Medicare Primer
Let’s start with a Medicare lesson which all of us Americans will need to know unless we die before the age of 65, a lesson which so many people I talk to never even thought about until after they made a decision which impacted the rest of their lives. I do spend part of each day saying the following… perhaps in not so much detail, but, usually, at the end of my spiel, the person on the other side of the phone wants to know why nobody ever explained any of this to them before.
Medicare (MC) is government-provided health insurance for all Americans aged 65 and older (there are some ways you can get MC under 65, but we’ll ignore those for now), and is bought on an individual level. Not everyone is in the Medicare system (military retirees, many private company retirees), but most civilians who have been in the private workforce their entire lives probably are on Medicare @ age 65.
There are three levels of Medicare protection:
- The most basic level of protection is Original Medicare (OM). Original Medicare is broken into three “Parts”:
Part A: Hospitalization, pays for everything from the moment you are admitted into a hospital until the moment you are discharged.
- You will be assessed a ~$1,400 deductible every time you enter a hospital, this deductible resetting 61 days after your last stay (meaning you can pay this 5 times a year if unlucky).
- There is no premium for Part A, and it usually begins automatically the month you turn 65.
Part B: Medical, pays for everything not in a hospital – doctor visits, tests, blood work, therapy, etc.
- You are assessed a co-insurance of 20% on every Part B service used. If you have a $100 doctor visit, you pay $20. If you have a $1,000 diagnostic test performed, you pay $200. And if your long-term, non-hospital oncology treatment is $1,000,000, you pay $200,000.
- There is a premium for this generous plan, currently $148, deducted from each Social Security payment/check.
- Part B does not start automatically – you have to apply for it, and if you have similar coverage… say, you’re still covered under an employer plan… you can avoid applying for it and save that $148.
Part D: Drugs. Guys, it took until Bush 2 for people to say, “Yeah, maybe it would be a good idea to include prescription drugs into Medicare”, possibly the most progressive bill he signed into law, to be honest, and the answer to the trivia question “Name one good thing accomplished by George W. Bush”. And you thought this thread would be useless, didn’t you?
As you can tell, there are problems – extensive use of Medicare will bankrupt much of the middle class prior to their deaths, which is not a good thing. And I have talked to such people. It is that 20% coinsurance which is the killer.
So, if you get one thing from this post it is this: YOU DO NOT WANT TO HAVE JUST ORIGINAL MEDICARE.
- Medicare Advantage (MA), the next level of protection and the missing “Part C”, above. These are the most common plans, they are the ones which are the subject of all those fucking ads on TV, and they are the plans which I deal with, the ones which demonstrate most starkly the falsehood of “choice”. And, to get a MA plan, you must have both Parts A and Parts B.
MA plans have the following characteristics:
- They usually have a $0 premium (you still have that $148 deducted, though)
- They work a lot like employer plans – there are coinsurances, deductibles, hard $ coverage limits, even a “Maximum Out of Pocket”. You will have HMO’s and PPO’s. You will have some that act like “full coverage”, with low copays, some will be more “catastrophic”, with higher copays.
- They are managed by private companies, usually massive insurers like Humana, Aetna (who owns CVS (or the other way around)), United HealthCare (UHC), BCBS, Cigna, as well as a myriad of smaller players (Empire, WellCare, Devoted). I haven’t looked it up, but I assume that Aetna gets that $148 you pay to Medicare if you get an Aetna plan.
- They are marketed with an array of benefits which are not included in Medicare including dental and vision benefits (do NOT get me started about how the American health insurance somehow convinced Congress that dental and eyes are not health), transportation benefits (free rides to the doctor, very big among seniors), and even refunds on that $148 Part B premium. (BUT THERE ARE ALWAYS TRADE-OFFS, SO WHEN YOU GET SOMETHING, YOU’RE CUTTING OUT SOMETHING ELSE. JUST WARNING YOU.)
- They are divided by county. In other words, different counties have different plans, and if you move from one county to another, you may have to change plans (if you’re in the same metro, no problem), and if you move from one state to another, you almost certainly will need to change plans.
The single greatest advantage to the MA plan is this – that 20% Part B is capped by that “Maximum Out of Pocket” (MOOP) mentioned above, which is defined as “the most you, the insured, have to pay in medical expenses before the plan pays 100% of all costs for the rest of the calendar year”. MOOP ranges from $900-$7,500, depending upon plan.
There are three types of Medicare Advantage Plans:
a. Chronic Special Needs Plans (C-SNP) – designed for people with chronic conditions which cannot be treated, only maintained. Only patients with chronic lung and/or heart disorders, and diabetes patients as well, qualify for these plans. These plans include A (hospital), B (medical), and D (prescription) coverage.
b. Dual Special Needs Plans (D-SNP) – designed for people on both Medicare and Medicaid. These plans typically have the most in the extra benefits mentioned above – unlimited transportation, dental up to $5,000, even free food at the grocery store. These also provide A, B, and D coverage.
c. “Regular” MA plans. These are for the rest who do not fit in the above categories. These plans typically have fewer benefits than the D-SNP or C-SNP plans, most come with Part D coverage in addition to A & B, but you can buy a regular MA plan without Part D.
Again, the biggest advantage to the Part C, Medicare Advantage plan, is that protection from the 20% coinsurance charged you by OM. The biggest disadvantage is that they are largely pay-to-use plans – that $0 premium is enticing, but then… copays. Deductibles. Coinsurance. It all adds up.
- Medicare Supplement (MS) aka “Medigap” plans, so named because these plans cover the entire gap between Parts A & B, and full payment. You know how you talk to your grandma who says she got her knee replaced and it didn’t cost her a cent? She had a Med Supp plan, guaranteed (or is on Medicaid.)
- MS plans always come with a monthly premium, this premium ranging from $50 - $500, usually falling from $175-$300.
- MS plans do not come with prescription drug coverage (requiring you to buy a separate policy, usually between $20-40/mth), nor do they include any of those benefits you see advertised by Joe Namath and Mike Ditka.
- You are guaranteed to be issued a MS plan when you turn 65 (or first get Part B, whichever is later), but after this “guaranteed issue” period, you will have to pass medical underwriting to get a supplement plan, something difficult for many seniors to do.
America, I’m gonna make your decision simple for you: UNLESS YOU ABSOLUTELY CANNOT AFFORD THE PREMIUMS, OR UNLESS YOU LIVE IN FLORIDA OR CALIFORNIA, ALWAYS GO FOR THE MEDICARE SUPPLEMENT PLAN, ESPECIALLY DURING THE PERIOD YOU ARE GUARANTEED THE DAMNED THING! And the reason is simple – a $200 premium is $2,400/year, which can cover hundreds of thousands of medical costs. And while that $0 premium for the Medicare Advantage plan sounds enticing, very few Medicare Advantage plans have Max Out of Pocket costs as low as $2,400, most averaging $4,000 and hundreds of plans with $7,000+ Max OOP’s. And I’m telling you, for those seniors on limited incomes, the ones who pay that $185 MS premium upfront are always happier with their plans than those with $0 MA plans who pay to use. And since I’m going to be a senior one day, I, too, will probably be happier paying that premium up front.
Florida and California are different – they have fantastic MA plan designs and getting a MA plan in these states is not a potential time bomb, especially with their low Max out of pocket. You may have a suck-ass county (Sorry, Yuma!), but as a general rule, these states offer MA plans which are competitive with MS plans.
TLDR: Original Medicare costs a lot. You can reduce these costs significantly with a Medicare Advantage Plan. You can reduce them even more with a Medicare Supplement plan, but you will pay a $150-$500 monthly premium for this plan. Never stay with Original Medicare. If you can afford the Supplement plan, get the Supplement plan. If you can’t, get the Advantage plan.
(Team, I didn’t even get into enrollment periods yet. Completely insane stuff. Will come later, when needed.)