Medicare Explained

The Basics

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD). If you or your spouse have worked full time for 10 or more years over a lifetime, you are probably eligible to receive Medicare Part A for free.

Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care. What Medicare covers is based upon, Federal and state laws, National coverage decisions made by Medicare about whether something is covered, local coverage decisions made by companies in each state that process claims for Medicare. These companies decide whether something is medically necessary and should be covered in their area.

Medicare Part B is available at a monthly rate set annually by Congress ($121.80 in 2016 for incomes $85000.00 or less for an individual). Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services. Some seniors are eligible to receive the medical insurance portion (Part B) free as well, depending on their income and asset levels. For more information, inquire about the Qualified Medicare Beneficiary (QMB), Special Low Income Medicare Beneficiary (SLMB), and Qualifying Individual programs through your county social services office. Remember, in most cases, if you don’t sign up for Part B when you are first eligible, you will have to pay a late enrollment penalty for as long as you have Part B. Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn’t sign up for it. Also, you may have to wait until the General Enrollment Period (from January 1 to March 31) to enroll in Part B, and coverage will start July 1 of that year. Usually, you don’t pay a late enrollment penalty if you meet certain conditions that allow you to sign up for Part B during a Special Enrollment Period.

Medicare Part C (Medicare Advantage Plans) are a type of Medicare health plan offered by a private insurance company that contracts with Medicare to provide you with all your Part A and Part B benefits. Medicare Advantage Plans include Health Maintenance Organizations (HMO’s), Preferred Provider Organizations (PPO’s), Private Fee-for-Service Plans (PFFS’s), Special Needs Plans (SNP’s), and Medicare Medical Savings Account Plans (MSA’s). If you’re enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan and are not paid for under Original Medicare. Most Medicare Advantage Plans have prescription drug coverage included.

Medicare Part D (prescription drug coverage) adds prescription drug coverage to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. These plans are offered by insurance companies and other private companies approved by Medicare.

Medicare Advantage Plans may also offer prescription drug coverage that follows the same rules as Medicare Prescription Drug Plans. Keep in mind, you may owe a late enrollment penalty if you go without a Medicare Prescription Drug Plan (Part D), or without a Medicare Advantage Plan (Part C) (like an HMO or PPO) or other Medicare health plan that offers Medicare prescription drug coverage, or without creditable prescription drug coverage for any continuous period of 63 days or more after your Initial Enrollment Period is over.

How Medicare Works

Original Medicare is coverage managed by the federal government. Generally, there is a cost for each service. In most cases, you can go to any doctor, other health care provider, hospital, or other facility that is enrolled in Medicare and is accepting new Medicare patients. With a few exceptions, most prescriptions are not covered in Original Medicare. However, you can add drug coverage by joining a Medicare Prescription Drug Plan (Part D). With Original Medicare you don not need to choose a primary care doctor. In most cases, with Original Medicare, you don’t need a referral to see a specialist, but the specialist must be enrolled in Medicare. You may already have employer or union coverage that may pay costs that Original Medicare does not. If not, you may want to buy a Medicare Supplement Insurance (Medigap) policy.

How to sign up for Medicare

If you are receiving Social Security benefits before turning 65, you should automatically receive notification of your enrollment in Medicare shortly before your 65th birthday or your 25th month of disability. Other individuals must apply by calling or visiting their Social Security office to receive Medicare. If you are not yet receiving Social Security or if you have not received a Medicare enrollment notice, you should contact the nearest Social Security office for information. Applications for Medicare can be made during a seven-month period beginning three months prior to the month of your 65th birthday.

It is best to apply during the three months prior to the month of your 65th birthday. If an application is made during that time, your coverage will begin on the first day of your birth month. Applying later will delay the start of your benefits. You may also apply for Medicare during the General Enrollment Period from January 1 through March 31 every year after your 65th birthday. Your coverage then starts July 1 of the year you signed up and you will pay a 10 percent surcharge on the Part B premium for each 12 months you were eligible but not enrolled. If you have limited income and resources, your state may help you pay for Part A, and/or Part B. You may also qualify for Extra Help to pay for your Medicare prescription drug coverage.

If you continue to work after age 65 or your spouse is working and you are covered by an employer group health plan (EGHP), you may want to delay enrollment in Part B of Medicare. Enrolling in Medicare Part B will trigger your open enrollment for Medicare supplement insurance at a time when you do not need supplemental coverage. The penalty for late enrollment in Part B does not apply if you are covered by an EGHP because of your or your spouse’s current employment. If you do work after age 65, you may apply for Medicare Part B at any time prior to retirement, but you must apply no later than eight months (the Special Enrollment Period) after your formal retirement in order to avoid paying a premium penalty. Even if your employer offers a retirement health plan, you will want to sign up for Medicare Part A and probably for Medicare Part B when you retire. Most retirement plans assume you are covered under Medicare and will not pay for services that Medicare would have covered. Veterans may be eligible for special medical programs. However, eligibility and benefits are very restrictive and are subject to change. The Department of Veterans Affairs advises veterans to apply for both Parts A and B of Medicare to ensure adequate medical coverage.

How Medicare Pays

The way Medicare pays is, you generally pay a set amount for your health care (deductible) before Medicare pays its share. Then, Medicare pays its share, and you pay your share (coinsurance / copayment) for covered services and supplies. There is no yearly limit for what you pay out-of-pocket. You usually pay a monthly premium for Part B. You generally don’t need to file Medicare claims. The law requires providers (like doctors, hospitals, skilled nursing facilities, and home health agencies) and suppliers to file your claims for the covered services and supplies you get.

Medicare pays for only a portion of your hospital and medical bills. As with many private insurance plans, the government expects beneficiaries to pay a share of their bills. Medicare Parts A and B both have deductibles and coinsurance. The deductibles for 2016 are $1288.00 per Benefit Period, for Part A. A benefit period begins the day you are admitted as an inpatient in a hospital or skilled nursing facility (SNF). The benefit period ends when you have not received any inpatient hospital or SNF care for 60 days in a row. Therefore, it is possible to have multiple Part A hospital deductibles in the same year. The Part B deductible is $166.00 per year. Private insurance is available to cover all or part of these out-of-pocket costs. These insurance plans are called Medicare supplements (also called Medigap or Med Sup plans).

Accepting Assignment

Most doctors, providers, and suppliers accept assignment, but you should always check to make sure. Assignment means that your doctor, provider, or supplier agrees (or is required by law) to accept the Medicare-approved amount as full payment for covered services. Participating providers have signed an agreement to accept assignment for all Medicare-covered services.

If your doctor, provider, or supplier accepts assignment, your out-of-pocket costs may be less, they agree to charge you only the Medicare deductible and coinsurance amount and usually wait for Medicare to pay its share before asking you to pay your share, and they have to submit your claim directly to Medicare and cannot charge you for submitting the claim.

If your doctor, provider, or supplier does not accept assignment they are “Non-participating” providers and have not signed an agreement to accept assignment for all Medicare-covered services, but they can still choose to accept assignment for individual services.

If your doctor, provider, or supplier does not accept assignment, you may have to pay the entire charge at the time of service. They can also charge you more than the Medicare-approved amount, called “Excess Charges.” Excess Charges have a limit called “the limiting charge.” The provider can only charge you up to 15% over the amount that non-participating providers are paid. Non-participating providers are paid 95% of the fee schedule amount. The limiting charge applies only to certain Medicare-covered services and doesn’t apply to some supplies and durable medical equipment.

Your doctor, provider, or supplier is supposed to submit a claim to Medicare for any Medicare-covered services they provide to you. They cannot charge you for submitting a claim. If they do not submit the Medicare claim once you ask them to, call 1-800-MEDICARE.

In some cases, you might have to submit your own claim to Medicare using Form CMS-1490S to get reimbursed.

Medicare Supplement Insurance

Medicare Supplements are standardized by the Federal Government. They are labeled A, B, C, D, F, G, K, L, M and N. Each standardized Medigap policy must offer the same basic benefits no matter which insurance company sells it. Cost is usually the only difference between Medigap policies with the same letter sold by different insurance companies. Plan A pays the Medicare hospital and physician coinsurance, the first three pints of blood, and 365 days of hospitalization beyond Medicare. Plans B through N provide these benefits and add more benefits such as coverage for Medicare deductibles, excess charges and limited preventive care, and foreign travel. You can only have one Med Sup plan. No one should try to sell you an additional Med Sup plan unless you decide you need to switch policies.

Open Enrollment for Medicare Supplement Insurance is at age 65 for all consumers, including those already receiving Medicare due to disability. The Open Enrollment period is a six-month period. For six months beginning when you are both age 65 or older and enrolled in Medicare Part B, companies must sell you any Medicare supplement plan they offer. After this limited open enrollment period, companies can pick and choose whom they will cover and how much they will charge based on your health. If you have an individual or “bank group” insurance policy, becoming Medicare eligible does not require you to cancel it and purchase a Medicare supplement. Doing so may save premium costs but it is important to compare benefits before deciding which will work best.

If you are eligible for employer retirement insurance, review the plan carefully to understand what benefits are available and how it works with Medicare. Be aware that employer plans are not standardized and are not subject to the requirements governing standardized Medicare supplement policies. Also, it is important to remember, if you leave an employer plan you may not be able to go back on it.

Some Texas residents are eligible to enroll in approved Medicare Advantage plans. These plans are offered by private insurance companies. Each year Medicare Advantage companies decide where they will offer their plans, what benefits will be offered, and what the premiums will be. Several include vision, dental, hearing, and wellness programs not covered by original Medicare. As noted earlier many Medicare Advantage Plans also offer prescription drug coverage. There are several Medicare Advantage plans available in Dallas, Tarrant and surrounding counties. Depending on plan choice, a member may be responsible for paying co-payments for certain covered services. Most importantly, with a Medicare Supplements, Medicare Advantage and standalone Part D plans, you must continue to pay your Part A (if any) and part B Medicare premiums.

Sonia Ashford is a licensed independent insurance agent in the Texas Medicare field. Sonia has delivered hundreds of speeches to consumers in the Dallas / Fort Worth area about turning 65, Medicare Advantage and Medicare Supplements. A respected agent within the industry, she is the owner of Ashford Insurance Services, LLC located in Bedford Texas. Visit Sonia’s agency website http://ashfordinsuranceservices.com to learn more about how she can help you with your financial saving decisions.

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