2018 Medicare Reference Guide

2018 Medicare Reference Guide

  • 26 Feb 0

Medicare is a government-run health insurance system for Americans over 65 years old or disabled. The system is funded through employee and employer payroll contributions and provides coverage for portions of certain health care costs, depending on level of coverage selected. 

While Medicare Part B premiums are unchanged from 2017, and Part D premiums have been lowered from 2017, changes under the Medicare Access and CHIP Reauthorization Act of 2015 has meaningfully lowered the income brackets determining Medicare Part B and Part D premiums in 2018. These changes can result in potentially higher Medicare Part B and Part D premiums for single enrollees with income above $107,000 and those married filing jointly with income above $214,000. For example, while income had to reach $214,000 (individual) and $428,000 (married filing jointly) to trigger the highest premium levels in 2017, those numbers are reduced to $160,000 (individual) and $320,000 (married filing jointly in 2018). 

Medicare coverage is split into four Parts:

Part A (Hospital Insurance)

Covers inpatient hospital care, skilled nursing facility, hospice,
lab tests, surgery, home health care

Monthly Premium*:$0.00
First 60 days of hospitalization -
patient pays a deductible
$1,340.00
Next 30 days - patient pays$335 per day
Next 60 days (lifetime reserve days)$670 per day
Skilled nursing facility:

First 20 days - patient pays

$0.00

Next 80 days - patient pays

$167.50 per day

Over 100 days - patient pays

All costs

*Most individuals over age 65 receive Part A free (“premium-free Part A”)
as a result of paying Medicare taxes while working. For those who have
not sufficiently paid Medicare taxes (rare), you can buy Medicare Part A
and pay a premium of $422 per month.

Part B (Medical Insurance)

Doctor and other health care providers’ services, home & outpatient
care, durable medical equipment, ambulance services, and some
preventive services

Premium Rates*If your 2016 income was** 
Single:Married Filing Jointly:
$134$85,000 or less$170,000 or less
$187.50$85,001 - $107,000$170,001 - $214,000
$267.90$107,001 - $133,500$214,001 - $267,000
$348.30$133,501 - $160,000$267,001 - $320,000
$428.60Above $160,000Above $320,000

Deductible:

$183 per year

Coinsurance:

20% of amount after deductible

*Most people pay less than this amount if premiums are paid out of
monthly Social Security benefits. This is due to the 2017 Part B premium
increasing more than the 2017 Social Security cost-of-living adjustment
(COLA) and Social Security’s “Hold Harmless” provision that prevents a
decline in Social Security benefits for most people.

**Medicare uses the modified adjusted gross income reported on your
2016 tax return to determine your 2018 premium (the most recent income
information provided to Social Security by the IRS). Therefore, if your
income has decreased from 2016 to 2017, Medicare premiums can
remain higher than expected due to this lag.

Parts A & B do not cover long-term care (aka, custodial care) as well
as dental care, eye care, and hearing aids.

Medigap Policies

In addition to the four Medicare Parts above, Medigap insurance is
offered by private companies to reimburse individuals for out-of-pocket
medical costs resulting from gaps left by traditional Medicare benefi ts,
such as copayments, coinsurance, and deductibles.
Medigap policies do not provide additional coverage but rather
supplement costs of original Medicare benefi ts.
Medigap policies don’t work with Medicare Advantage Plans (Part
C). If you decide to have Part A and B coverage, determine if you
need Part D, and then consider a Medigap policy. If you decide
to gain coverage through a Medicare Advantage Plan, a Medigap
policy is unnecessary.
Must follow federal and state laws and, in most states, are limited to
“standardized” policies.
In order to determine if a Medicap Policy is the right fi t, contact
your State Health Insurance Assistance Program. Medicare.gov
can also be a resource to point you in the right direction.

Medicare Enrollment & Election Periods*

Initial Enrollment Period:7-month period beginning 3 months prior
to the month you turn 65 and ending 3
months after the month you turn 65
Coverage Begins:
Part A
1st day of your birthday month
Part B & Part D
Varies depending on what month
you enroll
General Part A &
Part B Enrollment:
January 1st to March 31st
General Part D Enrollment:April 1st to June 30th
Annual Election/
Open Enrollment:
October 15th to December 7th

*Individuals already collecting Social Security as of 3 months
prior to turning 65 will be automatically enrolled in Part A & Part B
at 65 unless waived. Although required (Part D or an alternative
perscription drug plan) you still must manually enroll in Part D.
If an individual misses the Initial Enrollment Period then they can enroll
during General Enrollment, but late enrollment penalties may apply
which vary for Part A, Part B, & Part D. Under certain circumstances
individuals may be eligible for a delayed Special Enrollment Period with
no penalties.
Changes to existing Medicare coverage, including switching to/from
Part C coverage and making changes to Part D coverage, can be made
annually during the Annual Election/Open Enrollment Period.
Minimal Essential Coverage: Coverage necessary to fulfi ll the
individual responsibility requirement under the Affordable Care Act.
Medicare Part A or a Medicare Advantage Plan meets this requirement.
Medicare Part B alone does not.

Part D (Prescription Standard Benefit
Model)

Provided by private insurers. The costs and drugs covered varies by
Medicare Prescription Drug Plan

Monthly Premium*:Based on prescription drug plan selected 
Initial deductible:$405 maximum
(deductibles vary between plans)
Copayment or
coinsurance on next
$3,750
Coverage gap
(“donut hole”)**
$3,750 - $5,000
Copayment or
coinsurance
amounts above
$5,000
Premium Rates
Based on Income
If your 2016 income was
Single:Married Filing Jointly:
Plan premium$85,000 or less$170,000 or less
$13.30 + plan premium$85,001 - $107,000$170,001 - $214,000
$33.60 + plan premium$107,001 - $133,500$214,001 - $267,000
$54.20 + plan premium$133,501 - $160,000$267,001 - $320,000
$74.80 + plan premiumAbove $160,000Above $320,000

*Each prescription drug plan has its own list of covered drugs (referred
to as a “formulary”), with drugs assigned to different “tiers”. The drugs in
lower tiers will generally cost less than drugs in higher tiers.
**The coverage gap begins after you and your plan spend $3,750 in 2018
(amount can change each year). Then you pay discounted drug prices
out-of-pocket, for the plan’s covered drugs, until you reach the out-of-pocket
(OOP) threshold, which is $5,000 in 2018. For the remainder of
the year, “Catastrophic coverage” then begins for any covered drugs.

Medicare Advantage / “Part C”

Part A & B coverage but through private companies instead of through
Medicare. Some companies may offer additional benefits such as
prescription drugs, vision, and/or Dental

Part C plans are Medicare approved but administered through private
insurance companies.
Monthly premium amounts vary by plan.
Plans, not Medicare, establish the amounts they charge for premiums,
deductibles, and services. Amounts can only change once per year, on
January 1st.

Planning Considerations
and the Need to Prepare:

Health costs are the 4th largest expense for individuals between 65 - 74
years old after housing, transportation, and food. They are the second
largest expense for those over 75, after housing.
 
Traditional Medicare covers only about 60% of medical costs in
retirement, with the rest being covered by out-of-pocket spending and
private insurance.
Estimated retirement health care costs for a couple (Medicare Part
B & Part D premiums, Medigap premiums, & out-of-pocket drug
expenses) starting at age 65 in 2016.*
Median Prescription Drug Expenses
Throughout Retirement*
50% Chance of Personal Savings
Meeting Total Expenses
$165,000
90% Chance of Personal Savings
Meeting Total Expenses
$265,000
*Covering expenses at the 90th percentile would require $221,000 and
$349,000, respectively.

Source: Employee Benefit Research Institute

The Tax Cuts and Jobs Act of 2017 did not have a direct impact
on the Medicare system. However, as previously discussed, the
Medicare Access and CHIP Reauthorization Act of 2015 may result
in higher premiums for some enrollees.

It’s important to consider other factors when planning such as
increasing life expectancies, personal health variables, and the
impact of inflation. Also, Part D, Medicare Advantage Plans, and
Medigap policies can vary widely based on state, so it’s important
to contact a specialist in your area if you have questions.

For more information about Medicare, you can go to medicare.gov or
call 800-633-4227 (800-MEDICARE).

 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
Summary
Article Name
2018 Medicare Reference Guide
Description
Medicare is a government-run health insurance system for Americans over 65 years old or disabled. The system is funded through employee and employer payroll contributions and provides coverage for portions of certain health care costs, depending on level of coverage selected.
Author
Publisher Name
Manning & Napier
Publisher Logo

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