A Medicare Primer for Advisors

Medicare was added to the Social Security Act of 1935 during the mid-1960s. However, due to excessive costs, inefficient management and other factors, the long-term viability of this program has been in jeopardy for quite a while. However, in the post-Obamacare era, Medicare now has an additional obstacle to overcome, specifically in the way that medical fees will be paid. If the change isn't successful, it could spell disaster for what has essentially become a medical lifeline for millions of Americans age 65 and older. 

As an advisor, even if you don't sell health insurance, it is incumbent upon you to obtain at least a modicum of knowledge on Medicare, so you can advise your clients on this all-important issue. In this post, we'll discuss Medicare's eligibility requirements, its components, premiums and coverage, and the change mandated under the Affordable Care Act that could cause a problem. If you have clients who are currently covered under Medicare, or will be in the future, this is information you definitely need to know. 

Medicare Eligibility Requirements

To be eligible for Medicare you must meet the following criteria:

1) You must be a U.S. citizen or permanent legal resident; and

2) You or your spouse must have worked and paid into Medicare for a minimum of 10 years; or

3) You or your spouse is a government employee who has not paid into Social Security, but has paid Medicare payroll taxes while you were working. 

Medicare Components & Premiums

Medicare is divided into four parts. Here is a brief description of each.

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The following two tables contain the cost of each Medicare component.

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Medicare and The Affordable Care Act

Prior to the passage of The Affordable Care Act (the ACA or ‘Obamacare’), medical services for Medicare patients were paid on a "fee for service" basis. In other words, assuming you had a surgical procedure, you (or your insurance company) would receive a separate bill from the doctor, the radiologist, the anesthesiologist, the surgical facility, etc. Under the new law, there will be two bills generated: one for the facility and the other for the services provided. Therefore, the medical practitioners would divide the amount allocated under the bill for their individual services. To summarize, this only applies to Medicare and has the potential to cause a great deal of frustration among the medical community. In short, if the aggravation becomes too great, doctors might choose not to treat patients who are covered under Medicare. I'm not saying this will happen, but it is quite plausible.

Healthcare is one of the most important issues in an individual's life; it also accounts for about one-sixth of our economy. The key to assuring that Medicare doesn't veer off into the ditch is prudent management and consistent monitoring. However, thus far, there have been some rather large and unnecessary problems. Will this continue? It's hard to say. However, the percentage of those age 65 or older is a fast growing segment of voters. Moreover, it's not a group that politicians want to anger. Hence there is sufficient motivation to make it work, but do we have first-class leadership to get Medicare operating efficiently? We'll have to wait and see on that one. 

Thanks for reading and have a great week!

 

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