April 19, 2021

Medicare Basics Explained

 

For the last several years, a unique ID number has been used instead of your SSN.


Turning 65 is a milestone in anyone's life. Studies indicate that you have a statistically good chance of living another 18-21 years. Of course, your mileage may vary. Still, it is nice to know your odds look pretty good for having a long time to enjoy living.

65 is also when most of us grab the brass ring of health care: Medicare. The sense of relief in receiving that red, white, and blue card is immense. Not only are you less likely to be put in the poor house by a disease or illness, the lack of all the paperwork, forms, and pre-approvals feels like a two-ton weight has been lifted from your shoulder.

If so, then why do I continue to receive so many questions about Medicare? Why are people so confused? Well, to put it simply, the government has made things rather more complicated than need be. The program may be a godsend to many of us, but you have to make some important decisions before you begin. Then, every fall, you are asked if you want to change your mind about anything. Plus, the reality is, there are serious gaps in what Medicare will and will not cover, requiring you to make more decisions that often involve balancing risk against cost.  "

Disclaimer: Just about seven years ago, I made my decisions. Today, I remain comfortable with what I picked: traditional Medicare with a supplemental policy and drug coverage. Of course, that doesn't mean you should follow my lead unless that is what is best for you and your spouse (if married)

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.

Starting at the beginning, 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 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. All plans must provide A and B coverage, just like Medicare.  Services not covered by traditional Medicare are often included. Roughly 40% of all Medicare-eligible Americans now use an Advantage plan. Some plans have a zero monthly cost but look closely at what you may be doing without. 

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 or waiting until your full retirement age of 67 (or 70 for extra income), 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 months 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.

Every fall, for roughly 45 days, you can change to or from Medicare and Medicare Advantage, pick a different supplemental or Part D drug coverage plan.

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 a late signup.

With me so far?


Other Factors to Consider

Medicare does not pay 100% of most services. Several free screening tests for those on Medicare, like colonoscopies and mammograms, are covered under the ACA or Obamacare if you prefer. 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 most or all of 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 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 2021 most pay $148.50 per month. There is also a $203 yearly deductible. Part D prescription coverage costs vary depending on the plan you select and the level of drug coverage. 


What is Covered?

There is no simple answer to that question. Medicare publishes a 130-page booklet that still suggests calling them for specifics. But, in general, here is what you can expect:


Part A pays part or all 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 monthly costs vary widely.

Part D covers some of your prescription drug costs. If you don't need many 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. Some drugs require prior authorization. 

Importantly, these items are not covered by Medicare (not a complete list):
  • Routine Dental care
  • Dentures
  • Cosmetic surgery
  • Hearing Aids
  • Exams for fitting hearing aids
  • Long term care (past a limited period each year)


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? Why did you choose an Advantage plan instead of traditional  Medicare? Are you happy, or do you ever consider switching back? How has Medicare treated you so far?

Personally, Betty and  I have paid for our own health insurance for over 40 years. We made a very deliberate decision to avoid private insurance companies as much as possible. Hence our choice of traditional Medicare, along with supplemental and drug coverage.



20 comments:

  1. I have Traditional Medicare and a supplemental that I get through GM's retiree benefits. I hate the pressure put on us each year to switch to an Advantage plan. I don't trust it when it comes to covering the big stuff. In my mind the only reason they are pushing it is because it saves them money which means we pay more some where along the line. we pay more.

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    1. I don't plan on ever putting myself back in the situation where I have to deal with a particular network of doctors that seems to change every year, or needing prior approval for things that Medicare never questions. Private insurance tore a huge hole in our budget for too many years; never again.

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  2. I have retiree benefits instead od a supemental or advantage plan and this covers drugs ascwell.and almost all.out of pocket expenses Medicare does not. It's a hefty fee so I moved to an Advantage plan as a trial fir one year snd moved back. Advantage plans are great for mainly well people. my daughter the therapist has documented that people with Advantage plans are allowed about fifty percent of the amount of time in therapy or treatment as those in supplemental plans snd she is regularly forced to send people home earlier than the should be.

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    1. Yes I’m a state employee retired and have been scared to pull the plug for my retiree health plan. To 600 plus per month. FYI if I leave I can never get back again. So.... low annul deductible but? Still think I’ll stay on for my chronic anxiety peace of mind.

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    2. Common sense tells you that an Advantage plan with lower premiums will, somehow and at some time, still make a hefty profit by "managing" the care their customers receive. To my mind, that means reductions and cuts to what should be provided.

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  3. And yes. Because there is ways so.e discussion on this topic I am aware that I have the options others dint because of the federal.emoyment thing.

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  4. Advantage plans vary greatly from state to state.Here is Arizona we have been happy with our Humana Gold Medicare Advantage Plan . It includes some hearing and vision, has a copay only for hearing aids, (but we have not needed to get them at this point.) and even has a meal service for 2 weeks after any hospitalization. We have mental health benefits for small copay, PT and OT similar to what Medicare offers. Humana also gives a $75 allotment per quarter,per person, to spend on their catalogue of Over the counter items. We have purchased (free) a blood pressure cuff, a pulse oximteter,masks,gloves,hand sanitizer, our vitamins, toothpaste, moisturizers, vitamins, Tylenol, antibiotic cream, even bug spray and sunscreen! etc. They also offer Nicorette gum and patches,bathroom grab bars for the shower and tub, and more. There is a free weight loss program. At least here in Arizona, we’re pretty happy with Humana. We have a $3500 out of pocket per year max,each.If we needed a lot of care or hospitalization, the plan pays 100% after that is met. But doctor visits are only $10 copay for primary and $25 for specialist. This plan also includes Silver Sneakers, a free exercise program which offers gym memberships and a ton of online exercise classes specifically for Seniors. Telemedicine is also an option for no copay.

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    1. I know you and hubby have been happy with your Advantage plan and that is good. Having the option of approaches other than just traditional Medicare fits many people's needs, but you point out that the plans do vary greatly between states.

      I just know for me and Betty, we want as little to do with private companies as we can. The supplemental policy and drug plan are run by private insurance organizations, but they are straightforward in what they do without requiring us to jump through any hoops.

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  5. I'm just 59 right now, but I helped Mom for years until her death i 2007. She wanted to know exactly what her health would cost her so she had a gap plan. They aren't necessarily cheap if you have no health issues but someone on a tight budget, it offered her peace of mind. (Multiple joint replacements, annual cardiology visits post bypass and all of the testing to diagnose cancer at end-of-life). I shopped online every single year for her Part D to keep it the lowest cost. It was amazing to me that we changed it nearly every single year and she was on cheap medications.

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    1. I have stuck with the same Medicap policy for 6+ years and have been very happy. That doesn't mean I won't look for alternatives as the monthly premiums continue to rise, but that is probably true of any medical provider.

      At some point, this country's system will have to figure out how to stop medical care being partly managed by for-profit companies. Obviously, if a company's primary goal is to make money, my well-being is not of tremendous importance.

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  6. This information was so helpful to me a few years ago when you supplied it. Now retired and like you, traditional with Supplement and medication. So far so good...I have paid only about 12.00 out of pocket from doctors appointments and having both knees replaced. The knee replacement bills came to round 100,000.00 each with all included. I would never been able to afford without this insurance.

    Prior to reaching Medicare age, I COBRA from my employer for 18 months at approx 1,600.00 a month. Was still worth it to get out of a very stressful medical career but felt like I hit the jackpot when able to get Medicare and no longer had to pay that amount each month. I feel very blessed and lucky to have this insurance.

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    1. Karen, your original comment included an email address that was probably entered by mistake so I had to edit the comment and that required me to move it down several slots.

      I am glad the previous time this post was used it helped you. Since there are always new readers and Medicare is such an important topic I do re-provide the information every 4 or 5 years.

      $100,00 for a knee replacement is almost impossible to comprehend. The pricing system our our country's medical care is really out of control. But, with the blessing of Medicare you have new knees!

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  7. Bob, thank you for this excellent article. Health care coverage can be very confusing, especially after retirement. I remember being overwhelmed by the various options, yet it is crucial to understand in order to make the best personal healthcare decision. Upon reaching Medicare age, my husband and I opted for traditional Medicare, along with supplemental insurance and a drug plan. After years of having HMO plans where my husband and I were forced to get referrals for specialized care, or were restricted as to where we could go for our medical care, we wanted the freedom to choose our doctors, to choose our specialists, and to choose our hospitals. We're not comfortable relying on Medicare Advantage, for many reasons, one being that we live in a relatively remote area where the Advantage plans felt very restrictive.

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    1. Your reasoning matches mine. Even though Arizona has plenty of Advantage choices, I was not willing to place my health and that of my wife in the hands of a for-profit company for the bulk of our care. We had done that for the past 35 years and had no interest in continuing.

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  8. Just before I left the workforce, I was working in the Human Resources area of our local school district. One of my job responsibilities was handling health insurance for both current staff members and retirees. As a result, I ended up learning a lot about Medicare simply because of its impacts on our retirees. So, I'd like to add a couple of comments to your detailed and very substantial post, Bob.

    When you turn 65, your Initial Enrollment Period runs for 7 months - 3 months before the month in which you turn 65, the month of your birthday, and 3 months after the month in which you turn 65. Contact Medicare 3 months before your birthday to begin your enrollment process. DO NOT WAIT. Medicare is a complex monstrosity that you need to understand well prior to making any decisions. Begin the process early so that your Medicare enrollment (and your enrollment in any supplemental Medigap, prescription or Advantage plans) is all set well before your birthday. Otherwise, as Bob mentioned, your coverage may be delayed. Plus, if you miss your Initial Enrollment Period completely and sign up for Medicare after the 7 month period, you will pay a financial penalty in the form of higher premiums - and sometimes that penalty is permanent.

    Insurance rules can vary by state. For example, in the state in which I live, there is an extended enrollment period for Medicare Advantage plans beyond what the federal Medicare program requires. If you have any questions, your state should have an Insurance Department you may contact for information. Please continue to ask questions until you fully understand any insurance plan you're considering - traditional Medicare or otherwise. I know that's a monumental task, but nobody is going to advocate for you better than you.

    Be aware that Medicare premiums will be deducted on a monthly basis from your Social Security payments if you are receiving Social Security benefits when you become Medicare eligible. If you are not receiving Social Security benefits when you become Medicare eligible, you will be billed on a quarterly basis for your Medicare premiums, one quarter in advance, so be prepared for that outlay of funds.

    Also be aware that the standard monthly Medicare premium is currently $148.50, as Bob mentioned. But Medicare premiums run on a sliding scale relative to income. Anyone whose income was $88,000 or less in 2019 will pay the $148.50 in 2021. But if your income fell between $88,000 and $111,000, your monthly Medicare premium for 2021 will be $207.90. The highest tier on the income scale is $500,000 and over. Anyone whose income for 2019 fell in that range will pay a monthly Medicare premium of $504.90 in 2021.

    My apologies for hijacking your comment section, Bob. I've seen enough tragic situations that I couldn't stop myself from jumping up on my soapbox.

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    1. No worries..all good insight and more details than could be squeezed into the originsl post.

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  9. My wife also has a Medigap policy, plan G. She is not willing to go with an Advantage plan for reasons Bob listed. She was interested in changing this plan but found out she is trapped. In the last year she fell and fractured a wrist. She has also been treated for osteoporosis. The insurance broker tells her she now has a pre-existing condition that will prevent her from being accepted by any other insurance company for two years. Be careful whom you select. You may be with them longer than expected.

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    1. I wanted to switch from F to G coverage but had to wait a year because I saw a cardiologist for a 2 year followup on my heart problem in 2015. I did finally go to this policy last fall. It saves me about $300 a year. But, yes, I couldn't switch for 17 months after that visit.


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  10. We have an Advantage plan, and so far we've been pleased with it. We started with BC/BS and changed to the largest local network last year based on what we actually use. Overall, we're both still healthy and all our docs and specialists are covered in the two biggest networks in town. A few years back, DH needed surgery and the local network had just added the U of Michigan into our available network. So off we went to Ann Arbor and his $65K+ surgery cost us $250.

    I started out with Plan G when I retired, but realized after a year that I was paying a lot for something I just didn't use. My only complaint with the Advantage Plan is the supplemental we buy for vision and dental. It is fine for dental - I have always found dental insurance to be a math exercise and it generally is a bit better than out of pocket depending on the year. But the vision coverage isn't worth anything unless you use their providers who are basically chains. We have a long time eye doctor that we use and it turned out this "enhanced vision" only pays for things that Medicare will pay for unless we go to one of their contracted franchise providers. That said, the dental part pays for itself. At some point we pay one way or the other, as many of you have stated.

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    1. We have used a dental disount plan for the last 8 or 9 years. A $135 exam costs about half, as do X-rays. Crowns are about 40% cheaper. So, even with a yearly cost of $94 for the two of us, we save a few hundred a year.

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