is a federal government insurance system that helps tens of millions of seniors and people with disabilities pay for their health care. It’s the only truly national health care program in the United States – meaning that it’s available regardless of your income, the state of your health, or where you live nationwide – and it has been enduringly popular since it began in 1966.
Yet Medicare works like no other insurance you may have known in the past. To avoid total confusion, you’re wise to gain at least a broad understanding of how the program is put together and how its rules may affect you personally.
This chapter provides an overview of the program: addressing common concerns about how Medicare is different from other types of health insurance; describing the four parts of Medicare coverage (A, B, C, and D); and providing a checklist for the decisions that you have to make in choosing among the coverage options that Medicare offers.
When the prospect of becoming a Medicare beneficiary looms on the horizon, you suddenly become aware – if you’re like most people – of how little you know about the program. And even if you think you know, can you be sure that the information you have is accurate? Based on the questions I receive all the time, I can tell you that a lot of perceptions about Medicare are way off base; quite often, they’re gleaned from the Internet or even mass emails that are deliberately designed to spread misleading information and scare seniors.
But if you’ve had health insurance in the past, especially from an employer, you may be nervous about how Medicare coverage compares with it. So before I examine how Medicare actually works later in this chapter, I want to tackle some of the concerns people frequently raise about the program:
❯❯ As a government-run system, will Medicare give me inferior care? No (or at least, not inherently). The federal government runs and regulates Medicare and also largely pays for the medical services you use. Even so, those actual services are almost wholly private. The doctors you go to are not government employees; the hospitals and laboratories that provide services to you are not government-owned. Instead, they’re free to enter or not enter into contracts with Medicare as they choose. Those who accept you as a Medicare patient are the same kind of independent, private practitioners that you would’ve seen for diagnosis and treatment before coming into Medicare.
❯❯ Will Medicare allow me fewer choices than I have now? No. In fact, the reverse may be true. If you’ve had health insurance from a private employer, for example, you probably had only two or three plans to choose from each year. In contrast, Medicare offers a choice between the traditional program (in which you can go to any doctor or other provider in the United States that accepts Medicare patients) and a variety of private Medicare Advantage health plans, which are likely similar to health plans you may have known in the past. Depending on where you live, you may be overwhelmed by the number of options; in some areas, as many as 50 different Medicare Advantage plans are available. Also, at least 25 private Part D plans in each state offer Medicare prescription drug coverage. (I explain Medicare Advantage and Part D plans, and how they differ from the traditional program, in the next section.)
❯❯ Will my health issues and preexisting medical conditions work against me? Current and past health problems don’t bar anybody from Medicare coverage or cause anybody to pay higher premiums or co-pays than somebody who is in perfect health. That kind of discrimination, so common in the past in private health insurance, has never existed in Medicare. The one exception is that people with advanced kidney failure can’t enroll in a Medicare Advantage health plan; however, they still receive coverage for the appropriate care – regular dialysis or a kidney transplant – under the traditional Medicare program. (For the record: A history of smoking, alcohol use, or obesity doesn’t increase rates either.)
❯❯ Will Medicare be less expensive than the insurance I have now? Medicare isn’t free. Just like other insurance, it requires monthly premiums, deductibles, and co-pays that you’re responsible for paying unless you qualify for a low-income program or have extra insurance that covers these costs (see Chapter 4 for details). However, you need to consider the alternatives. Without Medicare, most older and disabled people wouldn’t be able to find affordable insurance on the open market.
Compared to most employer insurance (which as a whole covers younger and healthier people), Medicare is reasonably priced. In 2015, Medicare Part B premiums at the standard rate cost $104.90 per month per person, whereas workers’ monthly contributions to employer insurance averaged $90 for a single person and $402 for a family of two or more, according to the Kaiser Family Foundation’s 2014 survey of employer health benefits. Still, this isn’t an apples-to-apples comparison; many employees pay more than these averages for health benefits, and Medicare beneficiaries usually pay extra for drug coverage, while those with higher incomes pay more than the standard premiums.
❯❯ Will I pay a large deductible before getting Medicare coverage? Medicare does have some deductibles, but they’re relatively small compared with the ones many people pay in high-deductible health plans that are sponsored by employers or bought on the open insurance market. (I examine deductibles, along with co-pays and other Medicare costs, in detail in Chapter 3.)
❯❯ Will my out-of-pocket expenses be capped in Medicare? Not necessarily. Traditional Medicare sets no limit on the costs you pay out of pocket during a year, although you may buy Medigap insurance to cover those costs (see Chapter 4). But all Medicare Advantage plans are required by law to set caps on these expenses (up to $6,700 per year, but some plans have lower limits). And in the Part D program, after you’ve spent a certain amount out of pocket on your prescription drugs in a year, you qualify for catastrophic coverage that greatly lowers your costs for the remainder of the calendar year.
❯❯ Do I have to sign up for Medicare again every year? No; your coverage just rolls over from year to year unless you decide to change it. But you do have the opportunity to change your coverage if you want to during the open enrollment period that runs from October 15 to December 7 each year. During this time, you can switch from traditional Medicare to a Medicare Advantage plan (or vice versa), from one Medicare Advantage plan to another, or from one Part D prescription drug plan to another, as explained in Chapter 15.
❯❯ Will Medicare cover my younger spouse or other dependents? No. Family coverage doesn’t exist in Medicare – not for spouses, dependent children, or other family members. Each person must wait until age 65 to join the program unless he qualifies through disability at a younger age, as explained in Chapter 5. Also, if you and your spouse are both in Medicare, each of you must pay premiums separately and in full unless you receive government assistance to help pay for them. Medicare doesn’t give price breaks for married couples, even in its private Medicare Advantage health plans and Part D drug plans.
❯❯ Will Medicare coverage be cut off when I grow old? No! Medicare coverage is based on medical necessity, not age. So if you need a hip replacement when you’re in your 90s or even over 100, Medicare picks up most of the cost in the usual way.
