Medicare – Understanding The Puzzle

If you or someone you know is becoming eligible for Medicare, chances are you’re confused about what expenses it will cover, what you will be responsible for, and the choices of additional coverage that are available to help pay the difference. And correspondence from various insurance companies regarding their plans may be creating even more confusion. Should I have a Medigap plan? Which one? Is that the same as a Medicare Supplement (it is)? How about drug coverage? And what is Medicare Advantage? These and many more questions surely come to mind.

Let’s try to clear up some of the confusion. Medicare currently has four parts: 1) Part A is the Hospital (2) Part B is Medical (3) Part C is Medicare Advantage (4) Part D is prescription coverage. Parts A and B are sometimes referred to as Original Medicare. Currently, when you turn 65 you will get Part A automatically (assuming you have worked the required period of time). If you should enter a hospital, in 2012 you will be responsible for $1156 for up to 60 days as an inpatient. If your stay should continue past 60 days, you will be responsible for $289 per day from days 61 to 90. From days 91-150 your costs are $578 per day. Should you require inpatient skilled care after the hospital, you will have up to 100 days of coverage. The first 20 days are paid in full by Medicare. Days 21-100 leave you with $144.50 per day. There are other charges you are responsible for as well in part A. Please note that Medicare will not cover long term care coverage should you require it. Medicare Part B is optional, but you will want it if you need coverage outside the hospital (such as doctor visits). There is a cost for it. Many people will pay $99.90 per month per person, although you could pay more depending on your income. In 2012, there is a $140 deductible. After that Medicare will pay 80% of the approved amount and you will be responsible for 20% and any additional charges (known as Part B excess).

There are Medigap/Supplement policies that will pay what costs A and B do not in varying degrees depending on your budget and what you are comfortable with. Medicare part D is a prescription plan that will help to cover the costs of any medications you are taking. Plans vary from each insurance company regarding their formulary of medications, tier/cost structure, monthly premium and whether or not they have an annual deductible. As with a medigap plan, you are under no obligation to go into a part D plan. However, unlike medigap, if you decide not to take a part D when you are eligible, should you elect to enter one in the future, there will be a penalty you will be subjected to for as long as you remain in that or any other prescription plan. There is also the dreaded Coverage Gap or Donut Hole.

We don’t have time to detail it here, but it is something you should become familiar with and determine if you will be subject to it or not. You may be wondering why I skipped Medicare Part C – it’s not because I learned the order of the alphabet incorrectly in grade school, but because Part C or Medicare Advantage works in a somewhat different way. These plans are provided by private insurance companies that are approved by Medicare. Medicare pays them a fee and in turn the company will pay the doctors or hospitals should you have a claim. You will have co-pays for most of the services, however most plans will provide zero co-pays for many preventative services (yearly physicals, bone mass measurements, etc.).

Some plans may also include some dental and eye glass coverage and even gym memberships (Silver Sneakers). Most of these plans will also include a prescription plan so they have essentially put Medicare A, B and D into one package. In the Hudson Valley area, two of the most common plan structures are either HMO’s (Health Maintenance organization) or PPO’s (Preferred Provider Organization). An HMO has a network of providers in a service area and generally you must stay in that network to get covered services, except in an emergency. A PPO also has a provider network in a service area, but you have more freedom to go outside the network for a higher cost and you may give up some of those zero co-pay preventative services if you do so.

When selecting coverage for yourself, the “best” plan is the one that’s best for you and not necessarily the one your neighbor has. Your past and current health, medications you may be taking and monthly budget need to all be considered. Ultimately, the best plan for you is the one that will allow you to sleep at night.