More than 57 million older and disabled Americans rely on Medicare for their health insurance, with millions more joining their ranks every year. Since its launch in 1965, Medicare has evolved from no-frills coverage to a complex suite of health insurance products that many people neither understand nor use to their fullest advantage.
Part D drug plans did not even exist until 2006. More than 40 million people now have these private insurance plans. Likewise, Medicare Advantage plans are only about a decade old but have become the most popular choice of new Medicare enrollees and are now used by nearly 20 million people.
These new plans have brought strong benefits and protections to Medicare beneficiaries. Rising drug prices have become a national scourge, but most Medicare users are shielded from their full effect by Part D ceilings on out-of-pocket expenses. Medicare Advantage plans likewise provide out-of-pocket ceilings on health spending. They also often offer broader coverage than basic Medicare and at lower prices. They achieve these benefits by limiting people's care to designated health provider networks that may curb access to preferred doctors and hospitals.
Rising prices for health care coupled with welcome longevity gains have made health care expenses the largest uncontrollable financial expense for most of our older citizens. Properly used, Medicare can provide substantial protection against these often unforeseen expenses. Here are five ways Medicare can help protect the health of your wallet and your body.
Open enrollment. Medicare's annual open enrollment period begins Oct. 15 and runs through Dec. 7. It provides Medicare policyholders with an annual "do over" opportunity when they can switch plans and coverage. Medicare plans make lots of changes every year, especially in how they charge for drugs. And even if your plan has not changed, your needs might be different than they were last year. All private Medicare plans are required to send an Annual Notice of Change to members each fall before open enrollment begins. It sets forth changes in their plans for the coming year, and is a good guide to whether people should change their plans. A recent survey found that people switching to new Medicare Advantage plans saved about $200 a year in lower premiums and also lowered their potential out-of-pocket expenses by $400. Despite such possible savings, more than 80 percent of Medicare beneficiaries keep their current coverage each year.
Free benefits. Medicare provides many free wellness and preventive benefits. These services were substantially expanded by the Affordable Care Act. While use of these benefits has been rising over time, many people fail to take advantage of them. One new benefit that began recently is that Medicare will pay physicians to have end-of-life discussions with Medicare beneficiaries and their family members. These can be valuable sessions to raise important issues about the type and extent of care that beneficiaries want as they become frail. This may include medical directives to guide doctors and family members should they become unable to make their own care decisions.
High-income surcharges. Medicare levies substantial surcharges on Part B and D premiums for wealthier beneficiaries. For example, the standard monthly Part B premium is $105 for most people today. But it is nearly $400 a month for the wealthiest beneficiaries. These surcharges are based on a person's tax return two years before the current benefit year. For example, 2016 surcharges are based on 2014 tax returns. Higher-income beneficiaries may be able to minimize surcharges by timing pertinent financial decisions that affect their taxable income.
Part A as secondary insurance. Part A hospital insurance charges no premiums to people who have worked long enough to qualify for Social Security benefits. (If they haven't worked long enough, they still qualify for premium-free Part A if their spouses or even former spouses worked long enough.) Many people with employer group insurance do not need Medicare and can keep their employer coverage if they continue working past 65. However, if they are collecting Social Security, they automatically get Part A, as well. It may come in handy as secondary insurance to help pay the portion of hospital expenses not paid by an employer plan.
Part B co-payments. Part B of Medicare helps pay for covered expenses for doctors, outpatient and durable medical equipment needs. However, it pays only 80 percent of these covered expenses. Beneficiaries are responsible for the remaining 20 percent, and there is no cap on this exposure. Medigap, or Medicare supplement policies, can plug this gap, as can Medicare Advantage plans. Make sure you understand your worst-case financial exposure when getting your Medicare coverage, and take cost-effective steps to minimize or even eliminate such risks.