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A Four Step Guide to Understanding Medicare
Every fall each Medicare beneficiary will get a big Medicare and You handbook in the mail. It's full of confusing terms and breakdowns of numbers that are only vaguely recognizable. And this comes in the middle of all the ads for all existing insurance companies. It can be overwhelming, and there's no clear way to tell what can be thrown away and what should be kept.
Being new to Medicare, it can be overwhelming and difficult. This is particularly true if the years prior have been spent on an employer or work-provided insurance plan where the options are clear or set in stone. Upon age sixty-five, everything changes and all of a sudden the options feel endless.
You Are Not Alone, We Are Here to Help!
It's quite common to feel frustrated or overwhelmed by the process. And that's okay. That's why we are here, to relive what may feel like a burden.
This article will outline Medicare in four brief steps to give as much clarification as possible, as simply as possible.
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1. Medicare Basics
Most Americans qualify for Medicare as soon as they turn sixty-five. This includes permanent residents who have lived in the United States for at least five years. If on disability for twenty-four months of Social Security disability, Medicare typically goes into place automatically, despite age.
Next we'll start with Original Medicare. Once you have a basic understanding, then it is time to look at the other types of Medicare plans to figure out which type of additional coverage makes the most sense for you.
Original Medicare consists of Part A and Part B.
Parts A and B are both provided by the Federal government and handled by the same offices as Social Security.
Make a note: mail received from the Social Security office is mail to keep and review later, as well as information and mail from the Centers for Medicare and Medicaid Services.
The Parts of Medicare
Part A is Hospital Coverage. It pays for room and board at hospitals or skilled nursing facilities.
Part B covers Outpatient Coverage. Outpatient coverage includes almost everything else: doctor visits, equipment, lab-work, surgeries, durable medical equipment, diagnostic tests, etc. Keep in mind these things are only partially covered as you would still be responsible to pay a coinsurance, or percentage of the cost out of pocket.
Next, it is important to understand Part D. Part D represents prescription drugs coverage. When enrolled in a stand-alone Part D plan, a card from that insurance carrier would arrive by mail to be used at the pharmacy when purchasing medication. Part D is a very important piece of the Medicare puzzle even if you do not take any prescription medication. Going without a “creditable” Part D plan, can result in the government penalizing that person for each month they go without part D coverage. This penalty would kick in once a Part D plan has been purchased.
On the first day of the month someone turns sixty-five they become eligible for these three parts of Medicare. It might be earlier if on disability coverage too.
2. Medicare Costs
Time to answer some important questions: what are the costs involved? It is important to understand what costs come into play. If someone plans to continue working past sixty-five for an employer with health benefits, there is no need to enroll into Medicare Part B until retirement. There is no penalty as long as that person continues working and keeps the creditable group health coverage.
Part A of Medicare is free for most people. If you or a spouse have worked for at least ten years in the United States, Medicare Part A will come at no additional cost.
Costs for Part B
Part B comes with an additional monthly plan premium, based on income.
In 2020, Medicare's base rate for new beneficiaries is $144.60 per month.
People in higher income brackets will pay an "income adjustment” and will typically pay more for their Part B and/or D premium. Social Security bases this on tax returns from the two previous years to determine this income adjustment and will notify someone directly with exactly what the Part B premium will be.
If there has been a drop in income, you may file a reconsideration request to try to get a lower rate. Proof of lowered income will be needed, such as pay stubs. Social Security will consider the request and decide if they can lower it.
Social Security will deduct that Part B premium from your monthly income benefits. Take note: if not yet drawing from Social Security, an invoice for Part B on a quarterly basis. Once you begin drawing on Social Security income, this will change to a monthly automatic payment.
Is Part B Necessary?
If Medicare will be the primary insurance after you turn sixty-five, Part B is necessary. You can't enroll into a Medicare supplemental insurance or Medicare Advantage plan unless both Part A and Part B of Medicare are in place.
Again, if planning to continue working after turning sixty-five and stay on your employer's insurance, making Medicare your secondary insurance, you may delay Part B without a problem. Just check with a qualified agent to see if that would make sense for you.
Costs for Part D
Medicare Part D has premiums that vary based on location and what is available. As with Part B, beneficiaries may also pay more if they fall into a higher tax bracket.
The national average cost for Part D premiums is around $35 per month. It varies from state to state, and may be higher or lower.
There are options. You can request that Social Security pays Part D premiums directly to the insurance carrier to avoid that every month. Any surcharge from an income adjustment will be added to Part D monthly premium.
To find the most appropriate Part D plan or to estimate your prescription drug costs, be sure to talk directly with a licensed Medicare insurance agent.
3. What’s Covered and What’s Not
Medicare pays for most health care costs. The beneficiary’s share comes in the form of deductibles, coinsurance, and copays.
If coming from an employer health plan, costs can vary significantly. Paycheck deductions would purchase your insurance. A copay or some other fee would be required at the time of your doctor's visits, and there may be a coinsurance after surgery or hospital stays.
Medicare works similarly.
What Medicare Pays For:
Part A pays for the first sixty days in the hospital. The share the beneficiary is responsible for will come in the form of a deductible. In 2020 that will be a deductible of $1,408, and is subject to change each year. After sixty consecutive days in the hospital, Medicare will pay gradually less and you will be responsible for more. It could potentially mean hundreds of dollars per day, so you may benefit from a Medicare Supplement Insurance Plan.
Part B pays for outpatient care. It includes things like doctor checkups, lab-work, imaging tests, surgeries, medical equipment, and things like chemotherapy and dialysis. The beneficiary will pay a small deductible once per year ($198 in 2020), then Part B will cover 80% of the remaining outpatient medical expenses.
The beneficiary is responsible for the other 20% of outpatient services. There's no cap on the dollar amount, so it can become expensive fast for things like surgery or cancer treatment. Choosing additional health insurance coverage can reduce these out of pocket costs.
Part D is designed to help cover prescription medications. That means medications to be picked up at pharmacies or through the mail. Part D probably won't require any supplemental plans to enhance its coverage. Its designed to make it so you won't need to pay for a hundred percent of your medication.
4. Understand Your Additional Coverage Options
It's time to talk about Medicare Advantage plans and Medigap plans, which enhance your Medicare coverage.
Medigap Plans (also called Medicare supplements)
Medigap plans are designed to fill in the gaps from what Medicare does not cover. They pay for things that you might normally be responsible for, like that 20% of bigger medical expenses we mentioned above. Medicare covers the 80%, then Medigap will cover the other 20% of outpatient expenses handled by Part B of Medicare.
Some Medigap plans also cover Part A and B deductibles.
With a Medigap plan, the choice of medical professionals to visit is available, as long as they are willing to accept you as a “Medicare patient.” Medicare works with nearly 900,000 medical professionals across the country.
Medigap plans typically require a higher monthly plan premium, with little to nothing additional out of pocket above the premium. They do not include Part D prescription drug coverage. That would need to purchase that separately.
Medicare Advantage Plans (also called Part C)
Told you we'd get to Part C.
Medicare Advantage plans, or Part C, are additional health plans that can come with a premium as low as $0. These plans are provided through private insurance carriers and become the primary insurance, instead of Medicare. They can offer large networks of providers as well as additional benefits and services above and beyond what Medicare covers. Get in touch with us to help figure out the best details of a Part C plan to suit your needs.
On a Medicare Advantage plan, the beneficiary is typically responsible for a small copay paid directly to the provider at the time of medical services. You pay for co-pays, hospital stays, and a handful of other Medicare-approved services. You're agreeing to share more costs of your medical expenses as a trade-off for lower monthly premiums.
A Part D prescription drug plan is included in most Medicare Advantage plans at no additional cost per month.
Ask yourself a few questions while choosing between plans. Which plans do my preferred providers work with? Do I plan to travel? What will give me the most peace of mind? What are the most important services to me?
The right plan is available and please do not hesitate to contact us to help you find it!
So what mail should you keep and what should you toss:
Save mail from the government, especially anything from the Social Security Administration or the Centers for Medicare & Medicaid Services. Mail from those organizations generally has information about Original Medicare benefits. Keep them for review.
Review the fourth step of the above process and see whether any of the ads will be useful in light of that information. If so, feel free to keep them. But even if you throw them away, getting in touch with a qualified insurance agent who specializes in Medicare, will be your best bet. They will have information about plans available to you in your area.
Likewise with any mailers relating to Part D. The mailings received are not a one size fits all. They provide a general overview to assist in making an informed choice.
Get in contact with us and let us be an ally through the process, leaving you in confident control of your healthcare!
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