Medicare

Medicare is a federal government program to fund most mainstream health care (other than long term care) for U.S. citizens. Non-citizens can obtain Medicare if they have been permanent legal residents of U.S. (e.g. holder of a “green card”) for at least five years. Medicare is overseen by the Centers for Medicare and Medicaid Services (CMS) in the Department of Health and Human Services. Most people qualify for Medicare at age 65, but you also can obtain Medicare if you receive Social Security Disability Insurance (also called SSD or SSDI) benefits for two years or contract ALS (Lou Gehrig’s Disease) or end stage renal disease.

Medicare has four parts– A, B, C, and D. They equate to three flavors– Original Medicare (Parts A and B), Medicare Advantage Plans (Part C), and Medicare Prescription Plans (Part D). Part A covers hospitalization, hospice, rehabilitation, and limited care at home. Part B funds typical doctor care and certain equipment. Part C combines the services that Original Medicare covers (and sometimes additional benefits) in managed care plans. Part D covers drugs and sometimes is combined with a Part C Medicare Advantage Plan.

Medicare Advantage Plans may be cheaper than Original Medicare, but because they are managed care plans, they typically have provider networks and gatekeepers. Therefore, you may not have your choice of doctor or hospital. In contrast, Original Medicare has no networks or gatekeepers, but it has co-pays and deductibles. Therefore people on Original Medicare often buy Medicare Supplement (also called Medigap) policies from private insurers to cover co-pays and deductibles and cover international care and blood transfusions.

Medicare Part A carries no premium if you or your spouse paid at least 40 quarters of Social Security or Railroad Retirement Medicare payroll taxes. If you are disabled or have ALS or end stage renal disease, you may not be subject to the 40 quarter requirement. If you don’t qualify for premium free Medicare Part A, you can buy into Part A for a monthly premium , which varies based on work history. The Medicare Part A premium changes each year but is up to $437 in 2019. However, in order to buy into Part A, you also may have to buy Medicare Part B.

Medicare Parts B, C, and D have premiums, but Medicaid may pay them for low income participants. Conversely, high income participants may pay an additional premium. As Part C Medicare Advantage Plans, Part D Medicare prescription plans, and Medigap policies are sold by private insurers, prices can vary considerably from issuer to issuer. Original Medicare Part A and Part B coverage is provided by the federal government directly.

The Initial Medicare Enrollment Period for a person eligible at age 65 is 3 months before to 3 months after the month in which you reach age 65. After receiving Social Security Disability for 24 months you should automatically receive Medicare Parts A & B and can elect to enroll in Medicare Parts C and D. If you don’t enroll in Medicare during your Initial Medicare Enrollment Period, you may face late enrollment penalties unless you qualify for a Medicare Special Enrollment Period. If you’re covered under a group health plan based on your or your spouse’s current employment (not retiree or COBRA health insurance), you have a Medicare Special Enrollment Period to sign up for Parts A and B, and if you do so, you also can enroll in Parts C and D.

Medicare may be primary or secondary depending on various factors. If Medicare is primary, Medicare rather than other health insurance (such as COBRA or retiree coverage) pays first. Where Medicare normally would be primary but you don’t sign up for Original Medicare or Medicare Advantage Plan, other health insurance typically won’t pay costs Medicare normally covers.

Medicare usually is primary to small employer health plans, retiree health plans, COBRA, Medigap insurance, and some other kinds of health insurance. For instance, if you are eligible for Medicare but don’t take Medicare because you are covered by your spouse’s retiree health insurance, your spouse’s plan may not cover you for most costs.

When through no fault of the secondary insurer, you fail to obtain Medicare that would be primary insurance, the secondary coverage may pay either nothing or only what it would pay if you had Medicare. In that case you would be liable for costs Medicare normally would cover!

EXAMPLE- Because you have great health insurance through work, you don’t take Medicare at age 65. At age 66, you have surgery costing $100,000, which is fully covered by your employer plan. When you retire at age 68, the company’s retiree coverage kicks in, but you still don’t take Medicare. Your surgeons then charge $200,000 for a complex follow-up operation for which Medicare would pay 80% if you had Medicare. You are liable for at least $160,000 since Medicare is primary to retiree coverage. The secondary retiree coverage may or may not cover the remaining 20%. Even worse, the surgeons may charge uninsured rates, which typically far exceed what Medicare would pay.

Delaying Medicare enrollment also can lead to late penalties. You are not subject to late enrollment penalties in limited cases such as if you have qualifying employer health insurance.