Enrolling

Generally, an individual is automatically enrolled in Medicare Part A when that person attains age 65 and is receiving Social Security retirement benefits. Typically, the SSA mails one’s Medicare card three months before the retirement benefit recipient’s 65^th birthday.

If an individual has employer-provided or other health insurance (or believes that he or she cannot afford the Medicare Part B premium) and wishes to elect out of Part B coverage, instructions included with the Medicare mailing will tell the recipient how to opt out.

Most people older than 65 don’t pay a Part A premium because they paid Medicare taxes while working. However, for an individual not covered, or if the individual or spouse worked and paid Medicare taxes for less than 10 years total, a monthly Part A premium of $437 would apply in 2019. If an individual has 30 quarters of coverage but less than 40 quarters of coverage, a reduced premium of $240 is charged for coverage under Part A.

Medicare Part A hospital insurance

Medicare Part A (hospital insurance) covers hospital services, including semiprivate rooms (private rooms may be covered when such accommodation is medically necessitated), meals, general nursing care, prescription and other drugs administered in conjunction with inpatient treatment, and other hospital services and supplies. This includes care provided in acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, long-term care hospitals, inpatient care as part of a qualifying clinical research study, and mental healthcare.

Inpatient costs associated with traditional Part A coverage

Although Medicare Part A covers a significant portion of inpatient hospital costs, the patient still retains exposure to costs. The benefit from Medicare Part A depends on how many days the patient stays in the hospital. The good news is that most studies report the average Medicare-covered inpatient hospital stay is eight days. That said, certain patients would be in the hospital considerably longer than average.

In 2019, for the first 60 days, the patient generally pays a deductible of $1,364 and Medicare pays the rest. After that, the longer the patient stays, the greater his or her exposure. Rather than the flat-dollar deductible that satisfies the patient’s exposure during the first 60 inpatient days, the patient is then responsible for a daily copayment (copay). The patient pays $341 per day for days 61 through 90.

After inpatient day 90 and through day 150, a patient can tap into his or her store of nonrenewable lifetime reserve days. The patient must pay a copay of $682 per day until the 60 days of lifetime benefits have been used. After day 150, the patient is exposed to all the costs of inpatient care.

Now, consider the less frequent situation in which a Medicare Part A insured patient dips into lifetime reserve days.

Spell of illness

A spell of illness or benefit period is specifically defined. The patient is required to pay the inpatient deductible for every benefit period. A Medicare insured patient’s first benefit period or spell of illness begins with the first night of a qualifying stay in a hospital.

The spell of illness ends when the patient has not received any inpatient care (in the hospital or skilled nursing facility [SNF]) for 60 days in a row. There is no limit on the number of spells of illness that would be Medicare eligible. However, studies show that the average length of a hospital stay covered by Medicare is eight days.

Keep in mind that the Medicare-insured person does not have to use the entire 60 lifetime reserve days in one spell of illness; they can be allocated among several benefit periods. Nevertheless, the individual has a total of only 60 reserve days in his or her lifetime. Once the lifetime reserve days have been used, the beneficiary will receive coverage for only 90 days when the next spell of illness occurs.

Blood transfusions

After the patient pays for the first three pints of blood donated by third parties, Medicare Part A pays 80% of any additional blood that is supplied to a hospital inpatient. In certain situations, the hospital obtains blood from a blood bank at no charge, and then, the patient is not obligated to pay for it or replace it. If the hospital must buy blood for an inpatient, that patient is required to either pay the hospital costs for the first three units of blood supplied within a calendar year or arrange for blood to be donated.

Psychiatric care under Medicare

Medicare Part A also pays for stays in psychiatric hospitals, but the benefit is limited to 190 days of inpatient care during a beneficiary’s lifetime. Services may be provided either in a general hospital or a psychiatric hospital that only cares for patients suffering from mental health conditions.

In 2019, mental health inpatient stay benefits are covered as follows:

• $1,364 deductible for each benefit period
• Days 1–60: $0 coinsurance per day of each benefit period
• Days 61–90: $341 coinsurance per day of each benefit period
• Days 91 and beyond: $682 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over the patient’s lifetime)
• Beyond lifetime reserve days: all costs
• 20% of the Medicare-approved amount for mental health services from doctors and other providers while a hospital inpatient

What Medicare does not cover

Although Medicare provides a wide range of services, it generally would provide no benefit for the following:

• Acupuncture
• Cosmetic surgery
• Custodial (nonskilled) care in a nursing facility
• Most chiropractic care
• Non-emergency care outside the United States (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands are considered part of the United States.)
  • Emergency room visits in foreign hospitals are typically covered when a foreign hospital is closer or easier to get to than the nearest United States hospital that can treat a covered individual’s emergency.
• Dental care (Even dental care necessitated by an accident or medical procedure is not covered.)
• Experimental procedures. Medicare will not pick up the cost of any care deemed to be experimental.
• Eye exams and eyeglasses
• Hearing aids
• Hospital telephones or televisions
• Private nursing care

Parts A and B generally provide no benefit for outpatient prescription drugs. An exception may be available for certain outpatient chemotherapies.

Part A: (Hospital insurance) premium

If someone is not automatically covered for Medicare Part A, a premium of up to $437 each month applies in 2019. Most people have premium-free Part A coverage. Individuals entitled to such coverage starting at age 65 typically include those who

• already get retirement benefits from Social Security or the Railroad Retirement Board;
• are eligible to get Social Security or railroad benefits but have not applied for them yet; and
• had Medicare-covered government employment (or the spouse had).

Someone younger than age 65 may receive premium-free Part A coverage if he or she

• received Social Security or Railroad Retirement Board disability benefits for 24 months; or
• suffers from end-stage renal disease (generally meaning a dialysis patient) and meets certain requirements.

In most cases, an individual who chooses to buy Part A, is also required to carry Medicare Part B (medical insurance) and pay monthly premiums for both.

Part B: (Medical insurance) premium

Someone beginning Medicare coverage in 2019 or turning age 65 in 2019 will have a monthly premium of $135.50. However, if the insured individual’s modified adjusted gross income (AGI) two years ago is more than a certain threshold, the premium is generally higher. The SSA will contact those required to pay more based on higher incomes. The amount of premium can change each year depending on the insured’s AGI. Please refer to the following chart.

Knowledge check

1. Due to a lifetime of savings, inheritances, and smart investing, Herbert, who is now a 78-year-old widower, has an annual AGI of $300,000. In 2019, what amount will he pay for his Medicare Part B premium?
   1. $135.50 per month.
   2. $270.90 per year.
   3. $433.40 per year.
   4. $433.40 per month.

Part B deductible

For most Americans, the 2019 Part B deductible is $185 for the year. These amounts have been inflation-indexed for some time. This means that once a Medicare beneficiary has paid $185 for medical care covered by Medicare Part B, Medicare will begin to pay for services at 80% of their approved amount. Certain services are paid at 100% by Medicare and not subject to the Part B deductible.

Part D: Costs for Medicare drug coverage

Generally, people with Part D insurance pay premiums throughout the year into a Medicare drug plan. The monthly premiums operate in addition to the Part B premium.

Premium deductibility for self-employed people with Medicare insurance

Of course, not every American who turns age 65 immediately stops working. Individuals who work for themselves (and others) may work much longer. Medicare recipients who have self-employment income may deduct the premiums they pay for Medicare coverage—the same as premiums for any other type of health insurance by the self-employed. All Medicare premiums (Parts A, B, C, and D) are treated as insurance constituting medical care and may be deducted. Sole proprietors must pay the Medicare premiums directly.

Self-employed individuals for the purposes the deduction for AGI include sole proprietors, partners, and more-than-2% shareholders of an S corporation. The deduction from gross income is available for medical insurance paid during the tax year for self-employed individuals, their spouses, and their dependents, including their children younger than age 27.

Knowledge check

2. Blake is 70 years old. Are his Medicare premiums deductible from income?
   1. Yes, premiums are always deductible.
   2. No, premiums are never deductible.
   3. Yes, to the extent they (combined with other out-of-pocket qualifying medical expenses) exceed 7½% of his AGI.
   4. Yes, but only up to an annual maximum of $2,010.

Mini case study

Cheryl Sanchez is a married taxpayer, age 67. Her husband, Sal, is age 68 and a lifelong smoker. Sal had a very good year financially due to writing a situation comedy pilot that was picked up by a major television network. Cheryl continues to own and operate her restaurant, Chez Nacho, an unincorporated business. Because of some unexpected kitchen repairs, in 2018, Cheryl reports profits from Chez Nacho of only $8,000. Premiums for Medicare for herself and her husband first reflect the Medicare Part B monthly premium, which—based on their income of $300,000—is $352.20 per person, per month. For the two spouses, that amounts to $8,453. Additionally, they are paying $325 per month ($3,900 annually) for a Medigap F policy for Cheryl and $550 per month ($6,600 annually) for Sal who is “rated” because he is a smoker.

Total insurance costs follow:

However, because Cheryl’s self-employment income is only $8,000, their self-employed health insurance deduction on Form 1040 is limited to that amount ($8,000). Due to the 10% floor (.1 × $300,000 = $30,000), the Sanchezes would not be able to deduct the remaining $10,953 ($18,953 − $8,000) as an itemized deduction on Schedule A.

Mini case

Estelle Edwards, age 79, had been very active. She enjoys playing tennis and traveling. Estelle, who lives alone, was a patient at an SNF for 100 days to help her recover from knee replacement surgery. She was discharged from the SNF after 100 days because she had run out of days in her benefit period.

Her SNF per diem was $452. For the first 20 days, Medicare would pay the entire cost for a total of $9,040. For the subsequent 80 days, Estelle would have to pay a copay of $170.50 for a total of $13,640. However, Medicare would pick up the extra $281.50 per day from day 20 up to day 100 for a total of $22,520.

Six weeks later Estelle fell and broke her right hip and was again admitted to the hospital where she required emergency surgery and will need rehabilitation. It is unlikely that Medicare would cover the SNF care she would need after she was discharged from the second hospital stay.

As discussed, Medicare covers up to 100 days of care at an SNF during each benefit period (days 1–20 in a benefit period are covered in full by Medicare; days 21–100 are covered with $170.50 per day in 2019). Estelle’s benefit period started the day she entered the hospital the first time—for the knee replacement— and ends when she has not received Medicare-covered inpatient care at a hospital or SNF for 60 consecutive days. Clearly, Estelle has not been out of a hospital or SNF for 60 days in between her injuries, and thus does not qualify for a new benefit period. Because she has already spent 100 days in an SNF during this (original) benefit period, Medicare will provide no coverage for additional days in an SNF.

Estelle must pay the full cost of any additional days that she spends in the SNF unless she has another form of insurance to help pay those costs. If she cannot afford to pay the costs, Estelle should consider contacting her state’s Medicaid program and learn whether she qualifies for assistance.

What services are covered?

If a patient is eligible for the Part A home health benefit, Medicare covers the following types of care:

• Skilled nursing services and home health services provided up to seven days a week for no more than eight hours per day and 28 hours per week (Medicare may cover up to 35 hours in certain unusual situations.)
• Skilled nursing care, which includes services and care that can be performed safely and effectively only by a registered nurse (RN) or a licensed practical nurse. Examples of skilled nursing care activities that Medicare would typically cover include injections (and teaching patients to self-inject), tube feedings, catheter changes, observation and assessment of a patient’s condition, management and evaluation of a patient’s care plan, and wound care.
• Medicare pays in full for a home health aide if the patient requires skilled services. A home health aide provides personal care services including help with bathing, using the toilet, and dressing. However, if the beneficiary needs only personal care, that individual will not qualify for the Medicare home care benefit.
• Medicare home healthcare under Part A provides a benefit for physical, speech, and occupational therapy services that can only be performed safely by or under the supervision of a licensed therapist and that are necessary for treating the patient’s illness injury. Unlike the situation with skilled nursing care in a facility, there is no requirement that home healthcare visits ultimately improve the patient’s condition.
  • Physical therapy includes gait training and supervision of and training for exercises to regain movement and strength to a body area.
  • Speech-language pathology services include exercises to regain and strengthen speech and language skills. Occupational therapy helps the patient to regain the ability to do usual daily activities such as eating and putting on clothes independently.
• Medicare pays in full for physician-ordered social services ordered to assist the (typically elderly) patient with social and emotional concerns related to that patient’s illness. This might include counseling or help with identifying and engaging community resources.
• Medical supplies. Medicare pays in full for certain medical supplies provided by the Medicare-certified home health agency, such as wound dressings and catheters needed for the patient’s care.
• Durable medical equipment. Medicare pays 80% of its approved amount for certain pieces of medical equipment, such as a wheelchair or walker. The patient is required to pay 20% coinsurance (plus up to 15% more if the home health agency providing services does not accept assignment—accept the Medicare-approved amount as payment in full).

When a patient’s other needs for Medicare home health end, he or she may still be able to obtain occupational therapy under the Medicare home health benefit.

Creating a plan of care

At the start of home healthcare and when the patient’s condition changes, the agency providing the home healthcare must conduct an in-person assessment to determine which kinds of services the patient will require. The home health agency is then required to develop a plan of care that indicates the type and amount of services that the Medicare beneficiary will need. The patient’s physician must sign the plan of care soon after it starts and recertify that plan at least every 60 days. The plan of care and certification operates for a 60-day window. If the patient still needs more care going forward, the plan of care and certification can be renewed for as many 60-day periods as needed as long as the patient’s doctor signs them. A face-to-face meeting is not required for recertification.

Mini case

Unfortunately, after being discharged from the hospital, Ruth Weller, age 85, is housebound. Ruth had enjoyed a reasonably active life before her hospitalization and had been a volunteer reader at her local library. After pulmonary surgery, she developed adult-onset diabetes, which required blood testing and insulin injections throughout the day. Ruth needs help managing her medications, and it is hoped that occupational therapy will improve her ability to walk and move in general. Ruth and her (adult) children had several meetings with the hospital’s social services staff before she was discharged, and a home healthcare agency, Healing Hands, Inc. was engaged.

Within a day or so of Ruth’s discharge, Flo Nightingale, an RN, was dispatched by Healing Hands, Inc. and visited Ruth in her home. Flo took her vital signs and asked Ruth many questions. She tried to assist Ruth in walking for a few steps. Flo determined that although Ruth is able to eat independently, preparing meals will be difficult for her. Flo then developed a home care plan for Ruth. Services she recommended included occupational therapy (walking), skilled nursing care (medications—especially mastering the self-injections), and a walker to help Ruth become steadier as she moves about. Flo also recommends Ruth meet with a social worker to explore affordable ways to find assistance with meal preparations or deliveries. Ruth’s doctor approves Flo’s plan. No more than 60 days later, Ruth will be reassessed to determine whether the current plan of care should continue, be altered, or be discontinued.

It is important for the patient’s doctor to agree with the plan of care and is satisfied that the plan contains all the care that is appropriate for the patient. The plan of care is often contained in the same form as the home health certification that the patient’s doctor must sign to indicate the need for Medicare home care. As part of the Medicare certification for home healthcare, the doctor must confirm that the patient had a face-to-face meeting with him or her, or, more typically, with a representative of the home healthcare agency providing the services. Although it typically occurs sooner, the assessment meeting must occur within 90 days of starting to receive home healthcare (in certain circumstances within 30 days after actual administration of home healthcare). The physician must certify to Medicare that the face-to-face meeting confirmed the patient is homebound and qualifies for intermittent skilled care.

The face-to-face encounter can also be accomplished through telehealth. In certain areas, Medicare will accept telecommunications (such as video conferencing).

Costs associated with hospice care

Although there is no user cost for hospice services, the patient must pay a copayment of $5 for each outpatient prescription as well as 5% of the Medicare-approved amount for inpatient respite care. (This is not a fixed dollar amount, but rather what Medicare considers “reasonable” for hospice care in the region.)

For example, if Medicare pays $400 per day for inpatient respite care, the patient will pay $20 per day. Each time that a patient receives respite care, Medicare covers up to five days. There is no limit to the number of times that a person can receive respite care. Total copays for respite care should be no more than the inpatient hospital deductible amount for the year in which hospice care is elected—$1,364 in 2019.

Hospice care benefits under Medicare

In conjunction with hospice care under Medicare Part A, the following benefits are generally covered:

• Nursing services. Medicare pays in full for skilled nursing care services when they are delivered by or under the supervision of a licensed nurse. Administration of medications, tube feedings, catheter changes, observation and assessment of a patient’s condition, management and evaluation of a patient’s care plan, and wound care are all skilled nursing activities.
• Skilled therapy services. Medicare pays in full for physical, speech, and occupational therapy to manage symptoms or to help the patient carry out activities of daily living (for example, eating, walking, dressing, toileting).
• Home health aide services. Medicare pays in full for a home health aide to provide personal care services including help bathing, using the toilet or dressing, and certain homemaker services.
• Durable medical equipment and medical supplies. Medicare pays in full for durable medical equipment and medical supplies needed to relieve pain or manage a medical condition.
• Respite care (caregiver relief)
• Short-term inpatient care to manage symptoms and control pain. Medicare will cover short-term in-patient care in a hospice, hospital, or nursing facility only if the patient’s pain and other symptoms cannot be managed elsewhere. This can occur when the caregiver cannot or will not provide the care that a patient needs in a home setting.
• Medical social services. Medicare pays in full for services from a social worker (under the direction of a doctor) that address the social and emotional concerns of the patient and family members that relate to the patient’s terminal condition. This might include counseling or help in finding community resources.
• Prescription drugs. The Medicare hospice benefit covers only prescription drugs related to pain relief and symptom control. Inpatient prescription drugs are covered in full. The patient’s financial exposure can be no more than $5 for each outpatient prescription filled that is prescribed for pain relief and symptom control.

Ultimately, a Medicare-covered patient must decide as to whether to have his or her condition managed toward a possible cure in a hospital setting or to receive palliative care in a hospital setting; Medicare will cover either, but not both types of care simultaneously.

Knowledge check

3. Gary is a fighter. Although he was certified to have a life expectancy of fewer than six months, he is still alive, albeit weak, 200 days after his hospice admission. What will Medicare do?
   1. Stop paying for Gary’s care.
   2. Automatically continue Gary’s hospice care.
   3. Increase Gary’s co-payment for hospice care.
   4. Recertify Gary’s condition as terminal, then continue his hospice benefits.

Medical checkups

Medicare Part B covers two types of physical exams: one when the beneficiary first enrolls in Medicare and one each year after that. The SSA labels these as the initial “Welcome to Medicare” physical exam and the yearly wellness exam.

The 2010 Affordable Care Act created the once-a-year wellness visit as a new benefit, paying doctors to perform it and making it free to patients. Within six months of first providing the benefit in 2011, Medicare had paid for nearly 1 million “Welcome to Medicare” exams.

The annual wellness visit (AWV) takes place with one’s primary care provider, is covered once every 12 months after the first year of Medicare coverage, and has no deductibles, coinsurance, or copayments.

The AWV includes the provider taking the enrollee’s medical history, completing a health risk assessment, evaluating the patient’s physical condition, and screening for cognitive impairment, including depression. It also includes a personalized prevention plan in which the doctor develops a strategy, along with the patient, to manage that person’s health, including planning for the preventive services and screenings that an older person is likely to require within the next 5–10 years. The plan helps the beneficiary take advantage of Medicare’s preventive services, many with no cost-sharing.

Part B cost exposures

The Medicare Part B insured has significant cost exposure. First, the Part B deductible applies. Then the patient must share in costs exceeding that amount. The patient (unless eligible for a needs-based subsidy) must typically pay 20% of the Medicare-approved amount of the service. The 20% exposure for doctors’ fees can add up significantly. An individual may save by using doctors or providers who accept a Medicare assignment.

Knowledge check

4. Which of the following is not covered by Medicare Part A?
   1. Hospital insurance.
   2. Hospice care.
   3. Physician-ordered rehabilitative care.
   4. Custodial nursing home care.

How do Medicare Part C plans operate?

Medicare Advantage plans typically operate through a network of clinics, doctors, and hospitals. As with HMOs and (in a sense) PPOs, the patient must seek treatment from providers within that network. Most plans include prescription medication coverage. However, if an enrollee already has prescription drug coverage, a Medicare Advantage plan that does not include prescription drug coverage would be a better choice.

Although most Medicare Advantage plans offer full coverage within the network, they also cover emergency treatment while out of town. There are several different options to choose from within the Medicare Advantage plan. These can include the HMO plan, PPO plan, private fee-for-service plan, as well as a special needs plan.

The special needs Medicare Advantage plan covers those with special health needs as well as specific chronic health-related issues. If an individual chooses the special needs plan, it must include Parts A, B, and D. When comparing Medicare Advantage plans, it is wise to consider deductible and drug copays as well as plan premiums.

Medicare Part C eligibility

One must have eligibility for both Parts A and B to enroll in a Medicare Advantage plan. An individual can generally join if he or she

• lives in the service area of the plan which is applied for;
• has Medicare Part A and Part B coverage; and
• does not suffer from end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant).

Additionally, the individual must not have a Medigap insurance policy.

Knowledge check

5. Which statement is not correct regarding Medicare Part B?
   1. Medicare Part B covers outpatient or doctor visits.
   2. Medicare Part B does not cover home healthcare.
   3. Medicare Part B provides coverage for an annual wellness visit.
   4. Medicare Part B covers an annual flu shot.

Obtaining Part D coverage

A Medicare-insured person must enroll in one of the private insurance plans that Medicare has approved to provide it. Coverage is available through

• a “stand-alone” prescription drug plan (PDP) that offers only drug coverage. This is the typical choice of those who receive their other health benefits through the original Medicare fee-for-service program; or
• a Medicare Advantage prescription drug plan (MA-PD) that covers both medical services and prescription drugs. This approach provides all healthcare services in one package.

Medicare Part D costs

Under the standard benefit (the minimum set by law), over the course of a calendar year, the Medicare Part D-insured individual will pay the following:

• A monthly premium (amount varies among plans).
• An annual deductible (no more than $415 in 2019) before benefits are actually triggered.
• A share of the cost of each prescription (either a flat co-pay or a percentage of the cost) during the initial coverage period. This continues until the insured’s total drug costs (those paid by both the insured and the plan) reach $3,820 in 2019 starting from the beginning of the year.
• A percentage of costs in the coverage gap after the initial coverage limit is exceeded. In 2019, the insured must pay 25% of his or her plan’s price for brand-name drugs and 37% for generic drugs in the gap. The donut hole phases out when costs exceed $5,100 in 2019.
• No more than 5% of drug costs once in the catastrophic period of coverage. This begins after costs exceed $5,100 in 2019 and continues until the end of the calendar year.

Medicare Part D mini case

Retired nurse Edith Eldredge has reached the donut hole, or coverage gap, in her Medicare Part D plan. At her neighborhood pharmacy, the cost to fill one name-brand prescription medicine is $60 per month, plus a $2 dispensing fee. Edith will pay 25% of the cost for the drug and the dispensing fee or $15.50 ($62 × 25 = $15.50).

Although Edith pays $15.50, she is actually credited for $60.50 toward filling her coverage gap because the amount of the discount (required under the 2010 Affordable Care Act) as well as what Edith actually pays out of pocket count toward the donut hole. The remaining $1.50, which represents 75% of the $2 dispensing fee, is not counted toward her coverage gap.

Edith also has a generic prescription (and is still in the coverage gap). The price of the generic drug per month is $20, plus the $2 dispensing fee. After the 63% coverage is applied to the $22, Edith will pay $8.14 out of pocket for the generic prescription. The $8.14 brings her closer by that amount to closing her coverage gap.

With her two prescriptions, Edith is closing her coverage gap by $68.64 per month, and if she takes many different medications (as many elderly Americans do), she may close the donut hole entirely.

Late enrollment penalty

It is beneficial to enroll in Medicare Part D as quickly as possible after enrolling in Parts A or B (generally both) because an applicant will be penalized with an extra 1% of the national average premium for each month of delay without creditable coverage. The penalty (and average premium) increases each year in which the Medicare enrollee has no Part D coverage.

Avoiding the late enrollment penalty

Several situations will help a Medicare Part D enrollee avoid the late penalty.

• When an individual turns age 65, that person should generally join a Part D drug plan during the seven-month initial enrollment period following initial eligibility for Medicare Part A and Part B. This period runs from three months before the month of an individual’s 65th birthday to three months after it.
• To avoid the premium penalty, if an individual’s 65th birthday is August 20, he or she should join a Part D drug plan before the end of October at the latest (with coverage starting in December).
• When an individual becomes eligible for Medicare through collecting Social Security disability income benefits, that benefit recipient also has a seven-month period to sign up for Medicare Part D as well as Parts A and B. This period runs from three months before the 25th month in which Social Security disability benefits were paid and ends three months after it.
• When the Medicare-insured person loses prescription coverage from a current or former employer or union, the individual would not be subject to the late premium penalty if he or she enrolls in Part D insurance when losing the original coverage. This presumes that the prior plan provided benefits at as high a level as a Medicare Part D plan.
• When an individual no longer has prescription drug coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), that person would not be subject to the late premium penalty if he or she enrolls in a Medicare drug plan within 63 days of COBRA drug benefits ending. This presumes that the prior plan provided benefits as generous as typical Medicare Part D programs do.

Other circumstances include release from prison (63-day enrollment window) and return from living abroad (three-month enrollment window.)

Knowledge check

6. Which of the following statements is not correct regarding Medicare Part C?
   1. Medicare Part C or Medicare Advantage plans generally operate as PPOs and HMOs.
   2. Medicare Part C or Medicare Advantage plans generally provide their services through network doctors and hospitals.
   3. Many, but not all, Medicare Advantage plans provide prescription drug coverage.
   4. Medicare Part C is primarily a prescription drug program that covers all outpatient prescription drugs.

Types of Medigap plans

Insurance producers must sell older Americans a standard plan and only one policy. Currently, there are several standard Medigap policies from which to choose. Medigap A is the most basic core policy. As one moves higher in the alphabet, the plans add more coverage. For example, Medigap E will offer one or more benefits not included in Medigap D, but will lack a benefit provided in Medicare F, and so on.

Because of mandated standardization, there is little difference in plans offered among different insurers. However, residents of Massachusetts, Minnesota, or Wisconsin should check with their state insurance departments if considering an insurance company that issues policies in those states because Medigap policies in those states offer coverage different from the models followed by the 47 other states.

For residents of these three states, Medigap policies are standardized in a different way. These residents have guaranteed issue rights to buy a Medigap policy, but the policies are different.

• Massachusetts—See https://www.medicare.gov/supplement-other-insurance/compare-medigap/massachusetts/medigap-massachusetts.html.
• Minnesota—See https://www.medicare.gov/supplement-other-insurance/compare-medigap/minnesota/medigap-minnesota.html.
• Wisconsin—See https://www.medicare.gov/supplement-other-insurance/compare-medigap/wisconsin/medigap-wisconsin.html.

Comparing Medigap coverages

The chart that follows shows basic information about the different benefits Medigap policies cover.

Obtaining Medigap coverage

If a senior citizen age 65 or older purchases a Medigap policy within six months of enrolling in Part B, full federal guarantees and protections are provided. This means that a Medigap insurer cannot reject an applicant or charge a higher premium because of current or past health problems. Further, the policy must cover preexisting medical conditions.

However, in certain situations, an insurer may delay coverage of treatment for a preexisting condition for a period, typically six months, after purchase. Some state laws give additional consumer protections relative to preexisting conditions.

There are several other situations in which a Medigap insurance applicant is entitled to these protections—such as losing employer health coverage, COBRA, or retiree benefits that function as secondary coverage after Medicare. These protections also generally apply for individuals enrolled in a Medicare Advantage plan that closes down or if the Advantage plan insured out of its service area. In these circumstances, the period for buying a Medigap policy with full guarantees is about two months.

For persons younger than 65 who have Medicare entitlement due to disability, these federal guarantees do not apply, although many states mandate similar protections.