Understanding Medicare Featured

8:00pm EDT July 26, 2008

One of the hottest topics in the country is Medicare, the federal health plan that pays for medical services for qualified seniors, disabled persons and those with end-state renal disease.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 made a number of changes to the Medicare program, including the new optional Medicare prescription drug benefit (Part D), which became effective Jan. 1, 2006. Employers that provide health benefits to their retirees have options in light of the new Part D benefit.

Companies that have Medicare-eligible employees and retirees should be aware of these and other new developments, says Nancy Pokorny, vice president of business development at the Council of Smaller Enterprises (COSE). Companies either need to stay on top of the latest news or turn to a knowledgeable third party to help walk them through the basics.

Smart Business spoke with Pokorny about how companies can effectively work with their employees and retirees to ensure that they receive the maximum benefits from Medicare.

An employer receives a letter saying that someone in the company will be turning 65. What does it need to know about Medicare?

If you have fewer than 20 employees on payroll, Medicare is primary and your group health plan is secondary. This allows Medicare to pay first and then the group health plan will pay additional benefits to bring the subscriber’s coverage equal to those for the rest of the group. If, on the other hand, you have 20 or more employees, then the group health plan pays first, and Medicare pays second.

What does Medicare entail?

Medicare has two main parts. Part A pays for inpatient hospital care, skilled nursing facilities, and some hospice and home health care services. Provided an employee or spouse has 40 or more quarters of Medicare-covered employment, there is no cost associated with Part A. Part B covers Medicare eligible physician services, diagnostic tests, X-rays, lab services, outpatient hospital care, physical therapy, ambulance services and medical equipment. It costs $96.40 per month in 2008, provided your current income does not exceed $82,000 (single) or $164,000 (married couple).

Will employees automatically be enrolled into Medicare or do they need to sign up?

Your employees will need to sign up for Medicare. They should contact their local Social Security office three months before turning age 65 to sign up for Medicare.

Should employees sign up for Medicare Part A and B if they are still working?

It is suggested that employees who are turning 65 and will continue to work enroll in Medicare Part A and Part B. If you have less than 20 employees, enrollment will help minimize your employees’ out-of-pocket expenses.

What about Medicare Part D?

Medicare Part D is a prescription drug benefit plan available to all individuals turning 65 years of age. Medicare Part D prescription coverage offers employees many options and is available through privately held insurance companies. Whether an employee should sign up for Part D depends on what sort of drug benefit is available through the company’s health insurance plan. As an employer, you are responsible for notifying your employees as to whether or not the plan elected is considered creditable by government standards associated with the Medicare Part D plan. Visit cms.hhs.gov/creditablecoverage for information on creditable plans. If an employee needs to elect a Part D plan, Medicare’s Web site (www.medicare.gov) provides an excellent resource that compares drug plans.

The Web site MedicareRights.org states: ‘If you have drug coverage now that is at least as good as or better than Medicare’s basic drug benefit (creditable) you probably should keep it. You can join a Medicare private drug plan later without penalty if you need it. You should have received a letter from the company that provides your drug benefits — such as an insurance company, employer or state program — telling you whether your coverage is as good or better.’

How does an employee coordinate both Medicare and his or her group health plan to pay benefits?

When both programs cover an employee, it is very important to notify the health insurance company and providers (physicians and hospitals) to ensure proper coordination of primary and secondary payments. This will help to prevent claim payment delays and rejections.

NANCY POKORNY is the vice president of business development at the Council of Smaller Enterprises (COSE), one of Ohio’s largest small business support organizations. Reach her at npokorny@cose.org or (216) 592-2309. Composed of more than 17,000 members, COSE strives to help small businesses grow and maintain their independence. COSE has a long history of fighting for the rights of all small business owners, whether it’s through group purchasing programs for health care powered by Medical Mutual of Ohio, workers’ compensation or energy, advocating for specific changes in legislation or regulation, or providing a forum and resource for small businesses to connect with and learn from each other.