Despite all the public discussion about health care, few people under the age of 65 understand the basics of Medicare, the federal health program for seniors and certain disabled individuals.
Why focus on Medicare now, if you have years before you qualify? As big changes happen in our health care system, those who understand the programs and products ahead of time will not only be better equipped to plan for their post-retirement health care options, they’ll also have a better understanding of how these federal programs change over time.
Who is eligible for Medicare? Medicare is available to anyone over the age of 65 who is a U.S. citizen or a permanent legal resident for five continuous years. People under the age of 65 also qualify under certain circumstances, including: if they are permanently disabled and have received Social Security disability payments for the last two years, or if they need a kidney transplant, are under dialysis for permanent kidney failure or have Lou Gehrig’s disease.
How does Medicare cover expenses? Medicare coverage is divided into three primary parts: A, B and D (there is an optional Part C).
Part A is most associated with hospital care. It covers inpatient care, a limited amount of care at some skilled nursing facilities, some specific home health care alternatives and hospice care. Most people are enrolled automatically in Part A when they reach 65 and get this coverage for free. Medicare doesn’t cover long-term nursing home expenses; that’s why long-term care planning is important for all individuals.
Part B is all about outpatient services. It covers doctors’ visits, outpatient care and some other medical services that Part A does not. You have to pay a monthly premium for Part B coverage with a deductible.
Part D is the prescription drug coverage. It is administered by private insurance companies that operate in various areas of the country, so this requires some shopping on your part to make sure you’re getting the right drugs at the right price.
Part C is Medicare Advantage, an optional plan that enables you to receive their Medicare benefits through private health plans (also referred to as Medicare+Choice). These private plans include conventional HMOs and PPOs and are required by law to cover everything that Medicare covers, but they don’t have to cover everything exactly as Medicare Part A and B do.
A portion of this article was prepared by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Mike McCann, a local member of the FPA.