Medicare 101: Coaching Your Clients About Medicare Coverage

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Thousands of baby boomers turn 65 each day and become eligible to join the millions of Americans already enrolled in Medicare. With more people working into their retirement years, you and your clients should know more about Medicare cost and benefits; it’s never too soon to share this information with them.

The Basics

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with end-stage renal disease. There are four main parts to Medicare coverage (plus a supplemental plan), and these plans are offered by private insurance companies.

  1. Medicare Part A (Hospital Insurance) covers inpatient hospital stays, care in a skilled nursing facility, hospice care and some home health care.
  2. Medicare Part B (Medical Insurance) covers certain doctors’ services, outpatient care, medical supplies and preventive services. You pay nothing for most preventive services if you get the services from a health care provider that accepts the assignment. In 2019, the standard Part B premium is $135.50 per month (or higher depending on your income). Original Medicare includes Parts A and B, and you’re able to choose the doctors, hospitals and other providers that accept Medicare. In general, you’ll pay a deductible or coinsurance for Part A and Part B services.
  3. Medicare Part C (Medicare Advantage or MA) is an all-in-one alternative to original Medicare, and includes Part A, Part B and, typically, Part D. The coverage is provided by private insurance companies approved by Medicare, and you typically choose health care providers who participate in the plan’s network. You typically pay a monthly premium for the MA Plan, in addition to the monthly premium for Part B. You’ll also be responsible for a copayment and coinsurance for covered services, and these plans have a yearly limit for your out-of-pocket costs. Many MA plans also offer vision, hearing and dental coverage.
  4. Medicare Part D (Prescription Drug Coverage) adds prescription drug coverage to original Medicare and some other Medicare plans. You usually pay a monthly premium, and these plans are run by private companies approved by Medicare.

Medicare Supplement Insurance (Medigap): If you choose to buy a Medicare Supplement Insurance policy, the plan may pay some of the deductibles and coinsurance for Parts A and B.

Enrollment

If you’re already receiving Social Security benefits, you’ll automatically be enrolled in Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) when you turn 65 years old, but you can decline Part B coverage and sign up later. Since everyone has to pay a premium for Part B, you may delay this coverage if you’re already covered by another plan.

If you’re not receiving Social Security benefits, you need to sign up for Medicare. Most people should enroll in Part A when they turn 65 years old, even if they are covered through their employer’s insurance plan. If you paid Medicare taxes while you worked, you won’t have to pay a premium for Part A.

Other Coverage

If you have Medicare and other insurance coverage, such as employer or union, military or veterans’ benefits, each type of coverage is considered a payer. When you have more than one payer, you need to coordinate your benefits to determine which payer will pay first and which one will pay next.

The primary insurance company will pay up to the limits of the coverage; then, the secondary insurance company will pay (up to coverage limits) if there are costs not covered by the primary insurer. Remember to tell your doctor and health care providers that you’re covered by multiple insurers to help them determine where to send the bills and to avoid delays.

Practical Tips

When you work into retirement years or have a spouse with employer coverage, it’s important to stay on top of the rules because of the dollars at stake.

  • If you or your spouse are still working, the employee coverage is going to be primary and Medicare is secondary. However, once the employer coverage ends, Medicare coverage becomes primary. If you have a retiree health plan, it is secondary to Medicare. There are some exceptions if you’re under 65, and have Medicare through a disability or work for a small employer.
  • Pay close attention to the window for enrolling in Medicare coverage (if required), because you can only sign up between January and March each year.
  • Your premiums for Parts B and D will go up if you’re above the income thresholds ($85,000 for single filers/$170,000 for joint filers). If you’re above the income cutoff, you may be able to make some financial moves to keep your income below the threshold.
  • Keep in mind that providers sometimes make mistakes by billing the wrong plan or by failing to bill your secondary plan. Make sure each claim has made it through both plans before you pay.

Advising Your Clients

It’s a fact that many Americans are reaching their retirement years – and the Medicare system is complex. Tax professionals can give valuable advice about Medicare to their clients and prospects by educating them, and planning ahead to choose the right plan to avoid costly mistakes.

Editor’s note: This article originally published in the CPA Practice Advisor.

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