Watch out for these potential traps when signing up for Medicare

By Morey Stettner

Original Medicare or Medicare Advantage? Here's how to make sense of open enrollment.

There are big differences between original Medicare and Medicare Advantage.

Every fall, your mailbox overflows with letters. Sales pitches, actually.

Everyone from AARP to insurance companies to "Medicare counselors" is vying for your attention. They dangle enticing offers: free phone consultations, free information booklets, free sign-ups for free resources.

What's all the fuss about? It's Medicare open enrollment for Americans age 65 and older.

Until 1997, getting covered by Medicare didn't involve much choice: You simply signed up. But in 1997, the federal government launched a program to let beneficiaries opt for alternative plans offered by health insurers. In 2003, the program morphed into what it is still called today: Medicare Advantage.

Read: Here's what's really stopping Medicare Advantage from covering all of America's seniors

For nearly 30 years, people 65 and older have needed to choose: traditional (or original) Medicare, or Medicare Advantage?

"Different coverage options will fit different people better," said Gretchen Jacobson, vice president for Medicare at the Commonwealth Fund, a private foundation focused on healthcare. "There are long-term and short-term differences," she noted, so the decision involves weighing costs and benefits over time.

Whatever choice you make each year, you can change your mind later, but it might not always be easy, especially if you switch from Medicare Advantage to original Medicare and want to buy a Medigap plan to cover out-of-pocket costs. The annual Medicare open-enrollment period, which runs from Oct. 15 to Dec. 7, is when you can modify your coverage selections.

And 64-year-olds preparing to sign up for Medicare should start the decision-making process early. About 90 days before your 65th birthday, gather information and seek unbiased advice.

If you're thinking of choosing a Medicare Advantage plan, beware of two potential traps:

-- If you want to switch to original Medicare years later, you can - but only during the annual open-enrollment period in the fall. At that time, you'll probably want to buy a Medigap plan to go along with your traditional Medicare coverage - and if you do so, you may face medical underwriting to qualify for a plan. That means you could wind up paying much more than if you had bought Medigap at 65.

-- Even if you love all the features and benefits of Medicare Advantage plans (more on that below), insurers can discontinue these plans in the future. That's happening now: Rising medical costs, declining reimbursement rates from the federal government and regulatory changes are making Advantage plans less profitable for insurers, so the companies are pulling out of some states.

A reliable resource for one-on-one counseling is your State Health Insurance Assistance Program. These federally funded, locally delivered programs provide free help through a combination of trained volunteers and paid staffers. To find your local SHIP, go to shiphelp.org.

Another unbiased resource is the Medicare Rights Center helpline (800-333-4114). Run by a national nonprofit organization, the free helpline is staffed weekdays with trained volunteers, said Sarah Murdoch, the center's director of client services. The helpline gets about 15,000 calls a year, she adds, from all 50 states, from U.S. territories and from Medicare-eligible people living abroad who are moving back to America.

Insurance brokers offer another source of advice, although it's important to vet them carefully. Some brokers call themselves senior advisers or Medicare consultants, which makes them sound like unbiased experts. In fact, they may sell Medicare Advantage plans offered by a limited group of health-insurance companies.

Read: Most Medicare Advantage plans are free upfront. You still might not be able to afford one.

Independent brokers may claim to represent a range of insurance plans and promise to help you assess all your options - and many do. But before you enlist their help, ask, "Which insurers do you represent?" and "What choices do I have?"

"About one in three [Medicare beneficiaries] use a broker to sort through their choices," Jacobson said. "But [brokers] don't typically sell all plans in an area. And they're paid by insurers and may have financial incentives to sell certain insurance."

Some brokers have earned professional designations such as certified senior adviser, or CSA. While such designations don't guarantee unbiased expertise, they indicate the individual has passed an exam and met other criteria.

Regardless of how you gather advice, you will soon learn the big difference between traditional Medicare and Medicare Advantage: Traditional Medicare is administered by the federal government, while Advantage plans are sold by private insurance companies.

With traditional Medicare, you can choose your providers for most types of medical care, usually without prior authorization. Standard monthly premiums are currently $185 for most people, and you'll get a bill for $555 just before you turn 65 that covers the first three months.

Because some parts of traditional Medicare come with deductibles and coinsurance - such as for hospital stays, outpatient costs and other medical services - many new enrollees also buy two types of private insurance policies to go along with their traditional Medicare:

-- Medicare supplement policies, known as Medigap, lower or eliminate traditional Medicare deductibles, coinsurance and copays - and include an emergency foreign-travel benefit. There are 10 standard Medigap plans. Monthly premiums vary but often fall within the $100-$400 range.

-- Part D prescription-drug plans can cost as much as $100 a month, but lower-income beneficiaries can qualify for financial aid through Medicare Part D "Extra Help" or state pharmaceutical-assistance programs.

"People can sometimes get a little sticker shock from Medigap pricing," Murdoch said. "But you have to weigh the pros and cons and think long term. Depending on your state, if you wait [for years] to buy a Medigap policy, insurers can charge age-based higher prices or charge more" based on your health conditions (this is called medical underwriting).

With Medicare Advantage plans, private insurers sell policies that include hearing, vision and dental coverage, which traditional Medicare lacks. And Advantage policies generally result in lower out-of-pocket costs. But there's a big downside: Medical Advantage plans require you to see in-network providers, and you'll need referrals for specialists. The quality and depth of an insurer's provider network can vary, leaving you with a limited choice of hospitals, nursing facilities or specialists.

"You want to think about how important it is that your providers are in-network," said Jeannie Fuglesten Biniek, associate director for the program on Medicare policy at KFF, an independent health-policy research organization. "These networks can change over time, so you can develop a relationship with a provider who later leaves the network."

Medicare Advantage plans also tend to involve prior authorization for, say, skilled-nursing facilities or home health services and dialysis. This can introduce another hiccup in obtaining care.

By approaching the decision well in advance - and getting unbiased advice rather than heeding the ever-growing stack of sales pitches in your mailbox - you'll avoid mistakes.

Those direct-mail pieces may not necessarily look like sales brochures. Insurance companies might try to fool you into thinking you're getting an important notice.

For example, the envelope may proclaim, "Medicare Beneficiary Notification" in bold letters, with an alarming-looking red stamp emblazoned across the top reading "SECOND NOTICE."

All this for a mere solicitation to buy a Medicare Advantage plan from a big insurer.

"It's really challenging because people receive so much information when they first enroll in Medicare," Jacobson said. "Don't just choose what a friend chooses" or rely on official-looking mailers, she added.

It's best to step back and make sure you understand all your options. Review your list of medical providers and, if you like and trust them, determine whether you can stick with them if you buy a Medicare Advantage plan.

"You need to start from scratch with the basics and tune out all the noise," Murdoch said. "All those mailers are trying to sell you an insurance product. There can be a lot of confusion about what all the terms mean, when you need to enroll and how to make the best decision that's right for you."

-Morey Stettner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-30-25 1748ET