Introducing the New Medicare Card

Starting April 1st, 2018 the Centers for Medicare & Medicaid Services (CMS) will begin mailing new Medicare cards to members.  The new cards will no longer include the Health Insurance Claim Number (HICN) containing the individual’s Social Security number. Instead, it will contain a new Medicare Beneficiary Identifier (MBI) number that will be assigned to each individual.  The removal of the HICN number was part of the MACRA legislation that was passed in 2015 and is designed to help prevent fraud and protect beneficiaries from identity theft.

What will the new cards look like?

The new cards will still don the same iconic red, white and blue colors of the past, but will now include the new 11 digit MBI number instead of the old HICN number.

When will the new cards be sent out?

The new Medicare cards will be mailed out in waves, dependent on which state the beneficiary resides in.  See chart below:

WaveStates IncludedCards Mailing

Alabama, Florida, Georgia, North Carolina, South Carolina

After June 2018

All new MBI cards will be received no later than April 2019.

What is the Medicare Beneficiary Identifier?

The MBI is 11 characters in length and comprised of uppercase letters and numbers.  Each MBI is randomly generated which makes them different than the HICN, which were based on the beneficiary’s SSN.  To determine the MBI, they’ll use numbers 0-9 and all letters from A to Z, except for S, L, O, I, B and Z.  This will help the characters be easier to read.  Each character of the new MBI will be designated as either a numeric value, an alphabetic value, or both.  Here’s the format they will follow:

Example: 1EG4-TE5-MK73

Character 1 – numeric values 1 thru 9
Character 2 – alphabetic values A thru Z (minus S, L, O, I, B, Z)
Character 3 – alpha-numeric values 0 thru 9 and A thru Z (minus S, L, O, I, B, Z)
Character 4 – numeric values 0 thru 9
Character 5 – alphabetic values A thru Z (minus S, L, O, I, B, Z)
Character 6 – alpha-numeric values 0 thru 9 and A thru Z (minus S, L, O, I, B, Z)
Character 7 – numeric values 0 thru 9
Character 8 – alphabetic values A thru Z (minus S, L, O, I, B, Z)
Character 9 – alphabetic values A thru Z (minus S, L, O, I, B, Z)
Character 10 – numeric values 0 thru 9
Character 11 – numeric values 0 thru 9

Who will be getting the new MBI card?

Each person with Medicare will get their own randomly-generated MBI.  Spouses or dependents who may have had similar HICNs will each get their own different MBI.

Article Written by: Chris Hagerstrom from JSA

Four Important Decisions to Make Before Enrolling in Medicare

The period starting three months before your 65th birthday, continuing throughout the month during which your birthday occurs, and ending three months after that, is your initial Medicare open-enrollment window. Miss that opportunity to enroll and you could end up paying for your tardiness in higher premiums. So before you even reach the open-enrollment period, it's a good idea to know exactly what you're going to do about the many important decisions involved in signing up for Medicare.

Original Medicare or Medicare Advantage?

The numerous types of Medicare plans fall under two primary programs. Original Medicare, which consists of Medicare Part A and Medicare Part B, covers hospital related expenses and some non-hospital healthcare expenses, including certain types of medical appointments, medical supplies, and outpatient care. These plans are provided by the federal government and allow you to use any healthcare provider that accepts Medicare.

Medicare Advantage is a program that offers you various insurance plans from private providers, generally consisting of a mix of HMOs, PPOs, and possibly hybrid plans such as EPOs. Most of these plans charge a monthly premium over and above the basic Part B premium, and they may offer a very wide range of coverage options.

Image source: Getty Images.

It's important to make the right choice between original Medicare and Medicare Advantage at the time you enroll because you may lose access to some options after open enrollment ends. For example, during your initial open-enrollment period, Medicare Advantage plans are not allowed to decline coverage -- but after that, the plan providers may decline to cover you for a variety of reasons.

Will you need a Medigap plan?

If you decide to go with original Medicare, consider supplementing the rather sparse basic coverage with a Medigap plan. Medigap plans, which are sold by private plan providers, can give you coverage for healthcare expenses that don't fall under Medicare Part A or Part B. If you do decide to get a Medigap plan, the next decision will be which type of plan to get. The plans come in 10 different options and are standardized, meaning that (for example) every Medigap Plan L offers exactly the same coverage no matter where you live or which private provider is selling the plan.

Will you need Medicare Part D?

Medicare Part D provides prescription drug coverage, which you may or may not need depending on what other Medicare plans you choose. Neither original Medicare nor Medigap offers prescription drug coverage, so if you go that route, choosing a Part D plan is strongly recommended. Even if you're in good health now, you may still end up with expensive prescription requirements as you get older, and without an insurance policy to help prescription expenses can get very high very quickly. Some Medicare Advantage plans offer drug coverage as part of the basic plan, while others do not. If the Medicare advantage plan you choose has sufficient drug coverage for your needs, you can skip Part D.

High premium/high coverage, or low premium/low coverage?

"You get what you pay for" definitely applies when it comes to health insurance. When comparing the different Medigap plans and/or the different Medicare Advantage plans, you'll quickly see that plans that provide more coverage nearly always have much higher premiums than plans that provide less coverage. Thus, you'll have to decide whether it makes more sense to pay high premiums for a plan that will cover a larger percentage of your medical expenses, or lower premiums for a lower-coverage plan.

If you're in good health, you'll usually save more by adopting a cheaper plan, since you're likely to have fairly low medical expenses. If you have one or more serious medical conditions, choosing a high premium plan is generally the cheapest option in the end, since you're likely to rack up fairly high medical expenses over the course of the year.

However, note that if you choose to go the Medigap route and later wish to switch to a different Medigap plan, once you're outside your initial enrollment period, the new plan provider has the right to decline coverage or charge you higher premiums based on pre-existing conditions. Thus, it may make sense to choose a fairly high-coverage Medigap plan from the beginning, even if you're in good health. "Better safe than sorry" is another truism that can easily apply to healthcare, especially in retirement.

Click here for a FREE Medicare Plan review!

Written by: Wendy Connick of the Motley Fool

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Congress May Open The Door To Some Medicare Long-Term Care

Congress is taking a small, but important, step towards expanding Medicare to include some long-term supports and services. A bipartisan (yes, bipartisan) measure before the Senate Finance Committee would give some Medicare providers additional flexibility in the way they care for people with chronic conditions, who are among the program’s highest need and highest cost beneficiaries.

The bill, called the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017, nibbles around the edges of this important issue. Make no mistake, it would not expand traditional Medicare to provide anything like a long-term care benefit. Far from it. But it would begin to break down what has until now been a largely impenetrable wall between Medicare and those supports and services.

Given the current political environment, Congress would take a major step by even acknowledging that people with chronic conditions may require services that Medicare does not now offer. The sponsors of the bill include Finance Committee Chair Orrin Hatch (R-UT) and top committee Democrat Ron Wyden (D-OR) as well as Johnny Isakson (R-GA) and John Warner (D-VA).   The Finance panel held a hearing this on the bill yesterday and plans to vote next week to send the measure to the full Senate.

Expanding Managed Care

CHRONIC would expand the use of telehealth, extend and expand a home-based medical practice experiment called Independence at Home, and improve the Medicare appeals process for people in risk-based insurance plans such as Special Needs Plans (SNPs). But the biggest changes would apply to the care provided by managed care programs.

One would expand the use of those special needs plans, which are explicitly aimed at people with chronic conditions and high medical needs. Some of these programs already provide supports and services as part of their benefit packages but they remain relatively small.

The other would give Medicare Advantage plans important new flexibility to offer social supports and other non-medical services to their members. About one-third of Medicare enrollees are in MA plans.

Paying for Meals and Rides

Today, these managed care plans must provide identical benefits to all their members regardless of health status, and services are limited to those that are “primarily health-related.” That means that fitness benefits are OK, but home-delivered meals or medical transportation are not. For many older adults with chronic conditions, a ride to the doctor or a hot meal to stave off malnutrition are crucial to their well-being. And such services may reduce the chances of emergency room visits or hospitalizations.

CHRONIC would change those rules. It would allow MA plans to target specific supplemental benefits to their high-need members with chronic conditions. And, according to a summary of the bill, it would permit benefits that “have a reasonable expectation of improving or maintaining the health or overall function of the chronically ill enrollee and would not be limited to primarily health-related services.’

That doesn’t exactly say long-term supports and services, but it comes awfully close.

A Potential For Savings

The Bipartisan Policy Center, which has recommended many of the changes that found their way into CHRONIC, estimates that for an additional $5 per month, MA plans could provide a member with in-home meal delivery, non-emergency medical transportation, minor home modifications, and targeted case management services. In testimony to the Finance panel yesterday, BPC’s director of health policy, Katherine Hayes, put it cautiously but accurately:  “If the provision of these non-Medicare-covered social supports reduced hospitalizations, emergency department visits, and other Medicare spending for the targeted group of enrollees, there is also a potential for savings.”

One example of how these programs can help those with chronic conditions is CAPABLE, a demonstration created by Sarah Szanton and her colleagues at Johns Hopkins.  The program is built around a team that includes an occupational therapist, a nurse, and a handyman. They first determine a patient’s goals and then provide modest home repairs and modifications as well as assistive devices as needed. The results:  Three-quarters of participants improved their ability to do activities such as walking, dressing, or bathing. However, the CAPABLE experiment was available only for those who are dually eligible for Medicare and Medicaid, not for the Medicare-only population.

We are learning that programs such as this can work.  And they very likely can help those who receive only Medicare. Now, a bipartisan group of senators is taking some initial steps to open the door to those services.

Medicare Is Reducing The Cost Of Knee Replacements (Here's How That Could Backfire)

Knee replacements are booming. Between 2005 and 2015, the number of knee replacement procedures in the United States doubled, to more than one million. Experts think the figure might rise sixfold more in the next couple decades, because of our aging population. Since many people receiving knee replacements are elderly, Medicare picks up most of the cost of such procedures. In response to this huge rise in expenditures, Medicare is experimenting with ways to reduce the cost of procedures. But that raises a disturbing possibility. If orthopedic surgeons make less money on each knee replacement they perform, they might start performing unnecessary procedures.

Consider Medicare’s recent experiments with reimbursing knee replacements according to “bundled payments.” Under such reimbursement, Medicare gives healthcare organizations a lump sum to cover the cost of a knee replacement–not just the cost of the operation but also the cost of post-operative x-rays, physical therapy, even time in nursing homes or rehab hospitals. Before bundled payment, providers would receive separate payments for each of these services, meaning inefficient providers might take more x-rays than necessary, or keep patients in rehab hospitals longer than they needed such comprehensive care, and be rewarded for this inefficiency by receiving additional payments. Under bundled payment, Medicare tracks all the knee-replacement costs for a given patient, over a 90-day period. If a patient incurs fewer expenses than expected, Medicare gives the providers part of these savings back as a reward. (Warning–this is a very oversimplified description of bundling.)

Early evidence suggests that bundled payments reduce the cost of knee replacements by an average of almost $1,200 per procedure. With a million such procedures performed in a year, that reduction could save over $1 billion. Moreover, these savings don’t seem to come at the expense of quality, at least as far as we can tell. (Quality measurement in healthcare is notoriously difficult.) For example, when knee replacements were paid for through bundled payments, there was no subsequent increase in readmission to the hospital or emergency room visits among patients whose procedures were reimbursed according to bundled payments. Same quality at a lower price–who could be against that?!

Well, caution is in order. Healthcare systems that enrolled in the bundled payment system increased the number of knee replacements they performed–about three procedures more per hospital. By contrast, the number of knee replacements stayed steady in other hospitals. This finding, indeed ALL these findings, are tremendously preliminary. Bundled payments are still in their infancy. Quality measurement still doesn’t capture everything we’d like it to.

Nevertheless, the increase in procedures is concerning. Surgeons don’t like to see their income decline. So they could potentially compensate–if they receive less money per procedure, they might perform more procedures. Some of those procedures will be unnecessary–people will receive knee replacements for whom the risks of the procedure outweigh the likely benefits. I’m not suggesting that surgeons will purposely perform unwarranted procedures. I’m certainly not implying that they will put artificial knees in people who have little or no knee trouble. Medical practice is often about making tough judgment calls. And I worry that when people’s incomes start declining, it will subtly influence their judgment.

In trying to reduce the cost of healthcare, we can focus on increasing the efficiency of specific services. But if we don’t pay attention to the volume of services, we may be creating unintended consequences.

Bundled payments are not going to go away under a Trump administration. For starters, these payments aren’t recognized by members of the general public as part of Obamacare, so there’s not much political capital gained by eliminating them. In addition, many private insurers are also exploring the promise of bundled payments. So as private and public payers continue to experiment with healthcare reimbursement, they should keep a few things in mind:

1. They should continue to bolster their quality measures, while reducing the burden of collecting such measures. These two goals potentially compete with each other, but we need to pay attention to both of them.
2. Payers need to take account of patient populations–they should base reimbursement in part on risk adjustment, so as not to punish healthcare providers who care for sicker, more complicated patients.
3. They need to assess the appropriateness of healthcare services, so doctors and hospitals don’t respond to reduced reimbursement rates by providing unnecessary services.

The Role Of Life Insurance In Living To 120

The potential for living a very long and healthy life is greater now than ever before. New technologies, such as genomics and nanomedicine, are in the process of changing the face of medicine. For those who can afford state-of-the-art medical evaluations and treatments, as they are not usually covered by traditional health insurance, opportunities are increasing to live rewarding lengthy lives.

For the ultra-wealthy, who have considerable liquidity, paying for cutting-edge healthcare is often not a problem. On the other hand, for the wealthy as well as for the ultra-wealthy whose assets are locked up in one manner or another, such as being predominately the privately held family business, steps can be taken to address the prospective costs of dealing with higher probability illnesses.

According to Daniel Carlin, M.D., founder and CEO of WorldClinic, one of the foremost concierge healthcare firms, “Comprehensive longevity planning uses advanced medical testing, like genomics and biomarkers, to create expert healthcare plans. For many affluent families, this healthcare planning also incorporates financial planning. This means ensuring that the affluent families have the financial resources to cover the costs of these tests, cutting-edge treatments, and likely rehabilitation expenses.”

“A number of sophisticated wealth management strategies are used with the affluent to address their diverse needs and wants including having the funds available to deal with possible illnesses and rehabilitation,” says Daniel Geltrude, Managing Partner of Geltrude & Company and Director of the firm’s Family Office Practice. “Sometimes, part of the financial answer is for the wealthy to purchase life insurance, which is used in a number of ways. It’s many times the easiest and most cost-effective solution. For example, there are ways a business owner can use traditional or private placement life insurance to pay for these heath benefits.”

Clearly for the wealthy, comprehensive longevity planning will become increasingly important for them and their loved ones. In a large percentage of situations, life insurance can play a meaningful role in helping to deal with the potential considerable costs of state-of-the-art healthcare.

Medicare enrollment ends HSA eligibility

As many clients continue to work beyond the traditional retirement age of 65, financial advisers are often confronted with questions about the interaction of employer-provided health insurance, Medicare and health savings accounts.

Health savings accounts (HSAs), when paired with a qualified high-deductible health insurance plan, offer a triple tax-break. Contributions are tax-deductible. Assets grow tax-free. And distributions are tax-free if used for qualified medical expenses. Non-qualified distributions are subject to ordinary income taxes and a 20% penalty if withdrawn before age 65.

Most Americans become eligible for Medicare at 65. Anyone who begins receiving Social Security benefits before age 65 is automatically enrolled in Medicare at age 65. Those who are not yet receiving Social Security benefits must enroll in Medicare at age 65 during their initial seven-month enrollment period unless they have credible health insurance from an existing employer or are covered by their spouse's group health insurance plan.

In the absence of continued employer health insurance coverage, failure to enroll in Medicare during the initial enrollment period can result in a permanent delayed enrollment penalty.

But participation in any type of Medicare — including Parts A, B, C or D — renders you ineligible to contribute to an HSA.

Once you turn 65, you can take penalty-free distributions from an HSA for any reason. But in order for an HSA distribution to be both tax-free and penalty-free, the distribution must be for a qualified medical expense.

At age 65, you can use your HSA to pay for Medicare parts A, B, D and Medicare HMO premiums tax-free and penalty free. For example, if your Medicare premium is automatically deducted from your Social Security check, you can reimburse yourself directly from your HSA using those pre-tax dollars to pay for your Medicare premiums. However, you cannot use your HSA to pay for Medigap supplemental insurance premiums.

To be eligible to contribute to an HSA after age 65, you must not enroll in Medicare. That means if you want to continue contributing to an HSA after age 65, you can't receive Social Security benefits.

If you have already signed up for Social Security and now want to disenroll from Medicare Part A in order to continue contributing to an HSA, you would have to repay all the money you have received in Social Security benefits and repay any money the government spent on your Medicare claims.

Disenrolling may be easier said than done. One InvestmentNews reader, a financial adviser who delayed enrolling in Medicare because he was covered by his employer's health insurance plan, has found himself locked in a months-long battle with the Social Security Administration. He accepted a buyout from his firm at the end of 2016 and enrolled in Medicare effective Jan. 1, 2017. But the agency accidently backdated his Medicare enrollment by six months, making him ineligible for a HSA contribution for the second half of 2016 — contributions he had already made. At last check, he was still trading emails and phone calls with the agency and had planned to enlist his congressman's help in unraveling the bureaucratic mess.

If you want to continue contributing to an HSA after age 65, it means you must continue to work and be covered by an employer's group high-deductible health insurance plan. But if you are self-employed or work for a small business with fewer than 20 employees, you are out of luck. Medicare will become your primary insurer at age 65.

You lose your eligibility to contribute to an HSA on the first day of the month you turn 65 and enroll in Medicare. For example, if you turn 65 in July 2017, you are no longer eligible to contribute to your HSA as of July 1. Your maximum contribution for the year would be 6/12 times the applicable federal limit.

In 2017, the maximum an individual can contribute to an HSA is $3,400 or $6,750 for family coverage. HSA owners 55 and older can contribute an additional $1,000 in catch-up contributions. So if you have an individual HSA and turn 65 in July, you can contribute $2,200 for the first six months of 2017 ($3,400 + $1,000/2).

You have until April 15 of the year following the tax year you lose your HSA eligibility to make your HSA contribution, according to HSAresources.com, a firm that administers health savings accounts. You can do so even if you are no longer eligible for an HSA, as long as you are making contributions for a period when you were eligible. So if you turn 65 in July 2017, you have until April 15, 2019 to make your contributions for the first six months of 2017.

When Can I Sign Up for Medicare?

Medicare provides critical health benefits to countless seniors. You can register for Medicare during the seven-month enrollment period surrounding your 65th birthday, but if you don't enroll on time, you'll face not only a period without coverage, but a penalty that could increase your premiums -- for life. That's why it's important to pay attention to Medicare enrollment deadlines and sign up without delay.

Enrolling in Medicare

Though you're not eligible for Medicare benefits until you turn 65, you can actually enroll in the program beforehand. In fact, your initial enrollment period encompasses a seven-month period that begins three months before the month in which you turn 65 and ends three months after the month in which you turn 65.

If you fail to sign up for Medicare during your initial enrollment period, you still get more chances to register. Namely, you can sign up during the general enrollment period of January 1 through March 31 of each year. But not signing up during your initial enrollment period could end up costing you.

While most Medicare enrollees don't pay a premium for Part A, which covers hospital visits and the like, they do pay a premium for Part B, which covers preventative care and diagnostic services. This year, the standard Part B premium is $134, though it could be higher or lower depending on your income and whether or not you collect Social Security. If you fail to sign up for Medicare during your initial enrollment period, you'll face a 10% increase in your Part B premium for every 12-month period you were eligible for coverage but didn't enroll. And when you're living on a fixed income, that sort of penalty can really add up over time.

Furthermore, it's not just Part B you have to worry about in terms of late enrollment penalties. If you wait past your first opportunity to sign up for a Part D plan, which covers prescription drugs, you'll face a penalty there as well. This penalty for late Part D enrollment is calculated by taking 1% of the national base beneficiary premium -- which is currently $35.63 -- and multiplying it by the number of months you remain without coverage. That figure then gets rounded to the nearest $0.10 and added to your monthly Part D premium. So, if you go for 23 months without Part D coverage, you'll pay a penalty of $8.20 per month on top of your regular premium. 

Keep in mind that enrolling late won't just subject you to penalties; it also means you'll have a period of time without coverage for medical services or prescription drug needs. And if you encounter a health emergency during that time, the costs might well exceed the penalties you'll pay for late enrollment.

Special enrollment periods

Some seniors are allowed to sign up for Medicare during what's known as a special enrollment period. If this applies to you, you can sign up late without having to worry about paying a penalty. You'll be eligible for a special enrollment period if you're still working during your initial enrollment period and have health coverage under a group plan from your job. Your special enrollment period, which lasts for eight months, will then begin either the month after your employment arrangement ends, or the month after your group health coverage ends -- whichever is first.

Pay attention to deadlines

Because signing up for Medicare late can result in some pretty serious consequences, it's critical that you pay attention to your own personal enrollment deadline. If you're still not sure exactly when to sign up, you can use this handy tool to determine when eligibility kicks in. Then, once you're ready to register, you can enroll online here, directly through the Social Security Administration's website. While you can file for Social Security benefits at the same time as Medicare, you don't have to do so, and since Medicare eligibility kicks in before current workers reach their Social Security full retirement age, it often pays to tackle each enrollment separately.

Finally, don't forget to take advantage of Medicare's services (many of which are free) once you do enroll. The more proactive you are in addressing health issues, the more you'll be able to maximize your benefits over time.

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How A Simple Fix For Medicare Prescribing Problems Got Complicated

Back in 2014, federal officials settled on what they thought would be a straightforward fix to curb abusive pill pushing: Require doctors and other health providers to register with Medicare in order to prescribe medications for beneficiaries.

That way, the government could screen them and take action if their prescribing habits were deemed improper. Officials figured the modest change would barely ruffle the medical community: Doctors already had to fill out an application, have their credentials verified and enroll to get paid by Medicare for seeing patients, after all.

But this fix, which followed a 2013 ProPublica investigation into questionable prescribing in Medicare, has yet to be implemented. The government now says it needs until 2019 to put it in place — three and a half years longer than initially expected.

"It has definitely been much more challenging" than anticipated, said Jonathan Morse, acting director of the Center for Program Integrity within the Centers for Medicare and Medicaid Services, the federal agency that runs Medicare.

As a result, the government is still covering prescriptions written by doctors who have been kicked out of Medicare and even some who have pleaded guilty to crimes. Three New Jersey doctors who pleaded guilty in July 2013 to charges related to a bribery scheme continued prescribing drugs to Medicare patients the following year, a ProPublica review found.

One of those doctors, Franklin Dana Fortunato, told ProPublica that he was advised that he could continue treating patients between his guilty plea and his sentencing in May 2015.

In addition, at least 40 doctors kicked out of Medicare before 2014 had their prescriptions covered by Medicare's prescription drug program, known as Part D, that year, a ProPublica analysis shows.

Much of the reason for the delay rests with dentists. Medicare, which provides health care to seniors and the disabled, doesn't typically cover dental services, but the Part D program pays for drugs, such as antibiotics or painkillers, that dentists order for beneficiaries.

"Since Medicare covers very few dental item and services, many (perhaps most) dentists have little incentive to enroll in Medicare" outside of this requirement, the American Dental Association wrote to CMS in September 2016. The dental group also said the enrollment process is too complex and that CMS already has the information it needs to address fraud and abuse concerns.

ProPublica analyzed all providers who wrote at least 50 prescriptions for at least one drug in Part D in 2014. All told, more than 92 percent of the 428,000 providers were enrolled in Medicare. But among 18,500 dentists, almost the exact opposite was true: More than 82 percent weren't enrolled.

"From their perspective, they're basically saying to us, what incentive do they have to enroll," said Morse, the head of program integrity for CMS.

Part D, which began in 2006, has received high marks from patients. It now covers more than 42 million people. But experts have long complained that the program places a higher priority on getting prescriptions into patients' hands than on targeting problem prescribers. The Department of Health and Human Services' inspector general has repeatedly called for tighter controls.

In 2013, ProPublica documented how Medicare's failure to oversee Part D effectively had enabled doctors to prescribe inappropriate or risky medications, had led to the waste of billions of dollars on needlessly expensive drugs, and had exposed the program to rampant fraud. At the time, Medicare said it had no authority to take action against doctors or other providers even if it found their prescribing practices troubling.

Medicare's response, finalized in May 2014, gave officials the power to kick health providers out of the program if their prescribing is abusive, a threat to public safety or in violation of Medicare rules. CMS said it would use prescribing data, disciplinary actions, malpractice lawsuits and more to identify problem providers.

To date, officials said, Medicare has only done so once.

But the plan to require that providers enroll in Medicare has been met by delay after delay after delay.

At first, CMS gave providers until June 1, 2015, to either enroll in Medicare or formally opt out. Either way, the government would have additional information about them. If they neither enrolled nor formally opted out, Medicare said it would no longer cover drugs they ordered for beneficiaries.

That was delayed by a few months and then by a year. In March 2016, the agency delayed the drop-dead date yet again—until February 2017.

Finally, in October 2016, CMS pushed it off until January 2019. Beginning this spring, it said it will block prescriptions from doctors who have been barred from participating in federal health programs, those ousted from the Medicare program for other reasons, and those convicted of a felony in the past 10 years.

The delays have enabled troubled doctors to continue prescribing—while still having their prescriptions paid for by Medicare.

A family practice doctor in Michigan, for example, was charged in December 2012 with conspiracy to commit fraud and illegally distributing a controlled substance. But he wrote 7,864 prescriptions in Part D in 2014. In fact, 41 percent of his Part D patients received at least one prescription for a narcotic painkiller that year. He pleaded guilty in 2015 and was sentenced to seven years in prison.

And in Georgia, a nursing home doctor kicked out of Medicare in February 2014 for "abuse of billing privileges" nonetheless wrote nearly 45,000 prescriptions covered by the program that year.

While CMS has delayed its enrollment requirement, it has begun to review the reams of data it collects to identify doctors with aberrant prescribing patterns. It sent a round of letters to doctors, alerting them to how they compared to peers, but a study in the journal Health Affairs last year found that the letters were ineffective at changing behaviors.

A second round of letters, which contained stronger warnings, has led to a small change in prescribing practices, Morse said.

"Rather than saying, 'Hey we've noticed that you have this odd or higher than average prescribing behavior,' now it's much more 'We plan to take action if your behavior does not fall into line with that of your peers,'" he said. "It has become more effective because the letter is more strongly worded."

Enrolling in Medicare: Enrollment Time Frames

Knowing the right time to enroll in Medicare is a vital part of ensuring our clients have the best protection available in retirement.  There are three major time frames for clients to sign up for their benefits, the Initial Enrollment Period (IEP), the General Enrollment Period (GEP), and a Special Enrollment Period (SEP).

Initial Enrollment Period (IEP)

A majority of Medicare beneficiaries are automatically enrolled in Parts A and B the month they turn 65 if they qualify for premium-free Part A and/or are already receiving their monthly Social Security benefits.  For all others, there is a 7 month window to sign up for their Part A and/or Part B benefits, centered around the month they turn age 65.  It includes the 3 months prior to their 65th birthday, the month of their birthday, and the 3 months following the month of their 65th birthday.  Depending on when they sign up for their Part A/Part B during this 7 month window will determine when their benefits become active.  Here’s a handy chart to help you understand these time frames:

If you sign up for Part A (if you have to buy it) and/or Part B in this month:Your coverage starts:

Before the month you turn 65The month you turn 65

The month you turn 651 month after you sign up

1 month after you turn 652 months after you sign up

2 months after you turn 653 months after you sign up

3 months after you turn 653 months after you sign up

Example:  Mrs. Smith turned 65 in February but did not sign up for her Part B benefits until April, her Part B will go into effect on July 1st (3 months later).

If your client qualifies for premium-free Part A and/or they are already receiving their Social Security benefits they will receive their red, white and blue Medicare card 3 months prior to their 65th birthday with their A and/or B effective dates included automatically.  For those who don’t automatically qualify for Part A and/or B it’s important that they understand the IEP and sign up during this time, as missing this period could result in costly penalties should they enroll in the future.

General Enrollment Period (GEP)

Beneficiaries who missed their IEP have an annual time to sign up for their Part A and/or Part B benefits called the General Enrollment Period.  The GEP starts on January 1st and runs through March 31st each year, with their benefits going into effect the following July 1.

Example: Mrs. Smith has been on Part A since March of 2013, but signed up for her Part B benefits on January 5th of this year during the General Enrollment Period.  Her Part B effective date will be July 1st, 2017.

Special Enrollment Period (SEP)

Today, many beneficiaries have chosen to delay enrolling into Part B of Medicare due to working beyond age 65 and being covered through an employer or union group health plan.  For these individuals, a Special Enrollment Period exists for them to sign up for Part A and/or Part B outside of their IEP or the annual GEP called the Special Enrollment Period.  Medicare’s website describes the SEP as follows:

Once your Initial Enrollment Period ends, you may have the chance to sign up for Medicare during a Special Enrollment Period (SEP).  If you’re covered under a group health plan based on current employment, you have a SEP to sign up for Part A and/or Part B anytime as long as:

• You or your spouse (or family member if you’re disabled) is working.
• You’re covered by a group health plan through the employer or union based on that work.

You also have an 8-month SEP to sign up for Part A and/or Part B that starts at one of these times (whichever happens first):

• The month after employment ends
• The month after group health plan insurance based on current employment ends.

For clients who delay their Part B due to group or union coverage it’s important to understand this SEP and when they should take action.  Even if the client leaves the job and is covered under COBRA or is now covered under a retiree health plan, they are still only given the 8 month window after employment ends to sign up for their Part A and/or Part B coverage.  Failure to do so could lead to a late enrollment penalty if they sign up at a later date.

This is the first of a series of articles centered around enrolling into Medicare and will highlight some need-to-know items and things to consider for clients dealing with special circumstances.

How to Minimize Pricey Medicare Surcharges

Adjusted gross income (AGI) plays a powerful role in any client’s tax planning—deductions and credits phase out as income rises. Moderate to high-income clients face the cost of Medicare surcharges that adds to the client’s Medicare bill. Moderate income clients can lose out on valuable tax benefits without planning to reduce AGI if possible.

AGI Reduction Strategies

Medicare income-based surcharges are determined based on a sliding scale that uses the recipient's modified AGI to determine liability for Medicare premium costs. Five tiers of income levels currently exist, and the amount of an individual's income-based surcharge is determined based upon the tier in which his or her income falls—beginning in 2018, a change in the rules will mean that more moderate income clients will find themselves in the tier that imposes the largest surcharge.

At the most basic level, clients should take advantage of tax-preferred retirement accounts in order to reduce AGI and avoid these surcharges—contributing to a 401(k) plan can reduce AGI by at least $18,000 in 2017 (clients age 50 and older can contribute an additional $6,000 in pre-tax funds to these accounts). 

Clients should also plan to maximize contributions to health savings accounts (HSAs), which can serve to reduce AGI by up to $6,750 per year for a client with family coverage in 2017.  The funds are withdrawn tax-free to cover medical expenses, but upon reaching age sixty-five, the client can withdraw the funds for any purpose without penalty (funds withdrawn for non-medical purposes will increase taxable income in a future year, however). 

Clients who have reached age 70 ½ can reduce AGI by up to $100,000 per year by using their IRA required minimum distribution (RMD) to contribute to charity. The donation must be transferred directly from the IRA to charity in order to qualify.

An Alternative Approach

For some clients, it may actually be better to increase AGI at some point before retirement in order to reduce taxable income (and take advantage of the benefits a lower income can provide) later in life.  This would subject the client to a larger tax bill in a short period of time in order to plan for tax-free income (and a reduced AGI) at a later time.

Frequently, this can be accomplished by converting retirement funds to a Roth account.  Other clients may choose to sell off assets in a single year, pay taxes on the gain and contribute the profits to a Roth that can be accessed tax-free in the future.  Because the new administration is proposing to reduce ordinary income tax rates for high-income clients, the next few years may be an ideal time to take advantage of this strategy. 

However, while compressing income into a short time span can be a valuable strategy, it is important to remember that Medicare uses a two-year look-back period to determine any income-based surcharges, so that a client’s 2015 AGI will be used in determining the client's liability for income-based surcharges today—meaning that as a client approaches Medicare eligibility, he or she will want to ensure that AGI is at its lowest at least two years ahead of time.

Conclusion

Planning to reduce AGI may seem basic, but it can provide substantial tax savings for clients whose high income could generate substantial costs—both in terms of Medicare premiums and phased out tax benefits.

Aetna Won't Need Humana If Paul Ryan Privatizes Medicare

A push in the Republican-led Congress to further privatize Medicare could soften the blow of a federal judge’s ruling blocking the acquisition by Aetna AET -0.92% of Humana HUM -1.38%, putting even more health benefits of millions of seniors under management of the insurance industry.

U.S. House Speaker Paul Ryan wants to hand more Medicare business to private insurers under health reform proposals he has already written. That’s something Wall Street sees as a huge boon to private insurers like Aetna, Humana, Anthem WLP +% and UnitedHealth Group UNH -0.71%, enabling them to get more business.

U.S. District Judge John Bates Monday ruled against the $37 billion Aetna-Humana merger, saying it would hurt consumers, particularly if the two combined their large Medicare Advantage businesses. Increasingly, private insurers are taking on more management of seniors’ Medicare benefits through Medicare Advantage plans they operate.

But insurers won’t need to grow Medicare Advantage by acquisition if Republicans get their way. With Donald Trump in the White House and Republicans in control of Congress, analysts see private insurers taking more control of seniors’ benefits through Medicare Advantage or some kind of voucher system like “premium support.” Advantage plans contract with the federal government to provide similar benefits as traditional Medicare plus some extras like preventive care and access to certain other services including wellness services.

“Medicare Advantage is the most fundamentally positive story within managed care with deregulation from (the Centers for Medicare & Medicaid Services) accelerating the penetration of private plans within Medicare from the current 31% to 50% by the end of the decade,” Ana Gupte, managing director of health services at Leerink, said in a note Monday.

Medicare Advantage has already grown to 18 million senior enrollees , helped in part by quality measures and reforms under the Affordable Care Act, which Trump and the Republican Congress say they want to repeal.

But Ryan has said he wants to reform entitlements, and his so-called “Better Way” agenda he touts regularly on social media would build on the Obama administration’s effort to offer consumers choice through Medicare Advantage. Ryan describes Medicare Advantage as “rooted in the twin pillars of choice and competition.”

“Plans are free to innovate in order to provide the services and benefits that best meet their patients’ needs,” Ryan writes. “For example, unlike traditional fee-for-service Medicare, MA plans are statutorily required to have financial protections in place for seniors, specifically a mandatory maximum out-of-pocket limit to protect beneficiaries from high healthcare costs.”

Florida gets surprise $75 million Medicaid bill

A top Florida health official briefed lawmakers Wednesday about a Medicaid payment error that is expected to force the state to shell out $75.1 million.

"I apologize to be the bearer of bad news," Justin Senior, secretary of the Agency for Health Care Administration, told members of the House Health Care Appropriations Subcommittee. "We do everything we can to run the program as efficiently and as accurately as we can."

A programming error in 2013 at the agency resulted in managed-care plans not getting paid appropriate amounts to care for some Medicaid beneficiaries with disabilities, Senior said. The underpayments totaled about $185 million over a two-year period. The state faces making up $75.1 million of that amount, with the rest coming from the federal government through its share of Medicaid costs.

Senior said the agency, which manages Florida's Medicaid program, is asking lawmakers to approve spending the $75.1 million. The request comes at a time when lawmakers are grappling with projections of tight budgets in the coming years, with House members preparing to go through a series of budget-cutting exercises in advance of the legislative session that starts March 7. 

The error was related to the state's system that requires most Medicaid beneficiaries to enroll in HMOs or other types of managed-care plans. As part of that system, the state pays specified amounts to managed-care plans —- known as capitation payments —- to oversee the care of beneficiaries.

Senior said the Medicaid program gets eligibility information about beneficiaries from the state Department of Children and Families and from the federal Social Security Administration. He said the Department of Children and Families generally provides eligibility information about healthy people, while the Social Security Administration typically provides information about people with disabilities.

But Senior said information about a relatively small group of people who have disabilities and are mainly over age 55 came from the Department of Children and Families. During programming, that group was incorrectly classified, leading to the underpayments to the health plans.

Senior said the capitation payment rates for members of that group should have been about $1,000 a month, but the programming error led to the rates being set at about $400 a month. He said agency officials spotted the problem during a rate-setting process last year and fixed it.

But that still left the state and federal governments on the hook for underpayments during the 2013-2014 fiscal year and the 2014-2015 fiscal year.

Senior called the issue a "very strange situation" because AHCA had put in place extensive safeguards to try to prevent overpayments to medical providers and health plans. But he said it had focused less on underpayments. He said the agency and health plans did not catch the underpayments earlier because of the relatively small number of beneficiaries involved.

"You'd expect a phone call if someone was expecting a $1,000 check and you only sent them $400," Senior said. "It is kind of a testament to the obscurity of this that the plans didn't see it because it is a very small percentage (of the Medicaid population)."

An Intricate Look at How Medicare Is Funded

Medicare took in nearly $600 billion in 2014. Here's where all that money came from.
 

It may not get the same recognition as Social Security, which puts income in the pockets of retired workers on a monthly basis, but Medicare's importance is rapidly growing for the roughly 56 million people who are eligible to receive Medicare. Of these eligible people, approximately five in six are seniors aged 65 and up.

Medicare's importance is growing

According to a report published by the Urban Institute in September 2015, a male with average lifetime earnings who turns 65 in 2015 will receive an estimated $195,000 in lifetime benefits from Medicare, net of premiums. By comparison, the same individual is expected to receive $294,000 in lifetime benefits from Social Security. However, based on Urban Institute's far-looking projections, by 2055 the average-earning male turning 65 will receive a larger lifetime benefit from Medicare ($501,000) than from Social Security ($496,000). Medicare is growing in importance for seniors, and in just a few generations, it could prove more important than Social Security.

Unfortunately, Medicare shares the same issue as its peer program, Social Security: Its spare cash will soon be depleted.

According to the Medicare Trustees Report for 2016, the Hospital Insurance Trust is expected to exhaust its spare cash by the year 2028. Should this excess cash be depleted, reimbursements to hospitals and physicians could drop by 13% as Medicare essentially becomes a budget-neutral program that pays out only what it receives in revenue. It's a terrifying forecast for a program that's become so vital to the financial and physical well-being of senior citizens.

But before we can even think about fixing Medicare's Hospital Insurance Trust budgetary shortfall, we should understand how the program is funded in the first place, so let's take a closer look.

How Medicare is funded

To understand how Medicare is funded, we first have to recognize how its three working parts obtain their annual revenue. Medicare's three critical components are Part A (hospital insurance and long-term skilled nursing care), Part B (outpatient services), and Part D (prescription drug plans). In 2014, Medicare revenue totaled just shy of $600 billion, with $261 billion being spent on Part A, $260 billion spent on Part B, and $78 billion on Part D.

Part A

Here's the funding breakdown for Part A, with data courtesy of the Kaiser Family Foundation:

•         Payroll taxes: 87%
•         Taxation of Social Security benefits: 7%
•         Interest: 3%
•         Premiums: 1%
•         General revenue: 1%
•         Other: 1%

As you can see, payroll taxes provide the vast majority of funding for Part A. The Medicare portion of taxation involves a flat 1.45% tax on all earned income for working Americans, assuming they're employed by someone else. If they're self-employed, workers are responsible for the entire 2.9% Medicare tax to fund the Hospital Insurance Trust.

However, as part of the Affordable Care Act, there's also a Medicare surcharge tax of 0.9% that applies to employees who earn more than $200,000 in income. This 2.35% Medicare tax rate kicks in once an individual's income crosses the $200,000 barrier. Prior to that point, they would owe 1.45% on earned income like everyone else.

Note also that just 1% of funding comes from Part A premiums. The reason is that anyone who's earned 40 lifetime work credits qualifies to receive Part A with no monthly premium. Only people who've not earned 40 lifetime work credits are typically required to pay a Part A premium.

Part B

Next, we'll take a look at the funding breakdown for Part B, which covers various outpatient services:

•         General revenue: 73%
•         Premiums: 25%
•         Interest: 1%
•         Other: 1%

You'll quickly see that Part B is funded very differently than Part A. General revenue, which is money that's primarily derived from federal income taxes, makes up nearly three-quarters of the funding for Part B. The remainder is made up almost entirely of Part B premiums, which all enrolled members pay.

However, there can be quite a bifurcation in monthly Part B premiums costs. For instance, longtime Medicare enrollees who are also enrolled in Social Security have their monthly Medicare premiums automatically deducted from their Social Security benefits. This group of individuals, which makes up about 70% of Medicare beneficiaries, is also protected by a clause known as "hold harmless." The hold harmless clause ensures that Part B premiums don't rise at a quicker rate than Social Security's cost-of-living adjustments. With no COLA in 2016 and just 0.3% in 2017, many seniors will be paying just a fraction more for their Part B premiums in 2017.

On the other hand, new enrollees to Medicare, persons who aren't enrolled in Social Security, and those who choose to be billed directly are set to face a monthly Part B premium that's risen about 15% year over year. This remaining 30% of Medicare enrollees often faces the bulk of annual price increases in Part B.

It's also worth noting that members with high incomes -- in excess of $85,000 for individual filers and $170,000 for joint filers -- pay a surcharge on their Part B premiums.

Part D

Finally, Part D, the prescription drug plan, relies on a somewhat similar breakdown as Part B for its revenue:

•         General revenue: 74%
•         Premiums: 15%
•         State payments for dual eligible people: 11%

A majority of Part D's funding comes from federal revenue, while a slightly smaller portion than Part B is derived from the premiums consumers pay. Also like Part B, high-income taxpayers with more than $85,000 in annual income, or $170,000 in joint-filing income, owe a Part D premium surcharge.

The big difference in Part D is the 11% of funding that comes from a small percentage of the population that qualifies for both Medicare and Medicaid (aka the "dual eligibles"). State Medicaid agencies have an obligation to pay Medicare cost sharing for most dual eligibles, and in most cases providers are prohibited from charging dual-eligible consumers for prescription drug costs.  

Tying it all together

Here's what all three components of Medicare look like when they're melded together (figures don't add to 100% due to rounding):

•         General revenue: 41%
•         Payroll taxes: 38%
•         Premiums: 13%
•         Taxation of Social Security benefits: 3%
•         Interest: 2%
•         State payments from dual-eligible people: 1%
•         Other: 1%

As you can see, federal income tax revenue is the most critical component of Medicare funding, but the Medicare tax working Americans pay into the system is a very close second. Furthermore, it's worth pointing out that whereas Social Security derived 10% of its annual income from interest in 2015, Medicare generated only 2% of its annual revenue from interest in 2014.

With Medicare set to burn through its excess cash by 2028, the most effective way to tackle its impending budgetary shortfall could be to raise payroll taxes. According to the Medicare Board of Trustees report, the long-term actuarial deficit in the program is 0.73%. In layman's terms, it means the 2.9% cumulative tax in Medicare would need to be raised to 3.63% to eliminate any shortfall. Since this total is often split down the middle between employers and employees, we're talking about a 0.365% tax increase to the average working American.

While President Donald Trump has stated his unwillingness to alter Social Security or Medicare, change will more than likely be coming to the program at some point over the next decade.

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AARP President: Paul Ryan’s Medicare Plan Could Hurt Seniors

Medicare is being targeted by key congressional leaders for a sweeping set of changes that would dramatically increase healthcare costs for seniors and ultimately leave them paying more for their healthcare while getting less.

Making improvements to Medicare is a laudable goal, but doing it in a way that will cost the average senior thousands of dollars at a time in their life when they can least afford it is not. Neither is shortchanging the hardworking Americans who have paid into the system throughout their working lives.

Perhaps the most visible plan to cut Medicare is the one endorsed by House Speaker Paul Ryan, which would eliminate the guaranteed level of coverage that Medicare currently provides — e.g., covering hospital care and 80 percent of the total cost of doctor visits — and replace it with “vouchers” with which seniors would be directed to buy their own health insurance from the private sector.

Other plans being circulated in Congress contemplate similar approaches, the end result of which can best be described as shifting more risk to seniors – a risk that means either paying more for their healthcare or getting less of it.

Under these congressional plans, what happens to seniors if, for example, the values of the vouchers they receive fail to provide them with enough to buy what Medicare now covers? And what happens if the ongoing costs of their coverage exceed the amount of the vouchers they will now receive? The two choices appear to be a) either pay more out of their own pocket for the same coverage, or b) skip the medical care in question.

While Speaker Ryan has dubbed his voucher-based approach “premium support,” no one should be misled by the benign-sounding term. This is a clear downgrade of the Medicare benefits people have earned throughout their working lives, and the use of buzzwords like "modernization" and "choice" cannot hide the fact that seniors will be asked to bear more risk at greater personal cost.

To justify what they position as the “we-have-no-choice” necessity of their plans, congressional leaders have characterized Medicare, in operation for more than 50 years, as “going broke.” That’s simply not true. In fact, both the Medicare Trustees Report and The Congressional Budget Office report that Medicare’s fiscal strength has improved — not declined — in recent years and that the Medicare trust fund is fully funded through 2029 and 79-percent funded through 2040, a highly manageable shortfall that can be closed in coming years without experimenting with, or reducing, seniors’ healthcare coverage.

In an effort to make their plans to diminish Medicare seem more palatable, and be able to say that “no current Medicare beneficiaries will be affected,” the timeline for the proposed cuts is said to be pushed out a few years. But that fails to explain that when these new changes do kick in, current beneficiaries will be affected. By moving younger, healthier seniors into private plans via the use of vouchers, those now in the traditional Medicare program will see their own premiums rise dramatically. As a result, the Medicare benefits they have earned throughout their working lives and count upon may soon become unaffordable.

Fortunately for seniors and their families, those same congressional plans to alter Medicare’s fundamental promises will likely bump up against President Donald Trump, who campaigned on promises not to “touch” the benefits seniors have earned. The new President first expressed his views on the subject and distinguished himself from other Republican primary contenders and went on to make his commitment not to cut Medicare an ongoing element of his general-election campaign: “I am going to protect and save your Social Security and your Medicare. You made a deal a long time ago,” Mr. Trump said.

Not only do seniors nationwide strongly oppose such changes, but Medicare cuts and congressional plans to reduce Medicare’s long-standing promise to people run afoul of the new President’s often-stated views on the subject. For the sake of the tens of millions of Americans who now rely on Medicare or who will become Medicare recipients in coming years, let’s hope President Trump’s campaign promise not to touch Medicare holds true.

On behalf of not just our 38 million members nationwide, but of all older Americans and their families, AARP will continue to defend Medicare and its guaranteed level of coverage and we urge others to join us in that effort.

Schneidewind is AARP’s President and a member of the AARP Board of Directors.