How Medicare Works

Most people new to Medicare wonder how Medicare works. Medicare is a government health insurance plan for people 65 or older. It pays all or part of the cost of doctor's visits, hospitalization, prescription drugs, and other types of medical treatment. Medicare is divided into four parts, A through D.

Medicare Part A covers hospital care. Most people do not pay a premium for this coverage. Part A can help to pay for care in hospitals and skilled nursing facilities, but not for custodial care in nursing homes. It also may pay for hospice care and some types of home health care.

Medicare Part B is medical insurance. It covers doctor's visits, outpatient care, physical and occupational therapy, and some types of home health care not covered under Part A. It may also cover some preventive services. Most people pay a monthly premium for Part B.

Medicare Part C is a hybrid program that includes the types of coverage provided in Parts A and B. The main difference is that Part C is offered through private insurers approved by Medicare. The products offered by these companies are called "Medicare Advantage Plans", and they function much like an HMO or PPO. They can fill in many of the gaps in coverage under Parts A and B. They may also provide some coverage for prescription drugs. The cost of these plans is shared by Medicare and recipients. Recipients may choose to pay extra for some types of coverage in these plans.

Medicare Part D, which provides Prescription Drug Coverage, is the most recent addition to Medicare. Beginning January 1, 2006, everyone enrolled in Medicare became eligible for this program. Part D is intended to lower prescription drug costs. Medicare recipients are not required to join the program, but if they do not join when they are first eligible, they may pay a higher premium if they decide to join later on. Coverage under the program is provided by private insurance companies. Recipients choose a plan and a company and pay a monthly premium for coverage. For more information on Medicare Part D plans click here.

People who are covered under Parts A and B often buy "Medigap" insurance to pay for things not covered by Medicare, such as deductibles and copayments. Medicare has established twelve standard types of Medigap policies. Different types of Medigap policies cover different things. The more comprehensive the coverage, the higher the cost. To get the best deal, you should apply for Medigap insurance when you first become eligible. Then you can buy any type of Medigap policy at the same rate as everyone else, regardless of your health situation. If you wait, an insurer may refuse to sell you certain types of insurance or may charge higher rates.

Medicare does not pay for nursing home care. If you cannot afford to pay for a nursing home, you may be able to get help from Medicaid. Medicaid is a state and federal program that helps low-income individuals with their medical expenses.

The benefits available under Medicare, and the rules that govern coverage, are likely to change in the coming years. To keep with the latest developments on how Medicare works, visit www.medicare.gov.

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