medicare basicsEveryone has heard of Medicare, but you may not really be sure what it is. Medicare is the national health insurance program for Social Security recipients who are over 65 years or disabled. Those receiving railroad retirement benefits, disabled individuals after a waiting period, and individuals suffering from end stage renal disease are also eligible for Medicare. Medicare is an entitlement program and not a means-tested benefit. That means that if you paid into the system you are eligible (at age 65) and cannot be denied. There is no asset nor income test for eligibility (unlike Medicaid which is a welfare/means-tested benefit). Medicare is a nation-wide program, so benefits are the same no matter where you live.

Medicare works a lot like private health insurance: it pays a portion of the cost of medical care. You will probably have to pay some deductibles and co-insurance, but otherwise, the Medicare program will pay for your medical needs. But, it doesn’t pay for everything, and the co-pays can be hefty, so you have to understand how the parts of Medicare work too.

Medicare has two major components, Part A and Part B. Part A covers inpatient hospital care, hospice care, inpatient care in a skilled nursing facility, and home health care services. Part B covers medical care and services provided by doctors and other medical practitioners, home health care, durable medical equipment, and some outpatient care and home health services. Now there is also Part D that pays for prescription drugs. You have to pay a premium for both Part B and Part D.

You paid for Part A during your working years through federal payroll deductions. Once you turn 65 (or become disabled) you can apply for Part A and you won’t have to pay anything more for it. You have to pay for Part B with monthly premiums that are usually deducted from your Social Security check. You will also have to pay any co-pays or deductibles out of your own funds when you get care. Most people buy private supplemental health insurance policies (often called Medi-Gap policies) to cover the deductibles and some other costs. You have probably seen those plans advertised on television. They are almost a necessary component of your insurance planning after retirement.

There are also Medicare managed care plans (Medicare Advantage) that are more like HMOs (Health Maintenance Organizations). Some offer more coverage than Medicare itself and some have hefty premiums too. There has been much controversy over these programs and they are being cut back. This area is likely to change a lot in the near future.

When you retire and apply for Social Security or when you reach age 65, you should apply for Medicare. Some disabled individuals who get Social Security benefits can get Medicare right away while others may have to wait two years to qualify. When eligible, you can enroll at a local Social Security office ,or in today’s electronic world, you can apply online at www.socialsecurity.gov.