As Autumn arrives, we start to see a lot of attention being given to two things: political campaigns and Medicare Insurance. I won’t even try to address the former in this blog. (As an aside: My hope is that those who are able, will go to the polls on Election day and vote for the candidates of their choice. Participation does matter.) As for the latter, I often hear from clients: “Why does Medicare need to be so complicated?” While Medicare can be complicated, I believe that “complex” is a more accurate word for it.
Let’s start with some history: Medicare began in 1965 as an attempt to provide people over the age of 65 with basic health care coverage in retirement. Most people lost coverage from their employer during retirement and were faced with great vulnerabilities were they to become ill or hospitalized. The Medicare program has evolved over these 53 years, both expanding coverage to some under the age of 65, as well as helping to develop additional programs that would complement Original Medicare.
Original Medicare is divided into 2 basic Parts: Hospital Care and Doctors/Medical Providers.
Medicare Part A – Hospital Care: For the majority of enrollees, Part A has no monthly premium to be paid on an individual level, as it is funded through the years that person paid into Medicare during their work-life. Enrollment in Part A is the 7-month window from 3 months prior to the month in which one turns 65, and includes the month they turn 65, as well as the three months following.
Medicare Part B – Doctors or Medical Providers: Part B has a monthly premium that the individual must pay. For most enrollees, it is $134 per month in 2018, and it is likely to slightly increase for 2019. If one’s income is high, there will likely be a higher premium charged.
Both parts A & B offer other services, however the basic distinction that I have offered hopefully establishes at least a foundation for this discussion.
Parts A & B are Original Medicare and were never designed to cover all of one’s Medical Costs. It is easiest to envision Medicare as a block of Swiss Cheese, as there are holes in Original Medicare where the individual pays for services out of pocket. The out of pocket services are:
- Co-Pays [fixed dollar amounts paid to providers at the time of service]
- Coinsurance [cost sharing of a percentage of services]
- Deductibles [amounts the individual pays before Original Medicare pays for certain services]
- Excess costs [those services which are not covered by Medicare].
The other significant coverage that Original Medicare does not cover is Prescription Drugs. And speaking from my own experience, prescription drugs costs increase as one grows older.
In the 1980’s a number of private insurance companies began offering products called Medicare Supplement Plans [some refer to these types of plans as Medi-Gap Plans]. There is now a rather standardized model of Plans A-N. Each plan is designed to fill in some, if not most, of the gaps in Original Medicare. Each plan is priced differently and based on where you live. Although there is generally coverage wherever you might travel, deciding on which Plan will serve you best takes a little time to decipher.
Yet, the biggest issue remains, when one has Original Medicare and a Medicare Supplement Plan, prescription drugs are still not covered. In 2003, Medicare Part D was developed to explicitly address this issue. Free-standing Medicare Part D, Prescription Drug Plans (PDP), were developed and made available by private insurance companies to help fill this void. Thus, layered together, Original Medicare (Parts A&B), a Medicare Supplement Plan and a Medicare Part D plan provide a comprehensive approach for many over the age of 65.
In the 1990’s, a new program was developed in a unique partnership between the Federal Government and the Private Insurance sector. A new Medicare Advantage Program was developed to provide an alternative to the Medicare Supplement approach.
The Medicare Advantage program outsources Original Medicare to the private Insurance Company. The Company MUST offer at least that which Original Medicare provides and can offer enriched benefits as well. Some plans may offer dental coverage, and most plans have prescription drug coverage embedded in the plan. The plans are given a Star rating annually reflecting quality of service in a variety of assessment areas. The better the quality of service corresponds to the higher the reimbursement rate from the Federal government to the insurance company. As a result of the partnership with the government, the Medicare Advantage plans offer a very low premium.
Yes, Medicare is complex, but does not have to be complicated. Marathon Financial is able to answer your questions and help you navigate this complex system. Contact us today!
Enjoy the colors of this season.
Medicare can often be a daunting and confusing subject for most. When eligibility is reached, many find themselves with questions and unsure of how to take advantage of this program. Join Marathon Financial for a free Medicare seminar led by Jon Neal Selzer, LUTCF at the Dewitt Community Center on October 24th at 7pm. In addition to education on the basics of Medicare, the presentation will cover enrollment periods, how to sign up, benefits of Medicare plans, Medicare supplements, prescriptions, and more.
Join us on October 24th by submitting an RSVP to: Chris Doak at Chris@marathonadv.com or call 315.446.5797
Attendance is limited and RSVP is required.