How do I get the Medicare coverage I want with the lowest out-of-pocket cost?

Editor’s Note: Journalist Philip Moeller is here to provide the answers you need on aging and retirement. His weekly column, “Ask Phil,” aims to help older Americans and their families by answering their health care and financial questions. Phil is the author of the new book, “Get What’s Yours for Medicare,” and co-author of “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security.” Send your questions to Phil.

Pamela – Ill.: I will be 65 next January. I want to go on Medicare and want Part D and a supplement plan. When I go to my primary care physician or a specialist, or hospital or have MRIs, CT scans, X-rays and lab tests or any doctor services, physical and speech therapy, skilled nursing facility care, etc., I don’t want to pay a dime. I want no co-pays, but I don’t want to spend my entire Social Security check on Medicare because when I start collecting Social Security, that’s all I have to live on. I am now on no medications. Private insurance companies keep sending me flyers to contact their senior service advisors to purchase insurance. What is that all about? What I need is the free advice of someone who won’t steer me in the wrong direction. Is there any help you can provide?

Phil Moeller: You can use Medicare’s own online tools to get a good idea of available Part D drug plans and Medigap supplement plans. The premiums and payment rules for Part B are set by Medicare, so there is no “steering” going on there.

Part D drug plans generally do charge co-pays, but co-pays are only part of your total cost. You also need to look at plan premiums and annual deductibles. Because you take no medications now, I’d suggest you look for a low-premium plan. Even if it has steeper co-pays than other plans, you aren’t going to be using them. In later years, the odds are that your need for medications will increase. If that occurs, you can switch to a different drug plan during Medicare’s open enrollment season, which runs each year from Oct. 15 through Dec. 7.

You also should review the different Medigap plans carefully. Medigap, by the way, doesn’t help pay for uncovered Part D expenses. It only helps out with Part A and B costs.

Your overall objective here is to get the coverage you want with the lowest annual out-of-pocket expense. My book explains all this is detail. It’s not free, although I will admit when pressed that you can take it out from your local library!

Vicki – Va.: I am a federal employee and have a federal retiree health plan. When I turned 65 last year, I was bombarded with letters and emails and phone calls stating that if I do not sign up for Medicare by the time I turned 65, and signed up later, there would be a 20 percent add-on penalty for the rest of my life. But my insurer and my doctor tell me I should not get Part B, because I will have my federal insurance for the rest of my life. They also said I should keep Part A, for which I pay no premium, and that it will cover my hospital bills and my federal policy will pick up any co-pays. What’s your advice about Part B? While I haven’t gotten it, my husband did. He also has federal health insurance, and wonders how he can drop Part B.

Phil Moeller: Many federal retiree plans are “good” enough so that you will not need Medicare. However, many people do get Medicare in addition to their federal retiree plans. Others just assume they “need” it because some insurance company tells them, or, as in your case, scares them with talk of lifetime late-enrollment penalties.

It certainly is true that someone eligible for Medicare at 65 would face late-enrollment premium penalties if they don’t sign up during their initial Medicare enrollment period. These penalties, which do last as long as a person has Medicare, are 10 percent a year for Part B premiums and 1 percent a month for Part D drug plans.

However, if you don’t really need Medicare, why worry about penalties that will never come into play? So, if you’re satisfied with your federal coverage, I’d go ahead and terminate Part B.

Social Security handles Part B disenrollments. Here are its instructions, and here is the form your husband will need to complete.

I agree that it makes sense to keep Part A.

Felicia: I am nearly 63, and stopped working when I was 60. I receive alimony, which should continue until I reach full retirement age (FRA) at 66. This is enough for me to live on, so for the most part, I have not needed to access my retirement savings for daily living expenses. However, my ex-husband recently advised me he may lose his job, or face a major pay cut. This would mean the end or at least a big reduction in my alimony.

I have looked at my Social Security estimates online, and of course I could begin to collect now. There is also an estimate that shows what I would receive if I wait until my FRA to collect. Here is my question: The website bases my FRA benefits on making similar contributions for the next four years until I am 66. Since I am not working and not making contributions, I assume the estimate for age 66 is not correct. But I can’t figure out what happens to my benefit at 66 if I make no contributions. If it won’t change much, I am probably better off taking my Social Security now if I need it. If my benefit does not increase over the next four years, why wait? Or am I missing something?

Phil Moeller: At your age, Social Security will have estimated your benefits on earnings up to the age of 60, so your lack of work since that age will not be a factor. If you had continued working past that age, your benefits would only rise if your later earnings in any single year were large enough to merit inclusion as one of your top 35 earnings years. Any benefit boost would be minor.

So, the odds are that these FRA estimates are not far off the mark, even with you not working since age 60.

The biggest reason for delaying benefits is not the one you cite but that your annual benefits will rise by 7-8 percent a year – after accounting for any inflation — from your current age up to age 70, when they reach their maximum level. Holding out as long as you can will help a lot.

I advise people to seriously consider spending down their retirement balances if it allows them to delay Social Security and boost their lifetime benefits.

I know it’s scary to spend savings that may never come back. But Social Security is the only benefit I know that rises in value every year, is guaranteed by the federal government (yes, that’s hardly the confidence-inspiring fact it once was), and is taxed at rates more favorable than ordinary income from most investment accounts.

Melissa: My boyfriend is 65 and is on his large employer’s health care policy. He has a job offer from another company, where he will be covered as well. That new coverage does not begin until 60 days of continuous employment. So, if he were under 65, he’d just take the COBRA to cover that gap in coverage. However, since he is Medicare-eligible, the COBRA would be secondary and if he doesn’t sign up for Medicare Parts A and B for just two months — is that even possible? — he would be left essentially without coverage, as I understand it. What should he do?

Phil Moeller: I forwarded your question to Medicare experts at the State Health Insurance Assistance Program (SHIP), which provides free Medicare counseling to consumers. Here is SHIP’s response:

In this case, our understanding is that he should just take the COBRA for two months (unless his new employer group plan will require him to take Medicare anyway, in which case he may as well sign up for Medicare to begin with). COBRA should be primary since he doesn’t yet have Medicare. If he did have Medicare, then COBRA would become secondary.

This answers hinges on the fact that after ending his old job, he would have a special enrollment period in Medicare that would extend for eight months. Because he knows he is going to get a new job, and be offered health insurance there, he does not need to apply for Medicare right now, even though he is 65. He can get COBRA for this two-month period and it will be his primary insurance.

Later, when his new employer plan takes effect, he can drop the COBRA without running afoul of Medicare’s enrollment rules. When he eventually retires or leaves the new job, he will have another eight-month Medicare enrollment window.

Robin – Texas: My husband and I are on Social Security Disability and also Medicare Part A and B. We are both 57 years old, and my husband is two weeks older than me. My disability payment is larger than his. What happens when my husband turns 65? He will turn 65 two weeks before me. Will I lose my ability to draw my own benefit by having to draw a spousal benefit based on his? Will he? Or will we both be able to still draw our full Social Security? Will it change from disability to regular Social Security? We barely receive enough to survive on as it is, and any cuts would devastate us.

Phil Moeller: Your respective disability payments are based on your own Social Security earnings records, and thus should not be affected by what happens to the other spouse. Because you are both already receiving benefits, spousal benefits would not be involved unless one of you had earned a lot more money than the other prior to going on disability. Even if that was the case, spousal benefits would only be awarded if they increased your overall payment. Social Security should never award a new benefit if it resulted in reducing the benefit you already were receiving.

When you reach your full retirement age — 67 for anyone born in 1960 or later; 66 years and 10 months for someone born in 1959 — your disability payments will automatically convert into regular Social Security benefits. To emphasize, this does not happen at age 65 but at full retirement age.