- Parts A and B are what is known as Original Medicare which most people are eligible for when they turn 65.
- Medicare only covers a short-term stay in a nursing home for therapy and rehabilitation. There are 3 ways to pay for long term custodial care in a nursing home: Private pay Long term care insurance Medicaid.
- The donut hole closed for all drugs in 2020, meaning that when you enter the coverage gap you will be responsible for 25% of the cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs.
The Medicare population is projected to increase from 54 million+ beneficiaries today to over 80 million beneficiaries by 2030 as the baby-boomer generation ages into Medicare. This expansion will bring changes to the Medicare population. First, the average age of the Medicare population will initially skew younger than in the recent past, but then grow rapidly older as the number and share of beneficiaries ages 85 and older increases.
The Medicare population is, and will be for some time, less diverse racially and ethnically than the population as a whole. The health status of future Medicare beneficiaries is not clear.
Compared with previous generations, the baby-boomer generation has a longer life expectancy and much lower rates of smoking, but also has higher rates of obesity and diabetes. Boomers appear to have higher rates of some other diseases and chronic conditions, but they are also much more likely than generations before theirs to have certain health conditions under control.
With the thought of increasing health care costs and longevity risks increasing, understanding how Medicare works is a must.
Medicare is health insurance provided by the US government for people over 65 or for some disabled persons.
Medicare is made up of four parts:
- Part A
- Part B
- Part C
- Part D
Plus there is another option called Medicare supplement that we will discuss later. Let’s talk about what the letters really mean.
Parts A and B are what is known as Original Medicare which most people are eligible for when they turn 65. Part A is automatic. Parts B, C and D on the other hand are optional.
Part A is Hospital insurance that helps pay for things such as:
- Inpatient hospital stays
- Skilled nursing care for 100 days
- Limited home health care
If you or your spouse has worked a minimum of 10 years and paid in at least 40 quarters of Medicare taxes you are automatically enrolled in Part A with no monthly premium.
If you buy Part A, you’ll pay up to $458 each month in 2020. If you paid Medicare taxes for less than 30 quarters, the standard Part A premium is $458. If you paid Medicare taxes for 30-39 quarters, the standard Part A premium is $252.
Part B is medical insurance that helps pay for doctors visits, outpatient procedures, diagnostic
tests, medical supplies and vaccines.
Preventive benefits like certain screenings such as mammograms, diabetes and prostate screenings are also included.
Most people have to sign up for Part B and it typically comes with a standard monthly premium that is determined by your income. To make things easier, your Part B premium can be deducted from your monthly Social Security check.
Medicare supplement plans also known as Medigap plans act as secondary insurance to Medicare.
Medigap plans are designed to help cover some of the costs not covered by Original Medicare Parts A and B such as deductibles, co-pays and coinsurance. With Medigap plans you can also choose any doctor or health care provider that accepts Medicare.
Medigap plans don’t cover things such as:
- Long-term care
- Prescription drugs.
Keep in mind with a Medigap plan you pay both Medicare Part B monthly premium and your Medigap plan premium.
Original Medicare Parts A and B and Medicare supplement don’t cover prescription drugs. That’s where Medicare Part D comes in.
Medicare Part D is offered by insurance companies and it helps pay for prescription drugs. Each prescription drug plan has a list of generic and brand name drugs that are covered by that plan called the formulary. Each drug is assigned to a tier which determines how much you will pay for that drug.
Some Medicare Part D carriers have a transition process to accommodate the needs of new enrollees whose current regimens include drugs that are not on the plans formulary or those drugs that require prior authorization.
You can get Part D either as a standalone plan or as part of a Medicare Advantage plan. It’s up to you and your needs.
The Part D monthly premium varies by plan (higher-income consumers may pay more)
Here’s how Medicare Part D works:
- You can sign up for Part D when you first become eligible for Medicare.
- Part D is optional but if you do not enroll in a Part D plan when you first become eligible there may be a late enrollment penalty.
- The late enrollment penalty is calculated by multiplying one percent of the national based beneficiary premium times the number of months you went without other creditable prescription drug coverage.
By enrolling in Medicare Part D when you become eligible, you can:
- Save money on prescription drugs
- Better manage your healthcare budget
- Have prescription drug coverage in place should your health needs change in the future
Prescription drug coverage can be broken into four stages:
- Initial coverage
- Coverage gap
- Catastrophic coverage
The deductible is the amount you must pay each year for your prescriptions before your Medicare prescription drug plan begins to pay its share of your covered drugs.
Some Medicare Advantage plans have a zero dollar deductible, so coverage begins with the first dollar you’re charged for prescriptions. Once you enter the initial coverage, you pay a co-payment or coinsurance for your covered prescriptions and the insurer pays its share for covered drugs until the combined amount reaches the yearly amount.
Most Medicare drug plans have a coverage gap also called the doughnut hole. The coverage gap begins after you and your drug plan together have spent a certain amount for covered drugs.
Once you enter the coverage gap you pay a certain percentage of the plans
cost for covered brand-name drugs and a smaller percent of the plans cost for coverage generic drugs until you reach the end of the coverage gap.
Not everyone will enter the coverage gap because their drug costs won’t be high enough.
Once you get out of the coverage gap you automatically move into the catastrophic coverage period. With catastrophic coverage you only pay a small coinsurance amount or co-payment for covered drugs for the rest of the year.
If you are looking for an all-in-one plan that includes medical and drug coverage a Medicare Advantage plan may be right for you.
Part C plans are also called Medicare Advantage and are offered by private insurance companies and act as primary insurance instead of Original Medicare.
Medicare Advantage plans help with:
- Hospital costs
- Doctor’s visits and
- Other medical services that are covered by Original Medicare
- Plus Part C plans offer worldwide emergency in urgent care and
- Can include coverage for prescription drugs
- Routine vision, hearing, dental and even gym memberships
So how does Medicare Advantage work?
For starters you have to be eligible and enrolled in Original Medicare Parts A and B. You also need to pay your Medicare Part B premium along with your Medicare Advantage plan premium on a monthly basis.
When you have a Medicare Advantage plan you pay a copay or coinsurance for only the services you use and not for those you don’t.
Hopefully that gives you a basic understanding of Medicare and how it works and you’re on the road to choosing the right plan for your healthcare needs.
As people address living longer. The need for long term care insurance increases. 7 out of 10 of individuals 65 years old and above will need long term care, not covered by Medicare. But the issues of aging and needing care is not just a problem of an individual. It’s impact is felt by the whole family.
To protect you and your family, learn about the latest cost of long term care in your area and in all U.S. Rates may vary depending on the state you live in. The average annual cost of Nursing Home Care for a Private Room is $100,379.
Proper planning for long term care costs needs to address two major questions:
- How are we going to pay for it?
- Where is the money going to come from?
Jennifer Lang Financial Services is an Independent Agent and closely monitors the most competitive life insurance carrier rates to help you get the best possible long term care product. Get in touch with us to get a long term care design that works best for your specific circumstances.