Medicare is the federal government's health insurance program for people age 65 and older. If you're under 65, you also might be eligible if you have certain disabilities or permanent kidney failure. When you sign up for Medicare, you'll hear a lot about Parts A, B, C and D. Here's a quick guide to what each part covers.
Parts A and B: Original Medicare
About 75 percent of Medicare beneficiaries are enrolled in original Medicare, says Fred Riccardi, director of programs and outreach at the Medicare Rights Center in New York City. With original Medicare, you have your choice of doctors and hospitals. Benefits are paid directly by the government.
Part A: Hospital Insurance. This is free for most beneficiaries. It helps cover inpatient care in a hospital or skilled nursing facility, but not long-term care in a nursing home. It also covers hospice and some home health care.
Part B: Medical Insurance. The Part B monthly premium in 2011 is $115.40 for most beneficiaries, although some high-income individuals pay more. This part helps cover doctor's services, medical tests, hospital outpatient care, some home health care and durable medical equipment. Coverage includes many preventive services, such as flu shots and mammograms, which help maintain your health or detect an illness at an early, more treatable stage. It also includes a few medications, such as shots you get in a doctor's office and certain oral cancer drugs. But Part B doesn't cover the majority of prescription drugs; for that, you need a Part D plan.
Part C: Medicare Advantage Plans
This is an alternative to original Medicare for which you usually pay an additional premium. Medicare Advantage plans are administered by private insurance companies and cover the same benefits as Parts A, B and usually D. Some also include extra benefits, such as dental, vision or hearing services.
If you join a Medicare Advantage plan, the government pays a fixed amount to the insurance company every month for your care. The company can then set its own rates for your out-of-pocket costs. It also can make rules about how you access care, such as requiring you to use only certain doctors and hospitals or to get a referral to see a specialist. "The costs and restrictions vary from plan to plan, so make sure you understand what you're getting," Riccardi says.
"Watch out for hidden costs," Riccardi adds. For example, a plan with a low co-payment for doctor visits may look like a bargain, but savings may be temporary or nonexistent if you have to pay more for other services.
Part D: Prescription Drug Coverage
Part D is an option for which you pay a monthly premium. Medicare drug plans are managed by private insurance companies and help cover the costs of prescription drugs. This coverage can be obtained two ways: If you have original Medicare, you can enroll in a separate prescription drug plan. If you have a Medicare Advantage plan, prescription drug coverage often is included in the package.
"Plans differ in their costs and the drugs they cover," Riccardi says. When comparing plans, also look at whether they limit how much medication you can get at one time or if they require you to try lower-cost drugs first.
Some people already have drug coverage through an employer's or a union's insurance plan. If you have other coverage that is at least as good as Medicare's standard drug benefit (called "creditable" coverage), don't drop it without carefully weighing the consequences, Riccardi says. You may not be able to get it back. On the other hand, if you don't have other drug coverage, consider joining a Medicare drug plan when you first become eligible, even if you aren't taking any expensive medication. Otherwise, you may have to pay a penalty to join later.
Mastering the ABCDs of Medicare isn't simple. To learn more about your choices, call Medicare at (800) 633-4227.
