Transamerica Institute

Understanding Medicare

What is Medicare?

Medicare is a national health insurance program for people age 65 and over. 

* Medicare also covers some nonelderly people. People who receive Social Security Disability Insurance (SSDI) payments generally become eligible for Medicare after a two-year waiting period. Those who are diagnosed with end-stage renal disease (ESRD) or amyotrophic lateral sclerosis (ALS) become eligible for Medicare with no waiting period. The focus of this guide is for those approaching 65 years of age. For more information for nonelderly individuals that may qualify for Medicare please visit:

Medicare helps pay for health expenses but does not pay for all health expenses and does not cover long term care. Medicare is administered by the Center for Medicare & Medicaid Services (CMS), but you apply through the Social Security Administration.

There are four major parts to Medicare: Part A (hospital insurance), Part B (medical insurance), Part C (Medicare Advantage) and Part D (prescription drug coverage).

Each part includes many different plan options. To find information about specific Medicare plans, visit Medicare.gov/find-a-plan. The online Medicare Plan Finder allows you to compare the costs of different plans, their covered services, their quality ratings, and more.

You have a 7-month Initial Enrollment Period around your 65th birthday to sign up for Part A and/or Part B. If you do not enroll in Medicare when you first become eligible at 65 years of age, you may be subject to higher monthly fees after you do enroll.

For people who already have Medicare, the Open Enrollment Period for 2017 coverage is October 15 – December 7, 2016. During this period you can switch to a different Medicare plan or enroll in a Part C plan for the first time. The services that your plan covers and the costs associated with your plan may be altered every year, so it is important to consider if you want to make any changes to your coverage during Open Enrollment.



Medicare Open Enrollment

Between 8,000 and 10,000 Baby Boomers will turn 65 each day for the next 15 years. As more and more Americans near this milestone age, important decisions about when to retire and when to sign up for Medicare benefits will be on the minds of millions of Americans. Understanding your options when it comes to signing up for Medicare can help you save time, trouble and money

In an effort to inform Americans nearing their mid-60s (and their families) about Medicare, the Transamerica Center for Health Studies (TCHS) wrote this article that lays out the key information in one place.

This helpful article aims to inform Baby Boomers on:

  • Medicare Benefits
  • Enrollment Deadlines
  • Tips for Avoiding Penalties

Click Here for to read the article.

Listen to our Radio Show,  Clear Path, Your Road Map to Health and Wealth on Baltimore's NPR New Station WYPR on select Medicare topics:


Medicare and You

Relation to the Affordable Care Act (ACA)

Medicare Part A is considered as coverage under the Affordable Care Act (ACA). However, if you only have Part B, you are not considered to have minimum essential coverage, and because of the ACA’s insurance mandate, you may be required to pay a tax penalty for not having sufficient coverage. If you have Medicare Parts A and B and you want additional coverage, you can sign up for Parts C or D, but you cannot buy a non-Medicare plan through the ACA’s Health Insurance Marketplace if you already have Medicare.

It is important to note that retiree health plans and Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage are not considered as minimal coverage by the ACA, and you are not eligible for a Special Enrollment Period when that coverage ends. Therefore, it may be best for you to sign up for Medicare during your Initial Enrollment Period when you are first eligible for Medicare to avoid paying a higher monthly premium. However, if your COBRA includes creditable prescription drug coverage, you will have a Special Enrollment Period to sign up for a Medicare Part D drug plan when your COBRA coverage ends and you will not need to pay a penalty for enrolling late.

Original Medicare

“Original Medicare” refers to Medicare parts A and B. The federal government manages these plans, and you can receive care from any doctor, other health care provider, hospital, or other facility that accepts Medicare patients. Except during emergencies, it is important to ask the provider if they accept Medicare assignment before you obtain a service from them. If the provider does not accept Medicare, you may need to pay a much higher amount to receive their care.

Medicare Part A

Medicare Part A helps pay for inpatient hospital care and some other care, such as home health, hospice, and skilled nursing facility care.  Most people age 65 and over who are U.S citizens or permanent legal residents are eligible for Medicare Part A. 

Costs

Medicare Part A is free if you receive or are eligible to receive Social Security benefits. In other words, it is free if you or your spouse has worked and paid taxes for at least 40 quarters (10 years). 

If you are not eligible for premium-free Part A (do not have 10 years of work) you will have to pay a monthly premium for Medicare Part A. Depending in your income and assets, you may pay up to $411 each month in 2017. The specific amount you pay will depend on your work history and financial situation.

When should I enroll in Medicare Part A?

You can enroll in Medicare Part A during your 7-month Initial Enrollment Period between the three months before you turn 65 and the three months following. If you do not buy Part A during your Initial Enrollment Period when you are first eligible at 65 years of age, your monthly premium may cost 10 percent more once you do enroll. You will have to pay the higher premium for twice the number of years you were eligible for Part A, but did not enroll. For example, if you were eligible for Part A for 2 years but were not enrolled, you will have to pay the higher premium for 4 years. If you meet certain conditions that allow you to sign up for Part A during a Special Enrollment Period, you may not face the penalty.

If you're under 65, you can get premium-free Part A if:

  • You got Social Security or Railroad Retirement Board disability benefits for 24 months.
  • You have End-Stage Renal Disease (ESRD) and meet certain requirements.

Is enrollment in Medicare Part A automatic or do I need to enroll?

If you are receiving some form of Social Security (Social Security or benefits from the Railroad Retirement Board) when you become eligible for Medicare (age 65,) you will be automatically enrolled in Part A and Part B.  If you are not receiving Social Security when you turn 65, you must enroll in Medicare through the Social Security Administration.  The application can be done online here, by phone at 800-772-1213, or in person at your local Social Security office.  The Social Security Administration has created a check list of the information you need to apply which you can down load here.

Medicare Part B

Medicare Part B is general health insurance coverage. Medicare Part B helps cover physician visits, outpatient services, preventative services, medical equipment, and some home health visits. Part B covers both medically necessary services and preventative services that help prevent illness or detect it at an early stage when treatment is most likely to work best.

Part B covers things like:

  • Clinical research
  • Ambulance services
  • Durable medical equipment (DME)
  • Mental health
  • Inpatient
  • Outpatient
  • Partial hospitalization
  • Getting a second opinion before surgery
  • Limited outpatient prescription drugs

The Affordable Care Act recently expanded the range of preventative services that Medicare Part B covers, such as mammograms and colonoscopies, and patients can receive a “Welcome to Medicare” preventative visit and a yearly “Wellness” visit with their provider.

Medicare Parts B does not cover most prescription drugs, dental care, vision exams, hearing exams or aids, cosmetic surgery, acupuncture, or long-term care (also called custodial care).

Costs

Anyone who is eligible for Medicare Part A can also enroll in Medicare Part B. Most Part B benefits are subject to a yearly deductible ($166 in 2016), and out-of-pocket copayments, coinsurance and monthly premiums. The standard Part B premium for 2016 will be $121.80 (or higher depending on our income).

Some people who have income or resources higher than a set amount may need to pay higher Part B premiums as determined by Social Security. People with limited income and resources may be eligible to receive assistance with Part B payments through a variety of programs such as Medicaid.

If you have Original Medicare and you obtain a service to which the Part B deductible applies, you must pay the entire Medicare-approved amount for that service until your deductible is met. At that point, Medicare will pay about 80% of the cost of the service, and the coinsurance you will pay will be about 20%. If it applies to the specific service, you may also need to make a copayment.

When should I enroll in Medicare Part B?

Similar to Part A, Medicare Part B has a penalty associated with enrolling outside of the Initial Enrollment Period when you first become eligible (the 7 month period around your 65th birthday). If you do not sign up for Medicare Part B during your Initial Enrollment Period, you will be charged a monthly premium of 10% of the Part B premium for every full 12 months you were eligible but did not enroll.

If you have employer based insurance when you turn 65, you may keep your plan and then need to enroll in Medicare Part B within 8 months of losing your employer plan to avoid paying a penalty.

Medicare Advantage Plans (Part C)

Unlike Original Medicare, which the federal government administers, private companies approved by Medicare offer Medicare Advantage Plans. HMO and PPO plans are common Part C plans. Once you have Parts A and B, you may choose to purchase a Part C plan as well because you may find they offer extra coverage that you want. Every Medicare Advantage Plan covers all of the benefits of Original Medicare except for hospice care and some care in clinical research studies. Most Part C plans include Part D prescription drug coverage, and many offer vision, hearing, and dental services that Original Medicare does not cover.

Costs

Medicare Advantage Plans may have monthly premiums in addition to the Part B premium, but unlike Original Medicare, they have yearly limits on the amount that you can be required to pay out-of-pocket. Different Part C plans may have different deductibles, copayments, and coinsurance policies that you should compare prior to choosing a plan. They also have different requirements on which doctors you can visit and which facilities you can go to for care.

When should I enroll in Medicare Part C?

If you currently have insurance from an employer or union, it is important to contact their benefits administrator before you sign up for a Medicare Advantage Plan because doing so may cause you and your dependents or spouse to lose that coverage.

You can join a Medicare Advantage Plan during the 7-month Initial Enrollment Period beginning 3 months before you turn 65. If you get Medicare before you turn 65 due to a disability, you can enroll in a Medicare Advantage Plan during the 7-month period that begins 3 months before your 25th month of disability.

During the Open Enrollment Period of October 15 – December 7, anyone who has Medicare can join, switch, or drop a Medicare Advantage Plan. If you already have a Medicare Advantage Plan, you can drop that plan and switch to Original Medicare between January 1 and February 14. Under certain conditions, such as if you move out of your current plan’s service area, you have Medicaid, you qualify for Extra Help, or you live in an institution (such as a nursing home), you may be able to enroll in a Medicare Advantage Plan during another Special Enrollment Period.

One Special Enrollment Period that may be applicable to you is the 5-Star Special Enrollment Period. Medicare Advantage Plans are given an overall rating based on how good their care is, the results of their care, and member surveys. A 5-Star rating indicates that the plan provides excellent care. Between December 8, 2014 and November 30, 2015, you can switch to a Medicare Advantage Plan that has a 5-star overall rating. You can view the ratings of plans available in your area at Medicare.gov/find-a-plan. It is important to note that a Medicare Advantage Plan may earn a 5-Star rating and not provide Part D drug coverage. Therefore, you may lose prescription drug coverage if you switch from a plan that has drug coverage to a 5-Star Medicare Advantage Plan that does not. You should always carefully consider the coverage and costs of plans before deciding to switch.

Medicare Prescription Drug Plans (Part D)

Because Original Medicare does not cover most prescription drugs, you may wish to sign up for a Medicare Prescription Drug Plan (Part D) or a Medicare Advantage Plan to lower the cost of your prescription drugs. Similar to Part C plans and Medigap plans, private insurance companies run Part D plans.

Costs

Different Part D plans may have different formularies (lists of which drugs they cover), different premiums (which may be higher if you have a higher income), and different deductibles, copayments, and coinsurance amounts. Plans may also have agreements with pharmacies that set different prices for the same drugs at different locations. You may be able to get your prescriptions automatically refilled and sent to you in the mail. Your Part D plan may also include a Medication Therapy Management program that will help you and your doctors make sure that you are taking the best combination of medications for your health. Some Part D plans require prior authorization before you can fill certain prescriptions, and may have limits on the quantity of medications you can get at one time.

Most Part D plans have a coverage gap, or donut hole. This means that after you and your drug plan have paid a certain amount for covered drugs in a year, the percentage that you pay changes. If you enter the coverage gap in 2015, you begin paying 45% of the cost of covered brand-name drugs and 65% of the cost of covered generic drugs. Each plan has a set dollar amount that you can be required to pay out of pocket while in the coverage gap, and if you pay up to that amount, you are out of the coverage gap. At this point you enter what is called catastrophic coverage, and you pay only a small copayment or coinsurance amount for covered drugs for the rest of that year.

When should I enroll in Medicare Part D?

If you have employer or union insurance, you should contact their benefits administrator prior to enrolling in a Part D plan because changing your drug coverage may affect your doctor and hospital coverage or affect the coverage of your dependents or spouse. You can sign up for Part D during your Initial Enrollment Period when you first become eligible for Medicare when you turn 65 or if you obtain Medicare as a result of a disability. If you do not enroll then and you wait to join Part D during the Open Enrollment Period (October 15 – December 7 each year), and you do not qualify for a Special Enrollment Period, you will likely pay a late enrollment penalty. If you have a Medicare Advantage Plan that includes prescription drug coverage and you sign up for Part D, you will be dis-enrolled from your Medicare Advantage Plan and re-enrolled in Original Medicare. If you have a Medicare Advantage Plan that does not include prescription drug coverage, you may enroll in a Part D plan and keep your Medicare Advantage Plan. Once you have Medicare Part D, you can choose to switch Part D plans during the Open Enrollment period of each year.

Medicare Supplement Insurance (Medigap)

If you have Medicare Parts A and B and you need help paying some of the health care costs that Original Medicare does not cover, such as copayments, coinsurance, deductibles, and other services or supplies, you may be eligible to purchase Medicare Supplement Insurance (Medigap) from a private company. Medicare will pay however much of the cost of your service that it covers, and then Medigap will pay its share. In some Medigap plans, a certain percentage of the cost of a health care service may be reserved for the patient to pay. In addition, some Medigap policies require monthly premiums, but different insurance companies may charge different premiums for the exact same coverage, so you should carefully compare Medigap plans before you choose one.

When should I enroll in Medigap?

Your Medigap Open Enrollment Period is the 6-month period that begins on the first day of the month in which you are 65 and you are enrolled in Part B. If you are not enrolled in Part B when you first turn 65, then your Medigap Open Enrollment Period does not begin until you obtain Part B. If you wait to enroll in Medigap until after your 6-month Medigap Open Enrollment Period is over, you may have limited Medigap options, and you may be required to pay higher fees. If you are enrolled in a Medicare Advantage Plan, it is illegal for anyone to enroll you in a Medigap policy unless you are switching back to Original Medicare. However, if you have a Medigap plan you may join a Medicare Advantage Plan, though you cannot use a Medigap plan to pay for Medicare Advantage Plan copayments, deductibles, or premiums as you may be able to for an Original Medicare plan.

Financial Assistance for Medical Costs

If you have Part D and you need help paying for Medicare prescription drug plan costs, such as premiums, deductibles, copayments, and coinsurance, because of limited income and resources, you may be eligible for Medicare’s Extra Help program. If you qualify for Extra Help, you will receive assistance paying your Part D expenses, will have less costs if you enter the coverage gap in your Part D plan, will not be required to pay a late enrollment penalty if you enroll in Medicare after your Initial Enrollment Period, and will be able to switch plans at any time of the year. Qualification requirements for Extra Help may change each year, and are based upon yearly income and resource limits. You automatically qualify for Extra Help if you have Medicare and either have full Medicaid coverage, get help from Medicaid for paying your Part B Premiums with the Medicare Savings Program, or you get Supplemental Security Income (SSI). If you did not qualify automatically and did not receive notice of your qualification in the mail, you can apply for Extra Help anytime by visiting socialsecurity.gov/i1020, calling Social Security at 1-800-772-1213, or visiting Medicare.gov/contacts to find the location of your state’s Medicaid office.

If you need help paying for other Medicare health care costs, you may be eligible for a variety of other assistance programs. There are several different state-run programs such as the Qualified Medicare Beneficiary (QMB) Program, the Specified Low-Income Medicare Beneficiary (SLMB) Program, the Qualifying Individual (QI) Program, and the Qualified Disabled and Working Individuals (QDWI) Program.

In addition, Medicaid is a joint federal and state program that covers most medical costs that Original Medicare, Medicare Part D, and Medicare Advantage Plans do not cover. Medicaid programs may have different names in different states, may have different eligibility requirements, and may include different coverage. Many states have recently expanded their Medicaid programs, so people who were not previously eligible may now be able to obtain Medicaid.

Other forms of medical care financial assistance include State Pharmacy Assistance Programs (SPAPs), Pharmaceutical Assistance Programs, and Programs of All-inclusive Care for the Elderly (PACE).

All of the programs listed above vary state-to-state and year-by-year, so you should call or visit your state’s Medicaid office, visit Medicare.gov/contacts, or call 1-800-MEDICARE to receive specific and updated information.

What if I already have health insurance when I turn 65?

Many employers offer group health plan coverage to current employees or retirees. You may also have health plan coverage through the employer of your spouse or domestic partner.

If you have Medicare and you are offered coverage under a group health plan, you can choose to accept or reject the plan.  If you have a private plan, whether it be through employment or your spouse, when you qualify for Medicare, the decision to sign up for Medicare or delay Medicare is an important one that will have long term effects on your coverage. 

Many private plans change the structure of benefits for enrollees at age 65 to account for Medicare.  If you chose to not sign up for Medicare at 65 because you have a private plan, you may have gaps in your coverage.  If you plan on working past 65, call your health plan and discuss the effects of Medicare eligibility on your coverage and benefits.

If you have Medicare and other health coverage, each type of coverage is called   “payer.” When there’s more than one payer, “coordination of benefits” rules who pays first. The “primary payer” pays what it owes on your bills first, and then your provider sends the rest to the “secondary payer” to pay.

Medicare will either be the first or second payer depending on a variety of factors.  The payment arrangement between your private or employer plan and Medicare will determine which plan is the first payer. You should check your insurance policy for the rules about which plan will pay first.

You can also call the Benefits Coordination & Recovery Center (BCRC) toll-free at 1-855-798-2627.  This chart provides an over view of the general rules for first and second payers when you have Medicare and another health care plan.

Military Families

If you are an active-duty service member or the spouse or dependent child of an active-duty service member and you have TRICARE insurance, you must enroll in Medicare Part A when you are first eligible in order to keep your TRICARE coverage. You must be signed up for both Part A and Part B before the active-duty service member retires in order to keep TRICARE and avoid a break in health coverage. TRICARE, which changes to TRICARE for Life (TFL) when the active-duty service member retires, is coverage that is supplementary to Medicare. This means that when you obtain a Medicare-covered service, Medicare pays first, and then TRICARE pays the applicable Medicare deductible and coinsurance amounts for you. For any service that TRICARE covers and that Medicare does not cover, TRICARE will be the primary insurance. If neither Medicare nor TRICARE covers a service, you will be responsible for the necessary payment. Click here to learn more about health care options for veterans.