What exactly is Medicare and how does it work?

Medicare is the US Federal Government Health Insurance Program for:

People 65 years of age and older.
Some people with disabilities under age 65.
People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant).

Medicare has Four Parts

(Hospital Insurance) helps pay for: 

Care in hospitals as an inpatient, critical access hospitals (small facilities that give limited outpatient and inpatient services to people in rural areas), skilled nursing facilities, hospice care, and some home health care. Most people get Part A automatically when they turn age 65. They do not have to pay a monthly payment called a premium for Part A because they or a spouse paid Medicare taxes while they were working.

Part A Cost:

Most people get Part A automatically when they turn age 65. They do not have to pay a monthly payment called a premium for Part A because they or a spouse paid Medicare taxes while they were working.

If you (or your spouse) did not pay Medicare taxes while you worked and you are age 65 or older, you still may be able to buy Part A. If you are not sure you have Part A, look on your red, white, and blue Medicare card. It will show “Hospital Part A” on the lower left corner of the card. You can also call the Social Security Administration toll free at 1-800-772-1213 or call your local Social Security office for more information about buying Part A. If you get benefits from the Railroad Retirement Board, call your local RRB office or 1-800-808-0772.

Part B (Medical Insurance) helps pay for:

Doctors, services, outpatient hospital care, and some other medical services that Part A does not cover, such as the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary.

Part B Cost:
Medicare beneficiaries pay a monthly Part B premium. The monthly Part B premium for 2020 is $144.60 for Medicare beneficiaries with incomes under $87,000 (single) and $174,000 (married). In some cases this amount may be higher if you did not choose Part B when you first became eligible. The cost of Part B may go up 10% for each 12-month period that you could have had Part B but did not sign up for it, except in special cases. You will have to pay this extra 10% for the rest of your life. The annual deductible for Part B in 2020 is $198.

Enrolling in part B is your choice. You can sign up for Part B anytime during a 7 month period that begins 3 months before you turn 65. Visit your local Social Security office, or call the Social Security Administration at 1-800-772-1213 to sign up. If you choose to have Part B, the premium is usually taken out of your monthly Social Security, Railroad Retirement, or Civil Service Retirement payment. If you do not get any of the above payments, Medicare sends you a bill for your part B premium every 3 months. You should get your Medicare premium bill by the 10th of the month. If you do not get your bill by the 10th, call the Social Security Administration at 1-800-772-1213, or your local Social Security office. If you get benefits from the Railroad Retirement Board, call your local RRB office or 1-800-808-0772.

Part C (Medicare Advantage Plans):

Medicare Advantage plans are offered by private insurance companies as an alternative to Original Medicare; plans are government subsidized and regulated. Medicare Advantage Plans (also known as Medicare Part C) are health plan options that are part of the Medicare program. If you join one of these plans, you generally get all your Medicare-covered health care through that plan. This coverage can include Medicare Part D prescription drug coverage or you can enroll in a separate Medicare Part D prescription drug coverage plan. Medicare Advantage Plans include:

Health Maintenance Organizations (HMO)
Preferred Provider Organizations (PPO)
Private Fee-for-Service (PFFS) Plans
Special Needs Plans (SNP)
Medical Savings Accounts (MSA)

No health questions are asked (except the existence of End Stage Renal Disease or to qualify for certain Special Needs Plans). Acceptance is guaranteed for all Medicare eligibles every year during the appropriate enrollment period regardless of health conditions (except End Stage Renal Disease). Dual Eligibles — people on both Medicare and Medicaid (QMB, SLMB, QI, and QDWI) and also beneficiaries that receive “Extra Help” (LIS) — can enroll year-round and will pay lower copays for services and prescription drugs. If you need additional help with your Medicare costs –Please see this CMS Brochure HERE.

Most Medicare Advantage plans require you to pay a co-pay each time you see a doctor, receive medical treatment, or visit a hospital. The maximum out-of-pocket expenses you are required to pay are often capped on a per-year basis, but not always.

When you join a Medicare Advantage Plan, you use the health insurance card that you get from the plan for your health care. In most cases there are extra benefits and lower co-payments than in the Original Medicare Plan. However, with PPO and HMO plans you may have to see doctors that belong to the plan or go to certain hospitals to get services or risk higher out-of-pocket expenses for going “out-of-network”.
To join a Medicare Advantage Plan, you must have Medicare Part A and Part B. You will have to pay your monthly Medicare Part B premium to Medicare (depending on whether or not you receive “Extra Help”). In addition, you might have to pay a monthly premium to your Medicare Advantage Plan for the extra benefits that they offer. Depending on where you live, some Medicare Advantage Plans have a $0 premium plan option, and some even reimburse you for part of your Medicare Part B premium. Some plans include dental and vision benefits in addition to coverage for hospital stays, doctor visits, diagnostic tests, inpatient and outpatient services, skilled nursing, and more. Some plans even include free health club memberships.

Part D (Prescription Drug Coverage): 

Medicare Part D is the federal government’s prescription drug program that covers both brand-name and generic prescription drugs at participating pharmacies in your area. The coverage is available to all people eligible for Medicare, regardless of income and resources, health status, or current prescription expenses. Medicare prescription drug coverage provides protection for people who have very high drug costs.

Medicare Part D works in tandem with Medicare Parts A and B. Individuals entitled to Part A or enrolled in Part B can sign up for Part D to receive help paying for prescription drugs. Like other insurance, if you join, you will pay a monthly premium, which varies by plan and (for most plans) a yearly deductible. You will also pay a part of the cost of your prescriptions, including a co-payment or coinsurance. Costs will vary depending on which drug plan you choose and if you receive “Extra Help”. Some plans may offer more coverage and additional drugs for a higher monthly premium. Plans also vary in terms of the co-pays, prescription drugs that are covered (this is called the “plan formulary”) and the pharmacies that may be used.

If you have limited income and resources, and you qualify for “Extra Help”, you may not have to pay a premium or deductible. Individuals enrolled in both Medicare and Medicaid (“Dual Eligibles”) who have not already selected a Part D plan will be automatically enrolled in Medicare Part D by their state agency.

When Can I change my Part C or Part D plan after I enroll? 
Once enrolled in a Medicare Part D Prescription Drug Plan individuals can only change their plan from October 15 to December 7 of each year, with an effective date of January 1 of the following year, UNLESS you are eligible for a Special Election Period (SEP), then you may change throughout the year.

What is a Special Election Period (SEP)? 
A Special Election Period means that you are allowed to enroll in Medicare Part D without penalty after the Initial Election Period and/or Annual Election Period because you meet certain conditions set forth by the government. Below are the specific situations which might qualify you for a SEP.

You may qualify for a Special Election Period if:

You are a Hurricane evacuee and reside in certain zip codes as identified by the Federal Emergency Management Agency at the time of the hurricane.
You move permanently outside your plan’s service area.
You’re enrolled in another prescription drug plan or a Medicare Advantage plan whose contract is terminated.
You are not adequately informed about creditable prescription drug coverage.
You lose your previous creditable coverage through no action of your own*.
Your enrollment or non-enrollment is caused by an error by a federal employee or contractor hired by the federal government.
You were eligible for both Medicare and Medicaid (a “dual eligible”) but you lost your dual eligibility status.
You want to move from an employer-sponsored prescription drug plan to a Medicare Prescription Drug Plan.
You want to leave your current Medicare Prescription Drug Plan because it was reprimanded by the federal government or the federal government has determined the plan violated a material provision of its Medicare contract in relation to services provided to you.
You’re enrolled in a Cost Plan that isn’t renewing its contract with Medicare. This SEP begins 90 calendar days prior to the end of the contract year (i.e., October 1) and ends on December 31 of the same year.
You want to move from a Program of All-Inclusive Care for the Elderly—PACE—to a Medicare Prescription Drug Plan.
You live in—or are moving in or out of—a skilled nursing facility, nursing facility, intermediate care facility for the mentally retarded, psychiatric hospital or unit, rehabilitation hospital or unit, long-term care hospital or swing-bed hospital.
Your Medicare entitlement determination is made retroactively.
You are not eligible for premium free Part A and enroll in Medicare Part B during the January-March Part B General Enrollment Period.
You have a low-income subsidy.
The federal government may authorize other special election periods.

*To avoid a penalty, individuals must apply for Medicare Part D within 63 days of losing “creditable” prescription drug coverage, which is coverage that is at least as good as or better than the standard benchmark level of Medicare Part D Prescription Drug coverage as determined by the individual’s coverage provider.

Medicare Supplement (also called Medigap) plans:

A “Medicare Supplement Insurance” policy (also called Medigap) is private health insurance that’s designed to supplement Original Medicare. This means it helps pay some of the health care costs that Original Medicare doesn’t cover (like copayments, coinsurance, and deductibles). These are “gaps” in Medicare coverage. If you have Original Medicare and a Medigap policy, Medicare will pay its share of the Medicare-approved amounts for covered health care costs. Then your Medigap policy pays its share. A Medigap policy is different from a Medicare Advantage Plan (like an HMO or PPO) because those plans are ways to get Medicare benefits, while a Medigap policy only supplements your Original Medicare benefits.

Note: Medicare doesn’t pay any of the costs for you to get a Medigap policy.

Every Medigap policy must follow Federal and state laws designed to protect you and the policy must be clearly identified as “Medicare Supplement Insurance.” Medigap insurance companies in most states can only sell you a “standardized” Medigap policy identified by letters A through N. Each standardized Medigap policy must offer the same basic benefits, no matter which insurance company sells it. Cost is usually the only difference between Medigap policies with the same letter sold by different insurance companies.

*Medicare Supplement plans C and F, are no longer available for purchase by newly-eligible Medicare beneficiaries.