September 26, 2012

Someone Explain Medicare to Me

In reviewing the answers submitted for my new book, one query that has popped up several times is a concern about Medicare. The worry is not about the fate of the program or asking for help in determining what the politicians are likely to do (good question!). No, it is much more basic: "Please explain Medicare to me" or  "What decisions do I need to make?"

Disclaimer: I am still about 19 months away from qualifying for Medicare coverage, so I can't speak from experience. However, I'll do my best to summarize what you need to know. I will be covering Medicare, not Medicaid which is an entirely different program. As with most federal programs and health insurance coverage there are enough exemptions and differences to fill 20 posts. I will only attempt to explain the usual, most common situations.

Medicare is a federal program that pays for certain health-related expenses for people 65 and older. While many costs are covered, an individual enrolled in Medicare is responsible for certain deducible and copays. Some services are not covered at all and others for only a limited period of time.

There are four parts of Medicare:

Part A is hospital insurance. Copays, deductibles, or coinsurance will determine what you pay. Usually there is no premium for Part A.

Part B is medical insurance that helps pay for doctor visits, outpatient care, health health care, and equipment. There is a monthly premium for Part B.

Part C is better known as Medicare Advantage. This is coverage provided by Medicare approved private insurance companies.

Part D is prescription drug coverage. This is also run by Medicare-approved private insurance companies.

Most folks get Part A and Part B automatically. If you receive benefits from Social Security you will automatically get Part A & B coverage starting the first day of the month you turn 65.  If you aren't yet receiving Social Security (because you are still working for waiting until your full retirement age of 66) you must sign up 3 months before your 65th birthday to get Medicare coverage.

If you must sign up (as noted above) there is something called the Initial Enrollment Period which is the period from 3 moths before until 3 months after your 65th birthday. If you miss this window your benefits will be delayed.

If you decide to wait until after the Initial Enrollment Period, there is a general Enrollment Period during the first three months of each year. However, if you use this option, realize your part B premiums will be higher.

If you are covered by a group health plan at your place of employment  and then want to start Medicare, there is another time period, called the Special Enrollment Period that generally allows you to avoid the higher premiums for late sign up.

With me so far?

Other Factors to Consider

Medicare does not pay 100% of most services. So-called Obamacare has put in place several free screening tests for those on Medicare, like colonoscopies and mammograms. But, most doctor visits, tests, drugs, and equipment are going to cost you money...usually something approaching 20%. That's where Medigap coverage enters the picture. This is a policy, sold by a private insurance company, that acts as secondary coverage to Medicare and pays what is left over after Medicare pays what it will.

Just like the rest of Medicare there is a specific enrollment period for Medigap coverage. You can buy any policy that is offered for sale in your state, regardless of your health status. The amount of supplemental coverage, the monthly cost, and any deductibles are different for each policy offered. You decide how much supplemental help you want and can afford.

Speaking of costs, Part A Medicare coverage costs you nothing since you already paid into the Medicare fund while you were working. Part B coverage does carry a monthly cost. For 2012 most pay $99.90 per month. There is also a $140 deductible. Part D prescription coverage costs vary depending on the plan you select and the level of drug coverage. Again, Obamacare has lowered the payments you must make when you enter the drug "donut hole."

What is Covered?

There is no simple answer to that question. Medicare publishes a 148 page booklet that still suggests calling for specifics. But, in general, here is what you can expect:

Part A pays part or all of inpatient hospital care, inpatient care at a skilled nursing facility, hospice care services, and home health care services. As you might guess there are all sorts of qualifications and exclusions for this list but this is the primary purpose of Part A coverage.

Part B helps cover medically necessary services like doctor visits, outpatient care, durable medical equipment, and several preventive services and screenings.

Part C is the designation of Medicare-approved private insurance companies that has various coverage options and costs. You still have Part A and Part B coverage, but the specifics are likely to be different from original Medicare. Generally, coverage is more complete but the costs are higher.

Part D covers some of your presecition drug costs. If you don't need a lot of drugs now, it still may be wise to take this coverage because of late enrollment penalties. Part D is provided by private insurance companies and varies widely in costs and coverage. There are usually copays and deductibles involved. The "Donut hole" limits coverage on what these plans will pay for your drugs. UNder the new health care plan, that donut hole is shrinking and has a new feature that gives you a 50% discount on covered brand name drugs. 

Importantly, these items are not covered by Medicare (not a complete list):

  • Routine Dental care
  • Dentures
  • Cosmetic surgery
  • Acupunture
  • Hearing Aids
  • Exams for fitting hearing aids
  • Long term care

If you'd like more detailed information or see if specific services are covered,  this government website should be your first stop.

The official government handbook Medicare and You is also a must-have resource.

OK, now the fun part. What have I missed or overlooked that you want to pass along? If you have Medicare what can you tell the rest of us that we should know? Pe3rsonally I have paid for my own health insurance for over 40 years. I am looking forward to getting  a break on at least some medical expenses.


  1. Hi Bob, you did a pretty good job of covering all of this since I went through this about a year ago it is somewhat fresh in my mind. But, the thing that took the most time for me was the Medigap coverage. There were at least a score of plans available to me it varies from State to State. For each plan also designated by letters (plan "a" through "m"). There are many different private insurance companies that offer these plans. The basic plans themselves are regulated by Medicare but the costs are not so I had to do a lot of investigating. Generally the higher the letter the more of the gap (co-pay, deductibles, etc) covered. Some plans cover a few things and some cover almost all the personal expenses. One thing to realize is that the Medigap plan costs generally increase as you get older so you must also take that into place.

    1. Thanks for that extra input, RJ. I read about the various letters and thought of the silly security color code we used to endure at airports (weren't we always at Orange?).

      Medigap coverage is partly paid for by Medicare somehow. I had to make this type of decision for my dad and his cost was directly affected by how much he paid for his Medicare coverage. His secondary policy, through the state of Massachusetts, covers virtually everything Medicare doesn't and only costs $6 a month! Ah, the benefits of state pensions.

    2. I don't want your viewers to be confused here Bob. There are no Medigap plans available for $6/month or even ten times that amount. Massachusetts is about as close to universal care so maybe they do pay less even without the state pension.

      Medicare Advantage will probably go away or at least be modified when President Obama is re-elected. Right now Social Security pays considerably more for Advantage than regular Medicare. They will eventually even that out so all seniors have equal payment for their plans. If Mr. Romney is elected all this stuff is a totally unknown.

    3. My dad pays $6 a month for his share of his supplemental coverage while the town of Lynnfield pays substantially more than that to Unicare. But, his part is only $6...I know because I send the check every month.

      Up until last year when the town used Blue Cross his monthly cost was less than $4 a month. Maybe that is why public pensions and benefits are killing cities and towns!

    4. BTW, I fully expect his rate to skyrocket next year. To get the town's business I am sure the company used a teaser rate that will be only a fond memory in 2013 and beyond. Even so, the value for his dollars is amazing since the town continues to pick up 85% of the cost.

  2. Thanks for the informative post. I too am months away from qualifying for Medicare, so of course I'm interested. And my first reaction is: Jeez, it sounds very complicated!

    Just one question though: Is "Medigap coverage" the same as Part C Medicare Advantage?

    1. At the risk of exceeding my knowledge threshold, no, Medigap is supplemental insurance to pay the 20% that Medicare normally doesn't on many procedures and usually to cover the "donut hole" in prescription drug coverage (Part D).

      Medicare Advantage is an approved private insurance replacement for Medicare that covers what Medicare does plus performs like a medigap policy. Coverage varies based on how much you are willing to pay on a monthly basis.

      As I understand it, one of the important decisions we all must make is whether the cost/coverage of Medicare and medigap policies is more or less than simply going with an Advantage approach.

      Good question, Tom. Now I'll sit back and see if I am correct!

  3. One of the things – you will only get Part B if you elect it – A is automatic when you sign up for SS at 65 – and it is there when you start getting checks – but the Part B part is “voluntary” – if you work for a company that provides insurance and choose to stay on the company policy, there is no reason to elect and pay for Part B right away – you have I believe 3 years to go back and elect Part B before a penalty kicks in (that was the way it was a couple years ago for us). We stayed on the company policy until Blue Cross decided to jack the company rates up way high because of our age. When we dropped off it lowered the rates for the company by 15%. But it had only been a couple of years from the time we had started getting SS, so there was no penalty. That is something the SS office can give advice on.

    Also – all the different Medigap companies offer the same plans – Plan A, B, C, etc. The body of the plans are the same = Plan F in AARP is the same as Plan F in Mutual of Omaha. The only difference is the cost. SO it makes sense to pick a plan from a reputable company that offers it in your area for the best price. Some plans add on things to sell their plan – i.e. AARP adds on membership in Silver Sneakers and a few other things to justify a higher monthly cost than Mutual of Omaha. Just depends on what you are looking for – but Plan F in one is the same as Plan F in every other one.

    Advantage Plans or Plan C may be going away after Health Care Reform is fully functional – so it is something to think about – and most Plan C’s are very much like the old HMO plans that limit your choice on doctors, hospitals, etc. It is possible to pick a Plan C if you live in Arizona, and find if you travel in other states or live part time in other states, that Plan will not help you there because there are no doctors or hospitals that participate – then you are left with Out-Of-Network costs just like regular health plans before you were in Medicare. (This has happened to a number of our friends so I know it is the case). Usually Plan C includes meds so you don’t need Plan D.

    One last thing that it is important to know – if you have Medicare and travel outside of the US – you are NOT covered. If you have a supplement, and have chosen one of the Plans that have out of country coverage (such as Plan F) – it will cover 80% of the cost of your care out of country. (This I also know from experience). I do not know if any of the Advantage Plans cover out of country – certainly something that should be checked if one plans to travel outside your own state/country.

    There is also a deduction for anyone who is on Part B for Prescription Drug Coverage IRMAA – this does not benefit the person with the deduction. And it is not well explained in the Medicare info – or by anyone you talk to on the phone – but this is the 2nd year since it appeared – and the nearest I can determine is that it is to pay for drugs for people who cannot afford them. (Isn’t this all of us?) It ranged last year from $11.60 up to $66.40 per month – ties to adjusted gross income from you tax filing two years previously. This is also the way the Medicare deduction is figures – they go back 2 years and see your adjusted gross and then then deduct anything from $40.00 to $219.80 per month. This is for 2012 – I am sure it will go up for 2013 – it has gone up every year. So everyone who pays in for Part B has to have a Part D for drugs on a separate plan, but you are subsidizing “someone” for the drugs on your own deduction. Go Figure.

    Hope this just adds to your information – it is confusing – and I have been dealing with this stuff for 25 years – cannot even imagine how hard it would be for the average person to have to start making all the decisions that go with turning 65.

    1. Hi Pat,

      This is tremendously helpful. You have clarified some very important parts that I didn't see in my research or wasn't explained well. Of course, with the new health Care Law being slowly put in place some of this is a moving target so anything we "know" today may be obsolete tomorrow.

      Again, a big thank you for sharing what you have learned after 25 years of battling this stuff!

  4. So glad you are just a little older than I am. I'm counting on you to get this all figured out by the time I need to know! Thanks for this initial information.

    1. Everything in the post is only applicable for today. Heaven knows what Congress and the President will do next year.

  5. My husband's Medicare Advantage is $19 a month this year. We just got the plan changes for 2013 and his premium goes up to $43. That was just about the only change, though, except for a vision deductible he didn't have last year.

  6. I'm standing next to Galen:) I think things will change quickly in the next few years no matter who is elected...

    1. I agree. Look at the cost of Linda's husband's coverage...most of us would kill for $43 a month, but that is a 126% increase. What's to prevent it more than doubling again next year and the year after that?

    2. My insurance plan from my pension before I was Medicare eligible started out at $16 and at ten years it was more than $400! I was very happy to chuck it and go on Medicare.

    3. That is terrifying. Private health insurance may be the only business that seems to intentionally try to drive away its customers with unaffordable price increases. Is their business model designed to simply gouge a diminishing number of people until they reach their ultimate customer who pays $10 million a month?

  7. Hi Bob.

    I'm planning to retire in a very few short years. But I too have been confused about this stuff. One of my concerns is budgeting for retirement and obviously medical costs are a big part of that.

    I'm wondering if anyone can give some examples of costs they pay for some of the optional plans.

  8. Something else to consider is whether or not your current doctors will take regular medicare or medicare advantage coverage. Some of mine would take one but not the other. And even if the answer is yes now, it too can change. My internist is not taking any NEW medicare patients, but for now he will continue to see me.

    1. Very true. In 2013 I think the rate paid to doctors and medical facilities that accept Medicare will be cut again. I'm not sure I understand the logic of making it so fewer doctors accept patients. Yes, that cuts the Medicare deficit but at what cost?

  9. Getting close to Medicare age but still working full-time with group health benefits. Since Medicare pays first am wondering if my group health premium will decrease since it would be secondary.

    1. Excellent question. From what I understand if your group policy covers 20 or more workers, Medicare is secondary to your group coverage. If that is true then your group policy premium would not be affected.

      Hopefully someone with real knowledge will jump in.


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