Newsletters 2009 Newsletters Medicare Planning 101 (5/09)
Wednesday, 13 May 2009 15:09
Becoming eligible for Medicare is a birthday present most age 65 individuals do not relish. Medicare planning can be complicated and the maze of products can be difficult to navigate. Among the various questions that arise are the following:
- What are the different parts to Medicare?
- Do I qualify?
- What is Medicaid?
- What are the differences between the two?
The following is a brief overview of the Medicare and Medicaid systems along with a few considerations to make when evaluating both programs.
What is Medicare?
Established in 1965, Medicare is a federally funded health insurance program primarily for people age 65 or older that have been a legal citizen for at least five years. Those under age 65 with certain disabilities and receiving SSI disability payments for at least 24 months, and those at any age with permanent kidney failure are also eligible for Medicare.
There are several sections to Medicare insurance:
Medicare Part A (Hospital Insurance): Part A helps pay for inpatient care in a hospital, skilled nursing facility, or hospice and for home health care if certain conditions are met. Most people don’t have to pay a monthly premium for Medicare Part A because they (or a spouse) have worked at least 40 quarters in their lifetime and have paid Medicare taxes to support this coverage. If you don’t automatically get premium-free Part A, you may still be able to enroll, and pay a premium.
Medicare Part B (Medical Insurance): Part B helps pay for medically necessary doctor services and other outpatient care. It also pays for some preventive services (like flu shots) to help keep you healthy and some services that keep certain illnesses from getting worse. Most people will pay the standard monthly Medicare Part B premium of $96.40 in 2009, which will increase incrementally for those individuals earning over $85,000 or $170,000 for joint filers. Everyone is required to pay this premium unless you are on SSI disability or qualify for low-income assistance.
When you sign up for Medicare, you will automatically get Part A. Part B, however, is optional due to the monthly premium payment. You have the option to turn down the coverage or wait to sign up at a later date.
In evaluating whether you should sign up for Part B immediately, consider the following:
- Are you currently working and already have group health insurance from your employer or your spouse’s employer?
- If you aren’t currently covered, be aware that if you wait to sign up for Part B, the premium could go up by 10 percent for each year you could have had Part B but did not. You will pay that extra cost as long as you remain on Medicare.
If you are 65 or older when you sign up for Part B, you have six months to buy any Medicare Supplemental (Medigap) policy you choose, regardless of your health. A Medigap policy helps to pay some of the “gaps” in health care costs, such as co-payments, coinsurance, and deductibles. This six-month period is called the open enrollment period and you only have it once in your life. After the six months, you may not be able to buy the Medigap policy you want because policies may exclude persons with certain medical conditions. Note that if you are 65 or older and currently have group health coverage from your or your spouse’s employer, you may be able to save your open enrollment period until you need it.
Medicare Part C (Medicare Advantage Plans): You must have both Part A and Part B to join one of these plans. These plans provide Medicare benefits to enrollees and are offered by private insurance companies approved by Medicare. They come in three basic formats: HMO, PPO and PFFS. In most cases, these plans also offer Part D prescription drug coverage. The plans provide all of your Part A and Part B services and generally provide additional services, such as vision or dental. You usually pay a monthly premium, and co-payments that will likely be less than the coinsurance and deductibles under original Medicare (parts A and B).
Medicare Part D (Prescription Drug Coverage): Part D is a voluntary outpatient pharmacy-prescription drug benefit initially offered in 2006. It is purchased from healthcare companies as a stand-alone drug card or as part of a Part C Medicare Advantage Plan mentioned above. All plans must meet or exceed specific minimum requirements set by Medicare. In 2009, there is an initial deductible of $295. After the deductible is met, the enrollee must pay 25% of covered costs up to total prescription costs meeting the initial coverage limit. In addition, most plans have a coverage gap, commonly referred to as the "donut hole". In 2009 the gap, in which there in no coverage and the enrollee pays 100% of their prescription costs out of pocket, starts once you have purchased $2700 of prescriptions and coverage again starts up after you have spent over $4350 of your own money on prescriptions. From then, your drug plan will pay at least 95% of your drug cost until the end of the calendar year.
What is Medicaid?
Medicaid is a joint federal and state program and is based on need and social welfare, with eligibility based on assets and income. There are no age requirements and a person can qualify for dual coverage under both Medicare and Medicaid. Each state creates their own set of guidelines for qualification, with Medi-Cal being California’s version of the Medicaid program. If a person has limited income and/or financial resources, Medicaid covers a broader spectrum of services than Medicare does. It usually covers children, pregnant women, parents of eligible children, seniors and individuals with disabilities. Though poverty is used to determine eligibility, a person must fall into one of the coverage groups in addition to being determined eligible due to being in poverty. Medicaid benefits are paid directly to the provider of services. In addition to covering individuals who meet financial requirements, in some states Medicaid covers individuals who cannot otherwise afford insurance.
When considering which Medicare plan is right for you, think about your own unique needs:
Are you concerned with keeping costs at a minimum?
Do you want the freedom to go to any doctor you choose?
How close to home will your doctors and specialists be?
Are you relatively healthy? Do you only visit the doctor for check ups?
Do you have retiree health insurance from your employer or from a union?
Are you concerned with being able to go directly to a specialist?
Do you want to be able to go directly to specialists without referrals first?
Do you travel frequently? If so, do you leave the country?
Find out all you can about each Medicare plan you are considering. Don’t rely on brochures or information directly from the providers alone. Visit www.medicare.gov or contact your local State Health Insurance Assistance Program (SHIP), which offers free, one-on-one counseling about Medicare and related health insurance benefits. Take your time when sorting through your information and make sure you truly understand what’s being offered. The more you learn about your choice, the better armed you’ll be when choosing a plan that’s right for you.
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