A Guide to Medicare Basics- During Open Enrollment Season

Medicare

Medicare’s many components may seem daunting to anyone approaching retirement age or even to those already enrolled in Medicare. Yet individuals need to educate themselves on their options since the program provides essential medical services. Now that the annual Medicare enrollment period has begun, everyone should review their plans and costs.

Traditional Medicare requires enrolling in Part A and Part B. Part A covers hospital expenses, i.e. room and board in the hospital, including nursing services. However, skilled nursing coverage is extremely limited. Full coverage is limited to a maximum of 20 days. After day 20, the co-pay is $152 per day. After day 100, there is no coverage. Additionally, Part A incurs a deductible, described below.

Part B covers 80% of physician services both in and out of the hospital. For example, if you have a $10,000 surgery, Part B will reimburse $8,000. Individuals are responsible for the other 20%. Therefore, those who enroll in traditional Medicare may want to get a Medicare supplement policy which would cover the co-insurance as well as other unreimbursed costs associated with Parts A and B.

Part A is funded through payroll taxes; there are no additional costs to enroll. Part A has an annual deductible, however, which in 2014 is $1,216. Individuals who have purchased a Medicare Supplement policy are generally covered for this deductible. Part B, on the other hand, requires a flat fee each month from an individual’s social security check. In 2014, for individuals with incomes less than $85,000, the fee is $104.90. This fee increases for higher incomes. In addition, Medicare B charges an annual deductible of $147.

Since neither Parts A nor B covers prescriptions, those on traditional Medicare require a prescription drug plan, which is covered under Part D.

The alternative to traditional Medicare is an HMO referred to as Medicare Advantage, or Medicare Part C. This plan is generally less expensive than the traditional package of Parts A and B with a Medicare supplement. Aetna, Horizon Blue Cross, and AmeriHealth all offer Medicare Advantage Plans. The Advantage plan covers medical and pharmaceutical expenses. Because the plan is an HMO, it requires individuals to be within a network. If a doctor leaves the Medicare Advantage network, his Medicare patients must pay out of pocket or switch doctors. This could be problematic for seniors who have a longstanding relationship with their physician. Referrals are required for visits with specialists. Members of Medicare Advantage plans could be responsible for out of pocket expenses up to a maximum of $6,700 annually.

There are ten Medicare Supplement plans available; each identified by a letter A through N (with certain letters unused as plans are taken off the market). Each plan covers different gaps in Medicare, in possibly different ways, but not every company offers every option. Some will pay the entire cost of a service provided by a doctor regardless of whether the doctor bills more than the amount that Medicare B reimburses for the service. Individuals may find it advantageous to speak to one or more agents or brokers when purchasing a Medicare Supplement Plan. Companies may charge different fees for the identical Supplement Plan.

Individuals may also like the personal service provided by a particular agent or broker who sells insurance. Many agents or brokers will visit a senior at his home. While the cost of a Medicare Supplement Plan plus the premium for Part B will generally exceed the ongoing cost of a Medicare Advantage (HMO) Plan, the Supplement Plans specifically outline which costs they cover and therefore provide predictability, which is often advantageous for seniors on a fixed budget.

The annual Medicare enrollment period takes place from October 15 through December 7. During this period, individuals can get in or out of Medicare Advantage Plans or make changes in their Medicare D selections. Under certain circumstances, individuals can make changes to their plans outside of the enrollment period. For example if someone has enrolled in a Medicare Advantage Plan within the year for the first time and wishes to switch back to a traditional plan, the switch can be made outside the enrollment period. Likewise, if an individual is enrolling in Medicare B for the first time upon attaining age 65 or at the time he or she is first terminated from his employer’s plan, applications may be taken outside the enrollment period. Changes made during the enrollment period are effective January 1.

Individuals who continue to work after age 65 have the benefit of open enrollment into Medicare once they leave their employer’s plan, which means that they can enroll regardless of their health status.

Medicare Part D offers prescription coverage for individuals who have the traditional Medicare Parts A and B. Those who are enrolled in the Medicare Advantage HMO plans receive prescription coverage directly through their plans. There are numerous choices of plans — 28 Medicare D plans in the state of New Jersey alone. Medicare Part D plans charge monthly premiums ranging to over $100. The national average is $53, but many are as low as $20. Deductibles range from $0 to $310 per year. Even individuals who are not taking any medications at the time they enroll in Parts A and B are advised to enroll in a Medicare Part D plan at the same time, because, for each month of delay in enrollment, a penalty surcharge of 1% can be added to his Medicare D premium.

 

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About Dana Bookbinder

DANA E. BOOKBINDER, ESQ. is the Founder of Bookbinder Law, LLC and has been advising families throughout South Jersey for nearly two decades on legal issues concerning asset protection for long term care expenses, public benefits eligibility rules, disability planning, and estate planning. Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation. www.bookbinderlaw.com

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