Medicare Basics

By Michelle Lonsinger

Medicare is health insurance for people who are 65 or older, or for people of any age who have certain disabilities or have permanent kidney failure that requires dialysis or a kidney transplant.

This document is provided as a summary of Medicare benefits, and may not provide all of the information you need to make an educated decision about coverage and how to pay for it. For more information regarding the details and limitations of Medicare, see the publication “Medicare and You,” available at http://www.medicare.gov.

Medicare Parts

Medicare has several different “Parts” that help cover medical costs if you meet certain conditions. Each of these parts, and how the parts work together, is discussed in greater detail later in this article.

• Medicare Part A—Health Insurance: Helps cover the cost of inpatient hospital care, care provided by a skilled nursing facility or hospice, and home health care. Parts A & B are commonly referred to as Original Medicare, and are the default coverage option.
• Medicare Part B—Medical Insurance: Helps cover the cost of outpatient care, doctors’ services, and some preventative services. Parts A & B are commonly referred to as Original Medicare, and are the default coverage option.
• Medicare Part C—Medicare Advantage Plans: Provides coverage similar to an HMO or PPO, and is run by private, Medicare-approved companies. Includes the coverage provided by Parts A and B, and usually provides other coverage including prescription drugs
• Medicare Part D—Prescription Drug Coverage: Helps cover the cost of prescription drugs, and is provided by a Medicare-approved private company.

How does Medicare work?

• Medicare Parts A & B (Original Medicare) give you your choice of doctors and facilities, and are the default Medicare option. After paying the annual deductible, Medicare will pay a defined portion of your covered medical expenses.

Every three months, you’ll receive a Medicare Summary Notice (MSN) by mail. The MSN will detail the services and supplies that were billed to Medicare, how much Medicare will pay, and how much you or other insurance providers might owe for the services or supplies.

Original Medicare does not include prescription drug coverage. If you want to have this coverage, you must add it through Part D.

• Medicare Part C (Medicare Advantage Plan) must provide all of the services offered by Original Medicare, but can charge different out-of-pocket costs for services than those charged by Original Medicare. These are usually copayments, but may also consist of coinsurance and deductibles, and will vary by plan.

Many Medicare Advantage (MA) Plans include extra coverage, such as dental, vision, hearing, and health & wellness programs. You may need a referral from your primary physician before you can see a specialist. Some MA Plans limit you to doctors who are within their network.

What should I consider when choosing between Plans?

You should consider and compare all of your options before choosing or changing your coverage, including any other types of health or prescription drug coverage that you might have or be eligible for. If you have coverage from a current or former employer or union, you should discuss options with your plan administrator. Other things to consider include the following:

• Details of Coverage—There may be a Medicare Advantage Plan that provides extra coverage that you want and need, and that isn’t included in Original Medicare.
• Cost—The costs of premiums, deductibles, and payments for services such as hospital stays and visits to your doctor may vary between plans.
• Doctor and facility selection—Doctors and facilities that participate in the Medicare health plan vary. You should determine whether your preferred doctors and facilities participate in the plan you are considering.
• Drug coverage—Original Medicare does not include prescription drug coverage, so it must be purchased separately if you want it. Many MA Plans include prescription drug coverage.

Medicare Part A—Hospital Insurance

Medicare Part A helps cover the following expenses:

• Inpatient hospital care, including critical access hospitals and inpatient rehabilitation facilities
• Inpatient stays in a skilled nursing facility, but not custodial or long-term care
• Hospice care services
• Home health care services
• Inpatient care in a Religious Nonmedical Health Care Institution

When can I sign up for Medicare Part A?

If you receive benefits from Social Security or the Railroad Retirement Board (RRB), you’ll automatically be enrolled in Part A beginning on the first day of the month you turn 65. If you’re disabled and younger than 65, you’ll automatically be enrolled in Part A after receiving 24 months of disability benefits from Social Security or the RRB. Your Medicare card will arrive in the mail a few months before your 65th birthday, or in your 25th month of disability.

If you have ALS (Lou Gehrig’s disease), you’ll be enrolled in Part A in the same month that you begin to receive disability benefits.

If you’re eligible for premium-free Part A but aren’t receiving Social Security or RRB benefits (for example, because you’re still working), you’ll have to sign up for Part A. You should contact Social Security or (if you worked or work for the railroad) the RRB 3 months before you turn age 65.

If you have End-Stage Renal Disease (ESRD), you can enroll in Part A by contacting Social Security or visiting your local Social Security office. For more information on how to enroll in Medicare if you have ESRD, see the publication “Medicare Coverage of Kidney Dialysis and Kidney Transplant Services” available at http://www.medicare.gov.

If you aren’t eligible for premium-free Part A, you can buy it at the following times:

• Initial Enrollment Period—When you first become eligible for age-based Medicare, starting 3 months before you turn 65 and continuing for 3 months after you turn 65
• General Enrollment Period—From January 1st through March 31st each year
• Special Enrollment Period—If you or your spouse (or family member, if you’re disabled) is working and has group health plan coverage through an employer or union, you can sign up for Part A at any time while you have group health plan coverage, or during the 8 months after employment or group health coverage ends (whichever comes first)
• Special Enrollment Period for International Volunteers—If you wait to enroll in Part A because you have health insurance while volunteering in a foreign country, you can enroll during the 6 months after your volunteer period ends, the sponsoring organization loses its tax-exempt status, or your health coverage outside the U.S. ends (whichever comes first)

If you don’t buy Part A during the initial enrollment period or a special enrollment period, your monthly premium may go up by 10%.

How much does Medicare Part A cost?

If you or your spouse paid Medicare taxes while employed, you usually won’t need to pay a monthly premium for Part A coverage.

If you aren’t eligible for premium-free Part A, you might be able to buy Part A coverage if you’re an eligible citizen or resident and you’re at least 65 years old or disabled. For 2009, the monthly premium for purchased Part A coverage is $443. In most cases, if you buy Part A coverage, you’ll also have to buy Part B coverage.

There are state-run programs to assist those with limited income and resources in paying for Medicare.

Medicare Part B—Medical Insurance

Part B helps cover medically-necessary services including doctors’ services, outpatient care, and some preventive services. Medicare Part B will typically pay for 80% of the Medicare-approved amount of the service, and you may be able to save money by choosing doctors or providers who accept assignment (an agreement between you, Medicare, and your doctor that Medicare will pay the doctor directly for your services).

How do I sign up for Medicare Part B?

If you receive benefits from Social Security or the Railroad Retirement Board (RRB), you’ll automatically be enrolled in Part B on the first day of the month you turn 65. If you’re disabled and under 65, you’ll automatically be enrolled in Part B after receiving 24 months of disability benefits from Social Security or the RRB. Your Medicare card will arrive in the mail a few months before your 65th birthday, or in your 25th month of disability. If you don’t want Part B, you should follow the instructions that will arrive with the card, and return the card; if you keep the card, you keep Part B and will have to pay Part B premiums.

If you have ALS (Lou Gehrig’s disease), you’ll be enrolled in Part B in the same month that you begin to receive disability benefits. If you have ESRD (End-Stage Renal Disease), you can enroll in Part B at the same time you enroll in Part A.

If you aren’t receiving Social Security or RRB benefits and want to get Part B, you’ll need to sign up for Part B during your initial enrollment period.

If you didn’t sign up for Part B during the initial enrollment period, you might be able to enroll during the following times:

• General Enrollment Period—From January 1st through March 31st each year, with coverage beginning on July 1st. You may be subject to a increased premium based on the amount of time you were eligible for Part B without having it, unless you’re eligible for a special enrollment period.
• Special Enrollment Period—If you or your spouse (or family member, if you’re disabled) is working and has group health plan coverage through an employer or union, you can sign up for Part B at any time while you have group health plan coverage, or during the 8 months after employment or group health coverage ends (whichever comes first).
• Special Enrollment Period for International Volunteers—If you wait to enroll in Part B because you have health insurance while volunteering in a foreign country, you can enroll during the six months after your volunteer period ends, the sponsoring organization loses its tax-exempt status, or your health coverage outside the U.S. ends (whichever comes first).

How much does Medicare Part B cost?

Most people will pay the standard monthly premium for Part B, which will be $96.40 in 2009. If you’re single and your yearly modified adjusted gross income (your taxable income plus your tax-exempt interest income) exceeds $85,000, or if you’re married and it exceeds $170,000, you’ll be subject to a higher monthly premium.

You must also pay an annual Part B deductible, which is $135 in 2009, before Medicare will start paying its share of your eligible expenses.

There are state-run programs to assist those with limited income and resources in paying for Medicare.

I have TRICARE and Part B—does this change anything?

TRICARE coverage is for active or retired military and their families. If you’re have both Medicare and TRICARE coverage, contact TRICARE to find if there’s anything you need to do to keep the coverage. For example, you might need to purchase Part B if you or your spouse is no longer on active duty.

Medicare Part C—Medicare Advantage Plans

Medicare Advantage Plans (MA Plans) are health plan options that are similar to HMOs or PPOs, and are offered by private Medicare-approved companies. MA Plans include all coverage provided by Medicare Parts A & B, and often Part D, and are not supplemental insurance. There are many types of MA Plans, including the following:

• Preferred Provider Organization (PPO) Plans—Generally allow you to receive care from any doctor or hospital, and do not require referrals for specialists.
• Health Maintenance Organization (HMO) Plans—Require you to use in-network doctors and hospitals, and generally require referrals for specialists; may require pre-approval for services.
• Private Fee-for-Service (PPFS) Plans—Allow you to receive care from any doctor or hospital, but they must agree to treat you under the plan’s payment terms.
• Medical Savings Account (MSA) Plans—Provide a tax-advantaged personal savings account. Consists of a high-deductible health plan and a bank account. Medicare gives the plan a specified amount of money each year for your health care, and the plan deposits a portion of this money into your account for use towards the deductible. Once the deductible is met, your plan will pay for your Medicare-covered expenses
• Special Needs Plans (SNP)—Serves people who live in an institution or receive at-home care, or are eligible for both Medicare and Medicaid, or who have one or more disabling conditions. These plans generally require you to use in-network doctors and hospitals and to get a referral to see a specialist.

Who can sign up for Medicare Part C?

If you meet the following conditions, you’re probably eligible to join a Medicare Advantage Plan:

• You have Medicare Part A and Part B
• You live within the service area of the plan you’d like to join
• You don’t have ESRD (End-Stage Renal Disease) (there are a few exceptions to this; for the details, check with Medicare)

If you choose to join a Medicare Advantage Plan, you’ll enroll with the specific plan directly. Depending on the plan, you may be able to enroll online, by phone, or with a paper application. You will have to provide your Medicare ID number and the date that your coverage for Part A and/or Part B started.

When can I join or drop Medicare Part C?

You can join, drop, or switch Medicare Advantage Plans at any of the following times:

• When you first become eligible for age-based Medicare, starting three months before you turn 65 and continuing for three months after you turn 65.
• If you’re disabled, you can enroll starting three months before your 25th month of disability and continuing three months after your 25th month of disability.
• From November 15th through December 31st each year, with coverage beginning on January 1st of the next year.
• From January 1st through March 31st each year, although you can’t join or switch to a plan with prescription drug coverage during this period unless you already have Medicare prescription drug coverage. You also can’t drop a plan with prescription drug coverage or join/switch/drop a Medicare Medical Savings Account Plan during this time.

If you live in an institution, move out of your plan’s service area, qualify for “extra help,” or have both Medicare and Medicaid, you may be able to join, switch, or drop Part C at other times.

How much does Medicare Part C cost?

Medicare Part C charges a combined monthly premium for coverage, which includes Part A, Part B, Part D (if offered), and any extra coverage such as vision or dental. The cost of your premium will vary by plan, and you should contact each plan that you’re interested in for specifics.

Medicare Part D—Prescription Drug Coverage

Part D is available to everyone with Medicare, and is provided by Medicare-approved private companies. There are two ways to add prescription drug coverage:

• If you have Original Medicare, or a Medicare Advantage Plan that doesn’t offer prescription drug coverage, you can enroll in a Medicare Prescription Drug Plan (PDP).
• If you have a Medicare Advantage Plan that offers prescription drug coverage, you’ll get your coverage through the plan.

When can I sign up for Medicare Part D?

You can join, drop, or switch a Medicare PDP when you first become eligible for Medicare, or between November 15th and December 31st each year. If you add a Medicare PDP when you’re first eligible, you won’t have to pay a late enrollment penalty.

After you’ve enrolled for a Medicare PDP, you’ll receive membership materials that include a program ID card. When you use the card to fill a prescription, you may be required to pay a deductible, copayment, and/or coinsurance charged by the plan.

How do I sign up for Medicare Part D?

If you choose to join a Medicare PDP, you’ll enroll with the specific plan directly. Depending on the plan, you may be able to enroll online, by phone, or with a paper application. You will have to provide your Medicare ID number and the date that your coverage for Part A and/or Part B started.

How much does Medicare Part D cost?

Medicare PDPs charge a monthly premium that varies by plan, and many have a yearly deductible. You will usually also have to pay a copayment or coinsurance. Many plans include a coverage gap, which means that after you and the plan have spent a certain amount of money for prescriptions you’ll have to pay for any additional prescriptions out-of-pocket until you reach a defined limit. For example, your plan might have a coverage gap that starts after $2,500 of prescriptions and requires you to pay out-of-pocket until you reach $4,000.

Additional Information

Where can I find more information about Medicare?

For general information on Medicare, call 1-800-MEDICARE or visit http://www.medicare.gov.

For free health insurance counseling, contact the State Health Insurance Assistance Program (SHIP) for your state.

Does Medicare pay for long-term care?

Medicare and most other insurance plans, including Medigap (Medicare Supplemental Insurance) do not pay for long-term or custodial care. Medicare will pay for a medically-necessary skilled nursing facility or home health care for up to 100 days in a benefit period if your doctor certifies that you need daily skilled care such as IV injections or physical therapy. If you need to pay for long-term care, you should consider the following options:

• Long-term care insurance
• Personal resources
• Medicaid
• Home and community-based programs
• Programs of All-Inclusive Care for the Elderly (PACE).

Acronyms

ALS Amyotrophic lateral sclerosis, also known as Lou Gehrig’s disease

ESRD End-Stage Renal Disease

HMO Health Maintenance Organization

MA Medicare Advantage

MSA Medical Savings Account

MSN Medicare Summary Notice

PACE Programs of All-Inclusive Care for the Elderly

PDP Prescription Drug Plan

PPFS Private Fee-for-Service

PPO Preferred Provider Organization

RRB Railroad Retirement Board

SHIP State Health Insurance Assistance Program

SNP Special Needs Plans

 

Michelle Lonsinger is a freelance researcher, technical writer, and editor.

Copyright © 2008 by Michelle Lonsinger

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