Chapters

00:00 Introduction to Medicare

00:34 Understanding Medicare Parts

01:50 Choosing Between Original Medicare and Medicare Advantage

03:07 Comparing Medicare with State Health Plans

06:29 Enrollment Process and Important Dates

07:21 What You Need to Know About IRMAA

09:03 Action Items for Medicare Enrollment

09:44 Preview of Next Video and Calls to Action

10:54 Legal Disclaimer

Transcript

Hi everyone, I'm Ryan Earley, vested PERS member, former public school finance officer, current financial planner, and host of the PERS Pro YouTube channel. Today, we will break down what Medicare is, explore the different parts you need to know, compare original Medicare to Medicare Advantage, and see how these options stack up against the Mississippi State and School Employees Health Insurance Plan that PERS members are accustomed to. Let's get started.

What is Medicare? Simply put, Medicare is federal health insurance designed for Americans age 65 and older, though it also covers younger individuals with certain disabilities or conditions like end-stage renal disease. Think of Medicare not as a single plan, but as a suite of options. Depending on what you select, it can cover everything from major surgeries and hospital stays to your monthly prescription drugs and even extra benefits like dental and vision care. There are four primary parts to Medicare that we will discuss today.

So what do each of the Medicare parts mean and what do they cover?  Part A, hospital insurance, this covers room and board in the hospital, skilled nursing facility care, and hospice care. Part B, medical insurance, this covers your doctor visits, lab tests, and preventative services.  Part D, prescription drugs. This is run by private insurance companies approved by Medicare. It helps lower the cost of your medications. Supplemental or Medigap coverage. These are private policies that fill the gaps in original Medicare, like your 20 % coinsurance or your deductibles that we will discuss later in this video. Part C, Medicare Advantage. This is an all-in-one alternative to original Medicare. Private companies bundle Part A, Part B, and usually Part D into one plan often with extra perks like vision or dental coverage.

When you enroll in Medicare, you face a major decision, Original Medicare or Medicare Advantage? When you're standing at this crossroads, the right path depends on how much flexibility you want versus how much you're willing to pay upfront. Let's begin by looking at Doctor Choice. With Original Medicare paired with a Medigap policy, you have the ultimate freedom. You can visit any doctor or hospital in the United States as long as they accept Medicare. With Medicare Advantage, however, you are generally restricted to a specific network of providers.  If you go out of this network, you might pay the full cost yourself. If you travel a lot, this should be a major consideration in your decision making. 

Next, consider prescription drugs. Original Medicare doesn't include drug coverage on its own. So you'll need to purchase a separate Part D plan. Most Medicare Advantage plans bundle that drug coverage right into the main plan. 

Finally, let's talk about financial protection. Original Medicare has no ceiling on what you might pay out of pocket in a bad year.  On the flip side, Medicare Advantage plans are required by law to have an annual out-of-pocket maximum. Once you hit that limit, the plan pays 100 % for the rest of the year. If you don't have excellent health, this should be a major consideration in choosing between Original Medicare without Medigap versus Original Medicare with Medigap versus Medicare Advantage.

So how does Medicare compare to the Blue Cross Blue Shield Mississippi State Health Plan that PERS members are familiar with?  In this table, we are assuming the PERS member is retired and continues carrying Blue Cross Blue Shield state health plan coverage on a retiree only basis as either a legacy or Horizon employee. 

In terms of eligibility, the state retiree plan is generally available to any PERS member who is enrolled at the time of their retirement. Medicare generally requires you to be 65 with a few exceptions like disability. In addition to be eligible for a Medicare Advantage plan, you must be enrolled in parts A and B.

In terms of enrollment, the initial enrollment period for Blue Cross Blue Shield State Health Plan is at the time of retirement. For Original Medicare and Medicare Advantage, the initial enrollment period is a seven-month window, including three months before, the month of, and three months after your 65th birthday. The annual open enrollment period for Blue Cross Blue Shield State Health Plan is October of each year, while the annual enrollment period for Original Medicare is October 15th to December 7th.  And the open enrollment period for Medicare Advantage is January 1st to March 31st. 

Looking at cost, the state retiree plan ranges from $614 to $975 per month, depending on if you are a Legacy or Horizon PERS member. Original Medicare Part A will be free for most, and Part B premiums start at $202.90 per month and can go higher depending on your income. Medicare Advantage premiums will include Part B premiums, plus the Part C premium, for example, in Jackson County, Mississippi, average $13 per month. 

Looking at deductibles. The state health plan sits at $1,800 for individuals for in-network care. Original Medicare Part A has a $1,736 deductible per benefit period, which begins upon hospital admission and ends after 60 consecutive days without inpatient care. Part B has a $283 deductible per calendar year. 

Looking at coinsurance, both the state health plan and original Medicare Part B generally have a 20 % coinsurance clause once a deductible has been met. Original Medicare Part A has a range of coinsurance amounts depending on the length of the inpatient care, ranging from $0 per day for days 0 to 60, $434 per day for days 61 to 90, and $868 per day for days 91 to 150.  Any inpatient care that exceeds 150 days is the responsibility of the patient. 

Now pay close attention to out-of-pocket max. Original Medicare parts A and B have no limit on what you pay out of pocket unless you buy a Medigap policy. The state health plan caps your risk at $6,500 for in-network care and Medicare Advantage plans are required by law not to exceed a specific annual out-of-pocket limit, which for 2026 is $9,250 for in-network providers and $13,900 for combined in and out of network providers. However, providers are allowed to offer lower out-of-pocket maximums, and in Jackson County, Mississippi, for example, the average out-of-pocket maximum across 31 Medicare Advantage plans is $6,634. 

So when and how do you apply for Medicare? As mentioned earlier, your initial enrollment period, or IEP, is a seven-month window.  The three months before you turn 65, your birth month, and the three months after you turn 65. How you apply depends on whether you will be receiving Social Security benefits four months prior to enrolling in Medicare. If you are already receiving Social Security benefits four months prior to your 65th birthday, you'll be enrolled automatically. If not, you must apply manually through Social Security Administration's website at ssa.gov.

Your Medicare coverage effective date depends on when you enroll during your initial enrollment period and the part you're enrolling in. Your Part A coverage will start the month you turn 65, regardless when you sign up during that seven-month initial enrollment period. However, if you want your Part B coverage to start on the first day of your birth month, you must sign up during those first three months before you turn 65. Otherwise, your Part B coverage will take effect the month after enrollment.

Can you continue to work and enroll in Medicare? Yes, but there is an income surcharge called IRMAA you should be aware of. IRMAA stands for Income Related Monthly Adjustment Amount. The way this works is that Medicare looks at your tax return from two years ago to determine your current premium. If your income was high, for example, you were still working full-time or had a large capital gain, you might pay a much higher Part B and Part D premium. 

So for your 2026 coverage, your premiums are actually dictated by the modified adjusted gross income you reported in 2024. To calculate modified adjusted gross income, you take your adjusted gross income from line 11 from your federal tax form 1040, and to that you add tax exempt interest from line 2A. 

As you can see in this table, most people will pay the standard monthly premium of $202.90 for Part B coverage. But once an individual's modified adjusted gross income crosses that $109,000 threshold, or $218,000 for those filing jointly, the costs start to climb. The same methodology applies to Part D premiums. As you can see in the second table, most people will pay the standard monthly premium for Part D coverage. But once an individual's modified adjusted gross income crosses that $109,000 threshold, or $218,000 for those filing jointly, the costs start to climb again, although these increases are a lot less for Part D than the increases we just saw for Part B.

If your income has dropped significantly compared to that two-year-old tax return due to retirement, divorce, death of a spouse, or other eligible event, you can file an appeal using form SSA 44 to report a life-changing event. If approved by Social Security, your premiums will be lowered to match your current income.

If you are getting ready to enroll in Medicare, here are your action items for today. One, mark your calendar. Mark your calendar for when your seven month initial enrollment period is.  Two, begin to compare costs and coverage. Compare your current Mississippi State Health Plan either as an active employee or retiree against original Medicare and Medicare Advantage plans so you can budget for premiums, deductibles, coinsurance, and out-of-pocket maximums. Three, calculate your modified adjusted gross income. Look at your tax return from 2024 and calculate your modified adjusted gross income.  Compare MAGI to the IRMAA thresholds to get an idea if you'll pay a surcharge when it comes time to enrolling in Parts B and Part D. 

I hope this video helps PERS members better understand the basics of Medicare. In our next video, we'll explore how to complete PERS Form 9A Service, Pre-Application for Service Retirement Benefits. Please make sure you subscribe so you don't miss this and other videos in our new retirement series.

If you found this video helpful, can thank me by hitting the thumbs up button and sharing it with other PERS members. If you have a question about PERS or anything else related to personal finance, please visit our website at perspro.ms, click YouTube and submit your question or topic for a future episode. And finally, if you are looking for a financial planner that specializes in helping PERS members plan for retirement, including deciding when to apply for Medicare and what parts to enroll in please visit our website at perspro.ms to learn more about our firm and to schedule your initial consultation. 

Thank you for your valuable public service to the state of Mississippi. We'll see you next time.

Disclaimer, this video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.