With 10,000 people turning 65 a day the question that continually pops up from those that are nearing retirement and planning on working is “Should I keep my employer’s health plan or select Medicare?”
The question seems simple enough but to find the answer there are many factors and those factors will continually change that answer.
The first factor that should be looked at is how Medicare itself handles the situation. The Center for Medicare & Medicaid Services (CMS) provides ample information on just about every topic (the only hard part is finding them) and even this question of “What should be done?” is tackled.
CMS has created a guide titled “Medicare and Other Health Benefits: Your Guide to Who Pays First” and in it the rules are laid out simply to make things a little bit easier at first;
| If you; | Situation; | Pays First | Pays Second |
| Are 65 or Older and covered by a group health plan because your or spouse is still working | Employer has more than 20 employees | Group Plan | Medicare |
| Employer has less than 20 employees | Medicare | Group Plan |
From the chart above the view may be taken by those who are 65 or Older & covered by a group health plan that has more than 20 employees to keep the employer’s health plan. For those in similar circumstances but are employed in a smaller company with less than 20 employees the decision may be to keep Medicare Part B.
But now let’s add in some other factors;
1.Income; From the Kaiser Family Foundation “the Medicare Modernization Act of 2003 established an income-related Part B premium that took effect in 2007, requiring higher-income Medicare beneficiaries to pay a greater share of average Part B costs (35% to 80%, depending on their income). For Part D the new The Affordable Care Act (ACA) of 2010 includes two provisions that achieve Medicare savings by increasing premiums for higher-income Medicare beneficiaries opting for Part D)”.
“The health care reform law also freezes the threshold for the income-related Part B premium at 2010 levels through 2019, effective in 2011. Freezing the income thresholds will increase the number and share of beneficiaries required to pay the higher premium over time. This provision is estimated to generate savings to the federal government of $25.0 billion over the ten-year period from 2010 to 2019”.
Basically, the factor that income now plays is for those that are 65 & older & enrolled in Medicare Part B or Part D are now subject to higher premiums than the average because their “income” may be too high.
The Income brackets for the next 8 years are;
| Part B monthly premium amount | Prescription drug coverage monthly premium amount | |
| Individuals with a MAGI of $85,000 or less Married couples with a MAGI of $170,000 or less | 2011 standard premium= $115.40 | Your plan premium |
| Individuals with a MAGI above $85,000 up to $107,000 Married couples with a MAGI above $170,000 up to $214,000 | Standard premium + $46.10 | Your plan premium + $12.00 |
| Individuals with a MAGI above $107,000 up to $160,000 Married couples with a MAGI above $214,000 up to $320,000 | Standard premium + $115.30 | Your plan premium + $31.10 |
| Individuals with a MAGI above $160,000 up to $214,000 Married couples with a MAGI above $320,000 up to $428,000 | Standard premium + $184.50 | Your plan premium + $50.10 |
| Individuals with a MAGI above $214,000 Married couples with a MAGI above $428,000 | Standard premium + $253.70 | Your plan premium + $69.10 |
It is highly recommended to understand how Medicare defines income and to make sure that there is a clear understanding on what will be charged as a premium – for more on Healthcare costs please www.hvsfinancial.com /hvadvisor/
2. Coverage. For those who are looking to opt “in” to Medicare Part B must understand what is covered and what is not along with how these coverages differ from an employer’s plan.
To speak to Medicare because the benefits are clearly defined while employer health plans are unique to each company, what is covered by Medicare Part B is;
- Doctors' services
- Durable medical equipment (DME)
- Ambulance services
- Some preventive care services
- Outpatient physical, speech, and occupational therapy services
- Chiropractic care Outpatient
- Mental health services.
- Home health services X-rays and lab tests.
Now, please keep in mind that there are requirements to many of these services that are covered and that specific circumstances must be met, for example; Chiropractic care is covered only when manipulation of the spine is medically necessary to fix a subluxation. As for preventative services, Medicare covers all the costs for a one-time, comprehensive “Welcome to Medicare” preventive visit during the first 12 months of enrollment.
Then after the first 12 months you can get a yearly “wellness” visit to develop or update a personalized plan to prevent disease based on your current health and risk factors. An employer’s health plan may have benefits that allow for a more comprehensive physical along with one that can be administered more than once a year so it must be a factor when making a decision.
To have a better understanding on what Medicare Part A & B covers and doesn’t cover please seehttp://www.hvsfinancial.com/2011/02/medicare-breakdown-2 or www.medicare.gov
As for what is not covered at all by Medicare is Dental, Vision, Hearing & Podiatry, while an employer plan may have an option to cover one or all of these
3. Types of Coverage; One of the major factors in any decision for those that have dependents or a spouse is their health too. Unfortunately, Medicare only covers the individual, not the dependents or the spouse so their care must also be factored in as well.
4. Possible Chromic Illnesses If the enrollee expects to have any illnesses that may require an extended stay in a hospital the factor that Medicare will only cover up a certain number of days and then all costs will be incurred by the beneficiary.
For those that may have a chronic illness that extended hospitalization may be a reality they should consider the whole plan. Yes, there may be more upfront fees from an employer plan but those fees may be a constant and coverage could be as long as needed to be. Once again, Medicare coverage last only 150 days.
For a breakdown of costs per period click here or see medicare.gov
5. Costs; This can be one of the biggest factors especially for those that are planning on maintaining their current health plan from their employer and still enrolling in Medicare Part B for a “supplemental” plan.
The notion that Medicare is free is a wide one and thankfully is one that is quickly being put to rest because it is not free at all. The cost for Part B alone is;
- For new enrollees as of 2011 the monthly premium is $115.40, for those that are earning too much money (see above) that premium will be even higher.
- There is a $162 deductible per new incidence
- There is a 20% co pay on all services
So for those that want to “supplement” their employer plan or those that are looking to save money on overall costs this must be a factor. The employer plan may offer everything that is needed and more for a slightly higher or lower cost overall and Medicare can be a great option to choose if the circumstance call for it..
It is recommended that anyone in this position who is asking what they should do should seek professional advice from either a Healthcare Specialist or their Financial Adviser and please note that a person’s health and their care is a lot more personalized than a one solution or one number fits all
For more information on Medicare please see www.medicare.gov