Medicare Made Simple

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This is part one of my four part series on Medicare and the basics of what you need to know when you first enter the Medicare world. In part one, we will cover what is referred to as Original Medicare.  In later parts, we will discuss Medicare supplements, Medicare Advantage plans and Medicare Part D (prescription drug plans).

With the current state of uncertainty in individual health plans due to the ever-changing effects of the Affordable Care Act (ACA) and group health plans becoming more and more expensive, the thought of aging into Medicare is becoming very attractive.

If you worked and paid into the Medicare system for at least 40 quarters, you will be eligible for Medicare when you turn 65. Some people work their whole lives and never pay into the system.  The most common are teachers and school district employees, policemen, firefighters, and some other government workers.  Others may be just short of 40 quarters, or never worked a paying job, such as stay-at-home moms.  If you didn’t earn enough credits, you may still be able to get Medicare benefits.  If you are only short a few quarters, you may be able to pay an extra premium for Medicare, or you may be able to get Medicare through your spouse’s benefits (or even a deceased or exe spouse).  In all of these cases, you will need to consult with the Social Security office in your area to find exactly what your options are.

For everyone else, you will qualify for Medicare parts A and B when you turn 65. There four modes for enrolling in Medicare.

If you are already claiming your Social Security benefits, that is, you are getting your Social Security check, you will be AUTOMATICALLY be enrolled in Medicare. You will not need to take any action.  You will receive your Medicare ID card in the mail a few weeks before your birthday.  If you are not claiming Social Security benefits, you will need to enroll yourself.  You can pay a visit to your local Social Security office. Hint: call ahead and make an appointment.

Or, you can call the Social Security main switchboard (1-800-772-1213).

Or, you can go online to the Social Security website www.ssa.gov and follow the links for Benefits>Enroll in Medicare. Hint: A good independent agent can help you with this process.

Medicare is made up of four parts. Parts A, B, C, and D. Parts A and B are called “Original” Medicare. Part C, or Medicare Advantage, is a combination of A, B, and sometimes D.  Healthcare providers sometimes refer to Part C as Medicare Replacement.  Part D is the Medicare Prescription Drug program.

Medicare part A is what you have been paying for all your working life. For most people there is not further cost for part A after you have stopped working.  Part A is your hospital insurance.  It pays a portion your hospitalization – hospital room and board and hospital services.

Part B is your medical insurance.  It pays a portion of your doctor bills as well as a portion of your out-patient services.  You have not yet paid for Part B and you will now be billed a premium.  $121.80 per month for most people.  If you are already claiming Social Security benefits, your Part B premiums will be deducted from your monthly payment.  If not, you will be sent a bill in the mail.  Once you receive the first bill, you can then call Social Security and have the bill set up on a monthly auto-draft from your bank account.

If you are not insured by a group health plan, you will need to take both part A and B. If you are still insured by your employer or retirement group plan, you will need to have some questions answered.

  1. When I turn 65 and go on Medicare, will I be able to keep my insurance? If the answer to this is no, then you will need to keep Parts A and B and then get a good supplemental plan. If the answer is yes, then you will have two more questions:
  2. Will my group plan be the primary or secondary payor to Medicare? If your plan is secondary to Medicare then you will need to keep both Medicare parts A and B. Medicare will pay their share of any medical bills first, then your group plan will pay all or some of your share of the bill. If your group plan the primary payor, then you MAY NOT be required to keep – and pay for – Medicare part B. This is not a given. It depends on the group health law in your state and how your company has set up their plan with the insurance company. Usually, group of 50 or more people have the OPTION of requiring Part B. This is important because if you are not required to have part B, then there is no need to pay the premium for it.
  3. How much is it going to cost me? Again, depending on how your company has their health plan set up your premium can change. It can go up or down.

When your enroll in Medicare you will have two options for how you obtain your coverage, Original Medicare or Part C – Medicare Advantage. Part D is available on both sides depending on what type of plan you get.  These are two separate routes.  You must pick one or the other, you can’t have both.

Once you get the answers to all these questions you will want to seek the advice of a reputable independent insurance agent who specializes in senior supplemental health insurance.  Take all of the documentation from your group plan including an outline of coverage and premium rates, and ask for a side-by-side comparison of several private supplemental plans.  Then, you can make an informed  decision on whether or not to keep your group plan or get the private insurance.  If you decide to keep your group health plan, you may always get a private plan at a later date without penalty as long as your plan is considered creditable coverage under the Medicare guidelines (most major medical plan are creditable coverage).

First, it will be helpful to know what original Medicare covers, and more importantly, what it doesn’t cover. If you have Medicare Parts A and B and no other supplemental insurance plan, Medicare will cover the majority of your medical bills. However, medical expense being as high as they are, your share of the bills after Medicare pays will still be significant – unaffordable for many families.  Remember, Part covers hospital room and board and normal hospital services.  So if you are admitted to the hospital for 1 to 60 days, you will be responsible for the first $1,288.  This is the Part A deductible.  Be very careful here, this i not an annual deductible.  This per eligibility period. Once you have left the hospital and stay out for 60 consecutive days, the part A deductible will reset and if you go back to the hospital you will owe that $1288 again.

If you are in the hospital for more than 60 days you then fall into the Part A co-pay days and will owe $322 per day co-pay for days 61 to 90. At day 90 your Medicare benefits technically end, but you will now have what is called your 60 lifetime reserve days.  They are called lifetime reserve days because you only get them once in your lifetime and once you use them you don’t get them back.  When you are in your lifetime reserve days, for day 91-150 you will owe $644 per day co-pay for each day that you are in the hospital.  And when you hit day 151, you are out of Medicare days and you will owe the entire bill.  Medicare doesn’t pay another penny.  That is until, you LEAVE the hospital and stay out of the hospital for 60 consecutive days, and a NEW eligibility period begins.  Only now, you will have use up your 60 lifetime reserve days do when you get to day 91 you will owe the entire bill.  There are some other items that are covered by part A that we won’t get into in detail here like skilled nursing and hospice.

That’s just the hospital bill! But what do we all know about these events? We get home and receive the hospital bill in the mail and what follows shortly after?  The doctor bills!  You are going to get a bill from your surgeon, your anesthesiologist, your radiologist, the lab, pretty much anybody that walked by your door while you were in the hospital is going to send you a bill.  These bills are covered under Medicare Part B.

Part B is a little bit more cut and dry.  Remember, you did not pay for part B with your payroll taxes, so when you enroll you will pay a monthly premium.  The premium is based on your income, but most people will pay $121.80 per month.  After you have paid the premium, there is a $166 annual deductible. Once you have met the annual deductible, it is an 80%/20% split.  Medicare pays 80% and you owe the remaining 20% with no maximum.  Part B also covers out-patient office visits, urgent care centers, emergency rooms, out-patient labs surgeries, infusion type treatments in a clinical facility such as cancer treatments, and various other services.  All on the 80/20 split.  Then, we have what is called the Part B Excess Charge.  This is a 15% additional charge that providers who do not accept Medicare assignment are allow to bill you in addition to the 20% you already paid.  What that means is that you may be on the hook for between 20 and 35 percent of your total doctor and out-patient bills.  Now, most people would agree that with original Medicare alone and no supplemental insurance, you will have a dangerous out of pocket risk. The part A charges alone for a 150 day hospital stay will be close to $50,000.

So how do we protect ourselves from this risk? With a Medicare Supplement (also called Medigap).  We will cover Medigap in the next article.  Thanks for stopping by.  See you soon!

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