MEDICARE: KNOW YOUR ABCDs
At whatever age you stop working, age 65 is a pivotal year because it’s when you become eligible for Medicare. Many Americans retire at that age simply because they become free of the need to maintain employer-provided health insurance.
Although the rest of the US healthcare system could change significantly as a result of pending legislation, Medicare will stay essentially the same, and it offers a good measure of security to persons age 65 and over.
The basics of Original Medicare are simple: you go to the doctor and hospital of your choice, including specialists, and Medicare pays at least some of the cost. It’s not free care but rather part of an insurance program that has both government and private sector components.
There are some decisions you have to make, however, so it’s important to know your ABCDs – the four major parts of Medicare.
Medicare Part A is hospitalization, protecting against the cost of an inpatient stay in a hospital or skilled nursing facility. It also helps pay for hospice care and some home health care but not nursing home or long term care.
It you’re old enough to be eligible, there is no premium because the cost is paid for by Medicare taxes you paid throughout your working life.
Medicare Part B is medical insurance. It pays for physician’s services, outpatient care and other Medicare-approved expenses such as physical therapy, wheelchairs and walkers. It does not cover vision, dental, or hearing aid costs.
Part B is optional, and you must enroll during the three months leading up to your 65th birthday; otherwise your premium may be 10 percent higher for every 12-month period you delay. If you delay just because you have coverage that’s just as good or better through an employer or other source, there is no penalty.
Part B is funded by Medicare taxes paid during your working life plus a monthly premium ($96.40 for 2009).
Part A and Part B have separate deductibles that can change each year and co-pays that are usually 20 percent of the Medicare-approved amount. Unless you have secondary insurance or a Medicare Supplement (Medigap policy), these co-pays and deductibles could easily add up to tens of thousands of dollars for a heart procedure, hip replacement or a cancer treatment.
Medigap: Some employer-provided insurance plans take over secondary coverage once the worker retires. Otherwise, you must purchase a Medicare Supplement or Medigap policy from a private insurer to keep out-of-pocket expenses from getting out of hand.
A basic Medigap policy covers co-payments only; others pay for deductibles, co-payments and additional days in a hospital.
But it’s important to sigh up for a Medigap plan at the time you enroll in Medicare Part B. At that time, you are guaranteed a policy regardless of your pre-existing conditions, renewable as long as you pay the premiums.
Medicare Part D: Drugs have become an important, and often expensive component of healthcare. That gap in Medicare was filled during the Bush administration through legislation creating Medicare Part D.
This Prescription Drug Benefit, offered through private insurers under contract with Medicare, is voluntary, but, unless you already have good drug coverage, it’s a good idea to enroll in a plan. Even if your prescription costs are insignificant today, they could change quickly with a diagnosis of cancer, heart disease or diabetes. If you wait, you could pay a late enrollment penalty for every month thereafter.
Check out the various plans offered in your state by going to www.medicare.gov. To determine which plan is right for you, add up what your drugs plus premiums, deductibles and co-pays will cost you for the year under each plan. If you spend little or nothing on prescriptions, the best option is usually the plan with the lowest premium.
Part D plans change from year to year so you should go through the same analysis each fall, making a final choice between November 15 and December 31.
Medicare Part C or Medicare Advantage: “C” is for choice, and Medicare beneficiaries have long been able to opt out of the government-run Original Medicare for a privately administered HMO, PPO, or fee-for-service plan knows as Medicare + Choice. These plans were not very popular, however, until the advent of Medicare Advantage as part of the Prescription Drug legislation in 2003.
In addition to regular Medicare allotments, a Medicare Advantage plan gets additional money (averaging about 14 percent) from general tax funds for each Medicare beneficiary they sign up. The private insurer then takes responsibility for their clients’ claims.
For a senior in good health, Medicare Advantage plans are attractive because they can offer benefits not available under traditional Medicare such as vision, hearing aid, dental and sometimes even a health club membership. For the same or lower premium than you would pay for Part B, it’s possible to have a comprehensive plan that folds in Medigap and prescription drug coverage. In most cases, however, you give up the right to choose your own doctor or hospital and to go to a specialist without permission. And appeals regarding medical decisions and coverage may be more difficult than with Original Medicare.
If a Medicare Advantage plan fails to meet your needs, you can change plans or come back to Original Medicare during the open enrollment period each year between November 15 and March 31. But if you have major health problems at that time, you may have difficulty getting affordable premiums on a Medigap policy.
The extra tax money given to Medicare Advantage plans so they can compete better with the government-run plans are an issue in the current debate over healthcare reform. Eliminating this subsidy to private insurers, amounting to about $100 billion per year, has been proposed as one way of financing healthcare reform.
Without the subsidy, Medicare Advantage plans might increase their premiums and/or reduce their benefits. This is the only part of the Medicare program, however, that is likely to change with the proposed legislation, and it would not affect those in Original Medicare.
A complex mix of public and private elements, Medicare has been a successful program, allowing seniors an opportunity to put together a healthcare package suited to his or her individual needs.
Reedsburg Area Medical Center’s Patient Advocate, Jan Brown, is available to help you weave through the Medicare maze. This service is free. Please call her at (608) 524-6487.