Introduction to the A, B, C & D’s of Medicare
Clients new to Medicare always seemed to have questions; this is the nature of the business and so I have prepared the following articles to help you understand Medicare, Medicare Supplement and Medicare Advantage. Most of you when eligible for Medicare will receive a Medicare and You Book for 2013. It is an imposing document, but most of the information is from this publication. Other sources of information include; Wisconsin Guide to Health Insurance for People with Medicare, Medicare website and the Wisconsin Senior Care website. I hope you will find these articles useful.
The A, B, C and D of Medicare – The Basics
Medicare is a Federal Government Health Care Program for people 65 and older, people with certain disabilities and people with permanent kidney failure. Medicare contains four parts; A, B, C, and D; they work together to form your health care benefit. Please consult Medicare & You for 2013, this publication is important to anyone applying for Medicare benefits. Medicare offers a helpful website at www.medicare.gov. The Sheboygan County “Aging & Disability Resource Center” is another important source of information.
Part A - Hospital Benefits cover certain medical services for inpatient hospital care along with a skilled nursing care, home health care and limited hospice care benefit. There is no benefit coverage for assisted living or long term custodial care. Generally there is no premium for Part A benefits.
Part B – Medical Insurance is an optional benefit and covers physician’s services, outpatient hospital and surgical care, ambulance services, durable medical equipment, certain preventative care, deemed medical services not covered under Part A and certain medication expenses. The cost of Part B of Medicare is determined by income, most seniors will pay $104.90 per month in 2013 for this benefit. Medicare was created to provide seniors with a basic set of health care benefits; unfortunately Medicare does not pay for all medical services. Seniors can get additional insurance coverage called Medicare Supplement insurance to cover Medicare deductibles and copays associated with original Medicare. Many insurance companies offer supplemental insurance; the cost depends upon the insurance company, age, Zip Code and riders that you choose.
Part C – Medicare Advantage is health care insurance provided by a private insurance company approved and regulated by Medicare. See pages 68-80 in Medicare & You for 2013. Advantage plans combine Part A and B benefits and other medically necessary services. Advantage plans vary widely in type, benefits and cost and can be purchased with or without prescription drug coverage (Part D). The cost of Medicare Advantage plans varies; the general rule of thumb is the cost of these plans increases as the benefits increase. Read and study the Summary of Benefits provided by the insurance company.
Part D – Prescription Drug Coverage is a voluntary prescription drug program that can lower your prescription drug costs. These programs are offered by private insurance companies that are approved and regulated by Medicare. The drug plans vary with each insurance company and costs are relative to benefits. Part D plans can be purchased as “stand alone plans” (PDP) or within a Medicare Advantage program. You need to be careful in navigating this area of prescription coverage because of “penalties” that could be incurred by not being in a “qualified prescription drug” program. See pages 81-94 in Medicare & You for 2013 for more detailed information.
Medicare Supplement vs Medicare Advantage - Part 1
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 created Medicare Advantage (Part C) as an alternative to traditional Medicare and Medicare Supplement. The Act allows private insurance companies to offer medical plans that combine Part A, B and Prescription Drug (D) into one medical benefit plan.
Advantage plans are annual contracts that begin January 1 and end December 31st of each year and either renew for the following year or end. They are regulated by Medicare and must follow strict Medicare guidelines, but within these guidelines insurance providers have opportunities to offer different levels of medical and prescription drug benefits. Current monthly costs range from $0 per month to $215 per month in Sheboygan County.
Medicare Supplement insurance plans were designed to augment original Medicare by paying for those copays and deductibles that Medicare did not pay. These supplement plans have higher monthly premium costs than Medicare Advantage and increase in cost over time. Once enrolled in Medicare Supplement you may find it difficult to move from one Supplement plan to another without going through underwriting. The average cost of traditional Supplement, with all riders is dependent on age and Zip Code. For Sheboygan County the general costs ranges are:
| Age | Supplement Cost | Rx Cost | Total Ave | Average |
|---|---|---|---|---|
| 65 | $112 - $174 | $40 - $110 | $152 - $284 | $218 per month |
| 70 | $130 - $188 | $40 - $110 | $170 - $298 | $234 |
| 75 | $148 - $220 | $40 - $110 | $188 - $330 | $259 |
| 80 | $164 - $244 | $40 - $110 | $204 - $354 | $279 |
It should be noted that some Supplement providers are offering plan designs that now offer cost sharing riders that will make them more competitive with Medicare Advantage plans
The current cost for a benefit rich Advantage plan with prescription drug is $215 for all age groups and there is only one underwriting question for Advantage plans; do you have End Stage Renal Disease?
Medicare Supplements are regulated by the State of Wisconsin; Advantage plans are regulated by Medicare. Supplement Plans offer additional Wisconsin Mandated Benefits that Advantage plans do not, but Advantage plans may offer additional benefits that Supplements do not. So what is the best plan for you? It all depends on your current health, prescription drug needs, and financial situation. In general, Medicare Advantage is an excellent alternative to traditional Medicare and Medicare Supplement. Both my mother and father are enrolled in Advantage; both are over 80 and receive excellent health care benefits at a fraction of the cost of traditional Medicare and Medicare Supplement.
Medicare Advantage – Part 2
Medicare & You for 2013 lists all the Advantage plans offered in the State of Wisconsin, unfortunately it does not list plans by specific county. If you can navigate the internet, Medicare offers a website, www.medicare.gov that does offer a list of plans by zip code and county.
Another source of information is an independent insurance agent that offers both Medicare Supplement plans and Medicare Advantage plans. A good agent will review both traditional Medicare Supplement and Medicare Advantage plans pointing out the advantages and dis-advantages. The State of Wisconsin places a special burden on insurance agents and seniors, especially with regard to suitability; the agent has the responsibility to make sure that the insurance product is suitable for you and that you understand how the program works.
There are a number of insurance providers offering Advantage plans in Sheboygan County. What distinguishes providers are their underlying mission statements. Some of these providers operate to generate the greatest level of profit for their shareholders, while one operates to provide the greatest medical benefit and value to their clients. Medicare & You for 2013 offers a “members rated” statement for each insurance provider in the listing of Medicare Health Plans in Wisconsin.
Medicare requires all Advantage plan providers to have a “Summary of Benefits” that are similar in style and content; this allows easy side by side comparisons of the Medical Benefit Categories that define the benefits. The five most important categories are: Category 1: Premium and Out-of-Pocket Loss Limit; Category 3, Inpatient Hospitalization cost and copays; Category 5, Skilled Nursing Care cost and copays; Category 13, Out-patient Services; and Category 25, Prescription drug benefits.
The progression of Medicare Advantage plans for the past 10 years is higher copays and higher annual out-of-pocket-loss-limits. The annual out-of-pocket-loss-limit is the defining element of Medicare Advantage plans and range from $2000 to as high as $10,000 per year! Loss limits represent an annual ceiling of potential financial liability that you may sustain when a serious medical event occurs. An enrollee with major medical issues could readily hit the annual out-of-pocket-loss-limit, so you need to be careful when choosing a plan!
Medicare Advantage – Part 3
The future of Medicare Advantage is all about Washington politics. Original Medicare came about during the Johnson administration in 1965, out of a desperate need for health care for seniors and those individuals with medical disabilities. Without question, the second most important program to shape the quality of life in this nation after Social Security is Medicare. Because of politics, Medicare was born into this world as an incomplete health care plan. The Medicare Supplement industry was conceived to fill these deficiencies and for the last 50 years Washington special interests have been very successful at keeping Medicare a second-rate health care plan.
Progressive leadership in Washington saw an opportunity during Bush 2 to change Medicare by adding a badly needed prescription drug benefit. With overwhelming support from the senior community and the drug industry, Congress gave us the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The Act created a confusing prescription drug plan, controlled by private insurance companies; at the same time Congress created Medicare Advantage (Part C), as an alternative to traditional Medicare.
Medicare Advantage works because Medicare pays these private insurance companies a monthly subsidy to offset the cost of the medical liability of an enrollee. These subsidies are to decrease over time under the presumption that these private health insurance companies can do a better job at providing cost effective health care services. The current administration is implementing the presumption and changing the level of subsidies these companies receive and changing the financial dynamics the Advantage program.
What is the future of Medicare Advantage? Currently it is in the hands of the politicians in Washington. We know the Republican Party has stood in the way of Medicare reaching its full promise to the senior community and current Republican leadership is trying to replace Medicare with a voucher program. The future of Medicare is unclear, but one thing is certain, it is too important to the nation and the health care industry to let wither on the vine; its continued success is vital to every citizen of this nation. Medicare Advantage will be part of the heath care equation, and has entrenched itself as a viable option to Medicare eligible individuals.
Should you buy into Medicare Advantage? Absolutely! It represents exceptional value when compared to traditional Medicare and Supplement insurance, but seniors need to be careful in choosing a Advantage plan! Remember, every person with a Medicare Supplement policy has a 12 month trial period where they can enroll in an Advantage plan and if they do not like it, can re-enroll into their original Medicare Supplement plan.
Evaluating Medicare Advantage Plans
As an independent insurance I make it my business to know what Medicare Advantage providers are serving Sheboygan County and their specific medical and prescription drug programs.
The best place to evaluate a Medicare Advantage program is with Medicare and You for 2013 or the Medicare website. Medicare provides a Member Satisfaction Rating on all Medicare Advantage plans offered in Wisconsin. Medicare rates their quality and performance on 33 different topics in 5 categories that include; 1) staying healthy, 2) managing chronic long-term health conditions, 3) ratings of health plan responsiveness and care, 4) how often members have made complaints against the plan and how often members choose to leave the plan, and 5) customer service, how well the plan handles calls from members.
I believe that plan and benefit consistency is extremely important; is the provider committed to offering a consistent schedule of benefits year after year. All Advantage plans offer similar benefit schedules, but the real difference is in the financial exposure that a senior may experience in a health event. A good plan limits your financial exposure and only a very serious health event will cause a senior to reach the annual-out-pocket-loss limit. I look for value; does the Advantage provider offer good health care value at reasonable cost? Do they offer only one level of health care benefits or several?
I look at the insurance provider’s commitment to Wisconsin and Sheboygan County. In the past I have represented several national insurance providers that have left Wisconsin. I want an insurance provider that is truly committed to Wisconsin and Sheboygan County. Finally, I look at how the insurance provider is managed and their mission statement. Is management committed to their stock holders or are they committed to my clients.
Of all the insurance providers offering Advantage plans in Sheboygan County only one carries the highest Membership Satisfaction Rating from Medicare, only one is headquartered in northeastern Wisconsin. Only one has a mission statement of commitment to my clients. That is why I placed my parents with Network Health Insurance form Menasha Wisconsin.
Part D Prescription Drug plan
“The Medicare Prescription Drug, Improvement and Modernization Act of 2003” was born out of a desperate need by the senior community to deal with their prescription drug costs. Instead of adding a prescription drug benefit to original Medicare; the Act created a private insurance program. It could be said that the Act was designed by and for the insurance and drug industry; most seniors find it confusing, complicated, incomplete and expensive. The only positive thing to say about it is that it is better than nothing.
Enrollment in Medicare Part D “Prescription Drug Program” (PDP) is voluntary, but if you do not enroll when eligible, a monthly late penalty will be assessed at the time of enrollment. The penalty is one per cent of the base premium for every month you waited and enrollment will be limited to the Annual Election Period, October 15 to December 7 of each year for a January 1 start date.
There are several levels of Prescription Drug Plan benefits; a basic PDP with annual deductible, a PDP without annual deductible and a PDP with a generic benefit through the “coverage gap”. The benefit structure of the PDP breaks down as follows for 2013; the first $2970 of prescription drug cost is a shared cost between you and the insurance company, after $2970 you are in the “doughnut hole”. For 2013 the doughnut benefits are as follows; for generic drugs you pay 79% and the company pays 21%, for brand drugs you pay 47.5%, the company pays 2.5% and the drug company pays 50%. When your total-out-of-pocket costs annually exceed $4750 you have attained catastrophic level and the cost of medications drop significantly.
You can purchase a PDP as a “stand alone” plan to complement your Medicare medical benefit along with you Medicare Supplement or you can purchase a Medicare Advantage plan with a built in prescription drug benefit (MA-PD). Cost of the PDP’s is based on the level of benefit. Do not be fooled by an inexpensive PDP, they are inexpensive for a reason - generally a very limited drug formulary. Also do not be fooled by prescription drug discount cards offered by national brand drug stores – these are not qualified prescription drug plans.
Prescription Drug Plan premium costs and prescription drug costs can be reduced if you qualify for Low Income Subsidy (LIS); Social Security will notify you, if they believe that you might be eligible for LIS. Eligibility is base on income and assets and you have to pro-actively apply for LIS either at the Social Security website or you can get forms at the Sheboygan County Aging and Disability Resource Center.
The Drug Act of 2003 is a confusing and often complicated drug plan for the senior community, fortunately for Wisconsin seniors you have Wisconsin SeniorCare!
Wisconsin SeniorCare
While Washington was trying to determine whether seniors were worthy of additional Medicare benefits such as prescription drugs, the State of Wisconsin moved forward, on September 1, 2002 Wisconsin SeniorCare was created. Wisconsin SeniorCare is still the only “state run” qualified prescription drug program offered in the United States and should be the envy of the nation.
SeniorCare is a prescription drug assistance program for Wisconsin residents who are 65 years of age or older. The program is designed to help seniors with their prescription drug costs. You can apply at any time; there is a $30 annual enrollment fee per person. Your annual income determines the level of coverage and annual deductible. After the deductible is met there is a $5 co-pay for each covered generic prescription drug and $15 co-pay for each covered brand name prescription drug. The income and annual deductible limits for 2013 are:
| Income Limits | Annual Deductible |
|---|---|
| Level 1: At or below $17,424 per individual or $23,536 per couple annually. | No deductible or spend down. |
| Level 2a: $17,424 to $21,780 per individual and $23,537 to $29,420 per couple annually. | $500 deductible per person. |
| Level 2b: $21,781 to $26,136 per individual and $29,421 to $35,304 per couple annually | $850 deductible per person. |
| Level 3: $26,137 or higher per individual and $35,305 or higher per couple annually. | Pay retail price for drugs equal to the difference between your income and $25,993 per individual or $34,969 per couple. This is called “spend down.” After spend down is met, there is an additional $850 deductible per person. |
Wisconsin SeniorCare is an excellent qualified prescription drug program and a great value for the vast majority of Wisconsin seniors. For seniors with high prescription drug usage that puts them in the “coverage gap” or in “catastrophic coverage” you can have both Wisconsin SeniorCare and a prescription drug plan - Part D. SeniorCare will coordinate benefit coverage with your Part D plan. Individuals enrolled in Medicaid are not eligible for SeniorCare, because Medicaid already provides prescription drug coverage.
Only SeniorCare covered drugs purchased at the retail price will be used to meet the participant’s “spend down”, and SeniorCare covered drugs purchased at the SeniorCare rate will be used to meet the deductible. Other medical costs, such as physician office visits or hospital services do not count toward the SeniorCare spend down or deductible.
Election Periods
When you become Medicare eligible you will have “election periods”. An Election period is a allotted period of time for you to make a choice about whether you want to enroll in additional medical and prescription drug coverage. Election periods a slightly different for traditional Medicare Supplement plans than Medicare Advantage and Prescription drug plans.
Medicare Supplement has a 6 month “open enrollment period”. It begins three months prior to the Part B start date posted on your Medicare Card; it includes the month when your Part B of Medicare begins and the next 2 following months. This open enrollment period allows you the opportunity to switch Medicare Supplement insurance providers without having to go through underwriting. After the open enrollment closes for you if you choose to change supplement insurance providers or change the structure of your supplement program you will have to go through underwriting.
Medicare Advantage and the Prescription Drug programs have an Initial Election Period (IEP) of 7 months. It begins three months prior to the Part B start date posted on your Medicare Card; it includes the month when your Part B of Medicare begins and the next 3 following months. This time period allows you to change Advantage and Prescription programs almost at will. Once the Initial Election Period ends you will remain in these Medicare programs until the Annual Election Period begins.
Both the Advantage and the Prescription drug programs are annual contracts with Medicare that begin January 1 and end December 31st of each year and either the insurance provider renews their contact with Medicare for the following year or they can terminate the plan. Because insurance providers can annually change the benefits of both programs, Medicare allows enrollees (you) an equal opportunity to annually change your current Prescription or Advantage plan. The Annual Election Period (AEP) begins for contract year 2014, October 15th 2013 and runs to December 7th 2013. By late September or early October, seniors will receive information from their current Medicare prescription drug or Medicare Advantage provider about plan changes for year 2014.
Special Election Periods are exceptions to the normal rules conducting enrollments, there are a number of Special Elections. Most important is that Medicare allows those individuals that are just enrolling in Medicare Advantage for the first time a 12 month special election period. During the first 12 months of enrolling in an Advantage plan, if you decide that Advantage is not for you at any time you can go back to original Medicare and will have a 63 day guaranteed enrollment period to enroll in a Medicare Supplement plan.
63 Day Guaranteed Issue is offered to anyone who has been notified by a Medicare Supplement, Medicare Advantage and Prescription provider that the current plan that they are enrolled in is going to terminate. You will be given special notice by the provider of their intensions of terminating your health care benefits, this notice is very important for you to exercise your right of Guaranteed Issue. This right only applies to those individuals who have lost their health care coverage do to involuntary reason.
There are a number of Special Elections available to seniors, contact an insurance agent who specializes in Medicare to see if you may qualify for a Special Election Period.
Low Income Subsidy
If you have limited income and resources you may qualify for additional help to pay for prescription drug costs. Known as Low Income Subsidy (LIS) this program can lower your monthly premiums for your Medicare Prescription Drug Coverage (Part D) and the cost of your medications.
Extra help is based on gross income; a Single person may qualify if their annual 2012 income is less than $16,755 and have resources less than $13,070. Married persons living with a spouse and no other dependants with a 2012 income less than $22,695 and resources less than $26,120 may also qualify for extra help.
Income includes the following; gross Social Security, gross wages, interest dividend and capital gains income, IRA and annuity income, pension income, and business income. Resources include money in a checking or savings account, stocks, and bonds. Resources not included; your home, car, household items, burial plot, up to $1,500 for burial expenses (per person), or life insurance policies.
You automatically qualify for Extra Help if you have Medicare and meet one of these conditions: you have full Medicaid coverage (Forward Card); or, you get help from your state Medicaid program paying your Part B premiums; and if you get Supplemental Security Income (SSI) benefits. When you qualify for these programs, Medicare will mail you a purple letter that you should keep for your records. You don’t need to apply for Extra Help if you get this letter.
If you qualify the cost of a Medicare drug plan (Part D) or Medicare Advantage plan with prescription drug benefits, Medicare will help you pay for your Medicare drug plan’s monthly premium, any yearly deductible, coinsurance, and copayments, there will be no coverage gap, and there will be no late enrollment penalty. If you are not in a Medicare drug plan, or have not enrolled in a Medicare drug plan, Medicare may enroll you in one. If Medicare enrolls you in a plan, Medicare will send you a yellow or green letter letting you know when your coverage begins.
If you have Medicaid and live in certain institutions (like a nursing home), you generally pay nothing for your covered prescription drugs. If you’re getting Extra Help, you can switch to another Medicare drug plan or Advantage plan anytime during the year. The ability to switch from prescription drug plan to another drug plan anytime during the year has become more important as some of these plans begin to reduce the number medications in their formulary. If you have such a plan that does not carry your medication you can switch to a plan that does. Your new coverage will be effective the first day of the next month. If you’re enrolled in a Medicare Advantage plan that includes a prescription drug benefit, you can switch to a different Advantage plan with prescription drug anytime during the year.
Inpatient or Outpatient?
At a recent meeting for a Medicare Advantage provider, a serious issue with regard to hospital inpatient status was discussed. It was brought to our attention that a hospital overnight stay may be considered “outpatient” services instead of “inpatient”. Hospital status affects how much you pay for hospital services and will affect whether you will qualify for Skilled Nursing Facility (SNF) care.
Inpatient admission begins the day you are formally admitted to the hospital with a doctor’s order and ends the day before you are discharged. The important word here is order; without a doctor’s order you will not be considered inpatient. Outpatient care can include a variety of medical services, including: emergency care, surgery, lab tests, X-rays and observation.
Observation is considered outpatient care and lasts for a short period of time, but not always. At the meeting, there were reports of observation stays for up to 3 days! Three days of observation care will not qualify you for SNF care and the financial impact to a senior who may require SNF care after a medical event is substantial.
Inpatient care is covered under Part A of traditional Medicare. If you have a Medicare Supplement plan with a “Part A deductible rider,” you are financially covered. Outpatient Care is covered under Part B of Medicare and a supplement plan will cover all costs if you have the “Part B deductible rider” and “excess charge rider”.
The inpatient / outpatient issue can be a serious financial issue with people enrolled in Medicare Advantage plans. Item 13 of the Outline of Coverage is an important item to understand. The better Medicare Advantage plans will specify fixed dollar copays instead of percentages. You need to know how your Advantage plan handles “observation”.
Drug coverage while under observation can become another serious issue, especially if you are there for more than one day. Most medical facilities will not let you take self-administered drugs from home while under observation care. The costs of these medications are not covered under Part B of Medicare, Medicare Supplement or Advantage plan.
Being admitted for a Part A hospital stay requires a doctor’s order and a 3-day hospital stay fulfills the requirement for skilled nursing care. Outpatient care, Part B is generally a short term event that could lead to a longer stay. The longer stay could be a covered Part A hospital stay if you are properly admitted to the hospital; otherwise it could be billed as observation. Ask your doctor or the hospital staff if you are inpatient or outpatient. Did they formally admit you if an outpatient medical procedure extends more than 12 hours? Finally, doctors and hospitals have to follow Medicare regulations. You can find more information in Medicare and You for 2013 or at the Medicare website.
Medicare Fraud & Waste
At a recent agent meeting the topic of discussion was Medicare Fraud and Waste. This can become a contentious issue depending on where you stand on consumer protection, especially when it relates to Medicare. There are two opportunities for fraud and waste; the first opportunity is on the front end, in which competing agents and insurance providers bid for the business of the Medicare eligible individuals and the second opportunity is on the consumer end of Medicare services.
Insurance providers and agents are supposed to adhere to a high level of ethical standards when it comes to conducting business with Medicare eligible individuals. Unfortunately the need for economic survival in a competitive market often trumps ethical standards. The only way an individual can protect themselves is to learn as much as they can about the different insurance providers and insurance products they offer; mind you this can be a very daunting task. When talking to an agent; ask yourself this question; is this person more interested in selling you something; or is this agent trying to educate you on the options available to you and the value they offer? It’s great to have a good agent!
Medicare offers a Deter, Detect and Defend brochure and identifies two areas of opportunities for fraud and waste; the first is with personal identity theft. Identity theft occurs when someone steals your personal information; name, social security number, date of birth, Medicare number, Medicare Supplement or Advantage provider identification number, credit card number, etc. Medicare warns everyone to be suspicious of anyone offering free medical equipment, services or health surveys through the mail or telephone and then requests your Medicare ID number; if it’s free they do not need this number.
The second element of Medicare fraud and waste – Defend; asks that you check your medical bills, Medicare Summary notices and Explanations of Benefits reports. Were you charged for medical services or equipment that you did not receive? Do the dates of services and charges look correct? Unfamiliar dates need to be questioned. Were you billed for the same medical services twice? A big opportunity for Medicare waste is with mail order diabetic suppliers, promoted on the media.
Medicare fraud and waste takes from all of us and hurts those who can least afford it. Insurance agents and insurance providers are supposed to be held to higher ethical standards, but this is not always the case. Good information is a key element, but it can be confusing; and remember your friends may not always be your best source of information. One of the insurance providers that I promote takes the issue of Medicare fraud and waste seriously and assigns a customer care representative to every client to help them with this issue. So the moral of the story is to be careful!
