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Medicare - Federally Subsidized Health Insurance for Seniors
Most people think that their health insurance problems will be over when they turn 65 and become eligible for Medicare. Unfortunately, while Medicare is the best solution for most people over 65, and although it does cover most doctor visits and hospitalizations, the average senior with Medicare still spends about $4,000 a year (25 percent of their income) on the out-of-pocket medical items that Medicare does not cover.

In this chapter you learn how to maximize your Medicare benefits, minimize your out-of-pocket expenses, and save thousands of dollars each year if you are over age 65. I also explain the new Medicare Prescription Drug Insurance program that begins in 2006 and how to figure out if it is right for you.

Medicare is divided into four parts, plus private supplemental insurance, called “Medigap,” which covers the gaps in Medicare.

Part of Medicare

Pays For

Cost (2005)
Part A
Hospital insurance

Inpatient hospital, nursing facility, and hospice care

Included free with Social Security
Part B
Doctor visit insurance

Physicians, outpatient, and preventative services

$78.20/month
Part C
Medicare advantage

HMO/PPO-type private insurance plans

See text
Part D
Prescriptions (beginning 2006)

Prescription drugs

$37.37/month
(2006 estimate)
Medigap
Supplemental insurance (Plans A–J)

Out-of-pocket expenses for Parts A and B

$100–$300/month

People on Medicare get supplemental coverage in three basic ways: 35 percent have retiree health benefits, 22 percent have Medigap (explained later in the chapter), and 14 percent have Medicaid (see Chapter 7).

Medicare Part A, Hospital Insurance: Hospitals, Skilled Nursing Facilities 
Medicare Part A (hospital insurance) pays for inpatient hospital, skilled nursing facility, and hospice care. Virtually everyone who is eligible to receive Social Security benefits is automatically enrolled in Part A when they turn 65. There is usually no monthly premium for people eligible for Social Security benefits.

Medicare Part B, Doctor Visit Insurance: Doctors, Outpatient Services
Part B (doctor visit insurance) pays for physicians, outpatient care, preventive services and some other medical services that Part A (hospital insurance) does not cover, including physical therapy and some home healthcare. Part B also covers many incidental items that could add up to thousands of dollars, such as eyeglasses, chiropractic, and ambulance services.

Part C, Medicare Advantage: The Alternative to Medicare Parts A and B and Supplemental Coverage
Over the past few years, HMO and PPO alternatives to traditional Medicare have become available in many areas similar to those alternatives in private health insurance systems. These are called Medicare Advantage Plans and include Medicare Managed Care Plans (HMOs), Medicare Preferred Provider Organization Plans (PPO), Medicare Private Fee-for-Service Plans, and Medicare Specialty Plans.

The main reason people choose Medicare Advantage Plans is to save on Medigap (supplemental Medicare coverage), which typically costs $100 to $300 a month.
Medigap—Supplemental Insurance for the Gaps in Medicare Parts A (Hospital Insurance) and B (Doctor Visit Insurance)
Unless you have chosen a Medicare Advantage Plan or have similar retiree medical coverage, you should purchase a Medigap supplemental insurance plan. A Medigap insurance policy covers the gaps in Medicare Parts A and B. Under Part A, these coverage gaps start with the $912 deductible per hospitalization and rise to $540,000 if you spend 360 cumulative days in the hospital over your lifetime. Under Part B, these coverage gaps could run into thousands of dollars, with you paying 20 percent coinsurance for your doctors and other nonhospital medical services.
All Medigap policies cover at least 100 percent of (1) the Medicare Part A hospital deductible and coinsurance for the first 360 days of hospitalization, plus up to 365 more days of hospitalization, and (2) the Medicare Part B 20 percent coinsurance or co-payment if your doctor accepts “assignment.”

You almost always must have Medicare Parts A (hospital insurance) and B (doctor visit insurance) to purchase a Medigap policy. Medigap policies are “guaranteed renewable”— that is, they cannot be canceled nor can their price be increased based on your claims history for as long as you pay the premium. Like Medicare itself, you and your spouse must each purchase your own Medigap policy.

$$$ Tip: Some carriers, like Blue Shield of California, offer discounts if you and your spouse simultaneously enroll in the same Medigap plan type.

Medicare Part D, Prescription Drug Insurance: A Great Deal for Everyone on Medicare
Beginning January 1, 2006, new Medicare prescription drug plans (Part D) will be available. These plans are very different from the Medicare-approved drug discount cards currently available, which are described in Chapter 9. Medicare-approved drug discount cards will be phased out of Medicare by May 15, 2006.

Medicare Part D (prescription drug insurance) will save $714 per year for a typical senior taking $150 per month in prescriptions—and far more for seniors spending $5,000 per month or more in prescriptions. However, it is such a good deal for the low $37 per month cost that everyone in Medicare should enroll, especially because the cost is permanently increased for each month you delay. You should enroll in Part D for the insurance protection (unless you have other prescription drug coverage) even if you currently are not taking prescriptions.

 

  
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