Live Your Life Without Financial Worry. Leave Your Estate Planning Matters to Sallen Law.

Guest Blogger: What to do once you are eligible for medicare

MEDICARE: I’M ELIGIBLE, NOW WHAT?

Submitted by Susan H. Kavanagh

President, Kavanagh Solutions

Phone: (215) 579-2220

Email: shartkav@aol.com

Web-site: www.kavsol.com

Started in 2011 and continuing for the next 18 years, baby boomers will be turning 65 at a rate of 8,000 per day. With over 2.9 million people reaching this milestone each year, it is very likely that you will field Medicare questions posed by “newly eligible” baby boomer clients. As an advisor, it is important to have some basic knowledge of Medicare and offer resources that will help make this important health insurance transition easier.

Some background: Medicare and its companion program Medicaid were signed into law in 1965 by Lyndon B. Johnson. Since then, the Medicare Program has evolved in response to beneficiary needs, developments in medical care/best practices, insurance industry advances, etc. Initially, Medicare consisted of Part A(hospital and medically necessary skilled nursing facility, hospice, and home care) and Part B (some preventive care, doctors and other healthcare providers’ services, outpatient care, DME and home care). Eligibility for Medicare was expanded from covering persons age 65 and over to include disabled persons under the age of 65, persons with End Stage Renal Disease (ESRD), federal civilian employees, the President, members of Congress and federal judiciary. Since Parts A and B require beneficiary cost sharing in the form of per diem hospital co-pays, outpatient deductibles, and coinsurance, Medicare solicited private health insurers to provide insurance that would reduce or eliminate basic Medicare’s beneficiary cost share. The two types of Medicare Supplement and Managed Care plans that were developed are called Medigap and Medicare Part C or Medicare Advantage plans. These plans had done an effective job of covering the medical balance bills/cost share part of the equation until prescription drugs emerged as an important tool in the prevention and treatment of disease. Medicare recognized this change in the treatment of disease and how it was financially impacting Medicare beneficiaries. As a result, Medicare Part D (prescription drug coverage) was implemented in 2006.

As seen above, the basics and history of the Medicare Program are all very interesting but clients as “first-time eligibles” can be overwhelmed by the process of choosing one or more plans, comparing insurers and rates, and the whole application process. It is usually helpful to follow a few steps to facilitate the plan review and selection process.

Step 1: Consult with a Social Security Administration (SSA) agent. The agent will be able to answer questions about eligibility, the effective date of Part B, Parts B and D premiums (which may be income adjusted), other benefits, etc. If considering delaying the effective date of Part B, the agent can elaborate on applicable Part B late enrollment time and premium penalties.

Step 2: Research Other Sources of Medicare Supplement Coverage.

  • Check for Medicare Supplement, Medicare Advantage or equivalent retiree coverage offered through a former employer (commercial company or Government/Military), Association, Union or Trade Group.Many times they offer subsidized coverage that is better or equivalent to individual Medicare Supplement or Part C plans. Many such plans offer prescription drug benefits with no coverage gap or “donut hole”. Note: enrolling in an individual Medicare Supplement plan or Part D may automatically terminate the group retiree plan, thus leaving benefits on the table.
  • Medicare/Medicaid Dual Eligibility: check with Social Security and the local DPW office regarding enrollment and plan options, etc.

Step 3: Evaluate Individual Medicare Plan Options: assuming clients ruled out any group coverage and have a Part B effective date, they should research which individual Supplement or Medicare Advantage plans are suitable for them. In determining this, it is advisable to consider lifestyle issues such as planned relocation (includes moves to an Adult Community, Assisted Living or CCRC), residing several months each year in another state (snow birds), plan administrative ease, provider network participation, provider freedom of choice, medical conditions requiring special care or benefits and prescription drug utilization. It is very important to compile such a list to help with the plan evaluation process. Following are the insurance plans that “supplement” or enhance basic Medicare (for other options, see pages 82-83 of the Medicare & You handbook).

A. Medigap Plans:

  • Private health insurance plans that supplement original Medicare Parts A and B
  • Medicare is primary claims payer and Medigap pays secondary or after Medicare pays
  • Provider freedom of choice, no referrals required
  • Each insurer offers standard plans and chooses which they offer in a particular market (A, B, C, D, F, G, K, L, M, N)
  • Premiums may be higher than Medicare Advantage plans but point of service costs can be less depending on the plan chosen (A through N)
  • Cannot be used to supplement a Medicare Advantage plan
  • Plans do not cover prescription drugs so a separate Medicare D plan must be purchased for this benefit. Note: prior to 2006, some Medigap plans offered minimal prescription drug coverage and were grandfathered when the Medicare D plan was first introduced.

B. Medicare Part C Medicare Advantage Plans: there are two types of plans.

  1. Medicare HMOs (Health Maintenance Organizations):
    • Usually, have to choose a PCP who coordinates all care. The HMO builds a referral network around the PCP who must issue referrals to Specialists or other providers in their network.
    • May include prescription drug coverage and extra benefits
    • Low premiums can be offset by cost sharing at point of service
    • If non-referred, non-emergent care is received outside of the network, the member is responsible for all provider bills
    • The insurer is the primary administrator responsible for member benefits and claims payment
    • Geographic limitations apply resulting in member financial responsibility if non-emergent care is received out of the network.

2) Medicare PPOs (Preferred Provider Organizations):

  • Usually, do not have to choose a PCP or obtain referrals
  • Have the freedom to seek care from network or non- network providers. Note: use of non-network providers can result in high out of pocket financial exposure
  • May include prescription drug coverage and extra benefits
  • Cost sharing at point of service can offset some of the premium advantage
  • The insurer is the primary administrator responsible for member benefits and claims payment
  • Geographic limitations may apply and can impact coverage level for non-emergent care.

C. Medicare D Prescription Drug Plan:

  • Plans are offered and administered by private insurance companies
  • Can be stand alone plans or bundled with Medicare Advantage plans
  • Requires beneficiary cost sharing (deductible, co-pays, coinsurance) that changes each year
  • Three coverage levels: initial, coverage gap or donut hole, and catastrophic
  • Premiums, formulary, and member out of pocket costs vary by insurer and can change annually, e.g. the insurer can waive or reduce the annual deductible, add or delete drugs on their formulary, change the co-pays per drug tier, etc.
  • Time and financial penalties levied for late enrollment
  • Cannot have more than one Medicare D plan in place (stand alone, bundled with a Medicare Advantage plan or as part of a retiree group program).

Step 4: After comparing plans and rates, submit application(s) at least one month prior to your Medicare Part B effective date. Depending on the type of plan(s) selected, one or two application forms will have to submitted to insurers, e.g. Medigap and Medicare D plans must be applied for separately. This can usually be done via mail, telephone or online.

Hopefully, this will help your clients get started. If they prefer not to be a “do it yourselfer” there are plenty of helpful resources.

  • 1-800-Medicare (1-800-633-4227)
  • www.medicare.gov
  • Medicare & You 2012 handbook
  • Social Security 1-800-772-1213
  • www.socialsecurity.gov
  • SHIP for Pennsylvania - APPRISE 1-800-783-7067
  • Administration on Aging www.aoa.gov
  • Medicare Approved Supplemental Plan Insurers

Note: this article contains a general description of the Medicare program. It does not represent all of the benefits or options available to the consumer. For comprehensive details regarding Medicare, refer to the resources listed above.