Medicare is the federally funded and federally administered program that pays for doctor visits, outpatient care, hospital care and prescription drugs for people over the age of 65. It also covers people under 65 who have disabilities and people of any age who are suffering end-stage renal disease.
There are four parts to Medicare:
- Part A covers hospital care
- Part B covers outpatient medical care
- Part C pays for private health insurance for those who choose to participate in a network plan
- Part D covers outpatient prescription drugs
Part A is subject to certain deductibles per benefit period. Part B has a premium that must be paid. After paying that premium, Part B generally covers 80% of approved charges. The remaining 20% is usually covered by either supplemental insurance or it must be paid out of pocket.
When to Apply
If you receive Social Security benefits due to a disability, you are already covered by Medicare Parts A and B. If you are 64 years old but not yet receiving Social Security, it’s time to start thinking about your application. You should apply for Medicare during the seven month period that begins 3 months prior to your 65th birthday (or the day you become eligible for Medicare benefits) and ends 3 months after your 65th birthday (or the day you became eligible for Medicare benefits). Applying after the 7th month can result in monthly penalties that will increase the costs of coverage and may cause other coverage restrictions.
Decisions You Will Need to Make When Applying for Medicare
FIRST you will need to decide whether you want your coverage through Medicare or whether you want to sign up with an approved private insurance company. What’s the difference?
If you choose coverage through straight Medicare, you can use any doctor or hospital that will accept Medicare payments. Deductibles and co-pays are paid by you or you may buy a supplemental insurance plan to pay these fees. You pay a monthly fee for Part B.
If you choose coverage through a private insurance company, you can only use doctors and hospitals that are within that insurance plan. If you use another doctor, you will pay some or all of the cost yourself. You will generally pay a monthly premium to the insurance company, a monthly fee for Part B coverage, AND co-pays. The exact costs and coverages are dependent upon the private insurance plan.
SECOND, you must decide whether you want to enroll in Part D for coverage of prescription drugs. If you are covered through Medicare, you will pay a monthly premium for Part D. If you are covered through a private insurance company, you must join their plan, if they offer one. If they do not cover prescription drugs, you can join the straight Medicare plan. Be aware that Part D contains a coverage gap. For 2012, this coverage gap generally begins when you and your health plan have paid a total of $2,930 in prescription drug costs. During the coverage gap you usually pay the full cost of prescriptions until the out of pocket amount reached $4,700, but in 2012, there is a 50% discount on some brand name drugs and enrollees will pay a maximum of 86% coinsurance on generic drugs while in the coverage gap. When the total cost hits $4,700 you generally pay the greater of 5% or $2.60 for generic drugs or $6.50 for of your drug costs.
THIRD, you will need to decide if you want to buy supplemental insurance to fill the gaps not covered by Medicare (this is sometimes called Medigap coverage). This is sold by private companies and may be provided to retirees by some unions and some employers.
If you are part of a private insurance plan, you cannot use Supplemental Insurance to pay for your co-pays and deductibles and a Medigap plan cannot be sold to you.
If you are nearing retirement age and have questions about Medicare, particularly if you are concerned that you will need nursing home care in the future, talk with Matthew Dopkin who can explain the various benefit programs to you.
With the right combination of coverage and estate planning your senior years can be far less stressful.
Dopkin Law Firm advises clients on the intricacies of business and tax law matters. To discuss these or other issues with attorney and CPA Matt Dopkin, contact us at 215-519-4269 or via email at firstname.lastname@example.org.
© 2012 Dopkin Law Firm
This Alert is published by Dopkin Law Firm. It is provided solely as legal information, not legal advice. Legal advice depends, to a large extent, upon the particular facts of a matter. For legal advice, contact your legal advisor.