Social Security may seem to get all of the glory given that it puts money in seniors' pockets on a monthly basis during retirement, but the importance of Medicare is growing. According to the Urban Institute, an average income male with $47,800 in earnings in 2015 dollars will receive more in estimated lifetime benefits from Medicare than Social Security if he turns 65 in the year 2055. As healthcare costs continue to outpace the national rate of inflation, the importance of medical benefits during your golden years is only bound to gain in importance.
Medicare is a program that approximately 56 million people are currently eligible for. Yet the harsh reality is that nearly 20% of eligible Medicare beneficiaries (around 11 million people) don't have a good understanding of their Medicare plan. And not understanding some of Medicare's finer points could leave you paying more than you should be, or forgoing benefits that you're entitled to.
Can you pass this Medicare quiz?
How do you know if you're Medicare-savvy? Simple: take the following 10-question quiz I've devised to test your knowledge of fairly basic Medicare principles. Best of all, the answer to every question is either "True" or "False," making it easy for you to keep score at home.
Let's start by asking the questions to prevent you from scrolling to the answers, and then we'll tackle the correct answers below. Remember, these are "True" or "False" questions.
1. I automatically qualify for free Medicare benefits.
2. I can't be disqualified from Medicare because of pre-existing medical conditions.
3. Medicare is only for people aged 65 and up.
4. Medicare will notify me when it's time to enroll.
5. Hearing, dental, and vision coverage aren't included in original Medicare.
6. Everyone pays the same monthly premium for Part B and Part D.
7. There's no maximum annual out-of-pocket cost with an original Medicare plan.
8. Late enrollment into Part B or Part D could net me a penalty for the rest of my life.
9. Medicare Advantage plans can't charge me more for chemotherapy and dialysis than original Medicare.
10. Medicare is going bankrupt.
Do you have your answers ready? Let's take a closer look at how you did.
Did you pass?
1. I automatically qualify for free Medicare benefits. FALSE
Though it's often viewed as an entitlement program, you aren't simply promised Medicare benefits once you're born -- you have to earn them. Just as with Social Security, 40 lifetime work credits are needed to qualify for Part A (hospital insurance) for free. In 2017, a work credit equates to $1,300 in earned income, with a maximum of four work credits earned per year. Though these work credits are adjusted annually to account for inflation, essentially 10 years of part-time work will qualify you to receive Part A for free. If you don't have enough lifetime work credits, you may have to pay a premium for Part A, along with the expected premiums for Part B (outpatient services) and Part D (prescription drug plan).
2. I can't be disqualified from Medicare because of pre-existing medical conditions. TRUE
Good news: if you have pre-existing medical condition or are generally in poor health, Medicare can't turn you away. The program was primarily designed to provide medical coverage to seniors regardless of their health, meaning you'll be able to enroll and receive medical care no matter what your outlook.
3. Medicare is only for people aged 65 and up. FALSE
While Medicare was designed with the elderly in mind, around 1 in 6 current enrollees is under the age of 65 (the point at which seniors become eligible to enroll). In order for someone to qualify for Medicare under the age of 65, they would:
- Need to have a qualified disability and receive Social Security disability benefits for 24 months;
- Have end-stage renal disease;
- Have Amyotropic Lateral Sclerosis (ALS), or Lou Gehrig's disease as it's more commonly known.
4. Medicare will notify me when it's time to enroll. FALSE
The answer to this question really depends on your Social Security enrollment status. If you're already signed up to receive benefits from Social Security by the time you turn 65, you'll automatically be enrolled in Medicare Part A and Part B. You would still, however, need to enroll in Part D on your own. But if you aren't enrolled in Social Security by the time your initial enrollment period (IEP) rolls around, the onus is on you to remember to enroll in Parts A, B, and D during your seven-month IEP window.
5. Hearing, dental, and vision coverage aren't included in original Medicare. TRUE
As all-encompassing as Medicare is for seniors, one of the oddest things is that there are zero provisions for hearing, dental, and vision coverage. Medicare beneficiaries looking to get hearing, dental, and vision coverage either need to seek a separate plan outside of Medicare or consider purchasing a Medicare Advantage plan (also known as Part C). Medicare Advantage plans wrap up a number of original Medicare's main components (Parts A, B, and D) under one plan, and also add extras such as hearing, dental, and vision coverage.
6. Everyone pays the same monthly premium for Part B and Part D. FALSE
While there are standard premiums set for Medicare Part B and Part D, what you'll wind up paying may not be the same as your neighbor. For example, if you earn more than $85,000 per year as a single filer, or $170,000 as a couple, you'll be required to pay a surcharge on top of the standard premium for Part B and Part D.
Your premium can also depend on whether or not you're a new enrollee or an existing member. The "hold harmless" clause protects existing Medicare beneficiaries whose premiums are deducted monthly from their Social Security checks from having their Part B premiums increase by more than Social Security's cost-of-living adjustment (which is just 0.3% for the upcoming year). Meanwhile, new members are facing a double-digit hike in the standard Part B premium. To find out what category you might fall into, this Medicare.gov page on Part B costs can be quite helpful.
7. There's no maximum annual out-of-pocket cost with an original Medicare plan. TRUE
Though Medicare is a godsend for many seniors in that it helps foot a good portion of their medical care costs later in life, one of its few downsides is that there are no out-of-pocket annual limits. This can become particularly costly for seniors who are receiving in-office cancer treatments, which are traditionally billed under Part B. Some of the latest cancer immunotherapy treatments can run well in excess of $100,000 a year, and Medicare patients can be responsible for around 20% of the total cost of that treatment.
One consideration to be made here might be a supplemental insurance plan. Also known as a Medigap plan, a supplemental insurance plan would undoubtedly increase what you'll owe in monthly premiums, but it'll also reduce what you'll owe in out-of-pocket expenses.You can also consider a Medicare Advantage plan, which does offer annual out-of-pocket limits for Part A and B services.
8. Late enrollment into Part B or Part D could net me a penalty for the rest of my life. TRUE
It's true -- if you forget to enroll in Part B or D, you may be required to pay a late enrollment penalty every year for as long as you remain enrolled in Medicare. Missing a full year could cause your Part B premiums to increase by 10%, while for Part D it's based on the number of uncovered months times the base beneficiary premium (which in 2017 is $35.63).
If there is good news here, it's that there are special circumstances that may remove these penalties. If, for example, your plan changes its contract with Medicare, an error is made by a federal employee, or you lose your current coverage (e.g., you left coverage from an employer), you may be eligible to enroll outside of the normal enrollment periods. Simply forgetting to enroll, though, isn't considered a valid excuse.
9. Medicare Advantage plans can't charge me more for chemotherapy and dialysis than original Medicare. TRUE
If you're considering a Medicare Advantage plan, you can take comfort in knowing that not only will Part C cover the same services you're offered through original Medicare Parts A and B, but certain services, such as chemotherapy and dialysis, won't cost you a cent more with Part C than they would with original Medicare.
10. Medicare is going bankrupt. FALSE
Finally, we have one of the most pervasive Medicare myths of all -- namely that the program is insolvent and going bankrupt. There's little denying that rising medical costs have put Medicare's Hospital Insurance Trust on an unsustainable path. However, the program itself is incapable of going bankrupt since it's funded by payroll taxes. There will always be money generated from payroll taxes as long as Americans are working.
According to the Medicare Board of Trustees, by 2028 the program could exhaust its remaining spare cash. Should this happen, disbursements to physicians and hospitals could fall by an estimated 13%. While a drop in reimbursements could narrow Medicare's accepted network a bit, the program isn't going anywhere anytime soon.
If you wound up getting seven out of 10 questions correct or higher, give yourself a pat on the back -- you received a passing grade. However, missing even one question could leave you at a disadvantage when it comes to Medicare. Unless your score was perfect, perhaps it's time to brush up on what could become America's most important social program in the decades to come.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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