As you might guess, I get plenty of questions from family, friends and readers about how to sign up for Medicare. In these conversations, I’m always struck by the complexity of the Medicare program – and the challenging task of transitioning to it from other types of health insurance. That’s what prompted me to write a primer on Medicare enrollment for the New York Times that appeared this past weekend.
In my book Retirement Reboot, I argue that complexity is a feature – not a bug – in the various systems we’ve built for retirement in the U.S. There’s no better example of this than Medicare.
While many think of Medicare as a single government program, a great deal of privatization has been added over the years – most of it counter-productive. Private insurers now sell Medicare Advantage plans, prescription drug plans, and supplemental Medigap policies alongside the core federal program. Enrollees must navigate online marketplaces, brokers and commission-earning agents — and some coverage decisions need to be revisited annually.
Getting the timing of enrollment right is critical. And some people are surprised to learn that they may pay more – or less – than the standard amounts for their coverage.
It’s far too easy to make mistakes along the way. That’s why I believe we should streamline and simplify Medicare coverage. Here are just a few examples:
- Set a standard out-of-pocket cap for both traditional Medicare and Medicare Advantage. Experts have modeled caps ranging from $2,000 to $5,000. This would make Medigap plans unnecessary and also make it easier for people to switch back and forth between traditional Medicare and Advantage. A reform like this could be funded by reducing the current over-payments to Advantage plans ($76 billion per year, according to MedPAC, and higher by some estimates).
- Replace the Part D marketplace with a standard prescription drug benefit. This would remove the burden of shopping – and -reshopping – drug coverage annually.
- Require the Social Security Administration to send a clearly worded letter (by mail) explaining the requirement to sign up during the seven-month Initial Enrollment Period, which includes the three months before, the month of and the three months after your 65th birthday. Missing that window sets off late-enrollment penalties for Part B and Part D, which covers prescription drugs, that continue for life. The letter should explain when you can delay and when you cannot – and the substantial lifetime penalties you can incur if you don’t sign up on time. That has been proposed in legislation dubbed the Benes 2.0 Act. It would be a followup to Benes 1.0, which streamlined the enrollment process to eliminate lengthy coverage gaps after enrollment.
None of these reforms are likely to happen soon. So, while we’re waiting, check out my guide to enrollment in the Times (gift link). In it, I’ll walk you through enrollment step by step and explain the most important decisions you’ll need to make about coverage, enrollment timing and costs.