What You Need to Know About Medicare – Part 4 of 8

Josh Mungavin, CFP® Principal, Wealth Manager

Josh Mungavin, CFP®
Principal, Wealth Manager

Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan.  With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause.  This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.

Please send this article out to friends and family so that they can forward it to the people in their lives that need this information.  The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.

Medicare Part D

Medicare Part D is the “Prescription Drug Insurance” portion of Medicare.  Anyone who is eligible for Part A or Part B is eligible for Part D.  The premiums are at their base (usually around $32.42 (as of 2014) depending on coverage and region) for someone who earned under $85,000 and is filing single or $170,000 if filing joint and can be increased according to earnings by as much as $69.30 (as of 2014) for someone who earned over $214,000 and is filing single or $428,000 if filing joint.  If you don’t enroll when you are first eligible or go for more than 63 days without qualified prescription insurance coverage you will have to pay a monthly penalty of about $0.30 per month you went without coverage for the rest of your life.  The open enrollment period is October 15th to December 7th every year, during which time you can change plans.

Benefit Coverage

While Medicare Part D is regulated by the Medicare program, it is actually designed and administered by private health insurance companies and so is not standardized.  Plans can choose which drugs they wish to cover, the level of coverage for each drug, and which pharmacies (including mail order pharmacies) they will work with.  Medicare fully excludes coverage for benzodiazepines, cough suppressants, barbiturates, and some other controlled substances.  If the plan chooses to cover specifically excluded drugs the cost cannot be passed to Medicare.  The standard yearly deductible is $310 (as of 2014) and must be met before your yearly coverage begins.  One very common gap in Part D plans is a called a “donut hole” in which the patient will be responsible for 72% of plan covered generic drug costs and 47.5% of plan covered name brand drug costs once they reach $2,850 per year in drug costs (as of 2014), but once yearly costs exceed $4,550 (as of 2014) Part D begins to pay again.   After this point is reached you will pay the greater of 5% of drug cost or $2.55 for plan covered generic drugs and the greater of 5% of drug cost or $6.35 for plan covered brand name drugs.  The Health Care Reform Law has scheduled a yearly decrease in the “donut hole” which is scheduled to disappear in 2020.  When comparing plans:

  • Check Coverage – Make sure the drugs you need are covered by the plan by using the Part D plan finder by visiting http://plancompare.medicare.gov/pfdn/formularyfinder/drugsearch.  Even if a drug is listed sometimes a plan may not cover the dose and quantity that you need or may require you to get prior authorization from your doctor before the drug will be covered.
  • Compare the Costs – While the premium is important, its overall effect on total cost can pale in importance to the effect of deductibles, co-payments, pharmacy convenience, and drug coverage.
  • Check the Pharmacies – Each plan has a list of pharmacies that support the plan participants. Make sure that your pharmacy, a nearby pharmacy, or mail order pharmacy is supported by the plan you choose.  It doesn’t make sense to save $50 a month in premiums if the plan ends up costing $50 in additional gas every month.

Extra Help

Extra Help (also known as LIS) is a program to help people with limited resources pay for monthly premiums, annual deductibles, and prescription co-payments related to a Medicare prescription drug plan.  Recipients are eligible to pay no more than $2.55 for generic drugs and $6.35 for name brand drugs (as of 2014).  The Centers for Medicare and Medicaid estimate that there are more than 1.8 million people who are eligible and not receiving benefits.  For those who qualify for the program, savings can add up to almost $4,000 per year so it important to know if you meet the requirements.  In order to qualify for Extra Help:

  • Your resources must be limited to $13,440 for an individual or $26,860 for a married couple living together (as of 2014). Resources include investment real estate, bank accounts, stocks, bonds, mutual funds, IRA accounts, and cash but do not include a primary residence, car, life insurance policies, personal possessions, property you need for self support such as rental property or land you use to grow your food, resources not easily converted to cash such as jewelry or home furnishings, burial spaces, as well as a number of specific exclusions you can inquire about through Social Security.
  • Your annual income must be limited to $17,335 for an individual or $23,265 for a married couple living together (as of 2014). There are some exclusions if you support other family members who live with you, have earnings from work, or live in Alaska or Hawaii. Annual income does not include food stamps, economic recovery payments, victims compensation, scholarships and education grants, and certain help you receive for food, shelter, heating, electricity, water, and property taxes.

Where to Go For Extra Information

The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf

New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html

The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.

Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.

Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.

National PACE Association www.npaonline.org.

The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.

Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com