How to Understand Medicare: Logically Explained by an Analyst
This article is confirmed accurate and up-to-date as of October 2019.
I have a knack for analyzing complicated topics and making sense out of them, thanks to my technical background as a systems analyst.
When I turned 65 and became eligible for Medicare, I studied the rules and regulations so that I can make the right choices.
My intention with this article is to help you avoid stress by giving you a thorough understanding of the various parts of Medicare and its commonly misunderstood rules. I always stay knowledgeable of the latest changes to keep this article accurate and up-to-date.
Once you have a good knowledge of the important issues, you’ll have an advantage in selecting the right coverage for your needs.
You'll also know how to avoid penalties. Some of my friends have these penalties because they overlooked the requirement for Medicare drug coverage. I'll get into that later.
I will not discuss premium costs because that information is available from Medicare. What I will do is give you a complete understanding of the overall makeup of Medicare.
Remaining Clueless Can Cause Irreversible Penalties
Many of my friends who are older than me just took original Medicare. They didn't know of other options that offer more benefits at less cost.
They even had unexpected doctor bills that were not covered. And they found out too late about the irreversible penalties imposed for not starting a creditable prescription drug coverage in time. I’ll get into those details in this article.
You're ahead of those who remain clueless since you are showing interest in reading this article. I won't let you down.
So, You’ll Soon Be 65
Everyone has different needs based on how healthy or unhealthy they may be, and differing financial situations as well. For that reason, I can't tell you specifics about what to do. But I will tell you what I learned through my research and decision-making to get the most out of Medicare.
That should help you understand what you need to do and how to avoid the pitfalls.
When you are close to becoming 65, you will start getting a lot of mailings offering advice. These are agents who are focused on selling you insurance. They don't lie, but they don't tell you the full story either. They will only tell you what will convince you to go with their insurance.
I also started seeing a lot of Google ads everywhere I looked on the Internet. That's how Google advertising works. They know what your interests are, and what your needs are, based on your recent web browsing activity.
All these ads direct you to websites that help compare features of various plans.
It's best to ignore all these agents and ads. Everything they tell you, you can find on one single most useful site, medicare.gov.
Take the time to scrutinize that site. It will save you from making costly mistakes.
Are Medicare Agents Helpful?
One thing I learned by doing my research is that I kept stumbling upon agent websites that looked like they were specific insurance companies. Once I realized they are asking for personal contact information before I could gather any information from the site, I realized where I was.
Another thing I learned was that many agents I spoke with were giving me answers they knew I wanted to hear. After a while, I realized they were doing this to get me to sign up with them.
It would be more honest if they were to give me specific reasons why one thing or the other is good or bad, rather than tell me only what's good.
Whenever I asked why something was not the right choice, they beat around the bush. As an example, when I questioned an agent working for Anthem about something that didn't make sense in their proposal, she said that I’d get a full document explaining benefits after I sign up. What good is that? They lost my business for that reason.
New Medicare Cards Have More Security
By now everyone on Medicare should have received the new card. It no longer has your Social Security number on it. That helps avoid identity theft.
A sample of the old Medicare card is shown on the left below. On the right is a sample of the new version.
The Parts of Medicare
Medicare has different parts that cover different things. Original Medicare consists of Parts A and B. Then there are "plans." Notice what word I'm using as you continue reading.
The most common thing I've noticed is that many people confuse "Medicare Parts" with "Medicare Plans." This attention to detail will help you understand what many people tend to confuse.
Part A: This is the part of Medicare that helps pay the cost of inpatient hospital care, including nursing services after leaving the hospital, hospice, and some other home health services. The government pays the Part A premium unless you earn over a certain amount. For most people, it’s free.
Part B: This is the part of Medicare that pays 80% of the cost of doctor services. You pay the Part B premium, but you can have it deducted from your Social Security payments if you’re already collecting it.
Part C: This is the part that confuses people. It's an Advantage Plan. In my opinion, this should not be called a "part" letter. It’s an optional "plan" that replaces original Medicare.
The Plans of Medicare
Advantage plans replace everything with a single insurance, although you still have to pay for Part B if you want an Advantage Plan. You carry just one Insurance card, and you can still have your Part B premium deducted from your social security benefits.
Advantage plans are provided by private insurance. They can be an HMO or a PPO. They usually include Part D (I’ll get into that later) for prescription drugs, and they may have other benefits usually not included with original Medicare. In some states, all or part of the premium is paid by Medicare.
Unlike original Medicare, doctors need to register to be in any particular Advantage Plan. One plan I looked at did not include my primary doctor. That’s a problem you need to check carefully. If you choose a PPO, you can go to any doctor that accepts Medicare, but you will pay extra if they are not in the plan.
If I were in charge of naming conventions, I'd say that this should be called Part E for Extra. You have the option of adding a supplemental plan to original Medicare. That is also known as Medigap insurance. All Supplemental plans cover the other 20% that Medicare doesn't cover, and you can go to any doctor that accepts Medicare.
Part D drug coverage is optional, but accumulates penalties if you don’t take it.
Prescription Drug Plans
Part D: This is prescription drug coverage. It’s optional, but accumulates penalties if you don’t take it. Medicare requires you to have creditable prescription drug coverage to avoid penalties. This is usually included with Advantage Plans (discussed above).
If you are healthy and don’t need medications, except once in a blue moon when you come down with a cold or have an injury that requires medication, you might think that you can pass up on Part D and save the cost of the monthly premium.
However, for every month you go without Part D, and you don't have any other creditable prescription drug coverage (see next section below), you'll have a 1% penalty per month added to your premium in the future when you do end up taking a Part D plan.
To be clear, that’s 1% of the national average cost of Part D for every month you delay, starting from the month you become 65.
For example, say you decide you need drug coverage when you’re 70. That’s 60 months since you were 65. So you’ll have a 60% penalty added to your premium (1% for each of 60 months you delayed coverage).
Think about that! Nobody does. Nobody complains to his or her congressmen about this either. We all vote for our politicians without realizing how we are being screwed. Politicians abide by the only people telling them what to do—the drug companies.
What is Creditable Prescription Drug Coverage?
A creditable prescription drug plan is one that qualifies for Medicare to avoid the penalties I mentioned above. Any plan that is specified as Part D by the insurance company is a creditable plan.
You may also be covered by insurance from a current or former employer, union, or even a spouse’s insurance that is considered a creditable prescription drug plan. Make sure you get a letter indicating that it is creditable coverage. You’ll need that letter to avoid penalties if you join a Part D plan later.
Original Medicare vs. Advantage Plans
Part A - Hospital
Part A - Hospital
Part B - Medical/Doctors
Part B - Medical/Doctors
Part D - Prescription Drugs
Part D - Prescription Drugs
Possible Extra Coverage
The Part D Prescription Drug plan is an optional add-on to Medicare, but there is a penalty for delaying it, as discussed above.
A Supplemental Plan (aka Medigap) is also an optional add-on to regular Medicare to cover the other 20%.
Advantage Plans usually include Part D and may also include additional extra coverage.
Is Medicare Void of Obamacare Regulations?
Here’s an interesting note: I began my Medicare in the middle of 2015, and my rates went up 20% by January of 2016 for the Part D drug coverage.
I thought that I'd get away from Obamacare once I’m on Medicare. However, the Affordable Care Act (Obamacare) included rules that negatively affected Medicare. Obama reacted under the pressure of the pharmaceutical lobbyists and did not allow Medicare to negotiate better drug prices.
“Part of the agreement of the Affordable Care Act is that Medicare cannot negotiate lower drug prices with pharmaceuticals.”— Dr. Sanjay Gupta http://www.cnn.com/profiles/sanjay-gupta-profile
Your 20% Share That Medicare Doesn't Pay
Medicare only covers 80% of your doctor bills. And what’s worse, they don’t cover excessive charges that some doctors charge beyond Medicare-approved amounts. If you want to have insurance that pays your 20% share, you can do this with either of two methods:
1. Supplemental (Medigap) insurance. Private insurance companies provide this. You keep your Original Medicare Parts A and B. The Supplemental plan pays some of the costs not covered by Original Medicare.
2. Advantage Plans. This completely replaces Original Medicare and rolls all coverage into one plan known as Part C. A lot of research needs to be done to select the right one for your situation. The most important thing is to check if your doctors are in the plan you choose.
I like Supplemental (Medigap) plans better because any doctor who accepts Medicare will be covered. Advantage plans require you to use doctors and hospitals in their network. Supplemental Plans do not have networks, so you can use any doctor or hospital that accepts Medicare.
Based on your own needs, Advantage Plans can be a reasonable choice. You just have to compare and know what you’re getting.
Of course, you can just go with Parts A and B without additional coverage, but you have to pay the other 20% of doctor bills in that case.
Only Original Medicare Travels With You
Regular Medicare and all Supplemental Plans protect you when you travel anywhere within the U.S. You may visit any doctor or hospital that accepts Medicare patients. This includes specialists who accept Medicare with no need for referrals.
That is not true with Part C Advantage plans since private insurance companies run these. You’ll need to check their specific rules.
Video: Review of Medicare
Choosing to Just Use Parts A and B Without Extra Protection
As a healthy person, I feel I can deal with paying the 20% Medicare doesn't cover. But if I wait six months and add a Supplemental plan or Advantage Plan later, they can charge me more, refuse preexisting conditions, or turn me down altogether. Obamacare specifically left Medicare out of the preexisting condition rule. Not many people realize that.
Then there's Part D for prescription drugs. I don't need it now, but as I explained earlier, they tag on a 12% penalty every year that I wait (1% per month). And that would stay with me for the rest of my life.
Medicare is soon cruel, in my opinion. They get you coming and going, and they take advantage of the elderly who can't study complicated things and make decisions for themselves.
There Is a Medigap Supplemental Plan That’s Right For You
When you are covered by a Supplemental Plan (Medigap), there are no surprises. You’ll know what’s covered based on the plan you choose.
Don't confuse plans with parts. Medicare has Parts A, B, and D. And supplemental coverage has several plans to choose from, labeled from Plan A through Plan F. Rather than duplicate that info here, you can see a complete detailed listing of each plan at medicare.gov. Remember, that’s the only site you need for all your questions.
By law, each plan is exactly the same no matter which insurance company you go with. Therefore, once you decide on the supplemental plan you want, the only thing you need to compare is the cost.
Medicare Part B Excessive Charges
When you see a doctor who doesn’t “accept assignment,” that means he or she doesn’t accept Medicare’s approved amount as payment in full.
You need to pay this in addition to your 20% share, but only up to 15% more than Medicare’s approved amount. The doctor forfeits the rest, but it still is an additional cost to you that you may not be expecting.
Supplemental Plan F covers all of this, your 20% plus any excessive charges. Plan N covers your 20% but not excessive charges.
Why Supplemental Premiums Can't Be Deducted from Social Security?
Only Advantage Plan and Part D Prescription Drug Plan premiums can optionally be deducted from Social Security benefit payments because both of these are primary insurances.
Supplemental Insurance is considered a secondary insurance, and therefore its premium cannot be deducted from Social Security.
With Medicare Part B, you actually have a choice. You can pay for it yourself in quarterly installments, or you can have it deducted from your monthly Social Security benefits if you are already collecting.
When Do You Need to Start Extra Coverage to Avoid Penalties?
Remember that Medicare Parts A and B do not cover everything.
Basically, Part A covers hospital costs up to 150 days. However, you still share part of those costs, and you pay all the costs after 150 days.
Part B only pays 80% of doctor bills. You are responsible for the rest, including deductibles and excessive charges.
Because of all this, you may want to consider adding a supplemental plan to original Medicare or replacing it with an Advantage Plan, also known as Part C. I know. That’s so confusing. They should never have called it Part C. It really is a total replacement of Medicare that includes Parts A, B, and D.
Anyway, keep in mind that there are penalties for delaying extra coverage.
You must sign up for a Supplemental Plan or Advantage Plan within six months of your 65th birthday month. That is your one-time Initial Enrollment Period. However, if you begin Part B later because you had insurance from an employer or a spouse, then this six-month period starts when you start Part B.
Is It True That Supplemental Plans Can Be Changed Anytime Throughout the Year?
One can apply for Supplemental Insurance without penalty during the Initial Enrollment Period, which is within six months of the 65th birthday month.
Supplemental Plans can be started or switched from one plan to another at any time. However, penalties may apply if started or changed after the Initial Enrollment Period.
- Higher premium.
- Waiting period before covered.
- Refusal based on medical conditions.
These Penalties do not apply during the Initial Enrollment Period.
Advantage Plans can only be changed annually, but Supplemental Plans can be changed anytime. However, penalties may be imposed when you make changes, such as higher premiums or refusal to accept preexisting conditions. These penalties can also stand in the way if you try to apply after the open enrollment period.
Doctors can join or leave an Advantage Network anytime. Since you can’t change Advantage Plans during the year, you’ll have to select a new primary doctor or another provider if they leave the network mid-year.
There is an exception to the annual open enrollment period that I discuss below.
What Is the Open Enrollment Period?
Once a year, from October 15th to December 7th, one can change, join, or drop Advantage Plans. That does not apply to Supplemental Plans, however, which can be changed anytime with restrictions, as I mentioned above.
What Is a Special Enrollment Period?
If you move to a new location that's not covered by your present Advantage Plan, you can change your insurance midyear within a Special Enrollment Period.
Note that Supplemental Plans cover you all over the United States, so this only is necessary to consider if you have an Advantage Plan that might service only a local area.
What Is an Enrollment Exception?
You can also request a special enrollment period to change Advantage Plans mid-year if the insurance company you have is not following Medicare regulations.
You need to contact Medicare and register a grievance. After their investigation, they will make an "Enrollment Exception" if approved. At that time, you'll be able to select an alternate plan or go back to original Medicare.
How Is Shingles Vaccine Covered?
I include this discussion because several people have asked about this. I discovered there is some confusion about payment for Shingles injections.
The Shingles Vaccine shot is not covered by Medicare Parts A and B. However, most prescription drug insurance plans (Part D) do pay for this in full.
Remember that if you don’t start a Part D drug plan when you first become eligible for it at the age of 65, then you will incur a cumulative 1% penalty per month that adds up until you start this plan. At that time, the penalty will be added to the monthly premium that you pay.
An advantage plan (Part C) is another solution. It covers Parts A and B, and most advantage insurance plans will pay for Shingles Shots since they include coverage for Part D as well.
Do Your Own Due Diligence
As extensive as you may have found this article, I only gave you the vital information that most people have trouble understanding. I know, because since I started with Medicare, a lot of people have been asking me for help.
So I hope this has helped you have a good understanding with a thorough background of information to help get you started in the right direction.
You will have to do your own research since no one can tell you what’s best for your particular situation. Only you know that.
Just remember that as you delve into it, ask questions and be curious. That’s what I did.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
Questions & Answers
Will I be charged for Medicare Part B if I don't retire?
Most people enroll with Medicare at the age of 65. This includes Part A for hospitals and Part B for doctors.
If you don’t retire and you have group health insurance from your employer, or from your spouse’s employer, then you can legally delay enrolling in Part B. There will be no penalty as long as you have other coverage from employment.
There is a catch though. You can only delay enrolling in Part B under the above condition if your company employs at least 20 people. In that case, you must enroll in Medicare (both A and B). Also, your employer’s insurance is considered secondary since Medicare will pay claims first.
If you do work for a larger company and can delay enrollment as I mentioned above, then when you do eventually retire you’ll have eight months to enroll in Part B without penalty. This is known as a special enrollment period.Helpful 4
Are Medicare premiums going higher?
The Medicare Access and CHIP Reauthorization Act of 2015 was signed into law by President Obama on April 16, 2015.
This law reduces the inflation adjustment, which causes more beneficiaries to be subject to higher Medicare premiums. This affects wealthier Medicare beneficiaries, who will have higher premiums for their Part B (physician services) and Part D (prescription drugs) in the future.
Medicare Part B and Part D premiums are based on one's tax bracket and specified by the following income thresholds:
Individuals with a modified adjusted gross income (MAGI) under $85,000 and couples under $170,000 are in tier 1 and pay only the standard Part B premium., which is $134 in 2018 and 2019.
For individuals earning $85,000 to $107,000 and married couples between $170,000 and $214,000 the Part B premium in 2018 and 2019 is $187.50.
Individuals earning more than $214,000 and couples above $428,000 pay more than three times the standard premium.
The income thresholds have been frozen until 2019 but will increase by about 2% in 2020. After 2020 it will be indexed to general inflation.Helpful 11
Does Medicare include dental and vision care?
Vision care for medical conditions is included in all Medicare plans, but it does not cover eyeglasses or contact lenses. Dental is not covered.
If you want dental and eyeglass coverage, look at the Medicare Advantage plans available in your area. Some of them offer coverage for dental X-rays and two cleanings per year, as well as partial reimbursements on eyewear.
See how advantage plans differ from regular Medicare in this other article:Helpful 5
If I take a leave of absence from my job after 65, but later return to work, are there any Medicare penalties?
If your employer continues to provide you with uninterrupted health insurance that includes pharmaceutical coverage, then there are no penalties.Helpful 3
© 2016 Glenn Stok