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Medicare Basic-Medicare Information and What You Should Know
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A Brief History of Medicare
Medicare has been around since 1966 and I found that there is still a lot of confusion about it and how it works. Let’s be honest, there are a lot of moving parts with Medicare and that makes the water a bit muddy. In order to help clear up those muddy waters, I wanted to take a high level look at Medicare and the parts that make up Medicare. In future hubs I will take a more detailed look into the different parts of Medicare. As always please consult an insurance professional to help assess your needs so you can make an informed choice on your health care.
Discussion on a National Insurance program had started as early as 1912 when health insurance was on Teddy Roosevelt’s presidential platform. This idea did not catch on until 1945 when President Harry S Truman sent a message to congress to create a national health insurance fund open to all Americans. Truman tried to get a bill passed but was unsuccessful and it would not be until 1960 when President Kennedy picked up the banner of health insurance for seniors. A study in 1965 showed 56% of people over 65 did not have health coverage and that it was virtually impossible to get private health insurance. On July, 30 1965 Lyndon Johnson signed Medicare into law making health care a universal right for people over 65. In 1966 Medicare coverage took effect.
Original Medicare coverage consisted of Part A and Part B. To be eligible you had to be a US Citizen or lawful resident for at least five years and 65 years old. In 1972, President Richard Nixon signed legislation expanding eligibility to people under 65 who had been disabled for at least 24 months and people with End Stage Renal Disease (ESRD). In the 2000 people with ALS (Lou Gehrings disease) were allowed to enroll into Medicare at diagnosis of the disease.
If you are collecting Social Security or Railroad Retirement benefits you will receive your Medicare Card within 3 months of your 65th birthday. Otherwise you need to apply by going online at www.socialsecurity.gov or going to your local Social Security office to initiate coverage. Again do this within 3 months of the month you turn 65, doing this will ensure your Part A and B benefits will begin on the first of the month of your 65th birthday. If your birthday is the first of the month, they will begin on the first of the prior month.
Medicare Part A: Hospital, Skilled Nursing, Hospice
Part A covers inpatient hospital stays, skilled nursing, hospice care and limited home health care. You are entitled to Part A benefits at no cost if you or your spouse has worked and contributed to the Medicare fund for 40 quarters. If you do not meet the requirements you can purchase Part A for $411 per month as of 2016. As of 2016, Part A has a deductible of $1288 per benefit period, which a benefit period ends 60 days after you leave the hospital. Multiple deductibles are possible within a year and is subject to change each year. After the deductible, Part A will cover all inpatient costs, (i.e. medications, doctors, surgeries, nurses etc.) up to the first 60 days, after which you will have copays.
Medicare Part B:Doctor Visits and Outpatient Medical
Part B covers your doctor visits and outpatient health care. For members who are starting Part B in 2016 the cost for Part B is $121.80 per month, taken from your Social Security or Railroad Retirement payment. Part B has a deductible of $166 per year as of 2016 and again is subject to change each year. After the deductible is met, Part B will cover 80% of your medical costs and you would be responsible for the remaining 20%. There is no maximum limit to how much you could owe.
Medicare Part A and B does not cover everything. Medicare does not cover routine vision, dental and hearing exams, or long term care in a nursing home. They also do not cover dentures or hearing aids. In some instances coverage is available if it is medically necessary, for example Medicare will pay for eyeglasses after a cataract surgery.
Medicare Part C - Medicare Advantage
In 1997, President Bill Clinton signed legislation that created Medicare +Choice or Part C, today they are called Medicare Advantage Plans. These are health insurance plans offered through private insurance companies contracted with Medicare to take over the billing and administration of Medicare benefits for an individual. They must incorporate Part A and Part B – except for Hospice care, which stays with Original Medicare, and must have coverage as good as or better than Original Medicare. Because of this many plans offer additional benefits such as routine dental cleanings or vision tests. A majority of the plans will include a Prescription Drug Plan as well. It is important to remember you do not lose your Medicare coverage, Medicare Advantage plans just take over for Medicare.
Because the insurance companies are taking over the administration of the individuals plans, Medicare does reimburse the insurance company. This compensation is based on the plans annual Star Ratings, the higher the star rating the higher the reimbursement the insurance company receives. Because of this there are plans that still have a $0.00 premium. Yep, that was no typo, no additional premium other than the Part B Premium you are already paying. To be eligible for a Medicare Advantage Plan you must have Part A and Part B, must continue to pay your Part B premium and live in the service area.
In return for these low premiums you pay for medical services as you need them with copays and co-insurance, much like individual and employer plans. Typically there is no medical deductible to meet so your benefits begin right away. For example rather than an inpatient hospital deductible of $1288.00 you may have a co-pay of $295.00 per day for the first 6 days. There is generally a co-pay to see your Primary Care Doctor, typically between $10 - $30 per visit. Some instances you will be responsible for up to 20% co-insurance for some services. They will all have an Out-Of-Pocket Maximum which is your safety net, which limits how much you would personally spend each year. Typically this is no higher than $6700.00. The insurance company covers all medical expenses after that. These plans are network based meaning you need to make sure your Doctors are contracted with the plan otherwise their services will cost more or not be covered.
Medicare Part D: Prescription Drug Coverage
President George Bush signed the Medicare Prescription Drug Improvement and Modernization Act of 2003, effectively adding the Medicare Part D Prescription Drug Program to Medicare. Again these plans are offered by individual insurance companies that are contracted with Medicare to offer drug coverage. Many times these are included in a Medicare Advantage Plans but you can get a stand-alone plan. Although having a Prescription Drug Plan is “optional” if you do not have one when you are originally eligible, you will receive a late enrollment penalty for every month you do not have one. This penalty would be assessed when you finally enroll into a plan and continues to be assessed every month for as long as you live. Currently the penalty is 10% of the National Monthly Premium average, which is currently around $33.10 per month. Prescription Drug Plans premiums vary as well as the drugs that they cover. In my area the plans range in price from $18.40 to $120.00 per month for 2016. Again to enroll in a Part D Prescription Drug Plan you must be entitled to Medicare Part A and/or Medicare Part B, continue to pay the Part B Premium and live in the service area.
There are 4 stages of the Prescription Drug Plan. Some plans have a deductible and some do not, this is the first stage. Once deductibles are met, if they have one, you progress through the Initial Coverage Period, where you pay co-pays, Coverage Gap or Donut Hole and finally the catastrophic stage.
When Can I Enroll
Enrollment in a Medicare Advantage or Part D Prescription Drug Plan is generally for 1 year. . Each year you are able to change your plan between October 15 – December 7, which begin on January 1. Prior to October 1, the insurance companies will send out an Annual Notice of Change, which explains what will change in your plans. This could include adding a premium, deductible, copays or changes to the drug lists. If you experience a life event such as moving you may be able to change your plan earlier. You should consult an insurance professional or Medicare to see if you would qualify for a Special Enrollment.
Medicare Supplement (Medi Gap)
Although not contracted with Medicare to administer benefits, Medicare Supplements or Medigap plans, sold by individual Insurance Companies, were brought under Federal Oversight in the 1980s. If you have a Medicare Supplement, Medicare is your primary insurance and the Medicare Supplement is secondary, paying what Medicare does not pay. The medical services must be Medicare covered service. It is feasible to have a plan where you just pay the Medicare Supplement and Part B premium that you will not receive another bill. To be eligible for a Medicare Supplement you must have Medicare Part A and B and continue to pay the Part B premium. Medicare Supplement plans are purchased in the state you live but can be used in throughout the country. You can also use any doctor in the country as long as that doctor accepts Medicare. So you get freedom to choose your doctor and not worry about Physician and Hospital Networks.
What To Do Next
As you enter the world of Medicare the best advice I can give is research your options. Many companies, like mine, offer Medicare 101 Educational Seminars where we discuss this in more detail. Educational seminars are restricted from trying to sell you a plan so you can relax and just get the information. You can contact Medicare online at www.medicare.gov or call them at 1-800-633-4227 or contact a Licensed Medicare Agent, you can usually find them with an internet search or in the phone book. I would recommend an Independent Agent that sells multiple insurance companies. Since they are not limited to one company you get the benefit of them looking at all the plans in the area to help you determine which program best fits your needs. If you have a general question, let me know in the comments below.