The more you know about Medicare, the better decisions you can make related to it – and that can improve the condition of both your health AND your wallet.
There’s no way we can do an exhaustive analysis of the program in this Acorn, so we’ll just hit a few of the more important points – especially some of the most common misconceptions.
Misconception #1. Medicare is government healthcare.
Medicare was signed into law by President Lyndon Johnson in 1965 as part of his vision of a “Great Society”. It is a federal government program and they pay the bills, but each health care provider and organization can decide for themselves whether they want to participate or not. Most do. In 2015, 91% of primary-care physicians accepted Medicare as a method of payment, but only 72% of those same physicians were accepting new Medicare patients.
Misconception #2. It’s Part A and Part B – or nothing.
Once upon a time that was true, but just as product choices have expanded in other areas, Medicare now offers choices beyond “traditional Medicare” (as the combination of parts A and B have come to be known).
Now, you can opt for a new choice called Medicare Advantage, a catch-all name for the myriad of plans offered by insurance companies. Coverage varies widely (some plans include vision and dental) as does price.
One of the major complaints that seniors had about Medicare was that it did not cover prescriptions. However, since 2006, drug coverage has been available under an optional plan called Medicare Part D. As with Medicare Advantage, these are plans offered by insurance companies and cost and coverage vary.
Misconception #3. It’s free.
If you’re old enough to read this, you most likely no longer believe in the tooth fairy. You know there are very few things in this life that are truly free - and that certainly applies to Medicare.
Medicare Part A (hospital insurance) is as close as it gets to free. Most seniors pay nothing for this coverage, but they did pay for it through their payroll taxes for their entire working life.
Medicare Part B (medical insurance for doctor visits and some things not covered under Part A) currently costs most seniors about $121 per month, and since 2003, has been means-tested with higher income earners paying almost $400 per month in premiums.
The cost of Medicare Advantage (also known as Medicare Part C) varies, but everyone enrolled in a Medicare Advantage plan pays the Medicare Part B premium at a minimum.
The cost of Medicare Part D (prescription drug insurance) also varies with the plan you choose and, like Medicare Part B, it’s means-tested with higher earners paying as much as an additional $72.90 per month for their coverage.
Misconception #4. It covers everything.
Unfortunately, this is perhaps the biggest misconception of all. While Medicare does pay for a lot, there are also many exclusions. For starters, traditional Medicare normally pays nothing for vision, hearing, or dental. Also, there is no coverage for care received outside the United States.
Medicare Part A will pay for the first 60 days of a hospital stay after a $1,288 deductible. After that, the patient is subject to significant copays.
Medicare Part B typically pays 80% of covered costs after an annual deductible of $166. The patient pays the other 20%, but unlike most private insurances, there is no cap on out-of-pocket costs.
To cover these costs and co-pays, we recommend most people buy a Medicare supplement policy, aka a Medigap Policy available from private insurance companies. (A detailed discussion of these policies is beyond the scope of this Acorn, but you can learn more about them at one of our seminars.)
Finally, Medicare does not typically pay for the cost of a nursing home. That’s why long term care insurance is so important.
Misconception #5. You can enroll anytime.
Technically, you don’t have to enroll at any particular time, but if you don’t enroll when you are first eligible, it can really cost you. If you don’t enroll in Part B during your seven-month “Initial Enrollment Period” (the 3 months before and after the month of your 65th birthday) you can face increased premiums for the rest of your life. There are similar (but not identical) penalties for late enrollment in Part D (prescription drug coverage).
Most importantly, an insurance company cannot refuse to sell you a Medigap policy for health reasons if you apply during your six month “Medigap open enrollment period”. For most people, that period automatically starts the month you turn 65. After this period, an insurance can deny coverage and they can also charge you more.
Does all this make your head swim? If it does, you’re not alone. The disparate rules for different coverages, the possible penalties, and determining eligibility are enough to give anyone a headache. Fortunately for you, we are here to help. We have been advising on this for some time, and while we don’t profess to know everything, we have access to experts who can help you sort things out.
Some people don’t need Medicare at all, or they need only certain parts of it. For example, if you are still working and covered under your employer’s plan, you may defer all Medicare elections until after you leave that job or coverage terminates. Similarly, if you are covered under a former employer’s retiree health plan, then you may not need some or any parts of Medicare. If you are not sure, then make sure. You don’t want to be paying for coverage you don’t need, nor do you want the unpleasant surprise of finding out you are not covered when you thought you were.
The decisions about Medicare are extremely important, and unfortunately, you typically have only one shot at getting it right.
Valuable Resources for You
Charter Oak will host Medicare education seminars from 4 to 5:30 p.m. on Wednesday, November 9 in our Portsmouth office and from 4 to 5:30 p.m. on Thursday, November 10 in our Kennebunk office. All are welcome to attend. Please contact Christine Cote at 800-646-5720 or firstname.lastname@example.org to learn more.
In addition, we have researched several resources where clients can learn more about Medicare to help guide their decisions. Many parts of Medicare are state-specific, therefore we encourage people seeking additional and personalized guidance to refer to the following resources:
Residents of Maine may contact the Southern Maine Agency of Aging for Medicare and health insurance counseling at http://www.smaaa.org/medicare.html. Founded in 1973, under the authority of the federal Older Americans Act, SMAA is a non-profit organization dedicated to planning and implementing social services for adults age 60 and older.
Residents of New Hampshire may contact Patricia Bennett, CLTC, LUTCT, President of Longevity Planning in Portsmouth, NH at http://www.longevityplanning.com.
It is always our privilege and pleasure to serve you. Please do not hesitate to contact your advisor directly if you have questions on any of this information.