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Understanding Your Medicare Options

Nancy B. Crowley, CPA

Medicare serves as the primary source of health insurance for many Americans age 65 and older.  In order to make informed decisions and take full advantage of the coverage available for your specific situation, it is important to understand all of the program’s components and enrollment guidelines. 

Gain Knowledge: Learn the Components of Medicare

Medicare consists of four main parts:

Medicare Part A – covers inpatient hospital services, skilled nursing homes, home health services and hospice.  Usually, you do not pay a premium for this coverage; however, you will be expected to pay various deductibles and coinsurance payments.

Medicare Part B – covers medically necessary services, as well as preventive services. Part B is designed to supplement the hospital insurance program in Part A and is voluntary.  Premiums are deducted from your monthly Social Security check and the amount of premium paid will vary from 35% to 80% of the total actual cost of the Part B premium based on your modified adjusted gross income as reported on your IRS tax return from two years prior.  For 2015, this means paying a premium of anywhere from $104.90 to $335.70 per month.  It is important to note that not all medical costs are covered under Medicare Part B.

Medicare Part C – is also referred to as the Medicare Advantage plans.  They are Medicare-approved private health insurance plans for individuals enrolled in Medicare Parts A and B.  Medicare Advantage plans generally offer additional benefits, such as vision, dental, and hearing and may also include prescription drug coverage. These plans may potentially save you money because out-of-pocket costs in these plans can be lower than with Medicare Parts A and B.  Pricing will vary by plan provider, so it is best to compare all plans in your area. 

An alternative to Medicare Advantage plans are Medigap plans.  Medigap plans are private insurance you can purchase to cover some or most of your out-of-pocket expenses in traditional Medicare.  There are 10 types of Medigap policies standardized by law.  Premium charges vary among insurers, so it is wise to compare policies in your area.

Medicare Part D – is a voluntary prescription drug program which is offered through private insurance plans.  There are three different plans with various stipulations depending on your situation.  In addition, as the providers have some discretion in which drugs are covered, evaluating the plans is necessary.  There is no standard premium for a Part D plan.  Premiums will vary based on the plan chosen, your region, and the company offering the plan.  Similar to Part B, income-related premiums are charged to individuals with higher modified adjusted gross incomes as reported on their IRS tax returns from two years prior.

Take Action: Plan Your Enrollment:

In order to be eligible for Medicare enrollment,  you must be a U.S. citizen or a legally admitted alien who has continuously resided in the U.S. for five years. 

Medicare eligibility occurs at age 65.  There is a seven-month enrollment period in which you can apply for Medicare Parts A and B: 1.) not earlier than three months prior to your 65th birthday, 2.) during the month of your birthday, or 3.) no later than three months after your 65th birthday. 

General Enrollment – Should you miss this seven-month period to sign up for Part B, you must wait until the General Enrollment Period held between January 1 and March 31 of each year.  In addition, for each year that you fail to enroll, there is a 10 percent lifetime surcharge for late enrollment and your coverage will not begin until July 1.  

Special Enrollment – If you meet the Medicare eligibility guidelines, are still working,  and receiving medical insurance through your employer, you are eligible to sign up for Parts A and B any time once you have reached age 65.  You also qualify for the Special Enrollment period, which is an 8-month time window in which you can sign up for Part A and/or Part B, that starts the month after your employment or your employer-sponsored group medical insurance coverage ends, whichever occurs first.  In this case, there is no late application penalty or any additional paperwork to complete. 

Open Enrollment – If you are already participating in Medicare, the Open Enrollment Period is the time when you may compare and change your existing Medicare medical coverage and prescription drug plans. This year, the Open Enrollment Period is October 15 through December 7, 2015. 

To enroll, you can apply online at www.socialsecurity.gov, call Social Security at 1-800-772-1213, or visit your local Social Security office.  You will need to provide the following information:

  • Your Social Security Number
  • Your date and place of birth
  • If born outside the U.S. or its territories, the name of your birth country at the time of birth
  • Permanent Resident Card number if not a U.S. citizen
  • Employment start and end dates for the current employer (of you and your spouse) who provides your health insurance coverage through an employer-sponsored group health plan
  • Start and end dates for the employer-sponsored group health plan provided by you (or your spouse’s) current employer

For more information about Medicare, please visit www.medicare.gov or contact your relationship advisor.