What is it?
Part B of Medicare is known as “medical insurance”. It’s one of the two Parts of “Original Medicare” that is provided directly by the federal government (Part A being the other). Refer to the block diagram below to see where it fits into the big picture:
What Does it Cover?
Part B covers the majority of your non-prescription health care needs. It covers things like tests, treatment, procedures, medical equipment, etc., both as an outpatient or inpatient. Also, Medicare frequently uses the term “medically necessary.” In order for Medicare to cover something, they have to deem it “medically necessary.”
You may have noticed in the preceding paragraph that Part B covers things as an inpatient. But doesn’t Part A cover inpatient expenses? Well, yes and no. Part A covers your semi-private room, some nursing services, some drugs, and some other services while you're hospitalized. However, Part B will cover most of your tests, procedures, things like that. Anything doctor-related during a hospital stay will generally be covered under Part B.
How Much Does it Cost?
Everybody pays a Part B monthly premium, however not everyone pays the same amount. Those who have a Modified Adjusted Gross Income (MAGI) above $85,000 as an individual or above $170,000 as a married couple filing jointly will pay more depending on where their exact MAGI falls in the ranges in the chart below. These Medicare beneficiaries have to pay more than everyone else due to what’s called an Income Related Monthly Adjustment Amount (IRMAA). Social Security calculates your MAGI for the current year based on the most recent federal tax return that the IRS has provided them. So, for example, your 2017 IRMAA is based on your MAGI from 2015.
For those who first become eligible for Medicare in 2017 and are not subject to IRMAA, their Part B premium is $134. For those who started Medicare before 2017, are not subject to IRMAA, and who pay their Part B premium directly out of their Social Security check, their monthly Part B premium will be a few dollars more than what is was in 2016.
A deductible is essentially your part of the cost sharing that you pay in full before the insurance kicks in and starts to pay its part. The annual Part B deductible in 2017 is $183.
The biggest liability for a beneficiary under Original Medicare is the Part B coinsurance. Once you meet the $166 deductible, your coinsurance is then 20%, which means 80% of your Part B services are paid for by Medicare. This sounds like a pretty good deal, but the 20% that you’re responsible for is uncapped! This means you’re responsible for 20% of however big the medical bill is. For cataract surgery or routine blood work, this may not be much of an issue. But, if you need open-heart surgery or ongoing chemotherapy treatments, paying 20% of this bill could be financial crippling.
A nice thing about Medicare is that there is a whole list of preventative services that Medicare will pay at 100% even before you meet your deductible. Some of these services are covered annually, while others are covered only once or once every so many years. To see a list of these services, here is a nice resource: https://www.medicare.gov/coverage/preventive-and-screening-services.html
“Welcome to Medicare” and annual “Wellness” visits
During the first 12 months you are on Medicare, you are eligible for a “Welcome to Medicare” visit. There’s a specific list of preventative tests that Medicare covers at 100% of the cost. They’ll use the results from this visit to establish a baseline for your health and put you on a plan of action moving forward. After this first year, your annual “wellness” visits are used to monitor your health and can establish a personalized prevention plan to help manage your individual health conditions. This annual visit is also considered preventative, so the visit and any tests or services that fall under the scope of this visit are generally covered 100%.
The vast majority of doctors and health care providers accepts Original Medicare, and thus accepts assignment. This means that they agree to the amount that Medicare will pay for the various test or service provided. All of the discussions above about your cost sharing like deductibles and coinsurance only apply if the doctor accepts assignment. If you receive health care services from a provider who does not accept assignment, you may be billed more. Also keep in mind, in order for Medicare to pay their part, they have to determine that the service you need is “medically necessary.”
How Do I Pay For it?
Regarding the Part B premium, please see the section with the same question on the Medicare overview page. For the deductible and co-insurance amounts, you’ll generally be billed directly by the provider or facility where you receive healthcare services. If you have Medigap insurance, it can pick up most or all of these cost shares for you.
How Do I Sign Up, and When Will it Start?
Please see the sections with the same questions on the Medicare overview page.
Do I Have to Sign Up?
Not necessarily. If you, or your spouse, are still working and you are covered by that employer’s group health plan, you probably don’t need to sign up for Medicare Part B or (Part A) and it might be best for you to wait. As long as that employer has 20 or more employees, Medicare is not required to be the primary insurance.
Even if you don’t have to sign up for Part B when you’re first eligible, it may be a good idea to check with an insurance professional to look into your healthcare options. Even though you may still be able to stay under your current group’s policy, it might be more cost-efficient to sign up for Medicare Part A and B and enroll in your own supplemental insurances (including Part D). If you’re in this type of situation, contact me to set up a quick consultation and we can discuss your options to decide which is best for you.
Lastly, keep in mind that once you or your spouse retires you have to sign up for Part A and B if you’re eligible for Medicare even if your former employer continues to provide health coverage for you as a retiree. Failing to sign up at this time could result in penalties increasing your Part B premium by 10% for each 12 months you didn’t have coverage. You would have to pay this penalty for as long as you have Part B for the rest of your life. To give you an example: If you should’ve had Part B for the last 3 years, your Part B premium will be 30% higher for as long as you’re enrolled in Part B.
In my experience, most companies don’t offer healthcare options to retirees after they are eligible for Medicare; and even if they do, it is typically much more cost-efficient to get your own supplemental insurance. If you are retiring soon or have retired recently and would like to consider your options, or if you are retired and you or your spouse are losing your health care coverage at age 65, contact me and we’ll set up a time to review your supplemental plan options to find one that works best for you.