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All You Ever Wanted to Know About Medicare

The 2018 election exit polls ranked healthcare as the number one topic that Americans were concerned about. For many years we have seen this concern reflected in our practice. When planning for retirement clients want to know how much to budget for health insurance and out-of-pocket expenses and if they have enough money to cover the rapidly increasing costs each year.  For millions of retirees, Medicare coverage is the key to affording health care costs that would otherwise quickly drain their retirement savings.  However, Medicare doesn’t start until age 65 (unless you are disabled) and there are limits to what it covers.  In this article we will the discuss the different parts of Medicare and some of the key factors to consider when making your selections.  Since everyone’s circumstances are different, we recommend talking to a CERTIFIED FINANCIAL PLANNER™ before making a final decision.

The Overview

To help you get a handle on Medicare, let’s run through the types of coverage the program provides. The different parts of Medicare help cover specific services:

Medicare Part A (aka Hospital Insurance)

Part A focuses on the costs of health care at medical facilities, providing coverage for medically necessary care at hospitals while you’re receiving inpatient care. Under some circumstances, it also covers costs for home health services, hospice care, and skilled nursing facilities. However, nursing home costs are covered only for limited purposes and time periods.

Important points to consider:

  • Home health services must be medically necessary to be covered. Although you might need additional help around the house (e.g. cleaning or meal prep) these will most likely not be covered by Medicare Part A.
  • If you are admitted to a hospital you will be responsible for the deductible ($1364 per benefit period in 2019). The first 60 days will be covered for no additional charge.  For next month (days 61-90) you will pay $341 per day in coinsurance in 2019.  After day 90 the coinsurance is $682 per day (up to 60 days over your lifetime).  Beyond this “lifetime reserve” you pay all costs.
  • Medicare doesn’t cover private-duty nursing, TV/phone in room or private rooms (unless they are medically necessary).
  • Skilled nursing care (such as in a rehabilitative facility) is covered only if it is preceded by a hospital stay of 3 days or more. You pay nothing for the first 20 days for each benefit period.  For days 21-100 the coinsurance amount is $170.50 per day in 2019.  After day 100 you cover all costs. Medicare is not a substitute for long-term care insurance.

Hospice care coverage is extensive, and most items and services required are completely covered: pain management, nursing and social services, durable medical equipment, grief counselling, etc.  However, in most cases Hospice coverage is for treatment at home and does not cover room and board in a facility unless specifically needed for pain and symptom management.

Medicare Part A Hilton Head

Medicare Part B (Medical Insurance) 

Medicare Part B covers the medically necessary costs of health care outside medical facilities, such as doctors’ visits, outpatient procedures, and lab tests. It also helps cover the cost of services related to health care, durable medical equipment (such as wheelchairs and scooters), oxygen tanks, and ambulance services. In addition to providing coverage for health care needs that qualify as medically necessary, Part B also covers certain preventive-care services, such as screening for heart conditions, diabetes, and certain types of cancer.

Important points to consider:

  • Generally, you pay nothing for covered preventative services if the doctor accepts assignment.
  • The deductible amount for Part B services is $185 per year (in 2019). After the deductible is met, you typically will pay 20% of the Medicare-approved amount.  There is no annual out-of-pocket limit.
  • Annual fees for Concierge doctors are not covered by Medicare.
Medicare Advantage Plan Hilton Head

Medicare Part C (Medicare Advantage Plans)

In addition to government-provided Parts A and B, Medicare Part C, better known as Medicare Advantage Plans, is an optional type of Medicare health plan offered by private companies that contract with Medicare to provide you with all your Part A & B benefits and usually Part D. Part C involves paying premiums to those insurers, which then provide coverage for charges that Parts A and B don’t pay for. Medicare Advantage Plans vary greatly in both cost and scope, so you must look closely at all your options to make sure you get what you want from a plan; some plans offer extra coverage such as vision care, hearing, dental and wellness programs. Medicare Advantage Plans follow rules set by Medicare but may charge different out-of-pocket costs and have additional rules for referrals and network providers.  During the open enrollment period in the fall you can change plans or switch back to the Original Medicare (Part A & B) for the next calendar year.

Important points to consider:

  • Medicare Advantage Plans come in many flavors: HMO’s, PPO’s, MSA’s, and PFFS’s to name a few. Make sure you understand the rules and limitations of each before enrolling.
  • If you go to a doctor or health care facility that is not in the plan’s network your services may not be covered. This is particularly critical to consider with HMO and PPO plans.
  • Medicare Advantage Plans have a yearly cap on out-of-pocket expenses (unlike Original Medicare) which limits your exposure.
  • Providers (doctors) can join or leave a network anytime during the year. This can affect your coverage if in an HMO or PPO plan.

Medicare Part D (Prescription Drug Coverage)

Part D adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. Like Part C, these plans are offered by insurance companies and other private companies approved by Medicare.  In fact, many Part C Medicare Advantage Plans include Part D options within a single package. Your annual costs will include the premium for Part D, a yearly deductible, and coinsurance amounts.  They are also affected by where you purchase your drugs (in network vs out of network) and the drugs covered by the plan’s formulary list.  Medicare offers a good plan screener online to help you with the decision based on your family’s prescription needs: https://www.medicare.gov/find-a-plan/questions/home.aspx

Important points to consider:

  • Before you enroll in prescription coverage, discuss any changes with your benefit administrator if you still have employer or union coverage as this can impact your existing benefits.
  • If you have already selected a Medicare Advantage Plan check to see if prescription drugs are included in this coverage.
  • If you don’t sign up for Part D when you are first eligible for it, you may pay a late enrollment penalty unless you have prescription drug coverage through an employer or union.
  • Higher income earners may pay an additional surcharge, referred to as the Part D income-related monthly adjustment amount (or Part D-IRMAA). In 2019 for individuals whose income was over $85,000 or couples over $170,000 a surcharge is added to the base premium (up to $77.40 per month).
  • The coverage gap, or “donut hole” still exists. In 2019, after one spends $3820 on covered drugs, they will be responsible for up to 25% of the plan’s cost of drugs until $5100 is spent; at this point catastrophic coverage kicks in and the coverage reverts to the coinsurance amount.
Medicare Part D Hilton Head Island

Medigap (Medicare Supplement Insurance)

For those with Medicare Part A and Part B, a Medicare Supplement Insurance (Medigap) policy can help pay some of the health care costs that Original Medicare doesn’t cover – copayments, coinsurance, and deductibles.  Some Medigap policies also offer coverage for services that Original Medicare doesn’t cover, like medical care when you travel outside the U.S. The policies have been standardized and range from plans Level “A” to “N”, so you can compare apples to apples between providers. Logistically, Medicare pays its share of your health care costs first, then the Medigap policy pays supplemental benefits.

Important points to consider:

  • Medigap policies are a supplement for Original Medicare (aka Parts A&B). These are not meant to be used with Medicare Advantage Plans and it is illegal for anyone to sell you a Medigap policy if you currently have Medicare Advantage.
  • Coverage is guaranteed renewable even if you have health problems; they can’t cancel your policy if you pay the premium.
  • The best time to purchase a Medigap policy is during Open Enrollment – the 6-month period beginning when you are age 65 or older AND enrolled in Part B. After this time coverage may not be available or it may cost more.
  • Current Medigap policies do not cover prescription drugs.
  • Medicare SELECT policies require you to use specific hospitals and doctors for full coverage. If you purchase a SELECT policy, you can change your mind within the first 12 months and switch to a standard Medigap policy.
Medigap Insurance Hilton Head

Exploring the Costs of Medicare

Each part of Medicare has different charges associated with it. For Part A, those who’ve had Medicare taxes withheld from their pay for at least 40 calendar quarters during their lifetime are eligible for free coverage. Part B coverage requires a monthly premium that varies depending on your income level. Individuals with yearly income in 2019 of $85,000 or less, or joint tax return filers with $170,000 or less in income, pay $135.50 in monthly premiums for Part B; this is considered the “standard” premium amount. Couples would pay twice this amount.  Above those levels, premiums are higher, topping out at $460.50 per person per month for incomes above $500,000 for singles and $750,000 for joint filers. These surcharges are known as IRMAA- “income related monthly adjustment amount”.  IRMAA can often be an unwelcome surprise in families where one spouse retires earlier than the other, resulting in higher family income.

Private insurance for Medicare Advantage (Part C), Medicare Part D or Medigap coverage involves paying monthly premiums to the insurers that provide your policy. What you’ll pay in premiums depends in large part on the extent of the coverage the policy provides, with more all-inclusive policies charging higher monthly premiums.

Medicare is a complex system that has many interlocking parts. By understanding how they all work, however, you’ll be in the best position to get everything you’re entitled to receive under Medicare. For more information, cost calculators, and Medicare options by state, please visit www.medicare.gov or contact us to help you evaluate your personal situation.