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Understanding Medicare & Supplement Insurance Plans
Medicare is health insurance for people who are 65 or older, or are on Medicare under age 65 due to a disability. Medicare provides basic health insurance coverage, however it by far does not cover 100% of all hospital and medical expenses. Medicare generally only covers partial expenses, and for most procedures leaves you with paying the additional 20% (Medicare only cover's 80%). Medicare also has large deductibles for hospitalizations, etc. For example, the standard initial Medicare Part A Hospital Deductible is $1,132 (in 2011). For these reasons, most people on Medicare will purchase Medicare Supplemental Insurance to cover these gaps.
The Four Parts to Medicare
There are four parts to Medicare coverage:
- Part A (Hospital Coverage)
- Part B (Medical Coverage)
- Part C (Medicare Advantage) *Replacement of Medicare
- Part D (Prescription Drug Plan)
Most people only have Part A, Part B, and optionally Part D. To cover the gaps left by Medicare, most people will also purchase a Medicare Supplement Insurance Plan.
Keep in mind that each of these parts of your Medicare coverage will be paid for separately. Your Medicare Part A & B will likely come out of your social security check once per month. You will then pay a separate premium for your Part D drug plan - again coming out of your social security payment. Finally, if you purchase Medicare Supplement Insurance, that will be a separate payment which you can have automatically deducted from your checking account once per month if you wish.
As a sample breakdown of payments, John Smith, age 65, has Medicare Part A, Part B, Part D, and a Medicare Supplement Insurance Policy. He pays:
- Part A = Free (he worked at least 10 years)
- Part B = $115.40 /month (standard Part B premium in 2011)
- Part D = $30 /month (average drug plan cost)
- Medicare Supplement Policy = $120 /month (estimated cost)
In this example John Smith's total cost for healthcare would be $265.40 /month. Keep in mind that there is no Medicare Supplement Policy that will include vision, dental, or drug coverage. These all must be purchased as separate policies. You can contact us to find affordable options. Remember, Medicare typically does cover some vision/dental procedures like cataract surgery for example - if they consider it to be "medically necessary".
Medicare Part A
Medicare Part A provides partial coverage for hospital services. Medicare Part A pays for inpatient hospital care, skilled nursing facility (SNF), blood services, and hospice care. Skilled nursing facility (SNF) care is for recovery from a sickness, injury, or a surgery, and is NOT long-term care like many people commonly confuse. Skilled nursing care is only for short term care (max 100 days), and currently, Medicare stipulates that you must be showing continuous improvement in the SNF everyday or else they will terminate that benefit.
Medicare Part B
Medicare Part B provides coverage for medical services. These services include medical expenses either in or our of the hospital, outpatient hospital treatment such as doctor's services, blood services, clinical laboratory services (diagnostic tests), home health care (approved medically necessary skilled care services and supplies), and durable medical equipment like wheelchairs, walkers, etc. Medicare Part B also covers some preventive services.
Medicare Part C (Advantage Plans)
Medicare Part C is also known as Medicare Advantage, or Medicare Replacement. Medicare Part C (Advantage Plans) are NOT Medicare Supplements (they are NOT in addition to, but they are a direct replacement). If you elect to enroll in Medicare Part C, you will be electing to replace your Medicare parts A & B coverage with the Part C (Advantage Plan). You will still continue to pay your monthly Medicare charges, although will not have Medicare Part A & B as your insurance - it will be completely 100% replaced by your Medicare Advantage Plan.
Medicare has contracts with private insurance companies that sell Medicare Advantage Plans and these companies are required to provide the benefits to the Medicare recipient. We do not recommend Medicare Advantage Plans due to the hassle, complications, and current legislation that negatively affect these types of policies. Below are a few features of these policies in which we don't agree with these plans:
- Plans require you to only use certain doctors and hospitals
- Pre-certifications & referrals usually needed to see specialists
- Not guaranteed policy for life and can be canceled at anytime (not renewable contract)
- Funding cuts from Medicare will likely hurt plan benefits and increase plan costs
- Locked into contract for 12 months
- High co-pays and deductibles (hospital deductibles average $150-$200 /day)
- Lack of choices and decisions to be made by policyholder
Although Medicare Advantage plans are beneficial for some people, most of our clients prefer Medicare Supplement Plans and find them to be superior in coverage, more affordable over the long run, and much easier to manage providing long-term peace-of-mind.
Medicare Part D (Prescription Coverage)
Medicare Part D is the Medicare Drug Program. Medicare Part D is simply a drug plan. Medicare has contracted with private insurance companies to offer prescription drug Insurance to people on Medicare, and Medicare will help subsidize the cost. There are a variety of plans to choose from and they are all priced independently. The national average drug plan cost is roughly $30 - $35 per month. These plans will generally pay a portion of each medication that you are taking. To learn more about prescription drug plans, visit our page on Medicare Part D Drug Plans.
Medicare Supplement Insurance (Medigap)
Medicare Supplement Insurance is a form of insurance that is designed by the Centers for Medicare and Medicaid Services (CMS). These policies are designed by Medicare so the different companies offer the same benefits for the policies, the only difference between insurance companies is the price they charge. Medigap policies are designed in a letter system ranging from "Plan A" through "Plan N" with the most common plans being Medicare Supplement Plan F, Medicare Supplement Plan G, and Medicare Supplement Plan N. These policies are designed to cover some or all of the coverage gaps left by Medicare. With most Medicare Supplement Plans you have no co-pays, no deductibles, and you can choose any doctor or hospital within the U.S. that accepts Medicare.
- Initial Enrollment Period (IEP)
- Annual Election Period (AEP)
- Open Enrollment Period (OEP)
- Medicare Advantage Dis-enrollment Period (MADP)
There is much confusion about the Initial Enrollment Period, Annual Election Period, Open Enrollment Period, and Medicare Advantage Dis-enrollment Period - all meaning something completely different. Below is a clear description of each.
Initial Enrollment Period (IEP)
The Initial Enrollment Period for Medicare Parts A and B lasts 7 months, starting 3 months before your eligibility month, and ending 3 months after the month of eligibility. The month of eligibility is the month of your 65th birthday, or, if you become eligible due to a disability, your month of eligibility is the 25th month of receiving Social Security Disability Insurance (SSDI).
Annual Election Period (AEP)
The Annual Election Period is an annual timeframe lasting from October 15th through December 7th (starting in 2011). During this timeframe, people with a Medicare Advantage Plan or Medicare Part D Drug Plan have the choice to drop or switch plans, with the new plan becoming effective the January 1st of the upcoming year. Do NOT confuse this timeframe for Medicare Supplement Insurance. People who have a Medicare Supplement Plan can change policies at anytime throughout the year without ever being locked into any annual contracts.
Open Enrollment Period (OEP)
The Open Enrollment Period referring to Medicare Supplement Insurance is a period of time in which a person new to Medicare will be guaranteed a Medicare Supplement Insurance plan without being asked health questions. This period officially starts on the date when you are both age 65 and enrolled into Medicare Part B for the first time. During this time you can purchase any Medicare Supplement Plan of your choice and not be declined coverage due to health conditions - no matter what they are. Many companies will also allow you to sign up for a Medicare Supplement (Medigap) plan up to 6 months before turning 65. Also if you joined a Medicare Advantage Plan when first eligible, and within the first year decide to go back to original Medicare with the option of purchasing a Medicare Supplement, many times you can get the supplement plan under a guarantee issue basis - no health questions asked.
Medicare Advantage Dis-enrollment Period (MADP)
The Medicare Advantage Dis-enrollment Period is new as of 2011. This is a new period designed to allow people who currently hold a Medicare Advantage Plan to terminate that coverage and switch back to Original Medicare with the option of purchasing a Medicare Supplement Insurance Policy. This period lasts from January 1st to February 14th.
If you have any questions about these terms, enrollment periods, or Medicare Supplement Insurance, we have Medicare Specialists standing by ready to answer all your questions. Please call us now at: (855) 419-3826.
How to Enroll In Medicare?
Most people new to Medicare are overwhelmed by their options are are not quite sure how to go about enrolling in Medicare. The process is very easy once you know what to do. You either have the option to enroll in Medicare by phone, online, or in person at your local Social Security office. We have developed a specific page that outlines the steps you should take to get enrolled in Medicare. View the following page to learn more: how to enroll In Medicare
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