Welcome to Open Enrollment! For Those New to Medicare, Here’s a Basic Guide to All Those “Moving Parts”
We love the traditions of October – fall colors, college football, and “pumpkin spice” everything. But there’s another event that returns regularly in this month, and that’s the ritual referred to as Medicare open enrollment, which began October 15 th and continues through December 7 th. This is an important period for Medicare enrollees, because it’s the one time each year when beneficiaries can change their plans, no questions asked. For many seniors, it’s also the first time they’ll have to sign up for this vitally important program.
Each week during open enrollment, we’ll be bringing you important news here on the AgingOptions Blog that will help you make a more informed choice from among the veritable blizzard of options available to you. But for those who are new to Medicare, or just need a refresher, we decided to begin at the beginning and describe the various parts of Medicare so you can see how they interconnect like puzzle pieces.
For this journey to square one, we’re looking to this article from the US News website in which reporter Ruben Castaneda brings us an explanation of the parts of Medicare: what they cover and what they don’t.
64 Million People Benefit from Medicare
The US News article begins with one those “This is a football” elemental statements. “Medicare is a health insurance program sponsored by the federal government for people aged 65 and older, and for individuals under 65 with specific medical conditions,” the article states. Reporter Castaneda spoke with several experts who provided some of the Medicare basics, but any time you need questions answered, the website for CMS – the Centers for Medicare and Medicaid Services – is a good place to start, as is the Medicare site.
Once you get past “step one,” the Medicare puzzle gets confusing. The program is split into four parts, called A, B, C and D. “Everyone who works contributes, through their payroll taxes, to the funds that pay for Medicare,” the article explains. “Anyone over age 65 with 40 quarters of work history is eligible for Medicare Part A” (we’ll explain the parts in a moment) and is automatically enrolled when they reach that magic age.
Eligibility is actually fairly simple. Besides individuals age 65 or older, those suffering with ALS (Lou Gehrig’s disease) are also eligible, as are those with end-stage renal disease, a permanent kidney failure that requires dialysis or a transplant. Finally, anyone receiving Social Security Disability Insurance for at least 24 months can qualify for Medicare coverage.
Medicare Part A – Often Called “Original Medicare”
As we said above, Part A is the starting place. This part of Medicare, often referred to as original Medicare, pays for an array of services but chiefly covers you when you go to the hospital. Part A can also cover ambulance services, hospice care, and a stay in a skilled nursing facility for rehabilitation purposes – typically no more than 100 days. It’s essential to note that Medicare does not cover long-term care, which is a fairly common misperception.
“Most people don’t pay a monthly premium for Medicare Part A,” says Castaneda. But if you didn’t pay into the Medicare program long enough in your work history through payroll taxes, you might have to cough up a Part A premium which can start at $278 and go up to $506 in 2023, depending on how long you paid Medicare taxes.
There’s also a deductible with Part A coverage. That hospital stay will cost you $1,600 in 2023 before Medicare starts paying your bill.
Medicare Part B – Doctor’s Visits and More
Medicare Part B is where things get interesting, and complicated. Part B is actually voluntary, and unlike with Part A, there’s no automatic enrollment at age 65 or any other age. But if you fail to sign up when you’re supposed to, you’ll face a hefty life-long penalty when you do enroll (more on that in a moment).
According to this recent Kaiser Health News report, roughly 5.7 million Americans get by with Medicare Part A only, which means they pay out of pocket for all the expenses covered by Part B. The list of services Part B covers is long and comprehensive, but here are a few highlights:
- Doctor’s appointments
- Some medical equipment such as canes, walkers and wheelchairs
- Insulin pumps and other equipment and services for individuals with diabetes
- Physical therapy and occupational therapy that your doctor deems medically necessary
- Preventive services such as most screenings, wellness check-ups and many vaccines
- Approved mental health services, typically including both inpatient and outpatient services.
By itself, Part B usually pays for 80 percent of allowable charges for covered services once you’ve paid the Part B annual deductible.
“Part A, No Pay – Part B, Not Free”
There are still plenty of pre-retirees who erroneously assume that Medicare is free, but it’s not. Part A doesn’t cost anything except your deductible, but Part B comes with a monthly premium of $164.90 per month (for most people) in 2023, a drop of about $5 below 2022. But, US News warns, “The monthly premium is income-based, so if your income is more than $97,000 as an individual or higher than $194,000 as a couple, your premium may be higher, according to CMS.”
(We wrote about the Part B surcharge and what you can do about it just a few weeks back here on the AgingOptions Blog.)
Medicare Part B also comes with an annual deductible, which in 2023 is $226 – $7 below 2022.
Beware of the Penalty for Part B Late Enrollment
As we mentioned above, missing the enrollment deadline for Part B can cost you down the line. “While enrolling in Medicare Part B is voluntary, there is a penalty for not enrolling in Part B in a timely fashion,” Castaneda writes, “and it’s not a one-time penalty. For each year you could have signed up for Part B but didn’t, you’ll pay an extra 10 percent, according to medicare.gov. The penalty is added to your monthly premium.” In other words, delay two full years and prepare for a 20 percent premium surcharge for as long as you live.
For those still working and covered by an employer’s health plan, the Part B penalty won’t apply, but you’ll need to provide documentation that you had health insurance using a simple form completed by your employer. (For reference, the form is called a CMS-L564.)
We’ve already mentioned several costly deductibles and other costs that can really create a fiscal crisis in the event of a costly illness. Many enrollees opt to cover these hefty extras by purchasing a private Medigap insurance plan referred to as a Medigap plan. “Such policies help pay for costs not covered by original Medicare, such as co-pays for doctor’s visits and deductibles,” the article explains. However, it’s important to know that you can’t buy Medigap coverage unless you’re enrolled in both Part A and Part B. No coverage shortcuts allowed. We’ll discuss Medigap in future Blog articles during open enrollment.
Medicare Part C – Better Known as Medicare Advantage
Still with us? Then let’s consider Medicare Part C, which – just to add to the confusion – is almost never called that. Part C is better known as Medicare Advantage, a type of coverage administered by private insurance companies which essentially combines Parts A, B, and often D together. (We’ll cover Part D below.) Regardless of their differences, Medicare Advantage plans must adhere to the rules set by Medicare, as US News points out.
We were frankly surprised to read in this comprehensive Kaiser Health News analysis (also cited above) that Medicare Advantage plans now cover 48 percent of eligible Medicare beneficiaries – an amazing growth rate. People are drawn to these plans because they offer the virtues of extra benefits at lower cost. “Most Medicare Advantage plans include coverage for prescription drugs (Medicare Part D),” says US News, “and many offer dental and vision coverage,” often setting an annual limit after which the policy-holder pays the rest
But Medicare Advantage plans, which are aggressively marketed during open enrollment, come with a few major drawbacks. The biggest downside: your doctor may not be on your plan. MA plans limit which doctors and clinics policy-holders can visit by approving a specific network of health care professionals. (This can also be a big negative for those who travel a lot or spend half the year in different locales.) “There are no such restrictions with private Medigap plans, which bolster original Medicare by paying for items Medicare doesn’t cover, like co-pays and deductibles,” says the US News report.
“In many ways, Medicare Advantage plans are similar to individual health insurance policies provided by employers or available on the individual insurance market,” Castaneda writes. “They have different monthly premiums, copays, provider networks and out-of-pocket limits. Some plans that have no or lower premiums might have higher copays or coinsurance, higher out-of-pocket limits and smaller networks of providers. You may also have to pay more for coverage of prescription drugs.”
And if that weren’t enough to confuse the consumer, Kaiser Health News reports that the average U.S. shopper has 39 Medicare Advantage plans to choose from this year – the widest range of choices ever.
Medicare Part D – Think D as in “Drugs”
We’re just about finished. To wrap up, let’s consider Medicare Part D, which covers prescription drug coverage. “You can only get a prescription drug plan if you are enrolled in Part A and/or Part B or Medicare Advantage,” US News explains. Part D plans can come bundled with your Medicare Advantage plan or purchased as a stand-alone policy from a private insurer.
If you take a wide range of costly prescriptions, you need to pay special attention to Part D. “Under Part D, there are limits on what drugs are covered and how much you pay out-of-pocket for brand-name and generic drugs,” writes Castaneda. “The amount of coverage for prescription drugs varies from plan to plan, and costs depend on the types of medication the consumer needs, and whether they take brand-name or generic drugs.”
The cost you’ll actually pay for your prescriptions depends on a bewildering array of variables. Are your drugs brand-name or generic? Are the medications you are prescribed included on your Part D plan’s list of covered medications, and if so, in which tier ? Drugs are classified into one of five tiers:
- Preferred Generic: Generic drugs with the lowest copayment.
- Generic: Generic drugs with a higher copayment than Tier 1.
- Preferred Brand: Brand-name prescription drugs with a higher copayment than Tier 2.
- Non-Preferred Brand: Brand-name prescription drugs with a higher copayment than Tier 3.
- Specialty: The highest cost drugs. They are generally used to treat complex conditions.
Your cost will also be affected by any amount left in your annual deductible, and also by the pharmacy you use – specifically whether or not it’s in your network. In 2022, the monthly cost of Part D ranged from $0 to $77.10 per month, based on annual income.
Our Goal at AgingOptions
Yes, if you’re new to Medicare, this can seem a bit bewildering. Remember, though, that good objective advice is readily available. Take your time, do your homework, and be careful if you’re dealing with a salesperson who earns a commission from the choice you make. It doesn’t mean he or she is wrong – it just means their so-called advice might not be completely objective.
Our goal at AgingOptions is to help guide you through the Medicare Maze so that you can make a decision that suits your unique needs. As we said, we’ll be talking a lot about Medicare here on the Blog and on the radio during open enrollment. We urge you to call in with your questions or contact us for recommendations. Whether you’re considering Medicare for the first time or reevaluating a plan you’ve had for years, these next several weeks represent a golden opportunity. We urge you to take advantage of it.
(originally reported at https://health.usnews.com)