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5. How does Medicare coverage work?
Medicare is the Federal health insurance program for Americans
age 65 and older, some disabled Americans, and individuals
who have end-stage renal disease (ESRD). The Original Medicare
Plan, which is available nationwide, is a fee-for-service plan
that is managed by the Federal Government. It pays for many
health care services and supplies, but it won't pay all
of your health care costs.
Generally, you should enroll in Medicare
when you first become eligible. If you choose to enroll at
a later time, you will pay a late-enrollment penalty.
already have health insurance from an employer or another source,
talk to your benefits administrator about whether you should
join Medicare or not while still covered.
Medicare has four
parts: hospital insurance, known as Part A; medical insurance,
known as Part B, which provides payments for doctors and related
services; and prescription drug coverage, known as Part D.
Medicare Part C gives you the choice of receiving the benefits
of Medicare A, B, and D through a private health plan, like
an HMO or PPO. This coverage is called Medicare Advantage and
is described on page 16 of this booklet.
don't pay a premium for Part A, since they already paid
for it through payroll taxes while they were working. There
is a monthly premium for Medicare Part B ($93.50 per month
in 2007, but people with incomes over $80,000 pay more).
you will pay a premium if you decide to enroll in Medicare's
prescription drug plan. If you don't enroll as soon as
you are eligible, your premium will be higher if you decide
to enroll at a later time. Also, once you are past your first
eligibility, you will have to wait for the annual enrollment
period (generally November 15-December 31 of each year) in
order to enroll in Medicare's
prescription drug coverage.
Medicare Prescription Drug Benefits
In January 2006, prescription drug coverage (Part D) became
available to Medicare beneficiaries for the first time. Through
this new benefit, Medicare now pays for a portion of your prescription
drug costs. Both brand-name and generic prescription drugs
are covered at participating pharmacies across the country.
Everyone with Medicare is eligible to enroll in this coverage,
regardless of income and resources, health status, or current
Do you have limited income and resources?
If so, you may be eligible for extra help with your
prescription drug coverage.
If you choose to have this coverage, you will be able to get
your drugs in one of two ways. You can buy an individual drug
plan, or you can sign up with a Medicare Advantage plan, like
an HMO or PPO. Either way, you will pay a monthly premium,
which varies by plan, coinsurance or copays for your drugs,
and in some cases, a yearly deductible (no more than $265 in
There are many plans participating in the Medicare prescription
drug program. This broad competition among plans should have
a positive effect on consumers' out-of-pocket
costs. Nevertheless, deductibles, out-of-pocket costs, and
covered drugs vary widely across the plans. Some plans may
offer more coverage and additional drugs for a higher monthly
If you have limited income and resources and you qualify
for extra help, you may not have to pay a premium or deductible.
If you are eligible, you will get help paying for your drug
plan's monthly premium, yearly deductible, and
prescription copayments. The amount of help you get will depend
on your income and resources.
To find out if you qualify for extra help, contact Social
Security at 1-800-772-1213 or online at http://www.socialsecurity.gov. Or, you may contact your State medical assistance office. Call
Medicare at 1-800-Medicare or go to http://www.medicare.gov to get
a phone number for the medical assistance office in your State.
If you already have prescription drug coverage from an employer,
former employer, or other source, you may be better off keeping
that coverage. You should contact your benefits administrator
to find out how your existing coverage works with Medicare
drug coverage before you make a decision. You may decide to
keep the drug coverage your have, or you may want to join a
Medicare drug plan instead of, or in addition to, your current
If you think you might be better off changing out of your
employer-based drug plan, be sure to consult with your employer
first. If you leave your employer coverage and later change
your mind, you probably will not be able to return to it for
health or prescription drug coverage.
Your employer, union,
or other group is your best source of information about your
current drug coverage. If you need more help in deciding what
to do, you can call your State Health Insurance Assistance
program to get personalized counseling about your choices.
To get their telephone number, visit http://www.medicare.gov online
and select "Helpful Telephone Numbers and Web Sites."
Medicare Advantage Plans
Another type of Medicare coverage, known as Medicare Advantage
Plans, is available in many areas of the country. These Medicare
plans include HMOs, PPO's, private fee-for-services plans,
and special needs plans.
In comparison to the Original Medicare Plan, Medicare Advantage
Plans often give you more choices and sometimes extra benefits,
like coverage for more days in the hospital. Many include
Part D drug coverage. To join a Medicare Advantage Plan,
you must have Medicare Part A and Part B coverage. You will
pay the monthly premium for Medicare Part B, and you may
also have to pay a premium to your Medicare Advantage Plan
for the extra benefits it offers.
Medigap Supplemental Insurance
Since Medicare doesn't cover all medical expenses, people
who don't have other health insurance and choose not
to enroll in a Medicare Advantage plan may decide to purchase
a Medigap policy. Medigap is private insurance that helps to
cover some of the gaps in Medicare benefits.
Since 1992, there have been 10 standard Medicare supplemental
policies. These Medigap policies are designated by the letters
A through J. In 2005, two new Medigap policies—designated by
the letters K and L—were added. Medigap policies K and
L have higher out-of-pocket amounts and lower premiums than
policies A through J. Although all 12 standard policies may
not be available to you where you live, supplemental Plan A
is available to Medicare beneficiaries everywhere.
For more information on Medicare, Medigap policies, and Medicare
prescription drug coverage, contact the Centers for Medicare & Medicaid Services. Log
onto their Web site at http://www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227).