Who Is Entitled to Medicare Benefits?
On July 30, 1965, President Lyndon Johnson signed into law Title 18 of the Social Security Act, which is known as Medicare. At the time the law was passed almost half of Americans over age 65 lacked health insurance and many were not able to find affordable medical care.
Today, the Medicare program provides health insurance coverage for more than 45 million Americans – about 38 million seniors (age 65 and older) and an additional 7 million younger people with certain types of disabilities, including end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant).
If you (or your spouse) have contributed payroll taxes to Medicare throughout your working life you are eligible for Medicare when you reach age 65, regardless of your income or health status.
An interesting Medicare fact from Dr. Mike: In 2009, Medicare spending was an estimated 13 percent of the federal budget.
What Are the Different Parts of Medicare?
Medicare has four parts, or programs that provide coverage for different health-related services.
Medicare Part A
Medicare Part A, also known as the Hospital Insurance program, helps cover the costs of:
- Inpatient care in hospitals
- Inpatient care in a skilled nursing facility
- Hospice care services
- Some home health care services
If you are eligible for Medicare you will not have to pay a monthly premium for Part A if you or your spouse paid Medicare payroll taxes while working.
If you and your spouse did not work or did not pay enough Medicare payroll taxes you may not be eligible for premium-free Part A. However, you may be able to purchase Part A by paying a monthly premium, which is up to $461 in 2010.
Medicare Part B
Medicare Part B, also known as the Medical Insurance program, helps pay for:
- Doctors’ services
- Outpatient care
- Some of the services not covered under Part A, such as some home health services, physical therapy, and occupational therapy
- Some preventive services
You will need to pay a monthly premium for Part B that can be deducted from your monthly social security check. Most people pay a standard monthly premium for Part B, which is $96.40.
For 2010, if you had a high income in 2008 (over $85,000 per individual; $170,000 per couple), you will have to pay a higher monthly premium for Part B, ranging from $154.70 to $353.60.
Medicare Part C - The Medicare Advantage Program
Medicare Part C, also known as the Medicare Advantage program, allows you to choose a health plan offered by a private insurance company that is approved by Medicare. Medicare Advantage plans include:
- Managed Care Organizations (such as a PPO or HMO)
- Private Fee-for-Service (PFFS) Plans
Medicare Advantage plans receive payments from Medicare to provide you with the benefits covered by Medicare, including Part A (hospital) and Part B (physician and outpatient services). Most Medicare Advantage plans include Part D coverage (prescription drug benefits) and many offer extra coverage, such as vision and hearing care, dental services, and health and wellness programs.
Medicare Part D
Medicare Part D, an outpatient prescription drug benefit, is offered to everyone with Medicare. To get Part D drug coverage, you have to join a plan run by a private insurance company that has been approved by Medicare or enroll in a Medicare Advantage plan that includes drug coverage.
Part D prescription plans are offered on a state-by-state basis and most states have 40 or more plans available. Although all these plans must offer at least a “standard” drug benefit determined by Medicare, they may provide additional benefits.
Choosing a Part D plan can sometimes be challenging due to a wide range of out-of-pocket expenses and the extra benefits provided. Drug plans with higher monthly premiums usually have a lower, or no annual deductible and cover some medications in the donut hole – a gap in coverage gap when your plan stops paying for your prescriptions and you are responsible for 100% of the costs.
With the passage of the Patient Protection and Affordable Care Act signed into law on March 23, 2010 by President Obama, seniors who are enrolled in a Part D plan will see a reduction in the amount they must pay for their prescription drugs when they reach the donut hole. By 2020, the donut hole will essentially be "closed" and rather than paying 100% of the costs, your responsibility will be 25% of the costs.
What Is a Medigap Policy?
The original Medicare plan pays for many, but not all, health-related services and medical supplies. You can purchase an insurance policy to cover the “gaps” that are not paid for by Medicare, such as copayments, coinsurance, and deductibles. These can add up to a lot of out-of-pocket expenses, especially if you are hospitalized or need skilled nursing home services.
Some Medigap policies also will pay for certain health services outside the United States and additional preventive services not covered by Medicare.
Medigap insurance (also known as Medicare Supplement Insurance) is completely voluntary and you are responsible for the monthly or quarterly premium. Medicare will not pay any of your costs to purchase a Medigap policy.
A Medicare tip from Dr. Mike: You might want to consider dropping your Medigap policy if you enroll in a Medicare Advantage plan. Your Medigap insurance cannot be used to pay your Medicare Advantage deductibles or copays.