Written by Jennifer Lavelli, CLTC, CSA, Medicare Solutions Advisor and Long-Term Care Specialist
Probably the most difficult thing to understand about Medicare is the many different parts, the way they work (individually and together), and the sometimes-complex rules about when you need to get the individual parts, and how and when you can change them. There are five parts of Medicare coverage available, and we will review how they can be organized into three different combinations of comprehensive Medicare coverage.
The five parts of Medicare coverage:
I and II. Original Medicare (Parts A and B):
Available from the Social Security Administration, and one of the two parts that the Federal government provides, Part A covers health care facility costs (e.g., hospital, skilled nursing, psychiatric facility). You become eligible for Part A at age 65 during your Initial Enrollment Period (or sooner if you collect Social Security disability or have ESRD).
You will not pay premiums for Part A if you or your spouse have at least 40 calendar quarters of work in any job where you paid Social Security taxes in the U.S.
Available from the Social Security Administration, the second of the two parts that the Federal government provides, Part B covers outpatient costs (e.g., doctors, laboratories, radiology). You become eligible for Part B at age 65 during your Initial Enrollment Period (or sooner if you collect Social Security disability or have ESRD).
You will pay monthly premiums for Part B. Premiums are based on the Adjusted Gross Income from your Federal Income Tax filing 2 years prior to the year you enroll in Medicare Part B. There is always a chart of what you will pay for Part B at https://www.medicare.gov/your-medicare-costs/part-b-costs
You must enroll with Original Medicare (Part A and/or Part B) before you can enroll in any of the additional parts.
If you will be receiving Part A with no premium (see how you qualify for no Part A premiums above), you will not receive any penalties for enrolling in Part A after your 65th birthday.
You must enroll with Part B during the three months preceding your 65th birthday to avoid coverage delays and/or penalties UNLESS you are working and covered by a group employer health plan, where the employer group is larger than 20 employees. If the group is smaller than 20 employees, you DO need to sign up for Part B even with your employer group healthcare coverage.
If you are NOT covered by a group employer healthcare plan, depending upon how late you enroll with Part B, you will experience one of the following penalties and/or delays in coverage:
- If you enroll the month of your 65th birthday, you won’t be covered until the following month.
- If you enroll the month AFTER your 65th birthday, you won’t be covered until the following month.
- If you enroll two months AFTER your 65th birthday, you won’t be covered until 2 months later.
- If you enroll three months AFTER your 65th birthday, you won’t be covered until 3 months later.
- If you miss the entire 7-month Initial Enrollment Period (3 months before, the month of, and up to 3 months after your 65th birthday month) you have to wait until the General Enrollment Period which runs from Jan 1 – Mar 31st every year, and your coverage will not begin until July 1.
- Whenever you don’t get Part B when you’re first eligible, your monthly premium may go up 10% for each 12-month period you could’ve had Part B but didn’t sign up. In most cases, you’ll have to pay this penalty each time you pay your premiums, for as long as you have Part B.
III. Part D:
Known as a PDP (prescription drug plan) and offered by commercial insurance companies, most people want and need a Part D plan to help pay for their prescription medications. You can enroll with a Part D plan even if you only have Part A.
You must enroll with a Part D plan during your Initial Enrollment Period with Medicare or within 63 days of leaving other creditable prescription drug coverage which could include drug coverage from a current or former employer or union, TRICARE, Indian Health Services, the Dept of Veterans Affairs, or individual health insurance coverage.
If you go more than 63 days without creditable drug coverage and then apply for Part D, you will be assessed a Late Enrollment Penalty. The amount of the penalty depends on how long you didn’t have creditable prescription drug coverage. The late enrollment penalty is calculated by multiplying 1% of the “national base beneficiary premium” by the number of full, uncovered months that you were eligible but did not enroll in Medicare drug coverage and went without other creditable prescription drug coverage. The final amount is rounded to the nearest $.10 and added to your monthly premium EVERY month you keep Part D. You can find out how to estimate your penalty at: https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty
- Medicare Supplements (aka Medigap Policies):
Medicare Supplements work in conjunction with Medicare Parts A and B. Their purpose is to reduce your out-of-pocket expenses from those two parts of Medicare.
You can enroll in a Medicare Supplement within 6 months of our Part B effective date, known as the Open Enrollment Period. After that, in New York or Connecticut, you will be issued the plan, but you will have a 6-month exclusion of coverage for any conditions that had been diagnosed or treated within the 6 months prior to your application. You cannot be denied a plan in NY or CT. They are among only 4 states that guarantee you will be issued a Medicare Supplement plan.
New Jersey, however, CAN deny you a plan (or charge you more for it) if you miss your Open Enrollment Period.
There are 12 Medicare Supplements available in the tri-state area including New York, New Jersey, and Connecticut. Three of them are no longer available to people eligible for Medicare after Jan 1, 2020.
Medicare Supplements are themselves identified by letters A through N, each of which is a generic plan offering different amounts of coverage for different Part A and Part B services. Each generic “lettered” plan is offered by multiple insurance companies, so you are wise to choose the plan you want, and then the insurance company that offers that generic plan at the lowest monthly premium.
- Part C Medicare Advantage plans:
These plans, offered by commercial insurance companies, are an alternative to Medicare Parts A and B. Most of them also include Part D prescription medication coverage.
You MUST enroll in Medicare Parts A and B in order to have access to Part C plans, but once you have a Part C Medicare Advantage plan, your Medicare Part A and B benefits are suspended – – you never have the combination of these three parts active at any one time.
Part C plans are available as HMO, POS and PPO plans. HMO plans require you work with a contracted network of providers. POS plans allow certain specific services to be accessed outside of their contracted network. PPO plans allow you to work within and/or outside of the network of providers, albeit at a higher cost for out of network services.
Your initial enrollment with Part C Medicare Advantage plans would be coincident with your enrollment in Medicare Parts A and B, within your 7-month Initial Enrollment Period.
Using the parts of Medicare – – Three Options:
Now that you can identify the five parts of Medicare, it is also important to know how you can use the parts to ensure comprehensive coverage. There are three different options/ways you can assemble the five parts in order to have comprehensive coverage:
Option I: Medicare Parts A & B, and a Part D prescription drug plan.
This is the simplest way to go. These three pieces provide comprehensive hospital, medical, and prescription drug coverage. You will expect to pay premiums for Medicare Part B and for a Part D prescription plan from a commercial insurance company.
With this option, you can also expect to pay Medicare Part A and Part B deductibles, coinsurance (typically 20% of Part B services), and copayments (for specific days in facilities with Part A).
Note that you cannot use your Medicare outside of the United States, so if you travel, you’ll want to buy travel insurance that covers your health and medical needs.
Also note that with Medicare Parts A and B alone, there is NO LIMIT to your out-of-pocket costs for services.
Absent special circumstances (referred to as Special Enrollment Periods) you can only change your Part D prescription drug plan once/year during Medicare’s Annual Election Period.
PROS: Medicare Parts A and B do not utilize networks – most providers nationally accept both parts. There are no referrals, no pre-qualifications, and no one is involved in your care except your provider(s). Almost every public/municipal and most private hospitals accept Medicare.
CONS: No limit to your out-of-pocket costs. No coverage for routine or preventative dental, vision or hearing.
Option II: Medicare Parts A & B, a Part D prescription drug plan AND a Medicare Supplement.
When you add a Medicare Supplement to Medicare Parts A and B, you can expect to pay an additional monthly premium for the Medicare Supplement, and for the Supplement to begin paying some (or most) of your Medicare out of pocket costs for services, including deductibles, coinsurance and copayments.
The amount the Medicare Supplement will pay is in accordance with that generic plan’s construct. You can always review how the various Medicare Supplement plans work at: https://www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies
All Medicare Supplement plans cover 100% of hospital copayments and add 365 days of hospital coverage after your Medicare hospital benefits are exhausted. Some Medicare Supplements will add Foreign Travel EMERGENCY (only) coverage – – 80% of your cost up to plan limits.
After your Open Enrollment Period in New York and Connecticut, you can change your Medicare Supplement monthly as long as you never allow 63 days to go by in between. In New Jersey, if you wish to change your Medicare Supplement after your Open Enrollment Period, you will be asked health qualification questions. Depending on your answers to these questions, you can be denied a plan or charged more for it.
PROS: You can both significantly reduce your out-of-pocket costs AND provide a limit to your Medicare out of pocket. No worries about providers “accepting” your Medicare Supplement.
CONS: Monthly premiums for Medicare Supplements can be high. No coverage for routine or preventative dental, vision, or hearing.
Option III: Part C Medicare Advantage plans
When you choose a Part C Medicare Advantage Plan, you are suspending your Part A and B benefits. You will still pay your Part B premium, but your hospital, medical, and prescription drug coverage will be provided by the Part C plan’s insurer.
Most Part C plans have nominal (if any) monthly premiums of their own. You can expect to pay deductibles, copayments, and/or coinsurance for every service.
Many Part C plans include access to preventative dental, vision and hearing coverage, in addition to other services including gym memberships, nurse hotlines, reimbursement for over-the-counter items, meals delivered after a hospitalization, foreign travel emergency coverage, etc. – – all things you will not get with Medicare.
You would be wise to check all your doctors and preferred facilities before choosing a Part C Medicare Advantage plan. If an HMO or POS plan, you will need most of all of those providers to be in the plan’s network. If a PPO plan, you will still want to have most or all your providers in network to ensure you pay the lowest costs for services.
Absent special circumstances (referred to as Special Enrollment Periods) you can only change your Part C Medicare Advantage plan during Medicare’s Annual Election Period (Oct 15-Dec 7) OR the Open Election Period (Jan 1 – Mar 31).
PROS: If your providers are in network, you can enjoy a low-cost plan with extra benefits.
CONS: If you are not careful in choosing a plan, you could get stuck paying higher out of pocket costs for out of network providers. Part C plans are referred to as Managed Medicare plans. If you get into a situation where your healthcare services are becoming costly, your insurer may become involved in your care.
Changing Your Medicare Coverage
Every year, during Medicare’s Annual Election Period (Oct 15 – Dec 7) everyone on Medicare can decide to change their coverage from any of the above options to any other. The decisions made during this period become effective January 1.
Also, every year, Medicare’s Open Election Period (Jan 1 – Mar 31) allows ONLY THOSE enrolled in Part C Medicare Advantage plans to switch to another Part C plan OR back to Medicare Parts A & B and a Part D plan (with or without a Medicare Supplement). The decisions made during this period become effective the 1st of the following month.
There are Special Election Periods for some people that allow them to change their coverage during other times of the year. Examples of Special Election Periods include being admitted to a Nursing Home, moving outside of the service area of your current plan(s), and/or having a State or Federal subsidy.
Evaluating, Choosing and Enrolling in Medicare Plans
Though it may seem self-serving, my best advice is to work with a Medicare insurance consultant/professional to choose your Medicare coverage.
A professional can provide you a view of all your options and review them thoroughly with you to help you decide which option works best. They are on top of the intricacies of the plans and can also provide you insights from the experiences of hundreds of other clients.
Make certain you are working with a professional who is contracted with most (if not all) of the Medicare insurance companies in your area; otherwise, you will only see the options from the companies they work with.
Jennifer Lavelli is a Certified Long-Term Care professional with additional certification from America’s Health Insurance Plans, and holds Life and Health Insurance licenses in NY, NJ and CT. A frequent presenter across Connecticut, New Jersey and New York state; she teaches people how to access, apply for, and successfully use your Medicare coverage. For more information or to get in touch with Jennifer, please contact her at firstname.lastname@example.org.