As I recently wrote, I am now covered by Medicare.  Lou Wislocki of Wislocki Insurance did an excellent job of teaching me the ins and outs of the Medicare program.  I asked him if he would be willing to provide a summary for this blog of the main points of Medicare.  Here’s what he wrote.  Thanks, Lou, for your clear and helpful explanation of the program.

Lou Wislocki

What is Medicare? It is a national insurance program for seniors and the disabled passed into law in 1965 during the presidency of Lyndon Johnson.  Harry S. Truman, our 33^rd President, was the first citizen to receive his Medicare Card.  Medicare was passed into law as the result of health care crisis for seniors due to the rising costs of health care.

If you are 65 years old and you or your spouse have paid social security tax, you are eligible for Medicare.  Younger disabled persons, those with Lou Gehrig’s Disease and those with end stage renal disease are also eligible.  If you are 64 ½ years old you probably have already been barraged with information about Medicare.  All of the information sent by Medicare and private insurance companies can be very overwhelming and confusing.  Let’s make it simple.

Medicare is actually very straightforward.  All the time you spent earning a living and paying FICA tax for social security, you were also paying for your hospitalization coverage under Medicare, also titled Medicare Part A.   Part A covers inpatient hospital care and most of the services connected with a hospital stay.  It doesn’t cover out-patient services.  Because you have already paid for your Part A, you don’t have to pay the government anything for it. Even if you’re still under your employer’s Medical plan, you’re automatically enrolled in Part A.  Part A doesn’t cover your entire hospital stay.  There is a flat deductible – $1,184, good for 60 days.  If you happen to be hospitalized longer that, starting day 60 you will pay a whopping $296 per day, up to day 90.

Doctor office visits, outpatient services or surgeries in outpatient surgical centers or in the hospital is covered by Part B.  Part B is also straight forward—it’s an 80/20 cost share, Medicare pays the provider 80 % and you pay 20%.  What is the maximum out-of-pocket cost for the year?  There isn’t any.  Whatever your outpatient Medical cost may be for the year, you will pay 20% and an additional 15% to providers who do not subscribe to Medicare.  Unfortunately, Part B does cost.  If you earned under $85,000 for a single person or $170,000 for a couple, Part B will cost $104 per month (2013), withdrawn monthly from your social security check or, if you don’t yet collect social security, billed to you.

Because there is no out-of-pocket maximum with Medicare, private insurance companies offer Medicare supplements (Medigap plans) to cover part or all of the deductible in Part A and part or all of the cost-share left in Part B.  Medicare supplements are just that—true supplements for which you pay a separate premium.  Medicare pays first, then the supplement plan pays its share.   Plans offered are titled A, B, C, D, F, G, K, L, M, and N.  To find out what these plans will cover, go to Medicare.gov. and search Choosing a Medigap Policy.  Medigap plans do not use networks.  Any provider who accepts Medicare will accept the payment of the Medigap plan.  Medigap covers what Medicare covers.

With the Balanced Budget Act of 1997, Congress allowed private insurance companies of offer another kind of Medicare insurance—Medicare+Choice, or Part C.  With the Medicare Modernization Act of 2003, Rx coverage was added as an option and Medicare+Choice became Medicare Advantage.  Medicare Advantage is very different from Medigap.  Medicare Advantage is not a supplement; it replaces original Medicare coverage (Don’t worry, you’ll still be in the Medicare program).  When you enroll in a Part C plan you leave original Medicare and the Part C plan pays your providers.  Medicare pays the plan your Part B premium and costs for Part A coverage. Part C plans are managed care plans, which means you are limited to a network of care providers who agree to accept the networks terms and agreed payments for services.  Plans range from HMOs to PPOs and PFFS plans.  If you choose a Part C plan you need to make sure your doctor participates in the network; otherwise, you may have to pay the full cost or a steep deductible before the plan will pay.  Any provider you use—from diabetes test kit providers to doctors—should be in the network.  PSSF plans (private fee for service) are an exception, but providers agree to the terms of service on the spot, each occurrence.  Part C plans are strictly regulated by CMS (Center for Medicaid and Medicare Services) and are required to have an annual maximum out-of-pocket cost no greater than $6,700.  Some plans offer a $3,400 maximum out-pocket-cost.

Prescriptions drug coverage is often included in Part C plans.  As separate plans added to Medicare or a PFFS plan, Rx Plans are titled Part D.  So now there are four Medicare Parts to remember:

Part A – hospital coverage

Part B – doctor’s coverage and outpatient

Part C – Part A, Part B and often Part D combined in a managed care plan

Part D – Stand-alone Rx plan added to Medicare or many PFFS plans

Be careful not to confuse Part with plan.  Part always refers to one of the above; plan will always refer to a supplement to Part B or an HMO/PPO plan.  Exception—stand-alone Part D coverage is often referred to as a Part D plan.

So which way do you go?  You can stay with original Medicare and buy Part B coverage, add a supplement plan to the Part B coverage (Medigap), or opt for Part C.  It really depends on you— what you need and what you can afford.  Choosing a Medigap plan may cost more and you may want to add a Part D (Rx) plan to it.  Your cost could range from $100 to $175 per month.  Part C plans often are less expensive – from $0 to $200, depending on where you live.  If you spend many months out of your home state you may want a Medigap plan because it does not depend on a network.  Part C plans will cover you for emergencies out of state even if the provider is out-of-network.  To understand more, go to Medicare.gov or consult a licensed health insurance agent in your state who is also authorized to offer Medicare plans.  Ask for an agent who can offer both Medigap and Part C plans so you can view understand your options.