Medicare is health insurance program established by the US Government for people 65 years or older or people with disabilities.
If a person qualifies for Medicare and the person is younger than 65 years of age that usually means this person is on some kind of disability approved by the Social Security Administration. A person would have a 2 year wait period while on disability before they would be automatically enrolled in Medicare Part A and B. In simple terms Part A would pay for hospitals and part B would pay for doctor visits. A premium for part A may or may not be charged, however, everyone pays for part B in some cases a person might also be automatically enrolled in part D for prescription coverage.
Now looking at Medicare in simple terms, it is an 80%-20% plan. So for $100,000 hospital stay, Medicare would pay $80,000 and the member would pay $20,000 unlike the traditional health plans Medicare has NO maximum out of pocket, which means if a person had that hospital stay in January; he would owe $20,000. If there is a 2nd or 3rd similar hospital stays in the same calendars year, that person would still owe an additional $20,000 or $40,000 whatever that 20% is. Therefore, Medicare Beneficiaries wither they are 65 years or younger would have a choice between a Medicare Advantage Plan or a Medicare supplement Plan to cover that 20% gap that Medicare does not cover.
Choosing a Medicare advantage plan might be cost effective but a member would be restricted by the plan terms, conditions and the plan’s network of doctors. In many cases people would be forced to change their primary care doctor and lose a long established relationship with their provider. In other cases, one can chose a Medicare supplement because they are less restrictive and have no plan networks. However, if you are on disability, and under 65, the insurance companies know that you are sick and most likely will cost them more money. In some states, insurance companies do not even offer Medicare Supplement Plans to people with disabilities. Luckily for us here in California, the insurance companies are required to offer the supplement plans for everyone who qualifies for Medicare. However, they are free to charge whatever they want.
Let us look at an example. A 65 year old male would pay anywhere between $124.64-$242.77 monthly for plan F where a 56 year old male in the same zip code would pay anywhere between $254.67-$858.00 for the same plan with the same companies.
Of course, no one plans on being disabled, but one should plan just in case, remember, in California, in 2018. If you are married and your spouse is working and you become disabled, if your spouse makes $1,867.66 or more per month in gross income, then you would not qualify for Medi-Cal, and if you do not qualify for Medical to cover that 20% that Medicare does not cover, you might be forced to buy a supplement policy to cover the 20% or risk losing everything you own in a case of hospital stay or an un-expected surgery.
How do I plan for disability you might ask? You buy private disability insurance; it would normally cost 1-2% of your annual income and will provide the extra money needed for the additional unplanned expenses.
Suppose you are married and as a household you make 60,000 a year and you make half of that which is $2,500 and you become disabled. After the Social Security Administration gives you the run around they end up giving you $800 a month, you still do not qualify for Medi-Cal or any cash aid from the county. Now the disability insurance will come very handy because it will bring up your income to approximately 75% of what you used to earn to $1,875 vs. only $800. Then if you are forced to buy a Medicare supplement at double the rates things would not be as bad.
And yes, it would be wise to buy Disability insurance up to age 65, because even if you are employed and covered by the State Disability Insurance (SDI) that only lasts for a maximum of 13 weeks. So any situation beyond 13 weeks, you are at the mercy of the Social Security Administration.