Monday, January 23, 2017

Help, I’m Lost in the Medicare Alphabet Maze!

Recently, I had to help a relative reinstate her Medicare Part D insurance coverage after she forgot to pay the premiums for several months.  The insurance company sent many notices advising that they would terminate coverage if the past-due premiums were not paid, but she either ignored the notices or could not comprehend what they said and eventually lost coverage.

After spending hours on the phone first with the insurance company and then with Medicare, I realized that Medicare is somewhat of a mystery to me.  Medicare is not yet my health insurance provider, so other than knowing that most of my clients are covered by Medicare and pay a monthly premium for the health insurance, I really had little idea of how Medicare works.  This blog post is a general guide to Medicare, while the next four posts will explore the alphabet of Medicare in more depth.

Medicare provides health insurance for around 49 million people – or approximately 15% of the population of the U.S.  Although most of us know that Medicare provides health insurance for people over the age of 65, Medicare also provides health insurance for younger people who become disabled after working and paying Medicare taxes for at least 40 quarters, and have been eligible for Social Security Disability Insurance (SSDI) for 24 months.  In addition, adult “children” who become disabled before the age of 22 may receive Medicare when they become eligible for SSDI adult “child” benefit based on a retired or deceased parent’s benefit. 

As with most insurance plans, the beneficiary of the plan pays a premium for the coverage, may be required to satisfy a deductible, and may be required to pay a co-pay (also called co-insurance) for services received.

Medicare Part A:  This is usually thought of as hospital insurance, but it may be more accurate to think of it as insurance that covers the nursing care services you receive while in the hospital.  Of course, Part A also covers some services received at home or in other settings outside of the hospital.  

Medicare Part A does not require a premium, but that is because it is paid for through Medicare payroll taxes. 

Medicare Part B:  This part is known as medical insurance, and pays for doctors, diagnostic services and lab tests.  In 2015, the premium is $104.90 for most beneficiaries, but in 2016 the premiums will go up to $120.70 per month.  Some folks may be eligible for extra help to pay those premiums based on low income, and some may pay more based on their higher income. In addition, there may be deductibles and co-pays for services received.

Medicare Part C:  This is for Medicare Advantage plans, which are alternative plans run by private insurance companies.  These plans provide care either through health maintenance organizations (HMO’s) or preferred provider organizations (PPO’s).  Medicare pays these insurance companies a flat fee for coverage, and these companies decide what services they will offer.  They must at a minimum offer the same services provided under Part A and Part B, but then decide what other services to provide as part of their benefits package.

Medicare Part D:  This is insurance for outpatient prescription drugs.  The beneficiary selects a private insurance plan out of many plans that are offered.  The plans require a monthly premium and most drugs will also require a co-pay.  Each plan has its own formulary, so it is very important to study the plans and choose the plan that includes those prescriptions the beneficiary takes on a regular basis.

This is just a very basic introduction to Medicare.  In the next four blog posts, I’ll discuss each of the four basic Medicare plans giving some basic information about what each plan should cover, and I’ll discuss the premiums, deductibles, and co-pays that each may require.

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