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Your crash course into Medicare

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The cost of good health care increases with age and depending on the health problem. For millions of people, these situations tend to present themselves when people are out of work and have no income. That’s why we have Medicare.

Medicare is a health insurance program for American citizens aged 65 and over and people with certain health concerns. Medicare covers a lot, but not all of the costs of healthcare.

A good principle to work with is that it will pay for about 80 percent of your medical fees while you’ll dig into your pocket to cover the rest. Alternatively, you can use a different plan such as Medigap to supplement the balance.

The federal program is run by the Centers for Medicare & Medicaid Services. Medicare is, however, not to be confused with Medicaid. While Medicare is an insurance program for retired Americans, Medicaid is a medical coverage program meant for low-income Americans that’s administered by state governments.

Medicare is a lot more comprehensive and has different plans and parts that can help you budget for your health care costs as well as help you avoid late penalties in the case that you miss certain deadlines.

For its benefits, you must familiarize yourself with the program before you enroll. Here’s a detailed guide to help you understand what the program is, what does medicare cover, its history, how much it costs, and how you can enroll.

History of Medicare in the U.S.

The conversation regarding a national health insurance system in the U.S. goes back to the early 19th Century when President Teddy Roosevelt ran with the idea of a national health plan as he contested for the presidency in 1912. But the idea of a national health insurance system didn’t gain much traction until President Harry Truman came into the fold.

On the 19th of November 1945, 7 months into his administration, the president delivered a message to Congress stating the need for a national health insurance plan for all Americans. The plan that the president had in mind would offer health coverage that would pay for hospital/doctor visits, nursing services, laboratory services, and dental care.

As hard as President Truman fought to get a bill passed during his presidency, he was not successful. It took another two decades before anything concrete on Medicare was realized.

President John F. Kennedy also tried to push for the creation of a national health insurance system after a study revealed that 56% of Americans aged 65 and over did not have health insurance. He too was not successful.

But in 1965, President Lyndon B Johnson signed legislation to pass the Medicare Bill and a year after that Medicare’s medical insurance benefits took effect and Americans began to receive Medicare health coverage.

Former President Harry Truman and his wife were the first beneficiaries of Medicare. Fast forward some 55 years later or so, a little over 60 million people are covered by Medicare with Medicare spending reaching $700 billion in 2017, a fifth of the entire national health spending of the same year.

What does Medicare cover and how does it work

As explained above, Medicare is the United States’ federal health insurance program covering people aged 65 and above. The plan is funded by every working American through Medicare taxes.

The withholding rate for Medicare in 2021 is 2.9 percent on self-employment and 1.45 percent of total income if employed by someone. If you pay these taxes for 10 years (40 quarters), you will have access to basic Medicare coverage for free when you get to full retirement age, or 67. But you can still get full Medicare benefits when you turn 65.

Basic Medicare comes in 4 different parts: Parts A, B, C, and D. Each part costs differently since they cover different items. Let’s break them down for easier understanding.

Part A: Hospital coverage

When you enroll for the Medicare plan, you are automatically placed in Part A. This part provides coverage for skilled nursing care, stays at the hospital, and hospice care that you may require in case you are hospitalized and require rehabilitation before you get back on your feet.

If you’re hospitalized, Medicare will pay for nearly all hospital charges for the first 60 days you’re admitted. There are certain exceptions such as not paying for a private room. Medicare also imposes a heavy deductible charge for every hospital admission. The deductible in 2021 stands at $1,484 but it changes each year.

Most people do not need to pay a premium to be included in Part A since they are already paying for the system through Medicare tax deductions made from their paychecks.

Part B: Doctor and outpatient services

Part B of Medicare pays for diagnostic screenings, ambulance transport, lab tests, doctor visits, use of medical equipment, and any other outpatient services. Unlike Part A, Part B demands more costs and you may want to shelve the idea of signing up for Part B especially if you’re employed and have worker’s insurance.

However, if you have no other form of insurance and defer enrolling for Part B when you first apply for Medicare, you might have to pay a higher monthly premium for as long as you’re registered in the program.

For instance, in 2021 you’ll have to pay a yearly deductible of $203 and a monthly premium of $148.50 as set by the federal government. That figure may be higher if you earn more than $88,000. You’ll also pay 20 percent of the medical fees for outpatient services.

It’s worth pointing out that both Medicare Parts A & B do not cover long-term care. If you suffer from a chronic condition that involves long-term personal care help such as in an assisted-living institution, Medicare will not cover any of the cost.

Part C: Medicare Advantage

Commonly known as the MA plan, Medicare Advantage is a bit complex. It is essentially another name for private health insurance and was implemented by the Balanced Budget Act of 1997 during President Bill Clinton’s second term.

They are basically private health plans that you can choose instead of Medicare. But if you do choose Part C, you will have to enroll for both Parts A and B and pay the premiums before you can sign up with a private insurance provider.

Private health insurance providers such as UnitedHealthcare, Humana, and Aetna are among the carriers that manage Medicare Advantage plans.

While some insurance providers pay for services that the Original Medicare doesn’t, the federal government requires the private insurers to cover everything covered by the original Medicare. Examples of services not covered by Medicare include extras such as shower grips and wheelchair ramps.

As per the Kaiser Family Foundation, about 50% of people enrolled in Part C don’t pay a monthly premium for the plan. However, they still pay an average of $70 in Part B premiums.

Try and consider doctor access when choosing between Medicare Advantage and Original Medicare. If you decide to choose Part C, do so in the awareness that Medicare Advantage plans are either PPOs (preferred provider organizations) or HMOs (health maintenance organizations).

With HMOs, you have to choose a primary care doctor who will direct your care and perhaps refer you to a specialist. Bear in mind that this could mean you have a limited pool of doctors and hospitals to choose from. PPOs, on the other hand, is a network of doctors that you can see and access their facilities without needing a referral.

Part D: Prescription drugs

Part D is responsible for lowering the total cost of your retail prescription drugs. Unlike Parts A & B which are provided by the federal government, you cannot sign up for Part D via the social security office since the service is provided by a private insurer.

Part D also has premiums and potentially has a yearly deductible. It will cater for either the entire medication or a certain amount of the total prescription costs from where you can add some money out of your pocket to pay for your prescription drugs.

For instance, if your drug costs get $4,130 in 2021, you will add 25 percent of the prescription drugs you buy across the year. If they proceed to mount to $6,550, you may qualify for catastrophic coverage. This is a level where your total prescription drug costs reach a set maximum level.

Remember to visit to make sure the plan you want to take covers the drugs you take.

Signing up for Medicare

If you have started receiving Social Security benefits, then you’re automatically enrolled in Original Medicare (Parts A and B) at 65. Two to three months before your birthday, you will receive coverage which should start on the first day of the month you were born.

If you are not yet receiving Social Security, you should apply during the designated enrollment periods set every year. To help prevent a possible gap in coverage, try and enroll at least 3 months before you turn 65.

This guide should help you understand more about Medicare before you enroll.

augusta free press
augusta free press