Things I've Learned About Medicare

I've worked at lots of different call centers over the years, and I learn something new at every one. Right now, I work for a company that takes calls for an insurance company's Medicare eligible members. Until I started working at my current day job I had no idea what was involved with Medicare, and I'd like to share some of the things I've learned about Medicare in the process. Everything I'll share with you is available either at Medicare.gov, through the free booklet Medicare And You, or through the Centers for Medicare and Medicaid Services website.

If you're like me, you haven't thought about Medicare and probably won't until you ready for retirement. The problem with this is that there are some things we ought to know about Medicare ahead of time.  So here's a few tidbits I've learned over the past few months I've been working for this company.

BASIC MEDICARE INFO

First of all, did you know that there are four different parts to Medicare? What you think of as traditional Medicare has two parts: Part A (Hospital Insurance) which covers hospitalization, hospice, home health care, etc. (and is generally what we pay FICA tax for), and Part B (Medical Insurance) which covers doctors, outpatient services, durable medical equipment (wheelchairs, insulin pumps and so forth)... which may or may not require a monthly premium. For those that choose to be covered only by original Medicare for medical services there is also the option of choosing a Medicare Supplement to cover those things the basic Medicare won't cover. These policies are also known as "Medigap" policies.

Medicare Part C, also known as Medicare Advantage, is basically a replacement for traditional Medicare and is run by Medicare-approved insurance companies such as the one I take calls for. These plans are regulated by a government agency known as the Centers for Medicare and Medicaid Services (a.k.a. CMS), and have to be at least as good as traditional Medicare. To qualify to get a Medicare Advantage plan, you have to have both parts of traditional Medicare (Part A and Part B). Sometimes these plans are free because they are covered by the premium members pay for traditional Medicare, but sometimes you have to pay an additional Premium for them. Medicare Advantage plans can cover just the medical issues like traditional Medicare does, or they can also include prescription drug coverage (a.k.a. Medicare Part D).

Medicare Part D, the prescription drug plan, was instituted as recently as 2006. The prescription drug plan with Medicare is a little interesting, and a little complicated. There are four stages to this plan: the Deductible, the Initial Coverage, the Coverage Gap (a.k.a. the "Donut Hole"), and Catastrophic Coverage. Each stage of the Medicare prescription drug plans as its own unique issues. Plus there are some other issues you'll need to know about Medicare before choosing whether or not to sign up for a Medicare-based prescription drug plan (more on this later).

The Deductible Stage most of us are already familiar with, because we probably have had deductibles with our traditional coverage through our jobs. Basically this means that we have to pay 100% for our medicine before insurance benefits kick in and we are covered.

We are probably also familiar with the Initial Coverage Stage. This is when we start seeing the benefits of our insurance, and we have our copayments or coinsurance. What's the difference between a copay and coinsurance you ask? A copay is a set amount (like $5 out of pocket cost for a prescription), and coinsurance is a percentage of the full cost (I pay 20% of the cost and the plan covers the other 80%).

The next stage is the one that gives us some trouble. This is the Coverage Gap Stage and is also sometimes known as the "Donut Hole". For some reason, when the Medicare-based prescription drug plan was set up it included a period of time were the insurance coverage would go away for most people (there are a few exceptions). That is what the coverage gap is all about. What this means is that when the total value of drugs that a Medicare eligible person has picked  up reaches a certain amount (i.e. what the member has paid out of pocket plus what the plan has paid), their coverage goes away... well, mostly (more on this later). That means that the person has to pay most of the full cost again, just as if they were in the deductible phase.

Per the 2013 Medicare And You booklet (page 86), everything the Medicare member has paid out of pocket from the deductible to copays and coinsurance counts toward the yearly out of pocket costs and getting out of the Donut Hole and into final stage known as Catastrophic Coverage. At this point the member pays only a minimal coinsurance for their medications.

DRUG COVERAGE IN THE COVERAGE GAP

I promised more information about coverage during the Coverage Gap... so here we go.

When the Medicare Part D prescription drug coverage plan was enacted, members had to pay 100% of the costs of their medications while in the Coverage Gap... no iffs, ands, or buts. Thanks to the Affordable Care Act (a.k.a. "Obamacare"), this is changing... along with a lot of other things.

In 2010, Medicare members who reached the Coverage Gap received a one-time rebate. Starting in 2011, the Coverage Gap is starting to close. This year, 2013, instead of paying the full 100% of drug costs, Medicare members will pay 47.5% of the cost of brand-name prescription drugs and 79% of the cost of generic drugs. The Affordable Care act will reduce the costs to 25% each in 2020 (see the chart below - information per Medicare.gov, page 6).

What Medicare Members Pay for Prescriptions in the Coverage Gap

• 2012 - Brand Name drugs, 50%     ..........  Generic drugs, 86%
• 2013 - Brand Name drugs, 47.5%  ..........  Generic drugs, 79%
• 2014 - Brand Name drugs, 47.5%  ..........  Generic drugs, 72%
• 2015 - Brand Name drugs, 45%     ..........  Generic drugs, 65%
• 2016 - Brand Name drugs, 45%     ..........  Generic drugs, 58%
• 2017 - Brand Name drugs, 40%     ..........  Generic drugs, 51%
• 2018 - Brand Name drugs, 35%     ..........  Generic drugs, 44%
• 2019 - Brand Name drugs, 30%     ..........  Generic drugs, 37%
• 2020 - Brand Name drugs, 25%     ..........  Generic drugs, 25%

IMPORTANT INFO ABOUT MEDICARE PRESCRIPTION DRUG COVERAGE

Here is something very important I learned about Medicare prescription drug plans while working at my current job... were you aware that Medicare can penalize you for not having drug coverage? It's called a Late Enrollment Penalty, or LEP, and here's how it works.

Once you are eligible for traditional Medicare (Parts A and B), you are also generally eligible for prescription drug coverage (Part D). If you choose not to take a Medicare Part D plan when you are first eligible and if you don't have drug coverage another way (like through an employer or the VA) for at least 63 days in a row, then Medicare can assess you a penalty when you eventually DO sign up for a Medicare Prescription Drug Plan. 

The Late Enrollment Penalty is calculated by taking 1% of the national base premium and multiplying that by the number of months a person has been without drug coverage. Per this Medicare.gov publication (pg 2), the national base premium is $31.17 in 2013. Here's an example per the 2013 Medicare And You publication (pg 89)...

Example: Mrs. Jones didn’t join when she was first eligible— by May 1, 2009. She joined a Medicare drug plan with an effective date of January 1, 2013. Since Mrs. Jones didn’t join when she was first eligible and went without other creditable drug coverage for 43 months (June 2009–December 2012), she will be charged a monthly penalty of $13.40 in 2013 ($31.17 X .01 = $.3117 X 43 = $13.40) in addition to her plan’s monthly premium.

Therefore, I suggest that it is very important to make sure you have some sort of prescription drug coverage while in retirement... or risk running into higher premiums when you sign up for a Medicare-based prescription drug coverage (or medical plan that includes drug coverage).

OK, that's enough of the heavy stuff. See you next week!