Medicare Planning

Medicare is the National Health insurance program for people over 65 and people under 65 who are receiving Social Security disability benefits. Participation is essentially mandatory if you want to have health insurance in this country. While you can, and probably should, have additional private insurance, you must enroll in Medicare in order for supplemental insurance to take effect.

When you turn 65, Medicare becomes the primary payer. Under original Medicare, any private insurance you may have is secondary and will not pay until Medicare has paid its share the only insurance that remains primary to Medicare is employer group coverage that covers 20 or more employees. So if you or your spouse is still working and covered by an employer group plan that covers 20 or more employees, you do not need to sign up for Medicare when you turn 65. Otherwise you do.

There are several parts to Medicare. Part a covers part of the cost of hospitalizations. Part B covers part of the costs of doctor visits and other health care services. Part D covers part of the cost of prescription drugs and is offered through private insurers.

Under original Medicare, when you go to the hospital under part A or incur a medical expense under part B, the bill is first sent to Medicare. The government will pay the portion it is responsible for, such as 80% of your doctor bill, and the remaining amount is billed to you. If you have supplemental insurance, your other insurance may pay all or part of the bill that remains after Medicare has paid its share.

Part D works a little differently because the insurance is offered through private companies that contract with Medicare. In order to have your prescription drugs covered buy insurance, you need to find a Medicare drug plan offered in your area. You will have several drug plans to choose from, each having its own drug list and offering slightly different coverage at differing prices. A key part of enrolling in Medicare is shopping for prescription drug plans and finding one that offers the coverage you need for the drugs you take at a price you can afford.

Some people think Medicare is free. This is not true. Part A may be free if you or your spouse has paid into Medicare for more than 10 years. But when we say quote “free” we are only referring to the monthly premiums. If you are hospitalized, you will pay a deductible before Medicare pays its share. And if your hospitalization lasts for more than 60 days, you will be responsible for paying part or all of the daily rate.

Part B is not free for anyone, except those who qualify for special assistance for being poor. Medicare charges a monthly premium that is deducted from your Social Security check if you are receiving Social Security. If you haven't started Social Security yet, you will get a bill from Medicare. High income people pay an extra amount on top of the base premium. In addition to the monthly premium, there is an annual deductible that you or your supplemental insurance must pay before Medicare pays its share. And because Medicare pays only part of the bill, you or your other insurance pays the remaining amount. There is no limit to the out of pocket expenses you could pay under Medicare alone. This is why most people have supplemental insurance.

Medicare subsidizes prescription drug coverage through payments to private insurers offering Part D prescription drug plans. Still, you will likely have to pay a monthly premium to the insurer offering your drug plan. In addition to the monthly premium, there may be an annual deductible as well as a copayment or coinsurance each time you get a prescription filled. Terms and premiums vary among drug plans, which is why you'll need to shop carefully for the right plan for your needs.

Some people think Medicare is automatic. This is only true if you are receiving Social Security when you turn 65. If you are not receiving Social Security, you will need to proactively sign up for Medicare three months before your 65th birthday. You do this through the Social Security Administration, by calling 800-772-1213 or online at www.socialsecurity.gov.

However, enrolling in Medicare through the Social Security Administration only takes care of parts A&B. If you want Part D, you will first need to choose a prescription drug plan. Then you can enroll in Part D through the private insurer or through medicare.

If you don't enroll in Medicare during the appropriate enrollment period, you may have to pay a late enrollment penalty when you finally do enroll. There are two main enrollment periods for parts A&B;

Initial enrollment period. The initial enrollment period is for everyone who will be signing up for Medicare at 65, that is, everyone who is not retaining employer group coverage past age 65. The initial enrollment period starts 3 months before you turn 65. Although it extends for a full seven months, you will want to enroll during the first three months in order to have Medicare coverage start on the first day of the month you turn 65.

Special enrollment period. If you are covered by an employer group plan that covers 20 or more employees when you turn 65, you have a special enrollment period that entitles you to sign up later. To avoid coverage gaps, you'll want to enroll in Medicare before your group coverage ends. However, late enrollment penalties can be avoided if you enroll by the end of the 7th month after your group coverage ends.

If you miss your initial or special enrollment period, the only other time of the year you may enroll in Medicare is during the general enrollment period, which runs January 1st through March 31st of each year. Late enrollment penalties may be added.

As for Part D, you have several choices depending on your other insurance period if a retiree plan will be serving as your supplemental insurance, and if that plan includes credible prescription drug coverage, you probably won't be signing up for Part D during your initial or special enrollment period. However, if that coverage ever ends, you must sign up for Part D within 63 days or pay a late enrollment penalty. Be sure to save the annual statement you get from your insurance company saying your drug coverage is credible. Medicare will ask for it, and if you can't provide it you may be charged a late enrollment penalty.

Because there are so many out of pocket costs associated with Medicare, part of your Medicare enrollment process will be shopping for private plans. You should do this well before your Medicare effective date so your supplemental insurance will start at the same time.

Supplemental insurance (“Medigap”). Medicare supplemental insurance is also known as medigap. It is designed to cover the gaps Medicare does not cover, such as some deductibles, copayments, and coinsurance amounts for Medicare approved services. There is a range of choices available to you, and if you sign up during your initial or special enrollment period, you cannot be denied coverage regardless of your health status. Policies are standardized so that all policies identified by the letter A through N offer the same benefits. For example, plan F, which is the most popular and comprehensive, provides the same benefits no matter which insurance company you buy it from. For this reason, price and service become key issues when shopping for supplemental insurance. If your employer offers retiree coverage, you may not need to buy supplemental insurance. Your retiree plan may offer better coverage at a lower price. However, you may still need to enroll in Medicare parts A&B.

Medicare Advantage plans. These plans offered by private insurers provide another way to get Medicare. They are sometimes called part C. Insurers offering Medicare Advantage plans contract with Medicare and receive a per capita amount from Medicare. They are then responsible for delivering all care under parts A&B. Most also offer Part D prescription drug coverage. If you enroll in a Medicare Advantage plan, you may get extra services such as vision care or Wellness programs in addition to Medicare gap coverage. You must enroll in parts A&B and pay Part B premiums, along with any premiums charged by the Medicare Advantage plan. Medicare Advantage plans are distinct from medigap policies. If you have a Medicare Advantage plan you may not apply for a medigap policy.

Savvy Medicare planning does not stop when you enroll in Medicare. In fact, if you, or even your parents, are already on Medicare, you should periodically review your other plans to make sure you have the coverage you need and are not paying too much in premiums.

There is a wide variation in premiums charged by the private insurers offering Part D prescription drug plans, medigap policies, and Medicare Advantage plans. Furthermore, prescription drug plans and Medicare Advantage plans are free to charge their coverage terms and premium pricing annually. Medigap plans are more stable in terms of their benefits since the plans are standardized, but insurance companies can and do raise their premiums from time to time. And the marketplace may have changed since you bought your policy, you might be able to get the same policy for a lower price now. Or maybe you'd like to change to a different plan.

If you have a Part D drug plan or a Medicare Advantage plan, be sure to watch your mail in the fall of each year. That's when the drug plans and Medicare Advantage plans announce their benefits and prices for the coming year. You should read this information carefully so you can decide if you want to keep your current plan and pay the new premium if it is changed, or shop for a new plan.

Pay attention to the calendar. The annual open enrollment period occurs from October 15th through December 7th of each year. During this time, the drug plans and Medicare Advantage plans may be giving seminars in your area. This is your chance to learn about other plans and do some careful comparison shopping. To switch plans, contact the new plan before December 7th. Your new coverage will take effect on January 1st.