Medicare - What’s it all about?
By Shane Flait © 2008

The majority of people 65 or older have two health care options. These are Medicare[1] and managed care. The Medicaid program gives medical assistance only for those with low incomes or disabilities. If you have typical income and assets, you’ll not qualify for ‘free’ Medicaid assistance.

If you’ve contributed enough through FICA taxes over the years, you are eligible for Medicare when you turn 65. And it doesn’t matter if you work or not. Be sure to apply for Medicare coverage three months before your 65th birthday so you can start it when you turn 65.

Medicare is a program with different parts. Only the first - Part A – is free. The other parts each cost an amount depending on your income and choices of ‘supplemental coverage’ they offer.

Let’s take a look at what each part is about. Medicare is divided into components:

• Part A –  hospital insurance
• Part B -  medical insurance (this is optional)
• Part C – additional insurance coverage
• Part D - offers voluntary prescription drug coverage offered via private vendors

Part A is called hospital insurance. It covers most costs of your stay in the hospital as well as some follow-up costs after being in the hospital. It also pays some outpatient medical services, including medically necessary equipment and supplies, home health care, and physical therapy. Under most circumstances (if you‘ve paid enough FICA taxes), you don’t have to pay a premium for Part A.

Part B is medical insurance. It’s optional. If you elect it, the monthly premium is deducted from your Social Security check automatically. It provides for certain out-of-hospital treatments and is intended to help pay doctor's bills for treatment in or out of the hospital. It also covers many other medical expenses you incur when you’re not in the hospital, such as the costs of necessary medical equipment and tests.

Medicare Part B has spawned additional insurance coverages to supplement what it and part A don’t cover. Here are some:

• Original Medicare Plan and Medigap insurance
• Medicare Part C coverage: Medicare Managed Care Plan (like an HMO (see below), and Medicare Private Fee-for-Service Plan

With the Original Medicare Plan, you pay your Part B monthly premium and then pay for additional services as you use them. With this plan you might also choose to buy Medicare Supplement Insurance, or "Medigap" insurance. The term Medigap implies that these insurance policies will cover the gaps in Medicare payments. Medigap doesn't fill all the gaps, but it helps.

Part C: Medicare Managed Care and Private Fee-for-Service plans are offered by private insurance companies. Managed care plans generally fall into two main varieties:

·         health maintenance organizations (HMOs) and

·         preferred provider organizations (PPOs).

HMOs are generally less expensive than PPOs but usually more restrictive in their services and choice of doctors.

With these latter two plans in Part C, you must continue to pay your Part B premiums, and you may also have to pay an additional premium to the insurance company as well as any related deductible or co-insurance payments. However, the services you receive may be more comprehensive than those offered through the Original Medicare Plan.

Seniors should compare the costs and local availability of Medigap with the Medicare Managed Care and private fee-for-service programs. Realize that you should be prepared for heath problems in retirement. They’re part of aging. Don't wait until they happen to cover the costs.

To avail yourself of Part D, you must join a Medicare Drug Plan. These plans are run by insurance companies and other private companies approved by Medicare. But each plan can vary in cost and the drugs covered.

Note: If you don’t sign up for Medicare’s Part D: Drug Coverage when you first become eligible for Medicare, you may pay a late-enrollment penalty to sign-up later. Everyone who qualifies for Medicare is eligible for Part D. With it you can protect against future drug costs and give yourself access to drugs that help you stay physically and mentally healthy.

 

To participate[2] in Medicare Part D, you need to join a Medical Drug Plan (MDP) in either of two categories of such plans:

1.      You can join one of the Medicare Prescription Drug Plans (called PDPs). These plans add drug coverage to either of your Original Medicare Plan, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) plans, and Medicare Medical Savings Account (MSA) plans. Or

2. Join a Medical Advantage Plan - like a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO) or some other Medical health plan that includes prescription drug coverage. Through these plans, you get all your Medicare coverage of Part A and Part B including prescription drugs (Part D). These Plans are called 'MA-PDs'

In either category you’ll usually pay a separate monthly premium for the drug coverage in addition to your Part B premium.

After joining a specific MDP, the plan mails you membership materials including a card to use when you get your prescriptions filled. When you use the card, you may have to pay a copayment, coinsurance, or a deductible amount depending on your plan

What to consider when comparing which MDP to choose:

Look for Coverage, Cost and Convenience provided by each plan. These will be different.

• Coverage - check if the type of prescription you want comes under that plan.
• Cost – see what costs and payment schedule that plan offers you.
• Convenience - make sure the plan's pharmacies include the ones you want to use.

 

You’re not permanently locked into the plan you choose. You can switch your plan from November 15 to December 31 of each year.

 

If you’re on Medicaid, they’ll automatically enroll you in a MDP if you don’t join yourself. Under Medicaid, in most cases, you’ll pay from nothing to about $5.60 out-of-pocket for each covered drug.

 

Shane Flait is a writer and educator. See more at www.EasyRetirementKnowHow.com