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Decoding the Language of Medicare

If you are not familiar with Medicare, it can seem like a different language. In “Medicare-speak” you hear “Medicare A,” “Part B,” “Part D,” “Medicare Advantage,” “Medigap,” “Medicaid,” . . .  What does all this mean?

Here is an overview of the program.

Medicare is a social medical insurance program administered by the United States federal government. You become eligible for Medicare when you turn 65-years-old. People younger than 65 with certain disabilities can also qualify for coverage.

There are two ways to receive Medicare coverage: “Original Medicare” and “Medicare Advantage plans.”

Original Medicare has two parts:

  1. Part A covers inpatient hospital care, skilled nursing facility care, and hospice care. Part A is funded by a payroll tax levied on both employees and their employers. If you have Part A coverage, it is free provided that you or your spouse paid Medicare payroll taxes for at least 10 years while you were working. Otherwise, you pay a monthly premium. You choose where you get your care and the provider bills Medicare.
  2. Part B covers doctor services, outpatient care and home health care. You pay a monthly premium. The amount you pay depends on your current income. Many seniors have the premium deducted from their monthly Social Security benefit.  As with Part A, you choose where you get your care and the provider bills Medicare.

Medicare Advantage Plans

Also called “Part C,” these insurance plans are comprehensive care programs that include the same coverage offered by Original Medicare except hospice care. There are several different types of Medicare Advantage plans including Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO).  Medicare Advantage Plans are sold by Medicare-approved private companies. The different plans vary in how much you pay in premiums, deductibles and co-pays.

You either have Part A and Part B (Original Medicare) or Part C (Medicare Advantage). You cannot have both.

Medicare Part D

Part D is prescription coverage purchased from a Medicare-approved private insurance company. Anyone who has Original Medicare can purchase Part D insurance.  You pay a monthly premium, deductibles and co-pays. Most Medicare Advantage Plans (Part C) include prescription benefits so Part D is often not needed.

Medicare Supplemental Insurance /Medigap

If you have Original Medicare, you will have out-of-pocket expenses: annual deductibles and co-pays. Medicare Supplemental Insurance, commonly called “Medigap,” helps pay for these costs. Medigap insurance has several standardized plans that are sold by Medicare-approved private insurance companies. You pay a monthly premium to the insurance company.  If you have a Medicare Advantage plan (Part C), you cannot purchase Medigap insurance.

Medicaid

Medicare is often confused with Medicaid. Medicaid is a joint federal and state program that provides medical insurance for low income people of any age. Each state sets its own criteria to determine whether an individual qualifies for coverage. Some seniors have both Medicare and Medicaid.

Medicaid also pays for long term care for low income seniors.  Traditionally this has meant nursing home care, but more options are becoming available for home and community-based services.

Medicare does not pay for long term care. To qualify to have Medicaid pay for your long-term care, you need to be extremely low income. For example, in Vermont where I live, to qualify for Medicaid, your savings cannot exceed $2,000.

This is a general overview.  There are so many details and rules to the Medicare program that the Centers for Medicare and Medicaid publish a book about it every year titled, Medicare & You.  This book is mailed to Medicare recipients every fall.   Or, you can click here to access it on line.