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Jeff Chivers
Medicare? ME????
Medicare 101
In the spirit of things “spooky” - at the request of a number of our classmates and as promised in an earlier post, drawing upon my health insurance industry experience I’ve put together some facts and important things to consider as we all approach the mysterious threshold of “aging in” to Medicare.
Although most of those in our class won’t turn 65 for 9-20 months, I can’t over stress how vital it is that you become educated and develop a Medicare strategy NOW in order to avoid costly mistakes that can affect your health choices and pocketbook for the remainder of your life.
Like many government programs, Medicare (like Social Security) offers benefits but is also laden with complexity that can be confusing, inflexible and costly if proper choices are not made at the outset. Because of this complexity I will touch only superficially on a few key points in this post. In future posts over the coming months, I’ll go into more detail.
Medicare's different parts
Medicare comes in four parts, each of which covers particular types of care and services. Virtually everybody who gets Medicare eventually enrolls in the first two parts, which have been around since the program started in 1966:
- Part A covers hospital inpatient care, some types of home health care, hospice care, and care in skilled nursing facilities. There is no premium for Part A if you or your spouse has earned at least 40 Social Security work credits (generally those who worked and paid FICA taxes for a minimum of 40 quarters – or about 10 years). There is generally a premium to pay for Part A if you don't have those credits.
- Part B covers doctor services, outpatient hospital care, preventive care, some types of home health care and durable medical equipment. Unless you also qualify for Medicaid (at or near the Federal Poverty Level), you have to pay a monthly premium for Part B. In 2015 it's $104.90 for individuals with an income of less than $85,000 a year and couples with an income of less than $170,000. Higher-income beneficiaries pay more. Also, you may have heard the Part B premium is to increase considerably for many Medicare beneficiaries beginning in 2016 unless kyboshed by congress in the coming months (don’t count on it!!).
Parts A and B carry with them deductibles and co-pays that can be very costly for those with chronic conditions and/or for those requiring surgery or extended hospital stays. Medicare Supplement Plans (also known as “Medigap” Plans, offered by private insurance companies but regulated by Medicare) can help greatly reduce or eliminate these otherwise burdensome costs. I will delve deeper into Medigap plans in a later post.
Medicare’s other two parts were added later.
- Part C, also known as Medicare Advantage Plans represent a simplified alternative to dealing directly with Medicare in getting your Part A and Part B benefits. But in order to participate in a Part C Advantage Plan, you must first be enrolled in Parts A and B. Offered through private insurance companies, Part C Advantage plans operate under the watchful eye of Medicare from which they also receive significant subsidies for taking on the role of managing your healthcare needs. There are advantages to being on these plans over that of straight Medicare, but these plans can also be costly depending on your health care situation. More on Advantage plans later, as well.
- Part D covers prescription drugs. This so-called “optional” benefit (also regulated by Medicare) is only available through private insurance companies. Most Medicare Advantage Plans also include Part D.
No matter how you choose to receive your Medicare benefits, you are entitled to certain preventative benefits at no cost, such as immunizations and screening tests for breast and colon cancer.
Signing up for Medicare for the first time
Unless you received Medicare early (qualifying 24 months following being eligible for Social Security Disability) most of us will be eligible for Medicare on the 1st day of the month we turn 65. This is known as your Initial Enrollment Period or “IEP” to sign up for Part A and/or Part B. Your IEP window lasts for 7 months – three months before you turn 65, the month you turn 65, and the three months following. If you are already receiving Social Security, Medicare will automatically enroll you. If not, you must enroll on your own either online through Medicare.gov or at a Social Security office.
When to enroll in Part A
Nearly everyone who becomes eligible for Medicare should enroll in Part A immediately, because it has no premium. This is true even if you are still working and have health insurance through your job. It will get you into the system.
When to enroll in Part B
This is trickier. If you get it wrong, it could cost you a lot of money.
If you are already retired or will retire right at 65, the answer is simple: sign up for Part B the same time you enroll in Part A. If you are still working, you're going to have to figure out the right time to enroll on your own.
It's really important not to mess this up. You don’t want to pay the Part B premium before you need to, but if you don't sign up for Part B when you should, you will be hit with a harsh late enrollment penalty. The penalty is a permanent increase in your Part B premium of 10 percent for every year that you should have been enrolled but weren't. So for instance, if you sign up for Part B two years after you should have, your premium will be 20 percent higher from that point forward!! Plus, your Part B enrollment represents a “timing trigger” that opens a brief window of opportunity for your right to the “guaranteed issue” of a Medicare Supplement “Medigap” plan regardless of your health or preexisting conditions. But more on that later.
Tricky Part B situations
Look down this list to see if any of these situations apply to you. It will tell you what you should do about signing up for Part B when you turn 65.
You receive financial help to buy an individual health plan through the Federally Funded Marketplace (“Obamacare”) or your state's health insurance marketplace. Once you become eligible for Medicare, you can no longer get a subsidy. If you keep the plan anyway you will get that late Part B enrollment penalty. To avoid this penalty, enroll in Medicare and cancel your Marketplace plan.
You have an individual health plan but don't receive a government subsidy to help pay for it. If you keep this plan instead of enrolling in Medicare when you turn 65, you'll be hit with the late enrollment penalty. It doesn't matter where you got it or how long you've had it. Cancel it and enroll in Medicare.
You are still working at an employer with 20 or more employees. You can delay Part B enrollment without a penalty if you have health insurance through your own or a spouse's current job. Once the last working spouse leaves his or her job, even if they're getting COBRA or retiree insurance, it's time for both of you to sign up for Part B. You have eight months, starting the month after the job ends, to get this done without penalty.
You are still working at an employer with fewer than 20 employees. Sign up for Part B at 65. Your employee health plan then becomes a "secondary" plan that pays for things only after Medicare has paid its share of the bills. Smaller workplaces like these are allowed to drop you from their employee plan after you reach 65. (That's against the law for larger employers.) If you ignore this rule, and your group health plan finds out you're over 65, it may refuse to pay claims that Medicare would have paid.
You or your spouse is on COBRA. Once you turn 65 you must switch to Medicare or face the late enrollment penalty. But COBRA can still function as the main insurance for the younger spouse, and you can keep parts of your COBRA plan that Medicare doesn't cover, such as your dental benefit.
You have a retiree plan. If you have a retiree plan from your old job, you must sign up for Part B when you turn 65. After you go on Medicare, the retiree plan becomes a secondary plan. But if your spouse isn't old enough for Medicare yet, he or she can still get the retiree plan if your former employer allows that.
You receive veteran's benefits. The Department of Veterans Affairs and Medicare operate independently of each other for the most part. Medicare won't pay for care you get at a VA facility. The VA won't pay for the share of your medical bills that Medicare doesn't pay. The VA encourages veterans to sign up for Medicare A and B to have the flexibility to seek care at non-VA facilities if needs be.
You have TRICARE for Life. If your military service entitles you to TRICARE for Life, you must sign up for Part B when you turn 65. This is required regardless of whether you are working or have other sources of coverage. If you don't, you lose your eligibility for this valuable benefit.
You are on the Federal Employees Health Benefits Plan (FEHB). FEHB will continue to cover you after retirement, even if you don't take Medicare at all. But if you delay enrollment in Part B after retiring, and then change your mind later, you'll be hit with the Part B late-enrollment penalty. Because FEHB premiums can be substantial, you need to consider your options carefully.
Well, enough for now. Are your heads swimming yet? In a future post on the subject I’ll delve more into areas of critical consideration – whether to rely solely on original Medicare parts A, B & D; Medicare A, B & D in combination with a Medicare Supplement “Medigap” plan, or go with a Medicare Advantage Plan (Part C) with the ins & outs; ups & downs and long-term implications of each approach.
Stay tuned!! But don’t hesitate to contact me if I can help with immediate questions you may have on Medicare or that “Obamacare” thing you may be dealing with at present.
Jeff Chivers - 801-712-8448
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Don't know what I could have done to deserve all of this, but one never knows exactly what will develop from a compliment or smile. Right?