Investor Column | Understanding all the basics about Medicare

Eleven thousand Americans will be Medicare eligible each day.

Even though I have been in the investment business for many years now, I like many others reaching the age of 65, have been unsure of how Medicare coverage works in detail.

I would like to share some insight that I have learned for those that are aging in to Medicare.

Medicare has four parts, A, B, C, D. Part A covers hospital room, board and nursing services. Typically, most people don’t pay for this part.

Part B covers outpatient services. These services include visits to your primary care doctor, specialist, outpatient lab tests. Part B this year has a monthly premium of $144.50 for most beneficiaries. Individuals with an income over $87,000 and joint filers with income over $174,000.00 will pay a higher part B premium.

Part C is for Medicare advantage plans. We will discuss that further.

Part D is for outpatient prescription drugs.

After understanding the above basics of Medicare, the next decision, a binary one, is to go with original Medicare or with a Medicare Advantage plan. That’s part C.

Under original Medicare you may go to any doctor or hospital that takes Medicare. They bill Medicare directly which pays most of the bill but not all of it. You may cover the balance out of your own pocket or with an approved Medigap policy. Medigap coverage is guaranteed renewable, meaning as long as you pay the premiums your benefits can not be canceled or decreased. If you want outpatient prescription drug coverage you would need to purchase a government approved Part D prescription plan also. Both Medigap plans and Part D plans are offered only through private insurance companies.

The expenses for original Medicare which includes Part B cost (almost everyone whether in original Medicare or an Advantage plan will pay this cost), Medigap cost and part D prescription drug cost can add up to a significant monthly amount. But it is the most flexible as it can be used anywhere in the country. If you are a true “snowbird” and spend six months here and then up north original Medicare may be a good option for you.

Medicare Advantage plans are designed as managed care plans. These plans are offered by private insurance companies that have been approved by Medicare to manage your care. Often Part D prescription drug is included in the plan. With some plans you pay a monthly fee. Although many plans I have looked at in our area do not have a monthly fee.

There are Health Maintenance Organizations (HMO’s), Preferred Provider Organizations (PPO’s), Private Fee-for-Services Plans (PFFS), and Special Needs Plans (SNP’s) and Medical Savings Account Plans (MSA’s) plans that are available with a Medicare Advantage plan. There is not enough space here to go in to details regarding each of these options but HMO’s and PPO’s would be the most popular in our area. HMO’s use your primary care physician as a gatekeeper to specialist. PPO’s do not require a gatekeeper to see a specialist.

There may be a lot of bells and whistles with these plans. These may include eyewear care, hearing aids and health club membership. Some even offer dental reimbursement to an extent and one plan even pays you for a portion of your Part B expense.

Medicare Advantage Plans must have an annual maximum out of pocket limit on total enrollee cost sharing (deductibles, coinsurance and co-payments). Original Medicare does not have a maximum out of pocket limit.

If you decide to go with an advantage plan and not original Medicare then what? How do you choose the correct advantage plan for you? It can be confusing at first and it was for me also.

I learned that (these plans are by zip code) there are several popular plans in each area. Most seem quite similar to each other with co-pays and such. It may often the additional “bells and whistles” that make the difference in selecting some plans.

The place to start when selecting a plan is first to see if your current physician is part of the plan you are interested in joining. Very important if you don’t want to change docs. The second is to check out the prescription drug coverage and cost. This is done by looking at the plans “formulary” list of drugs they cover and co-pays.

If you are “aging” in to Medicare this year remember you have seven months to enroll. The month of your birthday, the three months prior to that month and three months after.

It all should start with a good licensed Medicare agent. They can offer both Medigap, prescription drug and Medicare Advantage plans.

Michael T. Doll, A.A.M.S. is an investment planner with Harbor Financial Services, can be reached at 941-896-2473 or at mtdoll@harborfs.com. This is the view and/or opinion of Michael T. Doll and not necessarily the views and/or opinion of Harbor Financial Services, LLC an SEC Registered Investment Advisor, whose main office is located in the state of Alabama.