Medicare Basics: What to Know

Many clients who are retiring or suffering job loss face key decisions about their healthcare. These Medicare basics will help make those decisions.

Medicare is a commonly misunderstood government benefit.  With so many baby-boomers retiring and especially with the impact of COVID-19 on the economy, many clients are faced with important decisions on their healthcare.  For that reason, I wanted to cover some Medicare basics to help readers understand these issues.

If you’re 65 or older and lose your job, you can keep your employer-based health insurance under a federal law known as COBRA. However, it also could be more expensive. In addition, COBRA coverage isn’t qualifying insurance in place of Medicare, and if you miss some deadlines for enrolling in Medicare without having the right coverage, you could pay life-lasting penalties, explains CNBC’s recent article entitled “What to know about getting Medicare if you are 65 or older and lost your job.”

Another critical Medicare basic is that Medicare isn’t free. However, if you find yourself currently with no employer-based insurance, it may be your best option. There are also ways to lower your costs, if your income has dropped a lot.

Provided that you have at least a 10-year work history, you’ll have no premiums to pay for Medicare Part A, which covers hospital stays, skilled nursing, hospice and certain home health services. If you don’t satisfy the eligibility requirements for it being premium-free, you could pay up to $458 per month for coverage. Either way, Part A’s deductible is $1,408 per benefit period, with some caps on benefits.

Part B covers outpatient care and medical supplies. It has a standard monthly premium of $144.60 in 2020, but higher earners pay more. There is also a $198 deductible in 2020. Once you meet the deductible, you’ll typically pay 20% of covered services. You are allowed eight months to sign up for Part B, once you lose workplace coverage.

You can get a standalone plan to have with original Medicare, or you can get an Advantage Plan (Part C). These plans are offered by private insurance companies and typically include prescription drug coverage. If you select this, your Parts A and B benefits will be delivered via the insurer offering the plan (which may or may not have a premium).

A Part D drug plan covers prescriptions. The average cost for this coverage in 2020 is roughly $42 a month, but high earners pay extra for their premiums. The maximum deductible for Part D is $435 in 2020.

If you already have Part A and are enrolling in Part B because of a job loss, there is a form that you and your ex-employer should complete to avoid late-enrollment penalties, by making certain that you had qualifying coverage during the period of time you were eligible for Part B but weren’t enrolled.

Another important issue of Medicare basics is what Medicare excludes from cover.  Consider how you’ll pay for items like dental work, routine vision, or hearing care. It also excludes long term care, cosmetic procedures and overseas medical care.  Clients often mistaken the skilled nursing facility rehab component of Medicare with long term care insurance, so see here for more detail on that.  https://www.galliganmanning.com/long-term-care-whats-it-all-about/ 

Seniors frequently use original Medicare and a supplemental policy (“Medigap”) to help cover out-of-pocket costs, such as deductibles and coinsurance. Medigap policies are standardized, regardless of which insurance company sells them and your location. However, the premiums can differ from insurer to insurer and among locations. Therefore, it is critical that you know the differences you may see when evaluating your options. Look at a carrier’s premium rating system, its claims history and its customer service ratings.

If you go with an Advantage Plan, dental and vision coverage may be included. Note that these plans have their own copays, deductibles and out-of-pocket maximums.

Reference: CNBC (June 26, 2020) “What to know about getting Medicare if you are 65 or older and lost your job”