So, the most valuable piece of advice I ever received from a professor of Tax was that the Tax Code was written by the government, and it is not supposed to be logical. With that piece of advice I went on to get the Tax Award in my Graduating Class.
My advice to you, is that the Medicare Business does not always make sense, so when signing up for Medicare, do not spend too much time on the logic of how it works, just start with a few overall facts.
This article is designed to arm you with a basic understanding of Medicare. That said, note that each case is different and there are many exceptions not discussed.
Beginning your Medicare Journey:
Still Covered by Your Employer Plan
Understand that plan, because it can be better than Medicare, depending on how much your employer subsidizes the plan cost. As you will see below it is all about the money! At some point though, you will have to move to Medicare so read on:
Signing up for Medicare
Take a deep breath, read what you can online, find out where your local Medicare Office is located, as you will be there before this is over, I can almost guarantee it. Most importantly: BE CAREFUL OF THE DATE TRAPS! You have three months before and three months after your 65th Birthday to sign up and you have even less time after you sign up, to make sure you are signing up for the Drug Coverage.
It appears they started off attempting to make Medicare somewhat easy to understand many years ago, but since then, Medicare has become more complicated, and then they allowed insurance companies to get involved, and now it’s so advanced and it could be a college course.
1. Medicare Part A
This is the easiest piece, it pays for 80% of Hospital Stays and Inpatient Care. Best of all this is free! If you sign up, you get this.
2. Medicare Part B
This part pays for 80% of Doctor Visits and Outpatient Care, note that if you are covered by an employer plan you may not need this, but if you sign up you will pay for it. Cancelling this part if you don’t need it, is a first class head-ache, and you will pay for the time you were enrolled even if you did not use it. If you are not on an employer plan now, you will need this. Part B pricing is “means tested”, so your cost will depend upon your income. If you make a lot, you will pay a lot.
Take a break here: So you are wondering if that’s it. What else is there besides the Doctors and the Hospitals, well the literature will not tell you. In theory, other than the 20% copay for parts A and B, you are good right? Now enter the Insurance Companies! They will slice and dice the coverages and price each piece. These plans help to pay for the 20% copay and perhaps other coverages, you might want.
3. Medicare Part C
Now it starts to get messy: No one ever mentions Part C since it is more commonly called either Medicare Supplement Insurance or a Medicare Advantage Plan. They are different, and they are offered by an Insurance Company not the government, and you don’t have to purchase them if you don’t want to. So far, the only cost you have is Part B, but these are all on top of the Part B cost.
- Complexity: Once insurance companies get involved, it starts to become very complex. Over the years they have been able to sort through many types of claims and participants and come up with a price for each type of person or each type of claim. These plans are also different by state, all making these plans hard to choose.
- Medicare Supplement Insurance: Is the simpler of Part C coverages that you could buy, and because of that it is costlier and more paid to the insurance company directly. Med Sup, as some call it, basically pays the 20% copay that you were still responsible for after signing up for Parts A and B. Though expensive, this type of coverage can cover a great deal without additional fees and copays and is generally portable across states (subject to deductibles). But of course, this is made more complex based on your age, (before 65 years old you pay a lot more, and magically at 65 your price comes down, but starts going back up the later in life you sign up. Also, they have different forms: A, F, G, N; good luck deciding which is the best for you. Each has a different price and coverages. Most people tell you that F is the Cadillac plan, except if you are coming off an employer sponsored plan, in which case G is cheaper. With these plans there is no life time maximum since all is paid for by either parts A & B, or the supplement.
- Medicare Advantage Plans: These are plans designed by insurance companies and they are the most complicated, but they are less expensive. They have prices by type of coverage, by state, by deductible and copay amounts. With these plans the Medicare people turn over your Part A coverages & Part B coverages and premium to the insurance company and make them responsible for managing the plan and the coverages and the prices. You still pay your Part B premium and you pay for this plan on top.
Itemized saves money: With these plans you are charged many little fees and copays for each procedure, so you are somewhat only paying for what you use. This helps keep the cost down.
- Added Coverages: By keeping the costs down, these plans offer additional benefits like, dental, vision, drugs and hearing aids and they have out of pocket annual maximum costs, so you can manage costs better. These benefits are not covered under standard Medicare Parts A & B, nor the Medicare supplement insurance.
- State Specific: These plans are generally HMO type plans. They do cover you when you are injured out of state in an emergency only, (no doctor visits out of state). You are limited to certain doctors and hospitals in your state of residence. (There are PPOs with much higher costs, in some cases).
Before we start talking about Drugs, it is reasonable to say that the Medicare Advantage Plans are the most cost effective plans if you are willing to deal with the complexity.
4. Medicare Part D
The Drugs: When speaking to the Medicare Presenters at various seminars, you find that it all comes down to drugs in many cases. This is where many people need to pay the closest attention as some drugs are covered and some not. Some plans make you try a generic drug before they will let you have the drug you want or even need.
- Regular Medicare A & B, with a Medicare Supplement: If you enroll (which you should seriously consider and make sure you do not miss the sign up period as penalties would apply after that.) in this plan structure you will need to signup for Medicare Part D as well in order to get drug coverage, but the Medicare Drug Coverage is the best, I am told.
- Medicare Advantage Plans: In these plans’ drugs are generally included in the plan, but they have specific structures of pricing for different drugs, and not all drugs are included. You need to make sure your drugs are included in the plan you choose.
I hope this has been helpful as you wade through the mire of potential coverages. If you want to learn more regarding medicare, check out our article How to Sign Up for Medicare Benefits.
Do not delay as you near age 65! And if you want to enroll in medicare, use our free online quote service to help you compare multiple insurers’ plans.