Medicare insurance guide

Moneycation
Published by Moneycation™
Newsletter: September 30, 2014
Volume 2, Issue 9
Medicare insurance guide
Medicare health insurance gets complicated with its numerous
service stipulations, a nexus of coverage options and an array
of regulatory requirements. Planning for healthcare needs via Medicare is also not a quick task; it is
not something that is typically done within a half hour. Understanding this before considering
which insurance is right reduces unrealistic expectations and disappointment. It also helps to
understand what Medicare is and who it benefits before getting in to the finer details. The U.S.
Social Security Administration defines Medicare in the following way:
“Medicare is our country’s health insurance program for people age 65 or older. People
younger than age 65 with certain disabilities or permanent kidney failure also can qualify for
Medicare. The program helps with the cost of health care, but it does not cover all medical
expenses or the cost of most long-term care. You may buy a Medicare supplement policy
(called Medigap) from a private insurance company to cover some of the costs that Medicare
does not.”
Since Medicare is a Social Security program, it does not benefit all Americans in the same way.
This is partly because those with higher incomes during their working years pay more in Medicare
taxes. As the following two graphs illustrate, the greatest beneficiaries of the Medicare program are
low-income individuals and households with non-working spouses.
Source: Joseph Fried; CC BY-S.A. 3.0

Image: Joseph Fried; CC BY-SA 3.0
In order to simplify the Medicare plan selection process, eliminating the obvious unnecessary
coverage helps reduce the number of choices. A well defined method of identifying healthcare
needs, evaluating coverage options and comparing plan pricing assists with the rest of the path
toward selecting the right Medicare plan(s). This guide goes through the Medicare methodology
using these four steps in a way that makes sense and that is not confusing.
Step 1: Coverage elimination
Coverage elimination involves identifying the least probable health care needs in order to rule them
out as immediately necessary. For instance, if Medicare Parts A and B have affordable out-of-pocket
expense caps that may not be reached due to good health, the benefits of paying for
Medicare Part F and/or G may not outweigh the cost. In other words, a fair evaluation of existing
plan coverage and costs should be factored in to the weighing of supplemental insurance
advantages. If the supplemental coverage is unlikely to be used in the near term, and if any late
enrollment penalties do not cost more than enrollment premium costs in the short-term, then this
coverage may be eliminated along with too much focus on the underlying insurance policy rules.
Step 2: Plan prioritization
To further streamline the Medicare selection process, prioritize the healthcare coverage that is
necessary. For example, individuals without degenerative eye conditions and otherwise good vision
may find little use for additional insurance that helps pay for extensive eye surgery and treatments.
Each individual has a different health profile and this makes prioritizing healthcare needs a personal
process that requires an honest scrutiny of realistic medical events, expenses and requirements.
Step 3: Weigh options
Medicare itself may vary in quality and effectiveness from state to state, so be sure to review the
applicable Medicare programs by locality in addition to any standardized features. Healthcare
options are also not limited to within the Medicare system and extend beyond it. Out-of-the box

healthcare methods may not only cost less, but have better effects on individual health. Some
choices to consider and compare against Medicare are listed below:
• Medical tourism
• Holistic healthcare
• Alternative medicine
• Prescription discount options
• Private insurance choices
• Healthcare savings accounts
This step is time consuming because it involves researching identifiable healthcare choices, then
evaluating them in terms of medical scenarios, cost structure and within a financial plan. This
involves determining which, if any, individual health problems are likely to arise and what
insurance coverage would be most cost effective in addressing those healthcare needs. Moreover,
with time, healthcare needs change, so being aware of future expenses and being able to account for
them when they arrive is also something to consider. Some example tools that help with the
Medicare and medigap insurance evaluation process are listed below, but because medigap is
regulated differently in each state, a state specific medigap comparison tool is likely to be more
accurate.
Medicare Plan Finder
https://www.medicare.gov/find-a-plan/questions/home.aspx?AspxAutoDetectCookieSupport=1
Medicare News Watch: Medicare Advantage Plan Cost Comparisons
http://www.medicarenewswatch.com/index.php/en/cost-comparisons
NCDI Medicare Supplement Premium Comparison Database
http://www.ncdoi.com/medisupp/Search_new.asp
Maine Department of Insurance Medicare Savings Calculator
http://www.maine.gov/dhhs/oads/aging/medicare/calculator.htm
Medicare Parts A and B
Both Medicare A and B, which insure hospital visits and medical care, do not have monthly or
annual premium expenses when individuals have paid into the system in the past. When this is the
case it is referred to as premium-free Part A. A second qualification for many Medicare A recipients
is age, specifically the age of 65 having to be reached by the insured. For individuals who do not
meet income related eligibility requirements, premium-Part A allows coverage or a periodic cost,
but they too must have attained the age of 65. Enrollment in Medicare B is automatic for those with
premium-free part A, but an application is required of those who have premium-part A coverage.
Medicare Part A “covers inpatient care in hospitals and skilled nursing facilities, as well as home
health and hospice services” per the U.S. Social Security Administration. Also per the SSA,
Medicare B “covers outpatient care, including services of physicians, therapists, clinics, hospital
outpatient departments, clinical laboratories, and so forth.” The cost of Medicare Part A and B is
determined on factors such as income earning history, election to enroll and age requirements.

Medigap
Healthcare expenses that are not covered by Medicare A, B and C are often insured by
supplemental Medicare insurance or medigap. Medigap coverage is often defined via Medicare
parts D through N and is typically administered by third party insurers that apply to the government
for insurance money on behalf of program enrollees. According to the Texas Department of
Insurance, Medigap or supplemental insurance auto-renews each year whereas Medicare
Advantages plans do not.
Medigap insurance involves additional fees and pay structure is determined on a case by case basis.
The following chart demonstrates which Medicare enrollees are more likely to have insufficient
coverage and experience vulnerability as a result. Moreover, the graphic also indicates who could
benefit from specific forms of Medigap coverage because it is designed to assist with medical care
not typically insured by Medicare A and B.
Source: Rob Wohl; CC BY-SA 3.0
Medicare Part C
Medicare Advantage plans are administered by companies and include Medicare Part A and B
coverage. Medicare Part C coverage has additional benefits, but their existence may also come with
costs that should be carefully considered prior to purchase. For example, if an insurer passes on
costs to consumers, then Medicare Part C may not be worthwhile per the following graph.

Image: Nancy Pelosi; “New Report Highlights Medicare advantage Insurers' Higher Administrative Spending”; CC BY 2.0
Any negative propaganda designed to increase traditional Medicare use aside, and when compared
to “Traditional Medicare”, the average Medicare Advantage plan spends a great deal more.
However, what is also not clear in the graph, is whether the traditional Medicare spending includes
Medicare Part A and Part C and how much more coverage the Medicare Advantage offers for the
extra amount spent on marketing, administration and other tasks. Some factors to consider when
comparing Medicare Parts A and B with Medicare Advantage are listed below:
• Doctor network quality
• Speed of access to care
• Out-of-pocket caps
• Coverage limitations
• Extent of medical benefits
• Immediate vs. deferred coverage
• Out-of-state services
Another distinction between Medicare Part A and B, and Medicare Advantage is the complexity of
rules or terms of service. Since Medicare Parts A and B are singularly managed by the government,
then no additional policies and services can be implemented without the right approval process. In
government, this tends to be slower than at corporations. The results go both ways though, and
corporate run Medicare Advantage has the chance of being less helpful to consumers and more
profitable for the company. However, the Advantage plan may also be better for insured persons in
terms of access, coverage and options in proportion to cost.
When deciding whether or not to choose Medicare Part A and B instead of Medicare Advantage
depends on individual health, medical needs and overall insurance quality. For those individuals in
good health who are without extensive dental or vision problems, Medicare Part A and B may be
more practical because Medicare Advantage benefits could go unused or be a redundant monthly

expense. In other words, compare policies and make sure the insurance matches your healthcare
needs. For some Medicare Advantage plans, the coverage includes benefits also available through
Medicare Part D.
Medicare Part D
Medicare Part D is a supplemental prescription drug insurance that is available to anyone who is
enrolled in Medicare A or B. The policy coverage differs on a per policy basis and is most
beneficial to individuals with heavy prescription drug use or for those prescribed expensive
specialty treatments. Late enrollment incurs a late fee and the insurance can only be enrolled in
during a specific time each year. A possible alternative to Medicare Part D is to become a member
of a pharmacy discount program. These are not insurance, but reduce the cost of prescription
considerably and may be worthwhile if the prescribed drugs are eligible for discount.
Medicare Part E
For those persons insured by Medicare Part A and B seeking financial assistance for co-payment
and deductibles for these plans, Medicare Part E is an optional solution when available. This is
because Medicare E helps pay for healthcare service co-payments and deductible issued under
Medicare A and B. This Medigap insurance is particularly useful for those who will make heavy use
of their Medicare A and B coverage. When travel limitations prevent Medicare A and B from being
used, Medicare E offers an additional solution.
Medicare Part F
In addition to co-pays and deductibles, customers also have to foot the bill for “excess charges” or
the difference between actual medical charges and what Medicare is willing to pay for them. In
other words, Medicare E helps with co-insurance or high priced medical services that go beyond
Medicare coverage. This particular supplemental insurance increases in value when frequent and
costly specialized medical attention is necessary.
Medicare Part G
As with Medicare Part F, Medicare Part G also assists with the payment of out-of-pocket expenses.
However, Medicare Part G expenses are hospital related. They also benefit those individuals who
have affordable Medicare Part B deductibles and who plan on extended hospital stays beyond those
covered by traditional Medicare. Also per the Texas Department of Insurance, excess fees for both
Part F and G cannot exceed 15% of the Medicare covered amount.
Medicare Part K
In instances of good health and infrequent medical attention or healthcare needs, Medicare K may
be worthwhile because it lowers the cost of monthly premiums in exchange for a higher co-insurance
and deductible. If the lower premium savings add up to more than corresponding co-pay,
co-insurance and deductible increases, then Medicare Part K may be a good choice of coverage.
Another benefit made possible by Medicare Part K is an out-of-pocket cap of $4,950 in 2014, a
50% coinsurance on Medicare B and a 100% coinsurance coverage for Part A.

Medicare Part L
This form of Medicare is beneficial to those persons heavily vested in the services of the medical
community. Medicare Part L has an even lower cap of $2,470 for out-of-pocket expenses. It also
pays for 75% of the deductible on Medicare Part A, extra hospital care and hospice care co-payments
and co-insurance. This particular insurance coverage is suitable for end-of-life medical
care and frequent use of medical services requiring out-of-pocket expenditures.
Medicare Part M
Medicare Part M offers additional insurance for hospital and nursing services. Specifically, it
extends the hospital co-insurance and costs coverage provided by Medicare A by up to an additional
year. This healthcare insurance also helps reduce the cost of hospice care in addition to standards
Medicare Part A insurance through lower co-insurance and deductibles costs respectively.
Emergency travel insurance and preventative care co-insurance and co-payment expense payments
are another benefit of Medicare M.
Medicare Part N
Medicare Part N is a more affordable long-term care option to Medicare Part F per
eHealthInsurance, Services Inc. This is because doctor visit and emergency room visit co-pays of
$20 and $50 each are still required. Part B deductible and excess charge expenses are also excluded
from Medicare Part N. In light of this, persons who do not frequent doctors' offices and who do not
require multiple health checks throughout the year are more likely to benefit from this Medigap
plan than those with chronic conditions requiring frequent doctor visits.
The chart below provides a basic overview of what Medigap insurance includes. For more specific
comparisons, individual Medigap insurance quotes and service costs should be reviewed using tools
similar to the one discussed in the “Costs” section of this newsletter.
2014 Medigap Comparison Table
Medigap Benefits A B C D E F G K L M N
Part A Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Part B Yes Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
Blood Yes Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
A-Hospice Yes Yes Yes Yes Yes Yes Yes 50% 75% Yes Yes
Nursing/Facility care No No Yes Yes Yes Yes Yes 50% 75% Yes Yes
A-Deductible No Yes Yes Yes Yes Yes Yes 50% 75% 50% Yes
B-Deductible No No Yes No Yes Yes No No No No No
B-Excess charges No No No No Yes Yes Yes No No No No
Travel exchange No No Yes Yes Yes Yes Yes No No Yes Yes
Out-of-pocket limit N/A N/A N/A N/A N/A N/A N/A $4,940 $2,470 N/A N/A
Source: Medicare.gov; USGov-PD

Networks
Not all Medicare insurance plans have the same quality despite being subject to the same
regulations. This is because healthcare such as Medicare Advantage are available in HMO and PPO
networks. HMO or health maintenance organizations operate using a specific network of healthcare
providers whereas PPO or proffered provider organizations allow out-of-network doctors to be
consulted for a higher fee. What is more, not all HMO and PPO networks are the same, which
allows for variation in the quality of care. Individuals sometimes choose HMO Medicare coverage
in order to obtain highly specialized care and/or when they wish to continue seeing specific doctors
who are not in an HMO plan. The costs for the same coverage under HMO and PPO plans also
vary, so careful consideration of how well the cheaper of the two options are able to satisfy medical
needs is helpful.
Risks
The diversity in Medicare coverage and care, and the relative complexity of of Medicare coverage
leave room for avoidable risks that can cost money, reduce quality and overwhelm insurance
seekers. In order to avoid these risks, it is useful to first identify what the risks are so they can also
be made more apparent when reviewing and comparing policies. Some of these possible risks are
listed below:
• Annual lock in
• Late enrollment penalty
• Inaccurate information
• Dysfunctional registration system
• Complexity of terms
• High costs and hidden fees
• Low quality care
As with any purchase decision, consumer awareness and education are key to making more
informed choices. Following the process of eliminating, prioritizing and researching coverage
options should assist with minimizing or reducing the probability any one or more of these
insurance risks will become problematic. Taking the time to list healthcare needs, then seeking the
Medicare coverage or combination that best meets those requirements within an existing budget is
wise. Evaluation and comparison of plan costs is a part of the process.
Costs
After choosing the right kinds of Medicare for current, future and long-term care needs, the next
step is to determine costs and compare Medicare and any needed medigap plans. According to
eHealth Medicare, medigap plans are priced using one of three of the following methods:
1. Community rated plans: Standardized costs regardless of age
2. Issue-age-rated plans: Enrollment age based pricing
3. Attained-age-rated plans: Present age determined premiums

Since historical income determines Medicare A and B costs, Medicare savings from income can be
calculated using instruments such as the Maine Department of Insurance Medicare Savings
Calculator. Otherwise Medicare Part A may cost as much as $426 for each uninsured individual per
Medicare.gov. What is more, when Medicare customers feel overwhelmed and despite the
possibility of prices changing every year, they sometimes retain existing coverage due to the
difficulty surrounding switching plans per Kaiser Health News:
“While choice may sound like a good thing, many seniors say they find it difficult to compare
plans. As a result, they often stick with the same plan even if it is not best suited to
them...Many seniors said they did not want to switch plans because the process was so
frustrating, the report said. That can cost them money because companies change prices and
benefits almost every year.”
Since plans such as Medicare Advantage are not administered by the federal government, a wide
range of choices exist. Using insurance comparison tools such as the North Carolina Department of
Insurance's “Medicare Supplement Premium Comparison Database” assists with side-by-side
examination of policies. For example, by selecting the four simple variables of age, gender, plan
and tobacco use, then pressing the search button, numerous companies with monthly and annal
premiums are revealed. A screenshot of the results page for a non-smoking female, aged 65 who is
seeking Medicare Part C insurance is below:
Source: North Carolina Department of Insurance; Fair Use license

Medicaid
For individuals who meet eligibility criteria, some hospital and medical services are available via
Medicaid subsidy. For example, emergency Medicaid and Medicaid waiver aid allow for care when
other support is unavailable. In the case of Medicaid waivers, the program objectives often involve
relocating of persons from institutional settings to community or home based care settings.
Alternative Medicaid solutions differ between states, but provide options to Medicare. According to
Medicaid, services not provided by Medicare and unaffordable services provided by Medicare are
also paid for to an extent by Medicaid. This is evident in the following Medicaid.gov excerpt:
“Medicare enrollees who have limited income and resources may get help paying for their
premiums and out-of-pocket medical expenses from Medicaid (e.g. MSPs, QMBs, SLBs, and
QIs). Medicaid also covers additional services beyond those provided under Medicare,
including nursing facility care beyond the 100-day limit or skilled nursing facility care that
Medicare covers, prescription drugs, eyeglasses, and hearing aids. Services covered by both
programs are first paid by Medicare with Medicaid filling in the difference up to the state's
payment limit.”
Low-income individuals seeking financial assistance or financial solutions to their healthcare needs
may qualify for Medicaid assistance if they are of age, are legal U.S. Residents and have incomes
that meet federal poverty level criteria. Non-residents of the U.S. also qualify for financial
assistance for medical services if specific Medicaid waiver eligibility is determined to apply.
Medicaid waivers are also used for disabled persons in need of medical assistance.
Regulations
Healthcare regulations have evolved at a fast pace and rules or programs that were not around a few
months ago are now. These regulatory shifts are influenced in part by quality objectives. For
example, the Efficient Health Records Incentive Program that provides financial incentives for
hospitals and healthcare professionals requires system transformation in order to accomplish the
goal of reduced cost and better healthcare. This is evident in the following U.S. Department of
Health and Human Services graphic:
EHR Incentive Program Stages in Relation to National Quality Strategy And System Transformation
Source: U.S. Department of Health and Human Services; USGov-PD

In addition to the relative newness of the Affordable Care Act of 2010 and its implementation is the
issue of cost. Healthcare costs in the United States have risen to unsustainable levels over time and
this places an emphasis on expense reduction within the Medicare system. To illustrate, the graph
below shows the amount of federal spending on Medicare and Medicaid as a percent of national
gross domestic product. According to the projection, healthcare expenditures are expected to more
than double by 2050, and system modification is a way to limit or reduce this rise in national cost.
In order to avoid becoming overwhelmed by all the changes at the administrative level, it helps to
stay focused on what is within reach. Medicare plans evolve to incorporate new rules and ways of
doing things, and in some cases this increases benefits and lowers costs for consumers. In any case,
choosing a plan that provides specific benefits at a pre-determined amount for a specific amount of
time ensures Medicare coverage will not change at the individual level on a day-to-day basis.
Conclusion
Medicare and Medicare-Medigap comprise a buffet of insurance options that are not necessarily
practical or cost effective. Since most, if not every Medicare enrollee have specific health care
needs and requirement, identifying and selecting the right healthcare coverage is a substantial task
both in terms of healthcare coverage and financial planning. Since Medicare Advantage and
Medigap insurance is provided and administered by third-party insurers and because insurance
policies differ between states, terms of coverage are likely to vary. For this reason, careful
identification, research and comparison of prioritized insurance plans should be effective in
reducing risk, cost and unnecessary insurance coverage.

Sources:
1. “New York Times”; Hospitals and Insurer join forces in California; Reed Abelson; September 17, 2014
2. “CBS Moneywatch”; Pensions Elections: Beware Crafty Insurance Agents; Steve Vernon; July 24, 2012
3. “The Motley Fool”; Insurance Center
4. “CNN Money”; Money Essentials: Strategies for Buying Life Insurance
5. “Wall Street Journal”; How to Hire a Health Insurance Agent or Broker
6. “New York Times”; The Affordable Care Act: Answering the (Easy) Questions; Robb Mandelbaum; Sept. 18, 2014
7. “New York Times”; How Insurers Are Finding Ways To Shift Costs To The Sick; Charles Ornstein; Sept. 17, 2014
8. “United Health Care”; Show Me Guide: Medicare Made Clear™; 2014
9. “AARP”; Medicare Part D: Understanding Your Prescription Drug Coverage
10 “Medicare.gov”; How Do Medicare Advantage Plans Work?
11. “U.S. News and World Report”; Medicare versus Medicare Advantage: How to Choose; Chris I. Young, December
4, 2012
12. “Kiplinger”; Pros And Cons Of Private Medicare Advantage Plans; Kimberly Lankford; March 2008
13. “The Henry J. Kaiser Family Foundation”; Adding An Out-Of-Pocket Spending Maximum To Medicare:
Implementation Issues And Challenges; Juliette Cubanski, Tricia Neuman and Zachary Levinson; February 27, 2014
14. “Medicare.gov”; Medicare & You 2015 Medicare Handbook; 2015
15. “State of Wisconsin: Office Of The Commissioner Of Insurance”; Wisconsin Guide to Health Insurance for People
with Medicare-2014; December 2013
16. “Forbes”; Retirement Health Costs: Planning For The Wild Card; Richard Eisenberg; September 12, 2014
17. “Centers For Medicare And Medicaid Services”; Payment Adjustments And Hardship Expenses; September 15,
2014
18. “North Carolina Department of Insurance”; Medicare Supplement Premium Comparison Database
19. “Humana”; Medicare Supplemental Plans F And G: Protection Against High Out-Of-Pocket Expenses
20. “Social Security Administration”; Longitudinal Patterns of Medicaid and Medicare Coverage Among Disability
Cash Benefit Awardees”; Social Security Bulletin, Vol. 72 No. 3; Kalman Rupp and Gerald F. Riley; 2012
21. “Medicare.gov”; Your Medicare Costs
22. “New York State Department of Health”; Medicaid For The Treatment Of An Emergency Medical Condition Fact
Sheet
23. “Indiana Family And Social Services Administration”; Medicaid HCBS Waivers
24. “Medicaid.gov”'; Seniors and Medicare and Medicaid Enrollees
25. “Medicare Parts Guide” Medicare Part E
26. “Social Security Administration”; Medicare
27. “Humana”; Medicare Supplement Plans F and G
28. “Texas Department of Insurance”; Medicare Supplement Insurance Handbook and Rate Guide; October 2013
29. “BlueCross BlueShield of Illinois; Medicare Supplement Insurance – Plan L
30. “The Medical Channel”; 2014 Modernized Medicare Supplement Standardized Plan Summary And Comparison
Chart
31. “eHealthInsurance Services, Inc.”; Medicare Supplement (Medigap) Plan M
32. “Consumer Reports”; Managing Medicare: Get The Most From This Comprehensive Health Insurance Option For
Seniors; February 2014
33. “The Week”; The Problem With Medicare; The Week Staff; May 6, 2011
34. “Kaiser Health News”; Do Seniors Have Too Many Medicare Plans To Choose From?; Phil Galewitz; May 14,
2014
35. “YGNetwork”; Poll: Senior Attitudes Toward Obamacare And Medicare; John Murray; March 10, 2014
36. “American Association of Retired Persons”; Medigap or Medicare Advantage?; Patricia Barry; April 2014
37. “New York State Department of Financial Services”; Information For Medicare Beneficiaries
38. “eHealth Medicare”; Medigap Costs – Comparing The Costs Of Medicare Supplement Plans
Disclaimer: The content in this newsletter is for informational purposes only, and does not constitute financial planning
or any other kind of advice, and should not be construed as such. Any opinions or statements expressed by cited third
parties do not necessarily reflect those of Moneycation™. All information within this newsletter is to be used or not
used at the sole discretion of the reader and its authenticity and accuracy are not guaranteed. The author of this
newsletter assumes no liability for actions, decisions or events relating in any way to this newsletter's content.
Copyright © 2014 Moneycation™; All Rights Reserved

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