Medicare is federal health insurance for people aged 65 or older. It has different parts that cover various medical costs. Part A covers inpatient hospital stays and skilled nursing facilities. Part B covers outpatient services and has a monthly premium. Part D provides prescription drug coverage. Medicare Advantage plans are an alternative that bundle Parts A, B, and usually D. Supplemental Medigap plans help cover costs like copays and deductibles. Choosing the right Medicare plan requires understanding eligibility, costs, and coverage details for original Medicare versus Medicare Advantage and Medigap options.

1. 2014
Putnam Investments
8/8/2014
A Guide to Medicare

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Table of Content
Getting Started with Medicare……………………..……………….Page 3
Choosingthe Best Plan……………………………..……………… Page3
MedicareIncreased Premiums and Penalties………………….. Page 4
Costs Associated with Hospital Insurance (PartA)................... Page 4-5
Costs Associated with MedicalInsurance (PartB)……………..Page 5
MedicareAdvantage Plans…………………………………………..Page 5-6
Costs Associated with Prescription DrugInsurance Part D….. Page 6
Ways to Avoid the DonutHole……………………………………… Page 6
Medigap the SupplementalInsurance……………………………..Page 6-8
AdditionalInformation………………………………………………..Page 9

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Getting Started with Medicare
 Sign up for Medicare at the appropriate time
o If you are not working, you need to sign up 3 months before the month of your
65th birthday or 3 months after your 65th birthday month. If you choose the latter
there will be a gap in coverage
o If you are working and over 65, you need to sign up within 8 months after the
month in which your work stops or coverage stops (earlier the better to avoid a
gap in coverage)
 Sign up for Medigap at the appropriate time to maximize options
o Medigap enrollment period begins first day of month you are 65 or older and
have Medicare part B and runs for 6 months. If you are still working once you
sign up for Medicare part B your 6 months will begin
 Work for 10+ years paying the Medicare taxes for Medicare Part A to be free
o Part A will cost $234 if you or your spouse worked and paid Medicare taxes
between 7.5 and 10 years in the U.S
o Part A will cost $426 if you or your spouse worked and paid Medicare taxes for
fewer than 7.5 years in the U.S
 If receiving Social Security, you are automatically signed up for original Medicare (parts
A and B)
 If receiving Social Security, your Medicare expenses will be taken out of your primary
insurance amount
Choosing the Best Plan
 There are two options:
 Original Medicare (Part A and B)
 Medicare Advantage Plan
Benefits to having Medicare
Advantage Plans
Benefits to having Original
Medicare + Medigap
1. Often charge lower copayments
2. Coverage is consolidated into 1
plan
3. Monthly premiums are lower
4. Can include drug coverage for
no extra cost
5. Additional coverage
1. Larger network of providers to
choose from
2. Limits out-of-pocket expenses
3. Safer option in long run

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Medicare Penalties and Increased Premiums
 Every 12 month period without Medicare part B, the part B premiums increase by 10%
 Every month you go without Medicare part D insurance your penalty will increase. The
late enrollment penalty is calculated by multiplying 1% of the "national base beneficiary
premium" ($32.42 in 2014, and $33.13 in 2015) times the number of full, uncovered
months you were eligible but didn't join a Medicare Prescription Drug Plan and went
without other creditable prescription drug coverage
 If you have not signed up for Medicare and are eligible, you will not receive your Social
Security checks
 Part B and D premiums each increase as income increases as shown in the chart
below:
Costs Associated with Hospital Insurance (Part A)
 Inpatient Hospital costs:
o $1,216 deductible for each benefit period
o Days 1-60: $0 copayment for each benefit period
o Days 61-90: $304 copayment per day of each benefit period
o Days 91 and beyond: $608 copayment per each "lifetime reserve day" after day
90 for each benefit period (up to 60 days over your lifetime)
o Beyond lifetime reserve days: all costs
File Individual
Tax Return
File joint tax
return
File married &
separate tax
return
Monthly Premium
for Part B amount
you pay in 2014
Monthly
premium for
Part D 2014
$85,000 or less $170,000 or less $85,000 or less $104.90 your plan
premium
Above $85,0000
up to $107,000
above $170,000
up to $214,000
N/A $146.90 $12.10 + your
plan premium
Above $107,000
up to $160,000
above $214,000
up to $320,000
N/A $209.80 $31.10 + your
plan premium
Above $160,000
up tp $214,000
above $320,000
up to $428,000
above $85,000 and
up to $129,000
$272.70 $50.20 + your
plan premium
Above $214,000 above $428,000 above $129,000 $335.70 $69.30 + your
plan premium

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 Skilled Nursing Facility Costs
o Days 1–20: $0 for each benefit period
o Days 21–100: $152 copayment per day of each benefit period
o Days 101 and beyond: all costs
 Hospice and respite Care Costs
o $0 copayment for hospice care
o May need to pay a copayment of no more than $5 for each prescription drug and
other similar products for pain relief and symptom control
o May need to pay 5% of Medicare approved amount for inpatient respite care
o Room and Board
Costs Associated with Medical Insurance (Part B)
 Monthly premium based on your income usually $104.90 for 2014 (see chart above with
various income levels and higher premium amounts)
 An annual Part B deductible of $147
 You generally pay 20% of the Medicare approved amount for the doctor or other health
care provider's services
 Copayment for each service you get in an outpatient hospital
Late enrollment penalty may apply (see section Medicare Penalties and Increased
Premiums above)
Medicare Advantage Plans (Part C)
 Medicare Advantage Plans added benefits:
o Coverage for routine hearing exams and vision care
o Allowances toward eyewear
o Routine preventive dental care
o Prevention and wellness programs
o Worldwide coverage for emergency care
o Some include Prescription Drug plans (Part D)
 Health Maintenance Organization (HMO)
o Least expensive and most restrictive Medicare Advantage plan
o Restrictive in the doctors and other health care providers available to patient,
must be part of network or you pay entire bill
o Has to have a primary care physician in which the patient sees first at all times
o Need a referral from patient care physician to see other doctor
o Need to get prior approval from primary care physician for certain medical
services

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 Preferred Provider Organization (PPO)
o More attractive and more expensive
o Allows a member to see physicians and other providers not in HMO network and
allows for self-referring
o If you go outside the plan or self-refer the plan pays smaller part of bill then if you
followed the rules
o Member pays a higher premium for the plan and a higher copayment each time
the option is used
o Also pay a deductible which is usually less than a traditional insurance plan
Prescription Drug Insurance Costs
 You pay:
o 100% of deductible ($310)
o 25% of costs between $310
and $2,850
o 47.5% for brand name drugs
and 72% for generic
drugs while in doughnut hole
(between $2,850 and $4,550)
o 5% after $4,550
Ways to avoid the Donut Hole
 Check with doctors to see if prescription drugs are covered by Medicare, not all
prescription drugs are
 Ask doctors if there are generic drugs equivalent to the more expensive brand name
drugs
 Switch pharmacies
o CVS  Costco could save you hundreds of dollars a month
 Buy drugs in bulk or online to save money
Medigap the Supplemental Insurance
 Supplemental to Original Medicare, Parts A and B
 Designed to fill gaps in coverage such as copayments, coinsurance, and deductibles

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 Sold by private companies
 Policy covers only one person
 Medigap is guaranteed renewable even if you have health problems
Medigap Plans in Massachusetts:
1. Medigap Core Policy plan:
o Covers Inpatient hospitalization care copayments for days 61-150 (first 60 days
are covered by Medicare, days 61-90 $304 copayment, 91-150 $604 copayment)
o Covers an additional 365 Lifetime Reserve days paid in full
o Covers Part B excess charges (usually 20%)
o Monthly cost is about $100 per month, prices vary depending on insurance
company
2. Medigap Supplement 1 plan:
o Pays Part A deductible ($1216)
o Pays all copayments for Inpatient hospital care, days 1- 150
o Covers additional 365 Lifetime Hospital days paid in full
o Covers Part B excess charges (usually 20%)
o Covers Skilled Nursing Facility coinsurance for days 21-100 ($152)
o Covers Part B annual deductible ($147)
o Covers Foreign travel- for Medicare covered services needed while traveling
abroad
o Covers additional 120 days in Mental Health Hospital per benefit period
o Covers $10 per day in Skilled Nursing coinsurance for days 101-365
o Monthly cost is about $175, prices vary depending on insurance company

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 Regular Medigap Plans: Strategies to Maximize Medicare
 60% of Medigap plans are spent on Plan F
 Plan F is the only plan that offers 100% coverage on Part B excess charges and the
Part B deductible
 Plan C is the second most popular with 21%
 Plans B and D are about 5% each
 There are different pricings for Medigap plans, based on the age when you sign up,
standard price regardless of age, and attained age pricing.
Benefits of Medicare
Core Policy
1
2
3
4
Benefits
Supp
PShared Coverage
• Hospitalizati
on Part A
Copayments
• 365
additional
lifetime
hospital
days- paid in
full
• Part B
Coinsurance
• Parts A and B
blood- first 3
pints
• Less expensive

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 Any standardized Medigap policy is guaranteed renewable even if you have health
problems. This means the insurance company can't cancel your Medigap policy as long
as you pay the premium
 If a private insurance company sells Medigap plans, they have to sell plan A. If they
decide they want to sell other plans they must sell either plan C or plan F
 Massachusetts, Minnesota, and Wisconsin have different Medigap plans
 All Medigap plans with the same letter have the exact same coverage, important to get
it for lowest cost because they are all the same
 No Medigap policy covers the Medicare part B monthly premium ($104.90)
 Plan F costs the most and covers everything except the part B premium
 Plan C provides the second most coverage and covers everything except part b excess
charges and the part B ($104.90) premium
 Plans C, D, F, G, M, N all provide foreign travel emergency
 Plans K and L work differently and charge a percentage for various costs. They also
have an out-of-pocket limit. These plans are beneficial if you are worried about long
term care costs
Additional Information
 Be aware that your company could take you off their insurance plan at age 65
 If break in skilled care lasts more than 30 days, you need a new 3-day hospital stay
 If break in skilled care and inpatient hospitalization lasts at least 60 days in a row this
ends your current benefit period and renews your skilled nursing facility benefits
 Medicare Advantage Plans, Prescription drug insurance and Medigap are all provided
by private insurance companies
 Medicare and Medigap policies only cover one person
 Long term care is not covered by Medicare

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