Confused About Medicare?


Medicare is the national health insurance program to which all Social Security recipients who are either over 65 years of age or permanently disabled are eligible. In addition, individuals receiving railroad retirement benefits and individuals living with end stage renal disease are eligible to receive Medicare benefits.

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Medicare is not a welfare program, and should not be confused with Medicaid. The income and assets of a Medicare beneficiary are not a consideration in determining eligibility or benefit payment. Medicare is a national program and procedures should not vary significantly from state to state.

Coverage under Medicare is similar to that provided by private insurance companies: it pays a portion of the cost of medical care. Often, deductibles and co-insurance (partial payment of initial and subsequent costs) are required of the beneficiary.

Medicare has two substantive coverage 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.

Part A of the program is financed largely through federal payroll taxes paid into Social Security by employers and employees. Part B is financed by monthly premiums paid by Medicare beneficiaries and by general revenues from the federal government. In addition, Medicare beneficiaries themselves share the cost of the program through copayments and deductibles that are required for many of the services covered under both Parts A and B.

An increasing number of beneficiaries are financing their health services through managed care plans. The Medicare managed care benefit is different from the traditional Medicare “fee-for-services” system but coverage should generally be the same. Generally, a Medicare managed care plan administers the health care treatment of an enrollee by the use of a physician (known as a “gatekeeper”) who must approve the patient’s referral to specialized care. (Some Medicare managed care plans permit beneficiaries to go directly to a specialized care provider, without the gatekeeper’s approval, in return for payment of an extra premium.) A beneficiary may choose to receive Medicare coverage and care through a managed care plan by filing an enrollment form. Once the choice is made, the beneficiary generally must receive all of his or her care through the plan in order to receive Medicare coverage. Beneficiaries can change their minds, disenroll from their managed care plan, and return to “original” Medicare.

These plans are currently referred to by the administration as “Medicare Advantage” plans.  They are intended to offer options for the financing of Medicare covered health services. The options will include “coordinated care plans,” which include managed care plans, as well as medical savings accounts, private fee-for-service plans, and other options. Beneficiaries should enroll in such plans only after careful study and thought.

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