Updated July 21, 2020
Lower Premiums & Better Benefits: Good News for Medicare in 2020
About a third of those enrolled in Medicare have the private portion of this government-sponsored medical insurance for seniors and some people with disabilities. Called “Medicare Advantage” (or Medicare Part C), the private alternative to traditional Medicare is an increasingly popular choice among the program’s 60 million members.
As of 2020, enrollment in Medicare Advantage sat at just over 24 million people. The Centers for Medicare and Medicaid Services (CMS), which administers the Medicare program, is expecting even higher enrollment for 2020 – 24.4 million, an increase of nearly 30 percent in the last two years.
There’s a reason why Medicare Advantage (MA) plans are popular. By law, these plans must cover at least the same benefits as Original Medicare, which includes Parts A and B together. Beyond that, most MA plans cover a host of added benefits that make them an attractive and affordable alternative to traditional Medicare. Added benefits typically include prescription drugs, dental, vision, hearing and gym memberships.
These plans also tend to cost next to nothing on top of the premiums you’d pay for Original Medicare. As a tradeoff for better benefits, though, MA plans usually limit networks and provider access, which can be a hassle for people in rural areas or those living in places without many doctors to choose from.
Whether you’re in the Medicare Advantage club already or not, the annual enrollment period gives you a perfect chance to assess your needs to see if an MA plan will work for you.
Lower Premiums for More People
You don’t often hear about premiums going down – unless you’ve been following the path of Medicare Advantage plans over the last decade. MA premiums vary by plan type since they’re sold by individual private companies, but the government tracks premium prices to give people an average so they know what to expect.
Medicare Advantage premiums in 2020 will drop to an average of $23 a month. That’s about 14 percent less than it was last year and nearly 28 percent lower than it was in 2017. Per the CMS, next year’s premium average is the lowest it’s been since 2007.
Of course, averages don’t tell the whole story. You may find plans that are more expensive than that where you live, or you could find plans that cost nothing extra on top of your premiums for Original Medicare (which you still pay even if you have an MA plan).
That’s why it’s important to shop carefully during open enrollment, which runs from October 15th through December 7th. During this enrollment period, you can sign up for a new MA plan, switch MA plans or go from MA back to Original (and add a Part D drug plan). Shopping around might seem like a chore, but it’s a good way to make sure you’re getting the coverage you need for the best deal you can.
Greater Access to MA Plans Nationwide
Not only will premiums be lower for lots of people, but there will be more plan options to choose from throughout the country.
In 2019, individual counties in the U.S. had access to about 33 MA plans. That will jump to about 39 plans next year, representing an increase of 49 percent since 2017. Bottom line? You might have half a dozen new plans to choose from for next year, and the plans that are available could be even more enticing, especially if you’ve got a chronic health condition.
Extra Benefits for People with Chronic Conditions
Starting on January 1, 2020, Medicare Advantage plans can offer unique benefits to people with chronic health conditions. It’s a pretty significant shift in CMS policy, but it’s not the first time that CMS has expanded the definition of approved benefits for Medicare Advantage members.
Before last year, MA plans could only offer supplemental benefits if they met the “primarily health related” standard, meaning they served a non-medical medical purpose, like shower bars for people with disabilities.
In 2019, CMS started allowing MA plans to offer supplemental benefits that were still primarily health related but this time to specific members. They didn’t have to adhere to the “uniformity” provision that meant all enrollees had the same access.
MA plans can take it a step further in 2020 and offer benefits that might not seem, on the surface, to be health-related but that benefit people with chronic health conditions. And by the way, the CMS keeps a list of approved chronic conditions:
- Alcohol and other drug dependences
- Autoimmune disorders (specific ones)
- Cancer, except for pre-cancer conditions and in-situ status
- Cardiovascular disorders (specific ones)
- Diabetes mellitus
- End-stage liver disease
- End-stage renal disease (ESRD) that requires dialysis
- Heart failure (chronic)
- Hematologic disorders (limited to certain severe ones)
- Lung disorders (specific ones)
- Disabling mental health conditions (specific ones)
- Neurological disorders (specific ones)
The agency reassesses the list from time to time, but these are the 15 types of chronic conditions that are eligible for supplemental benefits under MA plans. What are those benefits? Well, that depends.
Now that MA plans have freedom in creating plans that include specific benefits for people with chronic conditions, there’s greater flexibility – which means more variables. Examples of supplemental, non-healthcare-related benefits could include:
- Meal delivery services on a longer-term basis
- Transportation to doctor’s visits, grocery stores or other non-emergency locations
- Air quality improvement services, such as carpet shampooing for people with asthma
- Services designed to address social needs
The guideline from CMS is that each supplemental benefit for people with chronic conditions must “have a reasonable expectation of improving or maintaining the health or overall function of the enrollee as it relates to the chronic condition or illness.” In other words, these benefits have to serve an actual purpose in helping someone maintain or improve quality of life.
Even better, CMS is allowing MA plans to offer benefits for capital improvement – i.e., changes you make to your home to make it more compatible with your condition. These could include widening your hallways or doorways and building permanent access ramps. Individual MA companies can decide the extent to which they’ll cover any supplemental benefits.
The CMS estimates that about 250 plans in 2020 will offer these non-healthcare supplemental benefits and that these plans will serve about 1.2 million people. If you have one of the 15 conditions listed above, make sure to shop around wisely during open enrollment this year (again, October 15th through December 7th). You may find a great deal on coverage that not only addresses your medical needs but your lifestyle needs as well.
Most Common Misconceptions About Medicare
Signing up for health insurance is tough enough without realizing too late that you missed an important step. Medicare is no different, in fact Medicare and the various parts, can be even more confusing. Medicare currently provides health insurance benefits for over 58 million people in the U.S. comes with its own mile-long list of rules to follow. Forgetting or ignoring or ignoring an important detail could prevent you from maximizing your benefits. Even worse, it could leave you on the hook for thousands of dollars in unpaid claims or facing high monthly premiums with added penalties.
One of the best ways we can be helpful, especially with respect to anyone who might have question for this upcoming annual enrollment season, is to help clear up some of the most common myths surrounding Medicare.
Eight Of The Most Common Myths About Medicare
#1 – You can sign up or make changes anytime.
Like any other type of health insurance, Medicare has enrollment periods. The Initial Enrollment Period starts three months before the month you turn 65. If your birthday is June 12, then your enrollment period starts on March 1. It ends three months after the month you turn 65, so in our scenario here, that means it would end on September 30 for you. In other words, you get seven full months to sign up for Medicare when you first become eligible.
If you don’t sign up for Medicare when you first become eligible, then you could face penalty fees if you decide to enroll later. There are special enrollment provisions, though. Those who aren’t retired at 65 and want to keep job-based health insurance can keep it until they retire or lose the coverage, which triggers a special enrollment period.
As for making changes, you can only modify your Medicare coverage at certain points throughout the year. These include:
- January 1 to February 14: During this Open Enrollment Period is when some people can change from a Medicare Advantage (Part C) plan to an Original Medicare plan.
- January 1 to March 31: This is the general enrollment period for Medicare. If you don’t have Medicare coverage at all, your initial signup period has ended, and you don’t qualify for a special enrollment period, then this is when you can sign up for original Medicare (Parts A and B, not Medicare Advantage).
- April 1 to June 30: During this period, you can add a Part D prescription drug plan if you signed up for Medicare Part B during the general enrollment window. You can also use this period to sign up for Medicare Advantage if you have Part A already and used the general enrollment period to enroll in Part B.
- October 15 to December 7: This is the open enrollment period, which differs from general enrollment. There are several things you can do during this period, including change from original Medicare to Medicare Advantage, join a Part D plan, switch from an Advantage plan that doesn’t offer drug coverage to one that does, and drop your Part D coverage altogether.
Pay close attention to when you can sign up for Medicare for the first time. This will be your best shot for securing the plan that you want without having to worry about penalty fees for missing your enrollment window.
#2 – Original Medicare is your only option.
Original Medicare, which was established in 1965, sought to ensure that seniors would have access to low-cost health insurance after they retired. Before the program got started, aging Americans had trouble finding affordable coverage at a time when they needed it most. Medicare changed that. And while it’s a great program that has stood the test of time, it’s not your only option. You can sign up for a private plan under Medicare Advantage, also known as Medicare Part C. There are also other options under Medigap and Medicare Supplement plans.
Medicare Advantage (MA) was introduced in 1997 and has been gaining popularity ever since, particularly in the last decade. In 2017, a third of Medicare enrollees (33%) chose private plans over original Medicare. These plans are sold through private insurance companies. By law, they must cover the same essential services as Medicare Parts A and B. But where original Medicare excludes a host of covered benefits, Medicare Advantage offers more robust coverage in many cases.
Costs vary for MA plans, but you’ll have an out-of-pocket maximum (OOP) if you choose this route. The OOP limits how much you’ll have to spend of your own money on covered benefits for the plan year. In 2018, the limit is $6,700 – again, that’s the maximum. Each company sets its own limit up to the maximum allowable amount. For people with heavy medical costs, having a cap on out-of-pocket expenses is beneficial. Original Medicare doesn’t set a cap.
There are other benefits and drawbacks to Medicare Advantage, so read the fine print carefully before signing up for a plan. Original Medicare could work well for you, but you should know that a private option exists that may offer better features at better rates.
#3 – You’ll get enrolled automatically when you turn 65.
This is true for a select portion of Medicare enrollees. There are four reasons you might get automatically enrolled into Medicare:
- You’re under 65 and have a disability;
- You have ALS (Lou Gehrig’s disease);
- You already receive benefits from Social Security or the Railroad Retirement Board; or
- You live in Puerto Rico and get benefits from Social Security or the Railroad Retirement Board.
People who qualify for automatic enrollment will get a Medicare card in the mail either the 25th month of disability payments or three months before they turn 65, whichever applies to their situation.
There’s also a process called seamless conversion that allows private health insurers to automatically enroll current customers into their Medicare Advantage plans once customers become eligible as long as the companies give notice to customers about the conversion. As you’re nearing 65, check your mail carefully for a notice like this. You can opt out of automatic enrollment.
Barring seamless conversion into Medicare Advantage or one of the conditions listed above, you will need to sign up for Medicare. Generally, it doesn’t happen automatically.
#4 – You won’t have to pay anything.
Because Medicare is administered by the federal government, some people think it’s a free entitlement program. It’s not. Medicare is a low-cost health insurance option that includes premiums, deductibles, copayments, coinsurance and more. How much you pay for Parts A and B depends on your work history and income level. In general:
- Most people do not pay a monthly premium for Medicare Part A (hospital insurance). This is because work-based taxes pay for this portion of Medicare. If you don’t have enough work credits, then you may be charged a monthly premium for Part A. This isn’t common.
- Medicare Part B requires a monthly premium from everyone, but the amount varies based on your income level and when you sign up. The average monthly premium for new enrollees in 2017 was $134 for people (single tax filers) who earn up to $85,000 a year. Above that threshold, Medicare charges more per month for Part B. The highest earners ($160,000 a year as a single filer in 2018) pay the most. Medicare uses tax records from two years prior to calculate your monthly premiums. In 2018, your income from 2016 will be used to determine your premium tier.
Along with monthly premiums for Part B, Parts A and B both include cost-sharing, meaning you will be responsible for a portion of your medical bills after Medicare pays its share based on your plan. Medicare Advantage, which is sold through private companies, also costs money, and amounts vary by plan. Part D prescription drug coverage includes a monthly premium and cost-sharing as well. Bottom line: Medicare isn’t free.
#5 – Medicare covers all of your healthcare services.
No health insurance plan will cover 100 percent of your medical care, and Medicare is no exception. Original Medicare covers many services related to hospital and skilled nursing care (Part A) and medical care (Part B). Trips to the doctor, hospitalization, annual wellness screenings, lab testing, durable medical equipment and other types of essential health benefits are also covered since these services are mandated by the Affordable Care Act.
But there are gaps in coverage that you would need to supplement with a Medigap policy, Part D prescription drug coverage or a Medicare Advantage plan. Traditional Medicare does not cover things like long-term (custodial) care, eye exams for prescriptions, cosmetic surgery, routine foot care or acupuncture. Dental care, including dentures, and hearing aids and hearing aid exams are also notable exclusions from original Medicare.
Don’t assume that your Medicare plan covers all of the services that you’ll need, particularly if you’re enrolled in original Medicare. Evaluate your needs ahead of time so you can put the right coverage in place. Otherwise, you’ll have to pay for uncovered benefits completely out of pocket.
#6 – You don’t have to worry about Medicare if you have a marketplace plan.
This is an important fact to get right. If you’re eligible for Medicare but you’ve chosen not to sign up because you have a plan through an Obamacare marketplace, there are some things you need to know.
- Marketplace enrollees who are eligible for Medicare cannot get tax subsidies to reduce the cost of monthly premiums. Once you’re eligible for Medicare, you will stop receiving subsidies. This could make your monthly premiums for the exchange plan unaffordable.
- Your health insurance company could deny claims if you’re eligible for Medicare because they deem certain services as Medicare’s responsibility.
- If you decide to enroll in Medicare after your eligibility window closes, you may be charged penalty fees – and some penalties last for as long as you have Medicare. Having a marketplace plan does not excuse you from the penalty fees associated with late enrollment.
This latter point is a big concern, to the point that Medicare is addressing the problem this summer. Thousands of seniors miss their initial eligibility window each year, but officials and consumer advocates are concerned that part of the reason is that people assume that having a marketplace plan will prevent them from incurring fees if they enroll in Medicare after the fact. This isn’t true. Unless you have job-sponsored coverage or approved special circumstances, you must enroll in Medicare during your initial eligibility if you want to avoid paying fees later.
Earlier this year, Medicare implemented a waiver program for people who didn’t sign up for Medicare when they could because they erroneously believed that their marketplace coverage would protect them from fees if they signed up later. The deadline to apply for a waiver from penalty fees and the late enrollment waiting period was September 30.
One important thing to note is that while insurers can – and are required to – cancel the subsidies for your marketplace plan once you become eligible for Medicare, they are prohibited from canceling your coverage. That means you could be charged the higher, unsubsidized premium once you become eligible for Medicare. If you have a marketplace plan and you reach Medicare eligibility, talk to a health insurer adviser about your options.
#7 – Medicare is bankrupt or going bankrupt.
You may have heard that Medicare is out of money. Rest assured that it’s not – at least not yet. It is true that a portion of original Medicare’s finances are in trouble, especially if the government doesn’t implement appropriate changes to funding, taxation or benefits soon. But the program itself is far from bankrupt. In 2015, the Medicare Hospital Insurance Trust Fund had a balance of $197.3 billion. That same year, expenditures hit nearly $279 million, most of which got funded through payroll taxes and interest on the fund itself. Medicare only had to take $3.5 billion from the reserves to cover the deficit.
Drawing $3.5 billion from a limited reserve isn’t a good thing, but it’s a far cry from bankruptcy. Still, estimates assert that the trust fund will be depleted by 2028. At that point, tax revenue will be the only source of income for the program unless changes get made before then. Once the trust fund goes insolvent, Medicare Part A will operate at 87 percent financing. This 13 percent cut to Part A, the hospital portion of Medicare, could be especially burdensome to beneficiaries. It translates to thousands of dollars a year in added out-of-pocket expenses. Changes to the program are already being discussed to prevent this worst-case scenario. These could include increasing the eligibility age, raising payroll taxes or cutting benefits, among other things.
When discussing Medicare’s finances, it’s also important to note that we’re only talking about Part A funding. Medicare Parts B gets funded from the Supplementary Medical Insurance Trust Fund, which includes general revenue and beneficiary premiums. Part B’s finances aren’t in trouble.
#8 – Healthcare reform will eliminate the program entirely.
Recent political unrest regarding healthcare reform cast doubt over the future of the Medicare program. To date, few politicians have addressed Medicare directly – other than to suggest that it be privatized – and none of the Republican-backed bills that went before Congress included specifics about the Medicare program. The focus has instead been on the private market for health insurance (non-group coverage) and Medicaid, which is the federal-state program for low-income Americans. Previous proposals, such as the AHCA, could have impacted Medicare indirectly because about 11 million Medicare enrollees are dual-eligible with Medicaid.
If you’re hesitant to sign up for Medicare because you think the program might be eliminated, don’t worry. Healthcare reform will not eliminate Medicare, not least of which because it’s a popular program among consumers regardless of political affiliation. If you would like to review your options for coverage under Original Medicare, Medicare Advantage or a Medicare Supplement plan at any point you can quickly connect to a licensed insurance agent who can answer your questions and help you make an informed decision.
Who is eligible for Medicare?
Medicare is only available for certain people. Among these are:
- Those over the age of 65
- Those under the age of 65 who have a disability that qualifies them to get Social Security Income
- Those who are 65 years or older or who are under 65 and have certain disabilities and who receive benefits from the Railroad Retirement Board (RBB)
- Those with end-stage renal disease (ESRD)
- Those with amyotrophic lateral sclerosis (AML, or Lou Gehrig’s Disease)
Medicare.gov, the official governmental website for Medicare, offers a questionnaire to determine whether a person is eligible for Medicare benefits. People who receive benefits from Social Security or from the RRB are automatically enrolled in Medicare. However, those who qualify due to one of the previously mentioned illnesses must sign up for a Medicare policy.
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In early April, the Centers for Medicare & Medicaid Services (CMS) released its 2019 Medicare Advantage and Part D Rate Announcement and Call Letter, announcing changes to Medicare Advantage and Part D for 2019.
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The Centers for Medicare and Medicaid Services projected earlier this fall that Medicare Advantage enrollment would jump to 22.6 million people in 2019, representing nearly 37 percent of the Medicare population (and an 11.5 percent bump from this year).
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The Centers for Medicare & Medicaid Services recently announced that many Medicare Advantage recipients can expect lower premiums in 2019.
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Rediscovering Medicare 2019
According to the Centers for Medicare and Medicaid Services (CMS), as of July 2017, more than 58 million Americans are enrolled in this social health insurance program. This includes people 65, disabled people under 65 and those with Amyotrophic Lateral Sclerosis (ALS, Lou Gehrig’s disease) and end-stage renal disease (ESRD). With this huge consumer base comes equally huge costs. In 2016, Medicare accounted for 15 percent of the federal budget at about $588 billion. The Congressional Budget Office expects spending to top $590 billion in 2017 and jump to $1.2 trillion by 2027.
But with so many people relying on Medicare, this financial outlay is essential. As with any other government programs, Medicare is continually being examined and improved. This includes all four parts: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage, private insurance plans) and Part D (prescription drug coverage). Changes made after the Affordable Care Act took effect in 2014 are some of the most significant changes to happen to the program, which has altered very little since its beginnings in 1965 under President Lyndon B. Johnson.
In 2016, updates to Medicare include new payment and pricing changes, including millions of enrollees being spared from enormous Part B premium increases. Other big changes involve coverage for specific procedures and end-of-life care and counseling and how patients receive medical care. These initiatives sought to redefine and improve the doctor-patient relationship, as well as Medicare enrollees’ overall experience.
Medicare Part B Increases Reduced for Millions
When it comes to Medicare, everything you need to know right now about specific plan costs centers on financial relief. The Medicare Board of Trustees (the Board), which is responsible for the program’s financial health, revealed that Part B premiums and deductibles for an estimated 52 million enrollees’ (about 30 percent of all Part B members) would increase again in 2017.
There were three reasons for this:
- Part B spending was higher than expected
- Sufficient funding had to be reserved for the Supplementary Medical Insurance (SMI) Trust Fund
- Lack of a cost-of-living adjustment (COLA) for Social Security benefits in 2017.
Under Social Security’s hold harmless rule, certain Medicare enrollees don’t have to pay a higher premium for Part B if there’s no cost-of-living adjustment from Social Security. This rule applies to anyone who has Social Security deduct Part B premiums from their payments as well as other select Medicare beneficiaries; about 70 percent of program subscribers fall into the hold harmless group. These “hold harmless” members paid $109 a month for coverage in 2017.
The remaining 30 percent of enrollees include those applying for Medicare Part B for the first time; those not currently collecting Social Security benefits; those with premiums paid by Medicaid (dual eligible); and those paying additional income-related premiums. In 2019, certain single and joint tax filers have a standard monthly Part B premium of $135.50. People who earn above a certain threshold pay more for Part B coverage. Here is the breakdown for 2019.
- $189.60 per month: Single filers earning $85,000–$107,000; Joint filers earning $170,000–$214,000
- $270.90 per month: Single filers earning $107,000–$133,500; Joint filers earning $214,000–$267,000
- $352.20 per month: Single filers earning $133,500–$160,00; Joint filers earning $267,000–$320,000
- $433.40 per month: Single filers earning $160,00–$500,000; Joint filers earning $320,000–750,000
- $460.50 per month: Single filers earning $500,000 and up; Joint filers earning $750,000 and up
In November 2015, Congress passed the Bipartisan Budget Act of 2015 (Public Law 114-74) . This spared enrollees from the much higher premium increases. So, in 2016, they only paid 16 percent more for Part B premiums – – $121.80, rather than 2015’s $104.90.This also includes a $3 repayment surcharge that will be added to monthly premiums over time to cover 2016’s reduced premiums. The premium increase from 2016 to 2017 was approximately 10 percent.
Even even if you’re in the group that was spared from paying higher monthly premiums for Part B coverage, you may still have to pay higher annual deductibles, which were raised in 2019 to $185.00 up from $183 in 2018. After your deductible is met, you’ll only be responsible for about 20 percent for Medicare-approved services (the coinsurance rate).
End Of Life Care – A Big Concern For Medicare Recipients In 2019
In 2017, dramatic changes were made to end-of-life options for Medicare, primarily in availability of newer options and how patients were counseled. “End-of-life” refers to all healthcare provided in the days or years before death, no matter whether it’s sudden or due to a long-term terminal illness. The Centers for Disease Control and Prevention (CDC) estimates that of the 2.5 million people dying each year in the U.S., about 75 percent are ages 65 and older.
This makes Medicare the largest healthcare insurer during the last year of life. About 25 percent of all Medicare healthcare spending goes to these enrollees, many of whom have various serious and complex conditions. Medicare covers a host of services – both curative (for curing) and palliative (relieving pain, discomfort) – that can be utilized right up until a member’s death. Among these are care in hospitals and several other settings, home healthcare, physician services, diagnostic tests and prescription drug coverage.
Beneficiaries with a terminal illness also qualify for benefits that wouldn’t normally be covered under original Medicare, such as bereavement and hospice services. End-of-life services are controversial, due to their costs and the difficult discussions and issues surrounding them. Originally, the Affordable Care Act (ACA) authorized voluntary, personalized counseling. But due to public outcry, this provision was quickly removed from the healthcare law. However, Medicare has reinstated this counseling.
Hospice benefits also played a part in Medicare as it introduced the new Care Choices model. Previously, enrollees opting for hospice benefits had to give up most curative care. But the new model allows those with terminal illnesses to receive hospice services without giving up treatment. On Jan. 1, 2016, 70 hospices began offering these new services; another 70 will join in 2018. Medicare also began covering advance care planning as a separate and billable service in 2016. Advance planning involves discussions between healthcare providers and patients regarding end-of-life care and patient preferences.
Changes to ACO selection
Medicare focused on how medical care was delivered to patients in 2018-2019. Key areas included teamwork among clinicians, particularly that of primary care doctors; the timeliness of preventive services; and patients transitions between hospital and home.
Medicare estimated that nearly 8 million beneficiaries (20 percent of original Medicare) were currently enrolled in Accountable Care Organizations (ACOs). ACOs are networks of doctors and hospitals with the goal of delivering better quality care at lower costs “Five years ago, there was minimal incentive to coordinate care,” said Patrick Conway, Medicare’s chief medical officer. “Physicians wanted to do well for their patients, but the financial incentives were completely aligned with volume.” With ACOs, networks get part of their reimbursement for meeting quality or cost targets; their long-term effectiveness is still being determined. But Medicare kicked off a major expansion in 2016. Enrollees could select their own ACO for the first time, and they can opt out if they preferred.
Joint Replacements’ Quality and Costs Examined
Another change to Medicare in recent years was an experiment involving two types of joint replacements: hip and knee replacements. These are Medicare’s most common surgeries. In 2014, more than 400,000 beneficiaries received hip or knee replacements. The CMS estimated that these procedures cost more than $7 billion for the hospitalizations alone. And for Medicare, average costs can vary widely within different geographic areas, ranging from $16,500 to $33,000. In addition, these surgeries require long recovery and rehabilitation periods. Their actual quality, in and out of the hospital, can also vary depending on the area and facility.
As such, it’s understandable that efforts have been made to improve the procedures’ quality while keeping costs down. In April 2016, hospitals in 67 metro areas and communities will take part in an experiment designed to manage these procedures’ total costs. The 90-day experiment will begin with the patient’s initial doctor’s visit, and encompassed surgery and rehabilitation.
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Medicare Enrollment Information
MEDICARE PART A
Medicare Part A has been dubbed the “hospital insurance”. Having Medicare Part A alone is sufficient under the Affordable Care Act (ACA) to comply with the minimum requirements. Despite that fact, Part A is usually used in combination with another insurance policy, such as Medicare Part B, which covers general medical services.
Part A – Original Medicare
‘Hospital Insurance’ that covers hospital care & prolonged stays.
PARTIAL COVERAGE FOR:
- Ambulance Services
- Inpatient Hospital Stay
- Skilled Nursing Care
- Home Care
- Mental Health Care
Medicare Part A covers inpatient hospital stays, hospice stays, home healthcare nurses, mental health inpatient stays and skilled nursing facility stays. The cost of inpatient hospital stays and mental health inpatient stays is explained in detail in the following paragraph. The participant must pay 20 percent of the total cost of home healthcare services and any necessary medical equipment; the Medicare Part A plan will pay the remainder.
Regarding hospice care, Medicare will cover quite a bit of these services, but it won’t cover everything. Check out this guide for more detailed information about how Medicare works with hospice.The cost to stay in a skilled nursing facility varies per day. Day 1 through 20 is included in your policy. Day 21 through 100 will cost $164.50 per day and any day beyond 101 must be paid entirely by the participant.
For inpatient hospital stays, Medicare requires patients to be admitted for two consecutive midnights for medically necessary reasons before it will pay a claim. You will also need to meet a deductible for the year ($1,364 in 2019) before your benefits start.
Under original Medicare, Part A covers the first 60 days of your hospital stay with no additional copayment (once you meet the deductible). From days 61 to 90, you’ll be responsible for a copay per day. In 2019, the per-day copay is $341. After day 90, you’ll have to use your “lifetime reserve days” to cover any additional time, but you only get 60 of these days period. During the lifetime reserve days, you’ll pay a copay per day ($682 in 2019). Once you’ve used up your reserve days, Medicare will not cover any additional hospital stays. With the exception of lifetime reserve days, your benefits will start over once the plan year ends and a new one starts.
Unless medically necessary, Medicare Part A will not cover the costs of a private duty nurse, a private room, or any extra perks during a hospital stay, such as television, phone or personal care items. In addition to the actual bed and medical care, Part A will also cover the cost of meals, general nursing care, medicines prescribed while in the hospital, inpatient rehab facilities and mental health care.
You should enroll for Medicare Part A when you first become eligible. Eligibility factors are:
- Reaching age 65
- Receiving disability benefits through Social Security (SS) or Railroad Retirement Benefits (RRB)
- Receiving disability for end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s Disease)
Those eligible due to age may first enroll three months before their 65th birthday, during the month of their 65th birthday, and for the three months following their 65th birthday, for a total of seven months. Those eligible due to receiving disability benefits will be automatically enrolled into original Medicare (Parts A and B) on the 25th month of receiving disability benefits.
If you miss the deadline for original Medicare, you can enroll during the general enrollment period, which runs from January 1 and March 31 each year. If you don’t enroll in Part A when you’re first eligible, and you don’t qualify for premium-free Part A (most people don’t pay a premium), then you may be charged a penalty fee for signing up later. There are also special circumstances that will trigger a Special Enrollment Period (SEP). This allows a participant to enroll outside of the normal deadlines.
Special enrollment periods vary depending on your circumstances. For instance, you might have good coverage through your job when you turn 65, and you don’t want to lose it by signing up for Medicare. Once you leave your job or lose that work-based coverage, you’ll have eight months to sign up for Medicare without incurring the penalty for late enrollment. Other SEPs exist for other times in your life, like moving to a new area or finding a higher-rated plan.
In order to sign up for Medicare Part A, you can either call directly or visit your local Social Security Administration (SSA) office. Although the Centers for Medicare & Medicaid Services (CMS) manages Medicare, it utilizes Social Security offices to carry out the enrollment process. For Medicare Advantage, you’ll need to contact a broker or find a policy directly through the company of your choice.
MEDICARE PART B
Medicare Part B is referred to as the “medical insurance”. Having Part B alone is NOT sufficient to meet the minimum standard mandated under Obamacare. It must be combined with Part A or another healthcare policy in order to avoid a tax for noncompliance.
Part B – Original Medicare
‘Medical Insurance’ that covers doctors’ visits & outpatient care.
PARTIAL COVERAGE FOR:
- Doctor Visits
- Preventative Care
- Outpatient Services
- Lab Testing
- Medical Equipment
Medicare Part B covers general medical services, like lab tests, surgeries and doctors visits that are not part of an inpatient hospital stay that would ordinarily be covered under Part A.
More specifically, a claim will likely be covered under Part B if you have a claim that resulted from:
- A service
- The necessity to obtain a supply that related to the diagnosis or treatment of a medical condition
- Obtained healthcare services to prevent illnesses or detect them at an early stage.
In addition, Medicare Part B will cover all but 20 percent of the cost for clinical research studies. This will only advance science and medical advancements to ensure that future patients have access to the best and most revolutionary healthcare services and prescription medicines. Part B will also cover all but 20 percent of the cost for emergency ambulance services to the hospital or transportation to a skilled nursing facility. However, the nearest medical facility must be able to provide the care that the patient needs.
Finally, Medicare Part B will pay for all but 20 percent of the cost for any durable medical equipment prescribed by the patient’s doctor for in-home use. Examples of durable medical equipment would be: crutches, braces, hospital beds, home oxygen equipment and supplies, wheelchairs, walkers and prosthetic devices.
Medicare Part B will cover all but 20 percent of the cost of outpatient mental healthcare, while Part A would cover the costs of any inpatient mental healthcare required. Part B also covers all but 20 percent of the costs of certain vaccination shots and particular types of prescription drugs that relate to various medical conditions. A full list of drugs covered by Part B can be found on Medicare.gov.
Similar to Part A, a person is supposed to sign up for Medicare Part B as soon as they reach the age requirement or the 25th month of receiving disability benefits. The required enrollment period starts three months before the person’s 65th birthday or 25th month anniversary. It includes the actual month of the birthday or anniversary and ends three months after the birthday and anniversary month, for a total of seven months.
Again, if they miss the initial deadline, a person can enroll during the open enrollment period (OEP), which lasts between January 1 and March 31. There will likely be a tax for not signing up for Medicare when first eligible. A person may also sign up for Medicare Part B outside of the OEP.
They can also sign up after first becoming eligible if they meet the requirements of a Special Enrollment Period (SEP). An SEP occurs if someone is receiving health insurance through their employer. Or, they can qualify for an SEP if: they sign up for Medicare Part B within eight months after their employment ends, or of their insurance through their former employer terminates, whichever comes first.
Again, any person who wishes to sign up for a Medicare Part B plan must do so through the SSA office. This agency handles the enrollment process for CMS.
MEDICARE PART C
Medicare Part C is also known as the Medicare Advantage Plan or “MA Plan”. It is provided by a corporate health insurance company in the form of an HMO or PPO plans. Any Medicare Part C plan offered by a private health insurance company must basically include the same coverage as Medicare Part A and B do individually.
Part C – Medicare Advantage
‘Private Insurance’ in the form of an HMO or PPO plan that combines Medicare Parts A & B along with additional coverage.
OFTEN FULLY COVERS:
- Dental Care
- Vision Exams
- Hearing Exams
OFTEN PARTIALLY COVERS:
- Eye Glasses
- Hearing Aids
- Prescription Drugs
A person is required to sign up for a Medicare Advantage (Part C) plan either: during the seven-month span around their 65th birthday or the seven-month span around the 25th month that they first started receiving disability benefits. The clock for this seven-month period begins three months before the month that the event (birthday, disability) occurs. It includes the actual month of the event and ends three months after the event.
There are some difference between Medicare Part C through a private insurance company and Medicare Part A and B, which is run through Medicare. In particular, Part C does not offer hospice care. Furthermore, some Part C plans cover more than Part A and B do. For instance, some Part C plans offer prescription drug coverage that is similar to a Part D plan. Some Medicare Part C plans could also offer dental and vision coverage, which is not included in a Part A or B plan.
Medicare gives insurance companies money each month, per member, to offset the overall cost of coverage to the participant. This is different than Original Medicare plans (Part A and B), which are managed by and claims are paid directly by the CMS, Therefore, the cost of Part C is typically as affordable as Part A and B.
Every Medicare Part C plan varies in cost and coverage, based on the insurance company. A participant should read their policy limits very carefully to determine things, such as whether a procedure is covered, whether you have a deductible and whether a doctor is within your plan’s network.
If a participant opts for a Part C plan that has a high-deductible plan, they may choose to sign up for a Medicare Savings Account (MSA). MSA is explained in further detail below.
MEDICARE PART D
Medicare Part D is used to cover prescription drug needs and is associated with a private health insurance company. A participant can also get prescription drug coverage through their Medicare Part C plan. The purpose of Part D is to subsidize the costs of generic and name brand prescription drugs.
Part D – Drug Coverage
‘Private Insurance’ that provides prescription drug coverage that may be included as part of a Medicare Part C plan.
- Generic Drugs
- Brand Name Drugs
- Specialty Drugs
DOES NOT COVER:
- Vitamins & Minerals
- Weight Loss Drugs
- Non-FDA Drugs
The fact that certain drugs are discounted more than others also benefits the participant. They are then able to shop around and compare the prices of name brand and generic medications, based on what best fits their financial constraints.
A newly qualified Medicare participant must also sign up for their prescription drug coverage when they first become eligible. Their failure to do so will mean that the participant must pay a tax on top of their normal premiums when they do sign up outside of the enrollment period. The OEP for Medicare Part D for a person with Medicare Advantage runs from October 15 through December 7. Medicare Part D open enrollment for a person with traditional Medicare (Part A and Part B) runs from April 1 to June 1.
Technically, the term of enrollment lasts seven full months and commences three months prior to the month that the Medicare enrollment necessity event is triggered. The month that the Medicare enrollment is triggered is month four; the three months subsequent to month four equate to seven months.
An important effect of Obamacare on participants’ prescription drug coverage is that it is designed to diminish the burden imposed by the “donut hole.” This is defined as a gap in coverage, whereby the participant must pay all of their prescription drug costs. A participant does not fall into the donut hole until they have reached a certain threshold. In 2019 this amount was $3,820, spent both individually for deductible payments and by the Part D plan. In 2018 the donut hole threshold was $3,750.
Under Obamacare, no Medicare Part D plan may impose a yearly deductible that exceeds $405.00 in 2018. In 2019, that amount increases by $10 to $415.00 a year. Generally, the deductible amount, if there is one at all, varies per drug plan.
After the participant reaches the coverage gap, Medicare Part D will pay 63 percent of the price for generic drugs in 2017; the participant is responsible for the remainder.In 2018, Part D paid only 56 percent of the cost for generic drugs. Under Obamacare, the amount that the Part D plan will pay will increase each year. And, the amount that the participant is responsible to pay will decrease until the year 2020, when the participant will only be responsible for 25 percent of the costs of generic medications.
Part D will pay for 75 percent of brand-name drugs and the participant is responsible for 25 percent of the costs during the period of time that the participant is within the donut hole in 2019. In 2018, Part D paid 65 percent of the cost of a brand name drug and the Part D recipient paid the remaining 35 percent. Although Plan D will cover a larger percentage of a brand name drug, the overall cost of these drugs is much higher than generics. As such, it may not be financially feasible for many people.
The participant will get out of the donut hole and can utilize a catastrophic insurance policy after they have paid a total of $5,100.00 out-of-pocket in the 2019 calendar year ($5,000 in 2018). The catastrophic coverage will pick up a larger majority of the cost of prescription drugs and will only pass a small coinsurance or copayment amount to the participant.
Free To $437.00 Cost per month for 2019
Medicare Part A Cost
Medicare Part A is typically referred to as “premium-free” Part A because most enrollees don’t pay a monthly premium for coverage. If you or your spouse worked for 10 years and paid Medicare taxes along the way, then you most likely have the required work credits needed (40) to receive premium-free Part A. Enrollees are also eligible for premium-free Part A if they receive Social Security or Railroad Retirement Board disability benefits or have an end-stage renal disease.
If, however, you did not pay Medicare taxes while working or haven’t earned enough credits, you will pay a premium for Part A. In 2019, premiums were $240 a month for people who earned 30 to 39 work credits and $437 a month for people who earned fewer than 30 credits.
$135.50 To $460.50 Cost per month for 2019
Medicare Part B Cost
A small percentage of beneficiaries (about 3.5 percent) pay $109 a month for Medicare Part B in 2019, but the actual cost of the program is $135.50 a month. The reason that a few Part B enrollees only pay $109 is because the “hold harmless” rule under Social Security prevents them from paying more when the cost-of-living adjustment from Social Security payments doesn’t keep up with Part B premiums. This happened in 2016 and 2017, so most enrollees pay a lower amount. New enrollees and others not held harmless (about 30 percent of Medicare customers) will pay the standard rate, which is $135.50 in 2019. The deductible is the same for everyone. In 2019, it’s $189.60 for the year.
For higher-income Part B beneficiaries, Medicare charges an income-based surcharge (called the “IRMAA”). In 2019, IRMAA surcharges will be based on a new income tier system that will effectively reclassify some enrollees into higher income brackets, forcing them to pay more than they might have in previous years. The income tiers (based on annual earnings) are as follows:
- Up to $85,000 ($170,000 for couples)
- Between $85,001 and $107,000 ($170,001 to $214,000 for couples)
- Between $107,001 and $133,500 ($214,001 to $267,000 for couples)
- Between $133,501 and $160,000 ($267,001 to $320,000 for couples)
- Between $160,000 and $500,000 (320,000 to $750,000 for couples)
- Over $500,001 ($750,001 for couples)
Medicare calculates income based on tax returns from two years prior. For 2019 determinations, the government will use your 2017 tax return. You can appeal the decision if you can prove that your income from two years ago isn’t the same as it is now. For more information on appealing or disputing IRMAA charges, contact Medicare directly.
Free To $200+ Cost per month for 2019
Medicare Part C Plan Cost
As stated previously, the cost of a Part C plan will vary, depending on the company and type of plan chosen. You will need to compare plans and prices, depending upon each insured’s medical conditions and financial circumstances.
Remember that you must have Medicare Parts A & B in order to obtain a Medicare Advantage Part C plan.
Free To $33.19 Cost per month for 2019
Medicare Part D Plan Cost
The monthly premium for Medicare Part D also varies depending on plan and income level. As with Part B, income determinations are made using tax returns from two years prior, and the same income tiers that Part B has are used to determine additional charges for prescription drug coverage.
In 2019, if a person makes less than $85,000 on their individual tax return or less than $170,000 on the joint tax return, the cost of the Part D plan is included in the cost of the Part A and B premium. If the participant makes between $85,000 to 107,000 on their individual tax return or between $170,001 and $214,000 on their joint income tax return, the monthly premium for Part D will be $12.40, in addition to the Medicare Part A and B monthly premium.
Again, the costs of Part D will vary and increase as the participant’s annual income increases. Any participant that claimed more than $500,000 on their individual tax return and more than $750,000 on their joint income tax return will pay the highest premium for Part D, which is $77.40 a month, plus their monthly premiums. The full breakout is below:
|If your individual income is…||If your joint income is…||This is what you’ll pay for Medicare Part D:|
|Up to $85,000 a year||Up to $170,000 a year||The plan’s premium|
|Between $85,001 and $107,000 a year||Between $170,001 and $214,000 a year||$12.40 13 plus the plan’s premium|
|Between $107,001 and $133,500 a year||Between $214,001 and $267,000 a year||$31.90 33.60 plus the plan’s premium|
|Between $133,501 and $160,000 a year||Between $267,001 and $320,000 a year||$51.40 54.20 plus the plan’s premium|
|BetweenMore than $160,0010 and less than $500,000 a year||Between More than $320,0010 and less than $750,000 a year||$70.90 74.80 plus the plan’s premium|
|$500,000 or more a year||$750,000 or more a year||$77.40 plus the plan’s premium|
If you do not enroll in Part D coverage when you first become eligible for Medicare, you will have to pay a penalty for the same number of months that you went without Part D coverage. The penalty amount in 2018 is $33.50 a month.
Supplemental Medicare Plans
The monthly premiums for the different Medicare plans are generally seen as affordable to participants. However, what can be unaffordable and financially taxing is the deductibles and copayments. For this reason, many participants opt to take on Medigap insurance, in addition to their traditional Medicare plans. The cost of the Medigap policy varies, depending on the insurance company and the type of coverage offered.
Medigap policies are offered by private insurance companies and helps pay for some of the out-of-pocket costs that Parts A and B do not cover. Some Medigap plans may offer partial coverage for emergency care received while outside of the United States as well.
If a person has a Medicare Savings Account (MSA) or a Medicare Advantage plan, they cannot have a Medigap insurance policy. It is against the law for an insurance company to write a Medigap policy if the participant also has an MSA.
Medicare Savings Account
Some Medicare Part C plans offer high deductibles and will not begin full coverage of claims until the deductible is satisfied. In these instances, many participants also choose to take on a Medicare Medical Savings Account. An MSA is a special type of savings account designed to help pay high annual deductibles.
An MSA is set up with a private insurance company, and the actual account is set up with a bank of the plan’s choosing. The plan then deposits some money into the account. The participant is also encouraged to deposit money in the account as available. Money in the account is safe and secure and is also not taxed upon withdrawal, so long as the money is used to cover healthcare-related expenses, such as deductibles or copays. Participants are required to submit a special form with their annual tax return that explains how the money was used in order to avoid taxation.
At the end of the year, any money left over in the MSA will either roll over to the next year, or it can be withdrawn. If withdrawn and not used for healthcare-related purposes, the money will be taxed as income.
Are dental and vision care covered by Medicare?
Generally, neither dental nor eye care is covered under Medicare Part A or B. However, these benefits can be covered if there is some special type of care received during a hospital stay, in which case, it would fall under Part A coverage.
Some Medicare Part C plans may cover dental and eye care. If so, you can use money from a Medicare Medical Savings Account to cover the costs of dental and eye care. Otherwise, you may have to pay for a private dental or eye care insurance policy in order to get these types of services covered.
Why Medicare works with private insurance companies
In some instances, you may choose to have insurance through both Medicare and a private insurance company to maximize your coverage. When that happens, there are specific rules to determine which policy will pay a claim first. This is also called a “coordination of benefits.” Traditionally, the primary payer, which is oftentimes the private insurance company, will pay up to their policy limits on a claim. Then, they will send the remaining amount on the bill to the secondary payer, the Medicare policy.
The History of Medicare
Under the leadership of President Lyndon B. Johnson, Congress passed Medicare in 1965. Medicare was part of the Social Security Act. It was designed to benefit and promote the health and wellness of citizens who were over the age of 65, without consideration of their income level and medical history. Prior to the creation of Medicare, senior citizens faced exorbitant medical bills and high health insurance premiums, often with little recourse in addressing these costs.
The concept of Medicare has remained the same for almost 50 years. However, the quality of coverage has increased over the years as amendments have been passed requiring Medicare to cover more for participants. For instance, hospice care only became a requirement in 1984, and the eligibility requirements were expanded in 2001 to allow persons younger than 65 who had certain disabilities and medical conditions to obtain Medicare coverage.
Medicare Part A is funded in large part by the payroll tax levied on employers and employees (the Medicare Tax). Part B and Part D costs are partially funded by the premiums paid by participants. The portion of the federal budget allocated to Medicare spending is growing each year as more BabyBoomers become eligible to enroll in Medicare. Additionally, the average life expectancy of the nation’s senior citizens is increasing thanks to medical and scientific advancements.
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