What You Need to Know About Medicare
Original Medicare is a national health insurance program for the Elderly and for the permanently disabled. Medicare was signed into law in the ’60s by Lyndon Johnson and has changed very little over the decades. The Centers for Medicare and Medicaid Services(CMS) runs the Medicare program and administers claims and benefits.
Medicare functions and is structured very similarly to private health insurance and is based on a national fee-for-service framework. This means original Medicare has a negotiable fee schedule they update on an annual basis with the provider community and varies based on the region of the country in which you live. Original Medicare works in every state in the nation including Hawaii and Alaska, making it truly national in scope versus private insurance plans that normally have a regional or geographic framework.
Below, are some of the most questions asked of Medicare:
What does Medicare Cover?
Original Medicare is comprised of 3 distinct parts. Medicare Part A is hospitalization and skilled nursing facility care. Medicare Part B is anything under sun medical related. This would include doctor visits, surgical expenses, anesthesiologist charges, durable medical equipment, medications while admitted to the hospital, and the like. Medicare Part D is separate coverage under original Medicare and is designed to cover the cost of outpatient prescription drugs.
Part A Hospital coverage is limited by the number of covered lifetime reserve days under Medicare. This means these Hospital days are cumulative and add up against you. The first 60 days in the hospital are covered 100% aside from a per admittance deductible. This deductible will increase annually with inflation. From days 61 to 90 and 91 to 150 lifetime reserve days Medicare covers all the approved hospital charges except for a daily coinsurance amount. This too will typically be adjusted upward slightly every year to keep pace with Medical inflation. Please request a current outline of coverage to see the exact deductible and coinsurance dollar amounts for the current year. Once you go beyond 150 lifetime reserve days under Medicare you or your supplemental insurance plan are responsible for 100% of the cost of Medicare-approved charges as Medicare does not cover these charges beyond the 150th lifetime reserve day. A more detailed description of these additional lifetime reserve days are discussed under the Medicare Supplement Insurance section of the website.
Part A also covers some of the approved charges for Medicare Approved Skilled nursing confinement. Many times hospital confinement will include a recommendation by a health care provider for a certain number of days of skilled nursing confinement in order to rehabilitate the patient, ensuring they are well enough to care for themselves before they are released by the provider. Medicare covers the first 20 days of skilled nursing confinement in full assuming the confinement is approved by Medicare. From days 21 to 100 per benefit period, Medicare covers all the approved charges aside from a daily coinsurance amount. This daily amount is adjusted annually for inflation and can be found under a current outline of coverage. To request your outline of coverage please call us or complete one of our contact forms online and one of our agents will be more than happy to email you one.
Lastly, Medicare A covers 100% of the cost for hospice care for the terminally ill. If your doctor diagnoses you as being terminal with 12 months or less to live then Medicare would place you under hospice care and cover all covered hospital related charges at 100%, leaving you with very little if anything to pay for.
Medicare Part B covers all your Medicare-approved Medical insurance charges at 80% subject to a nominal annual deductible. Unlike the hospital part A deductible, this part B deductible is only applicable once per year regardless of the number of times you utilize services. Medicare does reserve the right to increase this annual deductible once per year to keep pace with medical inflation so, check with us about getting a current Medicare Supplement Outline of coverage to determine exactly what the current years’ part B deductible amount is. Also unlike the hospital days under Medicare Part A, the Medicare Part B coinsurance amount of 80% is unlimited over your lifetime. This means you do not need to worry about exceeding any predetermined annual or lifetime limits set by CMS or Medicare. Once the Medicare part B annual deductible is satisfied, Medicare will pay 80% of the covered part B medical expenses for the remainder of the year leaving you or your Medigap policy responsible for the 20% coinsurance amount left off by Medicare.
We will cover this 80/20 rule in more detail under the “Medicare Supplement Plans” section of the site. One final consideration you should be made aware of with regard to part B expenses is Medicare contains a predetermined fee schedule for what amounts they will approve to pay and the 80/20 percentage is based upon this approved amount. Providers have the ability to accept or deny Medicare patients. For those providers accepting Medicare patients, the vast majority accept this payment schedule. These providers are known as providers who accept Medicare “assignment” and do not charge in excess of the Medicare-approved amounts. However, some providers who do not accept Medicare assignment are technically allowed to charge in excess of what Medicare approves but by only 15%. As a consequence, most providers either accept the assignment or choose not to take on new Medicare patients if they are unhappy with Medicare’s reimbursement rates. Very few providers will accept Medicare but not the assignment. However, in the unlikely event, you are treated by one of these providers you must know some of the supplemental insurance plans will cover these excess charges while others will not. See a current outline of coverage to discover which plans do and do not cover these excess charges.
Medicare Part D is your outpatient prescription drug coverage and was added to original Medicare back in 2006 with the Medicare Modernization Act. Before this time, many Seniors were forced to go to Canada or come out of pocket thousands of dollars per year for all their outpatient prescription costs. Fortunately, you now have benefits for your medications under Medicare and looks very similar to prescription coverage you may have had under a group or employer-sponsored insurance plan. Medicare contracts with private insurance carriers like Blue Cross Blue Shield, Cigna, Aetna, Humana, United Health Care, and others to administer your Medicare Part D prescription benefits. So, you will typically sign up with a private insurance carrier like the aforementioned ones above who will then administer your federally funded part D program on Medicare’s behalf.
Under these plans, you may have an annual deductible then have just a copayment for medications similar to other forms of RX coverage through other types of health insurance. Your copay and deductible will vary depending on the Medicare Part D plan you select and, each carrier will have a different formulary. A formulary refers to the plans’ system for classifying medications in each federally recognized therapeutic class. For example, Lipitor, a very widely used cholesterol-lowering medication, may be classified as a Tier 1 generic medication under “XYZ” drug plan versus Tier III status under “ABC” plan. This means each medication can vary significantly in terms of copayments and out of pocket expenditure based solely on the Tier classification under the plans’ formulary.
All part D drug plans classify drugs based on a 5 tiered system. Tier I and II related medications are going to be your least expensive generic or preferred generic drugs. Tier II medications are your “preferred brand name medications and will carry a higher copayment and will normally be subject to an annual deductible if your plan has one. Tier IV and V medications are your non-preferred brand and high technology related medications. IV and V tiered drugs are your most expensive medication and will have the highest allowable copayment or coinsurance percentage you would be responsible for.
When Congress established Part D they also created a coverage gap known as the “Donut Hole”. This coverage gap was created so Part D could be effectively scored and pass the Congressional Budget Office’s scoring on deficits and deficit reduction. Fortunately for Seniors with high prescription drug costs, this gap will be completely eliminated by the plan year 2020. If you think you might fall into the donut hole or need a quote, please call one of our agents or complete a contact form. Please be sure to send us a list of your medications including the name of drug, dosage, and quantity. We will then log into www.medicare.gov to enter all your medications in order to receive quotes. Medicare has a powerful quoting engine which allows us to assist you in shopping and comparing available part D drug plans in your state based on the medications specific to you. You can also find a more detailed description of coverage amounts and thresholds for part D insurance under “Medicare part D” heading within our website.
What Does Medicare Cost?
US citizens who have worked a total of 40 or more quarters and paid social security and Medicare taxes for these quarters will typically be entitled to participate in the Medicare program. Medicare Part A does not carry a monthly plan premium for US citizens with more than 40 quarters of work history. Part A is funded out of the old age and survivors trust fund and is scheduled to become insolvent after the year 2035 if taxes or other sources if revenue are not increased. Medicare Part B and D do carry a monthly plan premium. Part B medical insurance will cost 134 dollars or more per month depending on your adjusted gross income(AGI). If you or your spouse report very high adjusted gross income then the part B premium may be as high as 500 monthly.
Social security can communicate with the IRS on this type of data and will notify you if your premium is more or less than the standard premium. This is known as the IRMA(Income-related monthly adjustment). One of our licensed agents will have the current IRMA number and can email those over to you or, you may visit www.medicare.gov to download the most current IRMA numbers based upon your AGI. It is important to note this potentially increased premium for Medicare is bracketed and can come down if and when your AGI is ever adjusted downward in retirement. Conversely, this standard monthly plan premium for Medicare part B can be less than 134.00 if your income is very low and you are deemed impoverished.
Medicare Part D premiums are established by the private insurance carriers who administer the plans in each given state and can vary widely from one plan to the next. The IRMA premium would be a monthly deduction in addition to the standard part D statewide premiums imposed by the plans themselves. For non-US citizens or legal immigrants coming into the US, Part A and B carry with them higher premiums than for US citizens with the requisite work history. Medicare’s website will continually keep these premiums current based on the plan year or, you may check with social security as to the exact premiums you would need to pay in order to gain access to Medicare part A, B, and D.
Social Security will typically deduct or withhold part B premiums for Medicare from a social security check each month. If you take Medicare before opting into social security payments then you would make payment arrangements for the Medicare Part B premium back to social security until such time as you begin drawing a social security payment. Once you sign up for Medicare, social security will mail you several options for part B medical insurance premium payments until the time comes when you begin drawing a social security check. When that time comes social security will then begin withholding your premium for part B out of the gross payment you would normally receive. Part D standard premiums can either be paid directly to the plan you sign up with or can be paid by way of social security deduction just like part B medical insurance premiums are. One of our licensed agents can assist you in establishing payment based on your personal preference at the time of application for insurance.
When Should I Enroll in Medicare?
Unlike social security eligibility, Medicare almost always begins the first day of the month in which you turn 65. Yes there are exceptions to this rule, such as persons deemed permanently disabled or those with end-stage renal disease. However, for the vast majority of us, Medicare begins at age 65. You should always enroll under Medicare 90 days before age 65 to ensure proper and timely enrollment without delays or penalties. If you or a spouse is still working full time and plan to continue carrying your employers’ insurance through work beyond the age of 65, you may be able to legally defer Medicare Part B until such time as you or a spouse retires and comes off of the group insurance through work.
You should still enroll in Medicare and opt out of part B only if you plan to carry your employer’s insurance through work and have full-time work status. Social Security will require you to complete a deferral application if you decide to pt out of Medicare at 65. This would be advantageous to defer part B because only part B and D carry the monthly plan premium. So, by opting to continue the employer plan you would effectively be able to put off paying your part B and D premium so long as your employer plan meets minimum requirements for creditable coverage outlined by CMS.
If, on the other hand, you do not have credible insurance coverage on or after the age of 65, you will need to enroll in Medicare Part B and D up to 90 days prior to your birthday to avoid potentially paying stiff penalties. Not only are there penalties for late enrollment under Medicare but, you could wind up having a delay in your effective date. This could mean you may have to wait several months in order to have access to medical or prescription drug insurance! We always recommend enrolling in Medicare when eligible and the process is relatively painless. The easiest way to enroll in Medicare is to go to: www.ssa.gov and click on the link for, “apply for medicare”. This short online application will enable you to effectively enroll under Medicare part B. Or, you can always go in person to your local social security office or contact social security by telephone to enroll. If you should need the number please do not hesitate to call us. One of our friendly agents can look up local social security office numbers for you so, give us a call if you need any contact numbers for Social Security or any other Government entity.
When Can I Enroll in a Medicare Plan?
Medicare Advantage(MAPD Plans) and Medicare Part D(PDP Plans) plans have different enrollment guidelines and timeframes for enrollment than do Medicare Supplement plans so, it is important to know your rights and responsibilities under-enrollment in a Medicare plan. Medicare Advantage and Part D drug plans have a very limited enrollment period called the annual enrollment period(AEP) that runs from October 15th through December 7th of each year. However, if you are new to Medicare or transitioning into Medicare from other insurance for the first time, you may be able to enroll under an initial coverage election period(ICEP) or a special enrollment period(SEP). Applications for MAPD or PDP business during the annual enrollment period(AEP) allow you to enroll in as many plans as you like with the last application received before the deadline of December 7th is the one to become effective.
If however you are new to Medicare and turning 65 or enrolling in Medicare part B for the first time due to transition to Medicare, you have 90 days prior to your Medicare effective date and 90 days after your effective date in which to enroll under a MAPD or PDP. Special enrollment periods outside the normal AEP or ICEP have 63 days before and after the qualifying event to enroll in an advantage plan or part D plan. It is very important you enroll in one of these plans during these time frames. If you miss this opportunity for enrollment you may be locked out without the ability to enroll again until AEP in October of the current year. Certainly, give our office a call or fill out a contact form on our site and one of our licensed agents can review these important enrollment periods with you and can even get an application started for you based on the plan you select.
Medicare Supplements to Original Medicare have a totally separate set of enrollment rules associated with them. Unlike Medicare Advantage plans and Part D Drug plans, Medicare Supplements(also known as Medigap plans) to not require you to enroll in the plan under any specific time frame. You only must be eligible for Medicare Part A and Part B in order to qualify for a supplement. So, this means you can enroll or switch your Medigap policy any time you like! The catch, however, is these plans are medically underwritten. This means the insurance carriers writing Medigap policies can either choose to accept your application or deny your application for insurance based on your health conditions. The exception to this underwriting rule is your initial coverage period when you first become eligible for Medicare Part B.
You have 6 months prior to part B effective date and after to enroll in any Medigap plan of your choosing with no Medical underwriting! This means even if you have a severe heart condition or diabetes, you cannot be denied for a Medigap policy within 6 months of your part B effective date. Whatsmore, a Medigap policy is a guaranteed renewable contract for life. So, once you have a policy you can never be denied for service or dropped from coverage for any reason other than nonpayment of premium! This feature alone makes the Medigap option for coverage more valuable than a Medicare Advantage PLan. However, Supplements do typically come with a higher price tag so, you will normally pay more for these valuable enhancements to coverage. We have several links to quoting engines on our website where you can shop and compare multiple highly rated insurance carriers before you speak or enroll with one of our licensed and AHIP certified Medicare Specialists. Or you can call us and have one of our agents deliver to you customized quotes from several large national insurers for any of these Medicare-related products.
For more information, medicare.org.
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