Well, I'm sure we don't need to tell you but it's that time of year again - open enrollment for Medicare supplement plans. If you watch even a minimal amount of television, you've seen the commercials more times than you wish to admit. You also probably know the names of the companies pitching their products -- Humana, Aetna, AARP, United Healthcare and multiple others by heart as well.
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 their message as the enrollment period for Medicare has arrived and consumers need to be educated on the plans that are available from state to state and even regions within a state. The enrollment period ends on December 7.
Many of the clients who visit Connelly Law for estate planning or other elder law services do express a modicum of confusion on Medicare plans and what may be best for them. Unfortunately, there is no cookie-cutter plan that works for everyone and some plans may even end up causing the consumer to spend more money than necessary if they don't know what they contain. These plans are based on the medical needs a person may have, the medications they take and the future direction of their health and healthcare requirements.
We also see more than some confusion about 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 workplace plan and happy with it are dismayed when the Medicare card arrives in the mail after they turn 65 and then must make a decision about what plan to take -- and yes, this decision may have lifetime ramifications. 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 quagmire -- and better yet, knowing it's a free service! But, let's begin by defining the differences between Medicare and Medicaid.
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, is specifically for low-income Americans and 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. 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 medical insurance through their employers. Those who are self-employed can purchase health coverage through a number of outlets, including state exchanges. However, once someone reaches the age of 65 and may still be 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 pros and cons 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.
But, 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.gov.
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.
Medicare Parts A and B
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.
MEDICARE PARTS 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 dreaded donut hole portion of prescription drug 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 what is the donut hole?
As explained earlier, most plans we buy with Medicare prescription drug coverage (Part D) have a coverage gap (called a "donut hole"). This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all costs out-of-pocket for your prescriptions up to a yearly limit. Once you have spent up to the yearly limit, your coverage gap ends and your drug plan helps pay for covered drugs again.
Rather than get into a long and maybe confusing explanation, we will use the diagram below to explain this. Don't worry, if you have diabetes or are on a diet, looking at the picture will not affect you, we promise.
So the donut hole diagram remains the same from year to year but what does change are the drug plan coverage parameters. Although these rates are set by Medicare, they do allow variations at the initial deductible level where insurance companies can offer a $0 initial deductible.
In 2020, these are the changes from 2019:
In the initial coverage limit, there will be an increase from $3,820 in 2019 to $4,020 in 2020, and is reflected in the chart above;
In the Coverage Gap (the Donut Hole), the out of pocket threshold rises from $5,100 in 2019 to $6,350 in 2020. At this point, the participant moves into Catastrophic coverage.
A little more about the Donut Hole. Plan enrollees will receive a 75% discount on the total cost of their brand-name drugs purchased while in the Donut Hole. The discount includes a 70% discount paid by the brand-name drug manufacturer and a 5% discount paid by your Medicare Part D plan. The 70% paid by the drug manufacturer combined with the 25% you pay, count toward your Donut Hole exit point.
For example: If you reach the Donut Hole and purchase a brand-name medication with a retail cost of $100, you will pay $25 for the medication, and receive $95 credit toward meeting your 2020 total out-of-pocket spending limit helping you reach the $6,350 threshold and exiting the donut hole.
For generic drugs, Medicare Part D beneficiaries who reach the Donut Hole will also pay a maximum of 25% while in the Coverage Gap (receiving a 75% discount).
For example: If you reach the 2020 Donut Hole, and your generic medication has a retail cost of $100, you will pay $25. The $25 that you spend will count toward your Donut Hole exit point.
When it comes to the Catastrophic portion of the plan, there is a minimum cost-sharing portion of this benefit. Under this, beneficiaries will be charged $3.60 for those generic or preferred multisource drugs with a retail price under $72 and a 5% co-pay cost for those with a retail price greater than $72. For brand-name drugs, beneficiaries would pay $8.95 for those drugs with a retail price under $179 and 5% co-pay for those with a retail price over $179.
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:
So before you begin the process of finding what Medicare plan is right for you, learn as much as you can about Medicare and seek guidance from your local SHIP office.
Next week we are going to look at the Medicare Advantage Programs and Medigap.
Don Drake oversees Connelly Law's Community Education Programming. He is a retired licensed clinician in the Commonwealth of Massachusetts with over three decades of experience working with older adults diagnosed with HIV/AIDS, substance abuse disorders, chronic homeless and mental illness. Prior to his retirement, he was the director of a unique treatment program for older adults with histories of mental illness, cognitive disabilities, and addiction at Shattuck Hospital in Boston. He was also a director at Steppingstone, Inc. in Fall River, Massachusetts where he was the clinical trainer, program and curriculum developer for the agency and oversaw treatment programming for older adults. He has over 40 years of human service and law enforcement experience and has worked as an administrator at programs in Boston, Hartford, Providence, and Philadelphia, helping to structure, hire and train staff in providing behavioral and addictions treatments to adolescent and adult clients. Drake also worked as a trainer for the Massachusetts Department of Public Health presenting training on QPR, a suicide prevention curriculum for the general public, the Massachusetts Council for Problem Gambling and the Crisis Prevention Institute, an international training organization that specializes in the safe management of disruptive and assaultive behaviors. He is also a retired professional wrestler who is in the New England Professional Wrestling Hall of Fame. Drake can be reached at Connelly Law Offices, Ltd. at firstname.lastname@example.org