Q&A: Medicare Doesn’t Have to Be a Mystery

Medicare doesn’t have to be a mystery. JJ Montanaro, a Certified Financial Planner™ at USAA, spoke recently with Jason Ware, a licensed advisor in USAA’s Health Solutions Department who has been helping people with their Medicare questions for more than eight years.

In this Q&A, Ware explains the ABCs (and D) of Medicare and why it’s so important to know when you’re eligible and when the enrollment periods are, so you can avoid penalties. He breaks it down even further for military members with TRICARE.

JJ: Everybody’s heard of it, but really, what is Medicare?

Jason: Medicare, of course, is a government health insurance program that helps people age 65 or older get the health care that they need. It’s also available to those who have been on disability for 24 months or longer.

So it breaks down like this: Medicare Part A is your hospital coverage, and as long as you’ve worked 40 quarters or approximately 10 years, you qualify for Medicare Part A at no additional cost.

Medicare Part B is really your doctor’s office coverage, and that one will have a cost associated with it. It really depends on what your income was.

Medicare Part C is Medicare Advantage plans. Those are actually sold through private insurance companies, and they work more like your health insurance probably does now if you’re working, where you have an HMO or a PPO. And it’s an alternative to original Medicare.

And then Medicare Part D is your prescription drug coverage. And a lot of folks assume that you get all four of those parts through Medicare. However, you only get Parts A and B through Medicare. Parts C and D are the divisions of Medicare that create and govern those plans, but they’re actually sold by private insurance companies.

JJ: So when we talk about going out and shopping for Medicare, we’re not talking about Medicare itself, but we’re really talking about Part C and Part D, those extra layers of coverage.

Jason: That’s right. You can only get Medicare Part A and B through the government. Part C and D are sold through private insurance companies.

JJ: What am I going to be responsible for if I’ve just got Medicare Part A and B? What are the potential costs that I might run into?

Jason: Medicare Part A and B both have yearly deductibles that have to be met before you get to access the benefits of the coverage. There is 20% coinsurance that can be involved, and there are excess charges. There are some additional things that just aren’t covered by Medicare Part A and B that you can receive by choosing Medicare supplement insurance and/or a Medicare Advantage plan.

JJ: There’s actually no cap on out-of-pocket costs with Medicare.

Jason: That’s right. Twenty percent of who knows what could be a lot of money, right?

JJ: That’s a scary thought. Now, what happens if my employer provides coverage? Do I still need to sign up for Medicare at that point?

Jason: That’s going to depend on the situation and the employer’s health plan. So what you’ll want to do it is actually contact your benefits administrator, and they’ll let you know if you can delay your Medicare, or if you need to go ahead and enroll and let that employer act as your backup or your secondary coverage.

JJ: With Medicare and signing up for Medicare, are there penalties if you don’t hit the right deadline?

Jason: There can absolutely be penalties, so if you don’t sign up for Medicare Parts A and B when you’re first eligible, and you’re not eligible for what’s called a special election period, you would then need to sign up in what they call the general enrollment period, which is Jan. 1 to March 31, and then your coverage would start July 1. And then they will assess a penalty for you not having Medicare if you could have. If you have employer coverage that’s considered a creditable plan and you don’t need Medicare, you can sign up at a later date and not have to pay that penalty.

JJ: Now, what if I’m retired from the military and I’m covered by TRICARE?

Jason: If you’re enrolled in TRICARE For Life, you still need to enroll in Medicare Parts A and B. Then your TRICARE becomes your supplement or your secondary coverage. And the great thing about TRICARE For Life is not only is it secondary to your Medicare A and B and helps pay some of those things that aren’t covered by Medicare, it also includes your prescription coverage. And the best part is there’s no charge for it or no premium for TRICARE For Life.

JJ: What is the difference between Medicare supplement insurance, or Medigap insurance, and a Medicare Advantage plan?

Jason: The main difference is, with a Medicare supplement insurance policy, Medicare is your primary insurance, so you can go to any doctor in the country that accepts Medicare. So there’s not really a network of doctors. Medicare supplement insurance policies eliminate the majority of your deductibles and your co pays, so you could have very little to no out-of-pocket costs when you go to the doctor or the hospital.

However, with a Medicare Advantage plan, you’re actually taking your insurance and you’re selecting a private insurance company to be your primary, so you’re going to go with the network or doctor that insurance plan has set up for you. And then you’re going to share the cost with copays and coinsurance.

JJ: Often times you think about insurance in general and you think, “OK, it’s a one-and-done. I sign up, and I have that coverage.” But in the landscape today, that may not necessarily be the case with Medicare Supplement Insurance or a Medicare Advantage plan.

Jason: That’s right. There is an annual election period that runs Oct. 15 to Dec. 7 every year, and that’s the time of year where, if you have a prescription drug plan or a Medicare Advantage plan, you can review next year’s plans and determine if it makes sense for you to switch. So you have the ability to switch advantage plans and drug plans every year during that annual election period.

Now, with a Medicare supplement insurance policy, you can change that one any time of year. However, you could be subject to medical underwriting questions.

JJ: Do you see people jumping from Medicare supplement insurance or Medigap policies over to Medicare Advantage plans?

Jason: It can happen because our health care needs change and our locations change. We do recommend that our members call us every year to review their current coverage and see if it’s something that they should consider changing.

JJ: Do the plans change? Like, could there be another plan that fits better, costs less or offers more?”

Jason: Medicare supplement insurance plans are created and standardized by Medicare, so when you sign up, that plan really isn’t going to have any changes throughout the year. However, with a Medicare Advantage plan, the benefits can change slightly, the cost can change slightly, the networks can change, and the prescription coverage can change year to year.

JJ: So it actually may pay to look at what you have and explore what’s available.

Jason: That’s exactly right. We always recommend reviewing these plans annually. Also keep in mind that if you elect to go with the Medicare supplement insurance plan, that does not include prescription coverage. So you’ll also want to consider a standalone prescription drug plan because prescriptions can be very costly and really affect your finances. Make sure you’ve got adequate coverage for that.

A lot of Medicare Advantage plans include prescription coverage. Medicare also doesn’t cover some things like dental and vision benefits, so it’s important to look at what options are available.

JJ: What about when you’re traveling? Is Medicare going to cover an illness on your European vacation?

Jason: Some supplement plans have some foreign travel emergency coverage. Medicare itself doesn’t cover you outside of the United States, but there are some supplements that do cover that. However, it is a minimum amount of coverage, so we still usually recommend that folks look at travel health insurance.

JJ: If you had to give our members one piece of advice, what would that be?

Jason: I’m going to give you two. 1. Know when you’re eligible for Medicare and when those different enrollment periods are. If you’re going to keep working, understand what your employer’s benefits will want you to do in regards to signing up with Medicare.

2. Research all of your Medicare solutions to determine which solution makes the most sense to you. Use all the resources available. Medicare’s website, which is medicare.gov, is a great resource for understanding how the government program works. We have some excellent information available on USAA’s website at usaa.com/medicare. For those TRICARE folks, if you want to just really make sure that you understand how your TRICARE and Medicare are going to work together, TRICARE’s website is tricare.mil.


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