How does Medicare coverage work? - Questions About Health Insurance

Medicare is the Federal health insurance program for Americans age
65 and older, some disabled Americans, and individuals who have
end-stage renal disease (ESRD). The Original Medicare Plan, which
is available nationwide, is a fee-for-service plan that is managed by
the Federal Government. It pays for many health care services and
supplies, but it won’t pay all of your health care costs.
Generally, you should enroll in Medicare when you first become
eligible. If you choose to enroll at a later time, you will pay a lateenrollment
penalty.
If you already have health insurance from an employer or another
source, talk to your benefits administrator about whether you
should join Medicare or not while still covered.
Medicare has four parts: hospital insurance, known as Part A;
medical insurance, known as Part B, which provides payments for
doctors and related services; and prescription drug coverage, known
as Part D. Medicare Part C gives you the choice of receiving the
benefits of Medicare A, B, and D through a private health plan, like
an HMO or PPO. This coverage is called Medicare Advantage and
is described on page 16 of this booklet.
Most people don’t pay a premium for Part A, since they already paid
for it through payroll taxes while they were working. There is a
monthly premium for Medicare Part B ($93.50 per month in 2007,
but people with incomes over $80,000 pay more).
Usually, you will pay a premium if you decide to enroll in Medicare’s
prescription drug plan. If you don’t enroll as soon as you are eligible,
your premium will be higher if you decide to enroll at a later time.
Also, once you are past your first eligibility, you will have to wait for
the annual enrollment period (generally November 15-December 31
of each year) in order to enroll in Medicare’s prescription drug
coverage.
Medicare Prescription Drug Benefits
In January 2006, prescription drug coverage (Part D)
became available to Medicare beneficiaries for the
first time. Through this new benefit, Medicare
now pays for a portion of your prescription
drug costs. Both brand-name and generic
prescription drugs are covered at participating
pharmacies across the country. Everyone with
Medicare is eligible to enroll in this coverage,
regardless of income and resources, health status,
or current prescription expenses.
If you choose to have this coverage, you will be able to get your
drugs in one of two ways. You can buy an individual drug plan, or
you can sign up with a Medicare Advantage plan, like an HMO or
PPO. Either way, you will pay a monthly premium, which varies by
plan, coinsurance or copays for your drugs, and in some cases, a
yearly deductible (no more than $265 in 2007).
There are many plans participating in the Medicare prescription
drug program. This broad competition among plans should have a
positive effect on consumers’ out-of-pocket costs. Nevertheless,
deductibles, out-of-pocket costs, and covered drugs vary widely
across the plans. Some plans may offer more coverage and
additional drugs for a higher monthly premium.
If you have limited income and resources and you qualify for extra
help, you may not have to pay a premium or deductible. If you are
eligible, you will get help paying for your drug plan’s monthly
premium, yearly deductible, and prescription copayments. The
amount of help you get will depend on your income and resources.
To find out if you qualify for extra help, contact Social Security at
1-800-772-1213 or online at www.socialsecurity.gov. Or, you may
contact your State medical assistance office. Call Medicare at 1-800-
Medicare or go to www.medicare.gov to get a phone number for
the medical assistance office in your State.
If you already have prescription drug coverage from an employer,
former employer, or other source, you may be better off keeping
that coverage. You should contact your benefits administrator to
find out how your existing coverage works with Medicare drug
coverage before you make a decision. You may decide to keep the
drug coverage your have, or you may want to join a Medicare drug
plan instead of, or in addition to, your current plan.
If you think you might be better off changing out of your
employer-based drug plan, be sure to consult with your employer
first. If you leave your employer coverage and later change your
mind, you probably will not be able to return to it for health or
prescription drug coverage.
Your employer, union, or other group is your best source of
information about your current drug coverage. If you need more
help in deciding what to do, you can call your State Health
Insurance Assistance program to get personalized counseling about
your choices. To get their telephone number, visit
www.medicare.gov online and select “Helpful Telephone Numbers
and Web Sites.”
Medicare Advantage Plans
Another type of Medicare coverage, known as Medicare Advantage
Plans, is available in many areas of the country. These Medicare
plans include HMOs, PPO’s, private fee-for-services plans, and
special needs plans.
In comparison to the Orignial Medicare Plan, Medicare Advantage
Plans often give you more choices and sometimes extra benefits,
like coverage for more days in the hospital. Many include Part D
drug coverage. To join a Medicare Advantage Plan, you must have
Medicare Part A and Part B coverage. You will pay the monthly
premium for Medicare Part B, and you may also have to pay a
premium to your Medicare Advantage Plan for the extra benefits
it offers.
Medigap Supplemental Insurance
Since Medicare doesn’t cover all medical expenses, people who don’t
have other health insurance and choose not to enroll in a Medicare
Advantage plan may decide to purchase a Medigap policy. Medigap
is private insurance that helps to cover some of the gaps in
Medicare benefits.
Since 1992, there have been 10 standard Medicare supplemental
policies. These Medigap policies are designated by the letters A
through J. In 2005, two new Medigap policies—designated by the
letters K and L—were added. Medigap policies K and L have
higher out-of-pocket amounts and lower premiums than policies A
through J. Although all 12 standard policies may not be available to
you where you live, supplemental Plan A is available to Medicare
beneficiaries everywhere.
For more information on Medicare, Medigap policies, and
Medicare prescription drug coverage, contact the Centers for
Medicare & Medicaid Services. Log onto their Web site at
www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227).