Medicare

According to the recent Centers for Medicare & Medicaid Trustees Report, monthly premiums are scheduled to rise next year from $104.90 to $159.30 for 16.5 million Medicare Part B enrollees. Those affected by the legislated increase include:

• People who sign up for Medicare for the first time next year
• Low-income seniors whose premiums are paid by state Medicaid plans
• High-income seniors who already pay premium surcharges
• Federal and state government employees

In addition, the Medicare Part B deductible is expected to increase substantially, from $147 to $223, for enrollees who do not have Medicare Advantage or a first-dollar Medigap supplemental policy.

Meanwhile, premiums for 36 million Medicare Part B enrollees normally would not change since increases are tied to Social Security cost-of-living adjustments – a component of the "hold harmless provision" in the Social Security Act. However, If Social Security checks are increased due to COLA, all enrollees will pay more for Part B. An announcement regarding Social Security COLA increases typically occurs in October; this year it is projected to be zero.

Under current law, Part B premiums must be raised to offset loss of premiums incurred by the hold harmless provision in order to prevent trust assets from running out. This basically means that a small minority of Part B enrollees will absorb the higher premium increases. Presently, there is active lobbying to reverse the premium hike, but it is anticipated that Congress won't act on the issue until year-end.

Unfortunately, the impact of premium increases could be severe. A recent survey revealed that half of Medicare beneficiaries live on an annual income of $24,000 or less, have less than $63,350 in savings and less than $65,500 in home equity. One-quarter of all Medicare beneficiaries have less than $5,200 in home equity, with 24 percent who have none at all.

Parts A and B
Medicare's Part A plans provide hospital insurance, while Part B provides regular medical coverage for doctor visits and outpatient care. In most cases, if you choose to buy Part A, you also must have Medicare Part B. Most people do not have to pay a monthly premium for Medicare Part A if they (or a spouse) paid Medicare taxes while working, but those who do may pay up to $407 each month. In addition, most enrollees will pay a deductible and coinsurance for Part A and Part B services. Plan holders can choose to go to any doctor, hospital, or other provider that accepts Medicare.

Part D
To get Medicare drug coverage (Plan D), enrollees must purchase a policy run by an insurance company or other private company approved by Medicare. Each plan can vary in cost and drugs covered, depending on the plan, the medications purchased, whether they are bought from a pharmacy in the plan's network, and whether those drugs are included in the plan's formulary. Enrollees who earn a higher income ($85,000+/year) may have to pay an extra amount directly to Medicare (not the plan) based on a sliding income scale. If an enrollee has a Medicare Advantage Plan or a Medicare Cost Plan that includes prescription drug coverage, the monthly premium typically includes the cost of drug coverage.

Many plans include drug co-pays or co-insurance expenses, some of which go into effect after the participant has reached his deductible, and some even feature various levels or " tiers " of copayments or coinsurance depending on the type of drug. A copayment is typically a set amount (for example, $10 to $40) for all drugs on each particular tier; the copayment is lower for generic drugs than brand-name drugs. Coinsurance is when the enrollee pays a certain percentage of the drug cost (for example, 25 percent of the cost to the participant).

Some Medicare drug plans don't have a deductible, whereas for others the deductible may vary. However, no Medicare drug plan may have a deductible of more than $360 in 2016. In 2016, once a participant and his plan have spent $3,310 on covered drugs, he will enter the coverage "gap". At that point, he will pay 45 percent of the plan's cost for covered brand-name prescription drugs and 58 percent of the cost for generics until he reaches his out-of-pocket spending limit of 4,850.00 (2016). Beyond that amount, he will incur no more expense for covered medications.

Note that the 50 percent discount that most drug manufacturers offer a Medicare recipient also counts toward his out-of-pocket total. The coverage gap – also known as the "donut hole" – is scheduled to be completely eliminated in 2020; until then the participant's share of gap expenses will be reduced incrementally each year.

Medicare Advantage
Medicare Advantage Plans (Part C) are offered by private companies that contract with Medicare to provide Part A, Part B, and Part D (prescription drug) benefits. Medicare Advantage Plans with prescription drug coverage are sometimes called "MA-PDs." They may include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans (MSAs).

Supplemental
Medicare Supplement Insurance policies are available to cover expenses such as copayments, coinsurance, and deductibles not covered by other Medicare policies, which is why they are referred to as "Medigap" policies. A Medigap policy covers coinsurance only after the deductible has been met – unless the Medigap policy also pays the deductible. Enrollees must have Medicare Part A and Part B in order to purchase a supplemental policy, which charges a separate premium.

Note that you can't buy a Medigap policy to work with a Medicare Advantage Plan, or a Medigap policy with prescription drug coverage to work with a Medicare drug plan. Furthermore, these plans generally do not cover long-term care, vision, or dental care, hearing aids, eyeglasses or private-duty nursing, and Medigap policies sold after January 1, 2006 may not include prescription drug coverage.

However, Medigap policies do offer coverage for services that original Medicare doesn't cover, such as for medical expenses incurred when traveling outside the country. Once a $250 annual deductible is met, Medigap Plans C, D, E, F, G, H, I, J, M, and N pay 80 percent for medically necessary emergency care outside the U.S. (Plans E, H, I, and J are no longer for sale, but those purchased before June 1, 2010 are still in force.) Note that foreign travel emergency care is covered only if it begins during the first 60 days of a trip. Also, Medigap policies impose a $50,000 lifetime limit on foreign travel emergency coverage.

A Medigap policy is different from a Medicare Advantage Plan in that it only supplements standard Medicare benefits, which is what an Advantage Plan covers (Part A and Part B benefits).

Although a participant can apply for a Medigap policy during the annual enrollment period, the best time to buy a Medigap policy is during his first six-month eligibility enrollment period, because at that time it can be purchased regardless of any health problems. After this initial enrollment period, insurance providers are permitted to use medical underwriting to decide whether to accept an application and how much to charge, so it's possible for a Medigap applicant to be turned down if he does not enroll during the first six months of eligibility.

Enrollment Period
Each year, participants can make changes to their Medicare coverage during the annual enrollment period starting next month, from October 15th through December 7th. During this time, they may change which type of plan they want, such as to or from original Medicare, shop among various Medicare Advantage plan options, original and Advantage drug plans, add a Medigap policy, or drop Medicare prescription drug coverage altogether. Plans do change from year to year, so it's important that enrollees take the time to shop during the enrollment period as they may find a new option that offers lower co-pays, better deals for prescription drugs, or one that simply suits their needs better.

Medicare plans are carefully evaluated and given quality ratings (1 to 5 stars) for the types of services each plan offers within the following five categories:

1. Staying healthy – Whether members got various screening tests, vaccines, and other check-ups
2. Managing chronic conditions – How often members with different conditions got certain tests and treatments to help them manage their condition
3. Member experience with the health plan – Member satisfaction scores
4. Member complaints and changes in the health plan's performance – How often members had problems with the plan and if/how much the plan's performance has improved over time
5. Health plan benefits

Note that Medicare plans are not offered via the Health Insurance Marketplace. Enrollees can check out plan options by visiting http://Medicare.gov/find-a-plan or calling 1-800-MEDICARE (1-800-633-4227) – both open 24 hours a day, seven days a week. To receive free personalized health insurance counseling, an enrollee can contact his State Health Insurance Assistance Program (SHIP) at https://www.shiptacenter.org or call 1-800-MEDICARE.

Updates on Medicare Advantage and Part D
As more baby boomers age into the Medicare system, there has been an upsurge in the number of both the Medicare Advantage (MA) and Part D plan participants. Since the Patient Protection and Affordable Care Act passed in 2010, there has been a 42 percent increase in MA beneficiaries, currently at an all-time high with more than 16 million.

In 2015, 60 percent of MA enrollees enrolled in a 4 or 5 star plan, compared to only 17 percent in 2009.
Moreover, average premiums are lower than before most provisions of the health reform legislation were implemented – decreasing by six percent between 2010 and 2015.

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