Medicare was launched as a basic healthcare program that older Americans could count on when they reached age 65. It provides:
- Part A – Inpatient hospital coverage.
- Part B – Outpatient/doctor care and doctor administered drugs.
- Part C – Another choice for obtaining Medicare coverage (see below).
- Part D – Prescription drug coverage, added in 2003.
Part C was introduced late in the 1990’s and was labeled Medicare+Choice; in 2003 the name was changed to Medicare Advantage (MA). This new Medicare option allowed private insurance providers to be paid a set fee for taking full responsibility for the healthcare needs of Medicare enrollees. This approach incentivized the MA provider to offer programs that helped keep their customers healthy since they were responsible for their long-term healthcare costs. Medicare Advantage offered seniors another choice, a choice that has had rapid growth in the last decade. Over 36% of Medicare beneficiaries have chosen Medicare Advantage. Historically, MA programs offer many added benefits, like reduced or free gym memberships. And they often include some eye, dental and hearing aid benefits. While there is often no cost for these added benefits there can be higher premiums and some limited choices of healthcare providers, limiting them to providers that are in the plan’s network. However, people can have more predictability in their healthcare expenses and budgeting.
As Medicare usage grew, private insurance providers then stepped in to offer Medicare supplemental insurance to further reduce out-of-pocket costs and increase benefits for Medicare beneficiaries. This offered even more choices for those over 65, although this insurance must be fully covered out of pocket.
As you can see, Medicare has gone through some changes over the years and has added more choices. It seems like this simple healthcare benefit has become more and more complicated. I thought maybe a short quiz may help shed some light on different aspects of Medicare. You may even learn some things you didn’t know about this important benefit.
I’ll ask 4 questions; the answers are below . . . don’t cheat and look at the answers before you answer the questions!!!!
Question 1 – True or false, everyone pays the same over the years for Medicare.
Question 2 – True or false, you don’t have to be 65 to be eligible for Medicare.
Question 3 – True or false, you can switch back and forth between Medicare Advantage and basic Medicare with minimal impact.
Question 4 – True or false, Medicare has a cap on how much a beneficiary will spend out-of-pocket each year.
Answer 1, False – For Medicare Part A, the actual dollars that you pay into Medicare depends on how much you earned and your tax status. If you are self-employed, you paid 2.9% of your income; otherwise your employer paid 1.45% and you paid 1.45%. Also, if you make over $200,000 ($250,000 if you’re married) your share goes up .9%. Your Part B premium is also based on your income, if you earn more than $85,000 ($170,000 if you’re married) your premium can go up substantially. Part D premiums can also go up based on your income. The government also contributes a portion of the cost of Medicare when you are retired. The bottom line is that the more you earn, the more you contribute to Medicare, both in your earning years and after you turn 65.
Answer 2, True – There are situations where someone who is younger than 65 will be eligible for Medicare. In 1972 Medicare was expanded to cover people younger than 65 with certain disabilities.
Answer 3, False – There are important rules that can come into play when you want to switch from Medicare Advantage back to basic Medicare and Medicare supplemental insurance. With Medicare supplemental insurance, the insurance company can require a physical and health history that can result in significantly higher premiums . . . in all but four states you may not be eligible for guaranteed coverage. Do your homework and ask questions as you make changes to your Medicare coverage.
Answer 4, False – Unlike the great majority of health insurance we had before we turned 65, which had a maximum amount we would have to pay a year for our healthcare, Medicare has one segment of healthcare that is not capped, Part D, the prescription drug benefit. If your total out-of-pocket costs for the year reach $6,550 you reach the catastrophic stage where your portion is 5% of the list price of the drug. While this seems like a small percentage there are serious, often rare diseases where the price of the drugs is extremely high. A drug that costs over $100,000 a year can add over $5,000 to the $6,550 that has already been paid. Seniors Speak Out has continually lobbied for a yearly cap on Part D. We just don’t think it’s right for the sickest among us to carry the largest financial burden.
Medicare can be complicated, each of us needs to ask questions, do research, get help from trusted sources like our doctor and access the help offered by our government. It seems like we get bombarded with ads, phone calls, emails and internet ads urging us to buy a specific supplementary insurance or Medicare Advantage program. Remember, each of us has unique circumstances and health requirements. Seeking trusted sources who know us and our situation, is the best way to make the right choice when it comes to Medicare.