Medicare is a federal health insurance program designed for seniors and people with specific disabilities. The Centers for Medicare & Medicaid Services (CMS) oversees and manages Medicare. To be eligible for Medicare, you must be an American citizen or permanent legal resident, and one of the following must apply to you:
- You are at least 65 years old.
- You receive disability benefits from the Social Security Administration (SSA) or the Railroad Retirement Board (RRB), regardless of age.
- You have been diagnosed with amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease.
- You have end-stage renal disease (ESRD).
Medicare in Depth:
What Medicare Covers
Medicare has 4 different parts, each designed to cover various medical expenses:
- Medicare Part A (Hospital Insurance)
- Medicare Part B (Medical Insurance)
- Medicare Part C (Medicare Advantage Plans)
- Medicare Part D (Prescription Drug Coverage)
This year, there are also 10 Medicare Supplement Plans (Medigap) that can help pay additional expenses not covered by your Medicare coverage.
How does Medicare Work?
With so many parts and numbers, it’s easy to get confused. Let’s break it down:
Part A covers you anytime you’re an inpatient at a hospital. For most, Part A is automatic and premium free once you’re eligible for Medicare. There are cost-sharing for covered services, deductibles, and a limit on the number of days you can receive coverage. Take a closer look at Medicare Part A.
Part B covers you anytime you are an outpatient. Part B has a yearly deductible. Once your deductible is met, services will be 80% covered, leaving you with 20% of the cost. Part B is optional and has a monthly premium. Take a closer look at Medicare Part B.
Medicare Part C is a federally regulated program offered through private insurance companies. Part C Plans help alleviate the costs of Parts A and B. Medicare Advantage Plans are often managed care plans (HMO & PPO) that offer more coverage at a more affordable price. These plans usually include Part D built-in, and can even provide coverage for things not covered by Medicare, like vision, dental, hearing, and more. These plans are dependent on the service area you live in and can change year to year. Take a closer look at Medicare Part C (Medicare Advantage).
Medicare Part D Plans are federally regulated prescription drug plans offered through private insurance companies. All Part D Plans use a tiered system to classify their covered prescription drugs, and list them in a drug formulary. It’s vital to check your prescription drug coverage every year, as plans change their drug formularies annually. Take a closer look at Medicare Part D.
Medicare Supplement Plans, often referred to as Medigap Plans, will fill in the gaps left by Parts A and B. Medigap Plans are standardized plans offered by private insurance companies that work in conjunction with Medicare. Medicare pays its share first and your Medigap Plan pays the rest. Medigap Plans usually only cover what’s covered by Medicare Part A and Part B covers, so you will need to add a Part D (drug plan) Plan separately. Optional coverage, such as vision and dental, may also be available for purchase. Take a closer look at Medicare Supplement (Medigap).
How is Medicare Funded?
Taxpayers primarily fund Medicare in a combination of general revenue, payroll taxes, and premiums paid by Medicare beneficiaries. This money goes into a fund controlled by the Social Security Administration (SSA) and pays for the services of its Medicare beneficiaries.
You’ve probably seen FICA (Federal Insurance Contributions Act) deducted from your paycheck. The FICA tax deduction is 1.45% of your earnings, and goes towards Medicare. Your employer also matches this contribution, totaling 2.9%. It doesn’t seem like much, but with millions contributing, it adds up. Part A takes most of this funding, which explains why Part B has a monthly premium. For most, the 2020 Part B premium is $144.60, but may be more depending on the income you reported 2 years prior.
At AHIC, we find that many of the people have forgotten that they’ve contributed to Medicare most of their lives. These are benefits you’ve earned. When most people become Medicare eligible, they usually think that they should stay with their employer coverage because they’ve heard Medicare is confusing or that the coverage isn’t as good. For most, Medicare is the most comprehensive coverage you can get, and you’ve already paid into it through your FICA deductions.
We’re on Your Side
Do you still have questions or need assistance applying for your Medicare benefits? If you’re still not sure which to choose, you’re not alone. AHIC is here to walk you through the process of applying for Medicare or shopping for the plan that’s right for you. Our services are free for you and we’ll be here to help for the lifetime of your policy.
Let an American Healthcare Insurance Consultant help you today.