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Articles

MEDICARE 101

I'm willing to bet Americans know more about where Medicare has failed than know essential facts about the program itself.

It's no wonder. Political rhetoric pits one side against the other whenever key legislation is debated. And those who find fault always shout the loudest, no matter what the argument.

Medicare is not a one-size-fits-all health insurance plan. Options exist to accommodate every situation; regardless of age, income level or basic need.

Congress has added new benefits over time, each with its own set of rules. One particular provision may require totally different qualifications than another. Its complexity makes it hard to understand.

But if you're approaching the magical age of 65, there are some program basics you need to know.

Medicare is not a single plan. Coverage is divided into four parts, each available on its own to allow recipients to choose whichever benefits they need.

Part A covers hospital stay or skilled nursing facility, home health care, hospice care and medicines received by patients during in-patient care.

Part B covers physicians and out-patient services. Rehab therapy, lab tests and medical equipment fall under this section. Doctor's services in a hospital and medicines administered in a doctor's office fall here too.

Part C gives you a choice of private health plans, called Medicare Advantage plans. They package Part A and B into a single product. Often Part D is included as well.

Part D is the newest addition to the Medicare family. This provides a benefit for the cost of prescription drugs.

You can enroll in Part B alone, but if you enroll in Part A, you must also enroll in Part B. You must be enrolled in A or B to get D.

Medicare does not cover everything. It rarely covers vision, hearing and dental care or nursing home care. It does not cover medical services outside of the United States.

There are deductibles and co-pays, depending on the plan you choose.

Unless you're already collecting Social Security benefits, you will have to enroll in the Medicare program. You will not receive notice from the agency.

You have three months before and after the month of your 65th birthday to enroll, a full seven month period including your birth month. If you do not enroll at the proper time, expect to pay a permanent late penalty of an extra 10 percent of your Part B premiums for each 12-month period you delay. If you don't enroll until you are 68, you will pay an extra 30 percent more for the same coverage as long as you are a plan participant.

If you miss that seven month window, you can only enroll in Part B during the general open enrollment period which runs from January 1st to March 31st each year. Coverage begins the following July 1st.

Penalties also apply to late enrollment for Part D prescription coverage for those who did not have creditable drug coverage since turning 65. Creditable drug coverage could be through a current or former private employer plan, union, COBRA, Veterans Affairs or military Tri-Care-for-Life system. Those that have this coverage have an extra two-month period to enroll in Part D prior to being assessed a penalty.

If you paid enough in Medicare taxes while you were working, there is no premium for Part A. Part B requires a monthly premium of $115.40 per month for those joining in 2011. Parts C and D carry a premium as well, which differs according to the plan you choose.

If you qualify for the low-income plan, your Part B premium is waived along with your deductibles and co-pays. Premiums for Parts B and D are higher if your modified adjusted gross income on your most recent tax return is above $85,000 for singles or $170,000 for married taxpayers filing a joint return.

Not all doctors accept Medicare patients, and expect even more to leave the program as they're paid increasingly less for their services. Find a list of participating doctors on the Medicare web site.

Don't wait until your enrollment deadline nears to start researching Medicare options. It may take that full seven months to learn enough to make a wise decision.


MEDICARE AND YOU
The Affordable Care Act brought sweeping changes to the healthcare industry. Medicare was likewise affected by the reform. As with all provisions of this Act, changes will be phased in over time.

Recipients should learn how these changes affect you. Doing so now gives you time to consider what revisions you'll need to make during the annual open enrollment period of November 15th through December 31st.

Lifestyle changes or health concerns may change your needs. Your current plan may no longer be the best one for you.

Medicare plans change also. Premiums can go up or down, a prescription you take may no longer be included in their plan, or your doctor may not participate. These factors have to be taken into consideration in choosing the right plan for you.

Are you on a Medicare Advantage Plan? You can switch back to original Medicare during open enrollment if that better fits your current needs. Or you can switch from one Medicare Advantage Plan to another.

You can join a plan that offers drug coverage or drop drug coverage completely during open enrollment.

Affordable prescription drugs are a key element in healthcare Act provisions affecting Medicare. Seniors struggle with the "donut hole" created in Part D coverage. Initial plan coverage provides benefits for amounts up to $2,700 of a recipient's annual prescription drug expenditures. No further benefits are available until the catastrophic level of $6,154 is reached.

In June of this year, the government began sending a one-time $250 rebate to seniors upon reaching this coverage gap that weren't already receiving Medicare Extra Help. Next year, those reaching this gap will receive a 50 percent discount on Part D covered brand name prescription drugs. The discount will increase over the next ten years until the gap is closed completely in 2020.

Realize this discount only applies to brand name drugs appearing on your plan's formulary list. You may see steeper savings if a generic equivalent is available.

Certain preventive care services will be offered free beginning next year as part of the Act. Colorectal cancer screenings and mammograms will be free, as well as an annual physical.

Medicare fraud is estimated at $100 billion annually. You can bet it plays a key role in healthcare costs. Scam artists will trick seniors into enrolling in Plans that do not exist. They'll steal the personal information provided in the application to claim benefits in their victim's name. And wipe out their bank accounts.

A large portion of fraud is committed through false claims or institutions overcharging for their services. Or fraudulently billing your company for a service you never received.

Request an itemized copy of your hospital bill. Confirm you received every service, drug or supply that appears. If you spot an outrageous charge, like a $50 aspirin, dispute it immediately.

All insurance companies send an Explanation of Benefits (EOB) whenever a claim is processed against your policy. Examine them closely. Report anything unusual to your insurer immediately.

If you're not using a wheelchair or taking a particular drug, your policy should not be providing a benefit for them. Don't just laugh off such a notice as a clerical error, they serve as a fraud alert. And we all pay the cost through higher premiums.

Medicare coverage is quite complex. Make sure you fully understand your options before enrolling in a plan. You can compare them on Medicare's web site.

It might be a good topic to discuss with family during a holiday visit. There's no better gift than peace of mind to give yourself and your loved ones.

SOCIAL SECURITY 2010
Planning for your retirement years can get tricky, particularly when the rules keep changing. But, as Winston Churchill once said, "He who fails to plan is planning to fail."

So whether we have hard facts available or not, we have to estimate the best we can. And for the majority of American workers nearing retirement age, that means Social Security. Let's take a look at factors that impact us mid-year 2010, with the certainty that they are subject to change.

Social Security is frequently scrutinized as lawmakers try to secure long-term funding. Those born prior to 1960 will likely receive benefits provided by current regulation. But changes will certainly be implemented to keep the program running past 2037 when funding is predicted to fall short of its obligations.

Who is eligible for Social Security retirement benefits? Most anybody who has earned a minimum income of $1,000 per quarter for 40 quarters of employment can collect. Federal employees hired before 1984 are not eligible. Pastors may choose whether or not to pay into the system. Railroad workers are covered through a separate retirement system.

Your benefit is based on a series of calculations. The Social Security Administration calculates your Average Indexed Monthly Earnings (AIME), and then adjusts for inflation and whether you take benefits before or after your normal retirement age. That age is now 66, or 67 for those born after 1954.

If one partner in a marriage earns less than the other, they can collect spousal benefits rather than payouts on their own earnings history. The spouse is entitled to the greater of their own benefit or 50 percent of the other spouse's. But until the higher-earner starts to collect benefits, the lower-earning spouse is only eligible for their own.

A divorced spouse who was married for more than 10 years and never remarried can collect on the ex-spouse's work history. Widows and widowers can receive the higher of their own or their spouse's monthly payment, but not both.

So now you're collecting benefits that you've earned throughout your working years. This income may be taxable come April 15th.

Back to the calculator. Figure your modified adjusted gross income. This includes income aside from Social Security like pensions, wages, interest and dividends. Add in tax-exempt interest. Now add one-half of the Social Security benefits you receive for the year. The number you'll get is considered "provisional income."

The IRS considers amounts over $32,000 for married couples filing jointly or $25,000 for single filers to be taxable income. Tax percentage rate is based on your income. IRS Publication 915 provides worksheets to compute the tax. Talk to your tax advisor about strategies you can use to offset your tax bill.

If you're considering Social Security's payback option, you'd better act fast. Your opportunity may be lost within the next few months if program changes are implemented.

The option allows recipients who started to collect benefits at a younger age to repay benefits already received and re-apply for the higher benefit amount at full retirement age. They could claim a tax credit for any income taxes they paid on those benefits.

The proposed change would allow retirees to withdraw their application for Social Security benefits only once during their lifetime, and within 12 months of first receiving benefits. They would have to pay back what they had already received and restart at the appropriate time.

The face of retirement is changing. The multitude of baby-boomers leaving the workforce around the same time was destined to impact retirement as we knew it. But the recession and unemployment crisis couldn't be foreseen, adding even more haze to an already cloudy future. It may seem fruitless to plan with all the variables. Set your course anyway, and once those clouds part you'll find yourself on the road to success.

WHAT IS A REVERSE MORTGAGE?
By definition, a reverse mortgage is a special type of mortgage loan that allows homeowners to borrow against the equity in their house without having to pay it back until they sell their home. As the name implies, it works in reverse of traditional mortgages. Rather than you paying monthly amounts to a mortgage company, the mortgage company pays you a fixed sum that can be disbursed as a cash lump sum, monthly payments or line of credit. This type of mortgage is only available to homeowners above the age of 62 who have equity in the home that is their principal residence.

You've worked hard to build up the equity in your house. A reverse mortgage can be a great way to tap that money when you need it most. With the uncertainty of Social Security, rising healthcare costs, costly home repairs or family emergencies, your home can provide you with financial security if need should arise. And since you're borrowing the money rather than earning it, it's tax-free. It can be a great tool for someone who is house-rich but cash-poor.

The product is governed by the National Reverse Mortgage Lenders Association (NRMLA), headquartered in Washington, D.C. Their role is to educate consumers as to the availability of reverse mortgages, train lenders on needs of older Americans, develop Best Practices and Code of Conduct to which lenders must adhere, and promote reverse mortgages in the media.

The most common loan is a product insured by the Federal Housing Administration (FHA) called the Home Equity Conversion Mortgage, accounting for almost 95% of the loans written. Other lenders have recently entered the market offering similar products. Programs vary by loan limits, interest rates and fees. Some limit the purpose you can use the funds for.

Yet for all the advantages of a reverse mortgage, there are pitfalls. There's always a risk when you put your home on the line. These loans can be quite costly with fees and interest rate. And scam artists who prey on the vulnerable double their pleasure when they find victims both elderly and in financial need.

The loans themselves are quite complicated. That in itself can be problematic, particularly for older applicants.

The reverse mortgage carries the same fees as its traditional counterpart. You'll be charged an appraisal fee, origination fee and recording fees. Some lenders even charge up-front fees and close out fees. Be sure to factor in all the charges in choosing your loan, sometimes the lowest interest rate isn't your best option.

One payout option allows you to take a fixed monthly payment for the rest of your life. While this guarantees you'll never lose your home, inflation may rise to where you can't live on that same fixed amount. And since none of us know how long we'll live, there's no assurance you'll collect enough in payments to equal your home's value. The lender can find a cheap bargain here.

Before you can apply for a reverse mortgage, you should meet with a HUD-approved counselor who can direct you to the best program for your situation. The service is free. Beware of outsiders representing themselves as a counselor. This is a ripe area for scam artists who charge a hefty sum for providing what should be a free service.

Learn more about reverse mortgages, find consumer guides and locate a local lender.

Find more information on reverse mortgages, a HUD counselor and HUD lender.

SCAMS, SHAMS AND OTHER RIPOFFS
Our inboxes are flooded with warnings from well-intentioned friends advising us to avoid everything from boiling water in the microwave to pumping gas. There are several web sites dedicated to separating true threats from urban legend. But the easiest way to do some quick research is to feed the keywords into a search engine. Your results will instantly tell you whether you should hit the forward or delete key.

Here are a few legitimate scams worthy of forwarding:

LONG-DISTANCE CALL FORWARDING SCAM: The supposed identity differs from one caller to the next, but their purpose is the same. They persuade you, using one guise or another, to forward their phone call to another number. You'll be instructed to dial either *72, 72# or 90#, depending on your phone company. Once you do, your phone bill will begin to rack up charges for 900 number 'sex lines' or outrageously high long distance rates.

Most of these calls originate from prisons, where long-distance calls can be charged 84 cents per minute. Calls from prison inmates are collect only, which means you would get a recording identifying the origin of the call and requesting your permission to accept the charges. To get around this, prisoners often work with an accomplice on the outside who accepts the call and then initiates a 3-way call to your phone number. You hang up, they don't. They continue to use your line, and your phone bill, until you deactivate the service.

VIATICALS: Looking for a higher rate of return on your investments? Here's one to avoid. In a typical viatical transaction, a terminally ill person expected to die, usually within two years and in need of cash, sells his or her life insurance policy for less than its face value. The buyer/investor agrees to pay the future premiums and collects the policy's full benefit when it matures - that is, when the seller dies. The earlier the seller dies, the larger the return on the investment.

Promoted as a low-risk/high yield investment opportunity by the broker, this vehicle will only leave you broke.

CREDIT REPAIR FIRMS: One of the most valuable things you can possess is good credit. But life's challenges can leave even the most honest among us in dire straits. While there are a number of nonprofit groups dedicated to helping you re-establish your sterling rating, others do nothing more than add to your mounting debt.

Beware of any firm that claims they can erase derogatory reports in a few short months, even if they are accurate. While credit bureaus will remove a rating found to be in error, those that are accurate will remain until you have re-established a good payment history. And this can only happen over a period of time.

For more information on these, including a scam alert library, visit aarp.org/bulletin/consumer/.