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CMS Moves to Define Where Medicare and Exchange Plans Overlap

By John Reichard, CQ HealthBeat Editor

August 12, 2014 -- Medicare recipients in theory don't have to worry about obtaining coverage on health law insurance exchanges and, moreover, can't. Except that is not always the reality.

The notion that the worlds of Medicare and exchange coverage never overlap is a fallacy, a new federal document shows.

Most Americans 65 or older need not be concerned about exchange coverage, according to the 15-page document entitled "Frequently Asked Questions Regarding Medicare and the Marketplace."

Typically, seniors who have Medicare Part A and Part B are in compliance with the mandate in the health law (PL 111-148, PL 111-152) that people have health insurance. And it's against the law for someone who knows that to sell or issue such a person a marketplace policy.

But there are a few instances when an individual can choose a marketplace plan instead of Medicare.

For example, individuals who didn't pay Medicare taxes while they worked have to pay a premium of up to $426 a month for Part A of Medicare, which covers hospital and skilled nursing stays, hospice care and some home care. They now have the option of dropping Part A and Part B, which covers doctors office visits and other outpatient treatment, and buying an exchange plan.

Exchange plans also are an option for people who are eligible for Medicare but haven't enrolled in the program.

But before choosing an exchange plan over Medicare there are two important points to consider, the Centers for Medicare and Medicare Services (CMS) says in the document. Those who decide to enroll in Medicare after their initial exchange coverage period ends may have to pay a late enrollment penalty for as long they have Medicare. And in general, they can only enroll in Medicare from January 1 to March 31 with coverage not taking effect until July.

Individuals who only have Part B of Medicare aren't considered in compliance with the health law and may face a penalty unless they buy more comprehensive coverage.

Medicare recipients are considered covered if they have Part A only, however.

The CMS document also states that people with exchange coverage don't have to drop their existing arrangements when they become eligible for Medicare. But if they are entitled to Part A without paying premiums, as most Americans are, they won't be able to get any tax credits from the exchange once Part A coverage begins.

Those in exchange plans who become eligible for Medicare Part A and who must pay premiums for it can keep getting exchange tax credits if they enroll only in Part B, because it isn't considered minimum essential coverage under the law.

The CMS document addresses numerous other questions, including ones relating to the interaction between Medicare prescription drug coverage and exchanges. One takeaway: people who sign up fully for Medicare benefits need not be concerned about the sometimes blurry line between Medicare and exchange coverage.

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