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Know the Basics About Medicare

Medicare is the federal health insurance program for almost all Americans age 65 and older and for many adults with disabilities. You need to know the basics about Medicare so that you can help your parents -- or yourself, if you are on Medicare -- with health care planning.

What Medicare Covers

Medicare consists of two parts: Part A and Part B. Together, the two parts provide coverage for basic medical services.

Americans age 65 and older are automatically entitled to benefits under Medicare Part A if they are eligible to receive Social Security. In addition to hospital inpatient care, Part A covers some skilled nursing facility (SNF), home health, and hospice care. For those who are entitled to Part A, there is no monthly or annual premium charge, but there is a deductible for each episode of hospital inpatient care, and daily coinsurance after a 60-day stay. Skilled nursing facility care coverage is limited to 100 days; people on Medicare do not pay coinsurance for the first 20 days, but do pay coinsurance for each day thereafter. There is no coinsurance for Medicare home health services, or an absolute limit on the number of Medicare-covered home health visits. However, you must continue to meet specified eligibility requirements as a condition of receiving home health services.

Part B pays for doctors’ services, outpatient hospital care, and home health visits not covered under Part A. It also covers laboratory tests -- for example, X-rays and blood work; medical equipment, such as wheelchairs and walkers; outpatient physical therapy; mental health care; and ambulance services. Part B has an annual $100 deductible and, for most services, 20 percent coinsurance. People enrolled in Part B must pay a monthly premium ($50.00 in 2001), which is typically deducted from their Social Security checks.

For a description of services covered under Medicare Part A and Part B, and how much people on Medicare must pay for each of these services, see the table below.

What Medicare Does Not Cover

You and your parents should be aware that the basic Medicare plan does not cover all health care expenses -- for example, it does not pay for outpatient prescription drugs, long-term custodial care at home or in a nursing home, eye exams, eyeglasses, hearing aids, or dental care. In addition, Medicare generally does not pay for care provided outside the United States. However, Medicare HMOs often provide some coverage of supplemental benefits, such as prescription drugs or dental care, in addition to the basic benefits covered in the traditional Medicare program, described in the table above.

Plan for Medicare Enrollment

If your parents are receiving Social Security benefits when they turn 65, they are entitled to Medicare Part A and Part B, and will automatically be enrolled in both A and B on the first day of the month that they turn 65. A Medicare card will arrive in the mail about three months before their birthday. Your parents can choose to decline Part B coverage, but they should take it if they want full Medicare benefits.

If your parents are still working at age 65, and believe that they may not need Part B because they have health coverage under an employer plan, they should check with their local Social Security office before declining Part B to be sure they will not have to pay a penalty for late enrollment. Your parents may elect to delay Part B enrollment at age 65 if either of them is still working for a company with 20 or more employees and has health coverage under an employer plan. They will then avoid duplicating Part B coverage and paying the Part B monthly premium. Your parents will not incur any premium penalties for waiting to enroll in Part B, as long as they do so before they lose coverage under their employer plan or within eight months after losing their employer coverage.

If your parents are citizens or permanent residents, but not entitled to Medicare (for example, because your folks did not work enough years to qualify), they may still voluntarily enroll in Medicare. However, they must pay a monthly premium for Part A benefits ($300 in 2001).

If your parents are entitled to, but not receiving, Social Security benefits, they must apply for Medicare, because they will not be enrolled automatically. They may apply at any Social Security office during the initial enrollment period, which begins three months before they turn 65, includes the month of their birthday, and the three months after.

If your parents have continuation health care coverage from a former employer, sometimes called COBRA, they should still enroll in Medicare Parts A and B during their initial enrollment period, because their health insurance under COBRA ends as soon as they are eligible for Medicare.

If your parents do not enroll in Medicare during the initial enrollment period, they must enroll during a general enrollment period, which is January 1st through March 31st of every year. Their coverage will begin on July 1st of the year they sign up. If they wait until the general enrollment period, they will incur a penalty for each year they delayed enrollment.

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Last modified: 11/04/07