As part of our work at Samuel Financial LLC, we connect our clients and their families with experts in many fields, such as social security, taxes, and real estate to name a few. This quarter, we are giving our firm’s financial column to Peter Stoner and Kathy Barniak, of Stoner & Company — experts on all matters related to Medicare. The annual enrollment period for people who are new to Medicare or who want to make changes to their existing plans is from mid-October to early December. Peter Stoner and Kathy Barniak have been a great resource to our firm and our clients.
By Peter D. Stoner & Kathy Barniak
Medicare Open Enrollment (officially known as the Annual Election Period) begins October 15 and runs through December 7, for plan changes effective January 1. Most baby boomers remember December 7 as a date that will live in infamy, which makes it easy to recall. Medicare was introduced in the 1960’s and was part of Lyndon Johnson’s “Great Society”. Back then, people over 65 had half the income of younger people, but had three times the medical expenses, so something had to be done.
There are two parts of Medicare, Part A, which covers hospital related expenses and Part B, which covers doctor related expenses. Counterintuitively, one applies for Medicare through the Social Security Office. You can reach them on-line at www.ssa.gov/retirement, or by calling 800-772-1213. You can also go to your nearest Social Security Office.
Medicare Part A is used for hospital insurance and covers inpatient stays at medical facilities, as well as, home health care, rehab at nursing homes and hospice care. Note that if you are spending the remainder of your life in a nursing home, Medicare will not cover custodial care. You will need long term care insurance for that. Part A has a $1420 “per benefit period” deductible in 2020. A new benefit period begins once a beneficiary is released from the hospital for 60 days or more, so this deductible can be incurred multiple times each year. Part A has a $0 premium for most people.
Medicare Part B provides medical insurance to help cover physician visits, physical therapy, durable medical equipment and other medical services, such as lab tests and screenings. It has an annual deductible of $197 in 2020 and 20% coinsurance. Part B has a premium which is “means tested”, so it is correlated to income. That premium is projected to be around $145 per month in 2020, but can be as high as around $460 a month for “high wage earners”.
Once someone has Medicare Parts A & B, they have health insurance, but because of the deductibles and coinsurance most people also elect a Medicare Advantage or Medicare Supplement plan. These are distinctly different types of plans that are confused for one another all the time.
Medicare Advantage (Part C) plans are provided through private carriers who have a contract with Medicare. In Massachusetts these plans are primarily Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs), so they all have some form of a provider network. Generally, referrals are required to see a specialist and most services incur a copayment. They tend to have low premiums and they offer multiple options with varying premiums, copays and out of pocket maximums. Usually, the higher the premium, the lower the copayments and the lower the premium, the higher the copayments. They may also include added benefits like vision and dental, not covered by Medicare, in order to differentiate themselves from other plans. Most Medicare Advantage plans incorporate prescription (Part D) drug coverage within their product.
Medicare Supplement (Medi-Gap) plans are also provided through private carriers. They have state mandated benefits and fill in the gaps left by Medicare. They cover any provider who has a contract with Medicare and specialists may be seen without getting a referral. No Supplement plan includes prescription coverage, so a separate, or “stand alone” Part D plan must be elected to provide prescription drug coverage.
Part D Prescription Drug Coverage will be provided through 25 different plans in 2020. Which plan is most suitable depends on your prescriptions. Premiums and copays vary substantially. If your prescriptions change during the course of the year, you can change your drug coverage during Medicare Open Enrollment (October 15 – December 7), but in most cases, must retain your existing plan until January 1 of the following year. There can be an added income assessment to the Part D plan premium for “high wage earners.”.
This is but a brief outline to provide the basics of Medicare. If you are turning 65 in 2020, or are over 65 and plan to retire, the paperwork for Medicare Parts A & B should be initiated 90 days before the month during which you plan to transition to Medicare. When your 65th birthday approaches, you will be inundated with literature that is overwhelming and confusing. You are welcome to call us personally, go to a SHINE counselor at your local Senior Center or use www.Medicare.gov for help.