Medicare’s precarious financial situation and status as a political football means that what is true today may not be so tomorrow.

So imagine how your older clients (or your clients’ parents) would value your assistance in sorting through the various options, especially since the complexity seems to increase just as their ability to understand it all declines.

The Basics

Medicare is the government-sponsored health care and insurance program that is usually available to Americans age 65 and over, as well as younger applicants who suffer from certain chronic conditions.

Most eligible first-time enrollees are notified by the government several months before their 65th birthday, or they are already receiving Social Security benefits and are automatically enrolled in Medicare upon reaching eligibility.

Beneficiaries usually have a “window” to change, add, or drop components of their coverage each year. The window is usually from mid-October through the first few days of December. If they don’t make any changes to their coverage during this period, they are re-enrolled in the same plans and options chosen for the prior year.

Medicare (Part A)

Different parts of Medicare cover different services. Part A is known as “hospital insurance.” It is usually free to eligible participants, and may cover prescribed care in a hospital, skilled nursing facility, or a nursing home. Part A can also pay for hospice and home health care.

It’s important to note to your clients that Medicare usually doesn’t cover custodial care in a nursing home—that’s why you should discuss long-term care insurance with your clients.

Medical Insurance (Part B)

Any beneficiary who is eligible for the free Part A coverage can also purchase Part B coverage, also known as “Medical Insurance.”

Part B helps pay for necessary services (such as outpatient procedures and doctor visits) and supplies (such as wheelchairs).  It can also cover some preventive treatments.

The program has an annual deductible of $147 for 2013. There is also a monthly premium that starts at $104.90 this year, and can be as much as two and a half times that amount for higher-income beneficiaries.

Medicare Advantage (Part C)

Beneficiaries who sign up for Parts A and B are also eligible to enroll in a Medicare Advantage plan. These plans are offered by private companies that then also administer Parts A and B of the beneficiary’s coverage.

Medicare Advantage plans can be established and administered along the lines of health maintenance organizations (HMOs), preferred provider organizations (PPOs), or private fee-for-service plans.

The Centers for Medicare and Medicaid Services (CMS) provide annual “star” ratings for the various Advantage plans, using 49 different categories of health care and services.  The ratings range from five stars for “excellent” to one star for “poor” performance. Interested clients can search for plans by state, star rating and other criteria at medicare.gov/find-a-plan.

Make sure that beneficiaries know that if they purchase Medicare Advantage coverage, they don’t have to purchase any “Medigap” insurance, described below.

Medicare Drug Coverage (Part D)

This insurance pays for prescription drug coverage. The primary factor clients should use to choose a particular Part D insurance provider is whether the plan covers the patient’s type of medication, and to what degree the cost is offset by the plan.

But because both the terms of the plans and the client’s health requirements will likely change each year, the coverage should be reviewed annually.

Also note that often the Part C coverage may often cover prescription drugs. If so, clients who have Part C coverage may not need to consider Part D coverage.

Medigap Policies

Medigap insurance is offered by private companies, and aims to pay for health care that is needed but not covered by basic Medicare (including co-payments, deductibles, etc.). The policies are only available to beneficiaries who already have Parts A and B, but who aren’t covered by a Medicare Advantage plan.

Initial enrollment in a Medigap plan takes place during the six months after the beneficiary turns 65. During this time applicants can’t be denied the option to purchase coverage, nor charged more for prior health conditions. If the applicant tries to purchase a Medigap policy after the six months have expired, the applicant’s premiums might be higher and he or she may even be denied coverage.

Getting It Done Right

The government’s official website (www.medicare.gov) allows users to not only research the various components of a particular coverage option, but also enroll in and review their own Medicare coverage.

If you and your clients are still (or even more) bewildered by all their various Medicare-related options, there is a place you can go for more help—for a price.

Allsup (www.allsup.com) is an Illinois-based company that focuses on helping individuals navigate the Social Security disability application process. About five years ago Allsup also began offering a “Medicare Advisor” program. The service makes a detailed inquiry into the health care needs and options of a prospective Medicare beneficiary, and then responds with recommendations for the beneficiary.

The company is not an insurance or coverage provider, and doesn’t receive payments from any other such organization. The cost of the service ranges from $75 to $395, depending on the level of assistance that the customer is seeking. Best of all, the initial conversation is free.           

Writer’s Bio: Kevin McKinley CFP, is principal/owner of McKinley Money LLC, an independent registered investment advisor. He is also the author of the book, Make Your Kid a Millionaire (Simon & Schuster), and provides speaking and consulting services on family financial planning topics. Find out more at www.mckinleymoney.com.