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A Medicare primer just in time for 2014 enrollment

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Published Oct. 21, 2013

Health care has dominated the news lately, but do not confuse Obamacare with Medicare. They have nothing to do with each other. Medicare will operate pretty much as it always has.

If you are new to Medicare, or just want a refresher, here are some questions and answers on the basics:

How does Medicare work?

Under original Medicare:

• Part A covers inpatient hospital care and a few other services. You get this automatically, and usually with no premium.

• Part B covers outpatient hospital care, doctor bills, physical therapy and more services. Part B is optional and costs most people a monthly premium that is deducted from their Social Security check. If you don't sign up for Part B when you become eligible for Medicare, you may face a stiff penalty if you want to sign up later.

• Part D covers prescription drugs. You buy these plans from private insurance companies for a premium as low as $12.60 a month. The plan then defrays the cost of your medications.

These are the components of original Medicare. (For those who are curious, the term "Part C" is no longer in use.)

Services under original Medicare usually come with deductibles and copayments that can add up to thousands of dollars a year. Sometimes, health insurance from employers or unions will pay deductibles and copayments. Some people cover them by buying private "Medicare supplement" policies. Premiums tend to be high, but if you suffer a catastrophic illness, Medicare supplement policies can pay off.

Also, a few Medicare supplement policies offer coverage outside the country, which original Medicare does not. People who travel a lot should consider one of these plans.

What is Medicare Advantage?

Medicare Advantage health plans provide alternatives to original Medicare. This is private managed care — usually an HMO (Health Maintenance Organization) or PPO (Preferred Provider Organization) — where you use the plan's network of providers for all your coverage.

Medicare Advantage plans are subsidized by taxpayers and usually turn out to be less expensive than original Medicare, though not always.

How does it work?

You must sign up for Part B Medicare to qualify for a Medicare Advantage plan. Some insurance companies will pay all, or part, of your premium. Some plans offer vision, hearing and dental benefits that original Medicare does not.

The tradeoff is that original Medicare lets you pick any doctor or hospital in the country, whereas Advantage plans often restrict you to a network or charge a hefty fee if you get service outside the network. If access to a particular hospital or doctor is important to you, make sure they are on the Advantage plan network before signing up.

Also, some Advantage plans skimp on coverage for hospital, skilled nursing care or other services. Pay close attention to those benefits when picking a plan. Don't just choose the plan with the cheapest premium.

Many Advantage plans include drug coverage, but a few do not. The charts in this section list only Advantage plans that cover drugs.

How do I get drug coverage?

Unless you already have prescription drug coverage through the Department of Veterans Affairs, a union, an employer or some other source, it's important to get some kind of drug coverage — either a Part D drug plan if you are on original Medicare or a Medicare Advantage health plan that covers drugs.

You should get coverage even if you don't use any prescription drugs.

It won't cost much. Most people can buy a Part D plan for less than $200 a year and many Advantage plans offer drug coverage without charging an extra premium. If you get sick during the year, you may need an expensive drug and will be happy you paid for coverage up front.

More importantly, if you decline drug coverage now, the government will impose a stiff penalty if you want to sign up for it later.

What's the best way to compare costs?

The charts in this section compare estimated costs based on a hypothetical person in good health. However, plan costs can vary widely from person to person, depending on the drugs you take and the services you use.

The only good way to compare costs tailored to your circumstances is with Medicare's online Plan Finder, which factors in your general health condition and the cost of your particular drugs. (An accompanying story in this section provides step-by-step details on how to use the Plan Finder.)

If you don't use a computer, find a friend or family member who does. Refer to the accompanying story that explains the ins and outs of using the Medicare website.

What is the "gap"?

Whether you buy a stand-alone Part D drug plan or an Advantage health plan with drug coverage, it works like this:

You may pay a deductible, though many plans waive it. Then you are responsible for copayments for each drug you purchase. Copayments can range from nothing for generics to $70 or more for brand-name drugs. Your insurance plan negotiates a price from the pharmacy and pays any remaining balance.

You reach the "coverage gap" when the total cost of all your drugs for the year reaches $2,850, a threshold set by Congress. Note that the total cost is calculated by what the insurance company pays the pharmacy, not just your share. If your plan buys your drugs for $500 a month, but charges you only $100, for example, you will hit the coverage gap in less than six months because the total cost will have reached $3,000.

You pay the bills in the coverage gap, although the Affordable Care Act requires the plans to discount those prices as well. Some plans offer additional coverage of generic drugs and brand-name drugs in the gap.

You stay in the gap until your out-of-pocket drug expenses for the year total $4,550. Then the plan must offer you "catastrophic" coverage, where you make only small copayments for generic and brand-name drugs.

What if I have limited income?

Medicare's Extra Help program, for people with limited income and resources, can reduce out-of-pocket costs for a Part D drug plan or a Medicare Advantage plan that covers drugs.

To qualify, a person must have an income of less than $17,235 and liquid assets of less than $13,300. A married couple could qualify with an income of less than $23,265 and assets of less than $26,580. (Liquid assets include stocks, cash and savings accounts. Ownership of a home and a car, for example, is not counted.)

If you fall below these thresholds or are just a little above them, contact the Social Security Administration to see if you qualify. Call toll-free 1-800-772-1213 or apply online at socialsecurity.gov.

What if I need even more help?

The federal government also offers Medicare Savings Programs for low-income people that saves you even more money. The lower your income, the more you stand to gain.

For all these programs — called QI, QMB and SLMB — your liquid resources cannot exceed $6,940 for a single person or $10,410 for a married couple.

The income limits are:

• QI: $15,756 for a single person and $21,180 for a married couple. This program pays your Part B premium but has a fixed budget. When enough people sign up, the money is exhausted and nobody else can qualify that year.

• SLMB: $14,028 for a single person or $18,852 for a married couple. This program pays your Part B premium and has no fixed budget. Everyone who qualifies gets the benefit.

• QMB: $11,736 for a single person or $15,756 for a married couple. This program pays your Part B premium, plus copayments and deductibles, and is guaranteed if you meet the qualifications.

Though these are federal programs, applications funnel through Florida's Medicaid office. You can call toll-free 1-866-762-2237 and ask for information on how to apply. You can also apply through socialsecurity.gov/i1020 or by calling Social Security toll-free at 1-800-772-1213. Ask for information about Medicare Savings Programs.

Help! I still don't understand

Volunteers who can help people over 65 and disabled people with insurance issues are available through Florida's SHINE program, which is administrated by the Department of Elder Affairs. When you call for an appointment, a volunteer will call you back. Volunteers are trained to use Medicare's website to help you find a personalized plan.

Note: Before you contact SHINE, make a list of all your drugs, dosages and monthly usage.

Call the Florida Senior Hotline toll-free at 1-800-963-5337 from 8 a.m. to 5 p.m. weekdays. You will be referred to the nearest SHINE office.

You also can call Medicare toll-free at 1-800-633-4227 to get help from government workers, but they generally do not have as much time to spend with you as SHINE volunteers do.

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