Medicare 101
Understanding Medicare can be complex, but we’re here to guide you through it! Our goal is to make your insurance experience more transparent. In the bullet points below, we address common Medicare questions.
Basics of Medicare
Who and what does medicare cover?
Medicare is designed to help different groups:
- Individuals aged 65 or older
- Certain younger people with disabilities
- People with End-Stage Renal Disease
It’s essential to know that Medicare itself only covers 80% of hospital and medical services, and the remaining 20% is the beneficiary’s responsibility. However, there are insurance plans you can obtain to help cover that cost. Also, coverage for dental, vision, and hearing services are not included in Original Medicare benefits.
In most situations, Medicare won’t pay for health care you get outside of the country. There are a few very strict exceptions in emergency situations.
Feel free to reach out if you have any questions.
The Key Parts of Medicare
- Part A: Covers hospital expenses (known as Original Medicare)
- Part B: Addresses medical services such as doctor’s visits, durable medical equipment, and some vaccines (also part of Original Medicare)
- Part C: Also called Medicare Advantage. These plans are offered by third parties, provides comprehensive coverage and often include prescription drug coverage.
- Part D: Provides standalone prescription drug coverage.
While not officially labeled with a Part in Medicare, supplemental plan also known as Medigap plans are a standard option for managing your Medicare health care coverages. These plans supplement the 20% cost share of Original Medicare. They do not cover prescription drugs, dental or vision.
Still need more information, we got you covered. Keep reading or reach out to us today.
How Medicare is Organized
Medicare is structured with four main parts. Each part represents an area of coverage.
Medicare Part A in a Nutshell
Let’s talk about Medicare Part A. This coverage takes care of your inpatient hospital stays, skilled nursing facility care, hospice care, and even some home health services.
Now, when it comes to the financial side, beneficiaries are responsible for a deductible during each benefit period. There’s also the possibility of a monthly premium, but only if you don’t meet specific eligibility criteria. Keep in mind there are limits on the number of days or quantity of services covered.
Another factor to consider is your cost share. Original Medicare only covers 80% of the costs incurred for Medicare approved services. You are responsible for the remaining 20%. With hospital stays this can add up to a large expense. It is also important to note that Part A won’t cover certain things. For instance, long-term care and cosmetic surgery are not included.
Important Note: There’s a potential penalty if you’re looking at the premium-free Part A, but don’t sign up when you’re first eligible.
Do you want to avoid the risk of large hospital bills? Let us help you figure out what plans can help.
Medicare Part B in a Nutshell
Let’s dive into Medicare Part B now. This coverage comes into play for specific medical services, like doctor’s appointments, some lab services, outpatient care, durable medical supplies, and even preventive services.
In terms of the financial aspect, beneficiaries are required to handle an annual deductible, and there are also monthly premiums. It’s worth noting that the monthly premium rates can vary based on income, so it’s not a one-size-fits-all situation.
On top of this, the beneficiary is again responsible for covering 20% of the cost for services that fall under Part B. This cost-sharing aspect is something to be aware of.
Important Note: If someone enrolls in Part B later than they should, a penalty comes into play. Also keep in mind, there are certain things that Part B doesn’t cover. Dental services, dentures, vision exams, eyeglasses, hearing exams, and hearing aids are not included. Routine physical exams are also not covered under Part B.
Feel free to ask if you have more questions. Remember, Part B provides coverage for various medical services, but there are some important details to consider.
Medicare Part C / Medicare Advantage Plans in a Nutshell
Let’s dive into Medicare Advantage Plans. You might see advertisements for MAPDs or MA plans. The difference between a MAPD and a MA plan is whether or not the plan has prescription drug coverage. Most people opt for a MAPD unless you have other creditable prescription drug coverage (i.e. Tricare).
These plans offer a comprehensive package, including hospital coverage and doctor services. But that’s not all—these plans can also throw in prescription drug coverage, dental care, and vision services. They often provide extra perks like gym memberships, transportation services, and even allowances for over-the-counter products or healthy foods. Keeping you healthy is a win-win for you and the insurance company.
Now, financially speaking, beneficiaries need to pay a monthly premium on top of their Part B premium. The premium cost varies by plan with some plans even having a zero-dollar premium. The good news is that the Part A and B deductibles are usually not part of the deal.
Here’s something important to remember: enrolling in an MAPD doesn’t mean giving up your Original Medicare. All the services covered by Part A and Part B are still billed under this single plan. If you enroll in a MAPD and decide to disenroll you have a 12 month period to decide and switch back to your Original Medicare or Medigap plan.
Of course, there are eligibility criteria. To enroll in an MAPD, you must maintain your eligibility and enrollment in Parts A and B. If, for any reason, you decide to disenroll from an MAPD, don’t worry—services initially provided by Parts A and B are still available to you.
MAPDs operate a bit like group insurance, coming in two flavors: HMOs and PPOs. HMOs work with a more restricted network of healthcare providers and often require referrals to see specialists. On the other hand, PPOs are less restrictive and charge higher copays or coinsurance for services outside the network.
One standout feature of MAPDs is the Maximum Out Of Pocket (MOOP) threshold—a safety net to limit your annual costs. Each plan varies in terms of premiums, deductibles, cost sharing, MOOP amounts, and the services they offer.
When compared to Medigap plans, MAPDs tend to have lower monthly payments. However, there’s usually a trade-off with more out-of-pocket expenses as you use services. They come with a network of providers, which could be limited outside your home area, but they often include dental, vision, and hearing coverage.
Feel free to reach out if you have more questions. Remember, MAPDs offer a bundled experience with plenty of variations, so it’s important to find the one that specifically suits your needs.
Medicare Part D in a Nutshell
Let’s look at Medicare Part D. This coverage is all about helping you handle the costs of prescription drugs. You will need a Part D plan if you stay with Original Medicare or have a Supplemental/Medigap plan.
The financial side of Part D plans involves a monthly premium, and on top of that, you might encounter plan deductibles and will have copays or coinsurance costs. You also may have to deal with the Coverage Gap, formerly known as the Donut Hole.
The beauty of Part D is that it offers flexibility. While plans vary in cost and the specific drugs they cover, they are required to provide a baseline level of coverage set by Medicare. This coverage extends to both generic and brand-name drugs.
The plans can differ in the list of prescription drugs they cover, known as a formulary. These drugs are grouped into different tiers on the formulary, affecting how much you pay for each one. The exact cost of each drug is tied to the plan you choose.
Here’s an important point: you must have either a Part D plan, an MAPD (Medicare Advantage Prescription Drug) plan, or another form of prescription drug coverage that’s considered creditable (as good as or better than a Medicare Part D Plan). This is to avoid facing a late enrollment penalty.
The largest medical expense most people face is the cost of prescriptions. We can help you find a plan that is cost effective, covers your medications and allows you to continue to fill those prescriptions at the pharmacy of your choice.
What about a Medigap Plan?
Medigap plans, also called supplemental plans, provide coverage for portions of Part A and B that require deductibles and or cost sharing. Beneficiaries must also enroll in a Part D plan or have other credible prescription coverage. Beneficiaries pay a monthly premium in addition to the Part B premium and are responsible for their Part B deductible. However, most plans do not have any other cost out of pocket.
An additional benefit to having a Medigap plan is that all services are self-referral. If a provider is contracted with Medicare, then the beneficiary can go to that provider. Some plans even provide emergency medical coverage while traveling outside of the country.
There are 10 plan options that vary in coverage. Plans are identified by a letter. All plans under the same letter must offer the same levels of coverage regardless of insurance carrier. The only difference is insurance company preference and monthly cost.
Premiums on Medigap plans generally increase a small percentage every year. It is financially prudent to have your Medigap plan reviewed every 4-5 years to check if you could save money by switching insurance carriers.
Medigap plans are underwritten. You will typically have one guaranteed underwriting period when you first enroll in Medicare. Some states have guaranteed issuabilty requirements, however this does mean the monthly premiums in those states will be higher.
Enrollment Periods and Penalties
Enrollment Periods
- Initial Enrollment Period (IEP): This is a 7-month period centered around the month the person turns 65. Your plan election will become effective the 1st of the month of your birth month or the 1st of the following month if enrolling after your birth month.
- Annual Enrollment Period (AEP): Takes place from October 15th to December 7th each year. Also sometimes referred to as Open Enrollment Period. Your plan election will become effective on January 1st of the following year.
- Special Enrollment Period (SEP): This kicks in when certain circumstances arise and become effective the following month. Some examples of these circumstances are:
- You move and, as a result of the move, you’re eligible for different plans.
- You’re eligible for Medicaid.
- You qualify for Extra Help with Medicare drug costs.
- You’re getting care in an institution, like a skilled nursing facility or long-term care hospital.
- Medicare Advantage Open Enrollment Period (MA OEP): this applies to you if you selected a MAPD or MA plan during your IEP or if you enrolled in a MAPD or MA plan during AEP. You can either enroll once in a different MAPD or disenroll and go back to Original Medicare (and enroll in a Part D plan).
Other enrollment or disenrollment periods exist such as:
If you join a Medicare Advantage Plan during your IEP, you can drop that plan at any time during the next 12 months and go back to Original Medicare.
You are considered Dual Elligible by being enrolled in both Medicare and Medicaid.
You move back to the U.S. after living outside the country.
Not sure if you can enroll or make plan changes? Feel free to contact us so we can find out.
What about those penalties?
Remember, penalties can apply for not enrolling in Medicare Part A, Part B, and Part D. These penalties are calculated based on the time between eligibility and actual enrollment, and they can be permanent, percentage-based assessments.
Part A late enrollment penalty: This penalty could increase your monthly premium by 10% for each month you delay enrollment. The penalty stays effective for a duration that’s twice the number of years you were eligible but didn’t enroll.
Part B late enrollment penalty: The Part B penalty stands at 10% of the annual premium for each year of non-enrollment. This penalty remains in effect for as long as you have Medicare. However, the penalty might be waived if you’re eligible for a Special Enrollment Period (SEP).
Part D late enrollment penalty: If you don’t enroll in coverage or have other creditable coverage for a continuous period of 63 days or more after your Initial Enrollment Period ends, a late enrollment penalty might kick in. Calculating the Part D penalty involves multiplying 1% of the “national base beneficiary premium” (which is $32.74 in 2023) by the number of full, uncovered months you didn’t have Part D or creditable coverage. The resulting amount is rounded to the nearest dime and added to your monthly Part D premium. This penalty sticks around as long as you have Medicare drug coverage.
Are you preparing to enroll in Medicare? Or did you not enroll on time? We can help you navigate these waters so you can get coverage and stop the penalty from increasing.
Other Helpful Information
What Does that Term Mean?
If you’re wondering about some of the terms we used in the above simple definitions, check out the Medicare Glossary – hosted by a non-profit group called Medicare Interactive. This is a helpful resource that defines the terms used in Medicare insurance policies in the way that Medicare uses them.
Still confused? Don’t hesitate to ask us if you have questions. We’re here to make your Medicare experience clearer and more transparent.
Helpful Links for More Information
If you’re a researcher at heart, or if you want specific info “straight from the horse’s mouth” then use the helpful links below to start your journey.
Medicare.gov: https://www.medicare.gov/
SSA: https://www.ssa.gov/medicare
Federal website: https://www.usa.gov/medicare/
DHHS Medicare: https://www.usa.gov/medicare/
Don’t worry, we’re standing by in case you get lost. Just ask us if you run into any questions.
Ready for a Deeper Dive?
We’ll explore Medicare concepts in a series of informational videos coming soon.
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Ilwaco, WA 98624
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