The Basics of Medicare
Most people have general knowledge of the Medicare program and what it does. It is medical coverage we qualify for when we retire at age 65, right? For the most part, yes. You will qualify for Medicare at age 65 and can qualify regardless of age if you become disable or diagnosed with End-Stage Renal Disease.
Medicare consists of four different parts:
- Part A is hospital coverage and is part of Original Medicare.
- Part B is doctor visits and other health care services and is also part of Original Medicare.
- Part C combines Part A and B into a Medicare Advantage Plan that operates like an HMO, PPO, or Private Fee-for-Service Plan with a network of providers and often adds in a Prescription Drug plan referred to as Part D coverage.
- Part D is prescription drug benefits.
Initial Enrollment at age 65 allows for seven full months to join including:
- Three months prior to your birthday month
- Your birthday month
- Three months following your birthday month
During this time, you will get coverage at standard rates regardless of any medical conditions you may have. Rates may change if you wait beyond the Initial Enrollment period.
The Annual Election Period from October 15th through December 7th would be your next opportunity to join.
Qualifying for Medicare Part A – Hospitalization Benefits
This is the first step. Part A coverage, for most of the population, is premium-free as part of your Social Security benefits. You then need to determine whether you want to enroll in Part B or combine the two parts of Original Medicare into a Medicare Advantage Plan. This will largely depend on your specific health care needs and current financial situation.
Enrolling in Medicare Part B – Doctor Visits and Other Health Services
Licensed health insurance agents can be a wealth of knowledge regarding how to best use the Medicare program and how its benefits can affect other coverages and household members. You can use your current physician, health services, and facilities. As long as they accept assignment from Medicare, you will be given the best pricing options for care.
Original Medicare is offered by government-run services that regulate premium pricing using a cost-of-living index and increases annually. For those who had an annual income of $85,000 or less as an individual, or $170,000 or less jointly in the 2016 tax year, monthly Part B premiums will be $134 per month with an annual deductible of $183 for the 2018 enrollment period. The premium increases as income levels rise.
This premium will also grow by 10 percent for each year you were eligible for Medicare and did not enroll and may cause you to be subject to premiums rated for any health conditions that occur before enrollment.
Don’t hold off your decision. If you check with a health insurance agent and find a better plan, you have a chance to change plans during the Special Disenrollment Period from January 1st through February 14th.
Enrolling in Medicare Advantage Plans, Part C
Purchasing Part C means you have combined benefits of hospitalization and doctor visits, including other health care services, into a network system of providers with a primary doctor who refers you to specialists, particular facilities, and hospitals. If you have ever been part of an HMO, PPO, or Private Fee-for-Service plan, you will be familiar with making sure the doctors you currently have are part of this network for cooperation with the cost of services, copays, and coinsurance requirements.
Medicare Advantage plans can be purchased by private insurance companies and, while they all must include certain basic benefits, you will need to compare coverage, pricing, and network providers offered to be sure they meet your needs.
Purchasing Prescription Drug Plans, Part D
If you chose Original Medicare Part A and B and have prescription coverage needs, you have the option of purchasing Medicare Part D. These plans are purchased through private insurance companies. They are also required to follow basic government guidelines, but otherwise, each policy has different formularies and tiers for pricing covered drugs. These plans are entirely voluntary.
Drugs on lower tiers contain prescriptions that are the least expensive, more commonly used, as well as generic drugs options, while the higher tiers are more specialized, sometimes newer to the market, and subsequently cost more. It is possible for your doctor to ask for an exception for lower tier pricing if it is medically necessary. When the plan makes changes to your prescription’s pricing, they must notify you 60 days prior and allow you a three-month refill in case you need to find another plan providing better options.
Prescription Drug premiums vary by plan depending on the drugs you use and whether you use a preferred pharmacy. Check to be sure that any drugs you are regularly prescribed appear on your plan’s formulary and where they are placed in the tier.
In 2018, the following costs will be in addition to your premium:
- An annual deductible of $405
- Copayments or coinsurance requirements (e.g. $25 copay or an 80/20 percent coinsurance)
- Costs associated with the coverage gap that exceeds the annual limit of $3,750 until you reach the threshold of out-of-pocket costs at $5,000. Discounted brand name drugs will be available at 65 percent of the retail cost and generic drugs will be set at 56 percent of cost directly from drug manufacturers during the gap.
- Costs related to any late enrollment penalty.
Medicare Supplement Policies (Medigap)
Medicare Supplement plans are offered by private health insurers and are only intended to supplement the Medicare plans listed above. You cannot buy a Medicare Supplement plan without first enrolling in Original Medicare Parts A and B. There is no need for a Medicare Supplement with a Medicare Advantage plan due to the network structure and large deductibles being replaced with more manageable copays and coinsurance.
Medicare Supplements (Medigap) help with Part A and Part B annual deductibles, copays, and coinsurance. They are all required to carry the same basic coverages no matter what company provides it, however, they can offer you more. Providing coverage while you travel is one example. Similar to drug plans, they are an optional coverage.
There are 10 plans, but the most common are Plans A, B, C, D, F, and G. They begin with the most basic benefit options and increase to more comprehensive coverage. Plan F is the only policy to include a high-deductible choice to keep premium costs down. Monthly premiums for Medigap Plans are paid to the insurance company and are in addition to monthly Medicare Part B premiums usually taken directly out of your social security check.
These plans also do not include drug coverage. You will still need to purchase a Part D Prescription Drug Plan if you need it.
Both Medicare Plans and Medicare Supplement (Medigap) policies usually do not cover long-term care, private-duty nursing, dental or vision care, hearing aids, or eyeglasses. You will need to purchase this health coverage separately.
If you have limited income and resources, your state may help you pay for Part A and Part B. You may also qualify for Extra Help to pay for your Medicare prescription drug coverage.
Ask a licensed Medicare Supplement agent to find a plan that will work best for you and personal circumstances.