Medicare isn’t always that simple, but with a little guidance you can make educated decisions from the beginning. Making good choices is the key to avoiding lifetime monetary penalties, enrollment delays and unnecessary medical underwriting. You can feel confident in your Medicare future by learning a few important items now.
Posted below are five critical and helpful facts about Medicare. After reading this article, you will possess much of the information needed to successfully navigate the Medicare maze.
There’s a lot Medicare won’t cover. That’s why most people purchase secondary insurance. You have three options:
There are pros and cons to each, but these different options help to close the gaps in Medicare. (You cannot enroll in both). So right from the start we know that Medicare has significant coverage gaps that should be filled with a secondary plan. We also know that Medicare does not cover routine prescription drugs. That’s why consumers take one of the two routes above. (It’s important to note that some people have employer sponsored group health insurance and retirement plans in lieu of the above.)
Medicare supplements, Advantage plans, and Part D drug coverage are only offered by private insurance companies – not the government. You have to seek these out through agents and decide which path is best for you assuming you don’t still have creditable group insurance through work or retirement.
Here’s the issue: Even with a Medicare supplement or Advantage plan, you still have holes in your insurance. Medicare does not cover certain hospital stays (Under Observation stays for example) and it also won’t help much with most long term care costs. Home health, assisted living and nursing home care costs are generally only covered for a 100 days maximum and only under certain examples when skilled care has been prescribed.
Consumers who wish to account for items beyond what Medicare and secondary insurance cover turn to Hospital Indemnity plans, short term care, hybrid life and annuities, and traditional long term care insurance. There are several impactful ways to protect yourself and your estate from what Medicare and secondary insurance won’t cover. However, you must purchase indemnity and long term care policies while you are healthy enough to qualify. Otherwise you can be turned down.
Finally, Medicare does not cover routine dental and vision needs. If you want dental and vision insurance, you’ll need to purchase those plans separately from a private insurance company. Some Medicare Advantage plans will include these benefits, but Medicare supplements will not. And many dental plans have waiting periods before major services are covered, so it’s best to get started early.
Once you enroll in Medicare Part B , the clock starts ticking. For most consumers, this is when they enroll in a secondary insurance policy. It might be a Medicare supplement (like popular Plans, F, G and N) or it might be a Medicare Advantage plan. If you miss or ignore your specific Open Enrollment Window, you can face late enrollment penalties, delays, medical underwriting and several other headaches.
However, you may not necessarily need to enroll in Medicare Part B at age 65. If you have group insurance at work, you may be able to defer your Medicare Part B enrollment until retirement. It depends on the size of your group. Having 20 or more employees is the threshold for Part B deferral.
But some people simply miss or ignore their window to enroll in Part B. This is a big mistake. If you miss it, you’ll have to wait until the General Enrollment Period and you’ll be assessed a 10% lifetime premium penalty for each year you were late. We see this happen most often with people who elect COBRA and then don’t enroll in Part B. This is called the COBRA Trap – and it’s bad. Very bad. Make sure you talk with Medicare experts if you’re not sure when to enroll in Medicare Part B.
There is also a penalty if you miss your Part D drug enrollment window. It’s a 1% penalty for each month you were without creditable coverage. This penalty will be assessed when you do choose a Medicare Drug Plan. Over time it can really add up. And like Medicare Part B, the Part D late enrollment penalty is also for life.
Finally, if you don’t purchase a Medicare supplement insurance policy (if that’s your choice) during your 7 month Open Enrollment window, then medical underwriting will be required and you can be turned down. Most consumers only get one chance to purchase a Medicare supplement without medical underwriting. So you must take advantage of your own specific open enrollment window when you’re new Medicare Part B.
In a nutshell, there are several penalties and delays associated with Medicare if you don’t act on time. Once you elect Medicare Part B (Part A is usually automatic), then make sure you explore all of your options. Talk with an experienced Medicare insurance agent, HR manager, friends & family. Just make sure you don’t miss your Open Enrollment window. The consequences are significant.
Medicare is flexible, but it does have limitations. Choices you make now may impact what options you have in the future. If you only know one rule, you should know that by choosing a Medicare Advantage plan, you may have difficulty qualifying for a Medicare Supplement later.
The rule goes like this: If you enroll in a Medicare Advantage (MA) plan, you are afforded a one year trial period. During that one year window, you can drop your MA coverage, return to Original Medicare, enroll in a Part D Drug plan and then purchase certain Medicare supplements without medical underwriting.
After one year on a Medicare Advantage plan, your options become more limited. You can still drop your Advantage plan and return to Original Medicare. You can also purchase a Part D drug plan, but medical underwriting may be necessary to purchase a Medicare supplement. This means you can be turned down for a supplemental plan like F, G, N and all the rest.
Why might you want to switch back to a Supplement from an Advantage plan? There are a couple of reasons. You might be having difficulty with the network; maybe some doctors and hospitals don’t accept your Medicare Advantage policy. Or you might be running into the higher out of pocket costs associated with Advantage plans. They can be as high as $10,000 for in-network services while many out of network services are not covered at all.
The bottom line: If you’ve been in your Advantage plan longer than 12 months – and you’re in poor health – it can be very difficult to find an insurance company who will sell you a Supplement like Plan F, G or N.
It’s important to know that the opposite move is usually not very difficult. In other words, you can move from a Supplement to an Advantage plan with relative ease. There is only one medical underwriting question with Advantage plans: Do you have End Stage Renal Disease? If the answer is no, then they will accept you during the Annual Election Period each year. (More on the Annual Election Period below)
So this tells us that Supplements are harder to qualify for. You may only get one shot at it. But most importantly, you want to be aware of that 12 month rule. We see many consumers get ensnared in that rule.
The first thing to know is that Medicare is not free. You must pay your Medicare Part B premiums no matter what. But your Medicare Part B premiums can change based on your annual income.
Those who have income above certain levels will pay more based on a sliding scale. And those who are below certain poverty lines will pay less. If your income goes up or down in the future, your Part B premiums will adjust accordingly. These two programs are called LIS (Low Income Subsidy) and IRMAA (Income Related Monthly Adjusted Amount).
Not only do these two programs affect your Part B premiums you pay the government, they also affect your Part D drug premiums you pay to your chosen drug plan. You can more pay more/less than your neighbor for the exact same Part D drug plan based on your annual income. Medicare is means tested; those who make more will have to pay more.
LIS and IRMAA will not affect the cost of your Medicare supplement insurance should you purchase one. They can however affect the cost of your Medicare Advantage Prescription Drug plan since the Part D coverage is included. Even if you choose a $0 MAPD plan, your premiums and/or drug copays can be increased or decreased based on the sliding scales the government uses each year.
(This is also a good time to tell you that many individual states sometimes have their own Medicare rules. When your new to Medicare, it’s important to ask your agent about any unique rules your state might have. Some states have special Open Enrollment windows and others have rules about the policies available if you qualify for Medicare under age 65 due to disability.)
No matter where you live, Medicare provides a window each year from October 15th thru December 7th when you can make limited changes. This window of time is called AEP which stands for Annual Election Period.
You can only make some changes during this short 54 day window that don’t involve medical underwriting. First, it depends on what type of insurance you have and what you want to do.
If you have a Medicare Advantage plan, you can shop for a new Medicare Advantage plan and you’ll be accepted so long as you don’t have End Stage Renal Disease. During AEP you can also disenroll from your Advantage plan, return to Original Medicare and purchase a Part D drug plan no questions asked. However, the 12 month rule mentioned earlier applies if you want to enroll in a Medicare supplement policy. You may not be qualify if you have certain health conditions.
So what if you already have a Medicare supplement during AEP? Well, you can shop for a new Stand Alone Prescription Drug plan no questions asked, but you cannot automatically buy a new (lower cost) Medicare supplement just because it’s “Open Enrollment.”
This is one of the most commonly misunderstood rules with Medicare. AEP does not give you the right to buy a new supplement like Plans F, G & N. In almost all case, medical underwriting will be required if you want to switch supplements or insurance companies. You can’t count on a free pass during AEP for everything. And that’s why you need to choose wisely from the start.
While this article more than scratches the surface of Medicare, there is still more to know of course. We recommend that you always employ a knowledgeable agent when researching your Medicare insurance policies. There’s more to know than just the nuts and bolts above. And Medicare makes minor changes each year and major changes about once a decade – so you should have an agent who keeps you informed.
Hyers and Associates is a full-service, independent insurance brokerage. We help our clients with Medicare supplements, Advantage plans, Part D drug, long term care and hospital indemnity insurance policies. Contact us today!