Ever have that nagging feeling that you’re not up to date on the latest need-to-know health or financial news, but it’s just too much effort to seek it out?
Well, don’t worry, we have you covered for 2016 Medicare updates!
Whether new to Medicare or an old-timer, this page is “one stop shopping” for everything you need to know about Medicare in 2016.
We cover everything from premium changes, to a basic refresher, in 5 simple parts:
1.) Part B Changes for 2016 – (Were the rate increases as high as expected?)
2.) Status of the Donut Hole (coverage Gap) in 2016 and when that sucker is going away for good!
3.) The truth about Medicare and Obamacare in 2016 – are you affected?
4.) Medicare Basics with 2016 Updates
5.) Supplement options for 2016
1.) Medicare Part B: 2016 Changes That May Affect You
Medicare Part B Premium & Deductible
The Part B premium change is the biggest impact on Medicare beneficiaries, especially those new to Medicare in 2016.
In the Fall of 2015, unprecedented premium & deductible increases loomed, until Congress forged a fix that critics say may not last.
Beware of misleading information online such as this Huffington post article which, at the time of print, included numbers that were only projections, stated as FACT; but after the fix by Congress, are no longer accurate.
False Projection #1
- 52 % increase in Part B premium from $104.90 to $159.30 for 30% of Medicare Beneficiaries.
The Truth About Part B Premium in 2016:
2016 Medicare Part B Premium increases to $121.80 for roughly 30% of Medicare beneficiaries (those either new to Medicare in 2016, or do not have premiums deducted from Social Security.
According to the Tampa Bay Times,
Not all 52 million beneficiaries were bracing for an increase. About 70 percent were shielded by a “hold harmless” provision, which keeps Part B premiums from rising if Social Security recipients do not receive a cost-of-living adjustment.
source – Deal to Ease Premium Hike for Medicare Part B May Be a Temporary Fix – Tampa Bay Times, Nov 2015
False Projection #2
- Increase in Medicare Part B deductible from $147 to $223.
The Truth About the Part B Deductible in 2016:
Medicare Part B deductible increases from $147 to $166.
The Part B deductible is paid by beneficiaries with Original Medicare only, or Original Medicare plus a Medicare Supplement (Medigap) plan that doesn’t cover the deductible (such as a plan N or G).
(If you are enrolled in a Medicare Advantage Plan, you may or may not have a deductible).
Part B Premium Amounts by Income for 2016
source: Part B Costs | Medicare.gov
2.) Status of the Donut Hole (Gap) and What is it?
The Donut Hole is a gap in your Medicare Part D (prescription) benefits.
(This gap applies to those with a “stand-alone” drug plan, or a Medicare Advantage Plan with prescription benefits).
The gap’s official name is the “Coverage Gap,” because you lose some coverage in the gap.
The coverage gap ONLY applies to your Medicare Part D drugs, (prescription drugs purchased at a pharmacy).
Drugs such as chemotherapy, administered in a doctor’s office, are typically covered under Medicare Part B.
What amount puts you in the Gap in 2016?
Medicare adds up your copays, plus the drug plan’s costs towards your drugs.
Once this amount reaches $3310 in 2016, you are in the coverage gap.
Only drugs that are covered by your Part D plan count toward this number. If your drug plan has a deductible, that counts too.
Your drug plan premiums do not count.
- Your Cost Sharing Goes Up in the Gap
Once you and your plan have spent a combined $3310 in 2016, your cost sharing will go up.
- Getting out of the Gap in 2016
Once you’ve spent $4850 total out of pocket on covered drugs, you are no longer in the gap.
For more detail, check out Costs in the Coverage Gap, at Medicare.gov.
Just know that there’s a 50% manufacturers discount in the gap for brand drugs. The good news is that this counts toward your total out of pocket along with the 45% you pay.
The Future of the Coverage Gap (Donut Hole)
Here’s the wonderful quote we’ve been waiting for, from this page on Medicare.gov –
The donut hole will be closed completely by 2020.
The percentage you pay for brand name drugs and generic drugs is going to decrease each year until 2020!
Here’s the breakdown.
3.) The Truth About Medicare & Obamacare (Are you affected?)
As if Medicare weren’t confusing enough, there’s even more healthcare talk in the media since the advent of Obamacare (officially named “The Affordable Care Act”).
Talk of tax laws, enrollment periods, deadlines and penalties can make anyone nervous.
The Good News – if you already have Medicare you can continue on as you always have.
There’s nothing to worry about and you can happily ignore all talk of the Insurance Marketplace.
What is the Healthcare Marketplace?
The Marketplace consists of either state (such as Covered California) or government operated (Healthcare.gov) organizations by which people (under 65, ineligible for Medicare) purchase health insurance. The health plans are administered by private insurance companies, but regulated and standardized by the government.
If you have health coverage through Medicare, the Marketplace won’t have any affect on your Medicare coverage.
Medicare’s website sums this up nicely in a short article listing the top 5 things to know about the healthcare law if you have medicare.
Here’s a summary:
- Medicare is not a part of the Health Insurance Marketplace set up by the Affordable Care Act, so you do not need to do anything during the Marketplace open enrollment.
- Your yearly visit and most preventive services are free, courtesy of the Affordable Care Act. (Even the part B deductible!)
- You save 55% on brand name drugs in the coverage gap (AND this amount increases each year until 2020)!
- Medicare has set up Accountable Care Organizations & The Comprehensive Primary Care Initiative to provide support for doctors in improving care coordination.
- According to Medicare.gov, The Affordable Care Act ensures that Medicare is protected & the Medicare Trust Fund will be extended to at least 2029.
Obamacare & Medicare: What to Watch out For
Medicare Parts A and B qualify as minimum essential coverage under the Affordable Care Act. If you had Medicare for all of 2016 just check the box on your federal income tax form.
Medicare Part B alone does not satisfy the law that requires all Americans to have health insurance.
If you have Medicare Part A (hospital) you’re considered covered.
Beware of someone trying to sell you a Marketplace plan. It’s against the law for someone that KNOWS you have Medicare, to sell you a Marketplace plan.
There are some BIG pitfalls to be aware of in regards to Medicare & Obamacare.
Be careful if you’re on a Marketplace plan, receiving a big subsidy (tax based discount) on your premium, and approaching age 65.
You may not receive any reminders that you should cancel your under-65 individual health plan as you approach 65.
Once you qualify for Medicare at age 65, you won’t be eligible for your premium subsidy anymore, even if you decide not to enroll in Medicare!
The danger here is that your insurance company will likely continue to charge you the same rate, even though you aren’t eligible for it anymore. The shock will come at tax time, and the difference you owed in the premium will have to be reconciled on your tax return.
You could end up either owing a large penalty or losing a refund.
To make matters worse, you could also face a Medicare Part B penalty because you didn’t enroll when first eligible.
Not only may you incur a penalty by waiting to enroll in Part B, you may face strict enrollment periods that could leave you without coverage for up to 6 months.
Be diligent and research every angle of your situation before making any decisions.
4.) Medicare Basics: Turning 65 in 2016 (or just need a refresher)?
We’re covering Medicare Basics:
- How and when to sign up
- The parts of Medicare
- Changes in 2016
Medicare Basics with 2016 updates
How and When to Sign Up (If you are New to Medicare)
(More information can be found on page 23 of the printed Medicare & You 2016 Handbook and in detail online at Medicare.gov)
Check out this great tool on Medicare.gov: Medicare Eligibility & Premium Calculator
You will be automatically enrolled in Medicare Parts A & B if:
- You are already receiving Social Security (or RRB) benefits before you turn 65
- You have been on disability for 24 months
- You have ALS (Lou Gehrig’s disease), starting when your disability begins.
You’ll receive your Medicare card in the mail 3 months before you turn 65.
You may not receive your card if SS doesn’t have the correct address on file, so make sure your address is updated with Social Security!
Once you receive your card, there is nothing further you need to do to receive your Medicare Parts A & B. Your effective date is written on your card (usually the 1st day of your birthday month). Your Part B premiums will be deducted from your Social Security check.
You will need to take action to enroll in Medicare if:
- You are not receiving Social Security when you become eligible for Medicare at age 65.
- You have end stage renal disease (kidney failure).
IMPORTANT – you become eligible for Medicare at age 65, even though Social Security’s full retirement age is no longer 65!
Beware of the Part B Late Enrollment Penalty!
Don’t make the mistake of thinking you can just skip your Part B enrollment because you don’t need it right now.
The penalty can set you back 10% for each 12 month period you could’ve enrolled but didn’t. That’s 10% of the Part B premium added on to what you already pay, for each year you weren’t enrolled.
You may be penalized unless you meet certain conditions such as:
- You’re enrolled in a group health plan based on your or your spouse’s current employment (COBRA doesn’t count!)
- You’re a volunteer serving in a foreign country.
You have 8 months to sign up for Part A and/or Part B after employment ends, or the group health plan ends (whichever happens first).
When to Sign Up
You can sign up for Medicare during a 7 month enrollment period around your birthday month.
The enrollment period begins three months before your birthday month, includes the month of your birthday, and ends three months after your birthday month.
Your Medicare can begin as early as the first day of your birthday month (or the month before if you’re birthday falls on the 1st).
If you wait until your birthday month to enroll in Medicare, your Medicare doesn’t become effective until the following month.
Beyond that, the time it takes for your Medicare to become effective is delayed even longer.
Avoid delays and penalties by enrolling in Medicare as early as allowed.
Refresher: Parts of Medicare with updated 2016 costs
Medicare Part A – Hospital 2016
- No monthly premium for most people.
- Inpatient hospital coverage $1288 deductible then $0 for 1st 60 days (additional cost info for inpatient hospital)
- Skilled nursing facility – $0 days 1-20. You pay $157.50 per day, days 21-100 (more about skilled nursing)
- Hospice – You pay $0 for hospice care (more about hospice & Medicare)
- Home health services – You pay $0 for Home health services (more about home health & Medicare)
Medicare Part B – Doctor Services 2016
- You must pay a monthly premium. People new to Medicare in 2016 will pay $121.80 (or higher depending on income).
- Most of you already enrolled in Medicare will pay $104.90, the standard premium for 2015 (or higher depending on income. (Download: Rules for Higher Income Beneficiaries)
– Part B Covers preventive services (no cost; conditions apply)
– Covers medically necessary services (20% cost to you, after the $166 deductible). Here’s a partial list:
- Doctor Visits
- Lab tests
- Outpatient surgery
- Durable Medical Equipment
- Emergency room
- Mental health (inpatient and outpatient)
Medicare Part D – Prescription Coverage
- Administered through private insurance companies as a stand-alone add-on plan, or included as a part of Medicare Advantage
- Gap Coverage changes for 2016
- Premiums typically range from $18 to well over $50
- You must enroll when first eligible for Medicare or you can incur a costly penalty later
- You can only switch drug plans during the fall enrollment period from Oct 15-Dec 7th.
- Many counties in the U.S. have as many as 30 different drug plans available each year and they can vary in price and coverage so much that it has become essential to review this coverage each year.
Medicare Part C – Medicare Advantage
- Alternate way to receive Medicare benefits, administered through private insurance companies.
- Usually includes Part D (drug) benefits
- Usually a managed care plan such as an HMO or PPO with restricted provider networks
- Regulated and approved by the Centers for Medicare and Medicaid Services (CMS)
- Must follow strict guidelines in plan structure and sales and marketing
- Plans change every year
- No guarantee of cost or provider availability beyond one year
5.) Supplement options for 2016
There’s only three ways you can have it on Medicare.
- Enroll in Original Medicare Parts A & B plus a drug plan (Part D), and that’s it. You pay your portion of cost with no supplemental coverage.
- You can choose to receive your Medicare Benefits through a private insurance plan, called Medicare Advantage, or Medicare Part C.
- You can enroll in Original Medicare just like option #1, but choose an add-on Medicare Supplement plan to cover the gaps (called Medigap).
Medicare explains it using a simple flow chart.
While there are three potential scenarios you can choose on Medicare, “Choosing a Medigap Policy” shows you the TWO ways to receive your Medicare:
1.)Original Medicare, or
using this handy flow chart.
(source – page 7 2015ChoosingAMedigapPolicy)
Most Important reasons to supplement Medicare
- Medicare doesn’t include an out-of-pocket spending limit.
- Predictable monthly costs
- Peace of mind
Already on Medicare in 2016?
If you have Medicare already, you would find yourself in one of the three options we already discussed:
1.)Original Medicare – no supplement
2.) Medicare Advantage
3.) Original Medicare plus Medigap
It’s good to know where you are. Know your options!
If you are happy with your current situation, there’s nothing you need to do, other than review your drug plan in October 2016.
If You’d like a Medigap Policy
Did you know that if you have original Medicare Parts A & B only, and would like to add a supplement (Medigap), you can do that ANY time of year? However, you must answer medical questions, and could be denied, if you are beyond your Medigap Open Enrollment.
Switching your Medigap
If you want to switch from one Medigap plan to another, either to improve your benefits or lower your cost, you can apply ANY time of year! Some carriers may charge a $20-$25 application fee, but applying is the only way to know if you will be approved through Medical underwriting.
If you are on the fence, I caution against waiting. There’s no risk in applying. The longer you wait, the greater chance you may find yourself with a medical condition that won’t qualify. So if you’re relatively healthy and are wanting to save money or change your level of coverage, do it as soon as possible. Even if you’re diabetic now, or have had cancer or heart conditions years ago, you might still have a chance with certain carriers.
If you’d like to enroll in Medicare Advantage
If you have Medicare only, plus a drug plan, you need to wait until the 2016 Annual Election Period to enroll in Medicare Advantage (begins October 15, 2016).
There are a few exceptions to this rule.
If there is a “Five Star” plan available in your zip code, you are allowed to enroll in a “Five Star” plan ONE TIME between December 8th and November 30th.
Read more about 5 Star Plans on Medicare.gov.
Another exception is moving out of your current drug plan’s service area. If you move, it opens up a Special Enrollment period to allow you to enroll in a different prescription plan, OR Medicare Advantage Plan.
Switching your Medicare Advantage
If you already have a Medicare Advantage Plan in 2016, and are not happy, you have a few options.
You can drop your Medicare Advantage plan between January 1st and February 14th. This is called the Medicare Advantage Disenrollment Period. At this time you can join a stand-alone drug plan, and add a Medigap policy if you qualify. However, you are not allowed to join a different Medicare Advantage Plan until the next open enrollment.
You can switch you current Medicare Advantage plan to a “Five Star” plan, if one is available in your zip code.
Read about how to find the best Medicare Advantage plan anywhere in the country.
Bottom Line – know your options, and be diligent in making your healthcare decisions!
- The Standard Part B Premium increase to $121.80 was lower than originally projected. (Phew!)
- The Part B deductible increase to $166 was also lower than projected. Some experts think seniors could face more increases in 2017.
- Cost Sharing in the Donut Hole decreases each year until it goes away completely in 2020. Yes!
- If you are on Medicare, you are not affected by Obamacare.
- If you are under 65 on an Affordable Care Act plan, it’s in your best interest to swap it out for Medicare as soon as you are eligible!
- Medicare Part B cost sharing is still 20%. The Part A Hospital deductible is $1288 in 2016.
- Supplementing Medicare will bring you peace of mind, predictable costs, and provide an out-of-pocket limit to annual medical costs.
Please let us know if we left anything out.
We’d love to hear your questions or comments below!