pay for Medicare in 2022
Medicare

What Retirees Will Pay for Medicare in 2022

Seniors will pay more for Parts B and D this year, though Medicare Advantage plans should be slightly cheaper.
January 12, 2022
Medicare to Consider Lowering Part B Premiums
Medicare

Medicare to Consider Lowering Part B Premiums

Beneficiaries could see a reduced Part B premium after Biogen announced it would slash the price of its expensive, and controversial, new Alzheimer's …
January 12, 2022
How to File Tornado Insurance Claims
insurance

How to File Tornado Insurance Claims

The five-state storms caused billions in damages. If you were affected, make sure you document your losses and contact your insurer immediately.
December 14, 2021
Last-minute Gifts That Save Money All Year
spending

Last-minute Gifts That Save Money All Year

Supply chain issues may not have motivated you to buy early and now you’re panicked. No need to worry; we’ve got you covered.
December 9, 2021