Benefits. Traditional Medicare coverage
is divided into two parts, Part A, hospitalization, and Part B, medical
services. The Medicare Part C (Medicare Advantage) program offers
a variety of coverages instead of traditional Part A and B benefits.
While Medicare Parts A and B together provide fairly generous hospitalization
and medical coverage with no restrictions on choosing providers, there
are extensive deductibles and coinsurance requirements. In many cases,
coverage is not as comprehensive as employer-sponsored insurance.
Employees ages 65 and older may therefore prefer to remain insured
by private plans rather than receive Medicare.
Secondary payer rules. If employees
or their spouses are covered by both an employer plan and Medicare,
most employer-sponsored health benefit plans are primary for the covered
employee and his or her spouse regardless of age. Benefits must be
paid by the “primary” plan before the secondary plan pays any benefits.
Medicare, however, is primary for retirees and in the case of individuals
with end-stage renal disease, after 30 months.
These rules generally apply to employers with 20 or more
employees. However, there are some exceptions. For example, if the
employee is under the age of 65 and is covered by Medicare due to
permanent and total disability, the employer's plan is primary only
if it is a “large group plan” (defined as a plan where the employer
had at least 100 employees during the prior calendar year).
An employer cannot offer, subsidize, or be involved in
the arrangement of a Medicare supplement policy where the law makes
Medicare the secondary payer. Even if the employer does not contribute
to the premium for its plan, but merely collects it and forwards it
to the appropriate individual's insurance company, the employer's
group health plan remains primary to Medicare. The secondary payer
rules make it illegal for a covered employer to provide any form of
incentive for an employee to decline employer coverage where the employer
coverage would be primary to Medicare. Examples of such incentives
include an employer offer to pay for Medicare Part B premiums or pay
premiums for a Medicare supplemental insurance policy for Medicare-eligible
employees if the employee would decline coverage under the employer's
Medigap. Many Medicare beneficiaries
purchase so-called Medigap insurance to cover the holes in traditional
Medicare Parts A and B coverage, including deductibles, copayments,
and coinsurance. These plans may be purchased from private insurance
companies, and the particular plans offered and the premiums charged
may vary widely from company to company.
Medicare Part C. The “Medicare Advantage”
program under Medicare Part C allows Medicare beneficiaries to elect
a variety of coverage through private providers instead of the traditional
Medicare fee-for-service program. The program offers:
• Health maintenance organizations (HMO)s;
• Preferred provider organizations (PPOs);
• Private fee-for-service plans;
• Special needs plans; and
• Medicare medical savings account (MSA) plans.
Generally individuals are eligible for a Medicare Advantage
plan if they:
• Live in the service area of the plan they want to join;
• Have Medicare Part A and Part B; and
• Don’t have end-state renal disease (ESRD).
How to apply.
Employees can apply
for Medicare online at http://www.socialsecurity.gov
. Employees can apply for Medicare three months before their 65th
birthday to ensure that Medicare coverage will begin promptly. Employees
who delay enrollment in Medicare past the age of 65 may face a waiting
period and higher premiums.
Medicare drug coverage. To receive
Medicare drug coverage individuals must join a plan run by an insurance
company or other private company that is approved by Medicare. Costs
and coverage may vary depending on the particular plan.
Individuals can receive drug coverage through:
• Medicare Prescription Drug Plans (Part D) (These plans
add drug coverage to original Medicare, some Medicare cost plans,
some Medicare private fee-for-service plans, and Medicare MSA plans); or
• Medicare Advantage (Part C) plans or other Medicare health
plans that offer Medicare prescription drug coverage.
donut hole. The Affordable Care Act provides
for the gradual elimination of the donut hole. Beneficiaries will
receive additional savings until the coverage gap is closed completely
Warning. Individuals who do not
join a Medicare Prescription Drug Plan when they are first eligible
(and they do not have other creditable prescription drug coverage
or get Extra Help) will likely pay a late enrollment penalty.