More than 11,000 baby boomers become eligible for Medicare every single day. The momentous 65th birth anniversary opens up a raft of health care decisions than have to be made by new patients during the special open enrollment period.
Medicare helps pay for senior citizen health care. But the program has evolved into something so monumentally complex that informed decisions on the various pieces and parts of the program are hard to come to. Over the next week or so, this column will attempt to decrypt the major switchbacks in the road to making proper choices and help to fill in the blanks.
Before we start, a codicil to everything interpreted in these columns needs to be emphasized. “Yes, but…..” Almost everything having to do with Medicare has a “Yes, but…” attached to it. While Medicare rules are set up to avoid misunderstandings, there are always situations where some rules don’t apply or an exception exists. When in doubt, contact the Center for Medicare Systems (CMS). They distribute a number of mostly helpful publications. If these publications have a shortcoming, it is that they note the possible exceptions to rules in a way which tend to confuse.
I found the “Yes, buts…” confusing enough that a number of private sources have been contacted for verification including a direct contact inside the Center for Medicare Services.
Insurance, by definition, is a method of sharing risk. In its simplest form, a population of people buys health insurance and pays the same premium. The premiums are contributed to a pool. The fund may be invested and profits used (along with the premiums) to pay overhead and the cost of care. Some “insureds” will spend less than they have contributed.
Others will spend more than they have paid in. The insurance pool idea protects against catastrophic loss for those unfortunate “insureds” who suffer from a serious disease or other expensive health condition.
As importantly, for those in an older age category, Medicare abrogates the negative effects of certain hazards which insurance companies and providers would use to exclude some people from care. First, enrollment in Medicare is guaranteed during the open enrollment period. Without this protection, folks with a pre-existing condition could be eliminated from owning health insurance of any kind. Secondly, Medicare negotiates specific price points for medical and hospital services. Elimination of these hazards for seniors is an important value for older people. Medical and hospital services often mark services up more than 300 percent of the allowable Medicare charge. Medicare negotiates these markups to a more reasonable level.
Broadly, Medicare is broken up into four main contract programs plus multiple, optional supplement availabilities. The programs are named Parts A (Hospitalization), B (Medical Provider Charges), C (Medicare Advantage), & D (Prescription Drugs). There are terms and conditions in each of these contracts.
Supplemental insurance coverage is similarly named as Plan A, B, etc. There are a number of these plans, but some letters are mysteriously missing. This can be a tad confusing because there is no direct relationship between the Parts of Medicare, and the Medicare supplement plans. The naming conventions are consistent across most states, but with some notable exceptions.
Confused yet? During the next few days, we will explain the parts and plans. Not all supplemental plans are offered in all markets. All plans, named similarly in all markets, should be identical in coverage, but may charge different premiums because insurance companies are allowed to calculate their own risk profiles.
Insurance agents will try to steer their customers to the policy which is most advantageous to their company. They may not explain other options especially if their company does not offer that option in a particular market. This is not to accuse the agents of doing anything wrong, but they may not understand all the plans available and all the ramifications.
There is an old joke that claims a giraffe is nothing but a horse put together by a committee. So it is with Medicare. The complexity is not the fault of the good folks attempting to administer the program. Dozens of interest groups have been compromised with to win their approvals during the legislative process. The result is a giraffe called Medicare.
Next: What choices do you have to make when you turn 65? What happens if you don’t act in a timely manner? Are there penalties?