When I first meet with someone about Medicare, I start with a “Welcome to Medicare” education. I do this because whether someone is new to Medicare or has had it for years, the majority never had any one sit down with them and explain how their new benefit works, much less what all the options are. Those who did have a sit-down were, primarily, steered to one option without mention of the other. It’s like going into a store asking to see shoes and being shown loafers only. “I’m not sure I like loafers. Do you have any sneakers?” Salesperson response, “There are no sneakers. No one has sneakers. Sneakers are bad.” Others call the 800 numbers hoping to receive honest, objective information and are often enrolled in wrong plans and, at times, enrolled in plans that do serious financial harm. Imagine same shoe scenario but you’re told, “We have loafers that look like sneakers! And you can choose between four sizes!”
Me? I believe in transparency. And, don’t shoot the messenger but Medicare is complicated. That is why so many agents sell only certain types of plans. It’s a lot to keep up with. The truth is, one plan is not better than another. One size does not fit all. One plan just fits better than the other. Your unique set of circumstance and preferences determine the right fit. Those circumstances may change through the years. Here’s the rub: If you know your rights, protections and all your options, you will be able to make choices that are best for you. But you must start with the basics.
So how does Medicare work?
Medicare is available to anyone 65 or older, certain people under 65 who are disabled and people with End-stage Renal Disease (ESRD). Original Medicare (OM), as enacted in the 1960s, is composed of Part A and Part B. Medicare Part A covers inpatient hospital care such as room, meals, nurses, tests; skilled nursing facility care; hospice care; and home health care. Part A is premium free for most people but if you or your spouse did not pay enough Medicare taxes, you may be able to purchase Part A. Part B covers outpatient care including doctors, labs, radiological services, home health, outpatient surgical procedures, and other outpatient procedures and services. Part B has a standard premium that is determined by CMS each year. You may pay an Income Related Monthly Adjusted Amount (IRMAA) if you are a high income earner. The IRMAA varies based on income but most people are not affected by this.
Medicare Part A and B
Medicare Part A and Part B pay a portion of medically necessary services. You are subject to periodic and annual deductibles and coinsurance of 20% of what Medicare does not pay. There is no limit on this to cap your out of pocket expenses. Medicare Parts A and B do not cover medications your doctor prescribes to you.
Medicare Part C
You may, also, here the term Part C. Part C, aka Medicare Advantage (MA), began in 1999. Advantage plans are run by private insurance companies and must cover all the services that Original Medicare cover. Many MA plans are HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations) and usually provide additional coverage for hearing, dental, and vision, which are not covered by Medicare.
Medicare Part D
Last, there is Part D aka Prescription Drug Plan (PDP). Part D followed on the heels of Part C. Drug plans must meet specific coverage criteria to be consider “creditable drug coverage”. Drug plans have a monthly premium and are, also, run by private insurance companies. You are eligible to purchase a PDP if you have Part A and/or Part B. If you go 63 days without “creditable drug coverage” after your Initial Enrollment Period, you may have to pay a Late Enrollment Penalty (LEP). You must be enrolled in Part A and Part B to enroll in a Medicare Supplement or Medicare Advantage plan. You must be enrolled in at least Part A to enroll in a Prescription Drug Plan.
So, as begin your search to figure out how does Medicare work, keep the above in mind as this will lay your foundation. I’ll cover plan options in future posts.