How does Medicare work? Understand the basics of this health insurance plan for people over 65.
Medicare is a national, federally administered health insurance program authorized in 1965 that covers the cost of hospitalization, medical care, and some related health services for most people over age 65 and certain other eligible individuals. Understand how Medicare works and how much it costs.
Medicare is a government-sponsored health insurance program that covers most visits to the hospital and visits to the doctor. Most people become eligible for Medicare when they turn 65, although there are some exceptions. Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) together constitute Original Medicare.
How does Medicare work? Here is some basic, generalized information about Original Medicare to give you a better understanding of the functioning of this nationwide health insurance program.
|Costs and Coverage||Medicare Part A||Medicare Part B|
|What Does It Cover?||Most visits to the hospital||Visits to the doctor when you’re not in the hospital|
|Monthly Costs||No cost, for most people||$130 a year, which is typically deducted from a person’s social security check|
|Deductibles||About $1,340 , each time you’re admitted to the hospital (unless you’re readmitted for the same illness within 60 days).||$183 a year|
|Cost-Sharing (Coinsurance)||20%, after 60 days in the hospital You’ll pay 20% of the cost for approved medical services when you’re hospitalized for an extended period of time – usually longer than 60 days||20% for most services Typically you’ll pay 20% of the approved medical costs, after you’ve met your deductibles.|
|Approved Rate||In most instances Medicare has an “approved rate,” which is essentially the rate Medicare is willing to pay for any given service, like a doctor’s visit or an MRI.Some health-care providers – doctors and hospitals – may wish to charge more than the Medicare-approved rate for services. If you visit one of those providers, you may be asked to make up the differences in costs.|
Three limitations of Original MedicareOriginal Medicare, Part A and Part B, is an important program that provides crucial health insurance coverage. However, beneficiaries should be aware of three factors associated with Original Medicare.
- Unlimited out-of-pocket costs: Original Medicare’s deductibles, co-insurance, and other forms of cost-sharing are unlimited. This means there is no limit to what your out-of-pocket costs might be.
- Prescription drug coverage: Original Medicare does not cover the cost of most prescription drugs. A separate program, Medicare Part D, covers prescription drugs. You need to enroll in Medicare Part D separately to get that coverage.
- Doctors: Medicare does not have a clearly defined network of health-care providers or a list of doctors who are required to accept Medicare patients
When you’re enrolling in Medicare, it’s important be aware of these limitations and of the private insurance programs available that offer supplemental, more comprehensive health coverage.Private InsuranceMedicare AdvantageMedicare Supplement PlansMedicare Part D Prescription Drug PlansDoes it limit your exposure to out-of-pocket costs? (For approved services)You’ll still have deductibles and coinsurance, with most plans, but they all limit your spending.These plans are designed to cover most of your deductibles and coinsurance. Does it provide prescription drug coverage?Yes, typically.Most Medicare Advantage plans include prescription drug coverage, but not all.You typically need to enroll in a separate prescription drug plan. Does it help me with doctors?Yes.Insurance companies that sell Medicare Advantage plans must have a defined network of doctors who accept patients on their plan.These plans typically give you more flexibility to keep a doctor you like. The information presented above is basic, generalized information about Medicare, and it does not cover all the details and specifics of the program.Finding the lowest priced Medicare planAn eHealth study published in September of 2014 found that only 5% of people who shopped for Medicare coverage at eHealth were in the Medicare plan that provided the lowest total out-of-pocket costs for their prescription drugs.More specifically, the study found that, among people enrolled in Medicare Advantage (Medicare Part C) prescription drug plans, only 11% were in the lowest cost plan, based on their personal drug regimen. If they had switched to the lowest cost plan available, they could have saved $218 in 2014, on average.The study also found that, among people enrolled in stand-alone Medicare Part D prescription drug plans, only 3% were in the plan with the lowest total out-of-pocket costs. By switching to the lowest cost plan, the average customer could have saved $961 in 2014. Medicare has neither reviewed nor endorsed this information.