November 14, 2017

A Quick Medicare Primer


This post originally ran in September, 2012. Last week a regular blog reader mentioned how helpful it was to him when he was researching his options.  I noticed it is still getting some views even after 5 years, so I thought it would be good to bring it back for new readers and those who are now close to 65 and looking for a simple review. I have freshened it up a bit from the original.

Here you go!


One query that pops up rather often 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 or later) 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 (for 2017 it is $104.90). There is also a small deductible. Part D prescription coverage costs vary depending on the plan you select and the level of drug coverage.

The infamous donut hole is a gap in coverage where you are mostly responsible for drugs after you have spent a certain amount each year. The "hole" closes after you have passed the yearly maximum. Depending what happens with Obamacare or its successor,  the donut hole is currently scheduled to come to an end in 2020.


What is Covered?


There is no simple answer to that question. Medicare publishes a 150 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. 


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.


29 comments:

  1. Have been beginnning research on the Medicare Advantage programs in Az. There are a number of them that do not charge any more premium.. you just pay your Medicare premium, and use their network.. Still in the midst of research, they sure don't make it easy!!!!!! It also varies a LOT from state to state!

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    1. Just be careful about the restrictions on out-of-area travel with Advantage problems. If you and Ken plan on going anywhere out of state or country you will be without coverage unless you purchase separate travel insurance, which is not a big deal.

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  2. The one thing I’d add to this is an important distinction between Medicare Advantage (part C) and Medicare Supplement (Medigap) plans. Aside from the fact that this an either/or decision, Advantage plans resemble the old HMO plans in which your doctors and hospitals are limited to those “in network.” (Basic Medicare let you choose any provider who accepts Medicare without going through a “gatekeeper.”) This may be irrelevant if your providers are all local and you’re happy with them — and you don’t care about forgoing the option to someday visit the Mayo Clinic or Sloan-Kettering (for example). Advantage plans completely replace Parts A & B and usually offer cost savings as well, which they can afford due to the provider limitations.

    Medigap plans, on the other hand, literally “supplement” (and don’t replace) Parts A & B by covering the 20% of charges that Medicare doesn’t (hence the “gap” name). This can be huge if you have a major procedure. The various Medigap plans, from A to N, offer the identical coverage in most states, although at different rates depending on local costs. I chose a Plan G in Texas for about $110 a month, while the same plan was almost twice as high for my sister in New Jersey. (For those who travel or want to travel overseas, Plans F, G, and N will reimburse you for emergency treatments outside the U.S., up to certain limits.)

    So for me, while an Advantage plan would have been cheaper on a monthly-premium basis, my potential out-of-pocket exposure was much higher in case of a big-deal medical procedure, which is the whole point of health insurance in my mind. And if you don’t sign up for a Medigap plan during the initial enrollment period, any subsequent enrollment requires a physical exam, which is to prevent people from using the cheaper Advantage for years until they get sick or frail and suddenly appreciate the superior Medigap coverage. In all likelihood, you won’t be able to switch into Medigap later.

    I think people tend to go for what looks like the cheaper immediate price without considering the long term trade-offs. I read somewhere recently that an average couple will spend about $250,000 during retirement on medical expenses. I know that won’t be me. As they say, “you pays your money and you takes your choice.”

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    1. Advantage programs are attractive from a price and extra coverage standpoint. But, as you note, the restrictions on coverage and that they don't work out of your home area make them non-starters for me.

      I have F Medigap coverage. A cardiac problem in Portland requiring a 2 day hospital stay and an intestinal problem necessitating a trip to the ER at home cost me exactly zero out-of-pocket. The comprehensive nature of Medigap on top of traditional Medicare allows me to sleep well at night. Add in Part D and I will pay around $300 a month in 2018...worth every penny to me.

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  3. Just to be clear, if one is receiving SS enrollment happens automatically with no penalty?

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    1. That is correct if you get Social Security, but with two important qualifiers:

      1) If you start SS on or before 65 you will get your Medicare card and info in the mail about 3 months before your 65th birthday month. The Part B premium will be deducted from your SS check in the month you turn 65. You will be enrolled in Parts A and B automatically.

      2) If your full retirement age is 66 or you decide to delay taking SS until you are 70, you will have to sign up for Medicare within 3 months before or 3 months after your 65th birthday month and arrange to pay the premium directly until you start on Social Security. If you don't take action then, you will pay a premium for your Medicare every month for the rest of your life.

      So, when you start receiving Social Security directly affects the answer. Before 65 and you are automatic, after 65 and you have to sign up and pay on your own until SS checks start.

      Important: if you want to start Social Security at 65 you have to sign up 4 months ahead of your birthday month and indicate your plans. That is how the Medicare program knows you will qualify for automatic enrollment in Parts A and B.

      Good question!

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  4. Yes, you're automatically enrolled in Medicare Parts A and B, and the Part B premium will be deducted from your SS payment. However, there is no automatic enrollment in the Advantage (Part C) or Supplement (Medigap) options -- you have to initiate either of those yourself. Also, there's no auto-enrollment in Part D (drugs) because you have to choose an insurer who operates in your area. Even if you have no prescriptions now, it makes sense to start and maintain the least expensive Part D plan -- mine is $20/mo -- because it gets far more expensive by the month to enroll as you get older.

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    1. I don't begin to get the full value of my $20/month Part D because of the deductible. But, it is "insurance" against a time when I may have to start taking expensive drugs. Then, I will be very happy I have the coverage.

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  5. Are you allowed to refuse Part B? Also, if you opt not to take SS until age 70, do you need to initiate the enrollment into Medicare at age 65?

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    1. You can refuse Part B if you have coverage through your workplace and it acts as your primary insurance. There are a few specific rules based on the number of employees so double check if this is your situation.

      Yes. you have a 7 month window to initiate Medicare coverage if you are not taking Social Security yet...3 months before your birthday month, that month, and 3 months after. You have to arrange to pay the monthly premium directly until Social Security begins.

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  6. Hi Bob! Thank you for reposting this. I didn't see it the first go around and my husband is exactly one year away from the big date. For the last few months we have been getting piles of brochures and flyers. Your perspective is much easier to read and absorb. Currently we have an HSA High Deductible policy that is a PPO. From the above comments it appears that the Advantage plan is like an HMO (we prefer the PPO) and we also like to travel a lot it sounds like some of those supplements like F & G would suit us better. Do they include prescriptions too? Does anyone know approximately how much those supplements cost per month in California at 65? Thanks for the advice! ~Kathy

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    1. Glad the timing work so well for you and hubby.

      The Medicare Advantage policies are like an HMO..you have to use a network of providers to get full coverage and it won't work outside your home area. So, if you travel you are much better off with traditional Medicare that works anywhere in the U.S. with no restrictions. Certain Medigap policies, like an F plan, pay the 20% that Medicare doesn't cover plus provides for emergency care if you are in another country.

      The Medigap policies do not cover prescription drugs. That requires a Part D policy. Mine costs $20 a month. There are a wide range of prices for Part D depending on what drugs you typically take.

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    2. Kathy, you can Google Medigap plans in your zipcode. There are lots of brokers who will quote you prices for each of the plan types from different insurers.

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    3. You can also get prices directly from the Medicare.gov site or any of the major providers like Humana or United healthcare.

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  7. Our senior center offered help with Medicaid, so I had an appointment where nothing was explained. I was just signed up for items I needed per her instructions. She signed me up for Medicaid based on my income. It has worked out well for me for the last six years. I still read and try to understand what is going on.

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    1. Medicaid would require a whole other post since its rules and eligibility are quite different from regular Medicare.

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  8. You said $104.90 deducted for Part B for 2017. They are deducting $134.00 for Part B from social security for me. Wonder if I need to call and inquire about this?

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    1. I don't know your specific situation but there are two possibilities: You are paying directly for Medicare because you don't receive Social Security payments, or your adjusted gross income is high enough (based on your tax return from 2 years ago) to bump your monthly premium to the $134 amount.

      About 70% of us pay the 104.90, while the rest pay rates ranging from $134 to $428.60 based on income

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    2. My husband and I went on Medicare this past summer and we each also have $134 deducted for Part B. I may be incorrect, but I thought I read that anyone starting Medicare for the first time after a certain date (sorry, I don't know the date) would have the $134 charge. I wish we did have the lower amount as we are trying to live off our SS payments and hold on to our savings for emergencies.

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    3. Yes, you are right. For those who signed up for Medicare for the first time in 2017 the rate is $134/month. Anyone who started before this year pays the $104.90 or one of the higher rates based on income from 2 years ago. Also, paying for Medicare without getting SS triggers one of the higher rates.

      How soon that discounted rate of $104.90 will disappear for everyone is anyone's guess. With Congress, sooner rather than later would be my guess.

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    4. ok, thank you for responding and clarifying that; very informative article too.

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  9. I live outside the U.S. and of course each country is free to decide the best way to manage healthcare (for seniors and others) but after reading the replies to this post I am glad I don't have to deal with this level of complexity.

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    1. I know a lot of people who have the same wish.

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  10. Let me just interject here, that my personal experience is that once the decision is made the month to month billing and so on and so forth is NOT that difficult to parse.

    Also, there is that group of us who do have retiree health insurance (teachers, government employers and the like). For most of that group it will make more sense to KEEP said plan instad of getting a medicare supplement or advantage plan. And in most cases, retiree health insurance drug benefits will be much better than any part D policy. That people who fall under this umbrella are known as "original medicare" recipients. In otherwords, when I go to the doctor, I show my medicare card, not my insurance card. Medicare pays first, then the retiree health insurance. and in most cases coverage is greater.

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    1. Once a decision has been made on what various pieces of the puzzle do, you are quite right...except for once a year deciding if you want to make any changes, everything just works.

      Thanks for the input on what happens with those on the type of insurance plans you mention. Medicare is in first position as the payer, followed by either the plans you mention or a supplemental plan.

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  11. We have a Medicare Advantage PPO (not HMO) and it works well for us. I would not like to have to have referrals from primary physician for specialists as you do in HMO. On the rare occasion that we have gone out of network they have agreed to the same fee. Our insurance is provided as part of my husband's retirement benefits from State government so our only choices were Medicare Advantage HMO or Medicare Advantage PPO. We do have to decide each year whether or not to go with the premium policy which pays better but cost a lot more. WE are so fortunate to be in excellent health that we stay with the lower cost one but I know that won't always be the case. Each year we say, well do we think our luck will hold out another year. We are in our late seventies.

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    1. The question of what we think our health will be a year from now is the great unanswerable question, isn't it. Our best guess impacts all sorts of decisions, including the type of policy we decide to commit to for another 365 days.

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  12. I'm not sure but I think there are also Part C PPO plans available in addition to HMO's. I hear in Az. the Blue Cross Advantage network is robust. I worked as a referral nurse at one time.Just a thought: If you have to call a specialist on your own and get an appointment, it can be a LONG WAIT no matter what insurance you have or how sick you are.I was told a 5 month wait on a very worrisome skin issue when I called a dermatologist directly. If you have a plan that requires your Primary doc to call in a referral, OFTEN the specialist office will GET YOU IN SOONER! Just some extra info here..HMO's are not all bad! I know Americans have a very deep need to be IN CHARGE of their health care.. but really, we are not.. the docs and ins. companies have got us in their grip. I have more research to do for sure..I have a name of an insurance person to visit after Thanksgiving--sure is complicated!!But am still leaning towards Advantage plan..

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    1. Keep digging! Maybe you have a good feeling about your decision when we get together to play cards!

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