Your Financial Future:
What is Medicare?
Medicare is a federal government program that provides health insurance to people over 65 and to some others. It now covers 49 million Americans.
If you are eligible for Medicare, your coverage includes:
- Part A: Hospital Insurance – covers inpatient hospital care, skilled nursing facilities and some home health care. Part A has an annual deductible and co-payments. The deductible for hospital stays is $1,156 in 2012. There is no monthly premium if you worked 40 quarters or more and paid Medicare taxes.
- Part B: Medical Insurance – covers doctor visits but not routine exams, medically necessary supplies and equipment, physical and occupational therapy, outpatient mental health services and other outpatient hospital services. Part B coverage also includes certain preventive benefits, like mammograms and cardiovascular screenings. Part B has a premium that is deducted from Social Security, Civil Service or Railroad Retirement pension benefits. In 2012, the monthly premium for Part B is $99.90. Upper income seniors pay a higher premium. The annual deductible for 2012 is $140.00. Co-payments apply to most Part B services.
- Part D, Prescription Drugs - this is an optional program, and you must enroll in Part D in order to receive coverage for prescription drugs. Part D is offered through private insurance plans that contract with Medicare. You will have to meet a deductible before your plan will pick up the cost of your prescriptions, and there will also be a monthly premium. Plans vary, but in general beneficiaries are responsible for 25% of drug costs and have a deductible of $350. Once both you and your plan have spent $2,930 in drug costs, you enter a coverage gap (commonly known as the doughnut hole). At this point, you are responsible for paying a larger share of prescription drug costs. Once you have paid $4,700 in prescription drug costs out of pocket, your plan will pick up coverage again. After this point, you will only pay 5% of total prescription costs. In 2012, beneficiaries in the doughnut hole receive a 50% discount on generic medications, and a 14% discount on brand-name medications. However, the entire cost of the drug goes towards the $4,700 limit. Under the Affordable Care Act, the doughnut hole will be phased out in 2020.
Medicare offers choices in private managed care plans in many areas. These plans may have expanded benefits For example, they are likely to include prescription coverage. However, they also have more restrictions on physician and hospital choice.
What is not covered?
Medicare does not cover most long-term care and covers only limited home health care and nursing home costs – usually following a hospital stay. It also does not cover routine dental care, eye care, or hearing aids.
Who is eligible for Medicare?
Generally, individuals are automatically entitled to Medicare if:
- they are 65 years old and have 40 quarters of work credit in covered employment, or
- if their spouse is eligible for Medicare.
Government employees are also covered if:
- they are 65 and
- they or their spouse worked in Medicare-covered employment.
Also, individuals without the required 40 quarters of covered employment may buy in to Medicare Part A and pay a monthly premium and also have the option of enrolling in Part B.
When am I automatically enrolled?
If you are not 65 yet, but are already receiving Social Security benefits, (early retirees and the disabled, for example) you will be automatically enrolled in Part A and will have the opportunity to enroll in Part B in the month you turn 65 or after 24 months of receiving disability benefits.
When do I need to apply?
If you are approaching the age of 65 and are not receiving Social Security benefits, you will need to apply for Social Security and Medicare benefits. It is a good idea to apply for Medicare close to your 65th birthday. There is a penalty for delaying enrollment in Part B of 10% for each 12 month period that you were eligible but did not enroll in Part B. However, the penalty does not apply if you delayed enrollment because you were actively employed and covered in a workplace plan or covered by an employed spouse’s workplace plan.
What can you do if your income is very limited and you can’t afford the premiums, co-payments and deductibles?
Contact your state agency that administers Medicaid and ask about the Qualified Medicare Beneficiary (QMB) and Specified Low Income Medicare Beneficiaries (SLMB), programs that offer substantial financial assistance to eligible individuals by paying premiums, co-payments and deductibles for eligible individuals.
Where can you go for more information about Medicare?
- For further information about eligibility or to apply for Medicare, call the Social Security Administration at 1-800-772-1213 or visit your local Social Security office. If you are newly eligible for Social Security benefits and you want to apply for both Social Security and Medicare you may do it on line at www.socialsecurity.gov.
- For general information about Medicare call 1-800-633-4227 or go to www.medicare.gov.
- Free consumer counseling is available in every state through state programs that are funded by the federal government. These programs, called SHIP programs (Senior Health Insurance Assistance Program) give neutral advice to Medicare beneficiaries about Medicare, Medicaid, private medigap insurance and Medicare private managed care plans. A listing of SHIP programs by state is available at www.medicare.gov/Contacts/Static/AllStateContacts.asp.
- Medicare Rights Center, a non-profit organization: www.medicarerights.org
- AARP, a non-profit membership organization: www.aarp.org
- National Council on the Aging, an association of aging organizations: www.ncoa.org