A Guide to Understanding Medicare Benefits

Transcription

1 WEALTH SOLUTIONS GROUP A Guide t Understanding Medicare Benefits This cmprehensive guide prvides an verview f the key cmpnents f Medicare, including eligibility requirements, an explanatin f the different parts f Medicare, enrllment, and csts. Financial & Estate Planning Department Audrey Blanke, Financial Planner Rich Braun, Financial Planner Chris Dlan, Financial Planner Brian Ellenbecker, Senir Financial Planner Linda Grant-Smith, Financial Planner A GUIDE TO UNDERSTANDING MEDICARE BENEFITS Medicare is a scial insurance prgram created under the Scial Security Act f 1965 as signed by President Lyndn B. Jhnsn and is designed t prvide a basic level f health insurance t retirees and ther qualified recipients. The prgram is financed by payrll taxes assessed n bth emplyees and emplyers (self-emplyed individuals pay bth prtins f the tax). The riginal Medicare prgram cvered hspital stays and ther medical treatments, but ver the years the prgram has expanded t include alternatives t the riginal cverage ptins as well as a prescriptin drug plan. ELIGIBILITY REQUIREMENTS Medicare is available t anyne ver the age f 65 wh is a U.S. citizen r a permanent legal resident fr five cntinuus years. Mrever, individuals under the age f 65 may qualify if they meet ne f the fllwing requirements: Are permanently disabled and have received Scial Security disability payments fr the last tw years Need a kidney transplant Are under dialysis fr permanent kidney failure Have Amytrphic Lateral Sclersis (ALS), als knwn as Lu Gehrig s disease. MEDICARE PARTS A AND B The riginal versin f Medicare (Original Medicare) included tw separate prgrams, referred t as Part A and Part B. Part A Hspital Insurance cvers mst medically necessary hspital, skilled nursing facility, hme health and hspice care. It is premium-free if yu r yur spuse have wrked and paid Scial Security taxes fr at least 40 calendar quarters (10 years). A mnthly premium is assessed n thse with less than 40 quarters f emplyment. Spuses wh dn t have enugh credits n their wn wrk histry are nly eligible fr premium-free Part A nce the wrking spuse reaches age 62. Rbert W. Baird & C. Incrprated Page 1 f 11

2 Part B Medical Insurance cvers mst medically necessary dctrs services, preventive care, durable medical equipment, hspital utpatient services, labratry tests, x-rays, mental health care, and sme hme health and ambulance services. All thse wh are cvered under Part B are assessed a mnthly premium fr this cverage. Medicare B recipients are generally respnsible fr 20% f mst Medicare expenses plus deductibles, c-pays, and ther fees, ften with n cap n maximum payments. Therefre, riginal Medicare is ften supplemented with private insurance plicies, knwn as Medicare Supplement r Medigap plicies. Medicare generally des nt cver dental, visin, hearing, r lng term care. MEDICARE SUPPLEMENTAL (MEDIGAP) COVERAGE Medigap plans are designed t limit the ut-f-pcket csts assciated with riginal Medicare by cvering sme r all f the cinsurance and deductibles assciated with Parts A and B. Medicare will have primary respnsibility fr paying a claim, but the Medigap plan usually has a crssver agreement with Medicare that allws the Medigap plicy t autmatically pay secnd. There are currently ten different standardized Medigap plans, each ffering different levels f cverage and different cst structures. Prir t June 1, 2010, there were 14 different plans available, labeled by letters A thrugh N. Fur plans (E, H, I and J) are n lnger being sld, but are still active fr thse wh had previusly purchased them and cntinue t pay premiums. Nt all plans are available in all states and sme states may ffer additinal standardized plans. Massachusetts, Minnesta, and Wiscnsin d nt ffer the afrementined lettered plans, but ffer different standardized plans. Each Medigap plan pays fr a particular set f s. Plan A ffers the fewest s and is usually the least expensive. Plans that ffer mre s are generally mre expensive. Plan F is the mst cmprehensive and tends t be the mst expensive, althugh there is als a high deductible versin f that plan which helps lwer premium csts. MEDICARE PART D Medicare Part D is the part f Medicare that prvides utpatient prescriptin drug cverage and is prvided thrugh private insurance cmpanies that have cntracts with Medicare. Part D cverage is ptinal (althugh if yu want prescriptin drug cverage, it shuld be cnsidered required), and purchasing the cverage shuld be based n the enrllee s individual needs. Hwever, if yu d nt enrll when yu are first required t, yu will pay a late enrllment penalty if yu need cverage later n. MEDICARE ADVANTAGE PLANS (PART C) Medicare Advantage (MA) plans (als knwn as Medicare Part C plans) are ffered by private health insurance cmpanies t prvide Medicare s as an alternative t Medicare Parts A and B, and usually D. Part C enrllees are still required t pay their premiums fr Part B and Part A (if applicable) cverage, but will nt need t purchase Medigap cverage because f the expanded cverage ffered by Part C plans. The plan must prvide all Part A and Part B services, and Part D cverage if prescriptin drug cverage is included in the plan. MA plans can prvide this cverage in different ways, with varying csts and restrictins that can affect hw and when yu can get care. All MA plans must cver all services that Original Medicare cvers. Medicare Advantage plans d nt allw the purchase f a Medigap plicy and will nt allw an existing Medigap plicy t be used t pay fr the ut-f-pcket expenses assciated with the Medicare Advantage plan. Generally, Medicare Mst Advantage plans will ffer prescriptin drug cverage. Hwever, if the Medicare Advantage Plan des nt ffer a drug prescriptin prgram r des nt require drug purchases t be thrugh the plan, then a separate Medicare Part D plan may be purchased. Rbert W. Baird & C. Incrprated Page 2 f 11

3 Medicare Advantage plans ften charge a premium in additin t the Medicare Part B premium. The plan may als charge a cpayment whenever yu receive a service, and there may als be ther c-insurance charges. There might be sme custmized ptins that allw fr lwer cpayments r lwer ttal ut-f-pcket expenses. Understanding the varius features, s, and csts prvided by Original Medicare when cmpared with cverage prvided by Medicare Advantage plans allws an individual r family t: 1. Custmize the health insurance prgram that best suits their medical needs. Careful cnsideratin shuld be given t an individual s future health insurance needs, nt just the health insurance needs f tday. Switching plans later n can be difficult, as Medigap plans are nly ffered n a guaranteed issue basis initially. Guaranteed issue means that the insurance cmpany cannt charge yu mre because f yur health. If yu need t purchase a Medigap plan utside f the guaranteed issue perid, it will likely be much mre cstly, r even impssible t d s. 2. Determine the mst cst effective way t pay fr their medical needs with an understanding f their annual r maximum ut f pcket expenses. 3. Ensure that their preferred hspitals, dctrs and pharmacies can be used. 4. Ensure that they are cvered when traveling dmestically r internatinally. MEDICARE ENROLLMENT PART A, PART B AND PART D Eligible individuals have a seven-mnth windw t enrll in Medicare, which starts three mnths befre the mnth f their 65 th birthday and ends three mnths after. Thse already receiving Scial Security at age 65 r wh have been receiving Scial Security Disability Insurance (SSDI) fr 24 mnths, will be autmatically enrlled in Medicare Parts A and B. Part B may be declined, but nt Part A. Three mnths befre their 65 th birthday r their 24 th SSDI payment, the individual will receive their new Medicare card and a letter explaining that they have been autmatically enrlled in bth Medicare Part A and Part B. The Part B premium will be autmatically deducted frm their Scial Security check beginning the mnth their cverage begins. Individuals wh are 65 but are nt receiving Scial Security retirement s will need t practively enrll in Medicare. Mrever, thse wh d nt enrll in Medicare during this seven mnth windw may be subject t a late enrllment penalty. Rbert W. Baird & C. Incrprated Page 3 f 11

4 ENROLLMENT PERIODS FOR MEDICARE PART A AND B Thse eligible fr Medicare but nt currently receiving Scial Security retirement s have three different time perids during which they may be able t enrll in Medicare Parts A and B. 1. Initial Enrllment Perid (IEP) Eligible individuals can enrll in Medicare at any time during a seven-mnth perid including the three mnths befre, the mnth f, and the three mnths fllwing their 65 th birthday. The actual date when Medicare cverage is effective depends n when enrllment ccurred: Enrllment Mnth Cverage Start Date 3 mnths befre birthday mnth 1 st f the mnth f 65 th birthday 2 mnths befre birthday mnth 1 st f the mnth f 65 th birthday 1 mnth befre birthday mnth 1 st f the mnth f 65 th birthday Birthday mnth One mnth after enrllment One mnth after birthday mnth Tw mnths after enrllment Tw mnths after birthday mnth Three mnths after enrllment Three mnths after birthday mnth Three mnths after enrllment Fr example, smene wh turns 65 in April, yur IEP and cverage start date wuld be: Enrllment Mnth Cverage Start Date January, February r March April 1 April May 1 May July 1 June September 1 July Octber 1 1. Special Enrllment Perid (SEP) Enrllment in Part B can be delayed withut penalty if the individual was cvered by large emplyer s (20+ emplyees) health insurance thrugh their r their spuse s current jb when they first becme eligible fr Medicare at age 65. Enrllment can ccur withut penalty at any time (1) while the individual has grup health cverage r (2) during the 8-mnth perid that begins the mnth after the emplyment ends r cverage ends, whichever cmes first. COBRA r retiree plans are NOT cnsidered emplyer health plans fr the purpses f this rule. 2. General Enrllment Perid (GEP) Anyne wh misses their initial r special enrllment perid must wait until the next GEP, which runs frm January 1 thrugh March 31 every year, t enrll. Cverage fr these enrllees will begin July 1 f the year they enrll. These enrllees may als pay a penalty in the frm f a higher premium fr every year they delay enrlling in Medicare Part B. T avid a gap in cverage, ne can crdinate the start date f their Medicare cverage with the terminatin f their prir cverage. Rbert W. Baird & C. Incrprated Page 4 f 11

5 ENROLLMENT PERIODS FOR MEDICARE PART D Thse enrlled in Medicare Part A and/r Part B can enrll in Medicare Part D during the Part A and B Initial Enrllment Perid (IEP). The effective date f the Part D cverage is based n the enrllment date. During the IEP, if yu enrll during the: Enrllment Date First three mnths f the IEP Last fur mnths f the IEP Cverage Start Date Mnth when first eligible fr Part A r B Mnth fllwing the mnth f enrllment Chsing t nt jin a Medicare Private Drug Plan during the Initial Enrllment Perid may delay cverage until the fall Open Enrllment, which runs frm Octber 15 t December 7 f each year. Cverage selected during the Open Enrllment perid begins n January 1 f the fllwing year. In additin, there may als be a premium penalty fr deferring the start f cverage. Special Enrllment Perids are available under a variety f circumstances. As lng as smene has creditable cverage, meaning the prescriptin drug plan is at least as gd as Medicare, they will nt incur a late enrllment penalty when enrlling in Part D. The availability f these SEPs and the effective date fr s varies based n the reasn fr the SEP. The chart belw identifies tw cmmn circumstances (many thers exist) fr a SEP, the enrllment time frame, and when s becme available: Part D - Special Enrllment Perid Reasn fr SEP Enrllment Availability Benefit Availability Thrugh n fault f yur wn, lse creditable drug cverage ( creditable ) r yur drug cverage is reduced s that it is n lnger creditable Yu chse t: enrll in an emplyer / uninspnsred Medicare drug plan disenrll frm a Medicare drug plan t take emplyer/unin-spnsred drug cverage (including COBRA) Begins the mnth yu are tld yur cverage will end Ends the later f: 2 mnths after yu lse cverage; r 2 mnths after yu receive ntice Begins the same perid f time when yur emplyer wuld nrmally allw yu t make changes t yur emplyee health care cverage. Ends 63 days after the mnth in which yur emplyer r unin cverage ends. The first day f the mnth after yu submit a cmpleted applicatin; r up t 2 mnths after yur SEP ends, if yu request it Up t three mnths after the mnth in which yu submit a cmpleted enrllment applicatin. INSURANCE PREMIUMS, DEDUCTIBLES AND CO-INSURANCE CHARGES Like any ther insurance plicy, enrllees in Medicare are respnsible fr mnthly premiums, annual deductibles and cinsurance charges. These amunts are dependent n a variety f factrs, including wrk histry, incme levels and enrllment date. Rbert W. Baird & C. Incrprated Page 5 f 11

6 PART A HOSPITAL INSURANCE Part A mnthly premiums are based n the individual s, r their spuse s, wrk histry. If either f the tw have at least 40 calendar quarters (10 years) f wrk in any jb at which they paid Scial Security taxes in the U.S., r either was a federal emplyee after December 31, 1982 r a state r lcal emplyee after March 31, 1986, they will be eligible fr Medicare Part A at n cst. If an individual did nt wrk at least 40 quarters and isn t eligible fr Scial Security s, but their spuse did, the nn-wrking spuse may be eligible fr free Medicare Part A based n the wrking spuse's wrk histry. This applies when the nn-wrking spuse: Is currently married t a spuse wh is eligible fr Scial Security s (either fr Scial Security retirement s starting at 62 r disability at any age) and married fr at least ne year befre applying. Is divrced and the frmer spuse is eligible fr Scial Security s (either retirement r disability). In additin, they must have been married fr at least 10 years and the nn-wrking spuse must be single at the time f applicatin fr s. Is widwed and they were married fr at least nine mnths befre their spuse died. In additin, they must be single at the time f applicatin fr s. If neither spuse qualifies fr premium-free Part A, cverage can be purchased. The premium is based n the insured s wrk histry. Medicare Part A prvides fr 60 days f fully cvered hspital stays, and an additinal 30 days at a reduced cst t the insured, fr a ttal f 90 days f cverage per perid. A perid begins when the patient is admitted t a hspital and ends after they have been ut f the hspital r skilled nursing facility (SNF), r stp receiving Medicarecvered skilled services at the SNF, fr at least 60 days in a rw. Fr hspital stays lnger than 90 days, Part A ffers 60 lifetime reserve days f cverage. These are flexible days that can be used at the insured s discretin, but can nly be used nce during their lifetime. These reserve days prvide a lwer level f cverage, but prtect thse with hspital stays lnger than 90 days, and can be allcated ver multiple hspital stays. Once the insured has exceeded 90 days in a hspital, the lifetime reserve days will autmatically begin being used unless the insured ntifies the hspital within 90 days f leaving the hspital, in writing, that they d nt want t use their lifetime reserve days fr that event. When deciding whether t use their lifetime reserve days, the insured shuld cmpare the actual cst charged by the prvider t the c-insurance amunt fr the reserve days. Fr example, if the hspital csts are just slightly higher than the daily cinsurance charge, it may be apprpriate t save a lifetime reserve day fr a future hspital stay that may be mre expensive. If the average daily hspital csts are less than the cinsurance daily charge then yu will nt use up a lifetime reserve day. After yu use up yur 60 lifetime reserve days, Medicare will n lnger pay fr any cverage until yu start a new perid. The fllwing table summarizes the premium, deductible and c-insurance charges paid by the insured individual fr Medicare Part A cverage fr These amunts may be adjusted annually. Rbert W. Baird & C. Incrprated Page 6 f 11

7 Insurance Premium Wrk Histry f yu r yur spuse Mnthly Premium < 30 quarters $422 per persn quarters $232 per persn 40 quarters $0 per persn Benefit Perid Deductible $1,340 per persn Benefit Perid Hspital C- Insurance Charges Daily Charge 1-60 days $0 per persn days $335 per persn days (60 $670 per lifetime reserve days*) persn* 151+ days 100% f cst Skilled Nursing Care C- Insurance Charges Benefit Perid Daily Charge 0-20 days $0 per persn days $ per persn 101+ days 100% f cst * The insured may decide t freg using their lifetime reserve days during that perid, in which case they will be respnsible fr 100% f the cst. PART B MEDICAL INSURANCE Premiums fr Medicare Part B cverage are based primarily n the insured s incme fr the year tw years prir t the year the cverage applies (fr example, the premium fr cverage in 2018 is based n the insured s incme in 2016). Insured single individuals with incme belw $85,000 (cuples belw $170,000) are charged the base premium amunt. Fr purpses f this test, incme is defined as Adjusted Grss Incme plus tax-exempt interest incme. As incme increases beynd thse levels, the mnthly premium amunt increases (see the table belw). This premium can either be deducted directly frm the insured s Scial Security s, r can be billed t the insured directly if they are nt receiving s. Thse that d have their Part B premiums deducted frm their Scial Security checks qualify t be held harmless frm Medicare premium increases under certain circumstances. The Hld-Harmless Prvisin is a special rule fr Medicare participants wh have their premiums deducted frm their Scial Security s. The prvisin states that the increase in Medicare premiums due t annual cst f living adjustments (COLA) cannt exceed, in true dllar terms, the COLA increase fr Scial Security payments fr the same year. In ther wrds, Scial Security recipients wn t see a net reductin in their s due t increases in Medicare premiums. Apprximately 70% f Scial Security and Medicare recipients are eligible t be Held Harmless in any given year. Thse wh cannt be held harmless include: Thse whse Medicare premiums are nt withheld frm their Scial Security s, New Medicare enrllees (peple nt eligible t enrll in Medicare until after an annual premium increase ccurs), Higher-incme beneficiaries subject t the Incme-Related Mnthly Adjustment Amunt (IRMAA) (Mdified adjusted grss incme greater (MAGI) than $85,000 fr individuals and $170,000 fr cuples) The fllwing table summarizes the premium, deductible, and c-insurance charges paid by the insured individual fr Medicare Part B cverage fr Because there have been very small cst-f-living increases n Scial Security s ver the past few years, there are still tw pssible 2018 base premium amunts ne fr thse held harmless and ne fr thse wh are nt held harmless. The belw amunts are adjusted annually. Rbert W. Baird & C. Incrprated Page 7 f 11

8 Mnthly Premium Premium Penalty Annual Deductible Medical C- Insurance Charges Adjusted Grss Incme + Tax Exempt Incme If Held Harmless* Single Married Filing Jint < $85,000 < $170,000 $ (average) Nt Held Harmless 10% fr every year that yu fail t enrll nce yu are eligible and d nt have a SEP. 10% penalty is charged t the base premium amunt and then added $183 per persn Type f Care $ Medical Services Daily Charge $85,001 - $170,001 - n/a $ t the actual premium Out Patient C-pay can t $107,000 $214,000 amunt, if the incme Hspital Care exceed Part test premium rules A deductible $107,001 - $214,001- n/a $ apply. Out Patient 20% $133,500 $267,000 Example: Mental Health $133,501 - $267,001 - n/a $ Single individual is Annual $0 eligible in 2016, but $160,000 $320,000 Wellness des nt enrll until 2018 and had incme > $160,000 > $320,000 n/a $ f $150,000 in Penalty = $134 (2018 base) x.2 (10%/ year) = $ Premium = $26.80 (penalty) +$ (incme test premium) = $ The penalty carries ver every year. Service Prviders may r may nt accept Medicare. Service Prviders that accept Medicare may nt accept the Medicare pre-apprved cst fr service. Under these circumstances, the service prvider may charge up t an additinal 15% ut-f-pcket fee t the insured. * Part B enrllees wh were held harmless in 2016 and 2017 will see an increase in the mnthly Part B premium frm the rughly $109, n average, they paid in An estimated 42 percent f all Part B enrllees are subject t the hld harmless prvisin in 2018 but will pay the full mnthly premium f $134, because the increase in their Scial Security will be greater than r equal t an increase in their Part B premiums up t the full 2018 amunt. Abut 28 percent f all Part B enrllees are subject t the hld harmless prvisin in 2018 and will pay less than the full mnthly premium f $134, because the increase in their Scial Security will nt be large enugh t cver the full Part B premium increase. 20% The incme brackets used t calculate the incme-related mnthly adjustment amunt changed fr the 2018 premium year. The tp 3 brackets were cndensed and the tp bracket (tier 5) nw starts at $320,001, rather than $428,001. PART D PRESCRIPTION DRUG PLAN Because Medicare Part D cverage is purchased frm cmpanies cntracted with the gvernment, cverage levels and therefre premiums will vary based n the type f cverage purchased. The premium charged by the insurance cmpany is subsidized by the gvernment, but the excess amunt is paid by the insured. Part D premiums are als subject t the same IRMAA threshlds as Part B premiums. The base beneficiary premium amunt fr 2018 is $35.02 per mnth. This amunt is nt representative f any particular Part D plan and is nly used t assist in calculating the related IRMAA and penalty amunts fr Part D. The weighted average premium 1 fr all Part D plans in the US is $43.48 per mnth in The lwest mnthly premium available is $12.60, while the highest is $ Premiums will vary depending n the cverage purchased. The Part D premium can be deducted frm Scial Security s, but is mre cmmnly billed by the prvider. Any IRMAArelated premium increase charged t thse with higher incme levels will be billed separately by Medicare. 1 Surce: The Henry J. Kaiser Family Fundatin s Medicare Part D: A First Lk at Prescriptin Drug Plans in 2018 Rbert W. Baird & C. Incrprated Page 8 f 11

9 In additin t the premium cst, there is als a deductible and c-insurance charges. These csts are subject t change every year. In additin, the insurer can change the cverage applied t drugs purchased at any time. Lastly, the ut-f-pcket csts will depend n the cverage perid at the time the drugs are purchased. There are fur different cverage perids fr Medicare prescriptin drug cverage. 1. Deductible perid If the plan has a deductible, the insured will have t pay the full cst f drugs (100 percent) until that amunt is met. While deductibles can vary frm plan t plan, n plan s deductible can be higher than $405 (fr 2018). 2. Initial cverage perid This perid begins after the deductible, if any, is met. During this perid the insured pays a prtin f the cst f drugs (cinsurance r cpayment), which varies by drug and by plan, with the plan will pay the rest. The length f this initial cverage perid depends n the insured s ut f pcket drug csts and the plan s structure. Mst plans initial cverage perid ends after accumulating $3,750 in ttal drug csts (fr 2018). 3. Cverage Gap ( Dughnut Hle ) perid After the ttal drug csts (the ttal amunt paid by the insured and by the plan) reach a certain amunt ($3,750 fr 2018), there is a cverage gap. During this perid, the insured will still pay the drug plan s mnthly premium but the plan will pay little t nthing fr yur drugs. Hwever, as a result f the Affrdable Care Act, there are discunts that will help pay fr drugs during this time. Since 2011, the cverage gap has been in the prcess f being phased ut. In 2018, there will be a 50% manufacturers discunt n mst brand name drugs and the Part D plicy will pay 15%, leaving the insured s share as 35%. There will be a 56% discunt fr generic drugs. The cverage gap will be cmpletely phased ut in 2020 when thse with cverage will pay n mre than 25 percent f the cst f their drugs at any pint during the year. 4. Catastrphic Cverage perid In all Medicare private drug plans, after the insured has paid $5,000 (fr 2018) in ut-f-pcket csts fr cvered drugs (regardless f the ttal drug csts), catastrphic cverage is reached. Csts that cunt tward the ttal ut-f-pcket (TrOOP) threshld include: Deductible Initial cverage perid csts Cverage gap csts what yu pay plus the discunt n brand-name drugs Amunts paid by thers, including family members, mst charities r ther persns n yur behalf State Pharmaceutical Assistance Prgrams, AIDs drug assistance prgrams, and the Indian Health Service. Csts that d NOT cunt twards this threshld include: The drug plan premium The discunt n generic drugs The 15% the Part D pays fr brand name drugs during the cverage gap The pharmacy dispensing fee What yu pay fr drugs nt cvered by the plan At the catastrphic cverage level, the insured will pay either a 5 percent cinsurance n the cst f cvered drugs r a c-pay f $3.35 fr cvered generic drugs and $8.35 fr cvered brand-name drugs, whichever is greater. The insurer shuld keep track f hw much mney the insured spends ut-f-pcket n cvered prescriptin drugs and hw clse they are t the cverage gap. This infrmatin shuld be printed n mnthly statements, but shuld be verified fr accuracy. Rbert W. Baird & C. Incrprated Page 9 f 11

10 Many drug plans include bth preferred and nn-preferred pharmacies in their pharmacy netwrks and prices may be lwer fr yur drugs at preferred pharmacies than at nn-preferred pharmacies. Each Medicare Part D plan will als have its wn drug frmulary (list f cvered drugs). Many Medicare drug plans place drugs int different tiers n their frmularies. Drugs in each tier have a different cst. A drug in a lwer tier will generally cst yu less than a drug in a higher tier. Sme plans will place the same drug at in a different tier. It is imprtant t evaluate what a plan will cver cmpared t what drugs yu are actually taking. The belw table summarizes the Medicare Part D plan csts. Nte that sme f these csts can vary based n the plan that is actually purchased. Mnthly Premium Premium Penalty Annual Deductible Drug C- Insurance Charges Adjusted Grss Incme + Tax Exempt Incme Single Married Filing Jint < $85,000 < $170,000 Base Beneficiary Premium (Actual Premium varies by Plan) Yur plan premium 1% fr every mnth that yu fail t enrll nce yu are eligible and d nt have a SEP. 1% penalty is charged t the base premium amunt and then added t the actual premium amunt, if the incme test premium rules apply. Perid Deductible ($0-$405) Insured s Respnsibility 100% $85,001 - $107,000 $107,001 - $133,500 $133,501 - $160,000 $170,001 - $214,000 $214,001- $267,000 $267,001 - $320,000 > 160,000 > $320,000 $ yur plan premium $ yur plan premium $ yur plan premium $ yur plan premium Example: Single Individual is eligible in April 2016, but des nt enrll until January 2018 and had incme f $150,000 in Penalty = $35.02 (2018 base) x.21 (1%/mnth) = $ Mnthly Premium = $7.35 (penalty) + $43.48 (avg. plan premium) + $54.20 (incme test premium) = $ The penalty amunt will carryver every year Varies by Plan but can t exceed $405 Initial Cverage ($405 - $3,750) Cverage Gap ($3,750 - $5,000) > $5,000 25% (standard ) 35% Brand 44% Generic Greater f: 5% r $8.35 fr Brand and $3.35 fr Generic The Patient Prtectin and Affrdable Care Act phases ut the Cverage Gap Perid by Prir t 2011, yu paid 100% f yur drugs during the Cverage Gap Perid. Starting in 2020, yu will nt pay mre than 25% fr yur drugs at any time during the year. Surce: The Kaiser Family Fundatin s Medicare Part D: A First Lk at Prescriptin Drug Plans in 2018 (Appendix) MEDICARE SUPPLEMENT INSURANCE PLANS Medicare Supplement Plicies, ften referred t as Medigap plans, are additinal plicies that may be purchased after a persn has signed up fr Parts A and B (riginal Medicare) and pays the Part B premium. These plicies may cver deductibles, c-insurance, cpayments and ther ut-f-pcket expenses that riginal Medicare des nt cver, alng with effectively creating an ut-f-pcket maximum n cvered healthcare expenses. The extent t which these uncvered expenses are cvered by a Medigap plan will depend n the cverage that is chsen. Medigap plans are issued by private insurance cmpanies. The plans are standardized, but premiums vary widely frm regin t regin and insurance cmpany t insurance cmpany. Every Medicare Supplement Plicy must fllw federal and state laws designed t prtect cnsumers. Therefre, insurance cmpanies can nly sell standardized Medigap plicies. Mst states identify these plans with letters A thrugh N. In Massachusetts, Minnesta, and Wiscnsin, plans are structured differently and are nt referred t by their letter designatins. Belw is a table f the standardized letter plans available: Rbert W. Baird & C. Incrprated Page 10 f 11

11 A B C D F / F* G K L M N Hspital Part A Cinsurance lifetime reserve days 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%, but requires cpayment: $20 ffice visits; $50 ER Hspice Part A Cinsurance Medical Part B Cinsurance 100% 100% 100% 100% 100% 100% 50% 75% 100% 100% 100% 100% 100% 100% 100% 100% 50% 75% 100% 100% 3 Pints f Bld 100% 100% 100% 100% 100% 100% 50% 75% 100% 100% Part A Deductible 100% 100% 100% 100% 100% 50% 75% 50% 100% Part B Deductible 100% 100% Part B Excess 100% 100% Skilled Nursing Facility Cinsurance Hme Healthcare Cinsurance 100% 100% 100% 100% 50% 75% 100% 100% 100% 100% 100% 100% 100% 100% 50% 75% 50% 100% Freign Travel Emergency Out f Pcket Limit $5, % there after $2, % there after *Optin t chse a high deductible plan with a $2,240 deductible and a separate deductible fr Freign Travel Emergency All States must ffer Plan A. Hwever, sme plans may nt be available in all states. Plans E, H, I and J are n lnger available fr sale, but existing plicies will still prvide cverage. Baird des nt ffer tax r legal advice. Please cnsult yur tax prfessinal r attrney t discuss yur individual situatin. Rbert W. Baird & C. Incrprated Page 11 f 11