Focused on Risk

The Basics of Medicare – what you need to know.

As an insurance advisor and agent, I have been fortunate to help my clients with a vast array of products and services over the years.  Sometimes, the solutions are simple.  At other times, a client’s situation may be complex and require meticulous planning and thoughtful consideration before a successful conclusion can be reached.  But of all the clients and cases I have seen, no other issue causes more confusion and questions than Medicare.  Here is a brief summary of how Medicare works and what you need to consider as you approach this important milestone:

What is Medicare?
Medicare is the government’s system of healthcare for people 65 or older and people younger than 65 with certain disabilities.

One important note: Medicare was never designed to pay for all of your healthcare needs.  There have always been co-insurance amounts and deductibles.  I will detail these as I describe the Four Basic Parts of Medicare:

Part A (Hospital Insurance)
Medicare Part A is coverage for care in hospitals, skilled nursing facilities, hospice and home healthcare.  If you or your spouse has worked a total of 40 quarters and paid Medicare taxes, there is no premium for this coverage.  However, there is a deductible for this coverage.  In 2012, you are responsible for the first $1156 for each benefit period under Part A.  A benefit period lasts for 60 days so you could incur this charge several times during the year.

Part B (Doctors Insurance)
Part B of Medicare helps cover the costs for medically-necessary services, like doctors’ services, outpatient care, durable medical equipment and other medical services.  For Medicare approved expenses, Medicare is the primary insurance and covers 80% of the costs.  You, the Medicare beneficiary, are responsible for the remaining 20% as well as the yearly deductible.  Unlike Part A, there is a premium for Part B, which in 2012 is $99.90 per month for most people.  If you are already receiving Social Security benefits when you turn 65, you will get Part B automatically.  However, for people that continue to work past 65 and stay on their employer’s group coverage, it is critical that you meet with a licensed insurance agent.  You might be paying too much and could be at risk for high out-of-pocket expenses that can be avoided with proper planning.  Timing is also a crucial issue with Part B.  Making a mistake could result in a life-time premium penalty from Medicare.

Part C (Medicare Advantage)
A Medicare Advantage Plan is another health plan choice you may have.  Medicare Advantage Plans are still a part of Medicare but are offered by private insurance companies.  They are required to provide all the coverage under Medicare Parts A and B and usually include Part D prescription drug coverage, as well.  Depending on what type of Medicare Advantage Plans that are offered in your area, these plans can be a cost effective alternative to traditional Medicare.

Part D (Prescription Drug Plans)
Part D helps cover the cost of prescription drug cost and is offered through private insurance companies.  Each year Medicare establishes a standard plan and insurance companies must offer benefits at least equal to the standard plan. These plans have different premiums, cover different medications, and have different co-insurance and co-pays.  The donut-hole or coverage gap is a part of all plans, however.  Individuals need to consult an expert for more details.

Confused yet?
There is really only one thing that is certain:  Medicare was never intended or designed to cover everything.  Between the Part A deductible and Part B’s 20% co-insurance amount, having only Medicare Parts A and B can leave you at risk for thousands of dollars each year.  Medicare alone is not enough to adequately protect your and your life’s savings.  So, what are your options?

Medicare Supplements can help pay for what Medicare doesn’t pay.  Medicare Advantage Plans pay instead of Medicare.  Either option can help reduce your financial risk.  But here’s where it gets tricky:  One size does not fit all.

So when considering your options, there are several factors to consider: your health, your finances, your eligibility- even your personal philosophy on insurance.  And you need an expert to help you wade through the rules and regulations of Medicare to find a plan that fits your individual needs.

A note about the author, Don Meyer works with Cornerstone Senior Services. He has been helping seniors for over 15 years with their Medicare and Long Term Care needs

Chappell, Smith and Associates help both businesses and individuals navigate their options when it comes to life and health coverage.  When our clients become Medicare eligible, we work with trusted advisors such as Don to transition their coverage.  For more information you can contact Gary Thompson at 615-435-8299 or gthompson@chappellsmith.com .