Medicare Deductibles and How to Avoid Them

Deductibles are essentially flat dollar amounts you must pay before your Medicare benefits kick in.  All told, in 2017 the total Medicare deductibles add up to potentially $3,187 in costs just for this year!  Plus, keeping up with them is no small task as they change (almost) every year.

To keep things simple, just remember this: A Medicare deductible is the amount of money you are required to spend out of your own pocket (first!) every year before your Medicare Plan starts paying for things. That’s really all there is to it.  If you have Original Medicare Part A, Original Medicare Part B and Medicare Part D, you’ll be “satisfying” deductibles before any of your claims or prescription drugs are paid for.  There are of course ways to not have to pay those deductibles, and we’ll quickly review those options below.

Some background: The Centers for Medicare and Medicaid Services (CMS) usually publish their deducible amounts for the following year in November for Medicare Part A and Medicare Part B.  They usually get around to publishing Medicare Part D deductibles in October of the prior year.  Like I said, they change every year.  Here’s what they are for 2017.

Medicare Part A Deductible:

$1,316

Medicare Part B Deductible:

$183

Medicare Part D Deductible:

$400

As I mentioned above, in 2017 this means if you have Original Medicare and a basic PDP plan, you’re going to potentially have to come up with $3,187 out of your wallet (or purse) before anything gets paid.  That’s quite a bit of money exposure I’m sure you’d much rather keep under the mattress or spend it on a vacation to the beach.  (If you do, go to the beach, make sure to see if your Medicare benefits will travel with you by clicking here).

While somewhere in the neighborhood of 20% of folks on Medicare don’t have either an MAPD or a Medicare Supplement, I’m a big fan of having some sort of supplemental or additional policy on top of having Original Medicare A and B.  I’m definitely not a big fan of going “bare with Medicare” as I outlined in a previous post, essentially because Original Medicare A and Medicare B do not protect or limit your financial exposure should a catastrophic health even happen to you.  You really need a MOOP!  If you’d like to read more about this, go ahead and click here.

The Takeaway:

If you’re shopping for Medicare Advantage plans (MAPD) the best place to do it (objectively of course) and really the ONLY place to do so to see all of your options at once is on the Medicare.gov site.  You can get there by clicking here.

If you don’t want to buy a Medicare Supplement or MAPD plan from a private insurance carrier and choose to keep Original Medicare for your medical coverage, you’ll still need to buy a PDP plan.  You can save yourself the pain of having to pay a $400 deductible for your prescription drugs by simply choosing a PDP plan that doesn’t have a deductible. Most “basic” plans (cheapest) have the deductible, but there are usually a few every year that are reasonably priced ($25-$35 per month range) that have no deducible.  You can search for those plans by clicking here, right on the Medicare.gov website.

Medicare Part B vs. Part D Prescription Drugs – Are You in the Right Medicare Plan?

If you’re in the wrong type of Medicare coverage, you may be paying a whole lot of money for prescription drugs billed under Medicare Part B, not Medicare Part D.  This is especially true if you get cancer.  How can this be?  Read on.

Medicare Part D covers Prescription Drugs, right?  Not always… Medicare Part B can play a big role.  In fact, there are many instances when Medicare Part D actually doesn’t cover all drugs you may need during the course of your healthcare.  When medical conditions get serious, many medications aren’t covered by Part D.  Instead, they’re covered by Part B.  Knowing the difference between the two could save you hundreds if not thousands of dollars when choosing your Medicare coverage.  This is especially true if you have cancer as chemotherapy drugs and all the associated medications that come into play during cancer treatment are extremely expensive.  

Medicare Part D Covers Prescriptions at Retail Pharmacy Locations or Mail Order

Generally, Part D covers prescription drugs at a retail or mail-order pharmacy.  Let’s say you get bronchitis; you make an appointment with your primary care physician, he/she sends your prescription into your local pharmacy.  When you pick it up, you pull out your PDP or your MAPD card, swipe it and pay the associated copay or coinsurance.  Simple, right?  Right.  

But what if you need a prescription drug that’s administered by a doctor? Let’s say you have macular degeneration, and you’re seeing an ophthalmologist for treatment.  Many folks with this condition get very expensive shots in the eye to slow the degeneration.  Clearly (no pun intended) you can’t do this yourself.  When this happens, the doctor actually bills the prescription under Medicare Part B, not Medicare Part D. 

Same goes for prescription drugs that are administered in an outpatient setting.  If you’re having your knee scoped or drained, and the doctor shoots localized anesthesia into your knee before the procedure, that will hit Medicare Part B, not D.    

So, generally, Part B covers drugs that usually aren’t self-administered, which is a fancy way of you’re not taking them by yourself.  The doctor, nurse practitioner, surgeon, anesthesiologist, etc. are giving them TO you.

Here’s a short list of medical conditions that, when prescription drugs are used in your treatment, are covered under Medicare Part B, and not covered under Medicare Part D.  

Cancer
  • Oral cancer drugs: Medicare helps pay for some cancer drugs you take by mouth if the same drug is available in injectable form or is a prodrug of the injectable drug. As new oral anti-cancer drugs become available, Part B may cover them.
  • Oral anti-nausea drugs: Medicare helps pay for oral anti-nausea drugs used as part of an anti-cancer chemotherapeutic regimen. The drugs must be administered immediately before, at, or within 48 hours after chemotherapy, and must be used as a full therapeutic replacement for an intravenous anti-nausea drug
Hepatitis

Hepatitis B shots: Usually a series of 3 shots covered only for people at high or medium risk for Hepatitis B.

Osteoporosis
  • Injectable osteoporosis drugs: Medicare covers an injectable drug for women with osteoporosis who meet the coverage criteria for the Medicare.
Transplants
  • Immunosuppressive drugs: Medicare covers immunosuppressive drug therapy for people who received an organ or tissue transplant for which Medicare made payment.

Other Prescriptions Covered Under Medicare Part B, not Medicare Part D

  • Some other vaccines when they’re directly related to the treatment of an injury or illness (like a tetanus shot after stepping on a nail).
  • Durable Medical Equipment (DME) supply drugs: Medicare covers drugs infused through an item of DME, like an infusion pump or a nebulizer.
  • Injectable and infused drugs: Medicare covers most injectable and infused drugs given by a licensed medical provider if the drug is considered reasonable and necessary for treatment and usually isn’t self-administered.
  • Antigens: Medicare helps pay for antigens if they’re prepared by a doctor and given by a properly instructed person (who could be the patient) under appropriate
  • Blood clotting factors: If a person with Medicare has hemophilia, Medicare helps pay for clotting factors they give themselves by injection.
  • Parenteral and enteral nutrition (intravenous and tube feeding): Medicare helps pay for certain nutrients for people who can’t absorb nutrition through their intestinal tracts or can’t take food by mouth.

Are You In The Right Medicare Plan?  

Here’s where it gets interesting.  If you have a Medicare Supplement Plan (Medigap), these drugs are usually covered at 100%, especially for the two most popular plans, Medigap C and Medigap F.  That’s because these plans cover 100% of the Medicare Part B costs, which includes the deductible and any associated coinsurance.  The third most popular Medigap plan is Plan N, and if you have this one you’d be covered at 100% after paying the Part B deductible.

If you’re on a Medicare Advantage (MAPD) plan, odds are you’ll be paying 20% of the cost for Part B drugs, all the way up to the annual Maximum Out Of Pocket (MOOP).  To make sure, you need to pull out your Annual Notice of Change or your Summary of Benefits right now.  Flip to the Section entitled, “Medicare Part B drugs.”  If I were a betting man, (and I’m not) I’d bet you right now your MAPD plan doesn’t cover Medicare Part B drugs any more than at an 80% level, leaving you 20% to pay.  You stand a very good chance of hitting your MOOP very quickly if you have cancer, or any other serious condition requiring hospitalization involving prescriptions administered by hospital staff.  

The Takeaway:

If you’re turning 65 or otherwise now eligible for Medicare, this is an often overlooked “gap” in traditional Medicare, as well as most Medicare Advantage plans.  Most agents breeze right by this section in their presentations, and it’s not prominently one of the topics in “educational” presentations or seminars.  But, you clearly need to pay attention to it since over 1.6 Million people in the United States will get cancer in a given year.  Chemotherapy drugs are not cheap by any stretch of the imagination if you happen to be stricken with cancer and neither are osteoporosis drugs.  

If you’re playing it safe and this gap is of concern to you, I’d seriously consider getting a Medicare Supplement plan, if you can afford the monthly premium.  9 out of 10 times, a MAPD plan is going to be cheaper (along with a whole other set of considerations, click here for more on those) but you’ll have to cough up 20% of the Part B drugs if you need to.  

 

Medicare Premiums Going up, Benefits Going down in 2017

Today, the Centers for Medicare & Medicaid Services (CMS) announced the 2017 premiums for the Medicare inpatient hospital (Part A) and physician and outpatient hospital services (Part B) programs.

And guess what?  They’re going up.  Especially if you’re rich. Not even rich, really.  Just better off than most.  Funny how the timing of this happens right after the Presidential election, hmm?

The “average” Medicare Part B premium will be about $109.00, compared to $104.90 for the past four years.  That’s for about 65% of the Medicare population.  The standard monthly premium for Medicare Part B will be $134.00 for the other 30% in 2017, which is a 10 percent increase from the 2016 premium of $121.80.

The above changes do not affect your Medicare Advantage monthly premiums but they may impact you if you’re on a Medicare Supplement plan that covers either the Part A and/or the Part B deductibles.  More about deductible increases later in the post.

Higher Income?  Higher Premiums for You!

If you did the quick math above, you’ll notice we have 5% of the population left to talk about.  These 5% pay much higher costs for the exact same Medicare coverage.

Since 2007, people with higher incomes have to pay higher Medicare Part B monthly premiums. I covered this pretty extensively in a post you can read by clicking here.  These income-related monthly premium rates affect roughly 5% of people with Medicare.

Individuals earning between $85,001 and $107,000 and couples earning between $170,001 and $214,000 will see their monthly premiums rise from $170.50 a person this year to about $187.50 in 2017. For those earning more than $214,000, or $428,000 for couples, the increase is to $428.60 a month, from $389.80 in 2016.

Medicare Deductibles Increase in 2017

The Medicare Part A inpatient hospital deductible that beneficiaries pay when admitted to the hospital will be $1,316 per benefit period in 2017, an increase of $28 from $1,288 in 2016.

If that wasn’t enough, CMS also announced that the annual deductible for all Medicare Part B beneficiaries will be increasing to $183 in 2017 (compared to $166 in 2016).

 More Bad News – Your Social Security Check

In 2017, Social Security benefits will rise a lousy 0.3%. Social Security says the cost-of-living adjustment will add $5 to the average monthly payment for all retired workers. This means that whopping $5 won’t cover the increase in your Medicare Part B premium, so your checks will actually be getting a bit smaller this year.

The Takeaway:

Not much you can do about this, really.  If you’re on a Medicare Advantage plan, these increases will not affect your plans, at least in 2017.  However if you’re on a Medicare Supplement plan (Medigap), your insurance company has been waiting on this announcement for some time.  That’s because they have to set their 2017 Medicare Supplement pricing, and increasing Part A and/or Part B deductibles means they’ll have to pay more out in claims.  More paid claims equals higher policy premiums.  Keep an eye on your Medicare Supplement renewal premiums when you get them in the mail… most carriers send them out in the first three months of the year.  An annual increase larger than 5-9% may mean it’s time to shop for a Medicare Advantage plan.  You can check out my post on those types of plans by clicking here.

 

Why Am I Paying More for My Medicare?

Amazed.  Dazed.  Incredulous.  Angry.  Frustrated.  These are words describing people on Medicare who get a nice, neat letter from the Social Security Administration People announcing their Medicare premiums are going to be more than they were anticipating.  A lot more.  Folks earning above $85,000 and married couples earning more than $170,000 in retirement are required to pay higher premiums for Medicare Part B and Part D, most often significantly higher.

As a reminder, Medicare Part B covers doctor visits, outpatient services and other care, Medicare part D covers prescription drugs. Your monthly Medicare Part B premium will be higher if your income is above a certain amount. You’ll pay more for Part B if the income you reported on your IRS tax return two years ago was above $85,000 per year ($170,000 for couples). The income that counts is the adjusted gross income you reported plus other forms of tax-exempt income.

Will I be Affected?

The qualifying income amounts are shockingly low.  If an individual makes $7,084 per month in retirement, their Medicare Part B premiums are a whopping 40% higher every month plus an additional $12.70 every month in Part D premium.  Add those up, and folks in this category actually pay 50% more for their Medicare coverage every single month.

“But I’ve been paying into Medicare my entire working career.  I went to college/graduate school/took a risk and started my own company and succeeded.  I’m proud to have made a good amount of money, but have also lived below my means, saved a high percentage of my pre and post-tax income to be able to retire on an amount I can live comfortably on for the rest of my life.  I’ve paid my Medicare taxes, I’ve been responsible and now I have to pay more?!?!

Yep.  I’ve heard hundreds of versions of the paragraph above.  It’s a shock to most people in this situation, and usually the reaction once the Social Security Administration letter announcing they’re now going to charge you more for being successful and responsible.   That’s essentially what this is… you can pay more than your neighbor or fellow retiree, therefore you will.  You’re subsidizing those who cannot afford to pay higher Medicare premiums.

As you may already be painfully aware, we’re not just talking about multi-millionaires here.  The Social Security Administration reports less than 5 percent of Medicare beneficiaries pay higher premiums, but small percentages can be deceiving.  That means almost 3 million people across the country have higher premiums than their neighbors, and the differences are significant.

Don’t worry, they’ll just take the extra premiums out of your Social Security check.  It’s really convenient.  (Apply dripping sarcasm)

The federal government looks at the modified adjusted gross income in the latest returns filed with the Internal Revenue Service (typically two years back) to determine if you must pay an income-related premium.

Adjusted Gross Income2016 Part B Monthly Premium Amount2016 Part D Monthly Premium Amount
Individuals with adjusted gross income of $85,000 or less
OR married couples with a $170,000 or less
Standard
premium:
$121.80
Your plan
premium
Individuals with adjusted income
above $214,000
OR married couples with adjusted income above $428,000
Standard
premium
+ $268.00
Your plan
premium
+ $72.90
Individuals with adjusted income above $160,000 up to $214,000
OR married couples with adjusted income
above $320,000 up to $428,000
Standard
premium
+ $194.90
Your plan
premium
+ $52.80
Individuals with adjusted income above $107,000 up to $160,000
OR Married couples with adjusted income
above $214,000 up to $320,000
Standard
premium
+ $121.80
Your plan
premium
+ $32.80
Individuals with adjusted income above $85,000 up to $107,000
OR married couples above $170,000 up to $214,000
Standard
premium
+ $48.70
Your plan
premium
+ $12.70

There’s even more good news (more sarcasm).  If you don’t fall into a higher-income Medicare bracket, you might sometime soon because the Affordable Care Act froze the income thresholds through 2019, rather than allowing the thresholds to rise with inflation.  This means as inflation marches on, the number of people considered “high income” will increase.

The Takeaway

If you make more, you’re going to be paying more. Much more.  If you disagree with the way the Social Security Administration has processed your tax information, file an appeal.  As you can imagine, in true bureaucratic fashion, there’s a form to fill out.  You may request an appeal in writing by completing a Request for Reconsideration (Form SSA-561-U2), or you may contact your local Social Security office to
file your appeal. You can find the appeal form online
at www.socialsecurity.gov/online or request a copy
through their toll-free number at 1-800-772-1213 (TTY
1-800-325-0778)