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Every day 10,000 of us turn 65 and, whether we continue to work or not, we need to address our Medicare eligibility.  Should we enroll in Medicare or not?  If we enroll, do we enroll for all of the letters (A, B, C, D) or just some of them?  Do we enroll in a Medicare supplement plan or a Medicare Advantage plan?  Are we better off staying on our employer’s plan or going onto an individual plan? And how much will each of these choices cost?

These are serious decisions that can have long-reaching consequences so the one consistent suggestion is to tread carefully and make decisions based on as much information as we can handle.

Let’s start with the first question: Should we enroll in Medicare or not?  Typical of most Medicare questions, the answer is “it depends.”

If we are currently covered on an individual policy or on an employer plan for a group of less than 20 employees, the answer is likely yes.

Individual policies can continue to accept our premiums once we turn 65, but there is no mandate that they actually pay our claims.  Even while processing our premiums, plans CAN require that Medicare coverage be primary, even if we have not enrolled. Beware that if your Medicare coverage is not in place, claims that would normally be considered Medicare eligible may be denied by our individual policy carrier.

Employer-based plans for groups of less than 20 employees are considered secondary after Medicare has covered the claims for which it is responsible.  Without proper Medicare parts A & B coverage in place, the bills that would be Medicare-eligible are not the responsibility of the private insurance company, but ours, personally.  There are a few insurance companies that will pay the claims for which Medicare is responsible, but they reserve the right to drop that responsibility whenever they choose.

The other problem that comes up if an insured does not have Medicare parts A & B in place, occurs when an employer changes insurance companies.  The new carrier may not have the same provisions to cover the Medicare-eligible bills, and enrolling in Medicare is not guaranteed at the time we may need to enroll in coverage.  When Seniors are determined to have missed their eligible enrollment period, they can only enroll in Medicare during the first quarter of the next year, with a July 1 effective date.  Additionally, there are financial penalties which will be imposed in this situation.  All of this can be avoided by enrolling for the correct coverage at the appropriate time.

If we are currently covered through an employer-based plan for a group of more than 20 employees there is no requirement to enroll in Medicare since the private insurance company’s coverage is primary.  In fact, if we enroll in Medicare part B, not only will we be paying unnecessary premiums, but we will affect our ability to enroll in the Medicare supplement plan of our choice without medical underwriting when we leave the group plan.

Another concern for individuals who are Medicare-eligible comes up when those individuals are enrolled in a high deductible health plan.  Contributions can only be continued into the H.S.A. account (which often accompanies a high deductible health plan) if we are not covered through any part of Medicare, so beware not to enroll in part A as so many individuals do. These inappropriate H.S.A. contributions create opportunities for penalties.   Plus, also be prepared for a possible late enrollment penalty when we leave our employer plan and enroll in a Medicare part D prescription plan.  Unless the deductible on our high deductible health plan is quite low, the prescription portion of our coverage will likely not be deemed creditable by Medicare, resulting in a late enrollment penalty.

All this is a warning to tread carefully in the Medicare enrollment process and to remain vigilant in how our choices change as we begin to be impacted by Medicare eligibility.  Our initial choices will need to be well thought out and decisions may need to be changed as our circumstances change.

Let’s go to the second question : If we enroll, do we enroll for all of the letters (A, B, C, D) or just some of them?

It might be helpful to first define what these four letters represent before determining which parts of Medicare apply to our situations.

Medicare part A is the hospital and home services portion of Medicare and primarily covers charges in the hospital, skilled nursing facilities, hospice and home health care.

Medicare part B is the portion of Medicare that covers medical services.  These include physicians’ services, medical & surgical services and supplies, therapies, diagnostic tests and lab work as well as some wellness expenses.

Medicare part C, also known as Medicare Advantage, are health plan options that are approved by Medicare, but run by private companies

Medicare part D provides prescription drug coverage.

So how do we choose which plans we need?

If we are covered on a health insurance plan sponsored by a company that employs 20 or more employees there is a good chance that we may not need to enroll in any of the parts of Medicare.  In some cases, if we do enroll we may well be paying excessive and unnecessary premiums and, in other cases, we may be prevented from participating in programs that are important to us.  Although the employer’s health insurance plan is primary in most cases, there are some situations where coverage on that plan may still require enrollment in at least Medicare part A, possibly Medicare parts A & B.

If we are covered on a health insurance plan sponsored by a company that employs less than 20 employees, it is safest to enroll in Medicare parts A & B in the 3 months before the month in which we turn 65.  Medicare is the primary provider of coverage and the private health insurance plan will pay bills not covered by Medicare.  If Medicare coverage is not in place, the private health insurance company is not responsible for bills that would otherwise fall under Medicare jurisdiction. There are some insurance carriers who are willing to take on the responsibility to cover bills that would otherwise fall to Medicare, but they can drop that responsibility if they choose to. Additionally, an employer may change to an insurance carrier that does not cover the claims that normally fall under Medicare, and enrolling into Medicare coverage is not guaranteed at the moment that we may need it.

If we are covered on an individual health insurance plan, we would be best served to enroll in Medicare parts A & B in the 3 month period before the month in which we turn 65.  We will also want to consider whether a Medicare part C (Medicare Advantage) plan is a better option than traditional Medicare parts A & B.  Finally Medicare part D (drug) coverage will be a serious consideration as prescription drug coverage falls primarily under this section of Medicare and will need to be added if a Medicare supplement plan is elected rather than a Medicare Part C plan.

We should look carefully at our coverage before turning 65 and give ourselves plenty of time to determine what we need to do and what we may benefit from doing.  It is a good idea to start to ask questions at least 90 days before the month in which we turn 65.  Making decisions at least 60 days before the month in which we turn 65 is highly recommended.

The third question in our series, Do we enroll in a Medicare supplement plan or a Medicare Part C (Medicare Advantage) plan? forces us to look at how we expect to use healthcare in our future.

Medicare parts A & B cover a wide range of services and, when included with Medicare part D coverage, they address almost all of the services most of us consider “healthcare.”  There are deductibles and copays in our traditional Medicare coverage which do not resemble the coverage which most of us have under age 65.  The hospital deductible is applied each time we enter the hospital (with some caveats,) while the Medicare part B deductible for physician and medical services is applied annually and copays, blood costs and other limitations are quite different from the deductible & copay arrangements most of us are accustomed to.

Add to that the question of whether or not a provider accepts Medicare assignment and many of us feel a bit confused.

A Medicare part C plan will look much more familiar with deductibles, copays and a provider list provided by a single insurance carrier.  The plan we choose may be a PPO, an HMO or a point of service plan.  A Medicare part C plan will provide coverage which is actuarially the equivalent of Medicare parts A & B, but our claims costs will be capped at an amount determined by the plan we choose.  If we enroll in Medicare parts A & B only, we face significant financial risks.  The first risk is that we will be charged the hospital deductible under Medicare part A each time we are admitted to the hospital unless it is a re-admission within 60 days of the prior admission.   The second is that we are responsible for the 20% co-insurance for physicians’ services, lab work, diagnostic tests and other charges that are addressed in Medicare part B coverage with no cap.  20% responsibility for a whole year can prove financially devastating, so the cap provided by the Medicare part C plan can provide a terrific safety net.

The other option to limit our financial responsibility is to consider a Medicare supplement plan.  The government allows private insurance companies to provide up to 10 plans which are vetted by Medicare.  Each provides slightly different levels of coverage, but whichever plan we choose it will be identical to all others of its title no matter which insurance company we select.  Often known as “Medigap” coverage, these plans fill the gaps left after Medicare parts A & B cover what they are committed to pay.  Coverage can be provided for just a few of the gaps or all of the gaps and, with proper plan selection, we can protect ourselves from all financial exposure left after Medicare parts A & B pay their share.

Whether we are considering Medicare parts A & B only, Medicare part C (Medicare Advantage) instead of Medicare parts A & B, or Medicare parts A & B along with a Medicare supplement, we need to start our research well in advance of the month in which we turn 65 so that we can make a good and timely decision.

Our fourth decision is :  Are we better off staying on our employer’s plan or going onto an individual plan?

Some of us will continue to have employer-provided health insurance coverage if we work beyond our 65th birthday.  Whether to enroll in Medicare parts A and / or B will need to be addressed, but we will also need to look carefully at the coverage we have through our group vs. the coverage we can obtain on our own.

Those of us who are on employer plans for groups of 20 or more employees should be able to stay on our plans with minimal upheaval.  If we choose to enroll in Medicare part A, and have several years of work history, we should not have any premium cost, but we do need to be aware of the plan design we are on in our group.

If we are on a high deductible health plan and are making contributions to an H.S.A. account, we need to stop making those contributions before enrolling in any parts of Medicare.  There may be penalties for contributions made to our H.S.A. accounts during the calendar year in which we turn 65 if we do enroll in any parts of Medicare, so we need to tread carefully.

Additionally, if we continue our coverage on a high deductible health plan once we are Medicare eligible, we need to be aware that there is a good chance that our drug coverage may not be creditable coverage under Medicare.  If that is the case, we could be assessed an extra surcharge when we finally enroll in a Medicare part D plan.  The penalty may be small, but it will be forever.

If we are insured on plans provided by our employers and the company has less than 20 employees we will likely need to enroll in both Medicare parts A & B.  There is a premium charged for Medicare part B which will be added to the premium we already pay for our group medical coverage.  In some cases, employers help to offset some of the Medicare premiums; in many they do not.

Although our group insurance becomes secondary to Medicare in the smaller group arena (under 20 employees,)  group insurance premiums under most plans do not reduce when we begin to pay our Medicare part B premiums.  When we look at the additional premium and no improvement on our current coverage, we are motivated to look at individual options.  Many of us have discovered that election of either a Medicare part C (Advantage) plan or Medicare supplement and a Medicare part D in addition to Medicare parts A & B can provide much more comprehensive coverage for significantly less premium.

It certainly behooves us to look at all of our options as we approach age 65 and again each year at open enrollment of our group coverage.  Our situation can change from year to year and we need to remain vigilant about selecting the most advantageous plans for our current situation.

Our final question in this series is And how much will each of these choices cost?

If we work for an employer who has 20 or more employees, we can stay on exactly the coverage we currently have and pay exactly what we have been paying.  Looking into the individual options described above could save quite a bit in premiums, however, and certainly could reduce the costs we face when we use our plans, depending on which route we take.

If we work for an employer who has less than 20 employees we need to look carefully at the cost of Medicare part B added to our current premiums.  Medicare part B monthly costs begin at $134 in 2017 and increase based on our Modified Adjusted Gross Income 2 years ago.  We need to look carefully at what level of premium we will face based on our tax filing 2 years ago.

Medicare part C (Advantage) premiums can be little to nothing per month, but we are required to pay our Medicare part B premium at whatever level Medicare determines based on our Modified Adjusted Gross Income 2 years ago.  We will need to look carefully at any deductibles or copays and particularly at the out of pocket limit to see what our potential costs will be when we use our plans.  We will also need to be careful in our research of provider and drug lists to be sure we do not find ourselves surprised when we use our plans.

Medicare supplement plan premiums vary by age and are normally quite a bit less than our group medical rates, but we need to be careful that we get rates that are specific to our zip codes, ages and tobacco use status.  The costs to use Medicare supplement plans are usually very low so the small premium is often a welcome change from the higher group premium and possibly a much higher cost in deductibles, co-pays and co-insurance when use the group plans.

Medicare part D (drug) plans are normally very reasonable, but we need to do the homework at www.Medicare.gov to be sure that we enroll in the plan which is most cost-effective for our own specific list of drugs.  Additionally, we need to be careful that we determine which pharmacies are “preferred” in the plan we select. If we do not do the extra research, we could find ourselves in the right plan but at the wrong pharmacy. The difference between “preferred”, “standard” and “non-participating” pharmacies can produce huge variations in our financial responsibility for the cost of our drugs.

If you desire to explore your Medicare eligibility and require assistance navigating the options, don’t hesitate to reach out to us at CDA, Inc. for personalized guidance!