Understanding Medicare

Transcription

1 Understanding Medicare When you think about income streams in retirement, Medicare may not initially come to mind. But it is an important part of most retirees "golden years." Medicare covers many health expenses starting at age 65. If you add up the cumulative expenses that Medicare covers for most people in their retirement, it can sum to hundreds of thousands of dollars. Medicare is a health insurance program administered by the U.S. government for people age 65 or older and for people with certain disabilities. If you re nearing age 65 you ve probably thought a lot about Medicare and know there are important steps to take and decisions to make regarding your health care coverage. One of the best resources for detailed information on Medicare is "Medicare and You 2015" at What Does Medicare Cover? There are four different parts to the Medicare program: Parts A, B, C and D. Part A (Hospital Insurance): helps pay for inpatient care in hospitals, skilled nursing facilities, hospice and home health care. Part B (Medical Insurance): helps pay doctors and outpatient services, durable medical equipment, some types of home health care and preventive care. Part C (Medicare Advantage): an alternative way to receive your Medicare benefits. Medicare-approved private insurance companies offer health plan options for benefits covered under Part A and Part B. Most Medicare Advantage Plans offer prescription drug coverage (Part D) and some plans include extra benefits for an additional cost. Part D (Medicare Prescription Drug Coverage): helps cover the cost of prescription drugs. Plans are offered by Medicare-approved private insurance companies. The majority of people enrolled are covered under the Original Medicare program (Parts A and B), while about 25% are enrolled in a Medicare Advantage Plan (Part C). It is important to note that Medicare does not cover everything. Some items not covered include long-term or custodial care, routine dental care, dentures, cosmetic surgery, acupuncture, exams for fitting hearing aids and hearing aids. The Affordable Care Act doesn't change Parts A through D above. It does offer more preventative services and an annual free wellness visit. It may also offer savings on prescription drugs.

2 Who Is Eligible for Medicare? Medicare coverage is available for the following: People age 65 and older: You are a U.S. citizen or permanent resident; and You or your spouse worked for at least ten years in Medicare-covered employment; or You or your spouse had Medicare-covered government employment. People under age 65: You received Social Security or Railroad Retirement Board disability benefits for 24 months You have end-stage renal disease and meet certain requirements If you meet these conditions, you don t have to pay a premium for Part A, but you still must pay for Part B if you want it. If you don t qualify for premium-free Part A benefits, but you are a U.S. citizen, you can pay premiums for Parts A, B and D. How Much Does Medicare Cost? Part A: Part A covers institutional services like hospital stays. If you or your spouse paid Medicare taxes while working, your premium for Part A coverage should be free. People who have to buy Part A will pay up to $407 per month, or $4,884 annually. Premiums for Part A could go up 10% if you miss the enrollment period once you become eligible. In addition, you may also pay deductibles or coinsurance depending on the services you need. The 2015 deductible for hospital stays is $1,260 with no coinsurance payments for the first 60 days of your stay (coinsurance payments begin on day 61). Part B: Part B covers doctor visits and other types of medical services. Your premium depends on your income. Monthly premiums range from $ to $ as shown in the table below: If Your Yearly Income in 2013 was You Pay File Individual Tax Return File Joint Tax Return $85,000 or less $170,000 or less $ above $85,000 up to $107,000 above $170,000 up to $214,000 $ above $107,000 up to $160,000 above $214,000 up to $320,000 $ above $160,000 up to $214,000 above $320,000 up to $428,000 $ above $214,000 above $428,000 $ Your premium for Part B could increase by up to 10% for each full 12-month period that you could have had Part B, but didn t sign up for it.

3 In addition to your monthly premiums, in 2015 you pay an annual deductible of $147 and 20% copayments on doctor and other medical services if the provider accepts assignment. Part C: Part C (Medicare Advantage) is an alternative way to receive your Medicare benefits. Medicare Advantage plans are private health insurance plans that contract with Medicare. The plans are paid a fixed amount to provide your Medicare benefits. Most Medicare Advantage Plans provide Medicare Part D prescription drug coverage and some may include extra benefits at an extra cost. You usually pay a monthly premium for the Medicare Advantage Plan in addition to your Part B premium. Each Medicare Advantage Plan can charge different out-of-pocket costs and can have different rules for how you receive services (such as where you receive services, if you need a referral to see a specialist, etc.) They have a yearly cap on how much you pay for Part A and Part B during the year, but the caps can be different between plans. To determine specific costs, you need to review the available Medicare Advantage Plans in your area. Part D: Part D covers Medicare prescription drug plans that can vary in cost and specific drugs covered. You pay your Part D premium in addition to your Part B premium. Medicare Advantage Plan (Part C) premiums may include an amount for prescription drug coverage. Premiums for Part D coverage could be higher based on your income as shown in the following table: If Your Yearly Income in 2013 was You Pay File Individual Tax Return File Joint Tax Return $85,000 or less $170,000 or less Your Plan Premium above $85,000 up to $107,000 above $170,000 up to $214,000 $ Your above $107,000 up to $160,000 above $214,000 up to $320,000 $ Your above $160,000 up to $214,000 above $320,000 up to $428,000 $ Your above $214,000 above $428,000 $ Your If you don t sign up for a Medicare prescription drug plan when you first become eligible and you don t have other creditable prescription drug coverage, you will probably have to pay a late enrollment penalty in the form of higher premiums. The penalty is based on the number of months you were eligible and uncovered but didn t sign up. Premiums, yearly deductibles and copayments can vary by plan. For specific drug plan costs, go to the Medicare Plan Finder at If you re in a high-income bracket, you will pay higher premiums for both Medicare Part B and Part D prescription plans. In addition, if you make over $200,000 (individual), or $250,000 (couple),

4 you will be subject to the 0.9% Medicare payroll tax increase and the 3.8% surtax on investment income. Medicare Supplement Insurance (Medigap) Medicare Supplement Insurance policies, sold by private companies, can help you pay some of your health care costs that Original Medicare doesn t cover, like deductibles and copayments. Some of these policies also offer coverage for services not covered by Original Medicare. If you choose a Medical Advantage Plan (Part C) instead of the original Medicare (Parts A and B), you may not purchase a Medigap policy. (It s illegal for anyone to sell you a Medigap policy while you are enrolled in Medicare Advantage, unless you are switching back to Original Medicare.) Insurance companies can offer only standardized Medigap policies, usually identified by the letters A through N. All policies offer the same basic benefits and some offer additional benefits. Different insurance companies can charge different premiums for the same policy. Medigap Plans How to read the chart: If a check mark appears in a column of this chart, the Medigap policy covers 100% of the described benefit. If a row lists a percentage, the policy covrs that percentage of the described benefit. If a row is blank, the policy doesn t cover that benefit. Note: The Medigap policy covers coinsurance only after you have paid the deductible (unless the Medigap policy also covers the deductible). (Source: Medigap Plans Medigap Benefits A B C D F* G K L M N Medicare Part A Coinsurance and hospital costs up to an additional 365 days after Medicare benefits are used up Medicare Part B Coinsurance or Copayment 50% 75% *** Blood (First 3 Pints) 50% 75% Part A Hospice Care Coinsurance or Copayment 50% 75% Skilled Nursing Facility Care Coinsurance 50% 75% Medicare Part A Deductible 50% 75% 50% Medicare Part B Deductible Medicare Part B Excess Charges Foreign Travel Emergency (Up to Plan Limits) Out-of-Pocket Limit** $4,940 $2,470 *Plan F also offers a high-deductible plan. If you choose this option, this means you must pay for Medicare-covered costs up to the deductible amount of $2,180 in 2015 before your Medigap plan pays anything. **After you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year. ***Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that don t result in an impatient admission.

5 Timing is important when you purchase a Medigap policy. The best time to purchase a policy is in the open enrollment period: six months beginning on the first day of the month when you are age 65 or older and enrolled in Medicare Part B. During this period, you can't be rated and charged higher premiums because of health issues. You must be accepted for coverage during this six month period. For more details on choosing a Medigap policy, read "Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare" at Enrolling in Medicare When it comes to enrolling in Medicare for the first time, timing is important. If you are already getting Social Security benefits, in most cases you will automatically get Part A and Part B starting the first day of the month you turn 65. You should get your Medicare card in the mail three months before your 65 th birthday. If you aren t already getting Social Security benefits and you want Part A or Part B, you will need to sign up. Contact Social Security three months before you turn 65. You can do this by calling Social Security or applying for Medicare online. There are three different enrollment periods you should review carefully: Initial Enrollment Period: This is the seven-month period that begins three months before you turn 65, includes the month you turn 65, and ends three months after you turn 65. To avoid any delays in coverage, sign up during the first three months before the month you turn 65. If you don t enroll during your Initial Enrollment Period, you may have to pay higher premiums. General Enrollment Period: If you don t sign up during your Initial Enrollment Period, you can sign up between January 1 and March 31 each year and your coverage will begin July 1. You may have to pay a penalty in the form of higher premiums. Special Enrollment Period: If you didn t sign up for Part A and Part B during your Initial Enrollment Period because you were employed and had health care coverage, you have the option to sign up during a special enrollment period. (Note: this does not apply to COBRA and retiree health plans.) You usually would not have to pay a late enrollment penalty. What about Switching Plans? You should review your coverage annually and determine if you are satisfied with your choices. Even if you are satisfied, the plans may change or your situation may change making other options more attractive. You can make changes to your choices during Medicare s Open Enrollment period which may vary each year. Coordinating Medicare with Other Health Insurance Coverage If you have other health insurance, such as employer group health insurance, make sure you know the rules about which insurance is your primary payer (pays the bills first) and which is the secondary payer. Also make sure you understand how signing up for Medicare benefits affects your other health insurance coverage. Checklist for Getting Started with Medicare There s a lot to remember, especially when you first sign up for Medicare. Here s a simple checklist to help you get started:

6 Carefully review all the information Medicare sends you. Make sure you get all your questions answered. Understand when your enrollment period begins and ends so you know how long you have to decide. Decide on your basic Medicare coverage: Original Medicare or Medicare Advantage. If you choose Medicare Advantage, research the plans available in your area and make your choice. Prescription Drug coverage is often included, but if not, decide if you want to add coverage. If you choose Original Medicare coverage, decide if you want Prescription Drug Coverage. If you do, research the plans in your area and make your choice. If you choose Original Medicare, decide if you want to add supplemental (Medigap) coverage. Sign up for Medicare online or by calling Make sure you get your Medicare card in the mail. Check your enrollment status online at Schedule your wellness visit.