What You Must Know to Avoid Financial Ruin & Get What You Deserve
Sixty million people (51 million seniors and 9 million adults with disabilities) use Medicare for their health insurance coverage. To understand what Medicare covers and how it provides coverage benefits, you need to know the ABCs and D of Medicare:
- Medicare Part A covers your hospital and skilled nursing facility stays.
- Medicare Part B covers medical services, including doctor visits, lab tests and other outpatient care.
- Medicare Part C (Medicare Advantage) covers both inpatient and outpatient care through a private insurer, and may also include additional coverage, such as prescriptions, vision, and dental care.
- Medicare Part D covers your prescription medications.
These are the four basic components of Medicare. On the surface, it may seem simple and look like coverage is all-inclusive. But it’s not.
The reality is that many traditional Medicare beneficiaries also rely on other sources of coverage to supplement their Medicare benefits. Most types of supplemental coverage pay some or all of Medicare Part A and Part B cost-sharing requirements. In some cases, supplemental coverage pays for benefits that Medicare does not.
Unfortunately, nearly 1-in-5 people with traditional Medicare benefits, about 6.1 million people, have no supplemental coverage. This situation often leads to financial disaster. To understand how millions of people with Medicare get in trouble, let me share a brief story; a situation I hope you can avoid.
Roxanne’s Medicare Mishap
Recently, a friend found herself in serious financial trouble after having her Medicare benefits for just two years. Roxanne qualifies for Medicare due to her disability. When we first met, she had no additional coverage, except a basic Medicare Part D plan for her medications.
After a trip to the emergency room, a week-long stay in the hospital, and changes to her medications, Roxanne found herself thousands of dollars in debt to the hospital and unable to afford her prescriptions. On top of her financial woes, Roxanne must drive over 200 miles each month to see a specialist, because none of the local specialists accept new Medicare patients unless they are in a plan network.
Had Roxanne known about Medicare Advantage plans she could have avoided all of the financial and inconvenience issues. Like so many people getting their Medicare benefits for the first time, Roxanne assumed her Medicare card was all she needed, and that everything was included. She even thought that her Part D plan was part of her all-inclusive Medicare benefits.
Roxanne’s story plays out the same way with thousands of people each year, who learn the hard way that Medicare is a complex health insurance system with many options. And, until you explore Medicare’s options, and match them with your personal health and financial needs, you are at risk of being the next Roxanne.
Let’s start from the beginning.
What is Medicare?
Medicare is health insurance for U.S. citizens and legal residents ages 65 and older. Benefits are also available to people with kidney failure (End-Stage Renal Disease), Lou Gehrig’s Disease, and certain disabilities.
When Medicare was first conceived it had just two parts, A and B. This is commonly called traditional Medicare (aka, “Original Medicare”). Part A is hospital insurance (inpatient care). Medicare Part B is medical insurance for outpatient health care.
Today there are four parts to Medicare, A, B, C and D, and additional coverage called Medigap. Not all parts work together, and they each have their own rules. This is why it’s so important to understand the basics.
The most important thing to understand is that traditional Medicare (Part A and Part B) covers most of your major medical expenses. That said, the services not covered by Medicare Part A and Part B, combined with your share of the covered services, creates a serious financial risk for most people. That’s where the other parts come in. They offer additional coverage.
Most people grossly underestimate how much Medicare costs and how much they need to budget. That’s why I wrote this guide. It will help you better understand how the Medicare system works, what’s covered (and what isn’t), what you’re responsible for paying, and how to get more coverage if you need it.
Why Most People with Medicare Need More Coverage
Let’s have a frank discussion.
Most people grossly overestimate the coverage Medicare provides versus what they must pay out of pocket. This misunderstanding leaves millions of seniors unprepared in their retirement years.
The reality is that Medicare pays for about 51 percent of the total cost of the average retiree’s healthcare. The rest is either paid out-of-pocket or by supplemental health insurance. If you have Medicare for a disability, your level of coverage will vary with your condition and where you live.
It’s true that Medicare does pay for approximately 80 percent of the health services covered. The problem is that Medicare does not cover all necessary medical expenses, including prescriptions, routine dental, vision, and hearing. For all of these health services, and more, you must pay out of pocket or purchase additional insurance. This is what causes the disconnect between the 51 percent (of the total) and the 80 percent (of what Medicare covers).
If You Don’t have Employer-Sponsored Insurance or Qualify For Medicaid or VA Benefits, You Are At Risk!
The hard truth is that traditional Medicare puts millions of people at risk of losing everything. Without additional insurance coverage to pay for the health care expenses that Medicare does not cover, an accident or critical illness is enough to bankrupt most people. Hospital, doctor and other medical expenses add up at a staggering rate, and there’s no escaping it without proper insurance.
Interestingly, the Affordable Care Act law (aka, “Obamacare”) reformed the private health insurance industry and Medicaid, but not Medicare. So, while poor people and people with private health insurance are protected from excessive medical bills, people with traditional Medicare are not.
Nearly 3-in-10 traditional Medicare beneficiaries (10 million people) have some form of employer-sponsored insurance. However, the share of beneficiaries with employer-sponsored retiree coverage is in decline due to the number of organizations phasing out health care as a retiree benefit.
Medicaid provides supplemental coverage for about 1-in-5 (7.0 million) traditional Medicare beneficiaries. A combined federal-state program, Medicaid provides health coverage to low-income people. When you have both Medicare and Medicaid (“dual-eligible”) you have the most complete coverage possible. Many seniors that are dual-eligible don’t realize it and continue to pay out of pocket when additional assistance is available. Most dual-eligible beneficiaries qualify for full Medicaid benefits, including long-term services. If you qualify for Medicaid in your state, get it.
The U.S. Department of Veteran Affairs (VA) offers health care benefits to qualifying Veterans. Most Veterans qualify for cost-free health care services, although some Veterans will pay modest copays for health care or prescriptions. Unlike Medicaid, VA benefits and Medicare benefits don’t work together, but you can be enrolled in both programs. Due to its complexity, I have dedicated an entire section to this topic. If you qualify for Veterans Administration (VA) healthcare benefits, get it.
How To Protect Yourself If You Don’t Qualify For Medicaid, VA Benefits, etc.
If you don’t have additional health coverage, including Medicaid, Veterans Administration benefits, TRICARE, or health benefits from an employer, you need to buy it. There are several types of additional coverage that you can get:
- Part C: Medicare Advantage Private Health Insurance
- Part D: Medicare Prescription Drug Coverage
- Medigap: Medicare Supplement Insurance
- Dental Insurance for Seniors
The type of additional health insurance you purchase is up to you. You need to consider your own personal health needs and finances.
If you can afford it, most experts feel that Original Medicare combined with a Medicare supplement (Plan F, G or N works best for most people), Medicare Part D plan, and a dental plan will give you the most complete coverage with the most flexibility. This level of coverage is not an option for everyone. For example, in some states, Medicare supplements are not available to people under age 65.
If your budget is a primary concern, you can get the most coverage for your money, with a little less flexibility, with a Medicare Advantage plan and a separate dental plan.
What Does Medicare Cover?
Most seniors overestimate the healthcare coverage provided by Medicare versus what they must pay themselves. As previously stated, Medicare only pays for about 51 percent of the total cost of healthcare.
The confusion is that Medicare claims it pays 80 percent. This is true, but it only pays 80 percent of the services it covers. Unfortunately, it does not cover prescriptions, dental, hearing, vision and many other common healthcare services that most seniors require.
Let’s discuss what is covered and how it’s covered by each part of Medicare.
Medicare Coverage Basics
If you have Medicare now, or if you will soon qualify, you need to know the basics, including what’s covered and what isn’t. Once you understand the four core parts, and the additional insurance options available, you’ll be on your way.
The Medicare program packs all coverage options into four parts, A, B, C and D. The four parts are designed to give you options. Only one part is mandatory, Part A, but not enrolling in Parts B and D can cause penalties down the road. Here’s what each part offers:
- Part A (Hospital Insurance) is the part of Medicare that pays for your inpatient care while hospitalized. Medicare Part A also pays for your skilled nursing care, hospice care, and home care, should you ever need it. This insurance covers about 80% of all inpatient and in-home health care expenses. You are required to pay the remainder, including your annual deductible, co-pays, and co-insurances.
- Part B (Medical Insurance) is the part of Medicare that pays for your doctor visits and other outpatient medical care, like lab work. Medicare Part B also covers many preventive services (see below), including your annual checkup. For the services that are covered, Part B pays 80% and you pay the remainder, including any excess charges.
- Part C (Private Health Insurance), more commonly called Medicare Advantage, Part C allows you to get your care from private health insurance plans that are approved by Medicare. If you enroll in an Advantage plan you are choosing a traditional HMO or PPO policy that replaces your Part A and Part B fee-for-service coverage. The “advantage” is that your medical bills are generally lower and more predictable. The lower cost comes at the expense of choice, as most plans require you to use in-network providers.
- Part D (Prescription Drug Plan), often called a PDP, is prescription medication coverage. Medicare Part D helps lower your prescription drug costs through a cost-sharing system. Sold by private insurance companies, Part D plans have deductibles, co-pays, and maximum annual benefit.
- Medigap (Medicare Supplement Insurance), while technically not part of the Medicare program, is private insurance that helps cover the gaps in Medicare coverage (deductibles, co-payments, and coinsurance) that make Original Medicare risky.
As you can see, Parts A and B are your core health insurance. Together they are often called Original Medicare. It’s not full healthcare coverage (pays slightly less than 80% for most people), but it is the most important part.
The Affordable Care Act law changed many aspects of Original Medicare. More services were added that help people stay healthy. At the same time, new restrictions and limitations were added that lower costs for the federal government.
For most people, the changes imposed by the Affordable Care Act force a critical decision. You can use your Original Medicare as-is, along with Part D, and risk huge hospital bills. Alternatively, you can switch to private health insurance or supplement your Original Medicare.
Upgrading Your Original Medicare to Full Coverage Healthcare
If you need more than the basic coverage offered, you have two options. The first option is a Medicare Advantage plan with or without prescription coverage. This option completely replaces your Part A and B coverage with private health insurance. The second option is a Medigap insurance policy combined with a Part D plan.
Here are the most common healthcare services that Original Medicare does not cover:
- Most dental care
- Routine eye care
- Routine hearing tests
- Most care while traveling outside the United States
- Custodial care (help with bathing, dressing, eating, etc.)
- Long-term care
- Cosmetic surgery
- Most chiropractic services
- Routine foot care
Original Medicare does cover the following preventive services:
- “Welcome to Medicare” Preventive Visit (one-time)
- Yearly “Wellness” Visit
- Abdominal Aortic Aneurysm Screening
- Bone Mass Measurement
- Breast Cancer Screening (Mammogram)
- Cardiovascular Screenings
- Cervical and Vaginal Cancer Screening
- Colorectal Cancer Screenings, including Fecal Occult Blood Test, Flexible Sigmoidoscopy
Colonoscopy, and Barium Enema
- Diabetes Screenings
- Diabetes Self-Management Training
- Flu Shots
- Glaucoma Tests
- Hepatitis B Shots
- HIV Screening
- Medical Nutrition Therapy Services
- Pneumococcal Shot
- Prostate Cancer Screenings
- Tobacco Use Cessation Counseling (counseling for people with no sign of
What Does Medicare Part A Cover?
Medicare Part A is hospital insurance. It pays for about 80 percent of all covered inpatient procedures. Part A also pays for home health care services or skilled nursing facility services following a period of hospitalization, but it does not pay for long-term care.
Your Part A insurance also covers some therapies required part-time or intermittently. This assists people who are unable to leave the home get the care they need, including blood transfusions.
Medicare Part A is private-fee-for-service insurance. That means it will pay any qualified healthcare provider in the United States that accepts Medicare’s standard rates.
Part A benefits are available to you throughout the United States, including U.S. territories. However, be aware that when you use a provider that does not accept Medicare rate assignment, you are responsible for paying all overages.
What Does Medicare Part B Cover?
Medicare Part B helps you pay for your doctor visits, outpatient care, clinics, laboratory tests, diagnostic screenings, and skilled nursing care. Part B insurance is not mandatory, but most seniors choose to take it because it is so affordable.
Part B pays about 80 percent of all doctor services you receive as a hospital inpatient. It also covers the most common preventive healthcare treatments and your annual checkups.
The nice thing about Part B is that the coverage is very flexible. It’s private-fee-for-service coverage, so you can use any eligible Medicare doctor or health care provider. No approvals are required.
Is Part B Coverage Required?
If you or your spouse are still working and you have health coverage through your employer or your union, contact your benefits administrator to find out how your coverage works with Medicare. It may be to your advantage to delay Part B enrollment.
You can sign up for Part B any time you have current employer health coverage. However, be aware that COBRA and retiree health coverage are not considered current employer coverage.
When your employment ends, three important things happen:
- You have 8 months to enroll in Part B without incurring a penalty. This period has nothing to do with COBRA coverage, so don’t wait. If you miss your 8-month window, you will not be allowed to enroll until the next General Enrollment Period and you will be without coverage.
- You may be able to get COBRA coverage, which continues your health insurance through the employer’s plan for up to 18 months, albeit at a much higher cost to you. If you already have coverage through a COBRA plan, it will end when you enroll in Medicare. If you have End‑Stage Renal Disease (ESRD), your situation may be different, so consult your benefits advisor.
- When you sign up for Part B, your Medigap Open Enrollment Period begins.
If you have TRICARE (insurance for active‑duty military and military retirees), you are required to enroll in Medicare Part B to keep your TRICARE coverage.
How Medicare Works With Your Employer Health Insurance, TRICARE, Medicaid, and VA Health Care
When you have other insurance, such as employer group health coverage, VA health care, or TRICARE, there are rules that determine who pays first. The insurance that pays first is known as the primary payer and the one that pays second is the secondary payer.
The primary payer always pays up to the limits of its coverage. The secondary payer only pays when there are costs the primary payer didn’t cover. The secondary payer may not pay all of the uncovered costs, in which case you will be required to make up the difference. If your employer insurance is the secondary payer, chances are that you will need to enroll in Part B before your insurance will pay.
For medical care expenses related to accident or injury, other insurance policies will be required to pay before Medicare. These include:
- No-fault insurance (including automobile insurance)
- Liability (including automobile insurance)
- Black lung benefits
- Workers’ compensation
Be aware that Medicaid, TRICARE and VA is never the primary payer for services covered by Medicare. They only pay after Medicare, employer group health plans, and Medicare supplement insurance policies have paid to the limits of their coverage.
What Does Medicare Part C Cover?
Medicare Part C, more commonly known as Medicare Advantage, is private industry HMO and PPO health insurance plans. Those who choose Part C trade their Original Medicare benefits (Parts A and B) for a single managed care policy that covers hospital stays, doctor visits, outpatient care, and preventive medicine. The benefit is a lower risk of high healthcare bills, and in some cases, additional health care benefits.
Some Medicare Advantage plans offer extra benefits for vision, hearing and dental. Most Part C plans also offer prescription drug coverage.
The benefit of a Medicare Advantage plan is that you get to shop for the options and coverage that best meets your needs, and the insurance provider takes care of the billing.
Medicare Advantage Plan Differences
There are three primary types of Medicare Advantage plans available: HMO, PPO, and PFFS (Private Fee for Service). There’s also a Special Needs Plan that covers those with special health needs as well as specific chronic health-related issues. If you opt to select the Special Needs Plan, it must include parts A, B, and D.
Here’s a quick overview of the differences between the three types of Medicare Advantage plans:
Medicare Preferred Provider Organization (PPO) – You are able to see any doctor or specialist that you choose. If they are not in your PPO network, your cost will increase. In most cases, you can see a specialist without a referral.
Medicare Health Maintenance Organizations (HMO) – You are able to visit doctors in the HMO network only. It is most often necessary to request a referral in order to visit a specialist.
Medicare Private Fee-for-Service (PFFS) – You are able to see any doctor or specialist, but the providers you use must be willing to accept the PFFS’s fees terms and conditions. It is not necessary to have a referral to see a specialist.
Medicare Special Needs – These plans are designed for people with certain chronic diseases or other special health needs. These plans must include Part A, Part B, and Part D coverage.
To learn more about Medicare Advantage and how it covers your healthcare, visit our Medicare Advantage plans page.
What Does Medicare Part D Cover?
A Medicare Part D Prescription Drug Plan (PDP) helps pay for your prescription drugs. This is not an automatic Medicare benefit. Part D plans are private insurance. You must enroll in a Medicare Part D plan if you want the coverage. In 2019, monthly rates start at around $20.
Medicare Part D does not pay 100% of your prescriptions. Depending on the plan you choose, there are various deductibles, co-pays, and co-insurances. There is also an initial coverage limit (ICL) that changes each year. The new health care law is gradually closing the coverage gap (aka, the “donut hole”).
A Part D plan is one of the most important healthcare benefits available to you. It’s critical for every Medicare beneficiary to understand how Part D works and how to find the best plan for your personal health needs. Visit our Medicare Part D plans page to learn more.
What Does Medigap Insurance Cover?
According to the Centers for Medicare and Medicaid Services (CMS), Original Medicare (Parts A and B) covers about 80 percent of your major healthcare costs. This might be true if benefits included prescriptions, vision, hearing and dental. According to the Employee Benefit Research Institute, Medicare covers only 51 percent of your health care services. This explains why so many seniors supplement their Medicare coverage with a Medigap plan.
If you or a loved one has ever been admitted to the hospital, undergone surgery or experienced and extended illness, you already know how expensive inpatient, doctor and medical services costs can be. Your portion of the Medicare-covered expenses that you are required to pay can add up to massive medical bills.
To help cover the expenses that your Medicare benefits do not cover, you can purchase Medicare Supplement Insurance, also called a “Medigap plan”. This is not government insurance. They are private insurance policies that give you the peace-of-mind you need when you need hospital coverage, surgery, and other expensive procedures.
Understanding Medigap Coverage
Medicare Supplement insurance takes over where your Medicare Part A and B benefits leave off. When you supplement your Original Medicare coverage with additional insurance, Medicare pays its portion first and then your Medigap plan kicks in to pay up to the limits of the policy.
Medicare has created 10 standardized plans. Each plan is represented by a letter (A, B, C, D, F, G, K, L, M, N). There is also a high deductible version of Plan F. The range of benefits and coverage rates vary with each type of plan. All policies cover the following common benefits:
- Medicare Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used)
- Medicare Part B coinsurance or co-payment
- Blood (first 3 pints)
- Part A hospice care coinsurance or co-payment
In addition to the basic coverage listed above, supplement policies may also cover:
- Medicare Part A deductible
- Medicare Part B deductible
- Medicare Part B excess charges
- Skilled nursing facility care coinsurance
- Foreign travel emergency
Medicare Supplements are Standardized and Regulated
As with all Medicare benefits, supplemental insurance policies are regulated by both Federal and state laws. The regulations are designed to protect seniors and make shopping easier. Medigap policies are required to be clearly identified as “Medicare Supplement Insurance.”
For your protection, a “standardized” policy will be identified by letters A–N. All policies offer the same basic benefits. Some policies provide additional benefits too. Please note that plans E, H, I, and J have been phased out by Medicare. If you are already enrolled in one of these plans you can keep it.
Medigap Premiums Are Not Regulated
Although Medigap policies are regulated, their premiums are not. Insurance companies apply different premiums for the same policy. Be sure to compare both the policy and the premium when you shop. Also, some states offer an additional Medigap policy known as Medicare SELECT. These policies require you to use specific hospitals, and in some cases specific doctors and other health care providers, in order to receive full coverage. If you discover that your Medigap SELECT policy isn’t working for you, don’t worry. You have 12 months to change your mind and switch back to a standard Medigap policy.
Medicare Supplement Price Shopping
Although the coverage for each of the lettered plans is the same, the premiums are not standardized. Each insurance provider sets their own rates. That means a Medicare Supplement Plan with one company could cost significantly more than the same plan from another company. That’s why it’s critical that you compare all Medicare Supplement Insurance Plan rates available in your state each year. Medicare Supplement Insurance Companies are not obligated to tell you when they are going to have a rate increase or how their prices compare to their competition.
Medigap and Your Medicare Benefits Open Enrollment Period
If you plan to purchase supplemental insurance you have a 6-month period of open enrollment, which starts the first month you’re 65 and enrolled in Medicare Part B. In this critical 6-month period you have the guaranteed right to buy any Medicare Supplement Plan that’s available to you in your state. That means you cannot be turned down for health reasons, including a preexisting condition. Be aware that once this critical period starts you cannot get an exception or delay based on having other health insurance coverage. That’s why it is so important that you get enrolled.
An Important Note About Medicare Advantage and Medigap
Medigap Insurance only applies to your Original Medicare benefits. If you have opted into a Medicare Advantage Plan, such as an HMO or PPO, (aka, Medicare Part C), you cannot purchase Medigap insurance (nor do you need to).
If you already have a Medigap policy and you are planning to switch to Medicare Advantage, your deductibles, copayments, coinsurance, or premiums will not be paid by your Medigap policy. You are free to cancel your Medicare Supplemental policy, but be aware that you may not be able to reinstate your Medigap policy in the future. You should contact the State Health Insurance Assistance Program in your area and your Medigap insurance company first to verify your options.
Also, be aware that if you currently have a Medicare Advantage plan. it is against the law for anyone to sell you a Medigap policy unless you drop Medicare Advantage coverage and go back to Original Medicare.
State Health Insurance Assistance Program (SHIP)
Not all ten plans (labeled “A” through “N”) are available in all states. For information about Medicare supplement insurance plans available in your state, contact your State Health Insurance Assistance Program (SHIP) or call your license Medicare insurance agent.
When and How to Enroll in Medicare
For most people Medicare enrollment is automatic. For some, enrollment terms vary depending on how and when you become eligible.
Most people are automatically enrolled in Medicare when they reach age 65. This is when your Social Security benefits start. If you live in the continental United States the Social Security Administration (SSA) kicks off your Medicare Part A hospital insurance and/or Medicare Part B medical insurance when you turn 65. For those U.S. citizens living in one of the U.S. territories, such as Guam or Puerto Rico, you will be automatically enrolled in Medicare Part A only.
If you are still working and have health insurance through your employer, Medicare Part B is optional. However, your health insurance must be “credible”. Be sure to compare rates before refusing Part B, as it may be a better deal.
If you are not automatically enrolled by the SSA, depending on your situation, there are several enrollment periods. It’s important to note that there Medicare can charge you penalties for not signing up when you should.
How to Enroll in Medicare Part A
The Social Security Administration (SSA) enrolls most people in Medicare Part A automatically when they turn 65. However, if you choose to delay receiving your Social Security retirement benefits or Railroad Retirement Benefits (RRB) beyond age 65, it is your responsibility to initiate Medicare Part A enrollment when you decide to retire.
Here’s what you need to do. Contact the SSA or RRB three months before you turn 65 or retire. You can stop by your local SSA office, log on to the SSA website (http://www.ssa.gov/), or call them at 1-800-772-1213. The RRB toll-free number is 1-877-772-5772.
How to Enroll in Medicare Part B
If you declined Medicare Part B automatic enrollment because you have creditable coverage, or if you were not automatically enrolled, there are several enrollment periods where you can enroll later. Your Initial Enrollment Period (IEP) is a seven-month period that begins three calendar months before you first become eligible for Medicare and lasts for three calendar months after your month of eligibility. For most of us, that means three months before our 65th birthday. If you become eligible due to a disability, your IEP starts on the 25th month after you first start collecting disability benefits from the SSA. If you have Lou Gehrig’s Disease, your enrollment into Medicare will be automatic. If you are diagnosed with End-Stage Renal Disease (kidney failure), you must call Medicare to start your Part B enrollment.
If you miss your IEP you can enroll during Medicare’s General Enrollment Period. General enrollment run from 1 January through 31 March each year. You can stop by your local SSA or RRB office or call their toll-free number.
If you lose your employer group insurance, or if you decide you want to switch from your employer’s coverage to Medicare, you can ask Medicare for a Special Enrollment Period. Your eight-month Special Enrollment Period begins when you decide you no longer want to be covered under your employer’s group insurance plan or if you lose your coverage due to employment termination. If you lose employment coverage during your normal IEP, a Special Enrollment Period does not apply.
How to Enroll in Medicare Advantage (Part C)
Medicare Advantage is the private insurance alternative to Medicare Part A and Part B. The enrollment process varies slightly by the insurer, but in all cases, you must have Medicare Parts A and B in order to enroll. You can enroll in Medicare Part C during your IEP or during the Medicare Advantage Annual Election Period (AEP), starting 15 October and ending 7 December. The open enrollment dates are not affected by Obamacare.
During the AEP you can add, drop, or change your Medicare Advantage plan. During this period you may change your enrollment in any Medicare Advantage plan without any penalties.
If you enroll in a Medicare Advantage plan during the AEP, and then later change your mind, you can drop the plan and go back to Original Medicare (Parts A and B) during the Medicare Annual Disenrollment Period (MADP). This period starts on 1 January and ends on 14 February. If you don’t dis-enroll during this time period, you must keep your plan for the rest of the year. The only exception is if you qualify for a Special Enrollment.
How to Enroll in Medicare Part D
As soon as you are eligible for Medicare benefits you must have creditable prescription drug coverage. If you don’t have coverage as soon as you are Medicare eligible, and then later need it, Medicare can charge you a late penalty. For most people, it’s best to get prescription coverage, even if they don’t need it at age 65.
There are three ways to get credible prescription drug coverage. You can get it as part of a Medicare Part C plan (Medicare Advantage), or through a Medicare Part D plan, or if available, you can get it through an employer group plan.
You can enroll in a Medicare Part D Plan during your Initial Enrollment Period (IEP) or during the Annual Election Period (AEP). Also, if you drop a Medicare Advantage plan and return to Original Medicare during the Medicare Annual Disenrollment Period you can join a Part D Plan at that time.
How to Enroll in a Medicare Supplement
Medigap plans are completely voluntary and there are no specific enrollment periods. However, you must enroll when first eligible in order to preserve your guaranteed issue rights (e.g., no insurance underwriting process). You only have a guaranteed right to buy a Medigap insurance policy in the six months beginning with the first month your turn 65 and are enrolled in Medicare Part B. After that an insurer can refuse to sell you insurance.
Medicare supplemental insurance is not compatible with Medicare Part C, but it is compatible with Part D. You can buy a Medigap plan through a qualified Medigap insurance agent in your state. They will handle all of the paperwork and explain the insurance benefits.
Who Is Eligible To Enroll In Medicare?
The basics of Medicare eligibility are simple. First, you must be a United States citizen or a permanent, legal resident for at least five years. Second, you must meet at least one of the following criteria:
- Be age 65 or older and eligible for Social Security; or
- Be permanently disabled and receive Social Security disability insurance benefits for at least two years; or
- Have End-Stage Renal Disease (ESRD) and require dialysis treatment or a kidney transplant; or
- Have Lou Gehrig’s Disease (Amyotrophic Lateral Sclerosis).
Most people are automatically enrolled in Medicare Part A (hospital insurance) as soon as they meet the eligibility requirement. Most people are not required to pay a monthly premium for Medicare Part A. As long as you or your spouse paid Medicare taxes while working for a minimum of 10 years, you’re covered. If you did not pay your fair share of taxes, you will be required to pay a monthly premium, up to $441 (at the 2013 rate; 2014 premiums may increase).
Medicare Part B (medicare insurance) is different. Most seniors turning 65 will get their Medicare Part B automatically, and most pay the full Part B premium. If you live in a U.S. territory, or if you qualify for any reason other than age, enrollment is not automatic. The Part B premium changes each year. Seniors earning up to $85,000 per year pay the standard premium. Higher-income earners pay more.
In all cases, you must enroll in Medicare Part B as soon as you become eligible. Your reason for qualifying determines when you are required to enroll. The General Enrollment Period is 1 January through 31 March. Your Individual Enrollment Period is within two months (before or after) of the qualifying event (e.g., your 65th birthday or 25th month receiving Social Security benefits).
If you fail to enroll in Medicare Part B when you are first eligible, you may be asked to pay a penalty equal to 10 percent of the premium for each 12-month period you were not enrolled. Some exceptions apply, including credible insurance through an employer.
As you likely already know, Original Medicare — that’s your Medicare Part A and Part B combined — does not pay for 100 percent of your healthcare needs. In fact, it only pays for a little less than 80 percent of the health benefits that it does cover, and it does not cover prescriptions, hearing, vision or dental insurance.
To pay for some or most of the fees, deductibles, copays and coinsurances not covered by Medicare, many seniors buy a supplemental policy called a Medigap plan (aka, “Medicare Supplement”). A Medigap plan can’t offer additional health benefits, but it will shield you from the liability high health care costs, should you become hospitalized or critically ill for an extended period.
The key to a Medigap plan is your guaranteed issue right. You have a six-month window when you are first eligible for Medicare Part A and B to buy a Medicare Supplement plan without underwriting. In other words, the insurer of your choice can’t turn you down, regardless of preexisting conditions. If you miss your guaranteed issue right window, you can be turned down and your monthly premium will likely be higher.
Medicare Advantage (Part C) Eligibility
Medicare Advantage (Part C) is the private health plan alternative to Medicare Part A and Part B private fee for service health insurance. To qualify for Medicare Part C enrollment you must be enrolled in Medicare Parts A and B. You can buy a Medicare Advantage plan through Medicare.gov or through a qualified Medicare insurance agent.
With Medicare Part C coverage, you don’t need and can’t buy a Medigap policy. That’s because Medicare Advantage plans typically cover more than Original Medicare. When you buy a Part C plan you are dis-enrolled from Medicare Part A and B.
Medicare Part C is optional coverage. You are not penalized for not signing up, and you can switch back and forth between Part C and Original Medicare annually.
Coverage, deductible, copays, and coinsurance vary by the insurance carrier and specific plan, so you must do your homework. Most counties with Medicare Advantage plans have at least on $0 or low-cost plan. However, be aware that these plans typically have a high deductible or high copays, so make sure it’s in alignment with your true health needs.
Also, be aware that the Medicare Advantage plan premium is above and beyond your Part B premium. The Social Security Administration will continue to deduct your Part B premium from your Social Security check each month. So, if you choose a Part C plan that has a $74 premium, and your Part B premium is $135.50 (2019 rate), then your actual monthly payment for the health plan is $209.50 per month.
Medicare Part D Eligibility
Medicare Part D covers your prescription medications. As with Medicare Advantage, Part D is optional coverage that’s available through private insurers, and you must already have Medicare Parts A and B to qualify. Also, Part D plans are regional. That means you must be living in a plan’s service area to enroll.
Even though Medicare Part D is optional, Medicare can penalize you if you don’t enroll when first eligible and then want to enroll later. The only exception is if you have creditable prescription drug coverage through another group plan, such as your employer’s health coverage. You will have to pay this penalty for as long as you have a Medicare Part D plan.
If you have a Medigap plan you can enroll in a Part D plan. These two types of insurance policies are completely compatible.
Individuals with low income can qualify for Extra Help with Medicare prescription drug costs through the Social Security Administration. If you qualify, Extra Help will cover some or all of the costs for your Part D copays, coinsurance, deductibles and all or most of your monthly premium.
How Much Does Medicare Cost?
Not everyone pays the same amount for their Medicare. If you have Medicare benefits, the amount you pay for your health insurance depends on how much you earn, the type of Medicare insurance you choose, and how much health care you require.
Medicare has several parts, and each part has different costs. Plus, people earning $85,000 or more per year pay more, and those with income at or below the national poverty standard qualify for Extra Help through the Social Security Administration.
Medicare Part A Premiums and Deductibles
If you or your spouse worked at least ten years your Medicare Part A has no cost. You already paid through payroll tax deductions. If you did not make the required Social Security contributions then you will pay a monthly premium.
If you are required to pay a monthly premium to receive Part A and you don’t enroll when first eligible (normally at age 65), your premium will increase by 10%. This is a late enrollment penalty. Most (about 99 percent) Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment.
The 2019 Medicare Part A inpatient hospital deductible that beneficiaries pay when admitted to the hospital is $1,364. The Part A inpatient hospital deductible covers beneficiaries’ share of costs for the first 60 days of inpatient hospital care in a benefit period.
In 2019, beneficiaries pay a coinsurance amount of $341 per day for the 61st through the 90th day of hospitalization in a benefit period and $682 per day for lifetime reserve days. For beneficiaries using a skilled nursing facility, the daily coinsurance for days 21 through 100 of extended care services in a benefit period is $170.50.
As you can see, the coinsurance costs can add up fast. You can eliminate the risk of having high hospital bills by purchasing a Medicare Supplement.
Medicare Part B Premiums and Deductibles
Unless you qualify for low-income assistance through Medicaid, you will be required to pay a monthly premium for your Medicare Part B coverage. The amount of your premium is based on your annual income.
If you have Social Security benefits, your Part B premium is paid directly from your SSA benefits as a monthly deduction. Each year the premiums adjust slightly.
In 2019 the standard monthly premium for Medicare Part B is $135.50. Approximately 2 million beneficiaries (about 3.5%) pay less than the full Part B standard monthly premium amount due to the statutory hold harmless provision. This provision limits certain beneficiaries’ increase in their Part B premium to be no greater than the increase in their Social Security benefits.
There’s also an annual deductible for all Medicare Part B beneficiaries. For 2019 the deductible is $185.
If you are about to become eligible, don’t delay enrollment. If you do, you will incur a late enrollment penalty. Medicare will increase your premium by a full 10% for each year you were not enrolled in Part B while eligible. You will pay the higher rate for as long as you are enrolled. If you are still working and your employer offers group health coverage, the penalty may not apply. Check with your benefits advisor to be sure.
If you enroll in Medicare Part B late, you may be required to pay a penalty. If you are still working and have credible coverage through your employer or a union, you are exempt from the late enrollment penalty. Be sure to call Medicare before you turn 65 to make sure your coverage is creditable.
Medicare Part B does not offer hearing, vision, dental or prescription drug coverage. For these services, you must purchase additional insurance or pay out-of-pocket.
Medicare Advantage Premiums and Deductibles
If you choose, you can opt-out of the Original Medicare private-fee-for-service program (Part A and B) by enrolling in a Medicare Advantage Plan (Medicare Part C). These are health plans sold and administered by private health insurance companies, but they are overseen and regulated by Medicare. Although they must offer the same Part A and Part B coverage as Original Medicare, they usually offer more services. That’s the “advantage”. Common additional benefits include, but are not limited to, hearing, vision, dental, and prescriptions.
To enroll in a Medicare Advantage (MA) Plan, you must qualify for both Medicare Part A and Part B. That means you’ll pay, at a minimum, your Medicare Part B monthly premium. On top of that fee, MA plans may charge an additional monthly premium for the extras. Rates vary widely depending on the plan and where you live. Plus, some plans may have additional costs, including deductibles, copayments, and premiums for additional benefits, like prescription drugs.
Medicare Part D Premiums and Deductibles
Medicare Part D is your prescription drug coverage. It’s not required, but you can be penalized if you don’t take it when first eligible and then decide to enroll later.
The monthly premium you pay for Medicare Part D varies by plan and state. The average premium for the past few years is around $33.50. If you have a higher income, you’ll pay more each month.
If your modified adjusted gross income is above $85,000 per year, you will pay a Part D income-related monthly adjustment amount (Part D-IRMAA). Medicare uses the modified adjusted gross income reported on your IRS tax return from 2 years ago. Social Security will contact you if you have to pay Part D-IRMAA, based on your income. In 2019, Part D-IRMAA is between $12.40 and $77.40 per month. If you have to pay a higher amount for your Part D premium and you disagree, contact Social Security.
Medicare Part D Plans have an annual deductible. You pay the full amount of the deductible before the plan starts paying its share of the cost for your prescriptions. For plan year 2019, the maximum deductible is $415. Some plans have a zero dollar ($0) deductible, giving you first-dollar coverage.
Once you’ve satisfied your plan’s annual deductible, you’ll pay 25% of the next $3,405 of your prescription costs, which is up to $851.25 out of pocket. And your Medicare drug plan will pay 75%, which would be up to $2,553.75. You pay your share through co-payments or coinsurance at the pharmacy. The amount depends on the plan you’ve chosen. You may pay more for some drugs than others, such as brand-name drugs. A co-payment is a fixed amount (e.g., $5), whereas a coinsurance is a percentage (e.g., 20%).
If your medications are expensive, you may reach the Medicare Part D coverage gap (aka, “doughnut hole”). This happens when you reach the Medicare Part D initial coverage limit (ICL). The doughnut hole is the amount of money spent on prescriptions that are not covered by Medicare Part D.
When in the doughnut hole you’ll pay 100% of your prescription drug costs until you’ve spent an additional $3,833.75. When your prescription costs total $7,653.75 (you’ve paid $5,100 and your plan has paid $2,553.75), then Medicare will cover about 95% of all additional prescription costs for the rest of the year.
When Medicare starts assisting with your prescriptions it’s called catastrophic coverage. When you reach this point you are only required to make a small copay or coinsurance payment for the rest of the year.
Medicare Supplement Insurance Premiums & Deductibles
Medicare Advantage is a great way to get more coverage, but it’s not the only way. You also have the option to keep your Original Medicare and add a Medigap plan.
Medigap are supplemental health insurance policies from private insurance companies. They cover some of the medical costs Medicare doesn’t, including copays, coinsurance, and deductibles.
A Medigap plan does not replace your Medicare. You pay a monthly fee to an insurance company in addition to your monthly Medicare Part B premium. Plan costs vary a lot. It all depends on the level of coverage, the company, where you live, and your age. It’s important to shop around before you buy, and compare rates annually to make sure you’re still getting a good deal.
Medigap plans vary from state to state You can get help from your State Health Insurance Assistance Program. Call 800-MEDICARE to find yours.
How To Get or Replace A Medicare Card
If you are a new beneficiary, getting your first Medicare card is automatic. The Social Security Administration will automatically enroll you in Medicare Part A as soon as you are eligible. For most people, the same is true of Medicare Part B.
In most cases, your red, white and blue Medicare card will show up in your mail about three months prior to your Medicare eligibility date. If you’re turning 65, that means you’ll receive your card as early as two months prior to your birth month. If you have Social Security disability benefits, you’ll get your card about twenty-two months after your benefits started.
Some people will not be automatically enrolled. Others are automatically enrolled in Medicare Part A (hospital insurance), but not in Medicare Part B (medical insurance). In this case, you must enroll at your local Social Security Administration office, online through the SSA website, or by calling the toll-free number. After enrolling manually, you’ll receive your card in the mail in about 30 days.
Medicare Advantage Plan and Medicare Part D Plan Cards
If you switch from Original Medicare (e.g., Medicare Parts A and B) to a Medicare Advantage plan, or if you buy a Medicare Part D Plan, you cannot use your red, white and blue Medicare card to receive services. That’s because all Medicare Advantage and Part D plans are private insurance, and each plan issues its own cards.
No matter when you enroll in a Medicare Advantage or Part D plan, there will be a slight delay between the day you enroll and when you are first eligible to use the plan benefits. If you enroll during the Annual Election Period (AEP), which runs from 15 October to 7 December, your coverage starts on 1 January. If you enroll during your Individual Enrollment Period (IEP), your benefits begin on the 1st of the following month, or the first month you are eligible. In most cases, your card will arrive prior to the date on which benefits begin.
Getting a Replacement Medicare Card
If your Medicare card becomes lost, stolen or damaged, visit www.socialsecurity.gov to get a replacement. You will be asked to provide some personal information, including your social security number, date of birth, phone number, and full name. To protect you from fraud, Medicare card replacements must be mailed to the last mailing address on record with Social Security, so be sure to keep your information up-to-date.
You can also go to your local Social Security Administration office. However, you’ll need to be prepared. Bring your Social Security card (original), your driving license, or a current passport.
How and when to use your Medicare Card
In order to process a claim for medical services or products, all providers you use need to see your Medicare card. That means you need to take it with you to the doctor, pharmacy, lab, and to your provider of durable medical goods. Even if you have to pay for the full amount of a visit because you have not yet reached your deductible, you still need to show them your card. It’s the only way they can process a claim so that you get credit for the amount spent.
We all know that Medicare fraud is a rampant problem. So, it goes without saying that it’s not a good idea to share your Medicare card or your Medicare claim number with anyone except your trusted health care provider. If you’re married, your spouse will have their own card. They cannot use yours.
Need to talk to Medicare.gov? Have your Medicare card handy, because they will ask you for your ID number before answering any questions.
It’s your responsibility to protect your Medicare card. Always keep it in a safe place. If you suspect that your Medicare car identification number has been used for fraud, report it to Medicare.gov.
How to Enroll in Medicare if you are Disabled
If you qualify for Social Security Disability income benefits due to a permanent disability, you most likely also qualify for Medicare benefits to cover your medical expenses. To qualify for Medicare Disability, most people will need to first collect Social Security Disability for two years. Medicare Disability begins when you receive your 25th payment from the Social Security Administration. However, the two-year delay does not apply to everyone.
How-to Qualify for Medicare Disability Benefits
If your doctor diagnoses you with a permanent condition that has left you disabled and unable to work for a period of twelve months or more, you have the right to apply for Social Security Disability. You apply through your local Social Security Administration (SSA) office, or on their website at www.ssa.gov. As long as you have worked at a legal job and paid Social Security taxes, you are eligible.
There are other criteria, as well. For instance, your medical condition must prevent you from doing your normal job function, or from being employed in a similar position or even a new line of work due to your age, level of education, or a physical limitation. If for any reason you do not follow your doctor’s prescribed treatment plan, the SSA may decide to disqualify you, and you can lose your Social Security Disability benefits.
Most people must collect Social Security Disability benefits for 24 months before they can enroll to receive Medicare. However, some illnesses allow you to qualify immediately, such as Lou Gehrig’s Disease. If you have Amyotrophic Lateral Sclerosis (Lou Gehrig’s Disease), you will be automatically enrolled in Medicare the first month that you begin receiving Social Security Disability benefits. If you live outside of the continental USA, Hawaii or Alaska, you will receive Part A only.
If you do not qualify for Medicare Disability due to a special illness, you will be automatically enrolled in Medicare Disability Parts A and B on the 25th of your Social Security Disability benefits. If you live outside of the continental USA, Hawaii or Alaska, you can apply by calling or visiting your local SSA office.
If you have kidney failure (ESRD) you must enroll in all parts of Medicare Disability manually. To do so, visit your local Social Security office, log on to www.socialsecurity.gov/medicareonly/ or call 1-800-772-1213. You can enroll in Medicare Parts A, B and/or D. Medicare Part C is not available to those with ESRD.
IMPORTANT: You have seven months to enroll, which begins the first month that you receive Social Security Disability benefits.
If You Live Outside Of The Continental USA, Hawaii or Alaska
If you live in a U.S. territory, automatic enrollment will be limited to Medicare Part A for qualified beneficiaries. Enrollment in Medicare Parts B and D is manual via telephone or a local SSA office.
Medicare Benefits for Veterans
Medicare-eligible Veterans with VA (U.S. Department of Veterans Affairs) health benefits and disabled Veterans have good options when it comes to their healthcare. If you are a Veteran, thank you very much for your service. I’m proud to tell you about your combined VA/Medicare benefits.
Medicare, VA Benefits, and You!
Although the VA and Medicare are both federal government healthcare programs, they are not interchangeable. If you’re eligible for both, it’s important to know your options and how to use them.
Veterans can have both Medicare and VA health benefits. However, Medicare and VA benefits don’t work together and you can’t stack the benefits. Specifically, Medicare does not pay for any care that you receive at a VA facility, and the VA may not pay for benefits covered by Medicare outside of the VA system. However, in some circumstances, the VA can bill Medicare for approved care you receive outside of a VA facility.
As you may know, the VA is starting to allow Veterans to get care outside of VA facilities. The new program is called the Veterans Choice Program (VCP), and it creates interesting new care opportunities for Veterans.
Veterans Choice Program
The Veterans Choice Program allows you to receive care, paid by the VA, from a community provider. For example, if you need an appointment for a specific type of care, and VA cannot provide the care in a timely manner or the nearest VA facility is too far away or too difficult to get to, then you can ask to receive care through the Veterans Choice Program.
To use the Veterans Choice Program, you need prior authorization to receive care from a provider that is part of VA’s VCP network. The authorization is based on specific eligibility requirements and discussions with the Veteran’s VA provider. VA must authorize care that is needed beyond the scope of the first authorization.
I, myself, use the Veterans Choice Program. My nearest VA hospital is over 100 miles away. On the occasions I’ve used VCP, a simple call to the VA was all that was required to get approval. The healthcare provider bills the VA, and the VA takes care of the rest, including billing Medicare for its share.
By law, the VA must bill your primary health insurance, which is Medicare. If you owe a co-payment, the VA will bill you directly. VA medical and prescription co-payments are nearly always cheaper than Medicare.
Your VA Benefits and Medicare Part A
You can have both Medicare and VA benefits at the same time, and it’s recommended that you do. It’s strongly recommended that all Veterans enroll in Medicare Part A for hospital coverage. As long as you worked 40 quarters or more, there’s no additional cost to have Medicare Part A.
Having Part A lets you receive hospital coverage should you go to a non-VA facility and not have Veterans Choice approval. Although you may never need it, it does not hurt to have it.
Your VA Benefits and Medicare Part B
Although it’s not necessary, the VA strongly recommends that Medicare-eligible Veterans and Disabled Veterans enroll in Medicare Part B as soon as they are eligible. Most of us pay a monthly premium for our Medicare Part B, but it’s worth it. Here’s why.
If your VA Benefits are dropped at some point or, if your local VA facility does not cover a health service you need, you could end up paying 100% out of pocket. This is why the VA recommends that you enroll in Part B.
Here’s something else you need to know. If you do not enroll in Part B when you are first eligible, you will incur a Part B premium penalty for each 12-month period you were without Medicare Part B coverage. That means if VA funding suddenly drops, and you’re covered at one of the low priority groups, you could lose your VA health benefits and need Medicare Part B. And, if you didn’t enroll when first eligible, the penalty may be significant.
Your VA Benefits and Medicare Part D
As a Veteran, the choice of whether to enroll in Part D is up to you. You don’t need a Medicare prescription drug plan because your VA plan may offer more coverage than Medicare. Remember that any prescription prescribed by a non-VA doctor must be approved by your VA doctor. This takes extra time and your VA doctor can disapprove of the prescription if they feel it is unnecessary.
Here’s the good news. If you choose not to enroll in Part D when you are first eligible you can still enroll in Part D without paying a penalty later. That’s because VA drug coverage is considered creditable coverage.
Many Veterans use their VA health benefits specifically for drug coverage. There’s no reason not to. The VA’s drug coverage offers better prescription drug coverage than most Medicare Part D plans, and there’s no annual deductible or crazy coverage gaps to deal with. Plus, since VA drug coverage is creditable, meaning it is as good as or better than Medicare prescription drug plan benefits, you can delay Part D enrollment without penalty.
If you lose your VA drug coverage benefit, make sure you enroll in a Part D plan within 63 days of losing your VA benefits.
Medicare Part D coverage might be a better option than the VA if you:
- Don’t live close to a VA pharmacy or facility, or do not want to use a VA provider to get prescriptions;
- Need the flexibility of filling your prescriptions at retail pharmacies, or find the VA’s drug formulary too restrictive;
- Reside in a non-VA nursing home and want to get prescriptions from the long-term care pharmacy that works with your nursing home; or
- Qualify for full Extra Help, which has lower co-payments than VA coverage.
If you are considering enrolling in VA drug coverage and Part D, remember that the two do not work together. Your VA benefits will only pay at VA pharmacies and facilities, and Part D will only pay at pharmacies in your plan’s network.
Your VA Benefits and Medicare Supplement Insurance
Some health insurance experts say that Veterans with VA health benefits don’t need a Medicare supplement for additional coverage. However, I think it’s important to consider your options and your personal situation.
Medicare Parts A and B, in conjunction with a Medigap plan, covers out-of-pocket expenses, including deductibles, copays, and coinsurance, as well as other benefits when seeking care outside of the VA, or outside of the U.S. and its territories. Here are some important reasons to consider a Medigap policy:
- You do not live near a VA facility
- You are enrolled in one of the VA lower priority groups, and could potentially lose your benefits
- Option to use local doctors and hospitals without VA approval
If you are in a lower VA priority group, there is no guarantee that Congress will continue to appropriate sufficient funds for the VA to provide care for all enrollment Priority Groups. If this concerns you, a great way to hedge your bet is a Medigap Plan N or a low-cost Medicare supplement.
If you have questions about VA benefits and coverage, contact the VA Health Administration Center at 1-800-733-8387 or 1-877-222-VETS
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