Facing the Complexities of Medicare

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Medicare is a complex insurance program that beneficiaries and professionals may find difficult to manage. Knowing the program's fundamental characteristics can assist in reaping its benefits and avoiding costly blunders. This Medicare guide provides an overview of essential Medicare basics and actions you may take to ensure you receive the benefits to which you are entitled.

This tutorial will assist you in understanding the fundamentals needed to make Medicare decisions. It discusses Medicare eligibility and enrollment, health and medication coverage alternatives, and Original Medicare expenses. It also contains helpful hints to assist you in making coverage selections. Note that this information isn’t comprehensive, and if you have complex issues, call 1-800-MEDICARE or your state's Health Insurance Help Program (SHIP). Call 1-877-839-2675 or visit www.shiptacenter.org.

Medicare eligibility 

If you fulfill one or more of the following requirements, you are eligible for Medicare:

1. You are at least 65 and eligible for Social Security or Railroad Retirement payments.

2. You are 65 or older, a US citizen or a permanent resident who has resided in the US continuously for five years before application, and either a US citizen or a permanent resident.

3. You are 65 or older, a US citizen, or a permanent resident who has resided in the US for at least five years.

4. You have received Social Security Disability Insurance (SSDI) payments for at least 24 months.

5. You are eligible for SSDI because you have ALS (Lou Gehrig's disease).

6. You have End-Stage Renal Disease (ESRD), generally known as kidney failure, and you, your spouse, or your parent have paid Medicare taxes for the required period of time, as determined by the Social Security Administration (SSA).

It is worth noting that if you're 65 or older, you don't have to give up your Social Security or Railroad Retirement benefits to get Medicare.

In addition, if you are 65 or older and are not eligible for Social Security or Railroad Retirement benefits but fulfill the citizen or permanent resident criterion, you must pay a Medicare Part A payment (see Part A costs for more information). Your or your spouse's employment history determines the amount you pay for Part A (how long you paid Medicare taxes while working). 

How Medicare works 

Medicare is a government health insurance program provided to all seniors and many people with disabilities, regardless of income.

Medicare is divided into four parts: Part A, Part B, Part C (Medicare Advantage), and Part D.

1. Inpatient hospital treatment, skilled nursing facility (SNF) care, home health care, and hospice services are all covered under Medicare Part A.

2. Outpatient medical care, including medically necessary services provided by a licensed health professional, outpatient hospital care, durable medical equipment (DME), laboratory tests, X-rays, therapy services, behavioral health services, and ambulance services, are all covered by Medicare Part B.

3. Medicare Part C provides an alternative method of receiving Medicare benefits (see below for more information).

4. Most outpatient prescription medicines are covered by Medicare Part D. Part D is provided by commercial firms.

Unless you opt-out, you will have Original Medicare, meaning you will get your Part A and B benefits straight from the federal government. If you want prescription medication coverage with Original Medicare, you must typically select and join a different private drug plan (PDP).

If you enroll in a Medicare Advantage Plan, you still have Medicare. Instead of Original Medicare, you can choose a Medicare Advantage Plan, commonly known as Part C or a Medicare private health plan, to get your Medicare benefits. Each Medicare Advantage Plan must offer all Part A and Part B services covered by Original Medicare. Still, they may do so under various regulations, fees, and limits, altering how and when you receive treatment. Part D prescription medication coverage is available via several Medicare Advantage Plans. Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are the two most frequent forms of Medicare Advantage Plans (PPOs). 

Medicare Enrollment 

Enrollment in Original Medicare is automatic for some people and does not require an application; however, others must actively enroll in Medicare services.

If you receive Social Security or Railroad Retirement payments, you should be automatically enrolled in Medicare Parts A and B when you reach the age of 65. If you are under 65 and receive SSDI or a railroad disability pension, you are automatically enrolled in Medicare beginning in the 25th month you receive a check. If you obtain SSDI or railroad disability due to ALS, Medicare begins the first month your SSDI or railroad disability benefits begin. You are not subject to the 24-month waiting period.

1. If you qualify for Social Security retirement or Railroad Retirement benefits but are not getting them when you reach 65, you must actively enroll in Medicare and apply with your local Social Security or Railroad Retirement Board office.

2. You are ineligible for Social Security retirement or Railroad Retirement benefits due to a lack of work history but are eligible for premium Part A.

3. You are eligible for Medicare because you have ESRD and your spouse or parent has a satisfactory employment history.

If you are eligible for Medicare but are not already receiving Social Security retirement or Railroad Retirement benefits, you have three options for enrolling in Medicare Parts A and B: 

1. Initial Enrollment Period (IEP) 

Your Initial Enrollment Period lasts seven months, beginning the month of your 65th birthday. This encompasses the three months preceding, the month of, and the month after your 65th birthday. The month you sign up for Medicare determines when your coverage begins. You can apply for Medicare anytime during your IEP by visiting your local Social Security office.

1. If you join within the first three months of your IEP, coverage begins when you become Medicare-eligible.

2. If you enroll in the fourth month of your IEP, coverage begins the month after you enroll.

3. If you enroll during the fifth month of your IEP, coverage begins the second month after you enroll.

4. If you enroll in the sixth or seventh month of your IEP, coverage begins the third month after you enroll.

As previously stated, if you are under 65 and are qualified for Medicare due to disability, you should be automatically enrolled in Medicare Parts A and B. Your Medicare coverage will begin at the start of the 25th month after you receive SSDI or Railroad Retirement disability compensation. If you have trouble enrolling in Medicare or have further concerns, contact Social Security at 1-800-772-1213. 

2. General Enrollment Period (GEP)

If you are eligible for Medicare but did not enroll during the Initial Enrollment Period (mentioned above), you can enroll during the General Enrollment Period. The GEP is held annually between January 1 and March 31, with coverage beginning on July 1. If you sign up during the GEP, you may suffer late enrollment fines and coverage gaps. If you do not enroll in Part B when you first become eligible and are not qualified for the Part B Special Enrollment Period (see below), you may be subject to a 10% premium penalty for every 12 months you postpone your enrollment. In most situations, you will be required to pay the fine every month for the duration of your Medicare coverage. For example, if you were eligible for Part B at 65 but delayed enrollment for five years and then enrolled during the GEP, you would be penalized 50%. 

3. Special Enrollment Period (SEP) 

Special Enrollment Periods (SEPs) are chances to enroll in Medicare that occur outside of regular enrollment periods and are prompted by certain conditions. For example, the Part B SEP allows you to postpone Medicare enrollment without penalty if you were previously covered by an employer group health plan (GHP) through your or your spouse's (or, in certain situations, a family member's) current job. You can enroll in Medicare without penalty for up to eight months after losing your GHP or stopping working (or your spouse or family member), whichever comes first. It is important to note that other types of insurance from your employer, such as COBRA or retiree insurance, do not qualify you for a Part B SEP. 

Medicare Part A 

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The majority of people receive Medicare Part A for free. You are eligible for premium-free Part A if you: 

1. Have worked in any employment where you paid Social Security taxes in the United States for at least 40 calendar quarters (10 years);

2. Are eligible for Railroad Retirement benefits.

3. Have a spouse who is eligible for premium-free Part A

4. Are under the age of 65 and qualify for Medicare due to a disability, ESRD, or ALS

If you do not fulfill the above conditions, you will likely have to pay a monthly premium for Part A. If you have worked between 7.5 and 10 years, your Part A premium in 2022 will be $274 monthly. If you have worked for less than 7.5 years, the monthly premium is $499. Delaying enrollment may result in a penalty in either situation. For further information, call Social Security (1-800-772-1213) or visit www.ssa.gov. 

Medicare Part B

With Medicare Part B, the majority of people pay a monthly fee. The usual Part B premium in 2022 is $170.10 per month. Note that if you delayed Part B enrollment and were not qualified for a Special Enrollment Period, you might face an extra monthly penalty. If your income exceeds a specific threshold, you may be required to pay an additional sum in addition to your Part B premium. You may have to pay extra for Part B each month if you are single and earn more than $91,000 a year or are married and earn more than $182,000 a year. Original Medicare covers most Part B services at 80% of the Medicare-approved price. If you see a participating provider, you are liable for the remaining 20% of the covered service cost. This 20% is referred to as co-insurance. For example, if a doctor's visit costs $100, Original Medicare will pay $80 to the doctor, and you will pay a $20 co-insurance.

If you have original Medicare, make every effort to see participating physicians. Participating providers take the Medicare-approved amount in full as payment. Physicians that do not accept assignments may charge you up to 15% more for covered services than Medicare allows.

While most doctors accept Medicare, some providers, known as opt-out providers, do not. Opt-out providers can charge whatever they want for services but must adhere to specific guidelines. If you see an opt-out provider, you are liable for the total cost of your care.

To cover the costs associated with Original Medicare, you can acquire supplemental coverage, known as a Medigap plan. Medigap policies only work with Original Medicare, not Medicare Advantage Plans. If you want information on enrolling in Medigap in your state, contact your SHIP or call 1-800-MEDICARE.

Medicare Advantage plans typically charge a standardized copayment for doctor's visits and several other Part B services. Many plans only cover services if they are provided by doctors, hospitals, or pharmacies in the plan's network.

If your income and resources are restricted, you may be eligible for a Medicare Savings Program (MSP) to assist in paying your Medicare expenditures. At the very least, an MSP pays your Part B payment and removes late enrollment penalties. You can contact your SHIP at 1-877-839-2675 or visit www.shiptacenter.org for further information about MSP eligibility criteria in your state.

Medicare Part D

Medicare Part D covers most outpatient prescription medicines. This coverage is exclusively accessible through Medicare private medication plans, either as a stand-alone plan for Original Medicare recipients or as a package of benefits included with a Medicare Advantage Plan. Enrolling in Part D when acquiring Medicare would be best unless you have creditable coverage (described below). Delays in registering may result in coverage gaps and enrollment fines.

On average, acceptable medication coverage is as good as or better than the minimal Part D benefit. If you are thinking about delaying Part D enrollment because you currently have prescription drug coverage, find out if your coverage is creditable. If you continue to have creditable medication coverage, you will not be penalized if you elect to enroll in Part D later. You will also have a two-month Special Enrollment Period to enroll in a Medicare Part D plan. Please ensure your employer or plan sends you a note each year alerting you if your prescription coverage is creditable.

Enrolling in Part D may result in you or your family members losing access to retiree or union medication coverage. Contact your previous employer or union benefits administrator before enrolling in Part D to inquire about how the plan works with Medicare.

Suppose you do not enroll in Part D when you initially become eligible and do not qualify for a SEP. In that case, you may enroll in or adjust your Part D coverage during the Autumn Open Enrollment Period. Fall Open Enrollment is every year from October 15 to December 7. If you enroll in Part D for the first time via Autumn Open Enrollment, you may be subject to a late enrollment penalty.

Each Part D plan has a formulary (a list of eligible pharmaceuticals), varying pricing and coverage regulations, and a network of pharmacies, frequently including both preferred and nonpreferred pharmacies.

Before enrolling in or altering your medication coverage:

1. Contact the plan of interest and ensure it suits your needs.

2. Check to see if your medicines are on the plan's formulary, if your pharmacies are in-network, and other important information.

3. Get as much information as possible in writing.

Part D expenses vary depending on the plan. A monthly fee is frequently charged for plans. In 2022, the national average Part D plan premium was $33.37.2.

If your income exceeds a specific threshold, you may be required to pay an additional sum in addition to your Part D premium. You may have to pay extra for Part D each month if you are single and earn more than $91,000 a year or married and earn more than $182,000 a year.

If your income and resources are limited, you may be eligible for Extra Help, a government aid program that helps pay for part or all of the out-of-pocket expenses of Medicare prescription medication coverage. Call Social Security at 1-800-772-1213 to apply for additional assistance or go to www.ssa.gov.

Inquire with your investment expert for further information on bridging gaps in your Medicare coverage and specific programs for those on fixed incomes.

Medicare appeals

You can submit an appeal if Medicare refuses coverage for necessary treatment or medication. If you begin a request, getting support from your provider is a good idea.

For additional information regarding the appeals procedure, call 1-877-839-2675 or go to www.shiptacenter.org. 

Important Disclosures
This material is provided for general and educational purposes only and is not investment advice. Your investments should correspond to your financial needs, goals, and risk tolerance. Please consult an investment professional before making any investment or financial decisions or purchasing any financial, securities, or investment-related service or product, including any investment product or service described in these materials.

Portions of this article were sourced from the work of MFS Heritage Planning. Neither MFS nor any of its subsidiaries are affiliated with Optima Capital Management.

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