Medicare primer

The information contained in this article is a compilation acquired from three major sources: the Senior Health Insurance Program Counselor’s Manual 2014 edition, the Medicare & You 2015 Handbook, and the 2013-2014 Medicare Supplement Premium Comparison Guide.

What is Medicare?

Medicare is a federal health insurance program for people 65 or older and for some people under age 65 who are disabled. Although Medicare is administered by the US Department of Health and Human Services, the eligibility and enrollment are the responsibility of the Social Security Administration.

Who is eligible for Medicare?

Generally people are eligible if-

• they or their spouse have worked for at least 10 years and have paid Medicare taxes (FICA), and

• they are 65 or older, and

• they are US citizens or a lawfully admitted non-citizen with permanent US residency of five continuous years.

What does Medicare cover?

• Part A - Hospital Insurance

• Part B- Medical Insurance

• Part C- Medicare Advantage (private insurance that includes Parts A, B, & D)

• Part D-Prescription Drug Insurance

Medicare was never intended to pay 100% of health/prescription costs, so beneficiaries must pay their portion. Oftentimes people will purchase a supplement to Medicare (also called a Medigap policy) to fill in the gaps where Medicare doesn’t pay for hospital and medical charges.

When should I sign up for Medicare?

This answer depends on your situation. For some people enrollment is automatic, for others it is not.

You will be automatically enrolled into Medicare if-

You are already receiving Social Security or Railroad Retirement Board benefits. (Ex. You began to collect Social Security at age 62 and now you are turning 65.) Medicare will be effective on the first day of your birthday month OR the first day of the previous month if your birthday is on the first of the month.

• You are under 65 but have received disability benefits for 24 months. Medicare will be effective on the first day of the 25th month of disability.

• You have ALS (Lou Gehrig’s disease). Medicare will be effective the same month that your disability benefit begins.

You will have to enroll into Medicare with Social Security if-

• You are nearing your 65th birthday and plan to retire or will continue to work until full retirement age or beyond. Medicare will be effective the first day of your birthday month OR the first day of the previous month if your birthday is on the first of the month.

• You have End Stage Renal Disease (ESRD)

Your initial enrollment period is a seven-month window: Three months before your birthday—the month of your birthday—and three months after your birthday. If you fail to enroll during these seven months, your next opportunity won’t come until January 1st - March 31st of the next year and your Medicare coverage won’t be effective until July 1st.

If I work beyond full retirement age, should I wait until I retire to sign up for Medicare?

No, you should contact Social Security three months before your 65th birthday and at least enroll in Part A. Most beneficiaries receive Part A free because they have had 10 years of Medicare covered employment.

Everyone, regardless of their work history, has to pay the monthly premium for Part B, which fluctuates with the cost of living index (COLA). In 2015, Part B will cost $104.90 per month if your 2013 income was less than $85,000 for I person, $170,000 for two persons. If your modified adjusted gross income as reported on your IRS tax return from two years ago is above these amounts, you may have to pay more for your part B premiums.

Do I have to take Part B?

Whether you sign up for Part B or not depends on whether you will have other group health coverage. If you or your spouse is still working and you have health coverage through that employer or union, you should contact your benefits administrator to find out how your coverage works with Medicare. This includes federal or state employment and active duty military service. It may be to your advantage to delay Part B enrollment.

Once your employment ends or the health coverage based on current employment ends, you have 8 months to sign up for Part B without a penalty. If you delay enrolling into Part B and don’t have any other group coverage, your penalty will be 10% for each year you were eligible, but did not enroll.

You must have both Part A and Part B to purchase a Medicare Supplement or a Medicare Advantage plan. (more about these later.)

What medical expenses do I have to pay if I only have Medicare and no other supplement?

Part A

Hospitalization

Day 1-60

You pay $1260 deductible per benefit period.*

Day 60-90

You pay $315/day.

Day 91-150

You pay $630 (lifetime reserve days/may only be used once).

Day 150+

You pay all cost.

*This is not a yearly deductible. Your benefit period begins on the first day of your inpatient hospital or skilled nursing facility stay and ends after you’ve been out of the facility for 60 consecutive days. If you return to the hospital on the 61st day, you will be charged another $1,260.

Skilled Nursing

Day 1-20

You pay nothing if you’ve had a qualifying 3 day hospital stay.

Day 21-100

You pay $157/day.

Day 100+

You pay all costs.

Home Health Care

Medicare pays 100% of all covered and medically necessary home health care. You pay nothing.

Hospice Care

You pay 5% of Medicare approved amount for respite care and 5% for each outpatient prescription.

Part B

Medical Expenses (physician visits, tests, ambulance)

You pay a $147 annual deductible plus 20% of the Medicare approved amount. If your doctor doesn’t accept Medicare assignment, you may have to pay up to 15% more. ■

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In the next newsletter, the author will address supplemental insurance, Part D and Part C.

This article was prepared by Janet Morgan. Janet became a SHIP (Senior Health Insurance Program) counselor in 2006 and currently works for the Boone County Council on Aging as the Information and Assistance Supervisor.

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February 2015Volume 6Number 2PDF icon PDF version (for best printing)