Lynn Brenner's Family Finance

Does a Veteran Need Medicare?

Q: I'm a disabled Vietnam veteran, and have been using the VA hospital and outpatient system since 1968. I'm now eligible for Medicare. Is it wise to sign up for Medicare? Or is it just double coverage and an unnecessary out-of-pocket cost? -- MD via email

A: That depends on the breadth of your VA coverage.

The VA provides treatment for service-connected conditions free of charge to all enrolled veterans. In addition, veterans who are in the highest enrollment priority groups -- including, for example, veterans whose service-related disabilities are 50% or more disabling, or who are former prisoners of war -- generally don't have to pay anything for care that's unrelated to their service.

By contrast, if  you're in a lower enrollment priority group, the VA may determine you're ineligible for some care that isn't service-related, or you may be required to make a co-payment. These same services may be fully covered by Medicare. If so, obviously it would be sensible to enroll in Medicare.

You may also want to bear in mind that VA health services rely on an annual Congressional appropriation. That's one reason that the VA encourages veterans of all ages -- especially those in the lower enrollment priority groups -- to retain any health care coverage they may already have. Other insurance won't disqualify you for VA health services; and it may prove a helpful supplement to your VA coverage.

Medicare comes in three parts. Part A covers hospital care. Part B covers doctors' visits and out-patient care. Part D covers prescription drugs. (Part C combines these three coverages in a single package administered by a private insurer. Part C is commonly known as Medicare Advantage.)

You should sign up for Medicare Part A because it's free if you're 65 years old and you (or your spouse) have paid Medicare taxes for at least 10 years. If you're already receiving Social Security, you're automatically enrolled in Part A when you turn 65. If you're not yet collecting Social Security, you must call the Social Security Administration to enroll in Part A; it won't happen automatically.

Speak to the VA about whether there's any reason for you to enroll in Parts B or D. If you have VA co-payments for any of your care, you may want to crunch numbers to determine whether Medicare Parts B and D would cost you less.

Don't postpone this conversation! It's important to make a decision during the three months before or during the three months after your 65th birthday. If you miss that six month window you'll pay a late enrollment penalty that permanently increases your Medicare premiums.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.

 

Heads Up: Medicare Open Enrollment Starts and Ends Early This Year

Medicare open enrollment -- the period when people with Medicare can make unrestricted changes to their coverage -- will run from October 15 to December 7 this year.

It’s a sensible change.

Medicare is an annual topic of conversation at Thanksgiving gatherings, as adult children help their parents decipher increasingly complex choices. Previously, open enrollment ran from mid-November until December 31 -- a frenetic time of year for most families. The new dates allow time to gather information about current coverage and research the new options online well advance of stuffing the turkey and mashing the potatoes -- and to change coverage before becoming engulfed in holiday shopping and festivities.

For readers new to this daunting task, a quick review of Medicare basics:

Part A is hospital and inpatient coverage.

Part B covers doctors and outpatient services.

Part D covers prescription drugs.

Part C is universally known as Medicare Advantage, which combines A, B, and D coverage in a single plan administered by insurance company. Medicare Advantage typically restricts you to the insurer’s network of doctors and hospitals.

Alternatively, you can opt for Original Medicare, which consists of Parts A and B, is administered by the government, and lets you go to any doctor or hospital that participates in Medicare. (By definition, this includes all the doctors and hospitals who participate in Medicare Advantage networks, although costs vary with each plan.)

If you choose Original Medicare, you must buy a standalone Part D prescription drug plan. You may also decide to buy a supplemental private insurance policy (called Medigap) to cover expenses not picked up by Original Medicare – such as co-pays, deductibles, and vision and dental services. (Medigap policies only work with Original Medicare. You can’t combine them with a Medicare Advantage plan.)   

Okay – so what should you pay attention to during open enrollment?

Everyone who has Medicare should review all their coverage options, says the Medicare Rights Center, a consumer-advocacy organization. Even if you like your current plan, it may not be the best option for you in 2012. The reason:  Many Medicare Advantage plans change their costs and benefits every year. And Part D prescription drug plans often change their formularies – the lists of the drugs they cover. If you don’t pay attention, you could find that come January 1, 2012, your plan no longer covers one or more of your regular prescriptions.  

Your insurer must alert you to upcoming changes in an Annual Notice of Change (ANOC) letter, which you should receive by September 30. But the ANOC letter doesn’t provide any personalized information. “It won’t say, ‘Joe, you take these three drugs, this one isn’t going to be on the formulary anymore, and this one is going to be priced differently,’” says Joe Baker, president of the Medicare Rights Center. “It will just be general information --‘We’re changing the formulary, the pharmacy network, the premium.’”  To find out how the changes affect you specifically, you must call the plan for a complete copy of the new formulary, which should also be posted on the plan’s website.

Don’t just look for your drugs. Also check for any new Part D coverage restrictions, such as a prior authorization requirement; a quantity limit, which could increase your cost by forcing you to buy your medicine more frequently; or ‘step therapy’  on certain drugs, which requires you to try another drug before the plan will cover your prescribed drug. Baker says there’s also a growing trend for Part D plans to differentiate between ‘preferred’ and ‘non-preferred’ pharmacies within their network. You pay the least when you use ‘preferred’ pharmacies – so make sure that your own pharmacies are on the preferred list.

If you are considering (or reviewing) a Medicare Advantage plan, make sure you understand how it works. Your check list should include questions like:

• Will I be able to use my doctors or other providers I want to see?  Are they in the plan’s network, and are they taking new patients who have this plan?
• Which specialists, hospitals, home health agencies and skilled nursing facilities are in the plan’s network?
• How much will it cost to see my primary care physician? A specialist?

For more questions about Medicare Advantage plans, see this invaluable guide from the Medicare Rights Center.  For questions to ask about Part D plans, either as part of a Medicare Advantage plan or as a stand-alone prescription drug plan, see 'How do I compare Medicare Private Drug Plans?'

Use Medicare's Plan Finder tool to select the best plan for your needs -- but don’t enroll until you have called the plan and confirmed the information you’ve gathered with a plan representative. Plan Finder and 800-MEDICARE may not have the most up-to-date information, explains a Medicare Rights Center spokeswoman. Keep a record of your conversation with the plan representative, she adds. Misinformation from a plan representative, if documented properly, in some situations can give someone a Special Enrollment Period to switch plans or go back to Original Medicare. 

Once you’ve confirmed the information, Baker recommends that you enroll in the new plan by calling 1-800-MEDICARE rather than the plan itself. This reduces the chance of administrative error, which happens sometimes when a plan sends the enrollment information to Medicare. Take notes of your conversation with the government representative, too.

When dealing with any bureaucracy, it's essential to keep records. People should document all calls (with name of representative, date and time of the call, and the information they were given) regarding health insurance decisions to protect themselves if they were given bad information, says the Medicare Rights Center. 

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved.

An Expensive Mistake: Waiting Until Cobra Expires to Enroll in Medicare

Q: I am currently employed and have health benefits. As of December 31, I’ll longer be employed, and my company has offered to pay my Cobra benefits for 8 months.  Do I have to sign up for Medicare on January 1 and have Medicare as my primary coverage? Or can I wait without penalty and sign up for Medicare when my Cobra is over? 

Also, I understand that the fee for Medicare is based on your salary two years earlier. Will my Medicare premium be adjusted downwards in two years, after my salary is no longer substantial? --CD, via email

 

A:  Depending on when you turn 65, it can indeed be a costly mistake to postpone your Medicare application until your Cobra coverage expires.

To explain why, let's start with the general Medicare enrollment rule for people who are employed:

If you're covered for health insurance through a company with 20 or more workers for whom you or your spouse is actively working [my emphasis added], that group coverage is primary even after you turn 65. But you must sign up for Medicare not later than eight months after the termination of your employer-sponsored coverage or your job, whichever comes first.

People often assume that this means after they leave a job, they can stay on Cobra for at least eight months before applying for Medicare. It’s an easy mistake to make – but it is a mistake!

The key words in the rule are 'actively working'. True, with Cobra you're still insured in your former employer's group plan -- but you're no longer actively working. The result is that as soon as you turn 65, your Cobra coverage becomes secondary to Medicare.

Anyone who will turn 65 while on Cobra should enroll in Medicare the month before his or her birthday. Medicare coverage begins the month after you enroll. By signing up the month before your birthday, you avoid any gap in coverage.

Three bad things can happen if you postpone your Medicare enrollment while you're on Cobra:  

The first is that after you turn 65, you'll be without primary health insurance. People usually learn this in a very unpleasant way: Their Cobra policy suddenly rejects their medical claims on the grounds that Medicare should be their primary coverage.

The second is that it may not be possible to sign up for Medicare as soon as you get this bad news. If you didn't enroll in Medicare within the three months before or the three months after your 65th birthday, your next opportunity is general enrollment, which takes place between January 1 and March 31, for coverage that starts July 1. In other words, depending on the timing, you could face up to 15 months without health insurance.

The third is that you pay more for Medicare when you enroll late. Your Medicare Part B premium is permanently 10% higher for each 12 months that have elapsed since your original enrollment deadline. If you enroll two years late, you'll always pay 20% more for Part B coverage.

The Part B monthly premium is currently $110.50 for individuals with income up to $85,000 and married couples with income up to $170,000. As you say, more affluent taxpayers pay more. (You'll find the details here.) The highest monthly premium is $353.60, currently paid by individuals and married couples whose respective income is $214,000 and $428,000.

The Social Security Administration uses the income reported on your tax return two years earlier to determine your premium -- so your 2013 premium will be based on your 2011 income.

One suggestion: It sounds as if your employer has offered to pay for eight months of Cobra coverage as part of your severance. If it would be more helpful to you, why not ask if the company will instead pay the same amount towards your Medicare Part B premiums?

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

(c) Lynn Brenner, All Rights Reserved

Is Social Security Reduced for Military Retirees?

Q: I am retired from the U.S. Air Force and receive a monthly retirement check. I have been told by acquaintances that when I start to draw Social Security, my military retirement check will be deducted from my Social Security payments. I'm currently 65, and my plan is to continue working for at least another five years and now draw Social Security until I'm 70.

What's the correct information about receiving military retirement and Social Security? I really have been counting on receiving both checks when I do finally retire. --JD via email


A: Not to worry. You will.

Social Security benefits aren't reduced for people who receive military retirement benefits.

Your acquaintances were probably thinking of the fact that Social Security is reduced for people who receive government pensions based on jobs in which they did not pay Social Security taxes. 

But you have paid those taxes.

Social Security has covered people on active duty military service, and on active duty training, since 1957. And since 1988, Social Security has covered inactive duty service in the armed forces reserves, such as weekend drills. 

One additional thought:

Now that you're 65, you're eligible for Medicare. As a result, any health care coverage that you currently receive from the Department of Veterans Affairs or under the TRICARE or CHAMPVA program may change or be discontinued, says Linda Lauria, a Social Security Administration spokeswoman in New York City. For more information about this, you should consult the VA, the Department of Defense, or a military health benefits adviser.

Please send your questions to [email protected].  I'm sorry I can't respond personally to every email. Questions are only addressed online.

 (c:) Lynn Brenner, All Rights Reserve