Over the years Medicare has changed significantly. Sometimes for the good
and sometimes not so good. Wanted to provide some food for thought on
how the different plans work to provide you with a better understanding of
Medicare offers many seniors good qualify health care one needs as they
age. Many times, even living a clean and healthy lifestyle can cause our
bodies issues we never thought of and probably have difficulties dealing with
the results. We all know the illnesses, so no sense regurgitating them.
Medicare for the most part provides the healthcare one needs as we age.
Medicare covers Hospitalization, Physician care, rehab services and of course
prescription drug coverage, among other services we are all familiar with
and deal with daily for ourselves or our families. Medicare, as most know
offers several ways to obtain coverage.
1. Original Medicare and a standalone drug plan.
2. Original Medicare, a private supplemental plan that pays what
Medicare does not and a standalone drug plan.
3. A Medicare Advantage plan from private insurance companies that
covers all medical situations through the insurance company
instead of Medicare. One must maintain Medicare Parts A & B to
participate in these plans.
Original Medicare and a standalone drug plan
Medicare is the only health insurance that does not have a maximum out of
pocket. Medicare is an 80/20 plan. Medicare pays 80% and the
participant pays 20%. Medicare unlike every other health insurance does
not have a maximum out of pocket. Meaning with Original Medicare the
Medicare recipient is responsible for the 20% with no maximum stop loss. In
other words, the recipient pays 20% forever. As we age, a medical
situation arises and those costs can be prohibitive.
The other issue with Medicare is something called assignment of benefits. To
understand this term an explanation of how Medicare pays needs to be
explained. For sake of discussion, the physician you are seeing has a
standard cost for an office visit. Assume the cost is $200. When that
physician submits the bill to Medicare; Medicare adjusts the bill based on
area of the country where the visit took place and the type of doctor. For
sack of discussion, Medicare reduces that bill to $140 and they pay the
doctor 80% of the $140. If that doctor takes assignment of benefits, he/she
must write off the $60 Medicare did not pay. If the doctor does not take
an assignment of benefits, they can bill you the part that Medicare removed
from the bill. Medicare pays $112; the Medicare recipient must pay the 20%
or $22.40 plus the amount Medicare took off the bill or the other $60. So
that office visit costs the Medicare recipient $82.40. If the doctor takes
assignment of benefits the Medicare recipient is only responsible for the 20%
or $22.40. Big difference especially if you are having medical issues and
need to see that doctor frequently. Many of the supplement plans pay the
part that Medicare disallows but some plans do not and it is important that
the Medicare recipient understands these circumstances before buying any
Original Medicare and a supplement and standalone drug coverage
The only issue with this method of Medicare coverage is the cost of the
supplement. As we age, the price increases. So those living on a retirement
income still face the increased cost of supplemental plans and drug
coverage plans. In your mid-seventies, the cost of the supplement will
increase to the low to mid $300 per month range. Many seniors on fixed
incomes cannot afford those monthly premiums and this may not be their
best option. These supplemental plans pay what Original Medicare does not
which is usually the 20% Medicare does not cover and in certain plans, the
amount Medicare disallows. These plans do not have a network other than
those physicians and facilities that take Medicare. So, you can go to any
doctor, any hospital that takes Medicare anywhere in the country. These
plans do offer limited services outside the US. There are better ways od
handling outside of Medicare.
The standalone drug plans are based on the medications one takes and
sometimes these plans can cost upwards of $50-60 per month or more. To
be fair, many plans monthly premiums between $18-$35 per month.
Medicare Advantage plans commonly known as MAPD plans
To understand the concept, one must know why and how these plans
function. Simply put there are 6000 counties in the US and each one has
different costs associated with Medicare. The cost of physician services in the
south would be much less than those same services in major metropolitan
areas. Those costs in Alabama or Mississippi are different than in New York
or California and Medicare take that into consideration when reimbursing
for services rendered. Therefore, the government does actuarial calculations
in each of those counties and decides the reimbursement amounts to the
MAPD plans in the specific area.
As an example, in Clark County NV, the costs are about $1100 per month
per Medicare recipient so Medicare gives each insurance company offering
Medicare Advantage approximately $900 per month per participant. The
government saves money and the MAPD plans make money. They can keep
15% of those reimbursements so 85% must be used to pay medical claims.
That is how these MAPD plans work.
Of course, the Medicare Advantage plans have maximums out of pocket so
when you reach the yearly maximum, the plan pays all covered medical
expenses for the balance of the calendar year. On January 1 st, each year the
countdown starts all over again with new maximums out of pocket. These
MAPD plans come in several versions: HMO, PPO, MSA, and PFFS. Since this
blog is directed primarily to Clark County NV, we are only going to discuss
the HMO and PPO type plans. The MSA plans are available in Clark County
but not as popular as either the HMO or PPO.
The HMO plans are like HMO plans for underage recipients. Usually, you
need a referral from your Primary Doctor to see a specialist. You usually
must-see doctors or use facilities in their network unless in an urgent or
emergency outside your service area. The out-of-pocket costs for these
plans are low compared to the PPO plans. The out-of-pocket maximums
range from $990-$3900. One company, Aetna, has two HMO plans with no
referral required and I suspect that trend will continue with other carriers
next year. I personally have not had any client reach that maximum unless
they had Chemo treatments, Ed Stage Renal Disease or Rheumatoid Arthritis
The PPO plans usually allow you to see any doctor or go to any facility in
their nationwide network. The copays are usually higher than the HMO plans
and the maximum out-of-pocket is higher as well. Both types of plans
usually have no monthly premiums so for many this is a great situation.
These plans usually change some of their benefits or costs annually so the
AEP (Annual Election Period) between October 5th and December 7 th is the
time to make changes to your plan. From January 1 st through March 31 st, you
have the OEP (Open Enrollment Period) where you can make one more
change to your coverage and then you are locked in until December 31 st .
As you can imagine, there are many options available for those aging into
Medicare and a good Medicare broker is a must to insure you get what you
need. A good Medicare broker will spend the time with the you to review
their doctors and medications before recommending a plan. If they do not,
seek another broker.
Len Barend, broker
The Barend Agency Inc.