A Common Medicare Mistake
By Philip Alsten
Assuming that Medicare is Free
Most U.S. workers know that taxes are taken out of their paychecks, and those taxes go to the government. More specifically, the payroll taxes known as FICA are Federal taxes used to fund Social Security and Medicare.
But that does NOT mean that Medicare is free. Here’s how it works:
Original Medicare is made up of 2 parts: Part A – Hospital (inpatient) Coverage and Part B – Medical Coverage, which covers outpatient care as well as doctors’ services, both in and out of the hospital. It takes 40 Quarters (or 10 years) of working and paying FICA taxes to earn Premium Free Part A. On the other hand, Part B has a required monthly premium that everyone must pay, unless you get government assistance to help pay it.
In 2021, the standard Part B monthly premium is $148.50.
High wage earners pay an additional amount known as the Income Related Monthly Adjustment Amount or IRMAA. See this link for the IRMAA chart https://www.medicare.gov/your-medicare-costs/part-b-costs
If you are collecting Social Security, the Part B premium is automatically deducted from your check.
If you are not yet collecting Social Security, Medicare sends you a bill every 3 months for $445.50.
In 2021, if you are admitted to the hospital, Medicare Part A has a Deductible of $1,484 that you pay. This amount covers you for up to the first 60 days of a hospital inpatient stay. It’s possible to incur this Deductible multiple times in a year. Extended hospital stays, beyond 60 days, require you to pay a Daily Coinsurance payment as well. In 2021, that daily Coinsurance is $371 for days 61-90, then $742 for days 91-150. Beyond day 150, you pay 100% of ALL Hospital inpatient costs.
Part B has a Deductible but it is only $203 (in 2021). This is an Annual, calendar year deductible, so you only ever pay it once a year. After the Part B Deductible is met, Medicare pays 80% of approved charges and you are responsible for the remaining 20%. There is no dollar limit to that 20% patient responsibility. All of these costs (deductibles and coinsurances) are expected to go up for year 2022.
Two Options (or paths to follow) to Protect Yourself from Medical Debt
Because Original Medicare might leave you financially exposed to high medical bills, there are two options (or paths to follow) to protect yourself from medical debt.
One option is to purchase a Medigap policy (also known as a Medicare Supplement plan) that pays for most of the gaps in Medicare. With Medigap plans, you pay a monthly premium, but you then know exactly how much financial exposure you have left. In most cases, very little or nothing.
The other option is to leave Original Medicare and enroll into a Private, Managed Care, Health Plan known as a Medicare Advantage plan. These managed care plans are primarily HMO’s and PPO’s.
Medicare Advantage plans are offered by private insurance companies contracted with the federal Government, and unlike Medigap, the Medicare Advantage plans can change from year to year.
In South Florida, Medicare Advantage plans often have premiums as low as $0. They also have annual Maximum Out-Of-Pocket Limits. But Medicare Advantage plans are Pay-As-You-Go plans that have Copays
for each service in the plan.
In order to stay in a Medicare Advantage plan, you MUST continue to pay your Medicare Part B premium.
As with many things in life, no matter which option you choose, you either pay now, or you pay later. There are pros and cons to both options (Medigap and Medicare Advantage) and there is no one-size-fits-all plan, and no “Best” plan.
Everyone is unique regarding their healthcare needs, finances, lifestyle, risk tolerance, and point of view. An independent insurance agent can review your situation, educate you on your options, and offer various plans from many different companies to help you find a plan that’s right for you.