From the alphabet soup of plans to the donut hole, here are tips on navigating Medicare’s health care options for seniors.
Medicare is the government’s health coverage for people 65 years of age or older, or younger people with disabilities and those with end-stage renal disease. Today Medicare provides health insurance for some 48 million Americans, a number that will grow in coming years.
New government health care policies affecting coverage – and worries about the future budget impact of the program – are part of an ongoing debate about Medicare’s future. You may have many questions about Medicare, from what coverage is best for you to what costs you may incur.
How Do I Sign Up for Medicare?
The Centers for Medicare and Medicaid Services (CMS) administers Medicare, and the Social Security Administration determines eligibility and issues payments. To enroll, you may file online when you apply for Social Security retirement or disability benefits (www.socialsecurity.gov), or call 1-800-772-1213. You may apply for just Medicare if you don’t want to receive your Social Security benefits yet. Some people are automatically enrolled in Medicare, and receive an insurance card in the mail three months before their 65th birthday or on their 25th month of disability.
What Are Medicare Parts?
Medicare has four components, or parts: A, B, C and D. Parts A and B are also called traditional Medicare, an open-network, single-payer coverage for basic health care needs.
Part A covers basic in-patient hospital stays, tests, treatments, semiprivate room and meals. Part A also covers in-patient mental health treatment costs and treatment in skilled nursing facilities.
Part B covers outpatient medical care, including doctor’s office visits, outpatient hospital treatment, tests, diagnostic services, blood transfusions, limited ambulance services, and durable medical equipment like crutches, canes, walkers or scooters.
Part C formerly called Medicare+Choice, is an option to purchase an approved private insurance policy called a Medicare Advantage plan. About 22 percent of Medicare members have a Medicare Advantage plan. Medicare Advantage plans include health-maintenance organization (HMO) and preferred-provider organization (PPO) policies. Medicare Advantage is not supplemental insurance, but offers more extensive coverage for services not included in traditional Medicare, such as vision, hearing or dental treatments. Many offer prescription drug coverage too. If you have more extensive medical needs, or want more choice in what doctor you see or services you use, Medicare Advantage may be right for you. Medicare pays a set amount each month toward your Medicare Advantage premiums. Plans vary, so researching benefits of each policy or consulting an agent may help.
Part D is Medicare’s prescription drug coverage plan, added in 2006. Everyone on Medicare is eligible for prescription drug coverage through two avenues:
- Enroll in traditional Medicare (Parts A and B only) and add Part D coverage
- Enroll in a Medicare Advantage plan with drug coverage
Will Medicare Cover all My Healthcare Costs?
No. Medicare doesn’t pay all of your medical costs. Many participants pay thousands of dollars each year in premiums, deductibles, drug costs, and other out-of-pocket medical expenses. For example, in 2009, people who paid no premium for Medicare’s hospital coverage still had to pay $1,068 for up to 60 days in the hospital. Median out-of-pocket costs for individuals on Medicare was $3,103 in 2006, according to an AARP study. For people on fixed retirement or disability incomes, these costs can be a burden.
What is the Donut Hole?
Most Medicare drug plans include a coverage gap known as the donut hole, a temporary limit on what Medicare will pay for covered drug costs until you reach a very high, or catastrophic level. During the time your drug costs are in the donut hole, you pay all out-of-pocket costs for your drugs.
In 2012, once you and your plan have paid $2,930 for the total retail cost of covered drugs, you’re in the donut hole until your drug costs reach $4,700. Yearly deductible, coinsurance and copayments for drugs count toward the yearly accrued cost. Drug plan premiums and the cost of drugs not covered by the plan do not count toward your coverage total. Once you hit the catastrophic cost level, you pay either $2.60 per month for generic and $6.50 per month for brand-name drugs, or five percent of the medication's retail cost, whichever cost is higher.
However, in 2010 the government passed the Patient Protection and Affordable Care Act (ACA), offering Medicare participants certain discounts to offset costs in the donut hole. In 2011, Medicare began offering participants in the donut hole a 50 percent manufacturer-paid discount on covered brand-name drugs and a seven percent discount on generic drugs, although the entire drug price counts toward your total accrued costs.
ACA will offer additional savings to participants until the donut hole phases out in 2020. For more information on the drug coverage gap, go to Medicare.gov.
People with very limited financial resources may apply for a Social Security program called Medicare Extra Help, which may be worth up to $4,000 in assistance for costs related to Medicare prescription drug coverage. If you qualify for Extra Help, you pay no more than $2.50 for each generic drug and $6.30 for each brand name drug. For more information on eligibility, click here.
If you have traditional Medicare coverage but need treatments or services that aren’t covered, you may purchase supplemental insurance policies called Medigap plans. A Medigap policy is sold by an approved private insurer and must clearly identify itself as "Medicare Supplemental Insurance.” Medigap policies sold after 2006, when Part D was created, do not include drug coverage. People who purchased Medigap policies with drug coverage prior to 2006 cannot add Part D coverage; they must drop their Medigap drug coverage or get a new Medigap plan that doesn’t cover drugs.
What If I Don’t Want Medicare?
Even if you’re eligible, you don’t have to use Medicare. If you or your spouse are still working full time at 65 and insured by an employer’s group plan, you can stay on that policy. “Typically, group insurance prescription drug coverage is better,” says Suzy Alberts, a health underwriter in Detroit. Medicare plans include copayments and even a coverage gap for drug costs, says Alberts. “Some drugs for arthritis, such as Enbrel, are very expensive. So people need to understand their prescription drug plan. Make sure you get all the details.”
However, Cathy Daugherty, a health underwriter in Irvine, Calif., says Medicare laws could change depending on election outcomes in the future. “I highly recommend that anyone turning 65 get on Medicare now,” she says. “Some people put this off for different reasons, but there could be some lesser benefits in the future. Once you lock in your benefits, you are set.”
Daugherty used to advise employed people 65 or over stay on their company policies, but now she counsels them to get on Medicare. “My gut tells me changes are coming. The benefits are good now, so if you get on Medicare today, you get to keep those benefits.”
What Is the Future of Medicare?
The 2010 passage of the Patient Protection and Affordable Care Act (ACA) offered Medicare participants extended coverage, discounts and fraud protections. In 2011, Medicare coverage expanded under the ACA to include a yearly wellness visit and many preventive services, like bone mass measurement or cervical cancer screening, for no cost to those on traditional Medicare. Learn more about Affordable Care Act and Medicare benefits.
The ACA aims to cut wasteful spending that passes costs to Medicare members. For example, starting in 2014, Medicare Advantage plans must follow stricter policies to cut down on administrative costs or company profits. However, some experts fear that if providers must reduce these costs, they may slash benefits like vision or dental care to save their profits in the future.
Skepticism about the long-term impact of the ACA includes worries about cuts to the federal budget to finance the changes. According to a 2011 report in Generations: The Journal of the American Society on Aging, these cuts totaled more than a half-trillion dollars of cuts to Medicare funding. Cuts stoke fears that expanded coverage requirements of ACA will gut Medicare in the future. The ACA extends the funding of Medicare through 2029, but some experts fear that the source of the funding – reductions in government payment rates to Medicare providers like hospitals – may encourage some institutions to withdraw from participation in Medicare altogether. If that occurs, seniors and people with serious disabilities would be denied care. Others worry that if Medicare cannot sustain itself financially, these individuals will be without coverage. The debate is complex and ongoing.
To get more information on your options regarding Medicare, here are some helpful resources: