February 2013

Medicare 101

Medicare LogoBy Mitchell Gordon

Medicare is a mystery surpassed only by the United States tax code, (and now the Affordable Care Act). I will try to break it down into simple terms and programs to make it easier to understand. Many people are paying extra penalties each month for the rest of their lives because they were not properly informed how the programs work. Many are also paying extra payments that are not necessary for the same reason. It is hard to figure out what to do when you don’t know the questions to ask. As an independent agent representing almost a dozen companies, my fiduciary obligation is to the client, not the insurance company or the doctor. We are paid almost the same from every company, so we can concentrate on the client and not the commission. Unfortunately, we are not allowed to approach anyone until we are asked or invited. That makes initial communication tough for us and prospective clients who need our help and guidance.

First the basics; I will keep it very simple:

Medicare is for people over the age of 65 and others (under 65) who have special circumstances. Also be aware that since I am trying to keep it very basic, I will not elaborate on the exceptions.

Medicare has four parts, A, B, C, and D. Part A covers hospitalization, Part B covers outpatient doctors, tests, labs, etc., Part C are the Advantage plans (described later), and Part D is the prescription program.

Part A has a $0 premium (mostly). There are deductibles and other costs, but there is very often no monthly premium.

Part B has a $99.90 premium (more or less depending on income), and other deductibles and copays.

Part C has different premium levels and copays.

Part D has different premium levels and copays.

Everyone gets part A automatically (at age 65). Part B is a choice; you do not have to accept it. But you must know that if you do not have other coverage that is equivalent (creditable) to Part B, you will be penalized 10% per year, every year that you do not take it. That penalty lasts for the rest of your life as long as you keep Medicare. What this means is when you turn 65, you will receive Part A. If you are still working and have insurance, or have insurance from a retirement program that is “creditable”, you do not have to take and pay for part B. Creditable means at least as good as, or better than Medicare. When you decide to drop the other coverage, regardless of your age or the reason it was dropped (whether voluntary or not) you will be eligible for Part B at the existing rate without any penalty. Now, understand that if you have “creditable” coverage, you do not have to take Part B and therefore will not have to pay the premium. This can be a savings of almost $1,200 per year. All you need to do is go to the HR director of the company that you receive the insurance from and have them write a letter to CMS (Center for Medicare and Medicaid) stating that you have “creditable coverage”.

The same goes for Part D. You are not required to have a prescription program. But if you do not have a program that is “credible” coverage for prescriptions, the penalty will be 1% per month.

The advantage to an independent agent is that they are not tied to any one company and can look at the entire field for a suitable program from every company available.

Be aware that each person has different needs; just because your neighbor has a particular program doesn’t mean that program will also be suitable for you. Each program should be decided upon as a very personal decision due to health, economics, and needs. Even spouses can have very different programs depending on their particular personal health needs.

There are different programs that work with (or instead of) Medicare. They are Supplements and Advantage Plans.
Supplements are plans that work with Medicare. You use your Medicare card at any doctor that will accept Medicare and the Supplement will cover the difference of what Medicare does not. Keep in mind that not all Supplements will cover everything. There are different levels of coverage. Unfortunately, they are also categorized with letters. Supplements range from A, B, C, D, F, G, K, L, M, and N. There is a premium for Supplements. Also, Supplements do not have prescription plans, so you will have to have a separate plan with another premium. Supplements (coverage) are actually very easy to explain. According to regulations, each particular Supplement must be the same. What this means is an “A” Supplement from one company must be the same as an “A” Supplement from another. An “F” Supplement from any one company must also be the same as an “F” from any other company. The only difference is price, customer service, and the fact that not every company offers each Supplement.

Now that you are totally confused, I will give a basic explanation of Medicare Advantage Plans. These plans
are the Part C of Medicare. They are Medicare “replacements”. You do not lose your Medicare. Instead you use the company’s program instead of Medicare. Many are $0 premium, have low cost copays, and include Part D. Many are HMO’s (Health Maintenance Organizations), but there are a few PPO’s (Preferred Provider Organizations). The HMO’s are network programs and require referrals from primary care physicians to see specialists. Advantage plans are very popular due to their low cost.

Please understand this article is a thumbnail sketch of the available programs. They need to be understood before making any decisions. You do not have to understand the entire Medicare system, just what you need. So far, there is no definitive word on how the new health laws will affect Medicare. Once we know, we will be able to educate everyone in how it works.

GIG  Gordon Insurance Group


“Education before Enrollment”