Understanding Medicare

On July 30, 1965, President Lyndon Johnson signed the Medicare program into law which became available one year later on July 1, 1966. Regardless of income or medical history, this government-run benefit provides health insurance to people 65 or older (and those under 65 who live with a disability). In fact, at the bill-signing ceremony, former President Harry Truman became the first enrollee in the new program.

Managed under the U.S. Department of Health and Human Services, Medicare is funded through payroll taxes paid my employees, employers, and the self-employed. Additional monies are generated from income taxes paid on social security benefits and interest from Medicare trust fund investments. As of 2015, 55 million people were covered under Medicare.

Traditional (Original) Medicare

Enrollment period. 3 months before the month you turn 65; the month you turn 65; and up to 3 months after you turn 65.

Different parts. At enrollment, you sign up for different health insurance services covered by Medicare. This includes Part A (in-patient hospital stays and short-term stays at a skilled care facility); Part B (doctors’ services, outpatient care, medical supplies and preventive services); Part D (prescription drug plan). Most people sign up for Part A. However, depending on healthcare coverage from an employee-sponsored plan (either through themselves or a spouse) some people may choose not to enroll in Part B at 65. There is an opportunity to enroll in Part B at a later date.  Like Part B, some people may choose not to enroll in a Part D plan depending on their individual circumstances.

Costs. Most people do not pay a monthly premium for Part A coverage if they paid enough taxes into the program while working. There are monthly premiums for Part B and Part D. These may be higher depending on adjusted gross income.

Medigap. Also called supplemental insurance, Medigap is an extra private insurance policy you can purchase to pay for costs not covered by Medicare including co-payments and deductibles. Medigap policies do not cover long-term care, dental/vision, hearing aids, eyeglasses, and private home care. Generally, to buy a Medigap policy you must have Medicare Part A and B.

Advantage Plans

Sometimes referred to as Part C or MA plans, Advantage Plans are offered by private companies which have been approved by Medicare. Advantage Plans provide Part A and Part B benefits and most also include prescription drug coverage in one monthly premium. The cost for an Advantage Plan is often lower than traditional Medicare. You cannot have a Medigap policy with an Advantage Plan. These plans are often HMOs or PPOs and will require you to see a doctor in its provider network. Therefore, check with your physician and other health care providers to make sure they take an Advantage Plan before enrolling in one. In some areas of the country, Advantage Plans are very popular and accepted by many physicians. However, many seniors have gone into these plans only to find out their physician is not in the Advantage Plan network.





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