The Medicare Maze

Dean Kortge, PhD

CURE, Winter 2012, Volume 11, Issue 4

Patients need a road map to navigate supplement policies.

Understanding Medicare coverage and supplements can be difficult under the best of circumstances, but adding a cancer diagnosis can make it seem daunting.

Medicare coverage of inpatient hospital care is fairly simple—all Medicare patients assume a set percentage of the cost of each hospital admission. Outpatient medical service is more complicated. Medicare Part B provides coverage for 80 percent of outpatient medical services with the remaining 20 percent left as the patient’s responsibility. That 20 percent responsibility has no “out-of-pocket maximum.” Most chemotherapy treatment is outpatient, which may cause concern, but many people minimize the risk of soaring outpatient costs by purchasing the Medicare alternative plan, Medicare Advantage or Medigap supplement insurance.

Medigap policies are designated “A” through “N” based on features offered in each policy. Each individual lettered plan offers different benefits and comes with a different premium cost. Although these policies are offered by a variety of insurance companies, the basic benefits in any one of the letter-identified plans must be the same.

Premiums for Medigap policies vary from state to state and are regulated by individual insurers.

Timing is important when selecting a Medigap policy, especially for people with complex medical needs. All Medigap policies can be purchased regardless of current or previous health issues after turning 65 and within the first six months of enrollment for Medicare. After the first six months of Medicare enrollment, a health underwriting process generally is required for Medigap policies, and patients could potentially be refused coverage.

Current Medigap policies do not include prescription drugs, so a separate Part D prescription plan is required. Many major insurance companies provide useful online calculators that can assist patients in selecting the best plan for their particular prescription needs. Part D insurance plans can be changed annually if an individual’s needs or preferences change.

All Part D prescription drug plans, whether offered separately to complement a Medigap plan or as part of a Medicare Advantage Plan, must follow federal minimum requirements. Not all plans cover the same prescriptions. Some plans have a deductible.

Many plans categorize drugs into a tier system, with generic drugs having the lowest copayment or co-insurance, and non-preferred brand-name drugs having the highest copayment or co-insurance. After the cost of prescriptions total $2,970 in the calendar year, a patient falls into the “doughnut hole.” This means patients pay more for prescriptions than before—47.5 percent of the cost for covered brand-name drugs. When total out-of-pocket expenses for prescriptions reach $4,750 in a calendar year, then patients pay a small co-insurance amount or copayment for drugs for the rest of that year.

Medicare Advantage Plans, which include parts A, B and D, are offered by insurance companies that contract with Medicare to provide benefits. Patients must unsubscribe from original Medicare to enroll in a Medicare Advantage Plan.

Unlike Medigap plans, Medicare Advantage Plans usually include prescription drug options. They may also offer other benefits. Most important, all Medicare Advantage Plans have a specified out-of-pocket limit that caps personal medical expenses at an established dollar amount. Typically, Medicare Advantage Plans require copayments or co-insurance for doctor visits, lab tests and hospital stays. For some other benefits, such as Part B drugs, which include infusion therapy (such as chemotherapy), a copayment is also required.

To learn more about which policy is best for an individual, experts have compiled these tips:

Which policy is best for you?

1) Figure your direct costs by totaling the annual premium costs of the various plans you are considering. Include annual cost of a prescription drug plan if you are considering a Medigap plan.

2) Know what your medical needs are. Do you see physicians often? Do you have lab tests or x-rays often? Do you anticipate increasing medical needs? The frequency of your medical visits can help you evaluate co-payment costs that go with Medicare Advantage Plans.

3) Consider what your maximum out-of-pocket expenses could be for a normal health year, and also what could happen if you encountered a major illness. Remember: you are protected from catastrophic medical expenses by the maximum out-of-pocket limit specified in the policy.

4) Factor in your monthly out-of-pocket prescription drug costs. 5) And remember, you can change this plan annually, guaranteed, regardless of any health problems.

For more information on Medicare decisions, visit curetoday.com/medicare.

Dean Kortge, PhD, is a senior insurance specialist at Pacific Benefit Consultants Inc. in Eugene, Ore.