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Medicare Mistakes: Traps That Can Leave You Without Enough Insurance

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It’s that time of year again, when millions of people try to figure out whether they are making the right choices about health-care coverage.

Medicare open enrollment is the annual window when Medicare participants can select a new prescription drug plan and/or sign up for a Medicare Advantage Plan—a privately run alternative to traditional Medicare. The window runs from October 15 through December 7.

But whether you’re just approaching Medicare age or you’ve been in the program for years, signing up for Medicare or adjusting your Medicare plan choices can raise some confusing issues. The stakes are high—a misstep could leave you badly underinsured or uninsured.

Among the most common and potentially costly enrollment issues…

FOR FIRST-TIMERS

Should I enroll in Medicare at age 65 if I’m still working and have coverage though my employer?

This question is becoming increasingly common as the weak economy forces more people to work past age 65. The answer depends largely on the size of the employer providing your coverage.

If your employer (or your spouse’s employer if it’s providing your coverage) has fewer than 20 employees, sign up for Medicare Part A and Part B in the months before you turn 65. Small-group employer plans become secondary payers once employees become Medicare-eligible at age 65—that is, these plans will pay only the small sliver of medical bills that is covered by this insurance but not by Medicare. Thus not signing up for Medicare Part B, which covers physicians and outpatient services, would leave you underinsured.

If your coverage comes from an employer that has 20 or more employees, enroll in Medicare Part A—the Medicare component that pays hospital bills—when you approach age 65. Part A is free as long as you or your spouse paid Medicare payroll taxes in at least 10 years, so there’s no downside to signing up. You may want to consider waiting to enroll in Part B until you lose your coverage because your group plan will remain primary to Medicare as long as you (or your spouse if the coverage is from his/her employer) remain an active employee. It may not be worth paying Medicare Part B premiums if you have good group coverage.

It might be worth dropping your group plan in favor of Medicare at age 65, however, if your plan is a limited-benefit plan or high-deductible plan…and/or you must pay a large amount out of pocket to participate in the group plan, perhaps because you work only part-time or you are covered as a spouse, not an employee. Visit Medicare.gov to review and select the Medicare and Medigap options that appeal to you, then compare the costs and benefits of these with the costs and benefits of your group plan before making a decision.

Smart: If you work for a small company, don’t assume that you know the exact number of employees or the health plan’s status. Instead, contact Medicare or your benefits department to confirm whether Medicare will be primary or secondary to your employer coverage.

If I don’t sign up for Part B at age 65 because my employer plan is primary, will I have to pay higher Medicare premiums for the rest of my life?

No, as long as you follow Medicare’s “special enrollment” rules, which provide an eight-month period to enroll after your coverage from active employment ends. Don’t delay signing up until deep into this eight-month special enrollment period, however. Some retirees believe that medical bills incurred during this window will be covered by Medicare as long as they enroll before the eight-month window closes—but that’s not accurate. You should enroll in Medicare shortly before your group coverage ends to ensure that there is no costly coverage gap—your Medicare benefits won’t begin until the month after you enroll.

Warning: Sign up for Medicare immediately upon becoming eligible if your group coverage is a retiree health plan or from COBRA. These are secondary payers to Medicare, and there is no special enrollment period after they end.

I am 65 and retiring from a company that provides wonderful health insurance. Should I use COBRA to remain on my former employer’s insurance after retirement rather than immediately enroll in Medicare?

No, in most cases. This is a common source of confusion for retirees. COBRA allows those leaving group health plans to extend their coverage, but it’s very expensive, and if you’re over age 65, you may get very little for your money—COBRA is a secondary payer for those who are Medicare-eligible. Instead, sign up for Medicare Part A and Part B, and compare the options for secondary coverage (Medigap plus Part D, an employer retiree medical plan and possibly COBRA).

Example: A man in his late 60s who required expensive postcancer treatments was obtaining insurance through his wife’s employer’s group plan, but then his wife passed away. He signed up for COBRA, believing that this would allow him to retain his current coverage. The insurer continued to pay his medical bills for most of the following year—until it realized that he was over age 65 and Medicare-eligible, at which point it not only stopped paying as primary but also demanded to be repaid for overpayments already made, leaving this man with more than $60,000 in uncovered medical bills.

FOR BOTH NEW AND EXISTING PARTICIPANTS

I heard that Medicare Advantage Plans would disappear in the wake of the new health-care law, but I’m still receiving lots of offers. Should I sign up for one?

I generally advise against Medicare Advantage Plans, particularly for people who have significant medical problems. These plans are run by private insurers that restrict access to medical providers and often make it more difficult to maneuver through the claims process than traditional Medicare does. Most people are better off signing up for traditional Medicare than worrying about insurance company hassles.

I’m feeling overwhelmed by all the Medicare Part D (prescription drug coverage) options being offered to me. Can I just sign up for the Part D plan that my husband uses? He’s been satisfied with it.

That is not the best way to choose a Part D plan. Different Part D plans have different formularies (lists of covered drugs), different co-pays and different deductibles. The one that’s right for your husband might be wrong for you because you likely take different drugs. The Medicare Plan Finder on Medicare.gov (click on “Find Health & Drug Plans”) is a handy tool to identify the plan that best fits your needs.

Although one Part D plan may save you as much as $1,000 over another plan, don’t choose a Part D plan based entirely on estimated annual costs. Also consider the Overall Plan Rating and Customer Service ratings. (You’ll see a plan’s Overall Plan Rating on Medicare.gov’s list of Part D plans available to you. To find Customer Service ratings, click on a plan in this list, then select the “Plan Ratings” tab.)

Warning: Your drug needs and the Part D plan’s policies and formulary will change over time, so review your Part D options every year.

WHAT THOSE MEDICARE TERMS MEAN

Medicare’s many options can be quite confusing. What each is…

Medicare Part A helps cover the cost of inpatient care in hospitals, skilled nursing facilities and hospices, plus certain home health-care costs. For most people, there is no premium because they paid Medicare taxes while working.

Medicare Part B helps cover the cost of doctors’ services, outpatient care and certain other medical services. There usually is a premium for Part B that is deducted from your monthly Social Security check.

Traditional Medicare, sometimes called original Medicare, consists of Medicare Part A and Part B.

Medicare Part D helps cover the cost of prescription medications. It is offered by private Medicare-approved companies. Part D plans vary somewhat in premiums, co-pays, co-insurance and deductibles.

Medicare Advantage plans, also called Medicare Part C, are an alternative to traditional Medicare. Unlike traditional Medicare, which lets participants choose virtually any health-care provider, many Advantage plans operate like HMOs or PPOs, using financial incentives to steer members toward in-network providers. Advantage plans often charge premiums (beyond those for Medicare Part B).

Medigap policies, also called Medicare Supplement Insurance, help pay healthcare costs not covered by traditional Medicare, including co-payments, coinsurance and deductibles. While Advantage plans replace traditional Medicare, Medigap policies just supplement it.

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Source: Susan H. Loeb, JD, founder of Your Benefits Advocate, a Chicago-based medical, insurance and Medicare claims advocacy firm. She is a licensed attorney and former benefits manager at University of Chicago. www.YourBenefitsAdvocate.com Date: November 1, 2012 Publication: Bottom Line Personal
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