Medicare Basics: What to Know

Many clients who are retiring or suffering job loss face key decisions about their healthcare. These Medicare basics will help make those decisions.

Medicare is a commonly misunderstood government benefit.  With so many baby-boomers retiring and especially with the impact of COVID-19 on the economy, many clients are faced with important decisions on their healthcare.  For that reason, I wanted to cover some Medicare basics to help readers understand these issues.

If you’re 65 or older and lose your job, you can keep your employer-based health insurance under a federal law known as COBRA. However, it also could be more expensive. In addition, COBRA coverage isn’t qualifying insurance in place of Medicare, and if you miss some deadlines for enrolling in Medicare without having the right coverage, you could pay life-lasting penalties, explains CNBC’s recent article entitled “What to know about getting Medicare if you are 65 or older and lost your job.”

Another critical Medicare basic is that Medicare isn’t free. However, if you find yourself currently with no employer-based insurance, it may be your best option. There are also ways to lower your costs, if your income has dropped a lot.

Provided that you have at least a 10-year work history, you’ll have no premiums to pay for Medicare Part A, which covers hospital stays, skilled nursing, hospice and certain home health services. If you don’t satisfy the eligibility requirements for it being premium-free, you could pay up to $458 per month for coverage. Either way, Part A’s deductible is $1,408 per benefit period, with some caps on benefits.

Part B covers outpatient care and medical supplies. It has a standard monthly premium of $144.60 in 2020, but higher earners pay more. There is also a $198 deductible in 2020. Once you meet the deductible, you’ll typically pay 20% of covered services. You are allowed eight months to sign up for Part B, once you lose workplace coverage.

You can get a standalone plan to have with original Medicare, or you can get an Advantage Plan (Part C). These plans are offered by private insurance companies and typically include prescription drug coverage. If you select this, your Parts A and B benefits will be delivered via the insurer offering the plan (which may or may not have a premium).

A Part D drug plan covers prescriptions. The average cost for this coverage in 2020 is roughly $42 a month, but high earners pay extra for their premiums. The maximum deductible for Part D is $435 in 2020.

If you already have Part A and are enrolling in Part B because of a job loss, there is a form that you and your ex-employer should complete to avoid late-enrollment penalties, by making certain that you had qualifying coverage during the period of time you were eligible for Part B but weren’t enrolled.

Another important issue of Medicare basics is what Medicare excludes from cover.  Consider how you’ll pay for items like dental work, routine vision, or hearing care. It also excludes long term care, cosmetic procedures and overseas medical care.  Clients often mistaken the skilled nursing facility rehab component of Medicare with long term care insurance, so see here for more detail on that.  https://galligan-law.com/long-term-care-whats-it-all-about/ 

Seniors frequently use original Medicare and a supplemental policy (“Medigap”) to help cover out-of-pocket costs, such as deductibles and coinsurance. Medigap policies are standardized, regardless of which insurance company sells them and your location. However, the premiums can differ from insurer to insurer and among locations. Therefore, it is critical that you know the differences you may see when evaluating your options. Look at a carrier’s premium rating system, its claims history and its customer service ratings.

If you go with an Advantage Plan, dental and vision coverage may be included. Note that these plans have their own copays, deductibles and out-of-pocket maximums.

Reference: CNBC (June 26, 2020) “What to know about getting Medicare if you are 65 or older and lost your job”

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Does Medicare Cover COVID-19-related Medical Expenses?

Seniors need to know what Covid-19 related expenses are covered by Medicare.
Seniors need to know what Covid-19 related expenses are covered by Medicare.

Knowing the way in which Medicare is offering coverage for COVID-19 can help seniors protect their health and their finances at the same time.

Motley Fool’s recent article entitled “How Will Medicare Cover COVID-19? Your Top Questions Answered” answered some common questions seniors have about the COVID-19 pandemic.

Will Medicare cover COVID-19 testing? The testing for the coronavirus can be difficult to obtain, depending on where you live. However, the good news is that Medicare Part B will pay for this. In addition, Medicare Advantage plans must also cover COVID-19 testing.

How much must Medicare enrollees pay to get tested? While COVID-19 testing may be a stressful process, if you’re on Medicare, you won’t pay to get the results. There’s no cost for your actual test and no co-pay for seeing a doctor who can order one.

Does Medicare pay for COVID-19 treatment? There’s no standard treatment for the coronavirus, but some patients with severe symptoms are being hospitalized. Medicare Part A will usually cover inpatient hospital treatment. As a result, if you’re admitted because of COVID-19, you’ll have your normal deductible under Part A ($1,408 per benefit period). Note that coinsurance won’t kick in during your first 60 days of consecutive hospital care, but beyond that, you’ll pay $352 per day until you reach the 90-day point in the hospital. If you have supplemental insurance, your Medigap plan may cover the cost of some of the out-of-pocket costs you have for getting hospital treatment.

Does Medicare cover a COVID-19 vaccine when it’s available? While a vaccine is at least a year out, if one becomes available, it will be covered by Medicare Part B and you won’t have a copay for it.

Will Medicare cover mental health services? Many seniors are having a hard time coping with the pandemic and its effects. Some are feeling isolated in their homes, and others are feeling anxious. Medicare does cover mental health services, and you may be able to meet with a professional remotely via telemedicine. Generally, you will be subject to your Part B deductible, plus 20% coinsurance. Seniors who are struggling with mental health issues can also call the Substance Abuse and Mental Health Services Administration’s Disaster Distress Helpline at 1-800-985-5990.

The COVID-19 crisis has been especially tough on seniors.

Knowing what to expect from Medicare could make a this a little easier.

If you’re interested in the CDC’s recommendation for Care Plans for older adults, see https://galligan-law.com/covid19-update-cdc-recommends-care-plans-for-both-older-adults-and-caregivers/

Motley Fool (April 30, 2020) “How Will Medicare Cover COVID-19? Your Top Questions Answered”

 

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Is Long Term Care Insurance Really a Good Idea?

Clients are often concerned that long term care insurance is too costly, but it may not be compared to the cost of private paying long term care.

Forbes’ recent article entitled “Is Long-Term Care Insurance Right For You?” says that a big drawback for many is the fact that long term care insurance (“LTCI”) is expensive. However, think about the costs of long term care. For example, the current median annual cost for assisted living is $43,539, and for a private room in a nursing home, it’s more than $92,000.  In many urban areas it is much higher, so utilizing long term care insurance my be best.

Another issue is that there’s no way to accurately determine if in fact you’ll even need long term care. Much of it depends on your own health and family history. However, planning for the possibility is key and unfortunately most clients don’t plan for long term care either with insurance, retirement or in their estate plans.

Remember that Medicare and other types of health insurance don’t cover most of the cost of long term care—what are known as “activities of daily living,” like bathing, dressing, eating, using the bathroom and moving. Medicare will only pay for medically necessary skilled nursing and home care, such as giving shots and changing dressings and not assisted-living costs, like bathing and eating. Supplemental insurance policies generally don’t pay for this type of care.  Those who meet financial guidelines may receive care provided under Medicaid or other benefits such as Veterans benefits.

It is important to shop around as there are no one-size-fits-all long term care insurance policies. Check the policy terms and be sure you understand:

  • The things that are covered, such as skilled nursing, custodial care, assisted living and in home care
  • If Alzheimer’s disease is covered as it’s a leading reason for needing long-term care
  • If there are any limitations on pre-existing conditions
  • The maximum payouts, including if maximum payouts are by day or year
  • If the payments are adjusted for inflation, which depending on the time of purchase might be key
  • The lag time until benefits begin
  • How long benefits will last, including whether there are lifetime caps on the amount paid or time periods paid
  • If there’s a waiver of premium benefit, which suspends premiums when you are collecting long-term care benefits
  • If there’s a non-forfeiture benefit, which offers limited coverage even if you cancel the policy
  • If the current premiums are guaranteed in future years, or if there are limits on future increases
  • How many times rates have increased in the past 10 years
  • If you purchase a group policy through an employer, see if it is portable (if you can take it with you if you change jobs).

Typically, when you are between 55 to 60 is the most cost-effective time to buy LTCI, if you’re in good health. See my prior blog on this point.  https://galligan-law.com/when-should-i-consider-long-term-care-insurance/   The younger you buy, the lower the cost. However, you will be paying premiums longer. Premiums usually increase as you get older and less healthy. There’s a possibility that you’ll be denied coverage, if your health becomes poor. Therefore, while it’s not inexpensive, buying LTCI sooner rather than later may be the best move.

The best thing to do is to consult your financial advisor and your insurance agent on whether a LTCI policy, and which, will work best for you.

Reference: Forbes (April 17, 2020) “Is Long-Term Care Insurance Right For You?”

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