Finding a Way Through the Medicare Maze

As you inch closer to the traditional retirement age, you might prefer to be spending time planning a cruise, visiting grandchildren or training for your first marathon. Instead, you may find yourself sitting confused at the kitchen table, hunched over a mass of papers dealing with medical insurance.

Let’s try to clarify things.

For starters, if you have worked and paid Social Security and Medicare payroll taxes for 40 work quarters, or about 10 years, you become eligible for Medicare at age 65.

But the Medicare card doesn’t come to you as a birthday gift. You need to enroll. There is a seven-month eligibility window that starts three months before your 65th birthday and continues for four months after.

You can sign up for both Part A, which covers hospital bills, and Part B, which helps pay doctor bills. The part B premium is $50 a month, and the money is deducted from your Social Security check.

If you miss the window and don’t enroll in Medicare during the seven-month period, you can face a financial penalty and have to pay more for Part B. Every year you don’t enroll for Part B, the cost will jump 10%.

If you didn’t sign up when you were originally eligible, the next chance comes during the general enrollment period, which runs from Jan. 1 through March 31 each year. Coverage begins July 1 of that year.

Those older than 65 who do not have a history of paid work can buy into the Medicare system if they have been legal residents of the United States for at least five years. And disabled people of all ages are eligible for Medicare if they are receiving Social Security disability benefits.

Some people decide to keep working past age 65, and that can create a more complex situation.

If you are employed at a company with 20 or more workers that already offers health insurance, you and your spouse are entitled to coverage regardless of age.

If you have Medicare and private insurance, your company’s group health plan is the primary payer of hospital and medical bills. Medicare is the secondary payer. Don’t expect, however, that every dollar of every bill will be paid just because you have two insurance policies.

Remember that the rules with regard to Medicare as a secondary payer are extraordinarily complicated, said Aileen Harper of the Center for Health Care Rights, a Los Angeles-based health insurance counseling and advocacy program.

Here is one example of how Medicare might pay.

The doctor charges $200. The company health plan says it will approve payment up to $150 for that particular treatment. The company plan pays 80% of approved charges, or $120. That leaves a balance of $80 for the patient to pay.

Medicare would normally pay up to $100 for the same treatment if the bill had been submitted to Medicare initially. But the patient won’t get $100, because he is not allowed to benefit from both the full company health coverage and full Medicare coverage. In this case, Medicare will pay $30, the difference between the company’s approved limit and what it actually paid. The patient is personally responsible for the remaining $50.

If your policy at work is limited--if, for example, it provides skimpy mental-health benefits--you probably will want to sign up for Medicare, too, she said. Take a close look at the policy before deciding if it’s worthwhile to pay the extra $50 a month for Medicare. “Generally speaking,” Harper said, “if you have fairly good health coverage, it may not be cost effective to enroll in Medicare.”

If your health insurance at work is through an HMO, or health maintenance organization, you have to use the HMO’s network of doctors and hospitals. Medicare, however, allows you to see any doctor, including physician specialists, or hospital you choose. But an HMO is likely to offer prescription drug coverage that Medicare lacks. Decide which trade-off is most important to you.

If you decide to stick with the company’s insurance and forgo Medicare for now, you don’t have to worry about being penalized for not enrolling in Medicare. You can delay until you decide to stop working. Then you have an eight-month special enrollment period.

In a family situation, the calculations become even more intricate. Many workers have spouses who are younger and not yet eligible for Medicare.

Take the example of John Jones, who has health insurance for himself, his wife, Joan, and his two college-age children. John turns 65 and keeps working. He can drop his coverage at work and rely on Medicare only. But he decides instead to stay enrolled in the health insurance program at work because Joan and the kids still need the protection.

Suppose, however, that John retires at 65, and thereby gives up his health insurance. He is protected by Medicare, but what about the rest of the family? Joan and the kids can find a refuge in the federal COBRA law (Consolidated Omnibus Reconciliation Act). Both the spouse and the children can keep the coverage from John’s company for 36 months even though he has retired. However, they have to pay the full cost of the premium, including the part his employer used to pay.

Let’s turn the situation around. Hector and Dolores are married and working, and each can get health insurance on the job. Both of them had been covered under his policy, which included a drug benefit. They always used his insurance exclusively.

But Hector decides at age 62 to switch to a three-day workweek. He will lose the health coverage available to full-time workers. Before Hector decides to make the switch to part-time work, he and his wife should do some careful planning. When open enrollment season comes at Dolores’ firm, she should enroll both of them in her company’s plan.

About one-third of workers are at firms offering health benefits to retirees. These programs can be quite different from the coverage for full-time workers, however, and many people are unaware of that fact.

If your firm offers retiree benefits, go over the policy carefully to see what is covered. Chances are you won’t get as much protection. When you have both retiree coverage and Medicare, then Medicare becomes the primary payer for your medical bills. The key here is to focus on what gaps can be filled to minimize your out-of-pocket costs. Medicare’s big disadvantage is the lack of drug coverage. If your employer’s retiree policy covers drugs, be sure to keep good records and receipts so you can get reimbursed for the prescriptions.

Medicare has a guidebook called “Medicare and Other Health Benefits: Your Guide to Who Pays First.” To request a copy, call (800) MEDICARE (633-4227) and request publication No. HCFA-02179.

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A reminder to people with disabilities who are enrolled in Medicare: April 30 is the deadline for an open enrollment period when you are guaranteed under California law the right to buy Medi-gap supplemental insurance coverage, regardless of your health status.

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The government has issued a new ruling that should ease some of the pressure on hospices that care for terminally ill people under Medicare. Believe it or not, some of the hospices were criticized by government inspectors because their patients were living too long, staying alive beyond the six-month standard definition established for covering a terminally ill person.

Hospice managers were worried they wouldn’t get reimbursement from Medicare if many patients lived beyond six months. Congress decided to inject some common sense into the situation last year with an amendment stating that the definition of a terminal patient “shall be based on the physician’s or medical director’s clinical judgment regarding the normal course of the individual’s illness.”

HCFA has now announced that “making medical prognostication of life expectancy is not always exact.”

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Bob Rosenblatt welcomes your questions, suggestions and tips about coping with the changing world of health care. You can contact him by writing Bob Rosenblatt, Health, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or by e-mailing bob.rosenblatt@latimes.com. Health Dollars & Sense runs the second Monday of each month.