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The ABCs and D of Medicare

Huge changes have been made to the nation's Medicare program, but many Americans -- even among the elderly -- know and understand little about the giant program that's been a major part of the American health scene for almost four decades.

Medicare, officially known as Title XVIII of the Social Security Act, is the federal government's health insurance program, implemented in 1966 to provide health insurance coverage for people age 65 and older. Eventually the coverage was extended to include the legally blind, people with end-stage kidney disease and younger people who are disabled and who meet the criteria to collect Social Security Disability Benefits.

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Enrollment in Medicare is automatic at age 65 for U.S. citizens and legal residents of the United States who have paid Medicare payroll taxes for a minimum of 10 years while employed or who have met other specific guidelines. Also eligible are those who qualify for Railroad Retirement Benefits, and federal, state and local government employees and their spouses. If you are not sure if you qualify for coverage, try Medicare's Eligibility Tool, call or visit your local Social Security office or call 1-800-772-1213 toll-free a few months before your 65th birthday.

Simple as A, B and C
Medicare consists of two parts: Part A, which is hospital insurance, and Part B, which is medical insurance. In 1997 a new option was added, called Medicare+Choice. This program is commonly referred to as Part C, although the Medicare administration does not label it as such. Medicare+Choice offers expanded benefits for a fee through private health insurance programs such as health maintenance organizations and preferred provider organizations that have contracts with Medicare. This year, as a result of congressional action to reform Medicare, Medicare+Choice will be replaced by Medicare Advantage.

Medicare doesn't mean free health care. How much you pay for your health care depends on the type of Medicare plan you choose, whether you have additional health insurance coverage through an employer or a pension plan, and how often you go to the doctor or hospital. You may have to contribute to the cost of your health care in the form of deductibles and copayments, and certain services may not be covered at all.

Medicare Part A
Most people are automatically enrolled in Medicare Part A, also referred to as "original Medicare," at age 65. Part A is free and you don't have to pay any monthly premiums. It pays for inpatient hospital expenses and some other services, such as a skilled nursing facility, home health care, or hospice care. If you don't fully qualify for Part A because you or your spouse didn't work 40 or more quarters in Medicare-covered employment, you may still be able to buy into the plan. If you have 30 to 39 quarters covered, you can buy Part A for a premium of $189 a month. If you have fewer than 30 quarters and you're not eligible for premium-free hospital insurance, you can buy Part A for $343 per month. For 2004, Part A has a deductible of $876 for hospital stays of one to 60 days.

Medicare Part B
Part B helps pay for doctors' and outpatient hospital services, physical and occupational therapists and some home health care when medically necessary. This is an optional plan, and you will have to pay a premium to participate. The monthly premium for Part B for 2004 has been raised from $58.70 to $66.60 per month, deducted from your Social Security, Railroad Retirement or Civil Service Retirement check. It has a $100 per year deductible and co-payments of 20 percent of approved services.

If you are 65 or older, still employed and still covered by your employer's health insurance plan, you won't need Medicare Part B coverage. But if you don't sign up for Part B during the seven-month period that begins three months before you turn 65, the premium can go up 10 percent for each month that you could have had Part B but elected not to. And, you'll have to pay that extra 10 percent for the rest of your life.

Medicare+Choice (Part C)
You need to have Part A and Part B to qualify for Part C. These plans, which you obtain through a private health insurance company, offer expanded benefits depending on the type of policy purchased. In most states, if you sign up for Part C the month you turn 65 or within a six-month window after your 65th birthday, you will qualify without having to answer medical questions. After that period, you will have will have to answer a medical questionnaire and can be turned down for health reasons. Medicare's Personal Plan Finder is designed to help you narrow down your options and choose a plan.

Yet another choice is called Medigap, which is a health insurance policy sold by private insurers to fill the "gaps" in Medicare parts A and B. There are 10 standardized Medigap plans, each of which offer a different set of benefits.

When you buy Medigap, you pay a premium to the insurance company in addition to the Part B premium. Similar to Medicare+Choice, you must be enrolled in Medicare A and B. You don't need a Medigap policy if you are in a Medicare+Choice plan, and may not have both Medigap and Medicare+Choice.

"Shop around wisely for plans that offer Medigap and Part C benefits, because premiums vary widely and the benefits are the same," says Robert M. Hayes, president of the Medicare Rights Center.

The government will mail you a Medicare information packet, including the Medicare Handbook, before your 65th birthday. If you don't receive it, contact your local Social Security Office or call toll-free at 1-800-772-1213 to request the information.

Part D is not so simple
With the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 comes a new prescription drug benefit, Part D, plus coverage for preventive screenings and tests.

But the legislation is complicated and confusing, and it has many seniors worried that they will wind up with fewer benefits than before.


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-- Posted: Jan. 14, 2004
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See Also
Older worker's guide to getting a job
12 questions to ask about long-term care insurance
Getting health insurance on your own
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