Medicare Supplement & Advantage Plans

The ABCs and D of Medicare

Medicare Part A and Part B were the first parts of the Medicare program created by the federal government. This is why the two parts together are called Original or Traditional Medicare. Each “Part” of Medicare helps pay for certain health care expenses.

 

Medicare Part A (hospital insurance) helps cover inpatient hospital and skilled nursing facility care, lab tests, surgery, hospice, and some home health care. Generally, if you’ve worked at least 10 years (40 quarters) and paid Medicare taxes while you worked, you have prepaid your Part A coverage and won’t have to pay a new monthly premium. However, if you didn’t pay Medicare taxes or did not earn enough Medicare credits, you will have to pay a monthly premium.

 

Medicare Part B (medical insurance) helps pay for outpatient care, medical supplies, lab tests, and some preventive services. Medicare Part B beneficiaries are usually responsible for a portion of their health care costs. Most people pay the standard Part B monthly premium. However, if your income exceeds certain limits, you will also have to pay a monthly adjustment amount in addition to the Part B premium.

There are two main ways to get your Medicare coverage —

Original Medicare or a Medicare Advantage Plan.

Part C Medicare Advantage Plans are an alternative to Original Medicare. Part C is only available from private insurance companies that contract with Medicare to provide coverage for all Part A and Part B services. Most (but not all) Medicare Advantage plans also provide Part D prescription drug coverage. Some plans offer additional coverage, such as vision, dental, and hearing. Like an HMO or a PPO, Medicare Advantage plans generally require you to use health care providers who participate in the plan’s network.

 

Medicare Part D (prescription drug coverage) is an optional coverage that is available if you have Medicare Part A and Part B. Private insurance companies approved by Medicare provide this coverage. You can choose to get prescription drug coverage in one of two ways:

• You can choose to add a Medicare Part D plan to Original Medicare, or

• You can choose a Medicare Advantage Plan that includes Part D prescription drug coverage.

If you add Medicare Part D to Original Medicare, you will pay a separate monthly premium for Part D in addition to your monthly Plan B premium. Some Medicare Advantage plans may include Part D without an additional premium.

 

Your initial enrollment period

There are only certain times when you can enroll in Medicare. The first time you can enroll is called your initial enrollment period. This seven-month period begins three months before the month you turn 65, includes the month you turn 65, and ends three months after the month you turn 65.

Some people get Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) automatically and other people have to sign up for it. In most cases, it depends on whether you are already getting Social Security retirement or disability benefits. If you are not collecting Social Security benefits when you become eligible for Medicare, you must enroll through Social Security. You can do this online, over the phone or in person at your local Social Security office.

 

Watch out for late enrollment penalties

There can be significant penalties if you don’t sign up for Medicare when you first become eligible or if you miss open enrollment period deadlines. You could face a permanent lifetime increase in the monthly premiums you pay, a lapse in coverage, or a combination of both.

 

If you want Medicare Part D (prescription drug coverage), you must actively enroll in it yourself. This is true whether you are automatically enrolled in Medicare or if you have enrolled yourself.

 

Health Savings Accounts and Medicare

If you are enrolled in a high-deductible health care plan, you may also be making pre-tax contributions to a Health Savings Account (HSA). However, if you enroll in any Part of Medicare, you can’t continue to contribute pre-tax dollars to an HSA. If you have an HSA

and will soon be eligible for Medicare, be sure to consult your tax advisor or your Human Resources Department if your HSA is through your employer.

 

Gaps in Medicare coverage

Medicare doesn’t cover everything. Even if Medicare does cover a service or item, you generally

have to pay a deductible, coinsurance, and copayment. Some of the items and services that Medicare does not cover include:

• Medical services or care outside the United States

• Long-term care

• Most dental care

• Routine vision exams

• Routine hearing exams or hearing aids

• Routine foot care

• Dentures

• Cosmetic surgery

• Acupuncture

 

Will you need Medigap insurance?

A Medicare Supplement Insurance (Medigap) policy helps pay some of the health care costs that Original Medicare doesn’t cover, including copayments, coinsurance, and deductibles. Some Medigap policies also cover additional services that Original Medicare doesn’t cover, like medical care when you travel outside the United States. You can only purchase a Medigap policy from private insurance companies; you must have Original Medicare Part A and Part B to purchase a Medigap policy. Medigap policies are not allowed with Medicare Advantage Plans. If you have a Medigap policy and join a Medicare Advantage Plan (Part C), you will have to drop your Medigap policy.1 You can’t use your Medigap policy to pay your Medicare Advantage Plan copayments, deductibles, or premiums.

 

If you have Original Medicare and you buy a Medigap policy, Medicare pays its share of the Medicare-approved amount for covered health care costs. Then, your Medigap policy pays its share. Depending on your Medigap policy, you might still have to pay some deductibles and coinsurance payments. There are a number of Medigap plans available. Be sure that your Medigap plan aligns with your personal situation.

 

A Medigap insurance policy only covers one person. If both you and your spouse want Medigap coverage, you each have to purchase your own Medigap policy.

 

Will you be prepared for long-term health care needs?

Medicare only pays for skilled nursing care in a skilled nursing facility if medically necessary; it does not pay for long-term (custodial) care costs.

Long-term care expenses are one of the largest unfunded potential liabilities facing today’s retirees and soon-to-be retirees. These expenses could have a significant impact on your retirement portfolio and your ability to create meaningful income for life. It’s never too soon to begin thinking about how you will manage the costs associated with long-term care. There are a variety of insurance products available in the marketplace that can help you plan for potential long-term care costs. It’s important to discuss these options with a qualified financial professional who can help you assess your personal situation.

Learn more about long-term care coverage here.

Next Steps

• Work with your financial professional to assess your current health care coverage and costs.

• Visit www.medicare.gov and create your personal MyMedicare account.

• Investigate a supplemental Medigap policy.

• Explore insurance solutions that can help you cover long-term care costs.