Most of my posts, this year, have been directed at Baby Boomers who are not yet eligible for Medicare but are mandated to buy health insurance.
In this post I want to talk with those of you who are new to Medicare or about to transition from traditional Major Medical insurance to Medicare.
When you do transition, you will find out that while Medicare is similar to the health insurance you had before, it is not exactly the same.
It is likely that the health insurance you had during your working years lumped all your medical payments into one category. Once you paid an amount equal to your plan’s deductible, it started to pay benefits.
That is not how Medicare works. Medicare has different parts to pay for different health care. In this post I want to discuss some of the changes you will have.
Most plans, that Americans have before Medicare, will only charge one deductible in any given year. Medicare A charges a deductible each time you are hospitalized. If you are admitted to the hospital multiple times during the year, you will have to pay multiple deductibles.
The only time you can escape having to pay a new deductible for being admitted to the hospital is if you are readmitted to the hospital, for the same problem, within 60 days of being discharged.
ADMISSION VS OBSERVATION
Another distinction that you will need to pay attention to when you spend time in the hospital is your official status.
If you are formally “admitted” to the hospital, Medicare will pay your bills under Part A. You would be liable for the admission deductible but your liability stops there. Medicare will pay the rest of your hospital bill.
That is not necessarily the case if you are “held for observation” in the hospital. If that is your status, Medicare will pay for your medical bills under Medicare Part B. In that case, you will be responsible to pay, at least, 20% of your health care bills.
The bill could be as much as 15% higher, if you use doctors who do not accept what Medicare pays as payment in full. If that is the case, you will personally be responsible for the extra bill.
You probably became used to your health insurance plan making no distinction between hospital’s and doctor’s bills during your working years. That is not the case with Medicare.
Although Medicare A will pay all of your hospital bills, after you have paid a deductible, it will not pay your doctor’s bill.
If you want insurance that will pay the bill from your doctor, you will want to enroll in Medicare B. It will pay 80% of your doctor’s bill, provided he/she will accept the amount that Medicare pays as payment in full.
If your doctor does not accept Medicare’s approved cost for his/her services, he/she has the right to withdraw from the Medicare system and charge you up to 15% more for the same treatment. That is called an “Excess fee.”
If that happens, you must pay the entire bill out of your pocket and make a claim directly with Medicare for reimbursement. Medicare will reimburse you up to 80% of the “Medicare Approved” amount for your treatment. You will have to absorb the cost of the 20% of the bill plus 100% of your doctor’s “excess fee.”
A third major difference you will need to get used to is how your prescription drugs are paid at your pharmacy.
When you were working, your health insurance would probably cover your prescription medications like any other health care cost. You may have had a separate deductible for more expensive Brand Name drugs but that is normally the only difference in plans.
Under Medicare, you will need to adjust to an entirely new system. Original Medicare does not pay for most prescription drugs that are used outside of the hospital. If you want insurance to help you at the pharmacy, you will need a Medicare D (Prescription Drug Plan).
When you transition from employer based health insurance to Medicare, it is likely that you will get confused. If you do, don’t feel alone. It happens to many Americans.
The good news is that it should not take you long to adjust to the new system, if you pay attention. Unfortunately, it can cost you a great deal of your retirement savings if you do not pay attention.
A recent study shows that Americans spend over $240,000 in addition to Medicare during their retirement. That is a huge chunk out of a person’s retirement savings.
What is even sadder is that expense can be cut to $20,000 – $40,000 during retirement for people who have purchased the appropriate supplements to go with Original Medicare.
Medicare does not go out of its way to hide its differences. However, neither does it sponsor huge educational events to let people know what they are about to get into. You can learn about the differences the hard and expensive way, though experience, or you can take the time to learn about them the easy and cheap way.
These are just some of the differences between the Major Medical insurance you have been used to and Medicare. If you have recently transitioned to Medicare, or are about to, take the time to read the book, Medicare and You. You will learn how it differs from what you have had before.