Medicare Overview

Medicare Overview

This paper is an overview of the Medicare system and how it works. The document is intended

for adults who will be applying for Medicare benefits at the present time, or sometime in the near

future. I know that Medicare can be very confusing to most especially to those of you who are

just aging into Medicare. Truth be told Medicare can still be very difficult to understand for

those of you who are past 70, and have been on Medicare for a while. Hopefully by the end of

this document you will understand some of the Medicare basics. For example, the difference

between the different parts that make up the system A, B, D, F, G, and N. You will also have a

working knowledge of the different aging
systems that companies who provide supplemental

insurance use, as well how those companies are rated, and what sorts of rate increases you might

expect from certain companies.

When you turn 65, or when you retire from an employer, and you apply for your part B, you are

in what is called the initial enrollment period.
What this means essentially is that you have aged

into Medicare and should you choose, you have the option to enroll in Medicare. This is the 6

months that no insurance company is allowed to ask you any medical questions, and you are

guaranteed issuance of a policy with any company that you choose. I caution all of my

prospective clients to choose a company wisely because if you have any medical issues the

company that you choose today may be the company that you have for the rest of your life. Lots

of seniors have the misconception that no more pre-existing conditions will allow them to change

insurance providers from year to year. Currently this is not so, you had your 6 months when

insurance providers could not ask you any health questions. If you find that you are sustaining

some higher than average yearly rate increases than you anticipated and you would like to

change insurance providers in 3 or 4 years, then those providers have the right to ask qualifying

health questions.

The different parts of Medicare consist of the following: Part A is hospitalization, which is
free

and it comes from the government, provided you have worked 60 quarters in your life. If you

have not worked 60 quarters in your life, but your spouse has, you can receive Medicare part A

benefits by also using your spouses worked quarters.
Part A provides for 80% of any

hospitalizations that you may require. Next, part B is also a benefit from the government

provided you or your spouse has worked 60 quarters; however there is a premium that you must

pay based on the money that you have earned over the 60 quarters worked. The median premium

that most seniors pay monthly is, $104.90; however, that is determined each year by the

government. In 2013, the premium was $104.50; this does fluctuate from year to year. The only

reason you would not pay this median premium is if you were considered one of the “1%er’s,”

and made an exorbitant amount of money over your lifetime, and then your premium would be

based on your income. Part B pays 80% of your doctor’s charges such as office visits, lab work,

x-rays, or any other Medicare approved procedure the doctor orders or preforms on an outpatient

basis.

Next I will explain the 3 most popular plans for traditional Medicare supplemental plans,

sometimes referred to as Medi-Gap plans. The benefits for all of these plans are mandated by the

government so that it does not matter which company you choose as your provider, the
benefits

will be exactly the same. Plan F is the most popular as well as the most inclusive. It pays 100%

of the 20% that Medicare does not pay. So you simply pay your monthly premium and then you

will never have to pay a penny to go to the doctor or hospital for any Medicare approved

procedures. The next plan, that is very popular, is the plan G. The plan G is very similar to the

plan F, the only difference is that with the plan G you have to pay the part B deductible. This

year the part B deductible is $147.00; however part B is managed by the government so that

deductible changes each year. After you have met the part B deductible, then you have the 100%

coverage of the plan F. The third most popular plan is plan N. Plan N also has the part B

deductible and after you meet the deductible then you are on a copayment system. You would

pay $20.00 for all doctor’s office visits, and a $50.00 copay for any emergency room visit;

however if you are admitted to the hospital that $50.00 copay is waived. There is one drawback

of the N plan, it does not cover any part B excess charges that you may incur. Excess charges

occur when certain doctors do not accept Medicare assignment. For example, a cardiologist, who

does accept Medicare, but not Medicare assignment could result in you paying large amounts out

of pocket. The Medicare assignment is when Medicare assigns how much they will reimburse

doctors for certain procedures. For example, Medicare assigns the dollar amount of $1,000.00 to

procedure X, and your doctor decides that he is going to charge $1,500.00. Medicare will pay

80% of the $1,000.00 assigned value and you would be responsible for the other $700.00 he

charges since he does not accept Medicare assignment. The lower monthly premium may be

attractive with the plan N; however if you need to see specialists who do not accept Medicare

assignment you may be out hundreds, or possibly even thousands per year. I strongly recommend

that you seek the help of an insurance agent or broker who has years of experience with helping

you navigate the different supplemental options that you will soon have available to you.

The next information that I would like to provide you with is the different aging systems that the

different insurance companies use for computing rates for prospective clients. The most popular

and most widely used system is the “attained age” system. The best way to describe the attained

age system is that insurance companies assign a predetermined age that designates when a

client’s rate will not be raised anymore because they have aged another calendar year. Of the

companies that we represent, United American has the lowest attained age at 80. Blue Cross

Blue Shield also uses this system and their magical attained age is 85. Aetna, Mutual of Omaha,

and Equitable all have attained ages of 99, what this means is that you may pay a few dollars less

early on when you age into Medicare; however the longer you are with one of these companies

they are going to make up the premium money on the back end. Another type of aging system,

which is used by AARP, is the community rated system. This system takes all members

regardless of age and groups them together and gives same monthly premium, or price, is

charged to everyone who has the Medicare Supplement policy, regardless of your age. Premiums

will not increase due to your age; however prices can and will go up because of premiums paid

out for the previous year. For example, someone who is just turning 65 would be better off in and

attained age policy versus someone who is 95 years old, who would be better off in a community

rated policy.

I would like to once again reiterate that Medicare is very confusing and I strongly urge you to

find someone in your community to help you navigate the Medicare system. You have a lot of

options open to you now that you are eligible for Medicare benefits. I also strongly urge you to

find an agent or broker who represents 4 or more Medicare supplement providers so that you

have a broader range of companies to choose from as this will help you choose the company that

best suits your needs as well as your budget. I would be happy to assist you or answer any

questions as you may have as you begin your endeavor in the Medicare system.