Medicare in Texas is a great way for retirees to obtain healthcare coverage. There is a lot to learn about the Medicare program as it has many moving parts. Having a basic understanding of how the program works will help you choose the right plans for your healthcare needs.
What Is Medicare
Medicare is a federal government program that was started in 1965 by President Lyndon Johnson as a way for retirees to obtain health insurance. Before Medicare, federal and state programs offered financial assistance for medical costs, but the programs had strict eligibility requirements. Now, Medicare is available to all retirees.
To be eligible for Medicare in Texas, you must be a legal U.S. citizen or permanent resident and fall into one of these categories:
● Individuals age 65 or older
● Individuals who have been receiving Social Security disability benefits for 24 months
● Individuals diagnosed with End-Stage Renal Disease (ESRD)
● Individuals diagnosed with Amyotrophic Lateral Sclerosis (ALS)
If you find yourself in one or more of these categories, you are eligible to enroll in Original Medicare, Medicare supplements, Medicare Advantage, and prescription drug plans. Let’s talk about these Medicare options in Texas.
Original Medicare in Texas
Two parts make up Original Medicare: Part A and Part B. These two work together to provide you with a wide range of healthcare coverage.
Part A helps cover your inpatient hospital expenses. Think of Part A as your “room and board” payment for either a hospital stay or a stay at a skilled nursing facility.
The best part is that most Medicare beneficiaries enjoy premium-free Part A. As long as you or your spouse paid Medicare taxes for ten years (or 40 quarters), you will not pay a monthly premium for Part A. If you haven’t met that requirement, you can still enroll in Part A but you will pay a premium each month.
Part A does not cover all of your inpatient expenses. There is a deductible and coinsurance costs based on the length of your stay. Deductibles and coinsurance amounts often change each year. In 2022, the Part A deductible is $1556 per benefit period. A benefit period begins on the first day of inpatient admission and ends when you are released from the hospital or skilled nursing facility.
Once you’ve met your deductible, Medicare Part A will pay for all the costs for the first 60 days in a hospital. Then, from day 61 to day 90, your coinsurance responsibility will be $389 per day. Part A includes 60 lifetime reserve days that you can use if you are still in the hospital on day 91. During this time, your coinsurance expense is $778. Once you’ve used all your lifetime reserve days, you will be responsible for the entire daily expense.
Medicare Part B helps cover your outpatient medical expenses. There are a variety of services included in Part B: doctor’s visits, lab work, x-rays, surgeries, durable medical equipment, and many preventive services.
There is a monthly premium for Part B. In 2022, the standard Part B premium is $170.10. We say “standard” because individuals with higher incomes will pay more for Part B. The Social Security Administration determines this by looking at your adjusted gross income from two years prior. If you fall into a higher-income category, you’ll pay IRMAA, an Income-Related Monthly Adjustment Amount.
Individuals who require financial assistance or you are eligible for Medicaid may receive some financial help with their Part B premium.
Like Part A, deductibles, coinsurance, and copays apply to your Part B coverage. This year, the Part B annual deductible is $233. Once you have met your deductible, Part B uses an 80/20 split to calculate your coinsurance costs. (Medicare pays 80%, and you pay 20%.)
An important thing to realize about Original Medicare is that there is no annual maximum out-of-pocket expense. You may be more accustomed to a group health plan, which usually limits what you could pay out-of-pocket. That is not the case with Original Medicare.
As you’ve noticed by now, while Parts A and B offer great healthcare coverage for beneficiaries, there can still be a big financial burden on individuals. There are two ways to supplement your benefits from Medicare in Texas: Medicare supplements and Medicare Advantage plans.
Medicare Supplement Insurance in Texas
Medicare supplement plans are also called Medigap plans. They were designed to fill in the “gaps” leftover from Parts A and B.
The federal Medicare program has made Medicare supplements simple to understand through standardization. There are just ten Medigap plans on the market, and each one offers the same benefits, no matter where you live or which insurance company offers the plan. The only difference you’ll find across states and insurance carriers is the monthly premium.
Medigap plans only cover services included in your Original Medicare benefits. If the procedure is not covered by Parts A or B, it will not be covered by a Medicare supplement plan. Medicare supplements can be used all over the United States. As long as your provider accepts Medicare, they will also accept your Medigap plan.
Let’s talk about the three most popular Medicare supplements in Austin, TX.
Medigap Plan F
Plan F is only available to beneficiaries who turned 65 before January 1, 2020. It will pay for all the remaining costs after Parts A and B have paid their portion. As a result, plan F enrollees have virtually no out-of-pocket healthcare expenses.
Premiums for Plan F in Austin, TX, are based on your age, gender, and tobacco use. For example, a 67-year-old female can expect her Plan F premium to range from $130 – $180, depending on which insurance company she chooses. Premiums typically increase each year.
Medigap Plan G
If you aren’t eligible to enroll in Plan F, Plan G is the closest alternative. It has the same benefits as Plan F, but it does not pay the Part B deductible.
Because it has slightly less coverage, the premiums for Plan G are lower. The lower premiums may even outweigh the Part B deductible advantage in Plan F. For example, that same 67-year-old female could enroll in Plan G in Austin, TX, for a premium between $100 – $125.
Medigap Plan N
For those looking for even lower premiums, Plan N provides great value. With Plan N, you’ll be responsible for the Part B deductible as well as any Part B excess charges. Excess charges occur when you see a provider who does not accept Medicare assignment. Since most physicians in Texas accept Medicare, the Part B excess charges are not common.
You will also be responsible for a copayment when you see your doctor or visit an emergency room. The doctor’s copay could be up to $20, and an emergency room copay could be up to $50. However, if you are admitted to the hospital, your copay is waived.
A 65-year-old female enrolling in Plan N in Austin, TX, can expect to pay a premium between $75 – $105.
Part C Medicare Advantage in Texas
Medicare Advantage plans are another way to supplement your Medicare in Texas. (You can only enroll in either a Medicare Advantage plan or a Medicare supplement plan, never both.) Advantage plans are also referred to as Medicare Part C.
Part C plans work quite differently than Medicare supplement plans. If you enroll in Part C, all of your Medicare benefits will be provided by a private insurance company instead of the government. A Medicare Advantage plan takes your Part A and B benefits, adds in extra benefits, and bundles them all into one convenient package.
What do we mean by extra benefits? Original Medicare does not include benefits for services like routine dental care and vision and hearing services. It also does not cover prescription medications. All of those things are critical to your overall health. Medicare Advantage plans often include many of these extra benefits.
Let’s talk about the types of Medicare Advantage plans in Austin, TX.
Part C HMO Plans
HMO (Health Maintenance Organization) plans are one of the most popular types of Part C plans because they often come with very low monthly premiums. HMO plans can offer such low costs because they use provider networks.
If you enroll in an HMO, you need to receive care from a provider and facility that participate in that insurance company’s network. If you go outside the network for care, you will be responsible for the entire cost of services.
Part C PPO Plans
PPO (Preferred Provider Organization) plans are also very popular. They also utilize provider networks, but PPO networks are often much larger than HMO networks. PPO plans also allow their members to receive care outside of the plan’s network and still benefit from some coverage. However, the member will pay more out-of-pocket if they go outside the network.
PPO plans are great for individuals who spend more time traveling, putting them outside their network area.
Part C HMO-POS Plans
POS stands for Point-of-Service. HMO-POS plans combine the rules of HMO and PPO plans to provide a hybrid option. Plan members receive the most benefits when receiving care within the HMO network but have some benefits outside of the network, just like PPO plans. The biggest difference is that there are two deductibles: one for in-network services and one for out-of-network services. (A PPO plan has one deductible for both.)
HMO-POS plans are great for individuals who want the lower cost of an HMO but need more freedom to choose their providers.
Part C MSA Plans
MSA (Medical Savings Account) plans are similar to HSAs (Health Savings Accounts). They have a high deductible but offer a separate deposit account that members can use to pay for services. Most MSA plans include an annual deposit made by the insurance company. While this will never pay the entire deductible, it is a helpful start. If an MSA enrollee doesn’t use the money in the account, it rolls over to the following year. Once the deductible has been met, most plans cover the rest of your healthcare costs at 100%.
MSA plans are great for individuals who want a low monthly premium and are financially stable enough to afford the high deductible.
There are hundreds of Medicare Advantage plans in Texas, each with varying levels of coverage and benefits. When you speak to one of our licensed insurance agents, we can help you choose the right plan for you.
Part D Prescription Drug Coverage in Texas
Prescription drug plans fall under Medicare Part D. There are many different Part D plans available. You will choose a plan based on which prescription medications you take. Beneficiaries who take more medications and require more coverage will typically pay a higher premium for their Part D plan.
One common misconception is that you don’t need to enroll in a Part D plan if you aren’t taking any medications. The problem with not enrolling is that you will be penalized when you want to get a Part D plan. Also, you may only be able to enroll at certain times of the year. If you are prescribed medication outside of one of those enrollment windows, you will not have the option to obtain coverage. Fortunately, there are very low-cost Part D plans for individuals who are not taking medications.
If you have a Medicare Advantage plan that includes prescription drug coverage, you will not need to enroll in a separate Part D plan. However, you should still review that plan’s drug coverage before enrolling.
Every Part D plan includes a drug formulary. A drug formulary is the plan’s list of covered prescriptions, categorized by tiers. There are usually four or five tiers in a drug formulary.
Prescriptions on the lowest tiers include common, generic medications. These have the lowest copays or coinsurance amounts. Prescriptions in the highest tiers include specialty, name-brand medications. These have higher out-of-pocket costs.
The Coverage Gap
The coverage gap or “donut hole” is another feature that applies to every Part D plan, whether it is a stand-alone plan or part of a Medicare Advantage plan. During the coverage gap, you will pay more for your medications.
The coverage gap begins when the total amount spent by both you and your insurance carrier meets a certain threshold. In 2022, that threshold is $4430. During the coverage gap, you could pay up to 25% of the cost of your prescriptions.
Your medications can change over time. So the plan you have for one year may not fit your needs next year. Fortunately, you can change Part D plans once per year during the Annual Enrollment Period.
Let’s review the different enrollment periods so you know when to apply for each type of coverage and when you can change plans if necessary.
There are a few enrollment periods in Medicare. These are very important to be aware of because missing one can negatively impact your ability to obtain coverage, and you could face penalties.
Initial Enrollment Period
Your Initial Enrollment Period (IEP) is a 7-month window around the time of your 65th birthday. It begins three months before the month of your birthday and ends three months after your birthday. For example, if your birthday is on July 2, your IEP begins April 1 and ends October 31.
During your Initial Enrollment Period, you can apply for Parts A and B. You will be automatically enrolled in both parts if you are already receiving Social Security benefits. You can also apply for either a Medicare supplement or Medicare Advantage plan, as well as a Part D prescription drug plan.
To enroll in Parts A and B, you can apply online, make an appointment with your local Social Security Administration in Texas, or call the SSA directly.
Special Enrollment Period
There are several reasons you might qualify for a Special Enrollment Period (SEP). The most common reason is when a 65-year-old chooses to delay their Medicare enrollment because another group health plan still covers them. More and more individuals are working past the age of 65, and if their employer contributes to their health plan, it is often the more affordable choice.
Once your employment ends or your plan terminates, you’ll qualify for an SEP and can enroll in Medicare as well as other policies.
Open Enrollment Period
Medicare’s Open Enrollment Period (OEP) occurs each year from January 1 to March 31. You can do several things during this time, but it is especially useful for individuals who did not enroll in Medicare during their IEP and do not qualify for an SEP.
If you enroll in Medicare during the OEP, your coverage will not begin until July 1.
Individuals who enroll during the OEP often incur late enrollment penalties. (This doesn’t apply if your IEP or SEP happens to fall during this period.) There are several penalties in the Medicare program. We discussed the Part D penalty earlier, which is the most common. There is also a Part B penalty.
If you do not enroll when you are first eligible and do not have other creditable coverage in place, you will pay a penalty for delaying your Part B enrollment. The penalty will be added to your Part B premium for your lifetime – or as long as you stay enrolled in Part B.
If you are considering delaying Part B enrollment because you are enrolled in a group health plan, we advise you to speak with your HR director or benefits manager to make sure your group health plan is creditable. Employers with at least 20 employees will always have creditable insurance.
The Open Enrollment Period also pertains to individuals who are currently enrolled in a Medicare Advantage plan. During OEP, you can make a one-time change to your current Part C plan by choosing a different plan, or you can choose to switch back to Original Medicare and enroll in a Medicare supplement. If you make any of these changes, they will go into effect the following month.
Annual Enrollment Period
The Annual Enrollment Period is one of the most important times of year for Medicare beneficiaries. It occurs each year from October 15 to December 7 and applies to any individual enrolled in a Part C or Part D plan.
Both Medicare Advantage and prescription drug plans can change each year. The plan may change its coverage and benefits, premiums, deductible, network, etc. Sometime around the beginning of September, you’ll be sent an Annual Notice of Change (ANOC) that will outline any changes. If you have no objections to the changes, you won’t need to do anything during the AEP. Your plan will automatically renew on January 1.
However, whether the changes impact your coverage or not, you should still take some time to shop for other Medicare plans in Texas. New plans get added all the time, and you may find a plan that has the same (or better) benefits than your current one and has a lower premium. It never hurts to look!
Congratulations! You’ve just learned the foundations of Medicare. This knowledge will help you when choosing a plan and understanding how your medical claims get paid.
You’ve got lots of options for Medicare in Austin, TX. Many beneficiaries often find it helpful to seek advice from a licensed insurance agent. An agent can compare the coverage and benefits of many plans and the premiums of multiple insurance carriers. Working with a Medicare advisor in Texas will ensure you find the coverage you need.