by Chris Huckins Google+ Email 


22 February 2013

Obamacare, Donut Hole, and Medicare 101

Posted in Health Insurance 101

Obamacare, Donut Hole, and Medicare 101

If you’re over 65, you’re automatically awesome. If you’ve worked and paid social security taxes for the past 10 years, you’re even more awesome. What makes you awesome? Turning 65 for many seniors means easing into retirement, which usually comes with impromptu vacations to Vegas, Europe, or for some, the moon! At this age, you’re also automatically eligible for Medicare.

What is Medicare? Starting in 1965, the US government launched an insurance program for people over 65 and in 1972, expanded it to included young people with permanent disabilities and end stage renal disease.  The program is composed of 4 parts: A, B, C, and D.

Medicare Part A is for hospital insurance, which includes: in-patient hospital care, nursing, hospice, and at-home care. Generally if you’ve already paid your social security taxes for the past decade, Part A is free.

Medicare Part B includes medical services, like doctor visits and usually charges a monthly premium. The average monthly premium in 2013 is $104.90.

Medicare Part C (aka Medicare Advantage) is what you get if you add Medicare Part A and Medicare Part B. A private insurer must enroll you in Part C and the advantage for many plans is the inclusion of prescription drugs, vision, hearing, and even gym and health club memberships. To enroll in Part C, you have to be eligible for Part A and pay your Part B premium. Part C includes an annual deductible, which means your monthly premium is lower. Lastly, you only pay co-insurance or co-payments for the aforementioned services you use. 

Medicare Part D includes prescription drug coverage and is also run through private insurers. It usually includes a monthly premium of $30 and a deductible, depending on the plan. The “D” could either stand for “Drug” or “Donut Hole”, the latter of which is an infamous trait to this plan. The donut hole is a gap in coverage for Plan D enrollees.

Typically, one pays the deductible for Medicare Part D and then only pays 25% of prescription drug costs until the $2800 cap. Afterwards, that senior has to pay 100% of prescription drug costs until the yearly limit of $4,550. Thank lobbyists in 2003 for this error.

Obamacare (Affordable Care Act) aims to close the donut hole by 2020. Until then, seniors can get a 50% discount on brand name prescription drugs and 14% off generic counterparts. Additionally, seniors who paid out of pocket for prescription drugs in 2010 received a $250 discount.

Since Obamacare rolled out these discounts and included free preventive care for Medicare members, more seniors enroll in Medicare every day and pay for required prescription drugs, which lowers premium costs and eventually will close the donut hole.

In 2011 alone, 2.65 million seniors saved over $1.5 billion dollars on prescription drugs by enrolling in Part D Medicare. That’s an individual savings of $569 per capita and for seniors with higher drug costs, up to $1,800. Sounds like vacation money to me; or presents for grandkids.

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