What is Medicare?
Medicare is a Federal health insurance program that pays for hospital and medical care for elderly and certain disabled Americans.
The program consists of two main parts for hospital and medical insurance (Part A and Part B) and two additional parts that provide flexibility and prescription drugs (Part C and Part D).
Medicare Part A, or Hospital Insurance (HI), helps pay for hospital stays, which includes meals, supplies, testing, and a semi-private room. This part also pays for home health care such as physical, occupational, and speech therapy that is provided on a part-time basis and deemed medically necessary.Part A is generally available without having to pay a monthly premium since payroll taxes are used to cover these costs.
Medicare Part B is also called Supplementary Medical Insurance (SMI). It helps pay for medically necessary physician visits, outpatient hospital visits, home health care costs, and other services for the aged and disabled. For example, Part B covers:
• Durable medical equipment (canes, walkers, scooters, wheelchairs, etc.)
• Physician and nursing services
• X-rays, laboratory and diagnostic tests
• Certain vaccinations
• Blood transfusions
• Renal dialysis
• Outpatient hospital procedures
• Some ambulance transportation
• Immunosuppressive drugs after organ transplants
• Certain hormonal treatments
• Prosthetic devices and eyeglasses.
Part B requires a monthly premium ($96.40 per month in 2009), and patients must meet an annual deductible ($135.00 in 2009) before coverage actually begins. Enrollment in Part B is voluntary.
What’s a Medicare health plan?
Generally, a plan offered by a private company that contracts with Medicare to provide Part A and Part B benefits to people with Medicare who enroll in the plan. Medicare health plans include all Medicare Advantage Plans, Medicare Cost Plans, and Demonstration/Pilot Programs. Programs of All-inclusive Care for the Elderly (PACE) organizations are special types of Medicare health plans. PACE plans can be offered by public or private entities and provide Part D and other benefits in addition to Part A and Part B benefits.
What drug plans cover?
Each Medicare drug plan has its own list of covered drugs (called a formulary). Many Medicare drug plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost.
A drug in a lower tier will generally cost you less than a drug in a higher tier. Sometimes, if your prescriber thinks you need a drug that’s on a higher tier, you or your prescriber can ask your plan for an exception to get a lower copayment.
A Medicare drug plan can make some changes to its formulary during the year within guidelines set by Medicare. If the change involves a drug you’re currently taking, your plan must do one of these:
• Provide written notice to you at least 60 days prior to the date the change becomes effective.
• At the time you request a refill, provide written notice of the change and a 60-day supply of the drug under the same plan rules as before the change.
What about services that are not provided through Medicare?
Supplemental coverage for medical expenses and services that are not covered by Medicare are offered through MediGap plans. MediGap consists of 12 plans that the Centers for Medicare and Medicaid Services have authorized private companies to sell and administer. Since the availability of Medicare Part D, MediGap plans are no longer able to include drug coverage.
Who is eligible for Medicare?
To be eligible for Medicare, an individual must either be at least 65 years old, under 65 and disabled, or any age with End-Stage Renal Disease (permanent kidney failure that requires dialysis or a transplant.)
In addition, eligibility for Medicare requires that an individual is a U.S. citizen or permanent legal resident for 5 continuous years and is eligible for Social Security benefits with at least ten years of payments contributed into the system.
Who pays for services provided by Medicare?
Payroll taxes collected through FICA (Federal Insurance Contributions Act) and the Self-Employment Contributions Act are a primary component of Medicare funding. The tax is 2.9% of wages, usually half paid by the employee and half paid by the employer. Moneys are set aside in a trust fund that the government uses to reimburse doctors, hospitals, and private insurance companies. Additional funding for Medicare services comes from premiums, deductibles, coinsurance, and copays.
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