5. How does Medicare coverage work?

Medicare is the Federal health insurance program for Americans age 65 and older, some disabled Americans, and individuals who have end-stage renal disease (ESRD). The Original Medicare Plan, which is available nationwide, is a fee-for-service plan that is managed by the Federal Government. It pays for many health care services and supplies, but it won't pay all of your health care costs.

Generally, you should enroll in Medicare when you first become eligible. If you choose to enroll at a later time, you will pay a late-enrollment penalty.

If you already have health insurance from an employer or another source, talk to your benefits administrator about whether you should join Medicare or not while still covered.

Medicare has four parts: hospital insurance, known as Part A; medical insurance, known as Part B, which provides payments for doctors and related services; and prescription drug coverage, known as Part D. Medicare Part C gives you the choice of receiving the benefits of Medicare A, B, and D through a private health plan, like an HMO or PPO. This coverage is called Medicare Advantage and is described on page 16 of this booklet. 

Most people don't pay a premium for Part A, since they already paid for it through payroll taxes while they were working. There is a monthly premium for Medicare Part B ($93.50 per month in 2007, but people with incomes over $80,000 pay more).

Usually, you will pay a premium if you decide to enroll in Medicare's prescription drug plan. If you don't enroll as soon as you are eligible, your premium will be higher if you decide to enroll at a later time. Also, once you are past your first eligibility, you will have to wait for the annual enrollment period (generally November 15-December 31 of each year) in order to enroll in Medicare's prescription drug coverage.

Medicare Prescription Drug Benefits

In January 2006, prescription drug coverage (Part D) became available to Medicare beneficiaries for the first time. Through this new benefit, Medicare now pays for a portion of your prescription drug costs. Both brand-name and generic prescription drugs are covered at participating pharmacies across the country. Everyone with Medicare is eligible to enroll in this coverage, regardless of income and resources, health status, or current prescription expenses.

Do you have limited income and resources? If so, you may be eligible for extra help with your prescription drug coverage.

If you choose to have this coverage, you will be able to get your drugs in one of two ways. You can buy an individual drug plan, or you can sign up with a Medicare Advantage plan, like an HMO or PPO. Either way, you will pay a monthly premium, which varies by plan, coinsurance or copays for your drugs, and in some cases, a yearly deductible (no more than $265 in 2007).

There are many plans participating in the Medicare prescription drug program. This broad competition among plans should have a positive effect on consumers' out-of-pocket costs. Nevertheless, deductibles, out-of-pocket costs, and covered drugs vary widely across the plans. Some plans may offer more coverage and additional drugs for a higher monthly premium.

If you have limited income and resources and you qualify for extra help, you may not have to pay a premium or deductible. If you are eligible, you will get help paying for your drug plan's monthly premium, yearly deductible, and prescription copayments. The amount of help you get will depend on your income and resources.

To find out if you qualify for extra help, contact Social Security at 1-800-772-1213 or online at http://www.socialsecurity.gov. Or, you may contact your State medical assistance office. Call Medicare at 1-800-Medicare or go to http://www.medicare.gov to get a phone number for the medical assistance office in your State.

If you already have prescription drug coverage from an employer, former employer, or other source, you may be better off keeping that coverage. You should contact your benefits administrator to find out how your existing coverage works with Medicare drug coverage before you make a decision. You may decide to keep the drug coverage your have, or you may want to join a Medicare drug plan instead of, or in addition to, your current plan.

If you think you might be better off changing out of your employer-based drug plan, be sure to consult with your employer first. If you leave your employer coverage and later change your mind, you probably will not be able to return to it for health or prescription drug coverage.

Your employer, union, or other group is your best source of information about your current drug coverage. If you need more help in deciding what to do, you can call your State Health Insurance Assistance program to get personalized counseling about your choices. To get their telephone number, visit http://www.medicare.gov online and select "Helpful Telephone Numbers and Web Sites."

Medicare Advantage Plans

Another type of Medicare coverage, known as Medicare Advantage Plans, is available in many areas of the country. These Medicare plans include HMOs, PPO's, private fee-for-services plans, and special needs plans.

In comparison to the Original Medicare Plan, Medicare Advantage Plans often give you more choices and sometimes extra benefits, like coverage for more days in the hospital. Many include Part D drug coverage. To join a Medicare Advantage Plan, you must have Medicare Part A and Part B coverage. You will pay the monthly premium for Medicare Part B, and you may also have to pay a premium to your Medicare Advantage Plan for the extra benefits it offers.

Medigap Supplemental Insurance

Since Medicare doesn't cover all medical expenses, people who don't have other health insurance and choose not to enroll in a Medicare Advantage plan may decide to purchase a Medigap policy. Medigap is private insurance that helps to cover some of the gaps in Medicare benefits.

Since 1992, there have been 10 standard Medicare supplemental policies. These Medigap policies are designated by the letters A through J. In 2005, two new Medigap policies—designated by the letters K and L—were added. Medigap policies K and L have higher out-of-pocket amounts and lower premiums than policies A through J. Although all 12 standard policies may not be available to you where you live, supplemental Plan A is available to Medicare beneficiaries everywhere.

For more information on Medicare, Medigap policies, and Medicare prescription drug coverage, contact the Centers for Medicare & Medicaid Services. Log onto their Web site at http://www.medicare.gov or call 1-800-MEDICARE (1-800-633-4227).

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