MORE ON MEDICARE

In the carriers section, we briefly discussed the basics of Medicare. In this section, we'll explore Medicare in more detail and clearly define Medicare Parts A, B, C, and D as well as Medicare Supplement plans. We'll also discuss the relationship between Medicare and Medicaid when individuals are eligible for both. Medicare Parts A and B comprise what is referred to as "traditional Medicare", which is administered by the government. Medicare Part C refers to Medicare Advantage plans, which are administered by private health plans. Medicare beneficiaries have the option of receiving their Medicare benefits either through traditional Medicare or through a Medicare Advantage plan but not both. Medicare Part D covers prescription drugs, and Medicare Supplement plans help cover Medicare cost-share obligations.

What is Medicare?

Medicare is a federal health insurance program for the elderly that was established as part of the Social Security Act in 1965. Medicare covers all Americans age 65 and older as well as certain individuals under age 65 including those with qualifying disabilities and end stage renal disease (ESRD). Medicare is paid for by employer and worker payroll taxes as well as premiums that are paid by individuals with Medicare. Medicare offers decent health benefits but does not cover all medical expenses; the coverage generally includes a deductible and coinsurance and most long-term care is excluded.

Medicare Part A (aka Hospital Insurance)

Medicare Part A, commonly referred to as hospital insurance, covers inpatient medical care in hospitals as well as short-term care provided by skilled nursing facilities (SNF's), home health agencies (HHA's), and hospice providers. Most Medicare eligible individuals do not pay a premium for Medicare Part A coverage because they (or a spouse) have paid Medicare payroll taxes for at least 40 three-month quarters, which equates to 10 years of work. If eligible individuals do not meet this criteria, they can purchase Part A coverage for a monthly premium.

Medicare Part B (aka Medical Insurance)

Medicare Part B, commonly referred to as medical insurance, supplements Part A and covers outpatient care provided by physicians, non-physician practitioners, and other medical suppliers such as ambulance and durable medical equipment. Part B also covers outpatient hospital services such as emergency room visits. Part B coverage is optional and a monthly premium applies to all who choose to receive it. Normally the Part B premium is deducted from the beneficiary's monthly Social Security check.

Medicare Part C (aka Medicare Advantage)

Medicare Part C, also known as Medicare Advantage, refers to Medicare plans that take the place of traditional Medicare and are administered by private health insurance plans. Generally, Advantage plan beneficiaries must seek care within the private insurer's network of physicians. The Medicare Part B premium still applies to those who choose a Medicare Advantage plan, and some Advantage plans charge an additional premium if the plan covers benefits in addition to those covered by Part A and B such as vision, hearing, dental, and prescription drugs. Individuals who choose a Medicare Advantage plan do not purchase a separate Medicare Supplement (Medigap) policy because the Advantage plan covers many of the same benefits that a supplement plan does.

Medicare Part D (aka Prescription Drug Benefit)

Medicare Part D, commonly referred to as the Medicare prescription drug benefit, refers to voluntary plans that help cover the costs of prescription drugs and are administered by private health plans. Medicare beneficiaries who wish to receive Part D benefits can do so by enrolling in a stand-alone Prescription Drug Plan (PDP) or by choosing a Medicare Advantage Plan with prescription drug coverage. Medicare requires a minimum standard of drug coverage for these plans, but benefits can vary depending on the cost of the plan, what drugs are covered, and what pharmacies can be utilized, among other things.

Medicare Supplement Plans (aka Medigap)

Medicare Supplement plans, commonly referred to as Medigap plans, are offered by private health insurers and serve as secondary coverage to traditional (Parts A & B) Medicare coverage. These plans help pay some of the out-of-pocket costs traditional Medicare beneficiaries are required to pay and are offered for a monthly premium.

Medicare and Medicaid Dual-Eligible Beneficiaries

Some Medicare beneficiaries that also meet low income restrictions in their state may be eligible for Medicaid coverage also. These individuals are referred to as dual-eligible beneficiaries. When this is the case, Medicaid serves as secondary coverage to Medicare and covers Medicare out-of-pocket costs up to the Medicaid payment limit. In some states, Medicaid will also cover Part A and B premiums for the beneficiary.

Essential QSA Knowledge

For those approaching Medicare eligibility, many important choices need to be made concerning how to receive Medicare benefits. If you are still working and receiving health insurance through an employer, utilizing traditional Medicare as a secondary policy may be a good option. For those who will use Medicare as primary insurance, the decision between traditional Parts A and B versus Medicare Advantage must be made. That decision will dictate whether a prescription drug plan or Medicare Supplement policy may be a good option. Those who think they may also be eligible for Medicaid would be well served to find out because this can limit costs significantly. Medicare transition can be a complicated process, but hopefully the information here helps clarify some of the considerations.

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