How Medicare Works as Government Health Insurance - dummies

How Medicare Works as Government Health Insurance

By Ryan P. Zacharczyk, CFP®, MBA CRPC

Medicare is the government health insurance program for those who are either 65 or older, have certain disabilities, or have end-stage renal disease. All those who are eligible for Medicare or will become eligible shortly should know what is provided and how the system works.

  • Part A (hospital insurance): This is the emergency care portion of Medicare. There is no premium in Part A for most eligible participants. Medicare Part A helps cover inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities (not custodial or long-term care). Part A also helps cover hospice care and some home health care. Beneficiaries must meet certain conditions to get these benefits. These benefits are not unlimited, and there are co-pays and deductibles that are required with most benefits in part A.

  • Part B (medical insurance): This is the maintenance care portion of Medicare. Most people will pay a monthly premium for Part B. Medicare Part B helps cover doctors’ services and outpatient care. Part B also covers some other medical services that Part A doesn’t cover, such as some of the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary. If you decide not to enroll in Part B when you are first eligible, you may incur a penalty if you choose to join later.

  • Part C (Medicare Advantage Plans): Medicare Part C combines your Part A and Part B options and must cover all medically needed services. Private insurance companies that are approved by Medicare provide this type of coverage. In most cases, Part C is a lower-cost alternative to the Original Medicare Plan, and providers usually offer extra benefits and include prescription drug coverage (Part D).

  • Part D (prescription drug coverage): Most people will pay a monthly premium for this coverage. Everyone with Medicare can get this coverage that may help lower prescription drug costs and help protect against higher costs in the future. Medicare Prescription Drug Coverage is insurance. Private companies provide the coverage. Beneficiaries choose the drug plan and pay a monthly premium. Like Part B, if a beneficiary decides not to enroll in a drug plan when they are first eligible, they may pay a penalty if they choose to join later.

  • Medigap insurance: Medicare coverage has its limits. It is generally unadvisable for a Medicare beneficiary to rely solely on Medicare. That’s why private insurance companies offer Medicare supplement policies, or Medigap coverage. Medigap is a supplemental insurance policy that is purchased by the individual through a private company to fill in the holes where Medicare is insufficient. Numerous plans are available in the marketplace, with varying premiums and coverages.