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| The Basics | Your quick guide to the new Medicare
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Avoid unpleasant surprises later by boning up on the basics now. Here's what's covered, what's not and what you'll end up paying for. Plus, the big changes ahead.
By MSN Money staff
Medicare is berated, debated and hated in Congress and in heartland America. Critics say it costs too much and beneficiaries complain that it offers too little. Yet this government program pays for about half of all medical costs for people age 65 and older.
Here is a quick primer on what you need to know about Medicare. For more in-depth information, check out the Medicare Web site link to the left.
What it is: Medicare provides benefits for certain health-care services and equipment. To be fully covered, you need both Part A (hospital insurance) and Part B (medical insurance). The chart below explains the differences between Part A and Part B, and then a second chart explains what is covered under the plans. We also have information about Medigap policies.
Who qualifies: Anyone who is 65 years old is eligible for Medicare benefits. If you're under 65, you also may qualify if you have been receiving Social Security disability benefits for at least 24 months or if you have a chronic kidney disease.
Providers: You can go to any doctor or hospital that accepts Medicare.
| Medicare types of insurance | | Part A | Part B | | Helps pay for hospital, skilled nursing, home health and hospice care. | Helps pay for doctors, outpatient health care and some other services not covered in Part A, such as physical and occupational therapy. | | Cost: Free to Medicare-eligible patients | Cost: $66.60 per month in 2004 |
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This chart, based on information from the Medicare Web site, shows what is covered and what you pay under both Parts A and B. The Medicare Web site version of this information is available in PDF format only, which requires you to have or install Adobe Acrobat software. You can access it from the link to the left.
| Medicare coverages | | Part A: Covered services | What you pay | Part B: Covered services | What you pay | | Hospital stays: Semiprivate room, meals, general nursing and other hospital services and supplies. | $840 for hospital stay of 1-60 days. $210 per day for days 61-90. $420 per day for days 91-150. All costs beyond 150 days. | Medical expenses: Doctors' services, inpatient and outpatient medical and surgical services, supplies, speech, occupational and physical therapy and related medical equipment. | $100 deductible per year. 20% of approved amount after the deductible, except in outpatient setting. 50% for most outpatient mental health. 20% for all occupational therapy services. | | Skilled nursing facility care: Semiprivate room, meals, skilled nursing services and supplies. | $0 for first 20 days. Up to $105 a day for days 21-100. All costs beyond 100th day in benefit period. | Clinical laboratory services | 0 | | Home health care: Intermittent skilled nursing care, physical therapy, speech language pathology services, home health aide services, medical equipment (such as wheelchairs and hospital beds) and supplies and other services. | $0 for home health care services. 20% of approved amount for medical equipment. | Home health care: (If you don't have Part A) Intermittent skilled care, home health aide services and supplies. | $0 for services. 20% of approved medical equipment costs. | | Hospice care: Pain and symptom relief and support services. Home care is provided. | Limited costs for outpatient drugs and inpatient respite care. | Outpatient hospital services: Services for diagnosis and treatment of illness or injury. | No less than 20% of Medicare payment amount (after deductible). | | Blood: From a hospital or skilled nursing facility during a stay. | For first three pints. | Blood: As outpatient or as part of Part B covered service. | First three pints plus 20% of approved amount for additional pints (after deductible). |
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Big changes in the works
The overhaul signed into law in November 2003 makes sweeping changes, the biggest the inclusion of a prescription drug benefit.
An interim benefit will allow seniors to buy a discount card early next year good for at least 15% savings. Beginning in 2006, beneficiaries can sign up for a stand-alone drug plan or join a private health plan that offers drug coverage. They will be charged an estimated premium of $35 per month, or $420 per year. After meeting a $250 deductible, insurance will pay 75 percent of drug costs up to $2,250. There will be no coverage for drug costs between $2,250 and $3,600 out of pocket -- the so-called coverage gap.
When out-of-pocket spending reaches $3,600, insurance covers 95 percent of drug costs or requires a modest co-payment. The premium, deductible and coverage gap will be waived for people earning up to $12,123 a year. To qualify for the subsidy, seniors can have no more than $6,000 in fluid assets. The subsidies will be phased out between $12,123 and roughly $13,500 in yearly income.
Also beginning in 2006, the legislation gives beneficiaries the option of enrolling in private health maintenance organizations or preferred provider organizations. Beginning in 2010, the legislation provides a demonstration, with direct competition between traditional Medicare and private plans in as many as six metropolitan areas. The law increases Medicare funding for doctors, hospitals and other health care providers, particularly in rural areas, where reimbursement levels are far below what is paid in other regions of the country.
For the first time, higher-income seniors - those with incomes of more than $80,000 as an individual or $100,000 as a couple -- will be required to pay more for their Medicare Part B (doctor, out-of-hospital coverage) premiums than other beneficiaries. Now, beneficiaries pay 25 percent of the Part B premium and the government pays the rest. Individuals with incomes greater than $80,000 will pay a larger premium. The size of their premium will increase on a sliding scale, topping out at 80 percent for people with incomes over $200,000. The deductible will rise from $100 to $110 in 2005 and thereafter be indexed to the growth in Part B spending. Individuals with incomes below $13,055 and couples with incomes below $17,619 and with assets no greater than $6,000 per individual and $9,000 per couple will pay no deductible and no monthly premium for the new drug benefit.
Medigap plans
You may buy one of 10 standard supplemental insurance policies, also known as Medigap plans, for extra benefits. These policies are sold exclusively by private insurance companies and are designed to help pay Medicare's coinsurance amounts and deductibles, thereby "filling the gaps" in Medicare coverage.
Cost: You pay the $66.60 monthly premium as outlined with Part B requirements, as well as an additional monthly premium for this policy. Premium costs vary by state, insurer and often times, by age. All charges are in addition to the $66.60 monthly premium as outlined in Part B requirements.
Options:
- Indemnity coverage: You can choose any doctor or hospital that accepts Medicare.
- Medicare Select: This type of preferred-provider plan usually costs less because you must use certain doctors and hospitals, except in an emergency.
Why you would purchase it: Supplemental insurance policies will pick up coverage where standard Medicare policies leave off, including covering some services that the traditional Medicare plan does not provide.
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