Medicare Coverage:
As you estimate the expenses you are likely to incur after you retire, pay attention to the costs of medical care, especially medical insurance.
You are likely to spend $3,500 to $11,000 annually on medical insurance -- and that’s before you visit a doctor or hospital, before you even fill a prescription, see a dentist, or visit an optician.
Your primary defense is Medicare. Sign up for it three months before your 65th birthday. Medicare consists of Part A and Part B. Sign up for both; if you delay signing up for Part B until after you lack coverage, the premium for Part B increases 10% for every year you defer.
Note: If you are still employed and covered by health insurance at work, defer signing up for Part B until you are no longer covered at work.
Medicare is the Federal health insurance program for Americans age 65 and older and for certain disabled Americans. If you are eligible for Social Security or Railroad Retirement benefits and are age 65, you and your spouse automatically qualify for Medicare.
Medicare has three parts: hospital insurance, known as Part A, supplementary medical insurance, known as Part B, which provides payments for doctors and related services and supplies ordered by the doctor, and prescription drug coverage, known as Part D which covers both brand-name and generic prescription drugs at participating pharmacies in your area.
If you are eligible for Medicare, Part A is free, but you must pay a premium for Part B and Part D.
Let’s see what each part covers:
Part A is free -- thank you, Uncle Sam -- and it pays part of the expenses for inpatient hospital charges. It also pays for skilled nursing facility care. However, it pays nothing for the first 20 days, but for day 21 through 100, it pays up to $114 per day. Part A also pays a very small amount of home health care costs.
Under Part A, you will pay the following for each benefit period. (Benefit periods start the first day the Medicare client is provided inpatient hospital, skilled nursing, or rehabilitation services and ends when the Medicare client has not been an inpatient of a hospital or other facility for 60 consecutive days.)
- A deductible of up to $912 for a hospital stay of 1-60 days.
- $228 per day for days 61-90 of a hospital stay.
- $456 per day for days 91-150 of a hospital stay.
- After 150 days, you pay all costs.
Did I say Part A is free? Well, that’s because you’ve been paying for it via Social Security payroll taxes. Oh, you didn’t have an earned income or accumulate 40 quarters of Social Security coverage? Well, in that case, you will have to pay the Part A premium, and it’s expensive ($375 per month). So it’s worth staying -- or getting -- employed so you can rack up those 40 quarters (that’s 10 years) under the Social Security system.
Part B, by contrast, is not free. The monthly premium for one person is $78.20. Thus, married couples will pay $1,876.80 this year. Part B pays for some physician charges, outpatient hospital services, certain home health services, and durable medical equipment. There’s a $110 deductible this year, and you pay 20% of the Medicare-approved amount for services after that.
But even used together, Medicare Parts A and B don’t cover everything. Unfortunately, there are lots of gaps between what care costs and what Medicare pays. For example, after 150 days in a hospital and 100 days in a skilled nursing facility, Medicare pays little to nothing. Because of these “gaps,” the insurance industry offers a solution: So-called “Medigap” policies help cover what Medicare itself does not.
Some people who are covered by Medicare buy private insurance, called "Medigap" policies, to pay the medical bills that Medicare doesn't cover. Some Medigap policies cover Medicare's deductibles; most pay the coinsurance amount. Some also pay for health services not covered by Medicare.
There are 10 standard plans from which you can choose. (Some States may have fewer than 10.) If you buy a Medigap policy, make sure you do not purchase more than one.
There are 10 versions of Medigap insurance, labeled A to J. Look at all 10 and decide which you like best -- A offers the least benefits and is the least expensive; J is the opposite -- and then shop around for the best price.
You’ll pay $800 to $10,000 or more a year per person. To learn more about the policies and the costs, go to www.medicare.gov and click on “Medicare Personal Plan Finder.”
Medicare will pay for many of your health care expenses, but not all of them. In particular, Medicare does not cover most nursing home care, long-term care services in the home, or prescription drugs. There are also special rules on when Medicare pays your bills that apply if you have employer group health insurance coverage through your own job or the employment of a spouse.
Medicare usually operates on a fee-for-service basis. HMOs and similar forms of prepaid health care plans are now available to Medicare enrollees in some locations.
The best source of information on the Medicare program is the Medicare Handbook. This booklet explains how the Medicare program works and what your benefits are. To order a free copy, go to: www.medicare.gov. You also can contact your local Social Security office for information.
You need to shop carefully before deciding on the best policy to fit your needs. You may get another booklet, Guide to Health Insurance for People with Medicare, to help you in making the right choice. To order a free copy, go to: www.medicare.gov.
Another good source of information on the same topic is The Consumer's Guide to Medicare Supplement Insurance. To order a free copy, go to: www.medicare.gov.
Medicaid
For specifics on Medicaid eligibility and the health services offered, contact your State Medicaid Program Office.
Medicaid provides health care coverage for some low-income people who cannot afford it. This includes people who are eligible because they are aged, blind, or disabled or certain people in families with dependent children. Medicaid is a Federal program that is operated by the States, and each State decides who is eligible and the scope of health services offered.
General information on the Medicaid program is given in the Medicaid Fact Sheet. For a free copy, go to: www.medicare.gov.