4 Basics You Need to Know About Medicare

Posted by on Sep 25, 2014 in Medicare | 0 comments

4 Basics You Need to Know About Medicare

In the massive and complex industry of healthcare, there are always questions from newcomers and retirees alike about health insurance, especially those regarding Medicare. If you are unfamiliar with Medicare, it is a federal government program that supplies qualified senior citizens (people who are 65 and older) with health insurance. Although it may sound straightforward, be assured that there are plenty of confusing aspects like costs, deadlines, conditions, regulations, and all the other details that go into a national program that benefits over 50 million people. That is why it is important to learn some of the rudiments of Medicare and its advantages. Here are four basic things that will help clarify your understanding of what it is and how it affects you.

1. Organization

Medicare is organized into two separate entities (Original Medicare or Other Medicare) and is comprised of four separate programs (Part A, Part B, Part C, and Part D). Each “part” offers coverage on specific healthcare costs.

Part A is called the Medicare’s Hospital Insurance Program. It provides coverage for inpatient hospital stays, hospice, some short-term nursing home stays, as well as some kinds of home healthcare. Part A is a division of Original Medicare.

Part B is called the Medicare’s Medical Insurance Program. It provides coverage for doctor’s fees, outpatient services, some types of home healthcare, as well as some types of physical and occupational therapy. Part B is a division of Original Medicare.

Part C is called Medicare Advantage. It is a program that serves as an alternative to Original Medicare. It provides all the coverage as Original Medicare, only it provides them through private health insurance companies. These private companies provide this coverage via a Managed care plan and contracts care providers and medical facilities at a discount. Part C plans are considered Other Medicare.

 Part D is called the Medicare’s Prescription Drug Plan. It provides you with medication insurance through private companies for a monthly premium. Part D plans may be added to Parts A, B, and C.

2. Funding

The majority of Medicare Part A is funded through employees and employers paying a combined 2.9% earned income tax (1.45% each). These are known as Medicare payroll taxes and are automatically deducted from your paycheck (if you are self-employed then you must pay the entire 2.9% yourself). Be aware that higher tax rates apply to individuals with higher wages and spouses that file separately. These taxes are then received by the Medicare Hospital Insurance Trust Fund along with monthly premiums from Part A beneficiaries and some additional accrued interest. Medicare Parts B and D, however, are funded by beneficiaries’ premiums and the nation’s general revenues and accrue interest in the Supplemental Medical Insurance Trust Fund.

The Department of the Treasury holds both of the Trust Funds while a board of trustees manages them (they also manage Social Security’s two trust funds). This board consists of six individuals and includes the Social Security commissioner, the Labor secretary, the Health and Human Services secretary, Treasury secretary and two president-appointed citizens. These trustees report to Congress in an annual hearing to discuss the funds and other fiscal aspects of Medicare.

3. Eligibility

If you are 65-year-old American citizen (or older), then you are fully eligible for Medicare. For non-citizens of the same ages, you must have arrived legally, maintained permanent residency, and lived in the US for at least five years. You are only eligible when you are under 65 if you had a kidney transplant or currently require dialysis due to an end-stage renal disease. Likewise, those disabled from amyotrophic lateral sclerosis are eligible without a two-year waiting period. If you are still unsure if you qualify, feel free to check the Medicare website to determine your eligibility.

4. Costs

The majority of retirees who are unfamiliar with Medicare believe that it is entirely free healthcare. Unfortunately, this is only true if you or your spouse paid Medicare payroll taxes for at least ten consecutive years. Otherwise, you will typically have to pay monthly premiums to get the proper Part A coverage that is right for you. As for Part B plans, there will be a premium based off your earnings that will be automatically deducted from your monthly Social Security money (unless you qualify with special low-income requirements). Similarly, you will likely be responsible for twenty percent of the majority of your medical bill charges with no yearly cap. Also, be aware that a Medicare Advantage Plan may control or contain several costs like prescriptions, copayments, and deductibles when you add supplemental insurance to your coverage. To find out what the costs of your premiums or coinsurance rates are, visit Medicare’s website.

Although healthcare can be a overwhelming topic, it is important to familiarize yourself with the programs your are affected by like Medicare. By learning how it is organized, how it is funded, when and how you are eligible, and the costs you will have to pay, you have subsequently learned how it can benefit you. If you still have questions, you should contact a professional to help you further.