A Simple Guide to Medicare
Medicare seems confusing. It really doesn't have to be. If you know your A B C's. Take a look at this chart and keep it for reference. I will go into more detail on each segment. The purpose of this article is to hit a few important highlights on Medicare for the 0ver 65 crowd. Hopefully this will help make it easier to understand some basics. I also hope you will find some useful information that you can refer back to if your need a refresher on the basics.
First and foremost, the real ultimate guide to Medicare is by the federal government at https://www.medicare.gov, don't let anyone tell you otherwise. When in doubt about any information you hear, go back to Medicare.Gov and find out if it is true and correct. Let's dive in a little. This is general information to help most people understand the basics. Again, always refer back to Medicare.gov for the definitive answers and other rules.
Part A: If you have worked and paid Medicare taxes with your paycheck for approximately 10 years, Part A is free when you turn 65. If you have not contributed enough years into the Medicare system, then you may have to pay for Part A. If you are disabled or have end stage renal disease, you may also qualify for Part A. For the vast majority of people, it is free when they turn 65.
Part B: Is a voluntary program that requires you to enroll and pay a monthly premium. In 2021, the base premium was $148.50 per month. However, depending on your annual income the premium could be more. Also of importance....
- Part B premiums go up each year based on inflation.
- Enrollment in Part B can only happen at certain times.
- There is a 20% coinsurance for doctors and there is no annual maximum cap. (There is a solution for this called a Medicare Supplement).
There are a lot of ways you can become eligible for Medicare before the age of 65. As mentioned above, disabled and end stage renal disease. I am going to focus this article on the retirement community and those turning 65. IF you are about to turn 65, here is what you need to know.
- When you are approaching 65, you have a 7 month window to enroll in Part B. This is the initial enrollment period or IEP. You have 3 months before your birthday, the month of your birthday, and 3 months after your birthday.
- When you turn 65, Medicare starts on the 1st day of the month of your birthday.
- If you do not enroll during this Initial period, the next opportunity to enroll is the "General Enrollment Period". You can enroll between January 1 to March 31 each year. If you enroll during this General Enrollment period, your coverage begins on July 1 of that year.
What if you are still working? Good news, you can keep your employer paid group medical insurance and enroll later! Yes, if you turn 65 you are not required to take Medicare Part B, C or D. You can stay on you or your spouse's employer group insurance. If you lose this employer provided coverage, you can jump on Medicare then. This is a "Special Enrollment Period" or SEP. A lot of people will work past age 65 and stay on their employer's group insurance. When they retire, they can then enroll in Medicare Part B and D or Part C and they do not have to pay a penalty for not enrolling on time. A person over 65 on a group plan can enroll any time in Medicare while still covered under the group plan. They can retire or end their employment and have up to 8 months to enroll in Part B and Part D or Part C. The 8 months special enrollment period starts the month they retire or end their employment.
I know this is confusing when we talk about enrolling in Parts B and D or C. I have not covered what C and D are so hang in there. I will give you a heads up, Parts A and B and D go together. Part C replaces all 3 of those with private health insurance.
Part D: Your drug coverage. Yes, I skipped C. When you enroll in Medicare Part A and Part B, you should add part D for drugs. This completes your coverage with Original Medicare.
Is Part D required? NO. But if you do not enroll in Part D when you are first eligible, you will have to pay a penalty if you decide later to enroll in drug coverage or Part D. I have clients tell me "I do not take any medicines, why should I buy a drug card (Part D)". You do not have to. But if you choose not to buy a drug card in your initial eligibility for Part B, when you do enroll in a drug plan you will pay a penalty for not enrolling on time. The penalty is 1% for every month you did not enroll when you were eligible. Let's keep this real simple. Let's say you decided not to buy a drug card (Part D) at age 65. You decide when your 68 you want to buy a drug card because now you have some expensive medicines. Remember, you can't just buy a drug card when you want. You can only buy a drug card (Part D) during the annual open enrollment period which is October 15 to December 7 each year and the coverage begins on January 1 the following year. If you get sick in June at age 68, start a high-cost medicine. You are out of luck until January 1 of the next year. This is one reason to buy even the lowest costing drug card and have it in case you need it. Let's say you did wait till you really needed a drug card. Let's say it was in the month of June when you turned 68. Remember you have to wait till January, and you have will have that 1% penalty for not buying the drug card when eligible. Simple fast math, from age 65 to 68 is at least 3 years or a 36 month or longer without a drug card. Your penalty would be at least 36% or more and it lasts forever. Some people get scared hearing a 36% or more penalty forever. One thing to think about is, how many months did you not have a drug card? And how much money did you save not having one? In the end it still may be worth not getting that drug card right at age 65. Some people wait. Personally, I don't' recommend waiting. I'd suggest buying the lowest costing plan you can, so you have some protection if you need it, and avoid that penalty. But now you at least know your options.
Let's wrap up this up for Parts A, B and D. These all make up "Original Medicare". A for Hospital, B for Doctors and D for medicine. With original Medicare you have the freedom to go to any doctor or hospital with no referrals if they accept Medicare. And most do! This is important !
What about Part C: Medicare Advantage plans!
Here is how I explain Part C, the Medicare Advantage Plan. You take your Part A, Part B and Part D, and you replace it with private health insurance. You have to use network doctors; you have copays and out of pocket expenses. You must use a doctor in the network. If your one of those fortunate snowbirds who spend part of the year in the north and part of the year in the south, you might find problems with care when outside your network. If you live in a big city, this is not too bad. If you live in rural America like I do, this may not be so good.
Let's talk about the out of pocket expense. For 2021 the maximum out of pocket for Medicare Advantage plans (Part C) is $7,550. If you have a major illness in September and you are still being treated in January you could find your self with $15,000 in out of pocket expenses. A good example is cancer.
So Medicare Advantage plans are bad, right? No! Not at all. They serve a purpose. People who are very healthy, live in an area with a great doctor network like a large metropolitan area, can save money with a Medicare Advantage plan. Cost of a Medicare Advantage plan averages around $60 a month. In some cases they may not cost anything. Also, Medicare Advantage plans bundle Part A for hospitals, Part B for doctors, Part D for drugs and usually add in extra benefits not available with traditional Medicare like dental, vision and gym memberships. Again, you need to know the trade offs.
A simple way to say this:
With Medicare Advantage "You get perks and low monthly premiums for a strict doctor networks, copays and potential large annual out of pocket expense when you need coverage" vs having original Medicare and a supplement that may get expensive as you get older.
With Original Medicare and a Supplement "You can choose any doctor who takes Medicare. You have no perks. Usually you have no out of pocket cost when seeing a doctor or being hospitalized. Your monthly cost for insurance does go up as you get older and your Medicare supplement can cost $200 a month an go up.
With Medicare Advantage plans and Medicare Part D drug cards there are specific times you can enroll, dis-enroll or change coverage. I am not going to go into all the dates and rules. But I want to talk about Drug Cards and the open enrollment and what you should do EVERY SINGLE YEAR! You should shop your drug card and consider changing it annually. Why? Your medications change over time is one reason. The bigger reason is that drug companies and the drug card insurance companies negotiate prices each year. If you sign up with Drug Card ABC this year and never change it, next year they may not have the best price for your medications. Someone else may have a better price!
If you have a Drug Card, Part D: Do this one step every year !Shop your Drug Card and change to the lowest costing plan every year. Why? Drug prices change. Drug Card Companies have to renegotiate prices. Your plan may not be the best plan for your next year. The medications and drugs you take change every year.
You are going to start entering your medications. The Medicare website makes this simple. If you're taking a medication, you can enter the first 3-7 letters of it, and the website will automatically show you a list of drugs starting with those letters. For example: if you type just "LIS" it will pull up " lisinopril" as the 1st drug. A very common drug for high blood pressure. When you click "Add Drug", the website will automatically show you the most common dose taken. You can change your medication by clicking the "Add to my Drug list" button. Then add your next drug. Do this for all your medications. When they are all listed, click the "Done Adding Drugs Button".
This next step is also important. Adding your pharmacy. Your zip code should be entered and a list of pharmacies in your area are shown. Pick an answer based on how or where you normally buy most of your drugs and medications. The reason is this will affect the results. If you checked you buy most of your drugs from mail order and you really buy them at the neighborhood drug store, prices for your medications and drugs will not be accurate. If you normally buy from Walmart and you select your neighborhood pharmacy again the results will not be accurate. As a matter of fact, if you don't mind going to Walmart, you can sometimes get better pricing with the Walmart and Humana drug card combination.
These drug cards are not specific to certain pharmacies. You can use them anywhere including buying medications and drugs by mail. But what is important is that the results shown are very much tied to what you put in the system. Only put the medications you use regularly, and only put the pharmacy you expect to use the most. This gives you the best results.
Moving forward, you have now entered all your regular medicines and selected your favorite pharmacy and clicked on the "Done" button, the Medicare website will now show you the best drug card for you for the next 12 months. The drug cards are shown in lowest total cost to highest. Generally, I recommend looking only at the top 2 or possible 3 drug cards. I usually recommend the very 1st one. Take a look at the sample image below of the top 2 results window.
In the above sample notice the Star Ratings. You might consider one plan over the other if one was a 2 star and one was a 4.5 star.
The most important thing to notice is the "Yearly Drug & Premium Cost". This is what you should expect to pay for your medications and your drug card. Notice in this example the top plan is $170.16 and the bottom plan is $289.92. Why would you pay more ?
I have to really make this point. These results are dependent on you entering the correct medications you take on a regular basis. Don't enter that antibiotic you got for the 1 time this year. Only enter those drugs you take regularly. Also, these prices are dependent on the pharmacy you picked. In this example had you picked Walmart as your pharmacy, the 2nd plan might have been the best choice and on top.
To wrap this up. Was it helpful? Did you find any useful information? This is not meant to be a total answer to every question you might have, but rather a down and dirty over view of options and some important things to especially remember.
How can we help you? At Carter's Insurance Agency and our sister company Carter's Benefits, we take time to explain these differences and we help you locate the right coverage. We can help you in person or over the phone. Give us a call if you have any questions or would like assistance with you enrollment.
Thank you for visiting our blog.
Written by Eddie Carter, Managing Partner
Carter's Insurance Agency
Published October 15, 2021