Medicare can seem overwhelming. But if you are a caregiver, it's important to understand how it works, as it will likely be the primary insurance coverage for your loved one.
Medicare is a federal program that provides health insurance for people 65 and older, as well as some younger people with disabilities and people with end-stage kidney disease or Lou Gehrig's disease (also called amyotrophic lateral sclerosis, or ALS). By learning about enrollment, benefits and out-of-pocket costs, you can help your parents make informed heath care coverage decisions.
Like most other insurance, Medicare does not cover all health care costs. Patients are responsible for deductibles, premiums and coinsurance or copayments unless they have additional insurance.
Medicare also doesn't cover:
- custodial care (such as help with bathing and dressing)
- the cost of long-term stays in a nursing home
- routine dental, vision or hearing care
- health care when you travel outside the United States
Medicare has several care options, and the choice affects how much you pay and what is covered.
Original Medicare Plan (also known as traditional Medicare)
- It is set up as fee-for-service, meaning that Medicare pays doctors and other providers directly for its share of the Medicare-approved medical services that patients receive.
- Patients can choose any doctor or hospital that accepts Medicare.
- Part A helps pay for inpatient hospital care, short-term nursing home stays, home health care and hospice care.
- Part B helps pay for doctor visits, some outpatient home health care, medical equipment, some preventive services, outpatient hospital care, rehabilitation therapy, laboratory tests, X-rays, ambulance services and blood.
- Part A has no premiums for people (or their spouses) who have paid enough Medicare payroll taxes at work. Patients pay a deductible for each hospital benefit period of up to 60 days and daily copayments beyond that period unless they have supplemental insurance that covers these costs.
- Part B coverage requires a monthly premium plus an annual deductible and a coinsurance payment of 20 percent for each approved service — except for some preventive screenings, tests and counseling sessions that are free of charge.
- People get an initial enrollment period of seven months (of which the fourth month is the one in which they turn 65) to sign up for Medicare. Signing up beyond that period usually means paying late enrollment penalties that are added to the monthly Part B premiums for all future years. However, people who are covered by health insurance from an employer for which they or their spouses actively work — and provided that the employer has 20 or more employees — have the right to delay signing up until the employment ends, without risking late penalties.
Medicare Advantage Plans (also known as Medicare Health Plans or Medicare Part C)
- Plans vary widely and include health maintenance organizations (HMOs), preferred provider organizations (PPOs) and private-fee-for-service (PFFS) plans.
- Plans are run by private insurance companies that decide the rules for covering benefits and payments.
- All plans must cover the same benefits (Part A and Part B) that traditional Medicare covers, but they may provide additional benefits — such as routine vision, hearing and dental care.
- Each year, the company can change benefits, premiums and other costs.
- In most plans, patients can only go to doctors, specialists and hospitals on the plan's list.
- Going out of network, in plans that provide this option, usually costs more out of pocket.
- Most plans include Medicare Part D prescription-drug coverage in their benefit packages.
- Each year during Open Enrollment (Oct. 15 to Dec. 7), patients can decide whether to stay in their current plan, switch to another Medicare Advantage plan or return to Original Medicare.
Medicare Prescription Drug Coverage (also known as Part D)
- There is no single Medicare drug plan.
- Part D drug coverage is provided by private insurance plans that have been approved by Medicare.
- Benefits and costs vary among drug plans.
- Medicare drug plans are not required to cover every prescription drug, but they must provide choices within each category of drugs used to treat the same medical condition.
- Plans do not cover over-the-counter medicines.
- Like other insurance, Part D plans have premiums, copayments and/or coinsurance, and sometimes annual deductibles.
- Costs depend mainly on the specific drugs that are used and the plan that is chosen. As plan copays can vary hugely, even for the same drug, people can often save a lot of money by carefully comparing plans each year during Open Enrollment.
Paying for Medicare
Medicare Part D Extra Help Program
- This program provides low-cost Part D drug coverage for people who have limited incomes and resources.
- It provides continuous drug coverage throughout the year (with no gap in coverage, known as the "doughnut hole").
- People who are enrolled in Medicaid, Supplemental Security Income (SSI) or a Medicare Savings Program automatically get full Extra Help with paying for Part D. Others need to apply for Extra Help by calling Social Security or going to ssa.gov/medicare/prescriptionhelp.
- Everybody who qualifies for Extra Help must also enroll in a Medicare Part D prescription drug plan.
Medicare Savings Programs
- These programs are run by the states and help pay out-of-pocket Medicare costs for people who have limited incomes and resources.
- Depending on income level, people may qualify to have their state pay their Part B premiums, Part A premiums (if they aren't eligible for premium-free Part A benefits), deductibles and copayments.
Medigap, or Medicare Supplemental Insurance
- This is not a government program. It's private insurance that people can choose to buy to cover some or most of their out-of-pocket costs in the Original Medicare program.
- Medigap offers 10 policies that are labeled A, B, C, D, F, G, K, L, M or N (except in Massachusetts, Minnesota and Wisconsin, where different Medigap policies are offered). Each has a different set of benefits, but most policies cover the Part A hospital deductible and the 20 percent coinsurance typically charged for Part B services.
- People age 65 and older get full federal protections — meaning insurance companies cannot refuse to sell them a policy or charge them higher premiums based on health status or preexisting medical conditions — provided that they buy a Medicare policy within six months of enrolling in Part B. People younger than 65 who qualify for Medicare based on disabilities do not receive these federal guarantees, but some states provide similar protections.
Originally published May 15, 2012
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