What Is Medicare Part B and How Does it Work?
Simply stated, Medicare Part B covers your Doctors bills. It also covers Hospital Out-Patient (Emergency Room) expenses, Ambulance bills and rental of durable medical expenses such as wheel chairs or hospital beds for use at home, etc.
Medicare is set up so that Medicare Part B is “voluntary”. You don’t have to take it. It’s voluntary because you have to pay a premium for it and you are allowed to avoid that premium by not signing up for it.
Of course, if you don’t sign up for it, you won’t have any coverage for any of the expenses mentioned in the first sentence of this article. And, if you don’t sign up when you are first eligible (usually, your Open Enrollment Period for Medicare Part B is the three months prior to the month in which you qualify for Medicare Part B, the month in which you qualify and the three months after you qualify and most folks qualify when they reach age 65.), you won’t be allowed to sign up until the next General Enrollment Period (January 1st through March 31st of the next calendar year) and your Medicare Part B coverage will not take effect until July 1st of the year in which you finally enroll. Moreover, you will have to pay a penalty of not more that 10% for every full year that you were eligible but did not sign up and that penalty is permanent. It is a lifetime penalty. You will never lose it.
An Exception You Might Qualify For
There is an important exception to this. If you are working for an employer who provides an Employer Sponsored Group Health Insurance Plan (ESGHIP), you do not have to sign up for Medicare Part B until you lose that coverage and you will not be charged a Late Enrollment Penalty for waiting. When you lose that coverage, the Human Resources (Personnel) Department of your employer will provide you with a document called a Certificate of Creditable Coverage, or words to that effect, which you can show to Medicare if and when they ask for it and that will prevent them from adding that penalty to your premium.
Then, Which Would be Better for Me?
Many people wonder which is better. Should they stay on their group plan at work or drop off and enroll in Medicare Part B as soon as they can? For some people, the question will be decided according to their spouse’s insurance needs.
Let’s say the husband is about to turn 65 and his wife is 63. They’re both covered under the husband’s group plan where he works and he is not planning to retire any time soon. If he drops off of his employer’s group plan, in most cases, she cannot remain on that plan if he doesn’t remain on it. So she would have to find replacement coverage until she turns 65 and that coverage for her will be expensive. In this set of circumstances, it would most likely be best for both of them to continue with the ESGHIP until they could both qualify for Medicare Part B, especially if the husband’s employer is subsidizing the premium expense as most do.
However, if you are the only one who would be affected by dropping off of your group insurance at work, even if you are going to continue to work, it might be smart to go ahead and do that.
First, the premium you would pay to Social Security for Medicare Part B (more on that in just a few moments) plus the premium you would pay for a Medicare Supplement and a Medicare Part D Prescription Drug Plan would likely be a good deal cheaper than the premium being charged to you and/or your employer for your coverage under the group plan at work.
Secondly, and probably more importantly, the coverage would almost certainly be better. Although you may enjoy copays for Doctors Office Visits under your group plan at work, that policy almost certainly has a large deductible for a hospital stay. With Medicare A & B along with an F Plan or a G Plan Medicare Supplement, you would have little or no deductible at all. You would also have no copays to have to pay at the Doctor’s office. So, your coverage would likely be cheaper and better, to boot!
How Does The 6 Month Open Enrollment Period Work?
Turning 65 is a magic moment for you with regard to your health coverage. Not only can you qualify for Medicare Part A & B (as well as Medicare Part D which is discussed in another article on this website), but you will have a 6 month Open Enrollment Period within which you can sign up for any Medicare Supplement with any insurance company that offers them and you cannot be turned down! They’re not even allowed to ask you any health questions. They have to take you! You could be lying on your deathbed, dying of cancer, and they would have to accept you as a client. Moreover, most of the better Medicare Supplement insurance companies do not impose a waiting period for pre-existing conditions. Your coverage begins with the policy effective date. Period.
If you are coming onto Medicare before age 65 due to a disability, this Open Enrollment Period also applies to you but the only Medicare Supplement currently available to someone in that circumstance is the A Plan Medicare Supplement. More on that later as well. Another important point: If you are of Medicare age and, even though you remained on your group plan at work, you’re already enrolled in Medicare Part B but you did that so long ago that you no longer qualify for the 6 month Open Enrollment Period, don’t fret if you lose your ESGHIP. You will have a 63 day right to get a Medicare Supplement beginning with the lapse date of your coverage with your group plan. This is called the Guaranteed Issue Period and you do not have to answer any health questions if you are applying for an A Plan, a B Plan, a C Plan or an F Plan. Those are the only ones that are available on a Guaranteed Issue basis. That’s important to know if you have significant health problems when you leave your Employer coverage. If your health is good, however and you can answer “no” to all of the health questions on an insurance company’s Medicare Supplement application, you can get a G Plan, if you want it and that would likely save you a great deal of money. More on that later.
Do I Have To Pay The Government for Medicare Part B?
Yes. The standard premium that you pay the Social Security Administration for Medicare Part B for new Enrollees is $134 per month. If you are receiving a Social Security benefit, Social Security will withhold that from your benefit each month before they deposit that money in your bank account. This is required by Social Security. They want to make sure they get their money so they take it away from you before you can spend it on something else.
If you are not yet receiving a Social Security benefit, you will have to pay the premium directly to the Social Security Administration. Usually, they will bill you for a quarterly premium at first. That’s $402 (3 times $134). Then, they will bill you until you begin to receive a Social Security benefit. In the past, Social Security has been billing new Medicare Part B Enrollees monthly but, recently, they have begun billing quarterly.
There is a method by which you can set up a monthly bank draft, if you wish, and they will even accept a credit card payment but credit card payments cannot be set up as a recurring charge. You would have to either call them quarterly and authorize it each quarter fill out the credit card information at the bottom of the bill they send you each quarter. You can use a debit card as well as a credit card.
What Is IRMAA and What Do I Need To Know About It?
Your premium could be more than the standard premium. For the last few years, Social Security has been “means testing” the premiums for Medicare Part B. They are also doing that for Medicare Part D, the Prescription Drug Benefit and I will be discussing that on the link entitled “What Is Medicare Part D and How Does It Work”.
The reasoning behind “means testing” is simple. The government believes that people who make more money should pay more for their benefits. Sounds good on the surface but it should also be noted that people who have to pay this extra amount do not get any more medical care than someone with a lesser income. They don’t get any better care than someone with a lesser income. They just have to pay more for it. We can debate the rightness or wrongness of this thinking some other time but suffice it to say that, the more money you make, the more money you will have to pay for your government benefits even though you may already have paid more into Social Security than did someone who did not make as much money as you did.
Social Security coordinates with the IRS and bases their assessment on the amount of income you reported in the tax year prior to enrolling. These figures are re-evaluated annually so your extra charge can, and likely will, change each year. And, by “change”, I mean it could go up and it could go down, all depending on the Modified Adjusted Gross Income you report on your income tax return each tax year.
That extra amount is called the IRMAA or Income Related Monthly Adjustment Amount. The following chart is the latest information I have been able to get from Social Security and shows the actual amount that will you will have to pay for your Medicare Part B premium depending on your Modified Adjusted Gross Income (MAGI): (and I’ll bet you thought the Magi were guys on camels who brought gifts!) These are the numbers for 2016:
|If your yearly income in 2015 (for what you pay in 2016) was||You pay each month (in 2017)|
|File individual tax return||File joint tax return||File married & separate tax return|
|$85,000 or less||$170,000 or less||$85,000 or less||$134.00|
|above $85,000 up to $107,000||above $170,000 up to $214,000||Not applicable||$187.50|
|above $107,000 up to $160,000||above $214,000 up to $320,000||Not applicable||$267.90|
|above $160,000 up to $214,000||above $320,000 up to $428,000||above $85,000 and up to $129,000||$348.30|
|above $214,000||above $428,000||above $129,000||$428.60|
There may be a way to reduce your IRMAA.
In some situations, Social Security can make a new decision about your IRMAAs. Contact Social Security (1-800-772-1213) to request a new decision if your MAGI (Modified Adjusted Gross Income) has gone down at least one range in the table above or has gone below the lowest amounts in the table since the 2015 tax year, AND the decrease in MAGI was caused by any of the following life-changing events:
- You married;
- You divorced, or your marriage was annulled;
- You became a widow or widower;
- Your spouse stopped working or reduced work hours;
- Your spouse lost income from income producing property due to a disaster or other event beyond your control;
- Your spouse experienced a scheduled cessation, termination or reorganization of an employer’s pension plan; or
- Your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy or reorganization.
Social Security will use the new lower MAGI to see if they can make a new decision about your IRMAAs. They cannot make a decision if your income has changed for a reason other than those listed above, such as receiving a one-time income from capital gains (read, you sold the farm). Italics mine
You will need to submit proof of the event listed above that caused your income to go down (such as a death certificate, a letter from your pension fund administrator or a letter from your employer about your retirement). If you filed an amended or corrected tax return for the year you want changed, you will also need to submit a copy of the tax return with proof the IRS has received it.
If your MAGI has gone down at any time during January through September, you will need to tell Social Security before the end of that year so they can correct your IRMAAs in that year. However, if the event that makes your MAGI go down did not occur until October 1st or later in the year, they can correct your IRMAAs for that year so long as you tell them before the end of March of the following year.
Now that we’ve gotten all of that out of the way . . .
Here’s How Medicare Part B Actually Works:
Each calendar year, Medicare has a Medicare Part B Deductible. In 2016 that amount is $183. It was $166 in 2016, $162 in 2010 as it was the year before that. In 2012, it actually went down to $140. This was the first time in the long history of Medicare that the Medicare Part B Deductible went down. It went up in 2013 to $147 and is now $183 for 2017.
You do not incur any deductible until and unless you have medical expenses covered by Medicare Part B. Medicare applies the amount it approves on the first charges it receives to that deductible until it has been satisfied. Sometimes, that can be all at once if the approved amount on a Physician’s charge is sufficient to satisfy the deductible. Otherwise, they will apply it to however many bills they need to in order to reach that $166 limit.
Medicare does not always apply their deductible to the Doctors bills in the same order that you incurred them. They apply their deductible to your Doctors bills in the order in which they receive them. Some insurance clerks in some Doctors offices do not file their claims as quickly as some others do. That is not intended as a slight to those insurance clerks. Heaven knows, they are busy, busy people.
Once you have satisfied your Medicare Part B Deductible, Medicare will then pay 80% of the amount they approve on a given charge. If the Doctor accepts assignment from Medicare (allows Medicare to pay him or her, instead of paying you), and most do, Medicare will pay the Doctor directly. If the Doctor accepts assignment from Medicare, the Doctor agrees to write off the amount of his or her bill that Medicare did not approve. The remainder of that bill, the 20% that Medicare approved but did not pay plus any amount of that bill that Medicare applied to your Medicare Part B Deductible, is your responsibility to pay. Most Medicare Supplement policies (except the A Plan Medicare Supplement) will pay that deductible and all Medicare Supplements issued after 1992 will pay 20% for you and, usually, if Medicare paid the Doctor, the insurance company will, too. Again, the A Plan Medicare Supplement is one of the exceptions to that rule. It does not cover the Medicare Part B Deductible. There are also two high deductible plans, the High Deductible C and the High Deductible F Plans. If you have one of those plans, no benefits will be paid on your medical expenses by either of those plans until that high deductible is met.
There is no limit to the amount Medicare Part B will pay and, consequently, there is no limit to the amount your Medicare Supplement will pay. You simply cannot run out of benefits.
What if My Doctor Doesn’t Accept Assignment from Medicare?
If your Physician does not accept assignment from Medicare, that is to say he or she does not allow Medicare to pay him or her directly, that Doctor can charge you an extra 15% of the Medicare Approved amount on his or her bill but that’s all they can charge. Some Medicare Supplements pay that extra 15% for you; most notably the F Plan Standard Modernized plan and the G Plan Standard Modernized plan.
Some older G plans only covered 80% of that extra 15% (in other words, the first 12% of the 15%) and you would be responsible for the other 3%. Usually, however, that 3% didn’t amount to very much. It was more of a nuisance than anything else. Most people who bought those old G Plans did so because the premiums for them were substantially cheaper than the F Plans and there was not much sense in paying between $350 and $500 a year in extra premium just to cover what was then a $183 deductible.
Many of the larger medical facilities, such as Mayo Clinic, traditionally do not accept assignment from Medicare. For them, based on the sheer volume of business they conduct, it makes sense. That extra 15% can amount to quite a bit of money for them.
It should go without saying that, if Medicare pays you instead of your Medical Care Provider, you must then turn around and pay that money to your Medical Care Provider. It’s not “found money”! But, a note of caution…don’t just endorse the check and mail it to your Medical Care Provider. There are a whole host of problems that can cause, not the least of which is that the check can get lost in the mail. The clerk at the Health Care Provider’s office could inadvertently credit that payment to another patient’s account. Unless you deposit that check into your own account and then send a personal check to the Health Care Provider, you have no way of demonstrating, if you ever need to, that you paid that bill. The check you receive from Medicare will not show up in your bank statement, it will show up in Medicare’s.
What if My Doctor Does Not Participate in Medicare?
If a Doctor will see you but is not a Medicare Approved Provider, then your bill with that Doctor is a matter between the two of you. Medicare won’t pay on that bill and neither will your Medicare Supplement. Remember, a Medicare Supplement supplements Medicare. If Medicare doesn’t start on a bill, neither will your Medicare Supplement policy.
Most Physicians are honest, hard-working people just like the rest of us. Their office staff will almost certainly tell you, up front when you first contact them, if their Doctor(s) participate(s) in Medicare. If they do not and you still choose to receive treatment from that Physician, you will have to make payment arrangements that this Doctor will accept or there are medical credit card companies that can also help. Usually, if the Doctor does not participate in Medicare his or her office staff will be able to help you get in touch with one or more of these companies.
How are Claims Handled?
You do not have to file your claims with Medicare. By law, if the Doctor is a Medicare Approved Physician, the Doctor’s Office must file the claim for you, even if the Doctor does not accept assignment from Medicare. Virtually every Medicare Supplement insurance company is set up with Medicare for Automatic Claims Filing or ACF. Every month every Medicare Supplement insurance company electronically provides Medicare with a list of all of their Medicare Supplement policyholders and Medicare’s records are, therefore, updated monthly and kept as up to date as possible.
When Medicare processes a claim for you, its computer already knows who you have your Medicare Supplement policy with and it sends the claim to them, electronically. Oftentimes, you will actually get an Explanation of Benefits (EOB) from your Medicare Supplement company before you get the Medicare Benefits Summary Notice, also known as an Explanation of Medicare Benefits or EOMB. There are two reasons for this:
First, Medicare has so many transactions that they decided quite a while back that they would only send out EOMB’s quarterly. It’s a cost cutting measure. The other reason is because no insurance company, no matter how big they are or how many insureds they have, has nearly as many people covered as Medicare does. So, the time it takes the insurance company to get your information to you is understandably shorter than it would take Medicare to send theirs to you.
There is one more deductible to be aware of under Medicare, the Blood Deductible. Most people are not aware of this but Medicare has a 3 pint Blood Deductible. That means, if you need blood, Medicare will not pay for the first three pints you receive. They will pay for the typing and cross matching and all of the services necessary to administer that blood to you. They just won’t pay for the first three pints of the actual blood, itself.
I know of no Medicare Supplement that will not pay for that deductible for you. However, most insurance companies will pay only for non-replaced blood. That is to say that, if you need blood and some of your friends or family members donate enough to replace the blood you used, most insurance companies consider that to be a non-expense to you.
Ambulance Coverage — Very, Very Important!
I also want to take a moment to discuss how Medicare covers Ambulance Bills. Let’s understand something here, first. It is not just a matter of opinion, it is fact. The Federal government is taking $716,000,000,000 (that’s Billion…with a B) out of Medicare over a ten year period to help fund Obamacare. According to the Congressional Budget Office (CBO), Medicare was already going broke before that happened. Add to that the fact that the Baby Boom Generation will double the number of people on Medicare by 2020, as compared to 2010, and it doesn’t take a rocket scientist to see that some very significant changes are going to have to be made if Medicare is going to survive and be there for the tens of millions of people who are going to need it.
One of the changes that is already happening is in how Medicare treats ambulance bills. Medicare has two criteria which must be met before they will pay for an ambulance bill for you. They’ve always had these criteria but they’ve not been as strict in enforcing them as they have been recently.
First, they must consider your use of the ambulance to have been medically necessary. It is not enough that you think it’s medically necessary when you call the ambulance. A bureaucrat at Medicare must consider it to have been medically necessary and he or she has the luxury of examining that question after the fact; after the emergency is well in the past.
Medically necessary, in the insurance language, means a threat to life or limb. If you have a heart attack or stroke, the use of an ambulance would almost certainly be considered medically necessary. If you have an injury that results in arterial bleeding or a compound fracture of your leg, that would also likely be considered medically necessary. You develop stomach pains that are so severe that you have to drive home from wherever you were when the pains began to develop, and then, later, when the pain is so bad you can’t see straight, that’s NOT medically necessary. Even if you get past that first criterion, you must meet the second one, as well. And here it is:
You have to be in such a condition that you could not have been safely transported to the hospital by any means other than an ambulance. Stomach pains that are so severe that you have to go home from wherever you were when the pains began? That won’t get it. If you could drive yourself home, you could have driven yourself to the hospital.
That very scenario has already happened to one of my clients, a widow who lives alone and had absolutely no one who could have driven her to the hospital. She had recently had bariatric surgery and was attending some function in downtown Amarillo one evening when she began experiencing some sharp abdominal pains. So, she decided to go home. There she tried to self medicate but nothing helped.
By the time she decided she needed emergency medical attention, she was no longer in any condition to drive herself. She would have been a danger to herself and everyone else on the road. So she called an ambulance, as any of us would have done. Medicare ultimately denied her claim stating that, if she could drive herself home, she could have driven herself to the hospital. I actually worked on the appeal for her but to no avail.
There are ambulance policies out there and some of them are very, very reasonably priced and with very, very generous benefits.