How to Help Retiring Clients Pick a Medicare Plan: Advisors' Advice

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Along with when and how to claim Social Security, choosing a Medicare option is an important financial decision all retiring Americans must make.

Unfortunately, as noted in a recent blog post penned by Kimberly Blanton, a staffer at the Center for Retirement Research at Boston College, picking an approach to Medicare is also one of the most difficult decisions while transitioning to retirement.

As Blanton writes, choosing among the various options is akin to navigating a confusing, shifting maze. There are cross-cutting considerations regarding out-of-pocket costs, the level of monthly premiums, the level of access to preferred doctors offices and hospitals, the coverage of regular prescription drug costs and various other factors to throw in the mix.

Blanton points out that nearly half of U.S. retirees are enrolled in Medicare Advantage — also known as Medicare Part C — which is double the market share 15 years ago. The reason for Advantage plans’ growing popularity, Blanton suggests, is their low monthly premiums.

But, as Advantage enrollment surges, some points of concern have emerged, including the fact that many retirees can’t go to any doctor or hospital they like. This is especially common when talking about Advantage plans structured around health maintenance organizations, or HMOs, Blanton explains.

Such plans require retirees to select their medical providers from a list approved by the private insurance company running the Advantage plan in question. If a retiree wants to see someone outside this network, they will likely have to pay more.

As Blanton points out, unlike Advantage insurance policies, Medigap operates as an add-on to traditional Medicare and covers the medical bills that Medicare does not. But Medigap tends to come with significantly higher premiums than Advantage plans, and retirees generally have to buy a separate Part D plan to cover their prescription drugs.

Despite the additional upfront costs, Blanton says, some studies show that Medigap plans may have lower out-of-pocket costs over the long run, though the evidence isn’t compelling. Many retirees say they value the predictability of Medigap coverage, even if it is more expensive.

Ultimately, advisors and their clients must work hard to navigate this complexity, drawing on both government resources and other sources of information, such as an independent, certified Medicare insurance agent, Blanton says.

See the slideshow for insights from seven advisors with substantial experience in helping clients sort through this big health care decision.

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