MARCH 16, 1998 VOLUME 5, NUMBER 37
When a Social Security recipient (or someone eligible to receive Social Security) turns 65, he is automatically enrolled in Medicare's Part A insurance coverage. That insurance covers hospital care (among other things). At the same time, the new Medicare recipient may also sign up for Medicare Part B, which covers outpatient doctor's visits. Less than 5% of seniors decline Part B coverage, usually to avoid having to pay the monthly $43.80 premium for the option. To most, though, Part B insurance is well worth the cost.
A few Medicare participants have a different problem. A 65-year-old who elects not to retire can continue to receive both salary and benefits from his employer, delay receiving Social Security, and yet begin to receive Medicare coverage. If the employer provides medical insurance, the Part B coverage for the senior worker may be unnecessary. Such a worker could decline Part B coverage until he actually retires, and save the cost of the premiums.
If a Medicare recipient elects not to participate in Part B, he can still sign up for the coverage later. To discourage recipients from holding out until they actually need the coverage, federal rules call for an increased premium for most late participants in Part B. For those workers who did not need Part B coverage because of their employers' medical coverage, however, the increased premiums are waived.
Complicating this entire picture is the problem of supplemental insurance coverage, commonly referred to as "Medigap." Many Medicare participants purchase private insurance to cover the deductibles and copayments imposed by Medicare, particularly in Part B benefits. Once again, however, Medicare recipients who are still employed and covered by their employers' health insurance programs may not need such coverage. Because these principles are complex, it frequently happens that new Medicare beneficiaries misunderstand the rules and make mistakes which later prove to be costly.
Consider, for example, John J. McGowan. Mr. McGowan lived and worked in Wisconsin. When he became eligible for Medicare in 1991, he was still working and covered by his employer's insurance plan. He elected not to participate in Medicare Part B--a reasonable choice at the time. When he actually retired four months later, he could have immediately signed up for Part B, but he instead purchased a private Medigap policy and believed that he did not need to participate in Part B.
A year after Mr. McGowan retired, he suffered a heart attack and underwent coronary bypass surgery. For the first time, he learned that much of his care would not be covered either by Medicare or by his supplemental insurance policy. Mr. McGowan had to pay about $15,000 out of his own pocket.
Federal law permits people like Mr. McGowan to sue to retroactively enroll in Medicare Part B if they can show that the initial failure to sign up was unintentional and that it was the result of an error on the part of a federal official. Mr. McGowan brought such a lawsuit, and argued that it is always a mistake for Medicare officials to fail to advise potential recipients to sign up for Part B coverage.
The Federal Court of Appeals disagreed. In their opinion, the judges agreed that "all this 'Part A' and 'Part B' and 'Medigap' lingo is perplexing for a person whose medical insurance has always been provided by an employer, and who has never before had to wrestle with such choices. Still, intake workers at Social Security offices can't deliver what would amount to short law school courses on the operation of the Medicare system and its relation to private insurance markets. The next man in line would grow a beard before being served...." Mr. McGowan was stuck with the consequences of his mistaken choice. McGowan v. Shalala, Seventh Circuit Court of Appeals, 2/5/98.