How Medicare Works
Medicare is the government's contract to provide healthcare insurance coverage for Americans over the age of 65. But, as with all contracts, it's always smart to read the fine print.
Medicare pays for about half of all medical costs for older Americans, including hospitalization, doctors, some nursing care, some prescription drug costs, and medical equipment and supplies. But there's much that Medicare doesn't cover, as well as an alphabet soup of coverages, premiums, deductibles, and eligibility requirements that can be difficult to navigate -- especially for someone facing a health crisis.
Here are the basics everyone should know about Medicare, and where to look for more information if you need it:
What is Medicare?
Medicare consists of four categories: Part A covers hospitalization, some skilled nursing facility and home health care, and hospice. Part B covers doctors' services and outpatient care such as X-rays, laboratory work, some home health care, physical and occupational therapy, and some preventive screening. Then there's Part C , also known as Medicare Advantage, which is Medicare received through a private managed care system such as an HMO (health maintenance organization) or PPO (preferred provider organization). When someone enrolls in a Medicare Advantage plan, they receive all the benefits of Medicare Parts A and B, as well as some additional coverage provided by the private plan. As with other managed care, however, Medicare Advantage plans limit where and how their members may receive care. Finally, there's Medicare Part D , which consists of private insurance plans that partially cover prescription drug costs.
Who's eligible for Medicare?
Most people qualify for all Medicare programs if they're 65 or older and are citizens or permanent residents of the United States. However, eligibility rules and availability are different for each plan within Medicare.
- For Part A, people are automatically eligible without paying any premium if, in addition to the age and residency requirements, they worked and p aid Social Security taxes for at least ten years. If not, they may still buy into Part A coverage for a yearly premium.
- For Part B, every citizen and legal resident over 65 is eligible. Even if someone is under age 65, he or she may qualify for both Part A and B if he or she has been receiving Social Security disability benefits for two years or has a chronic kidney disease.
- If they're eligible for Parts A and B, they can choose to receive that coverage through a Part C Medicare Advantage managed care plan, if a plan they like is available where they live.
- Anyone eligible for Medicare may purchase a Part D prescription drug plan offered by private insurance companies in the state where they live.
How does someone enroll in Medicare?
Enrollment is different for each part of Medicare. People who are receiving any type of Social Security benefits when they turn 65 will be automatically enrolled in Parts A and B. Medicare will send them enrollment cards and information about three months before their 65th birthday. If they aren't automatically enrolled, they may sign up for Part A or Part B at any local Social Security office. They should enroll two or three months before they turn 65 to ensure prompt coverage.
If they delay enrolling in Part A past their 65th birthday, their coverage can date back to up to six months before the date they do apply. Delaying enrollment in Part B is more of a problem. If they wait more than three months after their 65th birthday to enroll in Part B, they may not enroll until January 1 of the following year, and the coverage won't start until July 1 of that year.
If they want to enroll in Part C or D of Medicare, they do so with the private managed care plan or insurance company that runs the particular plan or issues the policy they want. If they don't enroll in Part C or D when they turn 65, or if they want to switch coverage under Part C or D, they can do so during Medicare's annual enrollment period, which falls between October 15 and December 7. (Some managed care plans and insurance companies also allow enrollment throughout the year.)
Which healthcare providers can Medicare patients see?
They can go to any doctor, hospital, clinic, outpatient provider, nursing facility, home care agency, or pharmacy that is approved by Medicare and that accepts Medicare patients. Before a visit, it's essential to verify that the doctor or other provider accepts Medicare.
What's covered by Medicare?
Medicare is intended primarily to provide coverage if when someone becomes ill or injured. This includes hospitalization, doctors' services, lab work, X-rays, hospice , and just about every kind of outpatient care, as well as some inpatient nursing facility and psychiatric care.
Over the years, however, Medicare has evolved to also cover a range of preventive and screening services through the Part B plan. Some of these services include cardiovascular screening; smoking cessation counseling; screening for breast, cervical, vaginal, colon, and prostate cancers; immunizations for flu, pneumococcal virus, and hepatitis B; diabetes screening and supplies; glaucoma tests; and a "Welcome to Medicare" physical exam. Most Medicare Part C managed care plans offer even more of these preventive and screening services.
For those who meet certain requirements for home health care, Medicare also pays for part-time nursing care; part-time health aides; speech, physical, and occupational therapy; and medical supplies and equipment such as bandages and wheelchairs.
Under Part D, the prescription drug benefit, Medicare covers part of the cost of approved generic and brand-name prescription drugs purchased at participating pharmacies.
What's not covered by Medicare?
Medicare isn't intended or designed to provide long-term nursing home or in-home care, so there are significant gaps in these areas. Families can't rely on Medicare to pay for 24-hour at-home care, meals, delivery services, and many of the personal services provided by home health aides (except for some skilled nursing care for a short tim e if it's medically necessary ).
Although Medicare has added many preventive services to its coverage in recent years, many such routine care needs are not yet covered, including dental care, medical treatment outside the United States, routine foot care, glasses, and hearing aids. Medicare coverage for mental health treatment -- including depression, which is a growing issue among people over 65 -- is also significantly limited. And Medicare doesn't cover elective procedures, including cosmetic surgery.
Most important, make sure the doctors you have in mind accept Medicare, or the program won't pay for even covered costs. This is also true for outpatient care and home care, and for prescription drugs, which Medicare patients must buy from a pharmacy that participates in their particular Part D insurance plan.
How much does Medicare cost?
Each part of Medicare has a different payment system. And within each part, patients' out-of-pocket costs will depend on the particular way they receive their benefits. However, the following basic information about premiums and copayments holds true in most cases. The figures given are for 2012.
- Part A : Most people pay no premium for Medicare Part A. People who aren't automatically eligible for Part A pay a monthly premium of up to $451. Everyone with Part A pays a deductible of $1,156 for each period of hospitalization, and copayments for each day past the first 60 days of a particular hospital stay.
- Part B : Every individual pays a premium of at least $99.90 a month for Part B coverage, deducted from monthly Social Security checks; this figure goes up for people with high incomes. A person must also meet an annual deductible of $140. After the d eductible, Medicare pays 80 percent of the approved amount for covered doctor services and 80 to 100 percent of the approved amount for outpatient services and medical equipment. Those who don't enroll in Part B when they turn 65 can enroll later -- but each year they put it off, the premium increases by 10 percent.
- Part C : Part C Medicare Advantage private managed care health plans lump Part A and B together, offering one monthly premium and the plan's own set of copayments and deductibles. It's important to check not only premiums but also out-of-pocket costs when considering one of these plans.
- Part D : Every prescription drug plan under Part D has different premiums, copayments, and drugs it covers. In choosing a plan, be sure not to focus solely on the lowest monthly premium but also on coverage of the specific drugs needed and any copayments that might apply.
Where can I find more information about Medicare?
More detailed information about each part of Medicare is offered in the articles on this site listed below. You can also look at the federal website for Medicare and Medicaid , as well as at Benefits Checkup , an online service run by the National Council on Aging that can help you identify which government benefits your seniors qualify for and how to enroll.