Understanding Medicare may actually appropriately begin with an understanding of what Medicare is not. One of the most common misconceptions is that Medicare is a free handout. It is neither free, nor is it a handout. The program is partially funded by the 1.45 per cent Medicare payroll tax paid by both employees and employers. Beneficiaries of Social Security who have reached the aged of 65 qualify for Medicare. They have paid into the system since 1965, but most recipients will still pay a premium for coverage.
Next, people are often under the assumption that Medicare pays for all medical expenses. This is also not true. Out-of-pocket expenses can be crippling if the recipient doesn’t plan carefully. So if it is not a free ride, just what is Medicare?
Medicare is a government administered insurance system for retirees. There are four programs within the system, each of which has a different function. Part A is hospital insurance. Part B is designed to help pay for doctor’s services and outpatient care. Part C, or Medicare Advantage Enrollment, is private insurance contracted by Medicare which provides benefits to those who qualify for Medicare coverage. Part D is prescription drug coverage.
Besides hospitals, Medicare Part A includes nursing homes, hospice units and home health care. Primarily funded by the payroll tax, it is automatically established for retirees receiving Social Security benefits at age 65. This program is usually premium-free, but can be purchased by otherwise unqualified retirees for a monthly fee.
Medicare Part B is voluntary and designed to help pay for doctor’s services and outpatient care. The monthly premium is $104.90 for most people who qualify for Medicare coverage. Additional charges may be assessed for people with higher income reported for the prior two years on their tax returns. The Social Security Administration will contact affected individuals. Anyone with income higher than $85,000 for an individual or $170,000 jointly will pay a higher premium. As with private or employment based insurance plans, there is a co-payment for services.
Medicare Part C or Advantage plans may be Health Maintenance Organizations, Preferred Provider, Private Fee-for-Service, Special Need and Medical Savings Account plans. Original Medicare coverage will be replaced by one of these plans. Most include prescription drug coverage. These plans should not be confused with Medigap (supplemental) insurance. That is private insurance to cover what Medicare does not, but it is illegal for insurance carriers to sell Medigap (supplemental) insurance to Advantage plan holders.
Part D is a voluntary private insurance plan to cover prescription drugs. If you do not enroll when you are eligible, and later find it necessary, you will pay a monthly penalty of 1 per cent of the national monthly base times the number of months you went without coverage. This amount will be added to your Part D monthly premium for the life of your coverage. You can enroll in a Part D only plan or a Part C plan.
One of the most important things to remember is that help is at hand. To ask questions, you can call 1-800-Medicare toll free at (800) 633-4227. The official government site will direct you to a number of agencies in your area that can also help people who qualify for Medicare to navigate enrollment in the program.
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