Turning Age 65? Understand Your Medicare Options
Medicare Supplement, Medicare Advantage or Traditional Medicare Alone?
If you are within nine months of turning age 65 it is very likely that you are getting inundated with information about Medicare Supplements and Medicare Advantage Plans and Part D Medicare Prescription Drug Plans. You may even have insurance agents knocking on your door because they “happen” to be in your neighborhood.
For the average American turning age 65 the number of different plans and different companies can be mind-numbing. There are ten different Medicare Supplements, twenty-three different Medicare Advantage Plans (In my zip code) and numerous Part D Prescription Drug Plans. And if the sheer number of Medical Supplements and Advantage Plans is confusing enough consider that there were fifty-eight different companies listed on the North Carolina Department of Insurance website offering Medicare Supplement Plan G plans. The twenty-three different Medicare Advantage Plans are offered through eight different health insurance companies in my zip code in North Carolina.
What is an individual to do?
First, it is important to understand the basics of Original Medicare. In the absence of a qualifying group health insurance plan offered through your own employer or that of your spouse, you must enroll in both Part A and Part B of Medicare within a seven month window beginning three months prior to the month that you turn age 65 and ending three months after the month that you turn age 65. If you enroll during this window, appropriately called your Initial Enrollment Period, you enroll in Medicare without any financial penalty.
An Example: Assume that John turns age 65 April 10, 2020. He can enroll in Medicare Parts A and B anytime beginning January 1, 2020 and ending July 31, 2020.
As a general rule Medicare Part A requires no monthly premium while Part B requires a monthly premium based on your income. Enrolling in both Parts A and B is required before you can begin choosing a supplement or Advantage Plan. If you are already receiving Social Security Benefits enrollment will be automatic. If you are delaying your Social Security benefits you will have to go to medicare.gov and get yourself enrolled.
Do I Need to Enroll in a Supplement or Advantage Plan?
There is no requirement to enroll in either an Advantage Plan or Medicare Supplement. If you do not enroll in a Part D Prescription Drug plan when first eligible, there is a financial penalty added when you do enroll later. In fact, there are some who argue that you should not enroll in a Medicare Supplement at all (I am not in that camp).
To decide whether you should enroll in a Medicare Supplement you have to understand what your financial risk can be.
Medicare Part A – 2020
Medicare Part A (Hospital Insurance) covers inpatient hospital care when all of these are true:
- You’re admitted to the hospital as an inpatient after an official doctor’s order which says you need inpatient hospital care to treat your illness or injury.
- The hospital accepts Medicare.
- In certain cases, the Utilization Review Committee of the hospital approves your stay while you’re in the hospital.
If you meet the criteria you will incur a deductible of $1408 per period of confinement. After the deductible you pay no other inpatient costs through the 60th day. From Day 61 through the 90th day you pay a daily copayment of $352.
Before going any further, we need to understand what Medicare means by “the Period of Confinement”. Medicare defines a period of confinement as beginning the day that you are admitted to a hospital or skilled nursing facility and ending when 60 days have elapsed since your discharge from inpatient care at a hospital or skilled nursing facility.
When analyzing your Part A benefits the two questions that you have to ask yourself are:
1. How likely is it that I would have more than one period of confinement in a year?
2. What is the likelihood of having a hospital stay of more than 60 days per confinement?
Your answers to these two questions will help you determine the amount of financial risk that you would be taking in the absence of a Medicare Supplement or enrollment in a Medicare Advantage Plan.
Medicare Part B
Medicare Part B provides coverage for doctors, durable medical equipment and medically necessary services. As a Medicare beneficiary you are responsible for an annual deductible ($198 in 2020) plus twenty percent of the Medicare approved charge. To help you understand what this means I used the Medicare Procedure Price Lookup tool. (https://www.medicare.gov/procedure-price-lookup). Here are a couple of examples:
Repair of a groin hernia using endoscope Code 49650.
Outpatient Surgery = Medicare approved amount = $2194
Assuming you have already paid your $198 Part B deductible Medicare would have paid $1755 and your 20% responsibility would be $438
Inpatient Surgery – Medicare approved charge = $4833 and Medicare would have paid $3866 leaving you $966 to pay. This is in addition to the Part A inpatient deductible of $1408
Catheter Insertion of Stents in Major Coronary Artery
Outpatient Surgery = Medicare approved charge = $6057. Medicare would have paid $4846 leaving you $1211 (not including the Part B deductible)
Inpatient Surgery – Medicare approved charge = $9908 and Medicare would have paid $8500 leaving you $1408 to pay. This is in addition to the Part A inpatient deductible of $1408
Of course, there are many procedures that could increase the cost significantly and it is possible that complications will ensue resulting in significantly higher costs. The real question is: is that a risk worth taking?
There are ten different Medicare Supplement plans available. These plans are designed to cover those costs that are the patient’s responsibility including the Part A $1408 per period of confinement deductible, the Part B $198 deductible and the 20% of Part B charges that are the patient’s responsibility.
The most popular Medicare Supplement today is the Plan “G”. Plan G covers 100% of the Part A deductible, the 20% of Medicare approved charges in Part B and any excess charges. Medicare beneficiaries love this plan because once they have paid the Part B deductible of $198, 100% of all other Medicare approved charges are covered. The maximum financial responsibility of an individual covered with Medicare Supplement Plan G is $198!
The best premium for a Plan G (assuming single Male turning Age 65) using my most competitive company is $110 monthly or $1320 annually. After reviewing your financial liability under Original Medicare with no supplement, you will have to decide if it is worth $110 a month or $1320 annually just to cover 100% of your potential liability under Original Medicare. Assuming no rate increases you would have paid $13,200 over ten years. Only you can answer that question.
A lesser sold but awesome option for many Medicare beneficiaries is the High Deductible Plan G. The premium for this plan is a low $34 monthly. This plan is identical to the Plan G but doesn’t begin to pay benefits until your out of pocket costs hit $2340 in 2020.
If you have talked to an agent who failed to talk to you about this option, you must find a different agent!
While there are eight other Medicare Supplements, in my opinion they are not worth talking about. That said, if you want to understand them, feel free to contact me / https://mels.youcanbook.me).
Part D Prescription Drug Plans
Traditional Medicare originally did not have benefits for prescription drugs. As a result, there were a couple of Medicare Supplements that did provide some benefit for the purchase of prescriptions. Unfortunately two events made the creation of a prescription drug plan critically important. As everyone is aware, the cost of prescriptions increased dramatically over the last 30 years. And as the cost of prescriptions escalated, so did the number of seniors age 65 and older being prescribed maintenance drugs. According to a 2019 Kaiser Family Foundation Health Tracking Study (https://www.kff.org/health-costs/poll-finding/kff-health-tracking-poll-february-2019-prescription-drugs/) 87% of people age 65 and older take at least one maintenance medication. That is 9 out of every 10 seniors is on some medication!
As a result of the increasing prevalence of prescriptions in the lives of seniors, Congress passed The Medicare Prescription Drug Improvement and Modernization Act of 2003. In 2006, as a result of the passage of this law, seniors began to have access to Part D prescription drug plans. This legislation essentially made buying a Prescription Drug plan manadatory and penalized Medicare Beneficiaries for not enrolling in a plan when first eligible. The penalty is 1% for every month that a beneficiary does not enroll in a qualified drug plan. The penalty is based on the “national base beneficiary premium” which in 2020 is $32.74. To understand what this means let’s consider an individual age 66 who did not enroll twelve months earlier, when first eligible. His penalty would be $3.93 monthly added to whatever plan he now purchased. This penalty is especially important to anyone choosing Traditional Medicare with or without a supplement.
Choosing the right Part D prescription drug plan can be extraordinarily confusing. Just go to Medicare.gov and do a search for prescription drug plans and you will find between 40 and 50 different plans. While the medicare.gov tool is good, you would be well served to talk with a health insurance agent who is very experienced in the Medicare marketplace.
Medicare Advantage Plans
Medicare Advantage plans have grown in popularity over the last twenty years. These are private health insurance plans that replace your Part A and Part B benefits and often include Part D prescriptions Drug benefits as well. Medicare Advantage Plans are most like the traditional health insurance plans that people under age 65 are enrolled in.
To enroll in a Medicare Advantage Plan you must be enrolled in both Part A and Part B of Medicare.
Depending on your location these plans can have very low monthly premiums and in North Carolina many of these plans have no premium at all. In addition to providing benefits for medical care, many of these plans provide additional benefits such as dental reimbursement, vision benefits, home healthcare benefits and more.
Like traditional (under age 65) health insurance, these plans tend be Health Maintenance Organizations (HMO) or Preferred Provider Organizations (PPO). Frankly, I cannot understand why anyone would enroll in an HMO. The HMO limits you to in-network providers. If you go to an out-of-network doctor or hospital you receive No Benefits! Regardless of how good the medical care may be in your current geographical area the question that you need to ask yourself is this: if I get diagnosed with a serious condition and the best treatment in the country is in a hospital in another state, would I want my insurance to cover me there? With the Preferred Provider Organization, you can use any doctor and any hospital in the country. If you do utilize out-of-network providers your maximum out of pocket liability can be as high as $10,000, but you have coverage.
In my opinion, with very few exceptions you want to enroll in a Preferred Provider Advantage Plan that uses a National Network versus a Regional network. To understand the importance of this, consider this example:
You live in North Carolina and get diagnosed with a rare heart condition. After doing research you discover that Vanderbilt University Medical Center is the best facility in the country, and it is the network of your Advantage Plan insurer in that area.
In a National Network you can go to that facility and be treated as being in network and the in-network out of pocket maximum would apply.
In a Regional Network, even though the facility is in-network in that state for your insurer, you are still considered out of network so the higher out of pocket maximum would apply.
This is very different from the travel benefit! Make sure that the agent that you are talking to understands the difference because it is HUGE! This is such an important distinction that if the agent does not discuss it – Find another agent!
For anyone thinking of enrolling in traditional Medicare without simultaneously enrolling in a Medicare Supplement, the Advantage Plan is a far better alternative since most of these plans have very low or no monthly premiums.
If you are getting ready to turn age 65 your first stop should be https://medicare.gov/medicare-and-you. This is a great resource and the more that you know before talking with any insurance agent, the better off you will be.
When talking with an agent pay attention to whether the agent explains HMO Advantage Plan versus PPO Advantage Plans and Medicare Supplements.
When talking with an agent pay attention to whether the agent explains the High Deductible Plan G or simply focuses on the Medicare Supplement Plan G alone.
Just because an agent is licensed with every Advantage Plan and 10 or more Medicare Supplement companies does not automatically mean that he/she is independent or that he/she is necessarily going to choose the best policy for your needs.
Moving from traditional health insurance to the world of Medicare is confusing. You have far more choices when enrolling in Medicare than you ever had in the under-age 65 health insurance world. Make sure that all of your questions are answered to your satisfaction before signing up for any supplement or Advantage plan.
If you have questions you can schedule a time for us to talk by going to https://mels.youcanbook.me or by calling me at 336-525-6357.