The ABCs of Medicare

What is Medicare?

Medicare is a federally funded health insurance program created in 1965 as part of President Lyndon Johnson’s Great Society initiative.  In 2024, there are over 65 million medicare beneficiaries- almost 19% of the entire US population.

Medicare provides health coverage to people 65 years of age and older, and certain younger people with disabilities or qualified illnesses.  It helps cover medical cost like doctors visits, hospital stays, and other treatments.  It is important to understand that Medicare is not designed to cover everything and there will be cost that still fall on you.

The ABCs of Medicare

Medicare has several parts, and there are both public and private plan options.  The public parts are Medicare Part A (hospital insurance) and Medicare Part B (doctor insurance).  The private plan options include Part C Medicare Advantage plans (these are sometimes shown as MA or MAPD plans), Part D stand-alone prescription drug plans, and Medicare Supplement plans (Medigap plans).

Most people will not pay anything for Medicare Part-A. During their working years, taxes were taken out to pay for this.  The monthly premium for Part-B is $174.40 for most people, but this number does vary based on your income when you enroll.  This premium is either taken directly out of your Social Security if you are receiving it, or you will be billed for it by Medicare.

The deductible for Part-A is $1,632 per benefit period.  A benefit period start on the day you are admitted to the hospital and, once you are all better and recovered, last for an additional 60 days.  After this 60 day period of you having recovered, if you need to go to the hospital again, you would trigger a new benefit period and have to pay another $1,632.  It is possible to have up to 5 benefit periods a year for a total of $8,160 not covered by Medicare Part-A.  The deductible for Part-B is $240 each year.

Medicare Part-A and Part-B also have co-pays.  These are outlined in detail below.

2024 Medicare Part A
2024 Medicare Part B

As you can see, there are some pretty big gaps in medicare as shown above.  The big take-away is the 20% coinsurance on Part-B as this is what pays for out patient surgery and other costly medical procedures.  How this boils down is if you are admitted to the hostpal and need an expensive procedure, you will first pay the $1,632 (Part-A deductible), then $240 (Part-B deductible), and then 20% of the cost of the procedure (Part-B coinsurance).  The cost can truly become daunting; not something you want to be worrying about when you’re supposed to be enjoying retirement!

There are two main routes that people take.  One is with a Medicare Supplement Insurance (Medigap) plan.  Medigap plans are additional insurance that you buy from private companies that help to cover the cost not paid for by Original Medicare.  Unlike a Medicare Advantage plan, there are no networks, so you can see any doctor you want without worrying about extra cost.  Some plans also offer coverage outside of the US.  These plans are great for people who only want to pay one bill each month and not worry about bills from the hospital or doctor’s office.  With supplement plans, you will need to health qualify to be able to join them, but you can switch between the different plans as often as you like.  The exception to this the first time you enroll in Medicare; companies can not deny you coverage or charge you more due to health problems.  If you try and buy a Medigap plan outside of the 6 months that you signed up for Medicare, insurance companies can deny you or charge you more for pre-existing conditions.  It is important to note, that Medigap plans are standardized.  They will be named by letters (Plan F, Plan G, Plan N, etc) and the benefits are always the same no matter which company sells it, but the monthly premiums can vary depending on the company selling the plan.

The other option people can take is called a Part-C Medicare Advantage plan.  These are referred to as MA plans, or, if they have a Part-D drug plan attached to them, a MAPD plan.  These are Medicare approved plans offered by private companies that replace Original Medicare for your health and drug coverage.  In many cases, you can only use doctors who are in the plan’s network.  There are a lot of different Medicare Advantage plans and each one has different features and benefits.  With these plans, your monthly premiums will be as low as $0, you instead have a maximum out of pocket cost that needs to be reached before the insurance company will start to pay.  This maximum out of pocket that you pay first varies depending on the plan you choose as do the upfront prices that you’ll pay for the different types of medical and hospital procedure.  All of those prices and cost that fall on you, as well as the maximum out of pocket, will be listed on the plans summary of benefits (summary of benefits is an insurance term for everything the plan does and does not cover and all the associated cost) for you to see, so you’ll know what you’re getting into before you sign up.  With a Medicare Advantage plan, you will not need to health qualify like you do with a Medicare Supplement plan, but you will not be able to switch whenever you want to either.  There are only a few times a year that you are allowed to change these plans.  Usually you can join or drop an Advantage Plan either during Open Enrollment from October 15 through December 7 or if you qualify for a Special Enrollment Period (this is referred to as a SEP) based on certain predefined events such as moving, your plan changing mid-year, or returning to work and being offered group benefits.

Generally, your prescriptions will be covered under a Part-D drug plan.  If you have a Medicare Supplement plan, you can enroll in a stand alone Part-D plan for little to no cost each month.  If you are enrolled in a Medicare Advantage plan, the plan you select will usually have a drug plan added on for you when you sign up. 

Like the Part-C Medicare Advantage plans, the cost you pay at the pharmacy for your prescriptions will vary depending on the plan that you’re on.  Also like the Medicare Advantage plans, you will not be able to change your Part-D drug plan when ever you want.  These can only be changed during certain times of the year or if you qualify for a SEP.

If you are still working and taking advantage of group benefits, make sure that it is considered credible coverage.  The insurance that you are on now needs to provide at the very least the minimum of what a Part-D prescription drug plan does.  If you are not enrolled on a plan that offers this, you face paying a fee every year for the rest of you life.  Feel free to reach out to us if you have questions about this, as it can be confusing.

If you receive Tricare military health care, then you’re covered and will not need a Part-D prescription drug plan.  There may also some plans and options that are available to you that you otherwise would not have access to.

Medicare, like all privately owned insurance companies, negotiates with doctors and hospitals and has agreed to pay a set amount for every procedure.

Sometimes, the hospitals and doctors still charge more than what Medicare is willing to pay.  The amount of cost over the Medicare amount, is called an excess charge.

There are a few Medigap plans that cover these charges, but outside of those you will be responsible for these out of your own pocket.

Enrolling in Medicare & When to Sign Up

Generally, there is a seven month window when you can sign up for Medicare, the three months before your birth month through three months after your birth month.  If you do not sign up during that window, you’ll have another change during the General Enrollment Period from January 1 through March 31.  During this enrollment period, your coverage will begin the month after you sign up and you may be faced with higher Medicare premiums due to your late enrollment.  This late enrollment penalty adds 10% to your Part-B premium for every 12 months you delayed enrolling in Medicare.

You are able to postpone signing up for Medicare without a late enrollment penalty only if you or your spouse are still working and you have health insurance based on that job.

Signing up for Medicare Part-A when you turn 65 is a good idea for most people.  The premiums are free to you if you are eligible for social security, even if you have not filed for them yet.  For Part-B, you will not face a late enrollment penalty so long you sign up within eight months of losing your job-based health insurance.  It is important to note, that this waiver of penalties applies only to job-based coverage, not COBRA or retiree health insurance, even if your plan allows you to receive health coverage after you retire.

Another aspect to consider in the size of the company you work for.  If your company has more than 20 people employeed, then Medicare will pay after your group coverage.  Since your group coverage pays first, it will be ok to wait to sign up.  If your company has less 19 or less employees, Medicare will consider your group coverage secondary insurance.  COBRA and retiree benefits are always considered secondary coverage.  Secondary coverage only pays what Medicare doesn’t pay.  If you fall into one of these groups, it is important to sign up for Medicare when you turn 65 so that you are not needing to pay for what Medicare would have paid before you secondary insurance picks up the rest.

You can ask your human resource department if you work-based insurance is considered primary or secondary.

Above we talked about how Original Medicare does not cover your prescription medications.  The first time you enroll in Medicare, the sign up rules are a little bit different than they are for Parts A & B.  You can buy Part-D coverage when you’re first eligible for Medicare, but you don’t need to sign up if you have other coverage that is considered as good or better than Part-D (this is called Credible Coverage).  This could be from a job-based group plan, retiree benefits, or Tricare military health care.

You should receive a letter from your employer or insurance plan every September telling you if your prescription drug coverage is credible.  Always make sure to keep this letter as proof that you had credible coverage.If you lose your credible coverage, or if drug plan you do have is not credible, you have a two month special enrollment period to sigh up for a Part-D plan without facing a penalty.  If you go more than 63 days without credible drug coverage, you will ned to pay a late enrollment penalty.  This penalty generally last as long as you have Part-D coverage.

The first step is to create an account with the social security department.  If you already have an account, you can skip ahead to the next section.

  1. Go to the website ssa.gov
  2. Create an account.  All you will need to create an account is a social security number.
  3. Verify that you can successfully login to the site.

Once you have created an account and ensured that you can log in, you can start to sign up for Medicare.

  1. Go to www.ssa.gov/Medicare/sign-up
  2. There are two different sign in option listed.  If you created an account BEFORE September 18, 2021, use the normal login screen.  If you account was created AFTER September 18, 2021, login using the LOGIN.GOV icon.
  3. Once you are signed in, click on Start Medicare Application.  If you need any help with this part, feel free to call us and we can help walk you through the process over the phone.
  4. Once you have completed this process, you will submit the application electronically to Social Security for your enrollment.  You will then receive a confirmation number that will allow you to access that information later to check on progress.  The easiest way to check on the application state is to log onto your Social Security account, and you will see information specificaly for your Medicare application and its progress.  You should check this regularly.
  5. Receiving your Medicare number in the mail usually takes between two and six weeks, but when you sign onto your Social Security account, you should see your verification.  By clicking on the verification, it will open up and show your Medicare numbers.
  6. With these Medicare numbers you are able to move forward with any type of supplemental coverage and drug coverage that you wish to enroll in.

What is better, a Part-C Advantage Plan or a Medicare Supplement Plan?

This varies person to person and depends on what you want to get out of you health care.  Networks, co-pays, monthly premiums, and maximum out of pocket expenses all differ between the two.  The chart below shows most of the differences.  It is important to note, that the plans under Medicare Advantage all differ slightly between each company as well as by your zip code.

Medigap Vs Advantage Plans

The choice between the two is a personal decision, and there is no wrong answer.  By age 80, assuming you’re needing to use your insurance the same amount as the average person, the cost between the two even out for the most part, with the Medigap plan pulling ahead if something major happens.  Other factors to consider include if you want to travel, or if you have the savings for a large max out-of-pocket charge when needed.

What is the Difference Between Medicare and Medicaid?

Medicaid is joint Federal and State program that provides health coverage to some people with limited income and resources.  The Federal government has rules that all state Medicaid program must follow, but each state runs its own program.  This means that eligibility requirements and benefits can vary from one state to another.

Medicaid offer benefits that Medicare doesn’t.  For people that are also enrolled in Medicare, there are plan to which only they have access.

Medicare Resources

Still have questions or wanting explore your options?

We can review your situation together and answer any questions you still have.  Our conversations are always free and generally take about 30 minutes.  Click below to find a good time to talk.

Aaron

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