Medicare Basics: A Complete Guide

There are some critical aspects of Medicare that people are simply not aware of. Let’s clear the fog on Medicare, addressing the myths and misconceptions to help you make better and informed decisions when enrolling in Medicare.

What People Think

There are many misconceptions around the facts and details of Medicare. Some of these come from the general public, while others spring directly from Medicare’s annual cost and benefit changes.

The costs of Medicare, primarily the premiums, change every year. Couple that with the different plans and coverage amounts and you have a perfect storm for confusion. With all the nuances, beneficiaries can benefit from a centralized, definitive hub of information.

As a provider of health insurance for seniors, Medicare is seen as a necessary social program. Some are even lead to believe that it is free.

Unfortunately, it is not free of charges; it is made up of premiums, deductibles, coinsurance costs, prescription drug costs and other out-of-pocket costs.

While Medicare does have certain services that are free in a sense, it certainly is not free as a whole.

Part A, or hospital insurance premium, is free for eligible beneficiaries, those who have paid taxes to Medicare while working.
Medicare Part B is not free at all, as it charges a premium based on your income.
Parts C, D and Medicare Supplement cover different services and purposes; and they all charge costs of their own as well.

There are other factors to consider when arriving at the truth about Medicare, besides costs alone. It important to separate the facts from fiction. Read as we debunk some commonly held myths about Medicare.

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Know the Costs of Medicare

Here is a glance at the basic 2018 costs of Medicare.

Part A Part B PartC Part D
Premium $413 $134 Varies by plan $10-$100
Deductible $1,340 per each benefit period $183 Varies by plan $0
Co-insurance and Other costs $335/day for days 61-90 in hospital 20% of the service after you pay off the deductible Varies by plan 75% of prescription drugs after you pay off the deductible

Myths Vs Reality

Medicare is not ending any time soon because of the Affordable Care Act, which has been a law since 2010. The ACA was not intended to replace Medicare and it will not take away any of the guaranteed benefits of Medicare. In fact, the ACA has in part made Medicare stronger, as it prohibits cuts to Medicare guaranteed benefits. The Affordable Care Act has provisions purposed with reducing the costs of Medicare, eliminating fraud and waste, providing patient-centered care and covering preventative care against chronic conditions.

The AEP, or Open Enrollment Period, only affects those already enrolled in Medicare. This period runs from October 15-December 7 each year. Although a major enrollment period, the AEP is not the only time period in which people can enroll in Medicare. In fact, this is the period in which beneficiaries make changes to their plans, so it does not pertain to hopeful enrollees. For those new to Medicare, there is the IEP, or Initial Enrollment Period, which is a 7-month period surrounding your 65th birthday. The GEP, or General Enrollment Period, exists if you’ve missed the IEP. There’s also the Special Enrollment Period, or SEP, for those obtaining health insurance from current employers and thus miss their IEP.

Enrollment Period What It Means Who It Is For? Time Period
AEP Annual Enrollment Period Existing Medicare beneficiaries to make changes to existing plans October 15 – December 7
IEP Initial Enrollment Period New and first-time enrollees 7-month period surrounding your 65th birthday
GEP General Enrollment Period New and first-time enrollees who have missed their IEP January 1 – March 31
SEP Special Enrollment Period Those obtaining health insurance from current employers and thus miss their IEP For 8 months after the month your employer coverage ends or employment ends

There is no single payment that all beneficiaries adhere to. Instead, the amount you pay, particularly for the premiums is determined by earning history, which differs greatly from beneficiary to beneficiary. There are surcharges to beneficiaries with high incomes. Although the standard premium for Part B in 2016 was $121.80 per month, those who earned $85,000 as single filers or $170,000 as joint filers incurred additional monthly charges. Besides premiums, costs differ even more depending if the beneficiary is enrolled in Part C, Part D or Medigap.

Medicare is not nearing bankruptcy by any stretch. Although it is not without its share of financial challenges, Medicare is on track. For example, Medicare’s Hospital insurance (Part A) is solvent, or capable of paying 100% of the costs for hospital insurance, from now until 2028. In 2028, hospital insurance still won’t be burned out, as taxes will pay 87% of costs. Medicare physician, outpatient and prescription drug costs do not face bankruptcy and will not run out of funding. These are covered by premiums and general revenues.

While everyone could use additional benefits, policy changes would only increase costs. Restructuring Medicare is usually proposed in the context of a budget, with the end goal of saving money. This would be achieved be making middle and upper income beneficiaries pay more out-of-pocket costs, with less in return, killing the purpose of redesigning Medicare. For example, policy changes are constantly brought up among policymakers, one of which proposes the implementation of a single co-insurance rate, which would up the costs to beneficiaries. The Centers for Medicare and Medicaid Services (CMS) Innovation Center conducts tests on these types of policies to assure a desirable experience for Medicare beneficiaries. CMS gets some of its ideas from the beneficiaries themselves, by having them submit theirs online.

Lesser Known Facts and Happenings in Medicare

Medicare has been around for over half a century. It has undergone various changes, some of them more obscure than others. Here are a few components of Medicare that you should know when enrolling.

1. Cutbacks

In December 2014, Medicare implemented cutbacks on nonemergency ambulance services in 3 states: New Jersey, Pennsylvania and South Carolina. This 3-year pilot program was developed due to the rise in fraudulent transportation operators, who had increased the number of nonemergency ambulance uses. The pilot program seeks to cut down on fraud and abuse. Thus, it approves nonemergency ambulance coverage to only those who are completely bedridden.

2. Reasons Why Medicare Is So Expensive

Those interested in Medicare may have noticed that Medicare raises prices as time progresses. The main reason behind Medicare’s rising costs is due to its demographics. Now that baby boomers are entering the age of retirement, there are more seniors dependent upon Medicare. With more beneficiaries tied to Medicare, it has a wider net to cover. The Medicare system partially holds the blame for increasing costs, as doctors and hospitals capitalize on the fact that Medicare will pay for expensive drugs and procedures.

3. Lack of Information Can Lead to Poor Decisions

Medicare is not always direct in its communication with its beneficiaries or soon-to-be enrollees. Based on the Kaiser Family Foundation 2012 survey, over a third of low income seniors were unaware of Medicare’s enrollment periods.

Education on Medicare is problematic for many seniors. With little knowledge on the many facets of Medicare, seniors often make ill-informed decisions, several of which can cost them.

4. Gaps in Coverage

Traditional Medicare, or Medicare Part A and Part B, do not provide any type of safety net for financial havoc due to a catastrophic disease. This has not changed in 50 years. Claim rejections are also higher than rejections by private insurance companies. Medicare also does not cover supplies like eyeglasses, dentures and copies of X-rays. It doesn’t cover services like routine eye exams, foot care, long term care, dental checkups and cleanings.

The Truth About Medicare Supplement

Medicare Supplement is a private insurance policy that beneficiaries can obtain from private companies. Medicare Supplement can help pay for some of the healthcare costs and services that Original Medicare doesn’t cover. Essentially, Medicare Supplement fills the gaps of original Medicare for a more comprehensive health insurance. Some of the services and costs Medicare Supplement covers include:

Medical Care Abroad

Doctor’s Office Visits

Preventative Testing

Outpatient Hospital Visits

Inpatient Hospital Visits

To shop for Medicare Supplement, you must be at least 65 and enrolled in Medicare Part A and B. You can apply for Supplement even if you have had a Medicare Advantage Plan, so long as you leave the Advantage Plan before you begin Medigap.

Medicare Advantage cannot work with Medigap, as Medigap is not allowed to pay for the copayments and other costs of Medicare Advantage, or Part C. Medigap can only help pay for Original Medicare.

Understanding Medicare

There are many myths, half-truths and mistruths circulating about Medicare. Despite the storm of confusion brewing among many hopefuls and enrollees, it is best to consider the facts outlined above when considering Medicare. If you are still unsure about Medicare or want to learn how a Medicare Supplement plan can help you, please contact one of our informed agents.

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