How Medicare Open Enrollment Choices Can Affect Retirement

The annual Medicare Open Enrollment period kicked off in October and seniors have through December 7th to make decisions about their healthcare for 2017. Beyond that, Medicare recipients should also have an eye on how their enrollment choices can impact their retirement future. Whether you're  deciding whether to make changes to existing Medicare coverage or signing up for the first time, there are some important considerations to keep in mind. (See also: 4 Medicare Open Enrollment Mistakes to Avoid.)

Medicare Open Enrollment 2017: What’s New?

The Medicare program is routinely updated and seniors should be aware that some important changes lie ahead for 2017:

Premiums may go up for some recipients. Medicare premiums are tied to the Social Security cost-of-living adjustment (COLA). This adjustment is meant to help Social Security benefits keep up with inflation. The Social Security Administration (SSA) recently announced a 0.3% cost of living adjustment for 2017. 

Because there was no cost of living adjustment in 2016, current Medicare enrollees will likely see no change in their premium amount. If you’re signing up for coverage for the first time this year, however, you’ll likely pay a higher premium. In terms of how that impacts your Social Security benefits, you may not see any boost from the cost-of-living adjustment if your premiums are deducted from your benefits. (Read: The Costs of Medicare You Need to Know.

Prescription drug coverage may be more expensive. Medicare Part D covers prescription drugs and seniors may see their out-of-pocket costs for prescription medications rise in 2017. The Kaiser Family Foundation is projecting a 9% increase in prescription drug premiums under Part D next year, along with a 7% hike in Part D deductibles

The Foundation’s analysis also revealed that most stand-alone Part D plans will charge coinsurance instead of co-payments for non-preferred brand name and specialty drugs in 2017. The end result may be a higher out-of-pocket expense, with the typical coinsurance for non-preferred drugs estimated at 40% through next year. 

How Seniors Can Protect Their Retirement During Open Enrollment

Between more expensive premiums and increasing deductibles, seniors have to tread carefully when it comes to their open enrollment choices. Switching to a new plan without understanding what the cost will be could mean having to spend more of your retirement income on healthcare.

For example, if you’re enrolling for the first time and you choose Medicare Part A, which covers hospital stays, you may pay up to $411 per month ($413 in 2017) if you’re not eligible to receive Social Security. (Part A is free if you already get retirement benefits from Social Security or the Railroad Retirement Board or are eligible for them – or if you or your spouse had government employment that included Medicare coverage.)

If you have to buy Part A, you’ll typically have to get Part B as well, which is the medical insurance component of medical care. That involves paying a separate Medicare Part B premium, which is $121.80 per month for 2016 ($134 in 2017 – it can be higher for those with higher incomes). Combined, that’s a substantial chunk of money to have to part with. (People who get Part A free also generally buy Part B unless they have a Medicare Advantage Plan or other coverage through their or their spouse's job. See: Medicare 101: Do You Need All 4 Parts?

To keep your retirement on track, remember to look at the bigger picture. If you’re enrolling for the first time, for example, consider where Social Security fits into the picture. Compare the various plan options that are available and ask yourself what kind of coverage you need. The more research you put into your Medicare choices, the better for your retirement nest egg.