Medicare is a federal government entitlement program that provides health care coverage (health insurance) to adults aged 65 and older. Those under 65 that are receiving Social Security Disability Insurance (SSDI) or with certain medical conditions may also be eligible. Original Medicare benefits include two parts, Part A and Part B, that provide your hospital and medical insurance. If you have qualifying work history (generally at least 10 years in the US or married to someone who has and is at least 62) your Part A benefits are premium free. Those that did not work long enough to be entitled to Medicare benefits may still be eligible to enroll, but have to pay more. You do have to pay a premium for your Part B benefits. This amount is based upon your modified, adjusted, household gross income. Below is a breakdown of these costs for 2020:
2020 Medicare Costs at a Glance*
Part A Premium (monthly): Premium-free with qualifying work history; $458 each month without
Part A Deductible and Coinsurance: You pay: $1,408 deductible for each benefit period
Days 1-60: $0 coinsurance for each benefit period
Days 61-90 : $352 coinsurance per day of each benefit period
Days 91 and beyond: $704 coinsurance per each "lifetime reserve day" after day 90 for each benefit period (up to 60 days over your lifetime)
Beyond lifetime reserve days: All costs
Part B Premium (monthly): The standard Part B premium amount is $144.60 (high earners pay more).
Part B Deductible and Coinsurance: $198 per year and then typically 20% of the Medicare approved amount.
Since Original Medicare is managed by the federal government the benefits are exactly the same for every enrollee. With Original Medicare you can use any healthcare provider who accepts Medicare, there are no networks. There are also no pre-existing condition limitations or waiting periods. However, coverage is limited and your out of pocket costs could be very high. There is also no coverage for prescription drugs under Original Medicare, but you can enroll in a private Part D Plan (Prescription Drug Coverage).
Those with Original Medicare can choose to enroll in Medicare Advantage Plans (Part C) which usually include Part D, provide ancillary benefits such as vision coverage and have a Maximum Out of Pocket (MOOP) limit. These plans often appeal to many people because they are convenient and cheaper than Medicare Supplemental (Medigap) plans. For 2020, the average Medicare Advantage plan premium is about $35 per month. However they are generally best for people who have low medical usage due to restrictions such as needing to use doctors in network. Medicare Supplemental (Medigap) Plans have a higher upfront premium, but they provide freedom of access to Medicare's entire network with ultimate flexibility. Having Original Medicare and Medigap is generally best for people who want very predictable back-end costs and peace of mind knowing exactly how much what they will spend on a hospital stay or chronic illness.
As you can see there are many different options to consider when enrolling in Medicare. The rules and restrictions change annually and can be complex, so it is important to review all of your choices carefully to avoid any potential penalties or unnecessary costs. As licensed insurance agents we can help you navigate through these choices and select the best plan to suit your specific needs.
Medicare Part A and Part B are often referred to as Original Medicare. Part A is hospital insurance. It covers inpatient hospital care, limited time in a skilled nursing care facility, limited home health care services and hospice care. While eligible people do not have to pay a premium for Part A, it usually doesn’t cover the full amount of your hospital bill, so you will likely be responsible for a portion of the cost. You will also have to pay a deductible before Medicare benefits begin. After paying the deductible Medicare pays 100% of your costs for up to 60 days in a hospital or up to 20 days in a skilled nursing facility. Beyond that you will pay a flat amount up to the maximum number of covered days. Medicare Part A benefits cover some of the costs for a total of 90 days in a hospital and 100 days in a skilled nursing facility. If you stay in a hospital longer than 90 days in a row it will cover a portion of your costs up to only an additional 60 days. These are called “lifetime reserve days"and can only be used once in your lifetime.
Medicare Part B is medical insurance. It covers certain non-hospital related medical expenses such as doctors’ office visits, X-rays, blood tests and outpatient hospital care. You pay a monthly premium for this part of Original Medicare, which varies depending on your income (Medicaid can help cover this for people with low incomes.) Part B beneficiaries are usually responsible for a portion of their health care costs and pay a low deductible annually before benefits begin. Typically you’ll pay 20% of the bill when you see a participating Medicare doctor, and it usually covers the full cost of many lab tests and services requested by the doctor.
If you qualify for or are already enrolled in Original Medicare you can choose to enroll in Medicare Part C, also known as Medicare Advantage.
Medicare Advantage insurance often includes every type of Medicare coverage in one health plan. While Medicare Advantage plans are required to provide all Medicare Part A and Part B benefits (except hospice care), including emergency and urgent care, Medicare Advantage plans may also cover additional healthcare services that Original Medicare does not such as eye exams, hearing aids, dental care, or health care received while traveling outside the United States. Additionally most Medicare Advantage plans also include prescription drug coverage, and some plans may have a lower deductible, copayments or coinsurance - thus allowing you to pay a smaller share of the remaining costs.
Medicare Advantage plans are technically still a part of Medicare, but are offered by private health insurance companies. The government sets the rules and guidelines (which change annually), and pay the insurance companies to sell and administer the plans as an alternative to Original Medicare. You will continue to pay your Part B premium if you have a Medicare Advantage plan. It is important that you talk with a representative in your area that is certified with several different Medicare Advantage Plans, because not all plans may be available in your area, out of pocket costs will vary and these plans can be changed every year.
Medicare Part D is optional prescription drug coverage. It is available from private insurers to anyone who has Original Medicare Part A and B and lives in the service area of the Medicare drug plan you want to join. Typically you pay a monthly premium to be covered under the plan. Different insurers offer different types of plans, so your premium and out-of-pocket expenses for prescription drugs will vary according to the specific plan in which you’re enrolled. Those costs can include a deductible, a flat copayment amount or a percentage of the full drug cost (called “coinsurance”).
Usually, if the plan has a deductible you pay the full amount of your prescription drug purchases until the deductible is met. After you satisfy the deductible, you will pay a share of the costs to the pharmacy at the time of pickup (a copayment or coinsurance), according to the terms of your plan. Once you have paid a certain annual maximum amount out of your own pocket for prescription drugs, you automatically get “catastrophic coverage.” This means for the rest of that particular year, you would only pay a small co-payment or coinsurance amount.
Be sure to talk to your doctor to see if you are taking the lowest cost medications available to you. Specific coverage may vary from plan to plan, so read your documentation carefully.
Medicare Supplement Plans, commonly called Medigap, are optional and available to those who have Original Medicare. They are sold through private insurance companies and cover Medicare Part A and Part B, but do not cover Part C, Part D or any other private health insurance. If you’re concerned about Medicare costs, a Medigap health insurance policy helps pay the “gap” between what Original Medicare pays and what you pay out of your own pocket. Without any supplemental insurance, you would be responsible for expensive hospital deductibles and co-pays as well as 20% of the cost of all outpatients services. This includes things like surgeries and chemotherapy which would be financially devastating without some form of supplemental coverage.
Because Medigap policies are regulated by state and Federal laws, the benefits for all the coverage options are the same regardless of insurer. The differences are in the price, who administers the plan, and which of the 10 options the insurer chooses to offer.
If you enroll in a Part C Medicare Advantage plan, you are not allowed to use and can’t be sold a Medigap policy. However, if you later return to Original Medicare you have a 12-month special enrollment period to sign up for a Medigap Supplement Plan. Your open enrollment for Medigap Supplemental Insurance begins the first day of the month you turn 65 and are covered under Medicare Part B. You have six months to enroll wherein the insurance company cannot refuse to sell you a Medigap policy, charge you more because you have health problems, or make you wait for coverage to begin. You may have to wait up to six months for coverage of a pre-existing condition. Original Medicare will still cover that health problem even if your Medicare Supplement Plan doesn’t cover your out-of-pocket costs. If you enroll in a Medicare Supplement Plan outside of your open enrollment period, the private insurance company may underwrite the plan which means you may be subject to a physical, and they can refuse to sell you the plan or adjust your premium based on your health status.
If you find that a Medicare supplement is out of your budget, then you should consider a Medicare Advantage Plan because their premiums are lower because you agree to use a network of providers in your local area.
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