Medicare and Secondary Insurance Coverage

Why isn’t Medicare Part A enough? Why do you need a “medi-gap” policy? Why do you need to choose Medicare Part B when you enroll for Medicare?

To be eligible for Social Security retirement benefits, a worker must pay in 40 quarters by the age of 65 and must file an application. Any person who is eligible to receive Social Security retirement benefits will automatically be eligible to receive Medicare Part A when they reach age 65. There is no cost for Part A. However, you must choose to enroll in Part B when you turn 65, or you will pay a permanent 10% surcharge for the Part B premium for each year that you delayed your enrollment. Further, there are deductibles and co-payments.

Medicare Part A

Medicare Part A covers inpatient hospital, skilled nursing facility, and some home health care services. About 99 percent of Medicare beneficiaries do not pay a Part A premium since they have at least 40 quarters of Medicare-covered employment.

The Medicare Part A annual deductible that beneficiaries pay when admitted to the hospital will be $1,288.00 in 2016, a small increase from $1,260.00 in 2015. The Part A deductible covers beneficiaries’ share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. The daily coinsurance amounts will be $322 for the 61st through 90th day of hospitalization in a benefit period and $644 for lifetime reserve days. For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 in a benefit period will be $161.00 in 2016 ($157.50 in 2015).

Enrollees age 65 and over who have fewer than 40 quarters of coverage and certain persons with disabilities pay a monthly premium in order to receive coverage under Part A. Individuals with 30-39 quarters of coverage may buy into Part A at a reduced monthly premium rate, which will be $226.00 in 2016, a $2.00 increase from 2015. Those with less than 30 quarters of coverage pay the full premium, which will be $411.00 a month, a $4.00 increase from 2015.

Medicare Part B

The Medicare Part B premium is deducted from your gross Social Security check each month. It costs $104.90/month if your annual income is below $85,000, and it rises above that.

Since 2007, beneficiaries with higher incomes have paid higher Part B monthly premiums. These income-related monthly adjustment amount (IRMA A) affect fewer than 5 percent of people with Medicare. Under the Part B section of the Bipartisan Budget Act of 2015, high income beneficiaries will pay an additional amount. The IRMAA, additional amounts, and total Part B premiums for high income beneficiaries for 2016 are shown in the following table:

Premiums for beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:

Medi-Gap policies are an important component of your household insurance package. They generally cover these co-insurances, co-payments and deductibles. You can compare these at www.medicare.gov. A major illness or catastrophic injury could result in tremendous medical costs that are not covered by Medicare Part A.

If your employer provides health coverage that is at least equivalent to Medicare (“creditable coverage”), you can delay signing up for Medicare Part A and B. If the plan ends, you’ll be able to enroll for Medicare Parts A and B without penalty. Be sure to provide documentation of the other plan and its end date. Apply three (3) months before you need the insurance and are eligible.

Medicare Part D Prescription Plans

The monthly premium is based on the plan you choose and also on your income. If annual income for an individual is $85,000 or less ($170,000 if married filing jointly), the cost is just the basic premium for the plan you choose. At higher income levels there is a monthly surcharge starting at $12/month and going up to $69.10/month. These surcharges are automatically deducted from the Social Security check. There may be a late enrollment penalty. It may be advisable to join Part D as soon as you are eligible.

Medi-Gap Policies

These plans are labeled “A” through “N”. The benefit package may include Part B co-insurance or co-payment, Part A hospice care co-insurance or co-payment, the Part A deductible, the Part B excess charges, and the Part B preventive care co-insurance. When obtaining health care services it is crucial to make sure that the provider submits the claim to Medicare as well as your secondary carrier in a timely way to avoid the risk of uncompensated care.