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Medicare: Do You Know All You Should?

Enrollment Periods

Currently, Medicare fixes the Initial Enrollment Period to be 7 months from the time you turn 65. Translated, this means three months before the month you turn 65, the month you actually turn 65, and the three months after the month you turn 65. If you enroll during this time, you are most likely to receive the lowest monthly premium available. In fact, under the Medicare system, you are encouraged to enroll in the time period of the three months before your 65th birthday, since all of the paperwork will have been completed and you will be ready for immediate coverage once you turn 65.

If you do not enroll during this period, because you are still working and have other insurance coverage, or for whatever reason, you can enroll during the general enrollment period of any year after you turn 65, which is between January 1st, and March 31st. If you elect this enrollment option, then you face two disadvantages: (1) you will pay a higher premium, since much like normal health insurance your rates will rise each year as you are getting older and theoretically your risks of medical emergencies are greater; and (2) you may contract a medical condition during the period in which you are waiting to enroll, and you may be forced to pay the entire cost of the medical expense yourself. Obviously, it is extremely beneficial to enroll early.

Enrollment in Part A: Thus, if you enroll during the initial period, you will receive Part A premium-free, so long as the other requirements are met. If you must pay for Medicare, you can enroll during the initial enrollment period, and pay a monthly premium. Or you can wait until the general enrollment period, and your monthly premium will be higher still. Remember, that despite the variation in these rates, they are set by law and do not vary from individual to individual. You can request a schedule of rates from your local Social Security office so that you can determine how much the "penalty" premiums actually are, and whether the coverages are better under your work policy or under Medicare.

Enrollment in Part B: Ideally, you should enroll in this part three months before your 65th birthday, so your coverage will begin at age 65. However, remember that under this portion, you are required to pay a monthly premium. You should check with the local office for these rates, since they will change by act of Congress. If you do not enroll during this period, there is again, a higher "penalty" premium.

Legal Illustration

Assume that you are 64 and you will be 65 in two months. You begin to enroll in the Medicare plan, so that it will cover you when you turn 65. During the two months prior to your 65th birthday, you are admitted to the hospital for acute appendicitis, treated and released after a few days. Your doctor and your hospital send you a bill for some $7,000. Can you submit this to Medicare for coverage, since you have already applied? The answer is that Medicare does not cover your medical expenses until you turn 65, unless you meet one of the previously discussed exceptions. Even assuming that you have met all of the Medicare requirements and would receive coverage when you turn 65, absent other circumstances, you most likely must rely on your own insurance or own assets to cover this $7,000 hospital and medical bill expense.

As another example, assume that you are involved in an auto accident at age 67. You have been enrolled for several years in Medicare. Your hospitalization requires a three weeks' stay and your total bill is $23,990. The accident was not your fault and the driver who hit you has $25,000 in insurance liability coverage. You reside in an insurance "fault state." Your attorney informs you that you can proceed against this insured driver, and settles this case for the policy limits. Do you have to reimburse Medicare for this $23,990, which would only leave you $1,010 to compensate you for your injuries and to pay your attorney?

The general rule is that Medicare is entitled by federal law to a lien on any case or on reimbursement from any source that you receive regarding the cause of the accident. Thus, the answer is yes, with at least two exceptions. First, your attorney will know if a portion of these medical bills can be paid with the medical portion of your auto insurance, which usually may be around $5,000. [Sometimes your attorney can get your insurance company to pay up to the limits of your personal medical expense coverage under your auto policy, which does not have to be reimbursed in some instances.]

Second, Medicare recognizes that if you have any attorney handling your settlement, their lien is reduced by the amount of attorney fee percentage. You must provide proof of the attorney's agreement to Medicare, and they will often make an adjustment on the amount required for you to reimburse them by the fee percentage. For example, if the attorney fee is 33 1/3%, Medicare might require reimbursement of only $15,977.34, [2/3 of $23,990] instead of the full $23,990. However, this varies and is one reason why any older, injured, insured driver or passenger in an auto accident should always consult a lawyer for representation.

Thus, in our example, instead of receiving the $1,010 to divide between you and your attorney, your medical bills required to be reimbursed may only total $10.977.34 [$23,990 minus $5,000 medical expense coverage minus $7,988.66 reduction of the Medicare lien = $11,001.34.] Taking $25,000 settlement less medical expenses of now only $11,001.34, leaves you with $13,998.66 to divide between you and your attorney. This is a whole lot better than dividing the $1,010.

Medicare: Do You Know All You Should?
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