Medicare and the Alphabet Soup

×

Expand

Photo credit: Getty Images

Medicare for All remains a rallying cry for some who seek health care system simplicity and radical transformation. But in reality, Medicare is a complicated program with an alphabet soup of provisions, features and of course, rules. Medicare may include parts A, B, C and D. And those are just the main features! Understanding the basic elements of the Medicare program takes time and patience and can trigger urgent family meetings to review and select the best options for parents or family members seeking to identify the best path to health care coverage with lower costs and strong benefits. We’ll try to breakdown the program components and help people understand some of the big picture choices available in Medicare.

Medicare Parts A and B

When most people think about Medicare, they think in terms of the two components of the original Medicare program: Medicare Part A and Medicare Part B. Loosely speaking, Part A covers hospital expenses while Part B covers non-hospital medical expenses such as doctor visits, ambulance rides and medical equipment.

Eligibility for Medicare is purely a function of age and citizenship status. Any person over the age of 65 who is a U.S. citizen or has been a legal permanent resident for at least five years can enroll in Medicare. People under the age of 65 can also enroll in Medicare if they have been determined disabled and received Social Security Disability Insurance (SSDI) or Railroad Retirement Board disability payments for at least 24 months.

For most people, Medicare Part A enrollment is free. Part A premiums are waived for anyone who has paid Medicare taxes, or whose spouse has paid Medicare taxes, for at least 10 years. Although Medicare Part A may be free, enrollment is not automatic. Most people will need to contact a local Social Security office to sign up and can do so as early as three months prior to turning 65. Those who don’t have 10 years of Medicare tax history can still enroll in Part A but will have to pay a monthly premium that ranges between $240 and $437 per month for 2019.

Medicare Part B is an optional, premium-based benefit. For 2019, the standard monthly Part B premium is $135.50 per month, but it can run as high as $460.50 for higher-income enrollees. Although Part B enrollment is optional, failing to sign up as soon as you turn 65 can be a costly mistake. You’ll pay a late enrollment penalty of 10% on top of the standard premium for each year you wait to enroll after your eligibility date. One exception to the late enrollment penalty is when you have health insurance through your job or your spouse’s job when you turn 65. In that case, you can enroll in Part B with no penalty whenever the job insurance ends.

Medicare Part C or Advantage Plans 

Medicare Part C or “Medicare Advantage” plans originated as demonstration projects as early as the 1970s with the goals of providing Medicare enrollees with access to private insurance plans offering coordinated care and more comprehensive benefits than traditional Medicare, while also controlling costs through managed care organizations. Advantage plans became available to all Medicare enrollees in the late 1990s and now are mostly run by private insurance companies.

Advantage plans have been growing in popularity over the past two decades, with about one-third of all Medicare enrollees in Advantage plans, but they have their pros and cons and may not be the best choice for everybody. On the good side, Advantage plans usually include prescription drug coverage and may offer more comprehensive services than traditional Part A and Part B coverage. Advantage plans also cap the maximum amount you will pay out of pocket each year, ranging on average between $5,000 and $6,000, whereas there is no limit to out of pocket expenses with Part A and Part B alone. Advantage plans also offer the simplicity of carrying a single member card rather than separate cards for Medicare, Medicare Part D and Medigap.

On the down side, Advantage plans are managed care plans that may have limited provider networks, especially in rural communities. They may provide no coverage or charge more for visits to out-of-network providers. Advantage plans may also have complicated copayment or coinsurance schemes for different types of services, which can lead to out-of-pocket costs building up quickly when you have a serious health problem. Although Advantage plans can be a good choice for some circumstances, people with chronic or complex health conditions may find pairing a Medigap plan with traditional Part A and Part B coverage to be a better option in terms of cost and choice of providers.

Advantage plan members pay their standard Part B monthly premium plus an additional Advantage plan premium. Many basic Advantage plans offer a $0 additional premium, but for those who choose plans with more robust benefits, the average additional premium is around $65 per month. Choosing the right Advantage plan is much the same as shopping for individual health insurance. It requires a good understanding of your own medical needs and some careful investigation to make sure the plan you choose offers a good balance between costs and benefits.

Medicare Open Enrollment

Medicare Part C and Part D plans can change from year to year, changing providers, networks or drug formularies. An annual open enrollment period from October 15 to December 7 allows plan participants an option to review and select a new plan. Remember to review your plan benefits and make sure your providers and medications are still covered—see “Finding Help” on the next page.

Medicare Part D and SeniorCare 

Prescription drugs played a much smaller role in treating medical conditions when Congress enacted Medicare in 1965, so the original Medicare program offered no prescription coverage. It would be nearly 40 years later before stand-alone drug plans came under the hallmark of Medicare with the introduction of Medicare Part D.

Medicare Part D plans are run by private companies under contract with the federal government. Although every Part D plan is required to offer benefits worth at least a standard minimum value, plans can vary widely in terms of specific drugs covered and out-of-pocket costs for different classes of drugs. With more than 700 different Part D plans available nationwide, choosing one that best suits your needs can be a real challenge.

On top of the challenge of choosing the right plan, Medicare Part D features a confusing “donut hole” gap in prescription coverage. The coverage gap kicks in after you have spent a certain amount out of pocket for prescription medications—$3,280 for 2019. Reaching the coverage gap, though, doesn’t mean that you will have to pay full price for prescriptions. Parts of the Affordable Care Act aimed to phase out the donut hole by requiring drug manufacturers to offer discounts to Part D plan members in the coverage gap. In 2019, the manufacturer discount is 70% for brand name medications and the Part D plan pays 5%, leaving 25% as out-of-pocket costs to the plan member. For generic drugs, the manufacturer discount is 63%, leaving 37% as out-of-pocket costs. The full amount of the discount and the member’s out-of-pocket costs count toward closing the coverage gap. Once your total costs reach $5,100, you are out of the coverage gap and will only have to pay 5% of prescription costs for the remainder of the year. Under current law, the donut hole phase out will be complete in 2020, but that doesn’t mean the coverage gap will be eliminated entirely. Part D members will still be required to pay 25% of the cost for both generic drugs and brand names until their total costs put them out of the coverage gap.

In 2019, the average monthly premium for a Medicare Part D plan is around $33, but it can be more or less expensive depending on where you live and which plan you choose. Like Medicare Part B, enrolling in a Part D plan is optional but can get more expensive if you do not enroll as soon as you become eligible. You’ll pay a penalty of 1% of the average monthly premium for each month you wait after becoming eligible. Again, like with Part B, you won’t have to pay a penalty if you maintain other prescription drug coverage before enrolling in a Part D plan. That could include insurance through a job or a spouse’s job, enrollment in a Part C plan that offers prescription coverage or enrollment in a state prescription assistance plan, like Wisconsin’s SeniorCare program.

SeniorCare is an income-based program operated by the State of Wisconsin that may offer a good alternative to a Part D plan, especially for lower income individuals who qualify for program benefits that cover medications with low copayments and no deductible. You can have SeniorCare instead of a Part D plan, or you can have both at the same time. Lower income people may also qualify for the Medicare Part D Low Income Subsidy, or “Extra Help,” to reduce copayments and deductible costs and pay some or all of the monthly plan premium. The combination of SeniorCare with a Part D plan and Extra Help can provide comprehensive prescription coverage with very low out-of-pocket costs.

Medicare Supplements and Wrap Around

The main purpose of Medicare supplement plans, also known as Medigap plans, is to cover the out-of-pocket costs connected with Medicare Part A and Part B. In most of the country, Medigap plans are required to follow a set of standardized federal benefit packages. Wisconsin, though, is one of three states that was granted a waiver on the federal rules. Instead of the 10 different Medigap plans available under the federal standards, Wisconsin has just one basic plan standard with the option to purchase additional benefits available under seven different rider options.

Wisconsin’s “basic benefits” Medigap plans cover Medicare’s 20% coinsurance on medical services as well as some additional benefits, including inpatient mental health and home health benefits beyond what Medicare will pay for, as well as certain state mandated benefits like dialysis and chiropractic care. Some of the optional rider benefits include coverage of Part A and Part B deductibles, extra days of home health services and foreign travel insurance. Medigap plans cannot offer prescription drug coverage.

The first six months after a person enrolls in Medicare Part B are considered the open enrollment period for Medigap plans. During that time, insurance companies cannot deny coverage or charge higher premiums based on health status or preexisting conditions. Medigap plans are, however, allowed to impose a waiting period on coverage for preexisting conditions. There are also other situations when Medigap plans are not allowed to discriminate or impose waiting periods on preexisting conditions. For example, people who enroll in a Part C plan as soon as they become eligible and leave the plan in less than a year qualify for guaranteed issue as long as they enroll in a Medigap plan within 63 days.

For those who can afford the added premiums, Medigap plans offer protection against potentially unlimited out-of-pocket costs for serious health problems, but for those at the lowest end of the income scale, Medicare Savings Programs can serve the same purpose. There are four flavors of Medicare Savings Programs, all features of the federal Medicaid program. At the lowest end of the income scale is the Qualified Medicare Beneficiary program, which pays deductibles, coinsurance and premiums for Medicare Part A and Part B. For slightly higher-income individuals, two similar programs cover premiums for Part B. The fourth program covers Part A premiums, if any, for working people with disabilities.

Other types of supplemental or Medicare “wrap around” insurance products are available, but it’s important to remember that these are not Medigap plans. They may offer services not covered by Medicare, like vision and dental, but they won’t pay your standard Medicare coinsurance or deductible expenses. The term “wrap around” may also be used to describe certain types of Medicare Part C plans that provide extra services for people who are dual-eligible for Medicare and Medicaid or who have certain chronic health conditions.

Finding Help

The Medicare program provides a critical layer of security for many of the nation’s seniors and people with disabilities. But the program complexity can leave folks feeling ill and confused. That’s why knowing where to get help is so important. And as always, programs like Medicare need to provide consumers the information, education, and patient advocacy assistance they need to secure the medical services they are entitled to and deserve under the law.

Official US Government Site for Medicare: Find information on open enrollment, program coverage, services, local help and resources at medicare.gov. Phone: 800-633-4227.

Wisconsin’s Aging and Disability Resource Centers: Provide information on programs, services, long-term care options and benefits at dhs.wisconsin.gov/adrc/index.htm.

Medigap Helpline: This statewide toll-free helpline operated by the Wisconsin Board on Aging and Long Term Care can help you make informed insurance decisions. Call with questions about Medicare supplement or Medigap policies. Toll-Free: 800-242-1060.

Legal Aid Society of Milwaukee: Provides free advice, referrals and assistance to Milwaukee County residents 50 years of age and older in matters involving public benefits, health issues, advanced directives and basic estate planning, including estate recovery. Phone: 414-727-5300.

SeniorLAW: Provides free legal assistance to Milwaukee County residents who are 60 and older. Benefit specialists provide legal information, while attorneys provide representation in appropriate court cases. Phone: 855-947-2529.