What is Medicare?

Medicare is a federal health insurance program that cover more than 41 million Americans:  35 million seniors and 6 million non-elderly people with disabilities.

It is the source of medical coverage for one in seven Americans right now.  The program was established in 1965 and added disability coverage in 1972.  Most (88%) have their health bills paid by the tradition fee-for-service plans (FFS), while 12% are covered under managed care plans, primarily HMO's.


  Who is covered under Medicare?

  • You are 65 years or older and eligible to receive Social Security
  • You are under age 65, permanently disabled, and have received Social Security disability insurance payments for at least 2 years
  • You get continuing dialysis for permanent kidney failure or need a kidney transplant
  • You have amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease).


Medicare Coverage

Medicare benefits are provided in 3 parts:  Part A, Part B, and, beginning in 2006 Part D

Part A Hospital Insurance  Part A covers inpatient hospital, skilled nursing facility (SNF), hospice, and some home health care.  Part A  is premium free for most people and financed by a 1.45% payroll tax paid by employees and employers.

Part B Medical Insurance  Part B pays for for doctor's services, outpatient hospital care, and home health visits not covered under Part A.  It also covers laboratory test, such as x-rays and blood work; medical equipment, such as wheelchairs and walkers; preventative services.  If enrolled in Part B, you must pay a monthly premium ($88.50 in 2006), which is deducted from your Social security check.  Part B has an annual $124 deductible(2006) and, for most services, 20% coinsurance.

Part D Prescription Drug Coverage   Part D will begin to cover outpatient prescription drugs in 2006.  Beneficiaries  enrolling  in new Prescription drug plans (PDPs) will pay a monthly Part D premium, that is set to cover about 25% of the cost of the standard drug benefit. The Part D premium for the standard benefit is estimated to average $37 per month in 2006 but will vary across plans.
Because this is so new, recipients this year have a longer time period to enroll, from November 15 to April 15.

See the updates below.


Medigap Basics


You can also choose to supplement Medicare to fill gaps in coverage.  Medigap policies are offered through the private sector.  To qualify for a Medigap policy you must be enrolled in Part A and B.  You have a six-month window after signing up for Part B to enroll in Medigap.  If you don't sign up during this period, you could be denied coverage or charged more for a policy.

There are presently 10 standardized types of plans, from Plan A to Plan J.  In 2006, two additional plans K and L will be added.  Each Plan offers different benefits, fills different gaps in Medicare and varies in price.  However, all Medigap plans must cover certain basic benefits.

Medicare Advantage Information

Medicare Advantage (formerly Medicare + Choice)  This plan is available in many areas.  If you have one of these plans you don't need a Medigap policy.  Medicare Advantage  plans are part of the Medicare program and will provide medicare-covered benefits under Part A (hospital insurance) and Part B (medical insurance for doctor visits and other outpatient services) and prescription drug benefits.

You'll use network providers in these plans.  There may be a monthly premium in addition to the Medicare Part B premium.  Medicare Advantage plans will provide a health card that can be used in place of your Medicare card.  In 2005, about 12% of the Medicare population used these type of plans.

What Medicare Does Not Cover  Medicare does not cover eye exams, eyeglasses, hearing aids, dental care, or care provided outside the United States.  Also, it does not pay for long-term care at home or in a nursing home but does cover short term skilled nursing care.

Some Basics of Medicaid

Medicaid is a health insurance program for low income children, parents, seniors and people with disabilities.  Also created in 1965, Medicaid insures over 51 million Americans.  Medicaid is jointly financed by states and the federal government and each state is responsible for administering its own Medicaid program (within rules set by the federal government).

Every state's Medicaid program includes outpatient drug coverage, although the scope of these benefits varies from state to state. Medicaid also pays for most nursing home and other long- term care.


Update on Medicare Part D (Nov 2005)

The answers come from the Centers for Medicare & Medicaid Services, the Medicare Rights Center and The Henry J. Kaiser Family Foundation.

Will all the drug plans provide standard, uniform Medicare drug coverage?

No. The plans, which are offered by a wide variety of private companies, aren't clones. Each one provides its own lineup of drugs and participating drugstores, as well as different monthly premiums, deductibles, co-insurance and benefits. What's more, the number and types of plans vary by state. In California, for instance, 18 organizations have rolled out 47 different stand-alone drug plans. In contrast, 11 companies will offer residents of Alaska 27 different options.

How much will monthly premiums for drug coverage cost?

The costs for what's being called Medicare Part D will depend upon where someone lives and the plan he or she chooses. Medicare, however, has suggested that the average monthly premium should cost around $32 a month in 2006. But some programs will offer premiums that cost less than $10, while others are dramatically more expensive. In New York, for example, premiums range from $4 to $85. Premiums are expected to rise annually.

As a benchmark, Medicare envisions that the basic plan will require a participant to meet a $250 yearly deductible and then pay 25 percent of covered drug costs between $251 and $2,250. A participant will foot all the costs from $2,251 to $5,100. This gap in coverage is being called the doughnut hole. Once medication costs surpass $5,100, a participant would generally pay 5 percent of the tab. Keep in mind that these are ballpark figures. Each plan has its own fee schedule.

When can someone sign up for the new drug benefit?

The enrollment period for current Medicare recipients runs from Nov. 15 through May 15, 2006. Individuals who want coverage to start on Jan. 1, 2006, should sign up by Dec. 31. Individuals can enroll through Medicare's Web site (www.medicare.gov) or by calling 800-MEDICARE. The elderly can seek help from their State Health Insurance Assistance Program, which exists in every state to help Medicare beneficiaries with their health insurance choices.

Is there any rush to enroll in the program?

 While enrolling is voluntary, most individuals will have to pay a monthly premium penalty if they join after they're first eligible. Premiums will automatically increase at least 1 percent a month after a Medicare recipient's initial enrollment period expires. So, for example, if someone delays signing up for two years, his premium will be 24 percent higher. And the tardy enrollee will be stuck with a higher premium for as long as he stays in the program.

What should people who have retiree drug coverage through their old employer do?

Before making any decision, retirees should find out if their old employers will continue offering health benefits next year. They also need to determine if their workplace coverage is considered “creditable,” which means it's at least as good as the new federal program. Retirees will receive letters from their old workplaces with this information.

Should a retiree keep Medigap insurance coverage?

Because the government heavily subsidizes Medicare Part D, retirees can receive better drug coverage with the new program at a lower premium than they would through a Medigap plan.

Can plans drop coverage of certain drugs?

Yes. Plans will be allowed to dump drugs on their lists as long as they give 60-days notice. Unfortunately, it won't be as easy for recipients to ditch a plan if it eliminates the drugs they need. Individuals can switch plans once a year during a period from Nov. 15 through Dec. 31.

Who will benefit from the plan?

Clearly the huge winners will be the elderly poor. They will pay virtually nothing for their drugs. To be eligible, seniors have to be cash poor, but they won't hurt their chances if they're house rich. A home and a car aren't counted in the eligibility calculations.

It's also an easy call for the affluent. They will probably want to participate because it protects them from runaway drug costs in the future. The benefit is essentially an insurance program.

Where can I learn more about the plan's options?

For more, download Medicare Drug Coverage 101: Everything You Need to Know About the New Medicare Prescription Drug Benefit at the Medicare Rights Center's Web site at medicarerights.org. See also the Kaiser Foundation (kff.org).