The annual Medicare Open Enrollment Period (OEP) began on October 15 and will end on December 7, 2019. During this period, Medicare beneficiaries (generally people age 65 or older who reside in the United States) have the opportunity to sign up for Medicare, change the plan they are currently enrolled in, or enroll in supplemental coverage, such as Medicare Part C (Medicare Advantage) or Medigap.
As you prepare to take advantage of the Open Enrollment Period, information is your most valuable resource. Here's a look at what Medicare is, what is changing for 2019, and where you can turn for guidance.
What is Medicare?
Medicare coverage consists of two main parts: Medicare Part A (hospital insurance) and Medicare Part B (medical insurance). These parts together are known as Original Medicare. A third part, Medicare Part C (Medicare Advantage), covers all Part A and Part B services, and may provide additional services. A fourth part, Medicare Part D, offers prescription drug coverage that can help you handle the rising costs of prescriptions.
Medicare Part A (hospital insurance)
Generally known as hospital insurance, Part A covers services associated with inpatient hospital care. These are the costs associated with an overnight stay in a hospital, skilled nursing facility, or psychiatric hospital, including charges for the hospital room, meals, and nursing services. Part A also covers hospice care and home health care.
Medicare Part B (medical insurance)
Generally known as medical insurance, Part B covers other medical care. Physician care — whether you received it while inpatient or outpatient at a hospital, at a health-care facility, or at a doctor's office — is covered under Part B. Laboratory tests, physical therapy or rehabilitation services, and ambulance service are also covered. Medicare Part B also covers 100% of the cost of many preventative services and an annual wellness visit.
Medicare Part C (Medicare Advantage)
In general, a Medicare Advantage plan is a private healthcare plan that contracts with Medicare to provide Part A and Part B benefits. A Medicare Advantage plan covers all of the services that Original Medicare covers except hospice care. We will go into more detail about Medicare Advantage plans later in this piece.
Medicare Part D (prescription drug coverage)
All Medicare beneficiaries are eligible to join a Medicare prescription drug plan offered by private companies or insurers that have been approved by Medicare. Although these plans vary in price and benefits, they all cover a broad number of brand name and generic drugs available at local pharmacies or through a mail order provider.
Medicare prescription drug coverage is voluntary. If you decide to join a plan, keep in mind that some plans cover more drugs or offer a wider selection of pharmacies (for a higher premium) than others.
In addition, please note that you could be penalized for not enrolling in a Part D prescription drug plan when first eligible. This penalty is called the late enrollment penalty (LEP), and Medicare calculates it by multiplying 1% of the "national base beneficiary premium" ($33.19 in 2019 and $32.74 in 2020) times the number of full, uncovered months you didn't have Part D or creditable coverage. The monthly premium is rounded to the nearest $.10 and added to your monthly Part D premium. The national base premium may increase each year, so your penalty amount may also increase each year.1
What is not covered by Medicare Parts A and B?
Some medical expenses are not covered by either Part A or B.
These expenses include:
- Your Part B premium
- Deductibles, coinsurance, or co-payments that apply
- Most prescription drugs
- Dental care
- Hearing aids
- Eye care
- Custodial care at home or in a nursing home
Medicare Part C, also known as Medicare Advantage, may cover some of these expenses. Or, if you're enrolled in Original Medicare you can purchase a supplemental Medigap insurance policy that will help cover what Medicare does not.
Are you eligible for Medicare?
Most people age 65 or older who are citizens or permanent residents of the United States are eligible for Medicare Part A (hospital insurance) without paying a monthly premium.
You are eligible at age 65 if:
- You receive or are eligible to receive Social Security or Railroad Retirement Board benefits based on your own work record or on someone else's work record (as a spouse, divorced spouse, widow, widower, divorced widow, divorced widower, or parent), or
- You or your spouse worked long enough in a government job where Medicare taxes were paid
In addition, if you are under age 65, you can be eligible for Part A without paying a monthly premium if you have received Social Security or Railroad Retirement Board disability benefits for 24 months, or if you are on kidney dialysis or are a kidney transplant patient.
Even if you're not eligible for free Part A coverage, you may still be able to purchase it by paying a premium.
Medicare Part B (medical insurance) is optional. If you want to join a Medicare managed care plan or a Medicare private fee-for-service plan, you'll need to enroll in both Parts A and B. Medicare Part B is never free — you'll pay a monthly premium for it, even if you are eligible for premium-free Medicare Part A.
How much does Medicare cost?
Medicare deductible amounts and premiums change annually. Here's what you'll pay in 2019 if you're enrolled in Original Medicare:
If you have your premiums deducted from your Social Security benefits, and the increase in your benefits for 2019 will not be enough to cover the Medicare Part B increase, then you may pay less than the standard Part B premium. Otherwise, you may pay the standard Part B premium of $135.50.
You'll also pay the standard Part B premium of $135.50 (or higher) if:
- You enroll in Part B for the first time in 2019.
- You don't get Social Security benefits.
- You're directly billed for your Part B premiums.
- You have Medicare and Medicaid, and Medicaid pays your premiums.
- Your modified adjusted gross income (MAGI) as reported on your federal income tax return from two years ago is above a certain amount.*
The table below shows what you'll pay if you're in this group.
*Beneficiaries with higher incomes have paid higher Medicare Part B premiums since 2007. To determine if you're subject to income-related premiums, the SSA uses the most recent federal tax return provided by the IRS. Generally, the tax return you filed in 2018 (based on 2017 income) will be used to determine if you will pay an income-related premium in 2019. You can contact the SSA at (800) 772-1213 if you have new information to report that might change the determination and lower your premium.
Since Original Medicare doesn't cover every type of medical care, and you'll have to pay deductibles and coinsurance, you may want to buy a Medicare supplemental insurance (Medigap) policy.
If you're enrolled in a Medicare Advantage plan, you'll generally pay one monthly premium for that plan in addition to your Medicare Part B premium. Each Medicare Advantage plan has different premiums and costs for services, and coverage varies, so what you'll pay depends on the plan you have.
How do you sign up for Medicare?
You'll generally be automatically enrolled in Medicare when you turn 65 if you've already been receiving Social Security or Railroad Retirement Board benefits for at least four months before you turn 65. The Social Security Administration (SSA) will notify you that you're being enrolled. If you're not automatically enrolled and are eligible for Medicare at age 65, you have a seven-month initial enrollment period to sign up for Part A and/or Part B.
Although there's no cost to enroll in Medicare Part A, you'll pay a premium to enroll in Medicare Part B. If you've been automatically enrolled in Part B, you'll be notified that you have a certain amount of time after your enrollment date to decline coverage. Even if you decide not to enroll in Medicare Part B during the initial enrollment period, you can enroll later during the annual general enrollment period that runs from January 1 to March 31 each year. However, you may pay a slightly higher premium as a result, depending on the circumstances.
If you decide to postpone applying for Social Security past your 65th birthday, you can still enroll in Medicare when you turn 65. The SSA suggests that you call (800) 772-1213 three months before you turn 65 to discuss your options. The easiest way to apply for Medicare is online at socialsecurity.gov.2
What's different this year?
For 2019, the biggest difference in Medicare is the Medicare Part D coverage gap—also known as the "donut hole"—has been closed (sort of).
The coverage gap refers to the out-of-pocket costs incurred by reaching a certain benefit threshold on medications. This does not, however, mean your medications will be free. Instead, Part D beneficiaries can expect a 25 percent copayment for drugs from the beginning of your plan year after meeting any plan deductible, until you reach the 2020 out-of-pocket spending limit of $6,350. After that, you'll pay 5 percent of your drug costs. This limit is significantly higher than it used to be, and provides even more of a reason to shop around and compare prices. Switching plans may help you save on out-of-pocket drug costs.3
Another drug-related change is the approved list of drugs your plan may cover. Both Medicare Advantage (Part C) and Medicare Part D prescription drug plans may restrict coverage in very specific ways. For example, a prescription drug used to treat two conditions may be approved for only one condition under Part D. Be sure to ask questions and understand what your plan will cover.4
Medicare Advantage (Part C) and Medigap
Medicare won't cover all of your health-care costs during retirement, so you may want to buy a supplemental medical insurance policy, known as Medicare Advantage or Medigap. Offered by private insurance companies, these policies are designed to cover costs not paid by Original Medicare, helping you fill the gaps in your Medicare coverage.
What is a Medicare Advantage Plan?
A Medicare Advantage plan is a private health care plan that contracts with Medicare to provide Part A and Part B benefits. A Medicare Advantage plan covers all of the services that Original Medicare covers, except hospice care.
Some plans offer extra coverage for expenses not covered by Original Medicare, such as vision, hearing, dental, and other health expenses. Most also offer prescription drug (Part D) coverage.
Several types of Medicare Advantage plans may be available, including health maintenance organization (HMO) plans, preferred provider organization (PPO) plans, private fee-for-service (PFFS) plans, and special needs plans (SNPs). If you enroll in a Medicare Advantage plan, you'll generally pay a monthly premium for it, in addition to your Part B premium.5
What do Medicare Advantage plans cover?
Medicare Advantage plans cover all services required by Original Medicare, plus any additional services offered by the private insurer, such as dental, vision, and hearing.
What are my out-of-pocket costs for a Medicare Advantage plan?
That depends on the plan you choose, and you may even be able to find a plan for $0. For an idea of what your costs may be, get a free Medicare plan quote. Keep in mind, you will still have a Part B premium.
What's covered in a Medigap policy?
Under federal law, only ten standardized plans can be offered as Medigap plans (except in Massachusetts, Minnesota, and Wisconsin, which have their own standardized plans). The plans currently sold are referred to as Plans A-D, Plans F and G, and Plans K-N.
Each Medigap plan offers a different set of benefits. All cover certain out-of-pocket costs, including Medicare coinsurance amounts. Some plans also cover other costs, such as all or part of Medicare Part A and Part B deductibles, foreign travel emergency costs, and Medicare Part B excess charges.
Medigap policies do not cover certain health-care expenses, including long-term care, vision care, dental care, or prescription drugs (to obtain prescription drug coverage you can purchase a Medicare Part D Prescription Drug Plan).
You can buy the Medigap plan that best suits your needs. But it's important to note that not all Medigap plans are available in every state.
Does everyone need a Medicare Advantage or Medigap plan?
No. In fact, it's illegal for an insurance company to sell you a policy that substantially duplicates any existing coverage you have, including Medicare coverage. For example, you don't need a Medigap policy if you have already joined a Medicare Advantage plan or a private fee-for-service plan, or if you qualify for Medicaid or have group coverage through your spouse.
With that being said, it is always a good idea to keep your options open. For example, if you have a change in health status or a new prescription drug, Open Enrollment is a good time to shop around and ensure you are in the plan that will work best for you.
In addition, you do not need to buy a policy if you work past age 65 and have employer-sponsored health insurance. If you find yourself in this situation, you may want to enroll in Medicare Part A, since it's free. Before making any decisions, be sure to talk to your employer's benefits coordinator.
As always, we hope you find this information useful! Please contact Portfolio Solutions® to learn more and help answer any questions you may have!
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