+ 7 Common Medicare Myths

The 7 Most Common Medicare Myths

Published September 24, 2016

Fool.com by Sean Williams

Social Security is often anointed as the most important social program in the U.S. because of the income it provides retired workers each month. But you’d be making a mistake if you didn’t put Medicare, the program designed to provide medical care primarily to seniors aged 65 and up, in the same discussion.

According to an analysis conducted by the Urban Institute, the cumulative lifetime benefits for a median income 65-year-old are estimated to be higher from Medicare than Social Security by the year 2055. In other words, the importance of Medicare is growing, especially on account of the medical inflation rate handily outpacing both the national inflation rate and wage growth.

Despite Medicare’s being a critical program for seniors, there’s a lot about it that’s simply misunderstood. Unfortunately, if you misunderstand Medicare it could come back to haunt you in your pocketbook. Here are seven of the most common myths associated with Medicare.

1. Medicare is free

Arguably one of the biggest Medicare misconceptions is that since it’s a critically important social program, it’s free. In reality, though some aspects of the program may be offered “free,” retirees are expected cover certain expenses on their own.

For example, Part A, otherwise known as hospital insurance, has no premium attached if you’ve earned 40 work credits throughout your lifetime. However, Medicare Part B (outpatient services) has a standard premium of $121.80 in 2016. Part D, or prescription drug plans, also requires a monthly premium.

On top of premiums, consumers could be responsible for deductibles and out-of-pocket costs. There are no annual out-of-pocket limits with original Medicare, meaning that retirees are often responsible for about 20% of their medical expenses.

2. Medicare covers everything

Another common myth is that Medicare covers all types of medical procedures and care. This is actually fiction, as there are a number of services Medicare doesn’t offer.

For instance, Medicare doesn’t offer coverage for standard dental, vision, or hearing care. If you’re interested in these services, you may want to consider an all-encompassing Medicare Advantage plan or purchase separate health insurance for these services from a private insurer.

In total, there are 10 services that Medicare surprisingly doesn’t cover. In addition to the three mentioned above, out-of-country medical care, most cosmetic surgery, and certain types of diabetes supplies aren’t covered by Part A or Part B.

3. I can enroll anytime I want

Medicare is designed to provide significant financial assistance during your golden years, but there are some restrictions, including when you’re allowed to enroll.

During your initial enrollment period (IEP), you’re eligible to enroll during the three months prior to your 65th birthday, the month you turn 65, and the three months following the month you turn 65. If you miss this IEP, you’ll need to wait to enroll until the next enrollment period.

For those of you who aren’t within your IEP, the standard enrollment period for Medicare or Medicare Advantage plans is between Oct. 15 and Dec. 7. The reasons these dates are consistent from one year to the next has to do with giving private insurers covering Part D time to get their paperwork in order prior to the Jan. 1 coverage start date.

Furthermore, Medicare Advantage members have an opportunity to dis-enroll and opt into original Medicare between Jan. 1 and Feb. 14. But note that this is a one-way street since original Medicare members may not dis-enroll and opt into a Medicare Advantage plan during this time period.

4. I’ll be notified when it’s time to enroll

Clearly you don’t want to be late enrolling for Medicare, but that doesn’t mean the program will necessarily notify you that it’s time to enroll.

Here’s the good news: If you’ve chosen to file for Social Security benefits before turning 65, you’ll be automatically enrolled in Medicare Part A and Part B. You’ll still need to enroll in Part D on your own.

The bad news is that if you’re not receiving Social Security by age 65, you’ll have to remember to enroll during your IEP or the normal enrollment period. If you fail to enroll in Part B or Part D, you could face a penalty when you do eventually enroll in Medicare. Worse yet, this monthly penalty follows you around for the remainder of your life (i.e., for as long as you’re enrolled in Medicare).

5. Everyone pays the same for Medicare

Medicare may offer the same benefits for everyone, but that doesn’t mean everyone pays the same price for medical care. Your work and earnings history can dictate how much you’ll pay for Medicare.

For example, if you haven’t earned 40 work credits over your lifetime, Part A isn’t free. If you have 39 or fewer work credits you could owe up to $411 per month for Part A. For what it’s worth, the vast majority of retirees receive Part A without paying a premium.

However, the biggest differences can be seen in Part B and Part D premiums between higher-income individuals and everyone else. If your individual adjusted gross income is below $85,000, or $170,000 as a couple, you’ll pay the standard Part B and Part D premium. But if you earn more than these income thresholds, you’ll pay a surcharge for your medical care. Part B monthly expenses can be as high as $389.80 for individuals earning more than $214,000 in 2016 and couples tipping the scales at $428,000 or more in income. Part D monthly surcharges range from $12.70 a month to as high as $72.90 a month on top of your plan premium for well-to-do persons.

6. Having poor health will disqualify me from coverage

Prior to the introduction of the Affordable Care Act, health insurance providers would have been able to pick and choose what patients to accept into their network. Following the ACA’s implementation, insurers are required to accept members regardless of their health. The same can be said of Medicare, which can’t reject you because you’re sick or have a pre-existing condition. You could be required to pay a surcharge if you make too much money, but your acceptance into Medicare is guaranteed.

7. Medicare is going bankrupt

The final misconception is the belief that Medicare is going bankrupt and won’t be there for Generation X and millennials when they are of retirement age. This is false, but the program itself isn’t on solid footing.

According to the Social Security and Medicare Board of Trustees’ latest report, Medicare’s Hospital Insurance Trust is on track to burn through its spare cash by the year 2028. If Medicare were to exhaust this cash, it would become a budget-neutral program. The result would be an estimated reduction in payouts to hospitals and physicians of 13%. It’s possible this payout reduction could cause some medical care providers to drop Medicare coverage.

Yet the keyword here is “budget-neutral.” This means that the money being generated from payroll taxes will continue to fund the program for the tens of millions of seniors enrolled. Medicare still clearly needs the attention of Congress, but it’s not going bankrupt and will be there for you when you retire.

+ Bethel Visiting Nurses to Hold Flu Vaccine Clinics in September

BETHEL – The Bethel Visiting Nurse Association (VNA) is holding several flu clinics for area residents ages six months and up. Flu vaccines are free for children 4 and under and the shots are also free for children 18 and under who have Medicaid or Husky A/B, do not have health insurance, are American Indian or Alaskan Native, or are under-insured. Preservative-free flu vaccines, high-dose flu vaccines for ages 65 years and older, quadrivalent inactivated flu shots and traditional flu shots will be available.

Aetna, Anthem BC/BS, ConnectiCare, Healthy CT, Medicare Part B and Oxford, Medicare Advantage Plans with Aetna, Anthem BC/BS, ConnectiCare, and Wellcare will be billed directly and patients should bring their medical insurance card.

The flu clinics will be held on the following dates:

•Sept. 16 10 a.m. to 1 p.m. at the Bethel Senior Center, 1 School Street, Bethel

•Sept. 19 9:30 to 11:30 a.m. at the Bethel Senior Center, 1 School Street, Bethel

•Sept. 24 5 to 6:30 p.m. at St. Mary’s Church, 24 Dodgingtown Road, Bethel

•Sept. 25 7:30 a.m. to 1 p.m. at St. Mary’s Church, 24 Dodgingtown Road, Bethel

+ Medicare Advantage Overtakes Standard Medicare

Medicare Advantage Overtakes Standard Medicare

The number of people enrolled in standard Medicare has stopped growing.  Based on data from the Centers for Medicare and Medicaid Services, the number of people enrolled in what we knew as Medicare grew at less than a half of one percent between December 2014 and December 2015.  This is not because the number of people in Medicare has gone down.  Indeed, there are a number of factors that will continue driving up the numbers of Medicare beneficiaries.

So, what happened?  The answer is the continued expansion of Medicare Advantage or what used to be called Medicare replacement plans.  These are for profit insurance companies, like United Healthcare, Humana and Aetna (Humana now is Aetna or vice versa) that provide insurance to anyone enrolled in Medicare.  Let’s look at the numbers of beneficiaries from 2009 through 2015:

What is the impact on beneficiaries, providers and the government spending from this transition?  The answer lies in how the Medicare Advantage (we will shorten this to MA) plans are reimbursed for taking care of Medicare beneficiaries.  They receive a per member per month or “PMPM” payment that, for a large part, is not impacted by the care provided.  As the MA plans submit claims data to Medicare, each patient receives a “risk score” based not on services, but the diagnosis included in the claim data.  MA plans that either fail to collect the correct risk score data or pay more out than they receive in will lose money.

First, let’s look at how this impacts physicians, hospitals and nursing homes.  The MA plans call the ratio of premiums they receive for a member to the amount they spend the “medical loss ratio” or MLR.  They create reports of members that have poor MLRs.  They create reports of physicians and other providers with poor MLRs.  They use these reports to determine who they wish to contract with.  Different from the old version of Medicare, now called “Fee For Service,” they don’t have to contract with anyone signing up as a Medicare provider.  It is in the interest of the MA plans to only contract with providers that give them the highest profits and lowest MLRs.

Why do people in Medicare enroll in MA plans?  Well sometimes it is because these plans wave the Medicare Part B premiums Medicare beneficiaries have to pay.  Sometimes they provide more services like a “Silver Sneaker” program with free memberships at a local health club.  Some MA members like having the ability to call a nurse from the MA plan with health questions.  Sometimes it is just robust marketing.  Everyone that becomes eligible for Medicare should see if it would help them to enroll in an MA plan.

What are the pluses and minuses for the government?  A big plus is that it gives the government an opportunity to fix a rate of spending and have a partner interested in keeping costs down.  If the government is paying a PMPM to an MA plan, they should have more control over costs of care.  On the down side, some of these MA plans have been bad actors both by going bankrupt through fiscal mismanagement and doing inappropriate things to Medicare recipients in the name of profits.

MA plans and the related concept of fixed monthly payments for taking care of patients looks like it is here to stay.  The winners will be the MA plans and providers that understand the data and incentives for success.

Timothy Powell, CPA CHCP

+ KraftHeinz Pushes Retirees to Health Exchanges to Cut Costs

Kraft Heinz Co., which counts Warren Buffett’s Berkshire Hathaway Inc. as its largest shareholder, is pushing some of its retirees to health exchanges as the company cuts expenses.

The foodmaker is eliminating some benefits as it seeks to provide care in “the most cost-effective manner,” according to a letter to retirees and their spouses dated Sept. 1, a copy of which was obtained by Bloomberg.

3G Capital, which combined H.J. Heinz and Kraft Foods Group Inc. with Buffett’s backing, has been cutting jobs and office expenses to boost profits. As of Jan. 1, Kraft Heinz will offer medical and prescription coverage through the individual marketplace for retirees age 65 and older. Coverage options including dental and vision plans will be available through the private Towers Watson OneExchange.

“As a result, the existing company retiree medical and prescription drug coverage designs will not be offered after December 31,” according to the letter.

Michael Mullen, a spokesman for Kraft Heinz, said that the change applies to 15,000 Medicare-eligible retirees.

“These retirees will have a selection of health plans that provide equal or better benefits than our group coverage at a similar or even lower cost,” Mullen said in an e-mailed statement.

Doug Leikness, president of the United Food and Commercial Workers union in Madison, Wisconsin, where Kraft Heinz has an Oscar Mayer plant, said the change will hurt workers and reduce costs for the company.

Saving Money

“They’re going to be saving a ton of money on this, by getting rid of their retiree insurance and providing a small supplement so retirees can buy their own,” he said. “Our members will take a huge hit on prescriptions.”

Kraft Heinz is also trying to shift some retirees away from pension plans under a voluntary program. Mullen said former Kraft employees who have a “future estimated benefit value” of under $2,500 a month at age 65, and have not started receiving the money, can “receive it as an immediate lump-sum payment or begin receiving annuity payments right away.”

“This program supports the company’s ongoing efforts to manage our future benefits obligations while giving plan participants additional choice and flexibility in how they invest and manage their retirement funds,” Mullen said in a statement.

From Blake Schmidt and Craig Giammona BloombergBusiness 9/10/15

+ 2016 Standard Part D changes

CMS Part D 2016 Standard Benefit Model Plan Feature Highlights

Here are the highlights for the CMS defined Standard Benefit Plan changes from 2015 to 2016. This “Standard Benefit Plan” is the minimum allowable plan to be offered.

  • Initial Deductible: will be increased by $40 to $360 in 2016.
  • Initial Coverage Limit: will increase from $2,960 in 2015 to $3,310 in 2016.
  • Out-of-Pocket Threshold: will increase from $4,700 in 2015 to $4,850 in 2016.
  • Coverage Gap (donut hole): begins once you reach your Medicare Part D plan’s initial coverage limit ($3,310 in 2016) and ends when you spend a total of $4,850 in 2016.
  • In 2016, Part D enrollees will receive a 55% discount on the total cost of their brand-name drugs purchased while in the donut hole. The 50% discount paid by the brand-name drug manufacturer will apply to getting out of the donut hole, however the additional 5% paid by your Medicare Part D plan will not count toward your TrOOP.
    For example: if you reach the donut hole and purchase a brand-name medication with a retail cost of $100, you will pay $45 for the medication, and receive $95 credit toward meeting your 2016 total out-of-pocket spending limit.
    Enrollees will pay a maximum of 58% co-pay on generic drugs purchased while in the coverage gap (a 42% discount). For example: If you reach the 2016 Donut Hole, and your generic medication has a retail cost of $100, you will pay $58. The $58 that you spend will count toward yourTrOOP.
  • Minimum Cost-sharing in the Catastrophic Coverage Portion of the Benefit:
    will increase to greater of 5% or $2.95 (up from $2.55) for generic or preferred drug that is a multi-source drug and the greater of 5% or $7.40 (up from $6.60) for all other drugs in 2016.
  • Maximum Co-payments below the Out-of-Pocket Threshold for certain Low Income Full Subsidy Eligible Enrollees:
    will increase to $2.95 for generic or preferred drug that is a multi-source drug and $7.40 for all other drugs in 2016.