You don’t get Medicare because you want it. You must be eligible for Medicare. Medicare eligibility doesn’t mean you can enroll in Medicare whenever you wish. You can only enroll in Medicare during specific periods under particular circumstances.
These special times are called election periods, each governed by criteria and circumstances. You must meet specific criteria to be eligible for Medicare and can enroll in Medicare during a specific time period or circumstance.
Congress passed the Consolidated Appropriations Act of 2021 (CAA), which expanded, streamlined, and made Medicare eligibility and enrollment easier.
Two areas of change are very relevant to newbies going on Medicare in 2023.
The Last 3 Months of Medicare Initial Enrollment
You have probably heard you have seven months to enroll in Medicare—3 months before your 65th birthday, the month of your 65th birthday, and 3 months after your 65th birthday. This is referred to as your Initial Enrollment Period. The problem for years was a bizarre rule when you enroll during the last 3 months of this period that affected your Medicare eligibility.
The old rule was if you enrolled during the 3 months before your 65th birthday, Medicare started the month you turned 65. That remains the same. For example, your 65th birthday is in July. Your Medicare will start in July if you enroll in April, May, or June.
If you enrolled during the 3 months after your 65th birthday, Medicare did not start until 2 months later for month 5, 3 months later for month 6, and 3 months later for month 7. For example, if you enroll in August, Medicare starts in October. You enroll in October, Medicare starts in January. Crazy.
Now when you enroll during the last 3 months, Medicare starts immediately the following month. For example, if your 65th birthday is in July and you enroll in Medicare in August, Medicare starts September 1st instead of October 1st.
Or if your 65th birthday is in July and you enroll in Medicare in September, Medicare starts October 1st instead of December 1st.
This makes way more sense. It shortens the waiting time and prevents lapses in coverage from employer health plans ending on an immovable date. Not sure why this Medicare eligibility wasn’t fixed years ago.
Medicare General Enrollment Period Eligibility
Over the years, a few people came to me who missed enrolling in Medicare when they were first eligible. Consequently, they were assessed the famous Medicare 10% penalty compounded for each year without Medicare, but more importantly, their Medicare eligibility was affected. They could not start their Medicare health coverage until months later.
Quite often, they have no health coverage for months. They are entirely on their own, paying for any medical services out of their own pocket.
Imagine you are 67 and decide it’s time to get on Medicare. You retired a few years back but never signed up for Medicare or had any other health insurance. You cannot just show up at the Social Security office, sign up for Medicare and have it start the next month. You must wait until the General Enrollment Period from January 1st—March 31st. This is just for enrollment. Medicare then did not start until July 1st, and you could only purchase a Part D drug plan and/or Medicare Supplement. No Medicare Part C/Medicare Advantage until January 1st. Not sure about the confused thinking behind such a bad rule.
In 2023, when a Medicare beneficiary signs up for Medicare during the General Enrollment Period, Medicare coverage starts on the 1st of the following month. For example, if you sign up in February, Medicare starts March 1st. You don’t need to wait anymore until July 1st for Medicare to start.
People constantly complain about how confusing Medicare is. Medicare rules, however—believe it or not—remain very constant over time. These two rule changes from the Consolidated Appropriations Act of 2021 (CAA) are unusual because Medicare does not change much. These new rules about Medicare eligibility and enrollment periods are a welcome adjustment to how Medicare operates.
The Bottom Line On Medicare Eligibility & Enrollment
When you do not deal with Medicare rules daily, they feel overwhelming. I understand and sympathize. Also, understand Medicare eligibility and the ability to enroll in Medicare is critical. There is no room for mistakes.
You want to know how Medicare works, the rules, and the intricacies so that you have the best possible Medicare health coverage.
You can also just call us rather than trying to remember the Medicare eligibility and enrollment rules. We listen to your situation and provide the most up-to-date and relevant Medicare information.
Call 402-614-3389 to speak with an experienced insurance professional and licensed agent.
Medicare is superb health insurance. The coverage is the most comprehensive of any health plan. The cost is incredibly low for the consumer. The medication portion, unfortunately, which has been relatively new since 2006, is not as good as most employer-provided drug coverage, at least for the Medicare demographic. Consequently, Medicare continually evolves, so the 2023 Medicare changes for drugs are significant.
Does Medicare Cover Insulin?
Medicare has covered insulin for a long time, but the cost to consumers has gone through the roof over the years. Under the Trump Administration, the Centers for Medicare & Medicaid Services (CMS) announced Medicare changes in 2021 that covered 1,750 Medicare Part D prescription drug plans and Medicare Advantage plans with prescription drug coverage. The plans would reduce insulin prices under the Senior Savings Model. Medicare beneficiaries would have access to a broad range of insulins at a maximum copay of $35 per month. The program, however, was voluntary.
The Inflation Reduction Act (IRA) law the Biden administration sponsored significantly changed Medicare for 2023. The IRA law set a cap of $35 for insulin that Medicare Part D prescription drug plans offered. The insulin price reduction act went into effect in 2023.
Not all, but many insulin medications to combat diabetes are capped at $35 per month.
Medicare Changes Insulin Prices in 2023
The $35 insulin cap is for both Medicare Part B and Part D. Most people get their insulin medications through their Medicare Part D prescription drug plan. They pay the monthly plan premium and a copay when they pick up their insulin. In the past, the copays were significant. Now insulins on Medicare prescription drug plans in 2023 changed to $35 per month.
What Are 2023 Changes to Insulin Covered by Medicare Part B?
Many others use insulin delivered through an insulin pump that people wear. The pumps are considered durable medical equipment and are billed under Medicare Part B. Part B has a deductible and an unlimited 20 percent coinsurance. However, when paired with a Medicare supplement, like Plan G, the 20 percent coinsurance is wholly covered. After a small Part B deductible is met, the beneficiary pays nothing for the pump or insulin.
What About Disposable Insulin Patch Pumps?
Insulet Omnipods are very popular. It is a disposable insulin “patch” pump. The disposable pump is a small wireless, tubeless pump worn directly on the body. Beneficiaries get the refills for the Omnipod under the Part D prescription drug plan, not Part B.
The Medicare change for 2023 is insulin refills will be $35 or less.
The patch pump, however, is considered a durable medical device, which falls under Part B. The device will be covered like any other durable medical equipment with no price controls. What you pay is determined by your plan.
How Does Medicare Change Deductibles in 2023 For Insulin?
Most Medicare Part D prescription drug plans and many Medicare Advantage plans with prescription coverage have deductibles. The deductibles aren’t going anywhere; they still exist. However, the deductible no longer applies to covered $35 insulin medications. In other words, Medicare beneficiaries do not have first to meet the deductibles of $505 before they start paying $35 for insulin. This is significant.
Many times the large deductible is an insurmountable obstacle for some clients when they go to the pharmacy to pick up their medication for the first time. They choose not to get their essential medication because of the cost.
I always show clients the prices when we meet. I’m not sure what happens from the showing to when some actually pick up the medication at the pharmacy, but I have fielded many a phone call–“I can’t afford $$$$!”
Medicare changed the rule for $35 insulin on January 1, 2023, to no deductible.
Reimbursement When Overcharged for $35 Insulin
Mistakes happen. If you are charged more than $35 per month for an insulin medication that is part of the program, the Part D plan must reimburse you within 30 days. The insurance company is responsible for the reimbursement. Contact the plan. The customer service 800-number is on the back of your Part D medical card.
Pharmacies Don’t Matter for $35 Insulin.
When I meet with clients, I always show how different pharmacies will affect drug copays. The effect of pharmacies on cost is essential to know if you wish to maximize your Part D plan and pay the least.
Drug plans sign contracts with different pharmacy chains and networks. As part of the deal, copays are lower if you go to one of the plan’s preferred pharmacies versus a non-preferred pharmacy.
Whether a preferred or non-preferred pharmacy, the insulin on the Medicare Part D plan will be $35. Many of my clients have a favorite pharmacy that may not be in the network—non-preferred. It is good to know, wherever you pick up your $35 insulin; it will be $35 insulin.
Not All Medicare Insulin Is $35
Medicare Part D prescription drug plans create formularies, a list of the medications the plan covers. The medications are put in tiers that determine copays and deductibles. Medicare requires the insurance companies to cover at least two medications in each category. Sometimes companies make choices, like covering Humalog insulin types but not Novolog insulin. The new law requires the plan to keep insulin at $35, but only insulins the plan carries. Not every brand or type. This is important in selecting a Part D plan. You need to know which brands and types of insulins are covered under a particular plan. And plans can change and often do change drugs on the formulary from year to year.
We always run clients’ medications when we meet to ensure they have the lowest cost plan for their specific list of medications. During Annual Election Period (AEP) Oct 15th–Dec 7th, we re-run clients’ medications to make sure they still have the best plan for them. If necessary, we change their plan.
No Medicare Change in 2023 for Non-Insulin Anti-Diabetic Drugs
While Medicare’s $35 insulin is a tremendous financial relief for Medicare beneficiaries who are diabetic, other medications are equally important to improve and maintain glycemic control. Some popular non-insulin and anti-diabetic medications are Trulicity, Bydureon, Ozempic, and Victoza. Oral and injectable (non-insulin) pharmacological options are available for treating diabetes. Medicare, however, did not change the pricing for these medications for 2023. They are not part of the price reduction program currently.
Special Election Period Because of $35 Insulin
The $35 insulin for Medicare beneficiaries is a new regulation, so Medicare has allowed a special enrollment period for “Exceptional Circumstances.” The rule is only for those who are on insulin. You have a one-time opportunity to change your Medicare Part D prescription drug plan from December 8, 2022, until December 31, 2023. The reason is to take advantage of the favorable pricing for insulin medications.
Again, the ability to change Part D plans is only for those on insulin medications, a one-time opportunity during this period.
True Out-of-Pocket Costs Carry Over
Each of the Medicare Part D prescription drug plans track the amount the beneficiaries pay and what the plan pays. These amounts determine where the beneficiaries are in the four stages. This calculation is called True Out-of-Pocket (TrOOP) costs.
Remember, there are four phases in pricing for Medicare Part D prescription drug plans: deductible, initial phase, the gap (or Donut Hole), and catastrophic phase. Switching Part D plans during the year does not mess this up. You do not start over again. The amounts, totals, and placement within Part D plan phases transfer to the new plan.
If you are in the gap phase in one plan, you will be in the same phase and place in the new plan. You did not lose your place or are forced to start over again.
Medicare Changes the Catastrophic Phase in 2023
The fourth phase in the four stages of tracking Part D prescription drug costs is called “Catastrophic.” When a beneficiary reaches the catastrophic phase, they and the plan have paid out approximately $7,400 in out-of-pocket costs between the beneficiary and the plan. The actual out-of-pocket for the beneficiary is $3,100. The prescription costs are usually minimal unless it is an expensive medication. The coinsurance in the catastrophic phase for expensive medications is an unlimited 5 percent, and 5 percent of a large amount is still significant for most pocketbooks.
The effect of the new legislation in 2024 is beneficiaries will no longer pay the unlimited 5 percent. The out-of-pocket cost will stop at a hard cap of $3,250 out-of-pocket max for beneficiaries. While still not a small amount, it is significantly less than what some beneficiaries paid who were on costly medications in previous years.
Medicare Part D Annual Limit In 2025
The Inflation Reduction Act (IRA) mandates that the annual limit of the Medicare Part D prescription drug will be $2,000 starting in 2025 and indexed for inflation yearly after that. Part D expenses are not currently capped. This Medicare change starting in 2023 is enormous.
I think of my clients on various insulins, anti-diabetic medications, Eliquis for the heart, Humira & Enbrel for rheumatoid arthritis. Their costs have been thousands of dollars for years. That will stop.
The Medicare Part D $2,000 cap is for all tiers of drugs. The limit is for all medications on the plan’s formulary, and the $2,000 limit is for all Medicare beneficiaries regardless of past or current income. IRMAA does not apply.
Inflation Cap on Part D Premiums
The law also includes a 6 percent limit on Part D premium increases. With current inflation around 6 percent now and medical costs usually at a higher rate of inflation growth than regular inflation, how the system will really work is yet to be seen.
Smoothing Part D Out-of-Pocket Costs
Another challenge with Medicare Part D prescription drug expense is the ups and downs of the costs.
One month the cost may be $1,000, and the next month is $100. Most consumers’ incomes are consistently the same each month, and large spikes in expenses create extreme hardship.
The IRA law offers an option for “smoothing” the payments evenly over the year.
In 2025 when the medication copays are set at a total out-of-pocket of $2,000 per year, “smoothing” would look like a $167 monthly payment for those on medications that reach the cost cap.
The smoothing idea aims to reduce prescription abandonment, dosage reductions, and delays in treatment because of high-cost specialty drugs. I had gotten phone calls too many times from the pharmacy when a client went to pick up a medication during the deductible phase. “I can’t afford $500 for this #%&* drug!” I explained their cost would not be $500 every month. They are in the deductible phase. Clients tell me they can’t afford the drug, so they leave it at the pharmacy. Not good.
The Bottom Line For 2023 Medicare Changes
The Medicare Part D prescription drug program has evolved since its inception in 2006. The Inflation Reduction Act (IRA) introduces significant changes to Medicare from 2023 to 2025. The law addresses the growing senior population dependent upon insulin and its rising cost. The IRA law reduces costs for those on limited incomes to afford critical life-sustaining medications.
It is essential to be aware of these new rules to benefit from them and get the proper medications to enhance your life’s quality.
Many years ago, I was still new to the Medicare insurance business. I had a few hundred clients but no high-income earners. I knew what Medicare IRMAA was, but I had never met someone subject to the IRMAA tax before. Doug was an improbable candidate. After many years and thousands of clients later, I definitely know what Medicare IRMAA is in 2023.
Don’t Judge A Book by Its Cover
Doug showed up at my office on a loud Harley Davidson hog. His hair was longer than mine, but that’s saying nothing. He was a big dude, and his leathers made him even bigger. We sat down and took care of Medicare business.
A few months later, when Doug’s Medicare started, I got a distressed phone call. “You said my Medicare premium was going to be this amount. It’s three times that!”
I was befuddled. I got my calculator out, but I couldn’t figure out why it was so high. Finally, I said, “Your income would have to be unusually high to be charged that much.”
Doug got quiet. “How high?” he asked. The first IRMAA bracket was $85,000 for a single person at the time. Doug guffawed and said, “Hell, my income is way more than that.”
Turns out Doug was not only a retired municipal employee with a pension and Social Security. He was also retired military with a 20-year pension. On top of that, he had built up a stock portfolio that kicked out around $30,000 in dividend income a year.
I should have taken the adage, ‘Don’t judge a book by its cover’ more seriously.
Since then, I always bring up income in my introductory meetings and how income affects Medicare Part B premiums. Zip code and fashion choices are no guaranteed ways to determine Medicare IRMAA in 2023.
What Is Medicare IRMAA in 2023?
IRMAA stands for Income Related Monthly Adjustment Amount. The government loves acronyms. Medicare IRMAA is a surcharge that high-earners pay for their Medicare insurance coverage to Social Security.
Everyone pays a tax for Medicare during their working years. The Medicare tax is included in the FICA (Federal Insurance Contribution Act) you pay, and that is recorded on your pay stubs. Your Medicare tax is currently 1.45%. It is graduated up for higher earners.
In 1966 when the Medicare program began, the cost to workers was $3 per person per month, which is approximately $30 in today’s dollars. The baby boomers are leaving the workforce in huge numbers, so fewer workers are paying the Medicare tax. Medicare tax revenue is dropping in relation to the number of beneficiaries.
As they leave the workforce, Baby Boomers enter Medicare. The number of workers paying in is contracting, and people taking out is ballooning. Expenses are climbing. The current demographics are crushing Medicare’s ability to provide the same level of services because expenses are outpacing tax revenue.
Medicare Prescription Drug Improvement & Modernization Act
In 2003 Congress passed the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA). In the legislation, Congress addressed the coming shortfall in Medicare revenue. The answer was to raise the price of Medicare for the top 7 percent of earners. There are currently 65 million Medicare beneficiaries. IRMAA will affect approximately 4.6 million people in 2023.
I don’t say tax because, technically, it is not a tax.
Most Medicare beneficiaries pay less than 25 percent of the real Medicare cost. The current Part B premium is $164.90. That is only about a fifth of the actual cost. In the MMA, Congress increased the amount a citizen paid for their Medicare insurance based on their income. The IRMAA increases the percentage that upper-income Medicare beneficiaries pay. Instead of paying only 25 percent of the cost, they pay 35, 50, 65, 80, or 85 percent of the actual Medicare Part B cost. The additional revenue is allocated to offset Medicare’s budget.
How Do the IRMAA Brackets Work?
Medicare IRMAAs is an unusual calculation compared to federal income tax brackets.
You do not pay a federal income tax rate on everything you make. The government divides your taxable income into chunks — also known as tax brackets — and each chunk gets taxed at a progressively higher rate. The beauty of this is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income. It is only the “chunk” in that bracket that is taxed at that rate.
Medicare IRMAA in 2023 utilizes a “cliff” style of assessment instead. That means if you are just $1 over the cut-off for the next tier of IRMAA, you will pay the higher amount. There are no brackets for each chuck of income like federal income tax and no graduation or progression in the amount you pay. The Medicare 2023 Part B IRMAA premium brackets change when you earn one dollar more above the line.
What Is Medicare IRMAA Based Upon?
The IRS and Social Security work with Medicare. Your income is based on your most recent tax filing. So, for example, you are going on Medicare in 2023. The most recent tax filing was in 2022 for 2021. Generally, IRMAA is based on a two-year lag in your income.
How Is Medicare IRMAA Calculated in 2023
Medicare IRMAA 2023 brackets are derived from your adjusted gross income (AGI). The AGI, however, differs from the MAGI (Modified Adjusted Gross Income) you usually think of when doing your taxes. AGI for IRMAA is a Medicare-specific form of MAGI. It is your AGI with tax-exempt bonds–both earned and accrued interest–added back. Interest from U.S. Savings bonds used for higher education is added back. Earned income from working abroad that was not added to gross income is included. MAGI (Modified Adjusted Gross Income) for Medicare is different than what is usually meant by MAGI for non-healthcare-related purposes.
You will be sent your Medicare IRMAA Initial Determination Notice soon after you enroll in Medicare Part B. Confirm the numbers SSA/CMS/IRS are correct.
Medicare Financial Planning
Examine the Medicare IRMAA 2023 brackets to see if you are close to any of them. What are your plans for the future? Will you withdraw from retirement savings this year or in future years? Will you sell your home at some point to downsize or move to a one-story home? Will you sell a large amount of stock, property, or other appreciated assets?
Any of these actions may increase your income substantially enough to move you into and/or up the IRMAA brackets requiring you to pay more. Knowing and planning for these events, you can move assets in smaller amounts over time to avoid large spikes in income and, consequently, increases in income tax and IRMAA.
How Do I Reduce Medicare IRMAA?
Charitable donations of cash, appreciated assets, and appreciated stock can reduce your taxable and IRMAA surcharge as well as contributions to 401ks, IRAs, and other qualified programs. Some minor adjustments may drop you down a bracket and save you some money.
What Are Medicare IRMAA Brackets for 2023?
Since 2007 some Medicare beneficiary’s Part B monthly premium included a surcharge based upon income. The Medicare IRMAA for 2023 is in the table below.
|Couple||IRMAA Surcharge Part B||
Total Monthly Premium
|Less than $97,000||Less than $194,000||$0.00||$164.90|
|$97,000 < $123,000||$194,000 < $246,000||$65.90||$230.80|
|$123,000 < $153,000||$246,000 < $306,000||$164.80||$329.70|
|$153,000 < $183,000||$306,000 < $366,000||$263.70||$428.60|
|$183,000 < $500,000||$366,000 < $750,000||$362.60||$527.50|
|Greater than $500,000||Greater than $750,000||$395.60||$560.50|
Since 2011, higher-income Medicare beneficiaries have paid a surcharge on top of their Medicare Part D premium. The Medicare IRMAA for 2023 for prescription drug plans is in the table below. This does not include premiums for specific Medicare Part D plans, Medicare supplements, or Medicare Part C/Medicare Advantage plans. The totals only reflect Part B premium and Medicare IRMAA 2023 surcharges. These IRMAA surcharges for Part D are a completely different idea from the Part D Gap (or Donut Hole).
|Couple||IRMAA Surcharge Part D||
Total Monthly Premium
Part B & Part D
|Less than $97,000||Less than $194,000||$0.00||$164.90|
|$97,000 < $123,000||$194,000 < $246,000||$12.20||$243.00|
|$123,000 < $153,000||$246,000 < $306,000||$31.50||$361.20|
|$153,000 < $183,000||$306,000 < $366,000||$50.70||$479.30|
|$183,000 < $500,000||$366,000 < $750,000||$70.00||$597.50|
|Greater than $500,000||Greater than $750,000||$76.40||$636.90|
Are There Exceptions to Medicare IRMAA Brackets?
No exceptions if your income falls within one of the tiers, but IRMAA has a two-year lag between when you filed your income tax and what Social Security Administration (SSA) assesses you. A lot can affect your income in that time, so SSA considers “life-changing events” when applying the IRMAA surcharge.
- Death of a Spouse
- Divorce / Annulment
- Work Reduction
- Work Stoppage
- Loss of Income from Property
- Loss or Reduction of Pension income
- Employer Settlement Payment
Death of a Spouse
Losing a spouse is tragic. The other effect is your income may be reduced because they are no longer bringing in income: Social Security and/or work income.
You will need to file the SSA-44 form with proof of death and an estimate of your new income for that year due to your loss.
The first IRMAA bracket is for income over $97,000 for a single individual. The first IRMAA tier for joint filers is over $194,000. Marriage may dilute your total income, so you fall below the IRMAA joint bracket. No need to overpay.
In that case, file the SSA-44 form with proof of marriage. Give an estimate of your new joint income. You will not need to pay the tax that year or less because you move down an IRMAA bracket.
Divorce / Annulment
Divorce or annulment can have the opposite effect. The IRMAA is based only on your income. You are now single, and your income may have been significantly reduced. Subtract your ex-spouse’s income. That may put you below the $97,000 threshold or lower your bracket. Don’t overpay.
In that case, file the SSA-44 form with the divorce decree and an estimate of your newly reduced income.
Many times as I help clients move toward Medicare and retirement, they continue to work. But, they work less. Or they get a part-time job.
If I ever retire, my part-time gig will be at the local golf course. I have had several friends and clients do that–for the free golf. The perfect retirement job!
If your income drops below $97,000/$194,000 or one of the other tiers, quickly complete the “Life-Changing Event” form so you only pay what is necessary. Complete the SSA-44 with proof, such as pay stubs, employer statements, or other reduced income documentation.
Work stops when you retire. It also stops when laid off or fired. The company is sold or shuddered. Illness or injury can stop you from working. All of which drastically affect your income.
Include any documentation, like correspondence from your company, public notices, and minutes from corporate board meetings, medical bills with your SSA-44 form to Social Security.
Loss of Income from Property
This one is undoubtedly applicable because of the COVID situation. Many landlords lost significant income when renters were not required to pay for long periods.
Income may be lost because of natural disasters, destruction of property through fire, or accidents. I remember a friend who had disease run through his hog confinements. He lost tremendous amounts of income for a year. Submit supporting documentation with SSA-44 to SSA.
Loss or Reduction in Pension Income
Some organizations will distribute a pension for a fixed period of time, such as 20 years. The pension income ends, and then you go on Medicare. The IRA, however, has that income included in your last tax return. You will need the appropriate documentation with the SSA-44 to appeal.
Employer Settlement Payment
Businesses close all the time. Some businesses do not end well. Suppliers are owed money. Banks and shareholders are owed money. Employees are stiffed for months of salary, commission, or other forms of remuneration. There eventually may be a lump sum settlement that comes, which raises your income in that year. Again, another life-changing event that will grant an exception. Documentation is essential.
Depending upon your IRMAA bracket, you will be paying at least $937 per year or more. Don’t pay that if you don’t have to. The appeal process is reasonably simple and straightforward if you qualify with one or more life events. No need to pay more than your fair share.
The Bottom Line On Medicare IRMAA in 2023
Medicare has rules. Lots of rules, including how much you pay if you are successful in our country. We are about helping you navigate the rules, and in the case of Medicare IRMAA for 2023, making sure you do not pay one penny more than is required.
If you fall into one of the Medicare IRMAA brackets, talk with your financial planner and tax consultant about minimizing the damage. Get started positioning assets well before 65 and have a plan to move yourself down the Medicare IRMAA brackets.
If you fall into one of the “Life Changing Event” categories, do not ignore the opportunity. Fill out the form, attach the documentation, and get your exemption.
We are licensed and experienced insurance professionals. This may be your first Medicare IRMAA rodeo this 2023. It is not ours. Give us a call and speak with a licensed agent at 402-614-3389.
Why do so many people bash Medicare Advantage? Yet, in every Part of the country, Medicare plans are expanding, and more people are joining. Why are Medicare Advantage plans considered so bad when they attract so many people and keep them as loyal customers?
What Makes Medicare Advantage Plans Bad?
The main reason is location, location, location. Medicare Advantage plans are designed for a particular location, usually a county or collection of counties that make up a region. Medicare Advantage is unlike Original Medicare (only Part A and Part B). Original Medicare is uniform and homogenous throughout the country. Medicare Advantage is not. One plan with the same insurance company may drastically differ from one city to another. In the same state, a plan may be great in an urban area but incredibly poor in a rural area 40 miles away.
When people criticize Medicare Advantage, they create a straw man. They pick the worst locations and the weakest plans. Then they compare those Advantage plans to Original Medicare with the additional insurance product of a supplement. The plans they use as models have high out-of-pocket costs, high copays, limited networks, and low star ratings. Consequently, Medicare Advantage makes a poor showing in those instances.
What Are the Common Pitfalls of Medicare Advantage?
High Out-of-Pocket Costs
Critics claim that Medicare Advantage plans have high out-of-pocket costs. Medicare Advantage’s maximum out-of-pocket (MOOP) for 2023 is $8,300 nationally. That is the highest out-of-pocket an insurance company may charge on a Medicare Advantage plan.
Insurance companies can set the maximum out-of-pocket (MOOP) lower than the allowed amount. On average, the MOOP was $4,972 in 2022 for in-network and $9,245 out-of-network nationwide.
The MOOP is the highest amount you are responsible for on the plan. Copays add up. If you meet the MOOP total of $8,330–or whatever the amount is–the plan pays 100% on any claims after that.
No Maximum Out-of-Pocket for Original Medicare
Compared to Original Medicare, however, Medicare Advantage has a top limit–a maximum out-of-pocket. Original Medicare has no maximum or cap on the Part A deductible. The Part B coinsurance is an unlimited 20%. Twenty percent of a million dollars is real money!
Those costs that Original Medicare does not pay are only covered if you purchase additional health insurance with a Medigap plan. You need to pay an additional amount to add a Medicare Supplement. A Medicare Supplement in the Omaha, Lincoln, and Council Bluffs areas for a 65-year-old ranges from $1,400–$2,000 per year for a Plan G on top of your Medicare Part B premium, which is currently $164.90.
I work primarily in the Omaha, Lincoln, and Council Bluffs Metro areas. Our maximum out-of-pockets are lower than the national average. Some Medicare Advantage plan MOOPs are as low as $3,800.
Nonetheless, $3,800 or $8,300 is a great deal of money for most people to come up with in a year’s time. It is a legitimate concern, so a person may wish to consider a Medigap Plan N or even High-Deductible Plan G as an alternative to Medicare Advantage. However, many people feel a $4,000 or $5,000 maximum annual out-of-pocket is reasonable for a health insurance plan. It is the same or lower than many employer health plans people had in the course of their working years.
‘Is There A Doctor In the House?’
Like your employer health plans, Medicare Advantage plans are usually network plans. The most common types of plans are HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization). The HMO plans generally mean you can only see health providers in the plan’s networks. If you go outside of the network–aside from emergencies–the plan will not pay. PPO plans allow you to go outside the networks to providers who take Medicare, but you may pay more for those services, and your MOOP will be higher.
Network plans can be limited in certain areas. Many rural areas have weak Medicare advantage plans. One of the reasons is that many providers or medical facilities do not work with the plans yet. In those instances, Original Medicare would probably be a better choice with or without a Medicare Supplement.
In other places, I’ve found that the different medical networks compete aggressively against one another. Part of their strategies is to align with specific insurance companies providing Medicare Advantage against their competitors. In this way, a plan might have a limited network of doctors and hospitals. In those situations, an agent must be acutely aware of his client’s needs and weigh all the factors. Depending upon the limitations, Original Medicare may be the better alternative.
Medicare in our Omaha, Lincoln, and Council Bluffs areas are blessed with three robust networks that cooperate with the six insurance companies offering plans in the area. The three networks work with all the plans. Networks and access to providers are non-issues here.
Referral, Or Not Referral
Some Medicare Advantage plans require a referral from your primary care physician (PCP) to see a specialist. The purpose of the referral system is to coordinate care and reduce costs.
In our area, the HMO plans are “open access.” Open access means no referral is required to go to a specialist when you need one. As a matter of fact, it has been years since Medicare Advantage plans required referrals in our area. However, some plans in some areas still require referrals, which some feel is a drawback.
Medicare Advantage Plans Change Benefits Every Year
Critics of Medicare Advantage site plan changes as a negative for Medicare Advantage. However, Original Medicare also changes. Medigap companies increase premiums almost every year, even several times a year, because of age, higher than normal claims, and inflation. Medicare Part D prescription drug plans DEFINITELY change yearly–premiums, deductibles, copays, and formularies are reworked every year.
Each year the Medicare Advantage plans mail out the ANOC (Annual Notice Of Changes). An example of changes is: the maximum out-of-pocket may increase. Copays may increase or decrease. Extra benefits, like dental and vision, may be increased or reduced, added or eliminated. You will experience change no matter which direction you go with Medicare.
Over the decade I have offered Medicare Supplements, Medicare Advantage Plans, and Medicare Part D prescription drug plans, all of them changed. Nobody is not changing–sorry for the bad grammar. Some years there are a lot of adjustments. Most of the time, the changes are minor. The changes really hinge on the funding the federal government pumps into Medicare or not and the rate of inflation.
In our area, the Medicare Advantage plans have actually gotten significantly stronger over time. MOOPs have lowered. Additional benefits, like dental, vision, and over-the-counter (OTC) items, were introduced and increased.
Medicare Part A & Part B usually change each year. The Part B premium increases, though it went down slightly this year. Deductibles increase. Part A deductible increased from $1,556 to $1,600 for 2023. Most people don’t notice Original Medicare changes because, if they have a Medigap policy, their supplement takes up the slack. They may not be aware until they get notice of a rate increase from the insurance company. Then, they blame the insurance company for the higher premium, not Medicare. A big part of the higher premium is because Medicare expanded the gap the insurance company needed to fill.
Part D Drug Changes
The biggest problem I have found with the Medicare benefits changing every year is with Part D prescription drug plans. Those on Original Medicare and a Medigap plan have Part D plans. The challenge is insurance companies change the drugs that are covered or not covered. The copays, deductibles, and premiums can change significantly in some years. Companies move drugs from one tier to another. The Gap (or “Donut Hole”) amount fluctuates from year to year. I find Part D plans change significantly compared with the drug element of Medicare Advantage plans.
Clients who ignore the changes in their Part D plan find themselves in a world of hurt come Jan. 1st when they go to the pharmacy counter to pay for their prescriptions.
Whether you are on the Medicare Advantage side or Medigap and Part D side, there is plenty of change to go around.
Medicare Advantage Plans Requires Prior Authorization
Critics of Medicare Advantage point out that Original Medicare does not require prior authorization for most services. Medicare Advantage, however, does require prior authorization for many.
The criticism is the delay that pre-approval causes. Detractors claim denials are higher for Medicare Advantage than Original Medicare, and the appeal process for denials is arduous.
Preauthorization can be a challenge. You may have faced it with your employer’s health plans. Getting approval from the insurance company is not a new idea. In the past with Medicare Advantage, denials may have been higher. Currently, denials are around 4 percent the first time around. Upon appeal, 75 percent of appeals are overturned. I hear more complaints from clients on Original Medicare and a Supplement. Last week, Medicare refused to pay for my client’s ambulance ride to the emergency room at 3 AM. I helped her with the appeal process.
For urgent cases, you can receive treatment and get approval afterward, or they will rush approval with a response in 72 hours or less.
Changing Your Medicare Advantage Plan
Medicare Advantage critics claim you can’t get out of your Medicare Advantage plan except during a short window of time each year.
Generally, you can only change your Medicare Advantage plan during the Annual Election Period (AEP), which is Oct. 15th- Dec. 7th each year. Ironically, for those on Original Medicare, that is the only time you can change your Medicare Part D prescription drug plan as well. Medicare limits everyone on Medicare in one way or another.
Medicare Advantage also has more times to change than those on Original Medicare. Medicare Advantage has its own unique Open Enrollment Period (OEP) from Jan. 1st–Mar. 31st, when you can make a one-time switch to another Medicare Advantage plan or change back to Original Medicare.
The advantage of Medicare Supplements critics assert is that you can change your supplement year-round. Changing a supplement, however, is subject to underwriting in most states. There is no underwriting for Medicare Advantage. Insurance companies offering Medicare Advantage plans must take you regardless of your health.
Medicare Advantage Does Not Travel
For many years Medicare Advantage plans were criticized because they were only local, especially HMO plans. The health coverage did not travel with you when you left home, except for emergencies.
Now you are covered for not only emergencies anywhere in the U.S. and, in some cases, abroad, but there may also be in-network coverage. Many of the larger insurance companies also have national networks to which the HMO plans have access, so you could be outside your service area and still get service and pay in-network copays.
You can also select a PPO (Preferred Provider Organization) plan. In a PPO, you can go out of network to a provider who takes Medicare. You may pay a higher copay, and your total out-of-pocket may be larger than in-network, but you will have access to non-network doctors and hospitals with a PPO plan.
Medicare Advantage plans are bad when the networks are small, the MOOP and copays are high, and customer service makes prior authorization a headache. Many rural areas have Medicare Advantage plans that are bad. Some insurance companies design Medicare Advantage plans that are poorly constructed, even bad. Like markets for many products or services, the areas and the companies may not produce the best product or service.
Caveat Emptor – Let the Buyer Beware!
The consumer needs to do his due diligence and use a reputable agent who will give you an honest assessment of the products in your market. Does the plan have good access to medical providers? Are the copays and maximum out-of-pocket reasonable for your budget? Is the company behind the plan strong and well-staffed to provide good to excellent service?
In the decade I have offered Medicare plans and supplements, I have seen the landscape change regarding insurance companies and products. For Medicare in the Omaha, Lincoln, and Council Bluffs areas, Medicare Advantage plans have continually improved with broader access to networks, low copays and MOOPs, and tremendous service to resolve issues as they arise. Some other places are not as good for Medicare Advantage. Many counties in rural Nebraska and Iowa still have no Medicare Advantage plans, or the plans are very weak. Each plan needs to be judged on its own merits, particularly when you are comparing it to Original Medicare and a Medigap policy, and a Part D prescription drug plan.
The question has changed from “Why are Medicare Advantage plans so bad?” to “How are Medicare Advantage plans so good?”
Medicare has lots of rules and regulations. The insurance companies and the State Insurance Commissioners have even more laws. The Medicare supplement 30-day free look period is one of those rules.
Medicare Supplements are called Medigap policies because filling in the gaps is precisely what they do. They fill in the gaps in Original Medicare. Supplements fill in the Part A deductible and Part B coinsurance.
You pay a monthly premium for a Medicare Supplement, and as you age and medical costs increase, the private insurance companies that provide Medigap policies raise rates.
Some companies raise rates higher and faster than other insurance companies, so you may want to change policies. There are rules around changing Medigap policies, and knowing the regulations is essential, like the Medicare supplement free look period.
Medicare Open Enrollment Rules
People often think “Open Enrollment” or “Annual Election Period,” which is from October 15th—December 7th, is when you need to change your Medicare Supplement. You may change then, but it is not a particular time for that purpose. A person will still need to undergo health underwriting to qualify for the new supplement. Preexisting conditions may prevent the person from passing underwriting.
The Open Enrollment for Medicare Supplements is when you turn 65 and/or activate your Medicare Part B. During that period, you are exempt from answering health questions. The insurance company needs to offer you a supplement at the best possible rate no matter your health condition at the time.
The other time you can change Medicare Supplements is by filling out an application and answering the health questions. Most people pass underwriting, but not all. A recent heart attack, stroke, or bout with cancer is an example of why an insurance company would deny new coverage. There are other preexisting conditions that will disqualify an applicant. Of course, you can remain on your current supplement if you continue to pay premiums. Medigap policies are guaranteed renewable.
Medicare Supplement Free Look Period
When you change to a Medicare Supplement, you have a 30-day free look period. During that time, you can cancel the policy without any reason, and the insurance company must return your entire premium without question. If you have another Medicare Supplement, you may wish to continue paying the premium simultaneously. If you cancel the original plan, you may have to go through underwriting to reinstate it.
Medicare Free Look: No Fear
The free look period for a Medicare Supplement, like any insurance product, is to encourage the consumer to purchase because of less fear about changing one’s mind.
There are a few other instances when someone might change to a new Medicare Supplement, and the free look period would also apply in those instances.
Guaranteed issue is when someone is coming off an employer’s group health plan and already has Medicare Part A & B. You have 63 days to enroll in a Medicare Supplement without underwriting.
Another situation is enrolling in a Medicare Advantage plan for the first time. You have a 12-month window when you can change to a Medigap plan without underwriting.
Another rare situation is when an insurance company closes its Medicare Advantage plan in your service area. You are afforded a guaranteed issue opportunity for a Medicare Supplement.
Certain states have laws specific to them. You can change your Medicare Supplement on your birthday without underwriting (California, Oregon, Idaho, Nevada, Illinois, Louisiana), on your anniversary without underwriting (Missouri), and year-round without underwriting (New York, Connecticut, Massachusetts, and Washington). There is no such regulation in Nebraska or Iowa for Medicare Supplements.
Again with any of these transitions, the Medicare Supplement 30-day free look period applies.
Over the years, I have had clients change their minds at the last minute. To change with them, the Medicare Supplement, free look period, makes the process easier and less cumbersome.
You have 30 days to look. No fear.
When people compare Medicare with Medicare Advantage, they usually mean Medicare (Original Medicare) with a Medicare Supplement and a Medicare Part D prescription drug plan versus Medicare Advantage (Part C) with prescription drugs included.
The comparison is difficult because they are drastically different, so I believe a fair side-by-side comparison is impossible. That, however, does not stop people from asking the question of which is better, Medicare Advantage or Medicare Supplement.
Medicare Is Original Medicare: Part A & B
Original Medicare is Part A for hospitals, and Part B for doctor visits and outpatient procedures. Part A has a $1,600 per event deductible in 60 days without a cap. Part B is an 80/20 split. You pay the 20% coinsurance, and there is no limit on the 20%.
Original Medicare + Medicare Supplement
To fill in the gaps in Medicare, you may purchase a Medicare Supplement / Medigap policy. Depending on where you live and the company you choose, the monthly premium can range from $100 to $200 per month. You can fill in the gap entirely except for the first $226 with a Plan G. As you age past 65, the price of your Medicare Supplement will increase.
Sometimes, your supplement may increase by hundreds of dollars. I recently had someone referred to me who was paying over $300 for her Medigap Plan G policy. She was in her mid-70s. She passed through underwriting, so we switched her to another Medigap plan at half the cost. Some people, however, cannot pass underwriting and need to remain on their high and increased Medigap policy.
Medicare Supplement + Medicare Part D PDP
Part D prescriptions drug plan (PDP) is separate from your Medicare Supplement and a separate charge. Again, the premium can range from $10 to $100 per month, with different prices for your medication copays. The key to comparing Part D plans is the year’s total cost — monthly premium plus individual prescription copays.
Medicare Advantage Or Medicare Part C
Medicare Advantage (or Part C) is different. Private insurance companies take what Original Medicare does and has a maximum out-of-pocket cost cap. Original Medicare, remember, is unlimited.
Medicare Advantage breaks out each of the different services. For example, x-rays, outpatient surgeries, labs, emergency services, etc. The service is given small copays versus Original Medicare’s unlimited 20%. These minimal copays add up toward the maximum out-of-pocket (MOOP). Most years, you will not reach your maximum out-of-pocket. In most years, your out-of-pocket will be $500 or less.
Medicare Advantage Has a Maximum Out of Pocket
The maximum out-of-pocket (MOOP) nationally is currently $8,300. The Omaha, Lincoln, and Council Bluffs area average around $4,500 or less for the MOOP. Some of the plans’ MOOP is $3,900. Original Medicare does not cover your coinsurance or deductibles unless you make the additional purchase of a Medigap policy.
Most Medicare Advantage plans also include Part D prescription drug coverage. There is no separate charge. Most of the Medicare Advantage plans in our area are zero premium or are very low premium with prescriptions included. The prescription drug part of Medicare Advantage excludes the Part D deductible on most plans. The current Part D deductible on stand-alone prescription drug plans is $505.
The cost for Medicare Advantage with drug coverage is usually zero. Your only monthly cost is your Medicare Part B premium and possibly copays for the medications.
Over the years, Medicare Advantage copays have increased to reflect rising medical costs and inflation. The increase has been minimal, but that will change, I’m sure, in our current high-inflation atmosphere. The same will be valid for Original Medicare and Medicare Supplements.
Medicare Advantage Has Networks
Another difference that concerns people choosing between Medicare Supplement and Medicare Advantage is medical networks. This is a genuine concern in certain areas. In our Omaha, Lincoln, Council Bluffs metro area, there are principally three networks: CHI Health, Nebraska Medicine, & Methodists Health Systems. The Medicare Advantage plans in our area work with all three networks. It is a non-issue. In other places, the network system may be something to be aware of.
All the Medicare Advantage companies offer PPO (Preferred Provider Organization) options. You can go out of network to someone who accepts Medicare. You may pay more and have a larger MOOP, but there is that option. You are not confined exclusively to the plan network.
Also, many of the larger insurance companies offer national networks, so even within their HMO (Health Maintenance Organization) system, you may still be able to see doctors and hospitals outside your local service area and pay in-network copays.
Medicare Advantage Prior Authorization vs Original Medicare & Supplement
The other difference between Original Medicare / Medicare Supplement and Medicare Advantage is preapproval. Original Medicare does not require prior authorization for most procedures and services. Medicare Advantage is the reverse. This is an unusual concern because, during all your working years, your insurance companies required prior authorization for any services of any cost or significance.
With Medicare Advantage, there is really no change. Those who do not favor Medicare Advantage put this out as a deficiency in the program. In my experience and statistically speaking, most denials in the big picture are overturned. The national average for Medicare Advantage denials is 4 percent. Those denials are usually attributed to a lack of explanation and documentation on the provider’s part. The fix is usually an easy and quick remedy when the effort is put in to correct the error.
How Much Risk Do You Want to Carry?
Original Medicare with a Medigap policy and Part D prescription drug plan is the most comprehensive Medicare insurance. You have reduced risk to the lowest level. The trade-off is you pay an ever-increasing premium for the convenience of not paying copays or an expensive year when you require many medical services.
Medicare Advantage saves you a monthly premium upfront, but you will pay copays as services are required. You may even reach your maximum out-of-pocket during a challenging year. That is the trade-off.
Networks are something to consider with Medicare Advantage. That consideration should be based on a case-by-case basis, depending on your location. But with national networks and PPO plans, the network issue is not the issue it was a few years ago.
How much risk do you wish to assume, and how much do you want to budget toward healthcare? The answer to those questions is the solution to which is better Medicare Advantage vs. Medicare Supplements.
Medicare has had an exciting history with prior authorization. Medicare prior authorization has become controversial over the years because of Medicare Advantage.
Have You Always Been Subject to Prior Authorization?
Health plans started using prior authorization in the 1960s. Hospital admittance grew after the creation of Medicare and Medicaid. At the same time, more employers began offering employees health insurance as part of their compensation package. Medical costs grew significantly, particularly hospital stays.
Insurance companies began implementing utilization reviews in the 1960s. Utilization reviews were a process to reduce the overutilization of resources and identify waste. Registered nurses initially performed utilization reviews in hospital settings. The skillset gained popularity within the health insurance industry as research grew around medical necessity, misuse, and overutilization of services.
Health plans reviewed claims for medical necessity and hospital length of stay. Health plans began to require physicians to certify the admission and subsequent days after admission to help contain costs. Prior authorization originated from the use of utilization reviews.
Fast-forward to the present day. You were subject to prior authorization when you entered the workforce and received employer-provided group health insurance as a benefit. The insurance company determines if it is “medically necessary” and covered by the policy your company purchased when you have any medical procedure. Then there is further discussion about the appropriate charges. Whether or not you were aware of it, prior authorization has always been part of your health insurance coverage.
Why Do Insurance Companies Use Prior Authorization?
Prior authorization is a medical management tool. Doctors and insurance companies work together to ensure that a specific treatment or service is the best option for the patient’s needs.
The purpose of prior authorization is to identify and discourage unnecessary and costly low-value services to reduce wasteful spending without impeding quality healthcare services.
Prior authorization, supervision, audits, and other compliance tools help identify and root out fraud, waste, and abuse in the healthcare system. The ultimate purpose is to reduce costs for the consumer and prevent unnecessary treatments.
The Department of Justice announced today (Feb 17, 2021) criminal charges against 138 defendants, including 42 doctors, nurses, and other licensed medical professionals, in 31 federal districts across the United States for their alleged participation in various healthcare fraud schemes that resulted in approximately $1.4 billion in alleged losses.
The charges target approximately $1.1 billion in fraud committed using telemedicine, $29 million in COVID-19 healthcare fraud, $133 million connected to substance abuse treatment facilities or “sober homes,” and $160 million connected to other healthcare fraud and illegal opioid distribution schemes across the country.
While most doctors, medical professionals, and medical facilities are honest and act with integrity, an element will always and continually seek illicit gain costing consumers and taxpayers untold amounts. This results in higher insurance premiums and medical costs. It is naive to believe all are good actors and that every recommended treatment and service is the best fit.
Why Does Original Medicare Not Use Prior Authorization?
In part, the Medicare prior authorization controversy is that “Original Medicare” does not require prior authorization for most procedures, and Medicare Advantage does. (Original Medicare is just Medicare Part A and Part B. The payment structure is called fee-for-service. Medicare Advantage (or Part C) is Medicare administered by a private insurance company contracted and approved by Medicare.)
At first glance, you probably ask, ‘Why does Original Medicare not require prior authorization’ because prior authorization is common practice in the health insurance world? No company will leave the decision to spend potentially tens of thousands of dollars, even millions, to one person without some oversight.
When Medicare was established, Congress included certain arrangements and excluded others. In Section 1862(a)(1)(A) of the Social Security Act:
“No payment may be made under Part A or Part B for any expenses incurred for items or service which . . .. are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed member . . ..”
The key phrase is “reasonable and necessary.” “Reasonable and necessary” has been interpreted over the years very broadly. If a submitted claim is in an allowed category and not excluded, the submission is “reasonable and necessary.”
The doctor authorizes an MRI of the shoulder because the patient complains of problems. MRIs are covered. This procedure is “reasonable and necessary” because it is not an uncommon practice, even if there may be less expensive diagnostic procedures or treatments.
As you can probably guess, this broad interpretation with no oversight or accountability will result in large amounts of fraud, waste, and abuse.
Why Is Medicare Advantage Prior Authorization So Controversial?
The short answer to why is that Original Medicare doesn’t require prior authorization. The controversy is some believe beneficiaries are being denied essential medical services and treatments. Beneficiaries and medical professionals do not even attempt to overturn denials because they believe the appeal process is so burdensome.
The facts, however, do not paint such a sad picture. The Office of the Inspector General reviewed a large number of Medicare Advantage Organizations (MAO), reviewing 448 million preauthorization requests in 2016. Of those, MAOs denied about 1 million preauthorization requests for a denial rate of 4 percent—4 percent is tiny.
The September 2018 Office of Inspector General report found that Medicare Advantage Organizations (MAO) overturned 75 percent of their own denials from 2014-2016, overturning approximately 216,000 yearly. During that same period, independent reviews discovered additional requests that had been inappropriately denied.
The most surprising finding, however, is that only one percent of beneficiaries and providers appealed their denial, which raised the question: how many were denied necessary treatment because the process is so arduous?
Unfortunately, the study does not give a coherent explanation of the denials. From my experience of doing Medicare planning for a decade with thousands of beneficiaries, doctors’ offices do not always submit requests with detailed documentation in support. When the request is denied, they blame the insurance company, and the effort stops unless the patient pushes the issue.
The other reason I find for denial is the doctor’s office uses the wrong billing code. Quite often, the insurance company does not give any explanation in those cases. The response is “denied.” The solution requires the doctor’s office to call and talk with the claims department about billing codes, documentation, and supporting tests. In the absence of these items, nothing happens.
Unfair Statistics and Sensational Journalism
The Department of Health and Human Services Office of Inspect General (OIG) conducted a study of Medicare Advantage Organizations’ (MAO) denial of prior authorizations during one week (June 1-7, 2019). In that week, there were 250 denials. The OIG discovered that 13 percent of these prior authorizations were incorrect. This amounted to 33 cases.
Later in the same report, they admitted the usual national average is 5 percent. No reason was given why the study was not expanded when the conclusions from their study did not coincide with other long-standing evidence, particularly when the study was so microscopic–one week and 250 cases.
In the same study, they did not review the cases where the prior authorization was approved when it should have actually been denied. There was also no control group to compare against. The OIG did not study fee-for-service Medicare billing for fraudulent or wasteful claims or denials on their part.
The New York Times piled on in an April 2022 article. They presented a very slanted view of the study, beginning the article with “Medicare Advantage plans often deny needed care, federal report finds.” Only toward the very end of the article did the author get into any of the facts of the report. The general impression during the first half of the article is Medicare Advantage denies its clients the necessary medical care they need.
Why Are Medicare Prior Authorization Denials Overturned?
Denials may be overturned for many reasons. First, there were errors on the part of the insurance company. The decision was incorrect.
Errors on the part of the doctor’s office or medical facility. They did not include sufficient documentation or incorrect information. The denial is reversed, then. The provider may add new information from additional tests in the appeal process that contributes to an overturn.
The overturn does not necessarily mean the MAO acted inappropriately, but the process and extra steps critics claim create friction in the system. Patients may wish to avoid going through the trouble of appeal. Doctors may not make recommendations because of a history of denials.
Did Medicare Ever Use Prior Authorization?
The Medicare practice of accepting bills from providers at face value without question as “reasonable and necessary” was an established and haloed practice from the beginning of Medicare. All parties who benefited the most—except U.S. taxpayers—were unmotivated to change until the wheelchair scandal.
In 1999 it was discovered that Medicare spent $8.2 billion to procure power wheelchairs and “scooters” for 2.7 million people. A large portion was paid to scammers because they discovered that Medicare not only did not require prior authorization for wheelchairs, but Medicare did not even review the authenticity of the claims.
A Washington Post article published in August 2014 highlighted the massive fraud of Medicare’s resources. The article chronicled the sensational scams and trials of many Medicare swindlers. The outrageous theft of public funds and the massive fraud shamed CMS to amend its regulations to finally require preauthorization for some “durable medical equipment,” i.e., electric wheelchairs.
Bureaucrats inside CMS admitted they knew how the wheelchair scheme worked as early as 1998. But it was not until 15 years later that officials finally did enough to curb the practice significantly. Durable medical equipment—electric wheelchairs—is the only exception to the “reasonable and necessary” practice. They must be preapproved.
Consequently, hundreds of millions of false and unnecessary claims were paid over many years in a massive Medicare fraud. Once the bureaucratic problem was fixed, and claims were more thoroughly reviewed, an enormous shift occurred. Medicare reimbursements for motorized wheelchairs fell from $32 million every month to $7 million—a 78 percent decrease.
The Medicare Claims System Is Designed for Fraud, Waste, & Abuse
By law, Medicare must pay most of its claims within 30 days. In that short window, it is supposed to filter out the fraud and uncover claims where the diagnosis or the prescription is bogus.
The system attempts to ameliorate the damage through a “pay and chase” policy. The bill is paid, then it is reviewed. Only a tiny fraction of claims — 3 percent or less — are reviewed by a live person before they are paid. The rest are reviewed only after the money is spent. If at all.
The whole Medicare claims process is set up as an honor system for the richest program managed by the U.S. government. It is a thief’s dream.
Medicare Prior Authorization Test Program
In March 2017, CMS (Center for Medicare & Medicaid Services) designed a test program for preauthorization for fee-for-service Original Medicare. In the month of March, the GAO (U.S. Government Accountability Office), in a Senate report, estimated a savings of $1.1 to $1.9 billion when preauthorization was used that month. The report estimated the federal government made an estimated $36.2 billion in improper payments for the Medicare fee-for-service program from July 2015 to June 2016.
The committee’s recommendation became the report’s title— “CMS Should Take Actions to Continue Prior Authorization Efforts to Reduce Spending.” The prior authorization programs created to monitor and measure improper payments were discontinued and never recommissioned.
Original Medicare Fee-For-Service vs. Medicare Advantage
The government created Medicare in 1965. It had been a long-time project of the Democratic Party. CMS (Center for Medicare & Medicaid Services), Department of Health & Human Services, and Social Security Administration are government agencies. Politicians of all political parties exercise control and funding over these agencies and programs. The agencies are staffed by thousands of bureaucrats and government union workers. A tremendous amount of various and conflicting self-interests, power, and money are all mixed together.
To save Medicare from ballooning budgets and to offer an alternative to citizens, the same politicians, programs, and agencies partnered with private insurance companies to control spending and improve patient care. What is now known as Medicare Advantage began back in the 90s.
The two ways of doing government healthcare for seniors are in competition. Politicians view the world through different ideologies and support policies and programs based upon their political views. Those who support the various political ideologies will support or attack these two platforms accordingly.
It is vital to find all the relevant facts, make your own comparisons and analysis, and determine where lies the truth and the better path.
When I meet with prospective clients, I begin with a brief explanation of Medicare. Then move on to the hundreds of plans. Drugs are next. This is hard. Clients must lay down their cards; some hold a straight flush of costly medications.
The Inflation Reduction Act of 2022 is a long-awaited solution to improve Medicare drug plans and make Part D affordable for those on costly medications.
Inflation Reduction Act of 2022 Deals with Medicare Drug Changes
When Medicare Part D was first established, Medicare contracted with private plan sponsors to provide the prescription drug benefit. The private insurance company created the Part D Prescription Drug Plans (PDP), sold the PDPs, and managed the PDPs. Each company negotiated separately with the pharmaceutical companies the price of the medications and which medications would be included on the plan formularies–the list of authorized drugs.
The insurance companies had the leverage of their brand and how many customers they would bring to the pharmaceutical companies. They were also competing with the other insurance companies to get more medications at the lowest cost. The pharmaceutical companies, of course, were trying to maximize their revenues and profits.
Ideally, it was hoped that the competition and freedom of the market would keep prices low. However, patent laws create a temporary monopoly for pharmaceutical companies that develop these very effective and popular new drugs. The patent, and the consequent monopoly, benefit the nation and the world with the newest and best medications. Unfortunately, it is a substantial financial burden for those who need the medication.
The Inflation Reduction Act Creates Leverage for Medicare
When Part D was created in 2004, a law was established known as “non-interference.” Non-interference means that the Secretary of Health and Human Services (HHS) cannot negotiate drug pricing with pharmaceutical companies, pharmacies, and insurance companies. Instead, the prices would be determined exclusively between the insurance companies, pharmaceutical companies, and pharmacies competing amongst one another.
With the Inflation Reduction Act of 2022, Medicare changes the law. The Secretary of HHS is granted a narrow exception to the non-interference clause. The HHS Secretary can negotiate on behalf of the 84 million Medicare and 76 million Medicaid beneficiaries for the lowest prices for a very limited number of costly prescriptions. The category of medications is single-source brand-name drugs or biologics without generic or biosimilar competitors.
Inflation Reduction Act of 2022 Effects Medicare Change in 2026
The Drug Price Negotiation Program begins in 2026 and is limited to 10 Part D drugs. Another 15 Part D drugs will be added in 2027, 15 Part D in 20228, and 20 Part in 2029. The HHS Secretary will select the drugs from among the 50 highest total cost Part D medications.
The timeline for the negotiation process will span roughly two years. For those companies that do not comply, there is an excise tax. The tax penalty starts at 65% of the product sales in the U.S. and increases by 10% every quarter to a maximum of 95%. The other option is that company can remove all its medications from the Medicare and Medicaid market.
Is the CBO Accurate, Reliable, & Trustworthy?
The Congressional Budget Office (CBO) claims HHS Secretaries’ ability to negotiate prices with Part D producers will significantly reduce what Medicare spends over the next ten years. The CBO also claims that reducing the revenue to pharmaceutical companies will have little effect upon developing new and better drugs. These are all projections and opinions to support the policy change. There is no evidence.
Drug Manufacturers Are Penalized for Inflation
The Inflation Reduction Act of 2002 adds another Medicare change. The Act requires drug manufacturers to pay a rebate to Medicare if prices for single-source drugs covered under Medicare Part B and nearly all covered frugs under part D increase faster than the rate of inflation reflected by the Consumer Price Index (CPI). The rebate dollars will be deposited in the Medicare Supplementary Medical Insurance (SMI) trust fund.
Cap Out-of-Pocket Part D Spending
Medicare Part D currently provides catastrophic coverage for high out-of-pocket drug costs. Still, there is no limit on the total amount beneficiaries pay out of pocket each year. Under the current design, Part D enrollees qualify for catastrophic coverage when the amount that they pay out of pocket plus the value of the manufacturer discount on the price of brand-name drugs in the coverage gap phase exceeds a certain threshold amount. Enrollees with drug costs high enough to exceed the catastrophic threshold must pay 5% of their total drug costs above the threshold until the end of the year. This can be huge.
The Inflation Reduction Act of 2022 amends Medicare’s design of Part D. For 2024, the law eliminates the 5% coinsurance requirement above the catastrophic coverage threshold, effectively capping out-of-pocket costs at approximately $3,250 that year.
The legislation adds a hard cap on out-of-pocket spending of $2,000 per person in 2025. How this will be funded, other than with savings, is still being determined.
Inflation Reduction Act of 2022 Puts Medicare Insulin at $35
Insulin is probably the most common high-dollar medication that burdens many Medicare beneficiaries. Most plans relieve several insulin products, beginning with the Trump Administration and now Biden.
Currently, Medicare beneficiaries can choose to enroll in a Part D plan participating in an Innovation Center model in which enhanced drug plans cover insulin products at a monthly copayment of $35 in the deductible, initial coverage, and coverage gap phases of the Part D benefit.
Participating plans do not have to cover all insulin products at the $35 monthly copayment amount, just one of each dosage form and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting).
While Medicare is incredible health insurance, Part D prescription drug plans are the weakness because of the light coverage for higher-end medication. The Inflation Reduction Act of 2022 helps Medicare better service citizens with more reasonably priced medications.
We can ensure you have the plan that best covers your prescription drug needs at the lowest possible cost.
Call 402-614-3389 to speak with an experienced and licensed agent and insurance professional.
A Health Savings Account (HSA) is a powerful tax-advantaged devise. An HSA, however, can have devastating effect if you do not understand how an HSA works with Medicare.
What Is An HSA?
A Health Savings Account (HSA) is a type of personal savings account introduced in 2003. It is designed to work with employer health plans, especially high deductible plans. HSA are not part of Medicare, though HSA can work with Medicare.
You and your employer can put money into your HSA account. The money contributed is an above-the-line deduction on your income tax and is excluded from gross income. Many HSA accounts have various investment options for the money. Earning from the invested funds grow tax-free inside the HSA account. There is no tax consequence when you used to pay a qualified medical expense. Qualifed medical expenses are deductibles, copayments, coinsurance for a health insurance plan.
You can continue to hold the HSA even when you are no longer employed. You can use it for medical expenses while at a different job or even during retirement. HSAs can work with your Medicare, but there are specific rules.
HSAs Are Coupled with an HDHP
You are eligible to contribute to an HSA when specific high-deductible health plans cover you (HDHPs) with a deductible of at least $1,400 for yourself only or $2,800 for family coverage. With HDHPs, the monthly premium is usually significantly lower. You pay more health care costs upfront before your insurance company starts to pay its share.
You can only contribute to an HSA if your plan has a deductible that requires you to cover initial costs. The plan cannot have what is called “first dollar coverage.”
Many employers now offer HDHP plans paired with an HSA account. Non-employer HSA-eligible plans are available through the Health Insurance Marketplace®, Small Business Health Options Program (SHOP), or outside of the Marketplace. HSA-eligible plans are also available in most states that use HealthCare.gov.
Banks, insurance companies, and other financial institutions offer HSAs. The money you contribute to the account is not taxed as long as it is spent on qualified expenses.
Qualified Medical Expenses for an HSA?
Qualified medical expenses include but are not limited to:
- Alcoholism Treatment
- Ambulance Services
- Chiropractic Services
- Contact lens supplies
- Dental Treatments
- Diagnostic Services—MRIs, CT scans, EKGs, etc.
- Doctor’s fees
- Eye exams, glasses, & surgery
- Guide dogs
- Hearing aids & Batteries
- Lab Fees
- Long-Term Care Insurance premiums
- Prescription medications
- Nursing Services
- Psychiatric Care
- Telephone equipment for the visually or hearing impaired
- Therapy or counseling
Sometimes, you can spend your HSA money on similar medical costs for your spouse or dependents.
How Do HSAs Work?
The money in your HSA rolls over year-to-year if you don’t spend it. The money may also be put into an interest bearing bank and brokerage accounts. You can move the funds among the difference investments without triggering a taxable event.
Health Savings Account (HSA) contribution limits for 2023 are increasing significantly in response to the recent inflation surge. The IRS announced the change on April 29, giving employers that sponsor High-Deductible Health Plans (HDHPs) plenty of time to prepare for open enrollment season later this year.
The annual inflation-adjusted limit on HSA contributions for self-only coverage will be $3,850, up from $3,650 in 2022. The HSA contribution limit for family coverage will be $7,750, up from $7,300. The adjustments represent approximately a 5.5 percent increase over 2022 contribution limits. Last year’s limits rose only by about 1.4 percent between 2021 and 2022.
For 2023, the maximum out-of-pocket (MOOP) limit for self-only coverage is $7,500 or $15,000 for family coverage. According to the IRS, only deductibles and expenses for services within the health plan’s network should be used to determine if the plan meets or exceeds the MOOP limits.
HSA and Medicare Rules
Before the introduction of Health Savings Accounts (HSA), the standard practice was to at least enroll in Medicare Part A even if you continued to work past 65 and remained on employer health cover. It was a generally accepted best practice for any worker who was not already collecting Social Security at the age of 65 to go ahead and sign up for Medicare Part A, regardless of other coverage.
Part A did not interfere with employer health coverage and did not usually cost anything. Part A then reminded the person to enroll in Part B and D when he eventually lost employer health coverage.
This rule of thumb still applies, for the most part, The crucial exception arises for anyone who works past age 65 and wishes to continue contributing to an HSA while on Medicare.
The Number of HSAs Has Exploded
The number of High Deductible Health Plans (HDHP) with HSAs has significantly grown in the two decades since HSAs emerged.
Over the past ten years, especially, HSA growth exploded. Since 2011, the number of HSAs has grown from 6.8 million accounts to 30.2 million in 2020. That’s a growth rate of over 300 percent in a decade and a near-doubling in just five years from 16.7 million in 2015.
The HSA market should reach beyond 36 million by 2023, which is a 20 percent growth rate from 2020.
Many people who joined an HDHP with an HSA ten and twenty years ago are now turning 65. In the past, I rarely spoke about HSAs, even five years ago. The subject comes up much more frequently now. I am careful to ask everyone I talk with about HSAs. Many have old HSAs, many are currently in HDHPs with HSAs, and many plan to work past 65.
Among those working past 65, some are going on Medicare when eligible. Others are deferring Medicare until full Social Security retirement benefits. Some need to stay with their plan because of a spouse or child who needs health insurance. Regardless of the reasons, discussing their HSA, if they have one, and Medicare is critical.
HSA and Medicare Part A
It is important to note once you enroll in Medicare, even if you only enroll in Medicare Part A, you can no longer contribute to an employer’s Health Savings Account (HSA). If you or your employer contribute any amount to your HSA after you enroll in Medicare Part A and/or Part B, you will pay a sizeable tax penalty when you withdraw the money from your account, as well as the unpaid taxes.
Does Medicare Part A Disqualify HSA Contributions?
Do NOT enroll in either Medicare Part A or Part B IF you wish to continue contributing to an employer HSA.
You must also make sure you and your employer stop contributing to your HSA at least six months before your Medicare takes effect if you enroll in Medicare after age 65. Medicare Part A is always backdated six months or to your 65th month of birth, whichever is shorter.
If you turn 65 and enroll in Medicare during the year, you and your employer must stop contributions the month you turn 65. Any contributions you or your employer make before your 65th birthday must be pro-rated for the year only to include the months before you turn 65.
How Does Social Security Benefits Affect an HSA?
Suppose you are already collecting Social Security upon turning age 65. In that case, you will be automatically enrolled in Medicare. You can stop your Part B to avoid paying the monthly premium, but you do NOT have the option to cancel Part A if you continue to receive Social Security benefits. Consequently, you will be penalized if anyone contributes to your HSA past 65 in this circumstance.
The only way to opt-out of this would be to rescind your Social Security election within 12 months and pay back all benefits received.
Social Security will also automatically enroll you in Part A if you start your Social Security benefits when you reach full retirement age. Again, you can no longer make HSA contributions once Part A is activated without penalty.
Can You Use HSA Funds For Medicare-Related Expenses?
Funds already in your HSA account can still be used for qualified medical expenses upon enrollment in Medicare. You could pay your Part A premiums with HSA money if you or your spouse did not work long enough to be eligible for premium-free Part A coverage.
If your Part B premiums are paid directly from your Social Security check, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses. Just remember to keep records of the costs.
Part D prescription drug costs and Medicare Advantage copays are also eligible expenses.
You cannot use HSA funds to cover Medicare supplemental insurance, also called Medigap.
HSAs and Long-Term Care
You can also withdraw money tax-free from an HSA to pay a portion of eligible long-term care insurance premiums based on your age.
You can withdraw up to $4,510 for long-term care premiums if you are age 61 to 70 and $5,640 if you’re older than 71. Your spouse can also withdraw up to that amount based on her age.
The eligible withdrawal limits for long-term care premiums are smaller at younger ages.
What Is the Penalty for HSA Contributions While on Medicare?
You will no longer have the HSA deduction during the period you were on Medicare and contributed to an HSA. You must add your pre-tax HSA contribution back into your income for the year you took the deduction. You will then be responsible for paying those past taxes with any interest due.
The IRS accesses an additional 6% as a penalty on the amount contributed.
HSA Testing Period & Penalty
HSAs also have what is described as a testing period. Contributors may make lump sum contributions, which are averaged out over the testing period. If the person’s Medicare is active at any time during the HSA testing period, an additional 10% IRS penalty is added along with the taxes.
Working Past 65 and Funding an HSA?
Note that a taxpayer must be enrolled in an employer-based group health plan to defer Medicare past age 65 without penalty. An HSA-eligible plan through the private Marketplace, COBRA, or a health care exchange does NOT qualify. In that case, you must cease contributions to the HSA upon reaching age 65 and enroll in Medicare to avoid lifetime late-enrollment penalties.
Once you are 65 or older and no longer have coverage through an employer-based group health plan, you have eight months to enroll in Medicare Part B to avoid a penalty. If you miss that deadline, there is a risk of a lifetime penalty for late enrollment.
The bottom line is that you must be clear on all rules and ramifications when working past age 65 and continuing to fund an HSA when Medicare eligible. You want to avoid penalties for excess HSA contributions or late-enrollment penalties for Medicare Part B and Part D.
Many people have heard of the Medicare Donut Hole, but even those on Medicare are not familiar with what the donut hole really means unless they fall into it.
When you are in the Medicare Donut Hole, you know it and quickly learn what it means.
Clients call me monthly asking, “What’s going on? My medication jumped from $45 to $145!” I say, “Oh, you’re probably in the Medicare Gap, or the more popular name is the ‘donut hole.”’ They ask, “What’s that?”
Even clients I have warned ahead of time usually still call with distressed and perplexed voices. People don’t really begin to grasp what’s happening until it happens.
Medicare Donut Hole Explained
How to explain the Medicare Donut Hole? There is nothing logical about the Medicare Donut Hole (or Medicare Gap). The government actuaries devised this idea to deal with many Medicare beneficiaries who are on many extremely expensive medications.
Think about it this way: We all pay for auto insurance. Most of us do not get into accidents or kill anyone, thankfully. Over a long driving career, there may be some fender benders, but nothing major.
So we complain a little, but we pay the insurance premiums. It’s the price of doing business. We understand that more people need to pay in than people take out for accidents and injuries for insurance to work. Medicare Part D prescription drug insurance is similar. We need more people paying in than taking out.
The Problem Of Expensive Prescriptions
When we were working, our employers and we paid a lot of health insurance premiums, including medication copays. The age group for employer plans is 18-64. Not many people were on Eliquis, Toujeo, Xarelto, Jardiance, Ventolin Inhalers, etc. However, when it comes to Medicare, you have people ages 65-100, and the percentage of persons on expensive medications is enormous.
If the cost and risk were evenly distributed among all participants without distinction, Medicare Part D prescription drug plans would be significantly more expensive — so expensive that those who aren’t on medications or very few medications would never buy a Medicare Part D plan.
Remember, you need more people paying into the insurance plan than taking out. The magical actuaries at Medicare came up with an idea. Voila, the Medicare Donut Hole!
4 Phases To the Medicare Part D Plans
The Medicare Part D prescription drug program is broken down into four phases. The first phase is the deductible. The deductible for 2023 will be $505. The purpose of any deductible is to ensure that people do not charge recurring and minor costs to the insurance plan. The consumer needs to foot the bill for those low-cost expenditures. All insurance policies have some deductible built into the policy. Otherwise, premiums would be astronomical.
Phase 1: Deductible
In the case of Part D plans, the deductible is usually only for the more expensive Tier 3 medications. The plan entirely or mostly covers minor and inexpensive medications.
Phase 2: Initial Stage
The second phase is the initial stage. The Medicare initial stage is how insurance generally feels to the consumer. There is a claim, and the insurance pays most of the claim. The insured pays a fourth or a fifth of the actual cost.
Most people on Medicare never get out of the Medicare initial phase. They may even be on many medications, but their cost is insufficient to drive them into the Gap.
Phase 3: The Gap / Medicare Donut Hole
The third phase is the Medicare Gap (or Medicare Donut Hole). You cross this threshold when you and the plan have paid at least $4,660 in the insurance company’s cost of the medications.
You’ve paid about a fourth of the cost out of your pocket. The insurance companies paid the rest. You have now thoroughly and completely crossed over into the Medicare Gap (or Medicare Donut Hole).
In the Gap, pharmaceutical companies discount the medication cost by 75%. You pay 25% of the actual cost. The reasoning is that now the persons who most benefit directly from the medications should bear the burden of the cost. Again, if it were evenly split among participants, those with no or few medications would opt out of Part D plans and significantly reduce the premium paid into the pool.
Phase 4: Catastrophic
The final phase is catastrophic. Like it sounds, the costs are catastrophic for most people by this point. You have paid $7,400 out of your pocket in actual or discounted costs. This amount is based on the actual costs of the medications. You need to pay the $7,400 out of your pocket to descend to the next level.
This phase is probably called catastrophic because you have paid out a catastrophic amount of money for medications, which is catastrophic for your budget.
In this stage, instead of paying the actual cost of the medications, the insurance company and Medicare step back in. Medicare significantly subsidizes the cost. Beneficiaries pay copays of $4.15, $10.35, or 5%, whichever is higher. The cost and tier determine the copay.
Then, the whole process starts over again on Jan. 1 each year.
Changes to the Medicare Donut Hole In 2024
Because of recent legislation in Congress, this entire system may be significantly altered starting in 2024. Hopefully, for the good, but as it stands, this is what and how the Medicare “Donut Hole” works.