Racine Journal Times / December 2006

To Your Wealth / Medicare Update

Justus Morgan

 

 

It’s that time of the year again! You probably had your fair share of turkey during Thanksgiving and are now eagerly awaiting the remaining holiday season and the beginning of the New Year. For anyone over the age of 65, it’s also the time of the year to re-evaluate your Medicare health insurance coverage.

 

There are a couple of changes effective for 2007 about which you should be aware. First, November 15 through December 31 is the open enrollment period for Medicare Part D. Second, the premiums for Medicare Part B will be increasing (as usual) starting in January but with a major change for the New Year.  Before going into the specific changes, let’s review the different Parts of Medicare.

 

Medicare Part A pays some of the cost of hospitalizations, limited nursing-home care, and hospice care. The premiums for Part A are typically covered by the government provided you have worked a certain length of time.

 

Medicare Part B primarily covers doctors’ fees, most outpatient hospital services, and certain related services. Participants in the program pay for part of the cost of Part B coverage through monthly premiums.

 

Medicare Part D is the new prescription drug plan which began earlier this year. The premiums for this Part are based on the type of plan you select.  Unlike the other Parts of Medicare, Part D is administered by private insurance companies rather than the federal government although significant costs are still paid for by the government.

 

The open enrollment period for Part D is significant because everyone has the option of selecting a new insurance company to administer their prescription drug benefit. Unfortunately, there is no easy answer to which company you should go with because of the many choices and drugs covered. In Racine County alone, there are 54 plans available. Here are the steps I suggest in making a decision of which plan to use:

  • First, if you are covered by an employer prescription drug plan, verify it is considered “creditable coverage.” If it is, you may not need to do anything further as this plan is equal to or better than the standard Part D plans;
  • Second, prepare a list of prescription drugs you are currently taking including dosage and frequency;
  • Third, visit your pharmacy or www.Medicare.gov to determine which of the 50+ plans cover your prescriptions at the lowest cost;
  • Fourth, contact a couple of companies for additional details on their benefits and identify the provider(s) that most appropriately meets your needs.

 

This method will allow you to narrow the field of choices from 54 plans to two or three, making the decision-making process much more manageable. If for some reason you choose a less than optimal company, you can make a change the following year. This is especially important if your doctor prescribes new medication or if your selected company changes their benefits.

 

Starting in 2007, there will be a unique twist to the premiums you will pay for Part B benefits. Historically, everyone paid the same amount regardless of financial circumstances. Beginning in 2007, your premiums will be based on your income from the previous year. The increase in premiums will begin with income over $80,000 for singles and $160,000 for married couples. The monthly premiums will range from $93.50 to $161.40.

 

These increases will continue until 2009, when higher income beneficiaries will pay over three times as much as those with lower incomes. Other than reducing your income below the threshold levels, there is little you can do to avoid the higher Part B premiums in the future. This is a significant change in direction for Medicare aimed at improving financial solvency. It is my prediction that this is just the beginning in a long process to attempt to restore federal entitlement programs to financial health.

 

For more information on Medicare visit www.medicare.gov or www.cms.hhs.gov.

 

Justus Morgan is a CERTIFIED FINANCIAL PLANNER™ practitioner with Financial Service Group, Inc., a registered investment advisory firm in Racine, website address www.toyourwealth.com.