The A, B, D, C's of Medicare

It’s been a few years since I last discussed Medicare, the government program that helps insure health care costs for those of us who are 65 or older. Since it recently turned 50, I thought I’d offer an update. It was conceived as a way to provide health insurance coverage for retirees and it continues to fulfill that role. In fact, it’s become the bedrock on which most retirement plans rest. Without it, people would need to save much more during their working years to cover their medical costs in retirement. Fifty years ago, coverage cost $3.00 a month. Adjusted for inflation, that would be around $22 today and current monthly premiums begin at $104.90. Premiums, along with health care costs, have outpaced inflation but coverage levels have also increased.

Like other health insurance plans with which you may be familiar, coverage is available at different levels and costs. Obviously, the greater the coverage, the higher the total cost but by paying a high enough premium you can obtain coverage that pays virtually all of your health-related expenses other than long-term care. The government has tried to make things a bit simpler by naming the plans, using the letters A through N.

For most Americans, Part A coverage is free. It covers inpatient hospitalization, care in skilled nursing facilities, blood during hospital stays and hospice care at home or in a facility. Potential enrollees have a seven month window in which to sign up for coverage: the month in which their birthday occurs, the three months before and the three months after. Those who have chosen to begin receiving Social Security payments prior to age 65 will be enrolled automatically.

Part B is sometimes known as medical insurance and it helps pay for various physicians’ services, outpatient care, many home health services, durable medical equipment and other medical services including many preventive procedures. Part B is optional and does require a premium payment, beginning at the $104.90 I mentioned earlier. It is quite possible for someone going to the hospital to be treated but not admitted, then find themselves facing a huge bill because of not having chosen Part B coverage. There’s a penalty for enrolling in Part B late and, since there’s also the potential for extraordinary cost, we insist upon it for our clients and friends.

Part D is the most recent plan offering, joining the lineup in 2006. Although not universally popular at the time, and still frequently criticized because of the donut hole in its coverage, it pays for a significant portion of the cost of prescription drugs for those 65 and over. Once a patient spends more than the required co-pays, it covers 95% of all prescription costs without limit. It too has a premium and, since there’s a penalty for late enrollment, we also insist that our clients enroll at age 65.

Why did I skip over the letter C as I introduced the plan components? It’s because Part C (also known as Medicare Advantage) integrates Parts A, B & D within a single policy. Many of these plans also provide at least some dental, vision and hearing coverage, none of which are covered under original Medicare. Many people who have previously been part of an employer plan will find Part C to be the most familiar because it requires just a single card.

There’s a significant potential disadvantage to Part C, though, as most of those plans are offered by a Health Maintenance or Preferred Provider Organization (HMO/PPO). Both types of group require that providers be in network and most (especially HMOs) are geographically limited. So, while Parts A, B & D are accepted nationwide, Part C probably will not be. True emergencies will always be covered (assuming they are properly coded) but those who live in more than one part of the country during a year will probably be better off obtaining their supplemental coverage through a Medigap policy, i.e., one of Parts E through N. For reasons known only to the government, coverage levels do not increase as we get farther through the alphabet and Part F is actually the most comprehensive – thus expensive.

So when and where to begin? Potential Medicare recipients must sign up as they turn 65 or face mandated delays in receiving coverage and/or penalties in the form of higher premiums; it’s best done sooner rather than later. There are hundreds of Part B, D and Medicare supplement plans available. In many cases, the approach of a 65th birthday brings a significant increase in mail and phone calls as insurance agents search for customers. Although it might be possible to open all the envelopes and compare all the plans on the dining room table, there’s a much better way. Medicare’s on-line tool allows you to enter personal information, including your physicians and the medicines you take, then view  a sortable list of the various plans available in your area. Medicare has been surveying patients and rating insurers since 2007 and those results are also part of the report. The process is tedious but not terribly difficult. Anyone who completes their own tax returns should have no trouble doing it. There are companies which will handle enrollment for you and we often help our clients with the process too.

For much more information on Medicare options, you need to download Medicare and You from the Medicare website. It can also be mailed and we have copies available if that seems easier. As always, please let us know if you have questions.