As individuals retire or age into Medicare, their insurance situation can change dramatically. There are a multitude of options open to those with Medicare. The terms are different, the prices are different, the products offered are dramatically different each year.
The purpose of this column is to give those who are eligible for Medicare, or soon to be eligible for Medicare, some understanding of their insurance options and how it could impact their health and finances.
These questions and answers are meant as a guide to help you understand the complex questions you are now thinking about. Each individual's specific situation may create a different solution. You shouldn't necessarily do what your friends, family and neighbors do.
Q: I know that Medicare has different parts, (A and B). How are the rules different? I feel like everyone tells me a different answer.
A: Medicare is the federally sponsored insurance plan for those people age 65 or older, under 65 on Social Security Disability, and those any age with certain diagnoses - such as End-Stage Renal Disease. Medicare is divided into parts. Each of these 'Parts', or types of coverage, have slightly different rules that apply to it. These rules include who needs to have it, how you sign up for it and what happens if you don't enroll.
Original Medicare is Part A and Part B. There is also Part D - the prescription drug coverage that is required for all who have Part A or Part B. Then there is Part C: Medicare Advantage Plans. Each Medicare part has different enrollment periods and rules for enrolling at different times (special enrollment periods).
Medicare Part A is classified as hospital coverage. Part A covers inpatient hospital stays, hospice care, skilled nursing facilities (for short-term, rehab stays) and home care services. Medicare Part A is automatically provided to those who have worked 40 quarters (10 years). There is no premium that you as an individual pay for this plan. If you are over 65 and don't qualify due to your work history, there is a sliding scale premium you could pay for this plan, (up to $441 each month). A little known fact is that if you don't sign up for Part A when you should, there is a premium penalty. That premium penalty is 10 percent, and you pay that additional premium penalty for twice the amount of time you didn't carry it when you should have. For example, if you went a year without signing up when you should have, your penalty would be 10 percent, and you would pay that higher premium for two years.
Medicare Part B is classified as medical coverage. Part B covers outpatient medical services such as: doctors' services, lab work, outpatient testing, ambulance services, diabetic supplies, emergency room services and flu shots (this is a partial list of what it covers).
Medicare Part B does have a premium that the individual pays. The premium Americans pay is based on when they enrolled; it is currently $104.90 monthly. This premium is usually paid directly out of your Social Security check. If you don't collect Social Security yet, you pay this premium in a quarterly bill from Medicare. The premium is adjusted each year. For those Americans whose annual income is over $85,000 for an individual or $170,000 for a couple, the premiums you pay will be more. The highest premium is $335.70 per month for those individuals who make more than $214,000 or couples over $428,000.
Medicare Part B is an optional program. You do not automatically have to enroll in this plan at age 65. If you or your spouse is working at age 65, you can choose not to enroll, and once you or your spouse stop working, you can enroll at that time without any penalty. If you don't automatically enroll in Part B when you should enroll and don't have other coverage, there is a premium penalty of 10 percent for each year you don't enroll. This premium penalty is paid for the remainder of your life.
Medicare Part C is insurance that is provided by companies other than Medicare. These Part C plans are called Medicare Advantage Plans. There are five types of plans: HMOs, PPOs, PFFSs, MSAs and SNPs with most enrolling in the HMOs, PPOs and PFFS plans.
These plans are offered by a large number of companies. All the companies have different names and policies for the plans. If you join a Part C plan, you are actually stepping out of traditional Medicare. You don't lose Medicare, you are simply choosing to use alternate coverage (opt out). You cannot join a Part C plan unless you have both Medicare A and B.
In other words: If you choose a plan from the Medicare Advantage Plan choices, you actually have Medicare Part A and B, but you don't use your red, white and blue Medicare card (Part A and B). You only use your Medicare Advantage Plan's card. The Medicare Advantage plans and the companies that offer them are approved by Medicare to provide this coverage.
The plans are required to cover all services that Medicare would cover, but often provide additional services. These additional services could be gym memberships, or health care products provided free of charge. These Medicare Advantage Plans have a wide variety of premiums (in addition to the Part B premium you are still required to pay). The Medicare Advantage plans are paid a monthly premium by Medicare to cover you. With these Medicare Advantage Plans, you often have co-pays for services you get. These services include doctor visits, emergency room visits, hospitalizations, physical and occupational therapy and many others. These plans sometimes have an out of pocket maximum, an amount you will never have to pay more than in any given year for Medicare-approved services.
Medicare Part C is actually not a part of Medicare, it is a replacement product offered by a private insurance company designed to replace Medicare. This replacement product could include Part A - hospitalization, Part B - outpatient coverage and Part D. Medicare Advantage Plans (Part C) can also be separate from your prescription drug coverage. The different products offer different combinations.
Medicare Part D is the prescription drug coverage that is another optional program under Medicare. This drug coverage is not provided by Medicare, but is regulated and approved by Medicare. This coverage works a lot like automobile insurance. For example, New York state does not sell auto insurance, yet you are required to have it in order to legally drive in New York state. Medicare Part D works the same way. Medicare Part D has minimum standards set by the Center for Medicare Services (CMS), but the plans and the companies that offer them can cover more than those minimum standards.
Medicare Part D in 2013 has a standard (minimum) plan which has a $325 deductible; you pay a 25 percent co-pay for the next $2,970 worth of medication, and then the coverage gap starts at $2,971; this year you pay 47.5 percent of name brands and 79 percent of generic medication. If you ever spend $4,700 (true out of pocket costs) in one calendar year, everything after that is only 5 percent co-pays paid by you; they call this catastrophic coverage.
Medicare Part D is considered optional coverage because if you have creditable coverage from another source you don't have to enroll in one of these plans. If you don't enroll in Medicare Part D when you are eligible and then try to enroll later, without having had other credible coverage, there will be premium penalty. This premium penalty is 1 percent per month, for all the months you didn't have coverage. If you wait five months to enroll that is only a 5-percent penalty, but if you wait five years, that is a 60-percent penalty each month for the rest of your life. The percentage is figured on the national average premium; in 2013 that is $.31 for each month you are uninsured.
One of the difficulties with Medicare is that depending on how you ask a question, you can get different answers. I hope this addresses some of what you asked for.
Janell Sluga is a geriatric care manager certified and works for Senior Life Matters, a program of Lutheran Senior Housing, and has worked in Chautauqua County with seniors for more than 18 years. She is HIICAP (Health Insurance Information, Counseling & Assistance Program) counselor-trained by Office for the Aging. She does not sell insurance or represent any insurance company. She is an unbiased source of insurance and education to help seniors choose the best option for them.