How to Understand Medicare: Logically Explained by an Analyst
This article is confirmed accurate and up-to-date as of October 2017.
I have a knack for analyzing complicated topics and making sense out of them, thanks to my technical background as a system analyst.
When I recently turned 65 and became eligible for Medicare, I studied the rules and regulations to educate myself in order to make the right decisions.
My intention with this article is to help you avoid stress by giving you a decent understanding of the various parts of Medicare and its commonly misunderstood rules. In addition, I always stay abreast of the latest changes to keep this article accurate and up-to-date.
Once you have a good knowledge of the important issues, you’ll have an advantage with selecting the right coverage for your needs. You’ll also know how to avoid penalties that I discovered many of my friends were assessed because they had overlooked the rules of Medicare drug coverage. I'll get into that later.
I will not discuss premium costs because that information is available from Medicare. What I will do is give you a complete understanding of the overall makeup of Medicare.
Remaining Clueless Can Cause Irreversible Penalties
I discovered that many of my friends who are older than me ignored doing research and just took standard Medicare.
Later, they discovered the unexpected doctor bills that were not covered. They also found out too late about the irreversible penalties imposed for not starting drug coverage in time. I’ll get into those details in this article.
Many people tend to remain clueless. You’re already ahead of them since you are showing an interest by reading this article. I won’t let you down.
So, You’ll Soon Be 65
Everyone has different needs based on how healthy or unhealthy they may be, and differing financial situations as well. For that reason I can't tell you specifics with what to do. But I will tell you what I learned through my own research and decision-making to get the most out of Medicare.
That should help you understand what you need to do and how to avoid the pitfalls.
When you are close to becoming 65 you will start getting a lot of mailings offering advice. These are agents who are focused on selling you insurance. They don't lie, but they don't tell you the full story either. They will only tell you what will convince you to go with their insurance.
I also started seeing a lot of Google ads everywhere I looked on the Internet. That's how Google advertising works. They know what your interests are, and what your needs are, based on your recent web browsing activity.
All these ads direct you to websites that help compare features of various plans.
It's best to ignore all these agents and ads. Everything they can tell you can also be found on one single most useful site, medicare.gov, and that is really the only place you need to visit when doing your research.
Take the time to scrutinize that site. It will save you from making costly mistakes.
Are Medicare Agents Helpful?
One thing I learned by doing my own research is that I kept stumbling upon agent websites that looked like they were specific insurance companies. Once I realized they are asking for personal contact information before I could gather any information from the site, I realized where I was.
Another thing I learned was that many agents I spoke with were giving me answers they knew I wanted to hear. After a while I realized they were doing this in an effort to get me to sign up with them.
It would be more honest if they were to give me specific reasons why one thing or the other is good or bad, rather than just tell me what's good.
Whenever I asked why something was not the right choice, they beat around the bush. As an example, when I questioned an agent working for Anthem about something that didn't make sense in their proposal, she said that I’d get a full document explaining benefits after I sign up and start being covered. What good is that? They lost my business for that reason.
New Medicare Cards are Coming
A new Medicare card is being phased in throughout 2018 and 2019. Finally, it will no longer have the Social Security number on the card. A sample of the original Medicare card is shown on the left below. On the right is a sample of the new version.
The Parts of Medicare
Medicare has different parts that cover different things. Original Medicare consists of Parts A and B. The most common thing I've noticed is that many people confuse "Medicare Parts" with "Medicare Plans." Watch closely which word I'm using as you continue reading. This attention to detail will help you understand what many people tend to confuse.
Part A: This is the part of Medicare that helps pay the cost of inpatient hospital care, including nursing services after leaving the hospital, hospice, and some other home health services. The Part A premium is paid by the government unless you earn over a certain amount. For most people, it’s free.
Part B: This is the part of Medicare that pays 80% of the cost of doctor services. You pay the Part B premium, but you can have it deducted form your Social Security if you’re already collecting it.
Part C: This is the part that confuses people. In my opinion this should not be listed as a part letter. It’s an optional replacement for regular Medicare known as an Advantage Plan.
The Add-On Plans of Medicare
Advantage plans are handled by private insurance such as an HMO or PPO. It usually includes Part D (I’ll get into that later) for prescription drugs, and it may include other coverage not usually included with Medicare.
You have to pay extra for this, but in some states all or part of the premium is paid by the state. Advantage plans cover the other 20% that Medicare doesn’t cover. They replace the entire thing with a single insurance, although you still have to pay for Part B if you want an Advantage Plan. You carry just one Insurance card and you can still have your Part B premium deducted from your social security benefits.
I found out that my doctor was not in any of the advantage plans I looked at. That’s a problem you need to check closely. Your doctors have to be registered with each particular HMO or PPO, otherwise you will get billed extra for those doctor visits.
In my opinion this should be called Part E for Extra. You have the option of adding a supplemental plan instead of going with an advantage plan. This is also known as Medigap insurance just to confuse you. All Supplemental plans cover the other 20% and you can go to any doctor that accepts Medicare.
Part D drug coverage is optional, but accumulates penalties if you don’t take it.
Prescription Drug Plans
Part D: This is prescription drug coverage. It’s optional, but accumulates penalties if you don’t take it. It covers medications with a lot of loopholes. If I were to get into the details, it would cover an entire additional article, so I’ll just discuss how to avoid Part D penalties.
If you are healthy and don’t need medications, except once in a blue moon when you come down with a cold or have an injury that needs medication, you might think that you can pass up on Part D and save the cost of the monthly premium.
The problem is that for every month you go without Part D, and if you don’t have any other creditable prescription drug coverage (see next section below), then you’ll have a 1% penalty per month added onto your premium in the future when you do end up taking a Part D plan.
Just to be clear, that’s 1% of the national average cost of Part D for every month you delay, starting from the month you become 65. For example: You decide you need drug coverage when you’re 70. That’s 60 months since you were 65. So you’ll have a 60% penalty added to your premium (1% for each of 60 months you delayed coverage).
Think about that! Nobody does. Nobody complains to his or her congressmen about this either. We all vote for our politicians without realizing how we are being screwed. Politicians abide by the only people telling them what to do – the drug companies.
What is Creditable Prescription Drug Coverage?
A creditable prescription drug plan is one that qualifies for Medicare to avoid the penalties I mentioned above. Any plan that is specified as Part D by the insurance company is a creditable plan.
You may also be covered by insurance from a current or former employer, union, or even a spouse’s insurance that is considered a creditable prescription drug plan. Make sure you get a letter indicating that it is creditable coverage. You’ll need that letter to avoid penalties if you join a Part D plan later.
Original Medicare vs. Advantage Plans
Part A - Hospital
Part A - Hospital
Part B - Medical/Doctors
Part B - Medical/Doctors
Part D - Prescription Drugs
Part D - Prescription Drugs
Possible Extra Coverage
The Part D Prescription Drug plan is an optional add-on to Medicare, but there is a penalty for delaying it as discussed above.
A Supplemental Plan (aka MediGap) is also an optional add-on to regular Medicare to cover the other 20%.
Advantage Plans usually include Part D and may also include additional extra coverage.
Is Medicare Void of Obamacare Regulations?
Here’s an interesting note: I began my Medicare in the middle of 2015, and my rates went up 20% by January of 2016 for the Part D drug coverage.
I thought that I'd get away from Obamacare now that I came of age for Medicare. However, the Affordable Care Act (Obamacare) had rules included that negatively affected Medicare too. Obama fell under pressure of the pharmaceutical lobbyists and did not allow Medicare to negotiate better drug prices.
“Part of the agreement of the Affordable Care Act is that Medicare cannot negotiate lower drug prices with pharmaceuticals.”— Dr. Sanjay Gupta http://www.cnn.com/profiles/sanjay-gupta-profile
Covering Your 20% Share Medicare Doesn't Pay
Medicare only covers 80% of your doctor bills. And what’s worse, they don’t cover excessive charges that some doctors charge beyond Medicare approved amounts. If you want to have insurance that pays your 20% share, you can do this with either of two methods:
1. Supplemental (Medigap) insurance. Private insurance companies provide this. You keep your Original Medicare Parts A and B. The Supplemental plan pays some of the costs not covered by Original Medicare.
2. Advantage Plans. There are many varieties that cover different things. This completely replaces Original Medicare and rolls all coverage into one plan known as Part C. A lot of research needs to be done to select the right one for your situation. The most important thing is to check if your doctors are in the plan you choose.
I like Supplemental (Medigap) plans better because any doctor who accepts Medicare will be covered. Advantage plans require you to use doctors and hospitals in their network. Supplemental Plans do not have networks, so you can use any doctor or hospital that accepts Medicare.
Based on your own needs, Advantage Plans can be a reasonable choice. You just have to compare and know what you’re getting.
Of course you can just go with Parts A and B without additional coverage, but you have to pay the other 20% of doctor bills in that case.
Only Regular Medicare Travels With You
Regular Medicare and all Supplemental Plans protect you when you travel anywhere within the U.S. You may visit any doctor or hospital that accepts Medicare patients. This includes specialists who accept Medicare with no need for referrals.
This is not true with Part C Advantage plans since private insurance companies run these. You’ll need to check their specific rules.
Video: Review of Medicare
Choosing to Just Use Parts A and B Without Extra Protection
As a healthy person, I feel I can deal with paying the 20% Medicare doesn't cover. But if I wait 6 months and add a Supplemental plan or Advantage Plan later, they can charge me more, refuse preexisting conditions, or turn me down altogether. Obamacare specifically left Medicare out of the preexisting condition rule. Not many people realize that.
Then there's Part D for prescription drugs. I don't need it now, but as I explained earlier, they tag on a 12% penalty every year that I wait (1% per month). And that would stay with me the rest of my life.
Medicare is soon cruel, in my opinion. They get you coming and going, and they take advantage of the elderly who can't study complicated things and make decisions for themselves.
There is a Medigap Supplemental Plan That’s Right For You
When you are covered by a Supplemental Plan (Medigap), there are no surprises. You’ll know exactly what’s covered based on the plan you choose.
Don't confuse plans with parts. Medicare has Parts A, B and D. And supplemental coverage has several plans to choose from, labeled from Plan A through Plan F. Rather than duplicate that info here, you can see a complete detailed listing of each plan at medicare.gov. Remember, that’s the only site you need for all your questions.
By law, each plan is exactly the same no matter which insurance company you go with. Therefore, once you decide on the supplemental plan you want, the only thing you need to compare is the cost.
Medicare Part B Excessive Charges
When you see a doctor who doesn’t “accept assignment,” that means he or she doesn’t accept Medicare’s approved amount as payment in full.
You need to pay this in addition to your 20% share, but only up to 15% more than Medicare’s approved amount. The doctor forfeits the rest, but it still is an additional cost to you that you may not be expecting.
Supplemental Plan F covers all of this, your 20% plus any excessive charges. Plan N covers your 20% but not excessive charges.
Why Supplemental Premiums Can't Be Deducted from Social Security?
Only Advantage Plan and Part D Prescription Drug Plan premiums can optionally be deducted from Social Security benefit payments because both of these are primary insurances.
Supplemental Insurance is considered a secondary insurance and therefore its premium cannot be deducted from Social Security.
With Medicare Part B, you actually have a choice. You can pay for it yourself in quarterly installments or you can have it deducted from your monthly Social Security benefits if you are already collecting.
When Do You Need to Start Extra Coverage to Avoid Penalties?
Remember that Medicare Parts A and B do not cover everything.
Basically Part A covers hospital costs up to 150 days. However, you still share part of those costs, and you pay all the costs after 150 days.
Part B only pays 80% of doctor bills. You are responsible for the rest, including deductibles and excessive charges.
Because of all this, you may want to consider adding a supplemental plan to regular Medicare, or replacing it with an Advantage Plan, also known as Part C. I know. That’s so confusing. They should never have called it Part C. It really is a total replacement of Medicare that simply includes Parts A, B and D.
Anyway, keep in mind that there are penalties for delaying extra coverage.
You must sign up for a Supplemental Plan or Advantage Plan within six months of your 65th birthday month. This is your one-time Initial Enrollment Period. However, if you begin Part B later because you had insurance from an employer or a spouse, then this six-month period starts when you begin Part B.
Is it true that supplemental plans can be changed anytime throughout the year?
One can apply for Supplemental Insurance without penalty during the Initial Enrollment Period, which is within 6 months of the 65th birthday month.
Supplemental Plans can be started or switched from one plan to another at anytime. However, penalties may apply if started or changed after the Initial Enrollment Period.
- Higher premium.
- Waiting period before covered.
- Refusal based on medical conditions.
These Penalties do not apply during the Initial Enrollment Period.
Advantage Plans can only be changed annually, but Supplemental Plans can be changed anytime. However, penalties may be imposed when you make changes, such as higher premiums or refusal to accept preexisting conditions. These penalties can also stand in the way if you try to apply after the open enrollment period.
Doctors can join or leave an Advantage Network anytime. Since you can’t change Advantage Plans during the year, you’ll have to select a new primary doctor or other provider if they leave the network mid-year.
There is an exception to the annual open enrollment period, that I discuss below.
What is the Open Enrollment Period?
Once a year, from Oct 15th to Dec 7th, one can change, join or drop Advantage Plans. This does not apply to Supplemental Plans, however, which can be changed anytime with restrictions as I mentioned above.
What is the Special Enrollment Period?
If you move to a new location that's not covered by your present Advantage Plan, you can change your insurance midyear within a Special Enrollment Period.
Note that Supplemental Plans cover you all over the United States, so this only is necessary to consider if you have an Advantage Plan.
How Is Shingles Vaccine Covered?
I'm including this discussion because several people have asked about this. I discovered there is some confusion about payment for Shingles injections.
The Shingles Vaccine shot is not covered by Medicare Parts A and B. However, most prescription drug insurance plans (Part D) do pay for this in full.
Remember that if you don’t start a Part D drug plan when you first become eligible for it at the age of 65, then you will incur a cumulative 1% penalty per month that adds up until you start this plan. At that time the penalty will be added to the monthly premium that you pay.
An advantage plan (Part C) is another solution. It covers Parts A and B, and most advantage insurance plans will pay for Shingles Shots since they include coverage for Part D as well.
Doing your Own Due Diligence
As extensive as you may have found this article, I only gave you the important information that most people have trouble understanding. I know, because since I started with Medicare a lot of people have been asking me for help.
So I hope this has helped you have a good understanding with a thorough background of information to help get you started in the right direction.
You will have to do you own research since no one can tell you what’s best for your particular situation. Only you know that.
Just remember that as you delve into it, ask questions and be curious. That’s what I did.
© 2016 Glenn Stok