Understanding Medicare Open Enrollment, Part 1

Since the beginning of July, we have seen the commercials on nearly every show from Wheel of Fortune to Judge Judy. You've heard the names of the companies pitching their products -- Humana, Aetna, AARP, United Healthcare and multiple others. But before you tune these out, if you're on Medicare or planning to enroll in Medicare, it is important that you pay attention to the message as the enrollment period for Medicare is approaching and consumers need to be educated on the plans that are available from state to state and even regions within a state.

Many of the clients who visit Connelly Law for estate planning or other elder law services do express some confusion on Medicare plans and what may be best for them. Unfortunately, there is no cookie cutter plan that works for everyone. These plans are based on the medical needs a person may have, the medications they take and the future direction of their healthcare needs.

This is a typical ad you will be seeing more and more as the open enrollment period for Medicare comes closer. It is important information for those currently on Medicare and those who are new to Medicare. Click to watch.

We also see some confusion between Medicare and Medicaid. The questions that often come up are about the difference between the two and the fact that some people who qualify can actually be enrolled in both! Still others who are insured by a company’s plan and happy with it are dismayed when the Medicare card arrives in the mail after they turn 65 and they must make a decision. What to do?

In an attempt to give you some guidance, over the next few blogs, we are going to try to provide some basic insight into Medicare. We will also discuss the SHIP programs that exist in every state -- a program that is invaluable in helping seniors navigate the Medicare mess -- and better yet, it's free!

Let's start out by defining Medicare.

Medicare is the federal health insurance program that was signed into law by

President Johnson over 50 years ago as a way to assist older Americans pay for their health expenses. Medicaid, also a federally run health insurance for low income Americans, was established at the same time.

Since its inception, Medicare has been expanded to also provide coverage for those under the age of 65 who have certain disabilities. Then in 2003, President George W. Bush added Medicare Part D, an addition to Medicare to help people pay for the ever-increasing cost of medications.

As alluded to earlier in this blog, before reaching the age of 65, the majority of

Americans get their insurance through their employer. Those who are self employed can purchase health coverage through a number of outlets. However once someone reaches the age of 65 and are still working and plan to continue working, they must make a decision about enrolling in Medicare or staying on a private policy if they have one. We will discuss the pro’s and con’s of this in another blog.

In most situations, to qualify for Medicare's full range of benefits, you need to be 65 and have earned the required "quarters" of coverage. This generally means you are eligible if you or your spouse (or, in some cases, your former spouse) worked — and paid Medicare and Social Security payroll taxes — for at least 10 years or forty quarters.

However, if you’re disabled or meet other requirements, you may also qualify — provided you are a U.S. citizen or permanent resident. (For instance, you might be able to buy into the Medicare program.)

Complete information about Medicare's eligibility requirements — at age 65 or, in certain situations, younger — is available at Social Security and

Medicare and Your Family

Unlike many health insurance plans, Medicare does not provide family coverage.

If you are 65 and qualify, you are insured by Medicare as an individual. You cannot insure your children or a younger spouse through your Medicare plan. Like you, your spouse is eligible for individual Medicare coverage once he or she turns 65.

For right now, we will look at the parts of Medicare.


This is referred to as original Medicare.

Part A is your hospital insurance plan. It covers nursing care and hospital stays, although not doctors’ fees. Part A also covers some home health services, skilled nursing care after a hospital stay and hospice care.

You likely won’t have to pay a monthly premium for Medicare Part A, thanks in part to all the payroll taxes you paid while you were employed. You must, however, pay a yearly deductible before Medicare will cover any hospitalization costs. In most cases, Medicare will pay 80% of the costs and the remainder is up to the individual to pay.

Part B pays for a portion of your doctor visits, some home health care, medical equipment, outpatient procedures, rehabilitation therapy, laboratory tests, X-rays, mental health services, ambulance services and blood. It also pays for screenings like heart disease, some types of cancer and diabetes. Part B is optional, and you may want to opt out of Part B if you still have health insurance through an employer, union, your spouse, etc. Part B requires that you pay a monthly premium to Medicare and there is a small deductible that must be reached before Part B begins paying for services. People with higher incomes may pay higher rates.

PART C and D

Part C plans, also known as Medicare Advantage Plans, are Medicare-approved plans offered by private insurance companies. Part C plans are an alternative to Original Medicare. Along with covering doctors and hospitals, they often cover prescription drugs, too.

Part D plans are Medicare-approved private plans that help people who have Parts A and B to pay for prescription drugs. And within Part D lies one of the most confusing parts of Medicare -- coverage that contains what has been called "the donut hole".

The Donut Hole

The donut hole portion of prescription plans is by far the most confusing for many of us. It involves numbers, circumstances and phrases that can make us pull out our hair, or what is left of it.

The way this works is not as complicated as it first appears and is really just about numbers. So let's try to explain it.

  1. At the beginning of the year, under your drug plan, the first part is called the Deductible, where the first $480 are paid by the plan.

  2. Once that number is reached, you move into the Initial Coverage portion, where you will just pay co-pays (which vary by the types of prescriptions, label or generic, tiers, etc.) until your drug costs reach $3750.

  3. When you reach that threshold, you now move into the Donut Hole. Imagine it like this -- if this was a real donut hole, nothing exists there and this is what happens to your drug costs -- almost no help exists from your insurance company. At this point, you pay a high percentage of the costs of your medication until you reach the $5000 mark. So you end up spending $1250 until you reach the next level (the $1250 figure comes from the difference between the Initial Coverage plateau of $3750. So, $5000 - $3750 = $1250.)

  4. When you reach $5000 of drug costs, you move into what is called the Catastrophic Phase of coverage. Once here, your out-of-pocket costs go down significantly as your insurance coverage now picks up 95% of your drug costs until the end of the year (If you are on an expensive medication, you could reach the Catastrophic Phase early in the year and stay in this level until the end of the year).

  5. On December 31, the plan ends.

  6. On January 1, this process starts all over again.

SHIP Services

The State Health Insurance Assistance Program (SHIP) provides Medicare beneficiaries with information, counseling, and enrollment assistance. Its mission is to strengthen the capability of grantees to support a community-based, grassroots network of local SHIP offices that assist beneficiaries with their Medicare-related questions.

SHIPs present and distribute information to groups and individuals to inform them


on Medicare benefits, coverage rules, written notices and forms, appeal rights and procedures, and more. They also provide free, in-depth, one-on-one insurance counseling and assistance to Medicare beneficiaries, their families, friends, and caregivers.

SHIPs assist people in obtaining coverage through options that include the Original Medicare program, Medicare Advantage (Part C) Plans, Medicare Prescription Drug (Part D) Plans, and programs designed to help people with limited incomes pay for their health care, such as Medicaid, the Medicare Savings Program, and the Low-Income Subsidy. They can help people compare Medicare Supplemental (Medigap) insurance policies and explain how these and other supplemental insurance options (e.g., insurance plans for retirees) work with Medicare.

SHIPs also provide information on long-term care insurance and, when needed, refer beneficiaries to agencies such as the Social Security Administration and local Medicaid offices for additional assistance. Many SHIP counselors are volunteers who are trained and certified to help navigate systems for older adults and some people with disabilities.

And, by the way, SHIP offices are always looking for volunteers to train and help provide information to seniors.

You can find the SHIP offices in your state by clicking on the photo below:

We at Connelly Law have developed a quick cheat sheet to help you understand the basics about Medicare. You can download it and print it out by clicking on the document below:

So before you begin the process of finding what Medicare plan is right for you, understand Medicare and seek guidance from your local SHIP office.

Next Week we are going to look at the Medicare Advantage Programs and Medigap.

Attorney Connelly practices in the area of elder law. This area of law involves Medicaid planning and asset protection advice for those individuals entering nursing homes, planning for the possibility of disability through the use of powers of attorney for the both health care and finances, guardianship, estate planning, probate and estate administration, preparation of wills, living trusts and special or supplemental needs trusts. He represents clients primarily in the states of Rhode Island, Connecticut and the Commonwealth of Massachusetts. He was certified as an Elder Law Attorney (CELA) by the National Elder Law Foundation (NELF) in 2008. Attorney Connelly is licensed to practice before the Rhode Island, Massachusetts, Connecticut, and Federal Bars.

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