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Understanding Medicare

Read the Spanish version: Entendiendo Medicare

Medicare is a federal health insurance program for people age 65 or older, younger people with certain disabilities, and people with end-stage renal disease. About 54 million people are enrolled in Medicare in 2014, according to the U.S. Census Bureau.

Most Medicare beneficiaries have “original Medicare.” This is the traditional fee-for-service arrangement, which means you can go to any health care provider who accepts Medicare. You pay a deductible, and then Medicare pays its share of the costs and you pay your share.

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Original Medicare includes two parts:

  • Part A covers hospital bills. Most people don’t have to pay a premium for Part A.
  • Part B covers medically necessary doctors visits, lab tests and supplies, such as wheelchairs and walkers, and preventive care, such as flu shots. You pay a premium for Part B.

You can add coverage for prescription medicine by purchasing a Medicare Prescription Drug Plan – called Part  D – from a private company approved by Medicare. Drug plans vary by cost and the drugs they cover.

To help pay costs original Medicare doesn’t cover, you can purchase supplemental insurance called Medigap. Medigap policies, which are sold by private insurers approved by Medicare, cover out-of-pocket expenses, such as copayments, co-insurance and deductibles.

Medicare handbook

View the “Medicare & You” handbook on Medicare's official website, or call the agency at (800) 633-4227 and ask for one.

The toll-free number is staffed by English- and Spanish-speaking customer service representatives.

Hearing-impaired individuals using a telephone device for the deaf can call (877) 486-2048.

Instead of choosing original Medicare, you can opt for a Medicare Advantage plan, also known as Part C. About 30 percent of Medicare enrollees have a Medicare Advantage plan in 2014.

Medicare Advantage plans cover everything original Medicare covers, except hospice care. Most plans include drug coverage, and some cover additional services, such as vision and dental care. Private companies approved by Medicare sell Medicare Advantage Plans.

You can’t use Medigap with a Medicare Advantage Plan. In fact, it’s against the law for anyone to sell you a Medigap plan if you have Medicare Advantage, unless you’re switching back to original Medicare.

Which is better – original Medicare or a Medicare Advantage Plan?

Generally, your choices are less restricted with traditional Medicare than with most Medicare Advantage plans. With original Medicare, you can go to any doctor, hospital, or other health care provider who accepts Medicare. With many Medicare Advantage Plans, you pay more out of pocket to see providers outside a plan’s network. However, your overall out-of-pocket costs might be lower with a Medicare Advantage Plan than with original Medicare.

Who pays for Medicare?

Medicare is financed by federal taxes and administered by the Centers for Medicare & Medicaid Services. Beneficiaries also pay out-of-pocket costs, including  Medicare premiums, deductibles and copayments, and Medigap premiums if they choose to purchase supplemental insurance.

Beneficiaries must also pay for their own custodial care, most dental care, dentures, routine foot care and hearing aids.

Who is eligible for Medicare?

To be eligible, you or your spouse must have worked for at least 10 years in Medicare-covered employment, be age 65 or older, and be a citizen or permanent resident of the United States. A younger person with a disability or with chronic kidney disease also might qualify for Medicare.

Are there income limits?

There are no income limits to enroll in Medicare.

How do I enroll in Medicare?

Some people are enrolled in Medicare automatically. Enrollment is automatic if you are not yet age 65 and you already are receiving Social Security or Railroad Retirement benefits. If you are disabled, you will be automatically enrolled in both Part A and Part B of Medicare beginning with your 25th month of disability.

Most people have to enroll in Medicare. The enrollment period begins three months before you turn age 65 (or right away if you require regular dialysis or a kidney transplant) and continues for seven months. Applying early can help you avoid a possible delay in the start of your Part B coverage.

If you have questions about Medicare eligibility or enrollment, call Social Security's toll-free number, (800) 772-1213 or visit the Social Security website.

To apply for Medicare, contact any Social Security Administration office or fill out an application online on the Social Security website. (If you or your spouse worked for the railroad, contact the Railroad Retirement Board.) If you don't enroll during these 10 months, you'll have to wait until the three months beginning on Jan. 1, and your Part B coverage won't start until July.

You cannot enroll in Medicare through your state's health insurance marketplaces, aka exchanges. The exchanges sell only individual health insurance policies.

What happens if I wait to enroll?

Don't put off signing up for Medicare. If you wait 12 or more months to enroll, your premiums likely will be higher.

Even if you continue to work and have employer-sponsored health insurance after your 65th birthday, you should sign up for Part A of Medicare. Part A might help pay some of the health care costs not covered by your employer plan, and typically the premium is free.

Talk to your benefits manager if you have employer-sponsored coverage to learn whether you should sign up for Part B. The answer will depend on whether your employer-sponsored coverage will be considered secondary coverage to Medicare Part B, or primary coverage. Primary coverage pays first, and secondary coverage pays the costs that the primary insurance doesn’t cover. If your employer-sponsored insurance is the secondary coverage, you might need to sign up for Part B. Otherwise your insurance might pay little or nothing.

Keep in mind that under some circumstances you will have to pay an extra 10 percent per year penalty for not immediately signing up for Part B.

What is a Medicare HMO?

A Medicare health maintenance organization (HMO) is a type of Medicare Advantage plan. It provides all Medicare-covered services under Parts A and B and may provide additional benefits — such as prescription drug coverage — that are not offered with traditional Medicare. Medicare HMO plans are sold by private companies approved by Medicare and are available in most parts of the country. In most HMOs, you can go only to health care providers in the plan’s network, except in an emergency.

What is a Medicare PPO?

Like an HMO, a Medicare preferred provider organization (PPO) covers all the services that original Medicare Parts A and B covers. Some plans also include coverage for prescription drugs and other services, such as vision and dental care. You pay less out of pocket to see health care providers in the PPO network, but you still have some coverage to see providers outside the network.

What are Medicare private fee-for-service plans?

These plans, offered by private health insurers, are hybrids of Medicare HMOs and original Medicare. Like original Medicare, there is no provider network; you can go to any doctor, hospital or clinic that accepts Medicare. However, the amount the plan pays for care may differ from what original Medicare pays. The plan might also cover services that original Medicare doesn’t cover.

Can I join more than one plan?

No, you can't join more than one Medicare health plan at the same time.

What if I want to leave a Medicare health plan?

You can change plans or switch to original Medicare during the annual open enrollment period, which runs from mid-October to early December. You can also enroll in a Medigap supplementary plan during this period if you switch from a private Medicare health plan to original Medicare.

Where can I get help when changing plans?

You should contact your State Health Insurance Assistance Program (SHIP) for help.

If you have questions about Medicare, or if you are interested in changing the way you receive Medicare-funded health care services, contact your local SHIP office. Special rules and consumer protections sometimes apply when you change health plans. Additionally, if you or your spouse has health insurance through a former employer or union, contact your benefits representative before you make any new plan choices. Otherwise, you could lose future options or benefits.

Financial help and benefits

There are several programs available to help low-income Medicare beneficiaries pay for some of their Medicare out-of-pocket expenses, such as premiums, deductibles or Medigap. For each of these programs the income requirements vary.

  • The Qualified Medicare Beneficiary (QMB) Program pays for your Medicare premiums, deductibles, and co-insurance.
  • The Specified Low Income Medicare Beneficiary (SLMB) Program pays for your Medicare Part B premium.
  • The Qualified Individual 1 (QI-1) Program pays for your Medicare Part B premium.
  • The Qualified Individual 2 (QI-2) Program pays a small portion of your Medicare Part B premium.
  • Individuals who may be qualified for any of these programs can apply at their local Medicaid offices.

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