MEDICARE BASICS

What is Medicare?

Medicare program is a health insurance program controlled and run by the federal government of the United States of America. Generally, it covers U.S. residents age 65 or older. It also covers some people under age 65 with certain disabilities.

The Centers for Medicare and Medicaid Services (CMS) is the federal agency that administers the Medicare program. CMS falls within the United States Department of Health and Human Services (HHS). When the Medicare program was first enacted, the Social Security Administration (SSA) was responsible for the collection and processing of premium payments for all Medicare beneficiaries.

Medicare is divided in four parts

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Medicare Part A – (Hospital Insurance)

 

Helps cover expenses for

  • Inpatient hospital care
  • Skilled nursing facility care
  • Hospice Care
  • Home Health Care

Typically, there is no monthly premium for individuals with more than 40 quarters of credits accumulated with Social Security (generally this requires about 10 years of full-time work in the U.S.), and those eligible for Social Security or Railroad Retirement benefits. Contact the Social Security Administration to learn more about your individual credits.

Enrollment in Part A is usually automatic when you either turn age 65, or if you have been on Social Security Disability for 24 months or longer.  To find out if you have to pay a premium for Part A, call (800) MEDICARE or visit www.Medicare.gov.  

Medicare Part B – (Medical Insurance)

Helps cover expenses for

  • Outpatient care, urgent care
  • Most services from health care providers like doctors, nurse practitioners, physician’s assistants, and others
  • Some home health care
  • Durable medical equipment
  • Some preventative services such as laboratory tests
  • Some outpatient physical/speech therapy, medical supplies and equipment, ambulance

Costs of Part B

The standard monthly premium is $134 (in 2017) for most individuals with incomes less than $85,000 per year.  Social Security Administration will tell you the exact amount you will pay.  

Enrollment in Part B is optional.  You may choose to delay enrollment under special circumstances approved by Medicare.  A few of those circumstances include

  • You are still actively employed and covered by an employer health plan with 20 or more employees.
  • Your spouse is actively employed and covered by an employer health plan with 20 or more employees.
  • You or your spouse are on active-duty military service and covered by TRICARE

Late Enrollment Penalty

Some people choose not to enroll in Part B when they first become eligible for Medicare.  Medicare has a Late Enrollment Penalty for people who delay enrollment without a valid reason.  Delaying enrollment in Part B may result in a beneficiary having to pay a penalty.  This penalty is not a simple fee that is paid one time.  This late enrollment penalty is paid in addition to your regular monthly premium every month for the rest of your life.

There are a few reasons why some people choose not to enroll in Part B when they are first eligible.  A common reason is cost savings.  Every Medicare beneficiary should be cautious about not enrolling in Part B.  They may save money in the short term, but they also risk having to pay a substantial penalty if they enroll later.  

If you have limited income and resources, you may qualify for help from your state for Part A, and/or Part B.  Contact your state Medicaid office for details.  You may also qualify for Extra Help.

WARNING:  You may pay a penalty if you delay enrollment in Part B when you’re first eligible.  You’ll have to pay that penalty for as long as you’re enrolled in Part B.  Go to  www.medicare.gov for detailed information.

Medicare Part C – (Medicare Advantage)

Characteristics

  • Run by private insurance companies approved by Medicare 
  • Must include at least all benefits and services covered under Part A and Part B
  • May include prescription drug coverage as part of the plan
  • May also include optional added benefits and services at additional costs
  • Plans are based on geographic areas (may not be available in some areas)
  • Sometimes the same company offers different plans within a single area
  • Also called MA (Medicare Advantage) or MAPD (Medicare Advantage Prescription Drug) plans
  • Completely optional
  • Limits on when you can enroll/change plans
  • NOT THE SAME AS MEDICARE SUPPLEMENT (MEDIGAP) PLANS

Costs of Part C

These plans may or may not have a monthly premium.  The monthly premium is decided by the different insurance companies offering plans in each area.  Each plan has its own summary of benefits which lists the cost of copays, coinsurance, and deductibles as well as other benefits included in the plan.  These plans also guarantee a specified dollar limit that your medical costs cannot exceed each year.  This is called Maximum Out Of Pocket (MOOP) costs.  Many plans have a MOOP of $6,700 per calendar year in some areas.  Prescription drug costs are NOT included in the MOOP.  

Prescription Drugs Sometimes Included

These plans may include prescription drug coverage as part of the plan.  This coverage will be similar to a Part D drug plan, in that they will have list of covered drugs called a Formulary.  Every drug in the formulary will fall within a tier system where the higher tiers generally cost more.  Additionally, the cost of these drugs (copays/coinsurance/deductibles) are not added into the MOOP costs for the plan.  Prescription drug costs will have their own separate limits similar to Part D plans.  (see Part D Plans for more details)

Compare Medicare Advantage Plans Carefully

These plans may vary widely, so it is important to compare amongst the different plans carefully before enrolling.  The same company may offer multiple plans in a single area with different costs, network limitations, and covered benefits.  An area may even have multiple companies offering many different plans, so it can be difficult to compare plans and companies due to the variety of coverages.  It is highly recommended that you consult a licensed insurance agent that knows all the plans in your area and can explain the differences.

How is Medicare Advantage Different?

When you enroll in a MA/MAPD plan, then you agree to leave Original Medicare.  This means that even though you are still enrolled in the Medicare Program, Original Medicare will no longer be your payer for your health care costs.  You agree to have the private insurance company control all of your health care.

When can I enroll or change plans?

Initial Enrollment Period

There are specific times when you may enroll in these plans. This is when you can enroll

  • During the 7 month period that
    • Begins 3 months before the month you turn age 65
    • Includes the month you turn age 65
    • Ends 3 months after the month you turn age 65

Changing Plans or Companies

Generally, after you have already been enrolled in one of these plans, you can only change plans or companies one time during the calendar year.

  • For most people this time is called “Annual Enrollment Period” (AEP)
  • Starts October 15 and ends December 17
  • Changes to your plan during this period take effect January 1 of the following year
  • Special Enrollment Periods (scroll down to learn more)

These are generally the only times of year that you may make changes to your Part C (Medicare Advantage) Plan.

Special Enrollment Periods (SEP’s)

Medicare also allows special times when you may choose to make a change to your plan.  These are called Special Enrollment Periods (SEP’s).  

Some of these SEP’s are:

  • Moved to a new address outside your current plan’s service area
  • Recently became eligible for Medicaid in your state, and currently enrolled in Medicare
  • No longer eligible for Medicaid in your state, and currently enrolled in Medicare.
  • My current plan is terminated by Medicare
  • I’m eligible for both Medicare and Medicaid
  • I qualify for Extra Help for Medicare prescription drug coverage
  • Go to www.Medicare.gov for other options

IF YOU WANT TO KNOW IF YOU QUALIFY FOR ONE OF THESE SPECIAL ENROLLMENT PERIODS, THEN CALL US IMMEDIATELY.  (800) 454-1035

Medicare Advantage Plans Have Rules

There are a few rules that beneficiaries must abide by.  Here are some rules:

  • You must be enrolled in both Medicare Part A and B and live within the plan’s service area.
  • Must use network providers and facilities.  You may still use providers/facilities outside the plan’s network, however, YOU may be responsible to pay 100% of those costs.  Neither Medicare nor the insurance company is obligated to pay these costs.  Always check with your insurance company before obtaining services from ANY provider/facility if you are not sure!
  • Only one health underwriting question.  (Have You Been Diagnosed with End-Stage Renal Disease?)
  • For many plans you must choose a Primary Care Physician (PCP).  Your PCP oversees all of your healthcare.  You must obtain a referral from your PCP before seeing a specialist, even if the specialist is in-network.  
  • Must obtain prior authorization for certain kinds of health care procedures.

When you see your network providers, be sure to let them know what plan you are enrolled in a Medicare Advantage plan.  Your insurance company will send you a special card that will usually list your plan name and/or policy number.  You should give this membership card to your providers whenever you receive care so they know who to bill.  You should not give your Medicare card to your providers otherwise you may experience billing problems.  

TIP:  Many people mistakenly believe these are the same as a Medicare Supplement or Medigap plans.  Part C (Medicare Advantage) plans are not the same as Medicare Supplements.  The two plans are very different.

WARNING:  You may choose either Original Medicare (with a Medicare Supplement), or a Medicare Advantage plan.  It is illegal for anyone to sell you a Medicare Supplement plan if they know you are currently enrolled in a Medicare Advantage plan.  Some Medicare beneficiaries falsely believe they can have both a Medicare Supplement plan AND a Medicare Advantage plan simultaneously.  This is NOT allowed by Medicare!  

Medicare Part D – (Prescription Drug Plans or PDP)

Characteristics of Part D plans:

  • Stand-alone plans that include prescription drug coverage to Original Medicare
  • These plans are run entirely by Medicare-approved private
    insurance companies
  • Helps cover some or all of the cost of prescription drugs
  • These plans may assist you with lowering the cost of your prescription drugs and may also protect against higher costs in the future

Each plan has its own special list of covered drugs called a Formulary. Drugs in these plans are placed into different price categories called Tiers. Generally, the lower tiered drugs tend to have lower costs, and the higher tiered drugs have higher costs.  

Costs of Part D

There is no standardized premium for these plans.  The premiums are set by the insurance companies that offer them.  You can choose to pay your premiums either by deducting from your Social Security payment or pay the insurance company directly.  

Late Enrollment Penalty

Many people choose to delay enrollment into a Part D plan when they become eligible for Medicare.  Medicare imposes a penalty for beneficiaries who choose to delay enrollment.  There are exemptions such as those who are currently enrolled in an employer health insurance plan and still actively working.  If you do not qualify for one of those exemptions then you may have to pay a penalty.  This penalty is not a one-time penalty, it is LIFETIME.  If you have Medicare and you have not already enrolled in Part D coverage then you should contact Medicare to find out if you must pay a penalty.  

Coverage Gap (Donut Hole)

The coverage gap, also called “Donut Hole” represents a particular cost phase where you as the beneficiary are responsible for paying a significantly higher portion of the cost than in the beginning phases.  See www.medicare.gov for coverage gap in the current year.

This is often the most confusing part of Medicare, so it’s important to understand.  

Eligibility

Your eligibility for Part D is generally the same as all other parts of Medicare.  

CHOOSING COVERAGE

What Are Your Basic Choices?

Most people choose one of the two main options shown in the image below.  

As mentioned previously, it is very important to understand that you must choose ONLY ONE of these two general options. Medicare does not allow you to be covered by Original Medicare AND Medicare Advantage at the same time. If you choose the Original Medicare option, then Medicare becomes your primary payer (if you don’t have an employer plan). If you choose the Medicare Advantage option then your Insurance company manages all your health care and you will be subject to the costs listed in the Summary of Benefits.

Medicare Supplements (also called Medigap)

What are the “Gaps”?

Medicare helps pay for a large portion of health care costs but it was never intended to pay all of them.  Medicare has many limitations which are calledGaps”.

These are the “Gaps” or “Holes” in Original Medicare:

  • Part A Hospital Deductible
    • You are responsible for paying if admitted in hospital
      • $1,340 in 2018 (was $1,316 in 2017)
      • NOT an annual or one-time deductible (based on benefit period of 60+ days, so you may need to pay this several times per year depending on how many times you’re admitted to the hospital)
  • Part A Hospital Coinsurance or Copayment
    • Days 61-90 = You pay $335 PER DAY in 2018 (was $329 in 2017)
    • Days 91 or more = You Pay $670 PER DAY in 2018 (was $658 in 2017) for each lifetime reserve day after the 90th day of the benefit period
  • Blood (first 3 pints)
  • Part A Hospice care coinsurance or copayment
  • Skilled nursing facility care coinsurance = $167.50 in 2018 (was $164.50 in 2017)
  • Part A deductible
  • Part B Deductible = $183 (2018)
  • Part B excess charges
  • Foreign travel emergency coverage

Medigap Insurance

Medigap (Medicare Supplement) Insurance is health insurance offered by private insurance companies to help pay some of the Gaps mentioned above.  There are many laws created by both federal and state governments designed to protect you as the Medicare beneficiary.  

Medigap plans are standardized by Medicare.  These standardized plans are identified as letters A through N and must offer the same benefits regardless of which company offers/sells that plan.  Companies are not allowed to make any changes to these standardized plans.  All companies offer the exact same benefits within each plan letter.  

Costs of Medigap

Because Medigap policies are separate from Medicare plans, they require a separate premium.  All Medigap plans have a premium that must be paid to the insurance company directly.  Many companies offer discounts for paying premiums by monthly Electronic Funds Transfer (EFT) from your bank or other financial institution.  Premiums vary widely from plan-to-plan, and company-to-company.  It is important to compare costs between each company as well as each plan letter in your area.  

Choosing a Medigap Company

Because according to the publication:2016 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare page 9 says, “Cost is usually the only difference between Medigap policies with the same letter sold by different insurance companies.”  According to Medicare’s own publication, this states that COST is the only difference between different companies within the same plan letter.  So essentially if ABC Company and XYZ Company both offer a Medigap Plan G, and the benefits are identical between the two companies, then cost is the only difference between these companies.  So if cost is the only difference between companies in most cases.  There are a few other factors to consider such as the financial strength of the company and how long they have been in business.

Which Medigap Plan is for YOU?

These are the standardized plans

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Medigap Must-Know’s

Medigap plans are a great way to cover all of the gaps in Original Medicare but there are a few things you need to understand.  Not everyone is eligible for a Medigap policy.  Here are some eligibility requirements:

Here are some things to keep in mind:

  • If you are turning 65 for the first time, you are guaranteed acceptance into any Medigap Plan letter you choose without being subject to the company’s underwriting.
  • Must have Medicare Parts A & B
  • Cannot be enrolled in a Medicare Advantage Plan (Medicare Part C) while also being enrolled in a Medigap plan
  • Medigap plans do not cover certain gaps in Medicare such as Dental, Vision, Hearing, Long-term Care, and private-duty nursing care
  • Once your Medigap policy is approved and issued, your plan is now guaranteed renewable for as long as you continue to pay your premiums (however, the company has the right to increase your premiums)
  • Medigap plans DO NOT cover prescription drugs (you may need to get Part D drug coverage separately)
  • The Medigap company cannot alter or change the covered benefits in the plan you are currently enrolled in (even if Medicare discontinues a plan)
  • There are many companies offering Medicare Supplement plans and you may purchase a Medigap plan from any of those that are licensed to offer it in your resident state

Employer Plans, Veterans, & Military

Medicare and Employer Health Plans

Most people should enroll in both Medicare Part A & B when they first become eligible. However, some people with employer plans may choose to delay Part B.  The reason for delaying Part B is because many employer plans already cover the same benefits covered under Part B.  However, the employer plan may also include additional benefits such as prescription drug coverage or other benefits that far exceed those covered under Medicare Part B.

WARNING: Enrolling in Part B of Medicare can cancel your employer plan and you may not be able to get it back.  If you are turning age 65 and have an employer health insurance plan and still actively employed, then you should consult with your employer health benefits department before enrolling in Medicare Part B.  

Veterans and Military

Most Veterans should enroll in both Part A and Part B when they first become eligible.  If you are a Veteran and have Veterans’ benefits then you should also be entitled to Medicare.  In this case Medicare will pay for Medicare-covered services.  The Department of Veterans Affairs (VA) typically pays for VA-authorized services.  

Military retirees may also belong to TRICARE.  Those who belong to TRICARE are usually also eligible for Medicare.  Medicare pays for Medicare-covered services, and TRICARE pays for services from a military hospital or some other qualified federal provider.  However, TRICARE may be the secondary payer, while Medicare is the primary.  

NOTE:  If you are a Military retiree you may be enrolled in TRICARE.  When you turn age 65 you should still enroll in Medicare.  Your TRICARE continues to stay with you in addition to Medicare.  For more detailed information, visit: www.tricare.mil