At some point, we will all need to learn about Medicare, its associated programs and terminology. Take this opportunity to review your own knowledge, or forward to a friend or coworker. We’re always pleased to hear from you, so please reach out with any questions.
Medicare is a national health insurance program offered by the federal government to provide health care insurance to certain individuals. Those eligible include people aged 65 and older, younger individuals with a disability as defined by the Social Security Administration, and individuals of any age with end-stage renal disease (an advanced kidney disease). United States citizens and legal residents who have worked and paid taxes in the U.S. for at least five years are eligible to apply when they meet one or more of the criteria.
Initial Enrollment Period (IEP): For traditional Medicare recipients, the IEP is defined as the first time a person becomes eligible to enroll. This period starts three months prior to an individual’s 65th birthday, and continues until three months after turning 65, for a total enrollment period of 7 months. It is important to be aware of your IEP dates because neglecting to enroll during this window of time can lead to increased premiums and significant additional costs.
Enrollment in Medicare Part A is required at age 65, while enrollment in Medicare Part B may be delayed if the participant or spouse is still working and covered by an employer plan. Discuss your coverage with your employer. If you have already filed for Social Security benefits, Medicare enrollment is automatic at age 65.
General Enrollment Period (GEP): Eligible participants who did not enroll during their IEP have another opportunity to enroll during the GEP, an annual window which begins on October 15th and runs through December 7th. Current Medicare participants may also make adjustments to their plan each year during the GEP.
Medicare Part A is hospital insurance. This coverage assists with expenses related to inpatient hospital care and nursing home care following a hospital stay. Part A also provides coverages for other types of home health care and hospice services. Part A does not cover doctor expenses during hospital stays.
Medicare Part A generally does not have a premium as long as the participant or spouse has qualified for Social Security benefits (40 quarters of coverage).
Medicare Part B is medical insurance. This coverage helps to pay for doctors’ expenses related to the diagnosis and treatment of medical conditions, outpatient care, and preventative health care. Medicare Part B does not cover dental, vision, or hearing care costs. New enrollees in 2018 pay a base rate of $134/month that increases for individuals in higher tax brackets; the highest earning tax payers with income above $320,000 (married) will pay a premium of $428.60 each for Part B coverage. Part B pays 80% of covered charges and the policy beneficiary is responsible for the remaining 20%. These costs may be paid out of pocket or by purchasing private insurance. Such supplemental policies are referred to as Medigap, while Parts A and B are collectively referred to as original or traditional Medicare.
Medicare Part D is prescription drug coverage. This insurance assists with the cost of prescription drugs and is available to anyone enrolled in Medicare Parts A and B. Benefits associated with Part D vary from state to state, and each state offers approximately 20 different plans. The average monthly premium is $34. High income earners will also pay an additional Medicare Part D surcharge that caps at $74.80 per person in 2018. This surcharge is applied even if the participant does not purchase a standalone Part D plan.
Medigap Plans are also known as Medicare supplemental insurance. These policies come into play after Medicare and apply to the 20% not covered by Part B. Medigap plans are designed to provide freedom of choice in medical care by allowing enrollees to use any physician or healthcare provider who participates in Medicare. These plans vary widely and should be carefully evaluated for cost and coverage on an annual basis.
Medicare Advantage Plans (MA), formerly known as Part C, are an alternative to original Medicare coverage that may provide a low-cost alternative to Medigap insurance and/or Part D plans. Medicare Advantage plans are private insurance plans and are required to provide the same minimum benefits as original Medicare plus supplemental coverage that may include prescription drug coverage and in some cases dental, vision and hearing. MA premiums are often less expensive than purchasing original Medicare, Part D, and Medigap coverage separately. It is important to note that MA plans will be paid for separately from Medicare Part B premiums; but, will not replace the Medicare Part B premium or any high income surcharge for Medicare Part B or Part D.
While Medicare Advantage plans may be less expensive than purchasing the Medicare plans separately, there are some limitations. Many of these plans require the selection of a primary care physician, which can restrict your choices of care providers. It is important to consider coverage and plan restrictions when selecting a plan.
If your medical needs change, the annual General Enrollment Period allows you to move between Medigap, Part D, or Medicare Advantage plans.
Things to consider when selecting Medicare, Medigap, or Medicare Advantage
- What is your health situation like at the time of enrollment? Are you frequently meeting with doctors and care givers?
- Would a local network plan work for you, or do you frequently travel and need a wider network?
- Are you covered by a company sponsored plan at age 65? Can you delay Part B as a result of other coverage?
- Is your company plan a low deductible or high deductible plan? If it’s a low deductible plan, there is no need to enroll in Part B.
- Once you begin Medicare, you can no longer fund a Health Savings account. All Medicare premiums are qualified expenses that can be withdrawn from your existing HSA account tax free.
- What types of medications are you currently taking? This may impact your decision on Medicare Part D coverage or Medicare Advantage Plan choice.
- What is your family health history?
Disclosure: SYM Financial Corporation (“SYM”) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about SYM, including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request.