What is Medicare? Is it health insurance or hospital insurance? Does it cost anything? Do I even need it? As one of the main battlegrounds of the last presidential election, Medicare has a place in the mind of every American; yet how many understand exactly what Medicare is, or what it can do for them? This article will explain the basics of this Social Security benefit and provide a base to take action from.
Medicare: What is it?
In 1965 the Social Security Act established Medicare and Medicaid in order to provide health care and hospitalization options for those who most needed them. Medicaid and Medicare are often thought of as the same program. The main difference is that Medicaid is primarily for low-income folk who cannot obtain medical care in another way; Medicare is primarily for citizens who are age 65 and older.
There are two main parts to Medicare; Part A (hospitalization) and Part B (doctor visits.) Between them they provide coverage for catastrophic illness or injury and routine health care, ensuring a basic level of health care coverage.
Who is eligible?
Anyone aged 65 or older is eligible who is also eligible for Social Security or Railroad Retirement benefits. Also, anyone suffering from end-stage renal disease and individuals who have received Social Security Disability Income for at least 24 months are also eligible.
What does it cover?
Each part of Medicare covers different aspects of health care coverage. It is important to know which is which in order to decide what you need. Below is a summary of the differences. For specific coverages important to you, you would contact the Social Security Administration at 1-800-772-1213.
• Part A: This covers some or all of your inpatient care in hospitals and in some cases other facilities, such as skilled nursing facilities, hospice care and some home health care.
• Part B: This covers outpatient hospital services, doctor visits, and in some cases prescription drugs. These services are covered if they are deemed medically necessary, but some preventative services are covered as well. Typically Part B will cover 80% of approved services (after the deductible is met.) There is also a subsidy for prescription drugs that provides a $600 credit for low income individuals.
What does it cost?
The total cost to you will vary depending on a number of factors, such as how often you go to the doctor, if you are under continuing care, use a lot of prescription drugs, and many other factors. The basic costs are as follows:
• Part A: In most cases there is no cost. As long as you or your spouse have paid taxes for at least ten years you are eligible.
• Part B: In 2005 the monthly premium is $78.20. If you do not sign up during your seven-month enrollment period you may have to pay more for Part B the longer you wait to enroll. There is a $110 deductible with Part B, which means that you pay that amount out of pocket before any Part B benefits begin.
How do you enroll?
There is a seven-month enrollment period, starting 3 months before your 65th birthday. In many cases people are enrolled automatically. In order to enroll, contact the Social Security Administration at 1-800-772-1213.
What if I want more coverage?
It is possible to have private or group coverage (such as a retirement benefit offered from your employer) in addition to Medicare. This could provide additional benefits to both Part A and Part B; it will most likely cost more, as you would normally be paying a premium for both Medicare and your other plan. There are a number of items to consider when making the decision to get additional coverage.
• Medigap: A Medigap Plan, sometimes called a Supplementary Plan, is designed to fill the gaps left by Medicare. For example, if you have only Medicare and are presented with a $5,000 doctor bill, Medicare will cover (after your deductible is met) 80%, or $4,000, leaving you with a $1,000 bill. If you have a Medigap plan, it covers the other 20%, so the entire $5,000 bill is taken care of.
• Secondary Insurance: In the event your insurance plan is not a Medigap Plan, it will operate as a Secondary Insurance plan. While Coordination of Benefits (who pays what) is always resolved between insurance companies, it is important to know the potential impact to you. A Secondary plan typically receives the bill after the Primary plan (in this case, Medicare) pays their portion. So far, this is just like a Medigap. The difference is in how the Secondary Plan looks at the bill. If your Secondary Plan covers a certain service at 80%, and Medicare covers it at 80% and has paid their portion, then the 80% has been met and your Secondary Plan will pay nothing. In the above example of a $5,000 doctor bill, you are back to paying $1,000 (in addition to the extra premiums for the Secondary Plan.)
• So what do I do?: Talk to your plan. Find out what they will pay in a number of different circumstances. Get concrete answers. There may be good reasons to carry a second plan, even if it isn’t a Medigap, such as a decent Prescription Drug program.
What’s next for Medicare?
On December 8, 2003, President Bush signed into law the Medicare Modernization Act. This is the first time in 38 years Medicare has undergone any significant changes. This Act also added a prescription drug benefit, which, along with all the other changes, does not go into affect until 2006.
The New Rx Program
In addition to the monthly premium for Part B, participants in the new Prescription Drug Program will pay an estimated $35 a month. There are four tiers to this program (keep in mind the figures below are estimates for 2006 only. They are likely to change):
• Tier One: There will be a deductible, which means you will pay 100% of the cost of your Prescriptions up to $250.
• Tier Two: After the deductible has been met, the plan will pay up to 75% until a benefit limit of $2,250.
• Tier Three: After the $2,250 is reached you pay 100% of your drug costs until $5,100 is reached. This figure is total drug spending, which means at this point you have spent approximately $3,600 out-of-pocket.
• Tier Four: At this point Medicare will pay 95% of all drug costs for the remainder of the year.
So what do I do?
Like any type of health insurance, Medicare is complex. It is important to write out what your specific needs are and any special situations that may impact your options (such as being eligible for retirement benefits or requiring Medicare before age 65.) Once you have a good understanding of the Medicare basics and your own needs, contact the administrators for Medicare and any other plans you are considering to discuss your options and what is required of you. The resources below will help you learn more.
External Links:
Medicare - By Phone: 1-800-MEDICARE (1-800-633-4227). TTY 1-877-486-2048
Social Security - By Phone: 1-800-772-1213. TTY 1-800-325-0778