Parts of Medicare

At present, there are four parts of Medicare program:

Part A is Hospital Insurance, which helps pay for inpatient care in a hospital, hospice, and some health care or nursing facility following hospital care. Since most people (or their spouses) worked for at least 10 years in Medicare-covered employment and paid taxes, this part of Medicare program is normally provided free to the eligible member.

Part B is Medical Insurance, which covers physician and outpatient hospital care and some other medical services, such as lab tests and x-rays. Part B of Medicare is basically meant to fill some gaps in medical insurance coverage of Part A. Part B is optional, and you have to pay a monthly premium if you enroll. The sum of the premium varies and there is an annual deductible. Part B will pay 80 percent of Medicare and you remain responsible for the other 20 percent of the Medicare charges.

Part C is Medicare Advantage (Medicare + Choice), which means that a person covered by Medicare Part A and B can get their health services through some provider organization at their choice. In other words, if you are entitled to Medicare Part A and enrolled in Part B, you can choose to switch to a Medicare Advantage plan. Private Health Insurance companies often enter into contract with the federal government to offer Medicare benefits by means of their own policies.

Part D is Drug Coverage, which pays for drugs your doctor may prescribe you. It is a sad fact that many senior Americans cannot afford to properly follow their doctors' prescriptions, as medications are notoriously expensive today. Though the elderly citizens make only about 15 percent of the U.S. population, they fall at about 40 percent of America's prescription drug costs.

Thus, Medicare Drug Coverage protects members who tend to have very high medication costs as well as covers from unexpected prescription drug bills. Since the drug benefit is not a part of the "Original" Medicare program (Part A and B), you can join a Prescription Drug Plan (PDP) or you can join a Medicare Advantage Plan (MA) or other Medicare Health Plan which provides drug coverage.

How to Sign up for Medicare

When a person who is receiving Social Security benefits becomes eligible at 65, he or she is automatically enrolled in Medicare Parts A and B. If a person is not receiving Social Security benefits before 65, he or she will be automatically enrolled on the day of application for benefits. If you are not ready to retire at the age of 65, make sure you enroll in Medicare Parts A and B when you turn 65 anyway, since your enrollment in this case won't be automatic. People wishing to be automatically enrolled in Medicare receive an initial enrollment package by mail normally three months before their 65th birthday.

Medicare program does not cover everything and it is vital to make your homework and check your policy for what is and what is not covered. Carefully read the information in your enrollment package and always have your medical bills well organized. You may wish to delay enrolling, but not enrolling at the age of 65 may result in higher premium later on.

Cost-sharing is the portion of a Medicare beneficiary's health care costs that the beneficiary is responsible for paying after Medicare pays for its share of the billed charge. Cost-sharing can be in the form of co-insurance, co-payments, premiums and deductibles.

Deductible is a fixed amount you have to pay in before your insurance starts to cover the medical services you receive.

Excess Charges (Excess Costs) - the difference between the Medicare-approved charges and the actually billed charge.

Formulary is a list of prescription drugs that are covered in accordance with your plan. The formulary offered by any drug coverage plan is to include two drugs of one and the same kind. Otherwise, the drug of this type must be excluded from coverage under Part D.

General Enrollment Period is the period from January 1 through March 31 of any year following the year when you turn 65 and have an opportunity to submit an application for Medicare.

Generic Drug is a prescriptive drug that has the same ingredient formula as the corresponding brand-name drug. Generic drugs are approved by Food and Drug Administration. They usually cost less than brand-name drugs.

Hospice Care is an establishment that helps to cater to the needs of terminally ill people and the program ensuring relevant services.

Initial Enrollment Period is the period when you become first eligible for Medicare beginning three months before your 65-th birthday, continuing the month of your birthday and three months after it. If you sign up for Medicare within the Initial Enrollment Period, you will incur no penalties, no matter what if you have Medical Insurance or Prescription Drug Coverage through Medicare.

In-Network / Par / Participating Providers are providers of medical services who work under contract with Medicare and have established connections with your insurance company.

Medicare Advantage Plans (MA), also referred to as Medicare Part C, are special plans offered to Medicare beneficiaries by private companies which work in conjunction with Medicare and cover the full range of hospital and doctor services covered in Original Medicare. They also may reimburse you for extra costs beyond the Medicare-approved amount. The most notable Medicare Advantage Plans are Health Maintenance Organization, Preferred Provider Organization, Fee-for-Service Plan, Medicare Cost Plan and Medical savings Account.

Medicare Advantage Prescription Drug (MA-PD) Plan is a Medicare Plan offering a Part D prescription drug benefit in conjunction with such plans as Health Maintenance Organization, Preferred Provider Organization or a private Fee-for-Service Plan.

Medicare Prescription Drug Plan (PDP) is a stand-alone plan offered under Medicare Part D to provide a prescription drug benefit.

Medigap is a Medicare supplemental insurance program offered by private companies, aimed at filling the gaps in Original Medicare and providing hospital, doctor and drug coverage benefits that the latter does not.

Original Medicare Plan is the traditional Fee-for-Service arrangement according to which services offered by Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) are covered.

Out-of-Network / Non-Par / Non Participating Providers are medical providers without an established connection with an insurance company which offers a particular plan in the area.

Out-of-Pocket Costs are the costs for the services which are not included in your insurance plan. Sometimes you may have to pay out-of-pocket costs if the cost of the service you need exceeds the Medicare-approved amount.

Premium is a monthly amount you pay for receiving benefits offered by Medicare Part B and Part D.

"Reasonable and Necessary" Care means the services which are covered by Medicare Part A (Hospital Insurance) required for the diagnosis or treatment of a particular disease. Utilization Review Committee is the highest body responsible for determining what is "reasonable and necessary" in a particular medical situation. Your physician will inform you about the services that are regarded as "reasonable and necessary"for your diagnosis.

Skilled Nursing Facility is a medical institution that continuously provides inpatient nursing care and related services to people recuperating from a serious disease or an injury.

Preexisting Condition Exclusion is the situation when an individual cannot be exposed to a Health Insurance coverage due to a medical condition he/she had before signing up for Medicare.

The first part of the Original Medicare Plan is Hospital Insurance (Medicare Part A). It ensures the protection you might need to bridge the gap between hospitalization and recovery, allowing you to concentrate on getting better. Hospital Insurance covers medical treatment on an inpatient basis (including nursing care and related services furnished by Medicare-certified hospitals), skilled nursing facility, critical access hospitals (facilities that provide limited inpatient and outpatient services to people in rural areas), home health care and hospice care. If you are hospitalized for a covered condition, with Hospital Insurance you will receive daily benefits for the stipulated term of your inpatient treatment.

The basic benefits covered by Medicare Hospital Insurance are usually referred to as "reasonable and necessary". Your physician will help you determine the "reasonable and necessary" benefits for your diagnosis. To bring your Hospital Insurance into force, you are to meet the following requirements. You are to have a physician's prescription for inpatient hospital care to provide the treatment of an illness or an injury. You cannot apply to any hospital to receive the services you need. The hospital you are applying to ought to be participating in Medicare. And the Utilization Review Committee of the hospital is to approve of your physician's prescription.

Hospital Insurance also covers home health care expenses. The underlying condition in this case is that the recipient is homebound and cannot leave the house without assistance even for a short trip to hospital. In such a situation a Hospital Insurance recipient can qualify for skilled nursing care, physical therapy, speech therapy or occupational therapy. The agency providing health care services at home is to belong to the comprehensive network of providers working under the contract with Medicare.

The Hospital Insurance Plan covers a limited set of services. Many important services remain uninsured and may require substantial expenses. For example, Hospital Insurance does not cover custodial or long-term care. The number of days for inpatient treatment or skilled nursing facility care in a benefit period can be limited. At the same time if something bad were to happen, the out-of-pocket expenses would be noticeably mitigated provided you are entitled for the Hospital Insurance Plan.

An individual is charged with deductibles and specified co-payments for Part A benefits. Your Hospital Insurance plan usually covers the greater part of the customary fees. On average, you are expected to cover 20% of the cost. If your doctor charges more than your insurance company finds appropriate you may end up paying more than 20% of the cost. You should also be aware of the hidden costs associated with a hospital stay, such as the cost of private hospital rooms, private duty nursing, transportation and housekeeping expenses which you may have to cover out-of-pocket.

Medicare Part A is available to most Americans. No monthly premium is required for this coverage. Given the range of benefits it offers, it is advisable to accept Hospital Insurance when you are eligible for it and then, if necessary, you can extend this policy through other types of health insurance plans which provide the services not covered by Medicare Part A.

Medical Insurance is not devoid of some gaps that may incur financial losses. Medicare Part B Plan requires you to pay an annual deductible ($131 for 2007) and monthly premiums ($93,5 or more depending on your income for 2007). The monthly fee is usually taken right out of your Social Security payment. Moreover, Medical Insurance does not include Prescription Drug coverage, which means that you will have to pay for medication. It is reasonable to apply to one of the prescription drug plan options (see the corresponding section "Drug Coverage"). But again you must be ready for premiums and deductibles. These charges may seem excessive; therefore, you should consider all the available options. Keep in mind that your Medicare Part B premiums may be paid through a Medicare Savings Program applying to qualified Medicare beneficiaries, specified low-income Medicare beneficiaries, qualified individuals (QI-1) and qualified disabled working individuals. You may reasonably opt out of Medical Insurance if you are still covered by employer or union health insurance which will be primary to cover your medical treatment expenses.

If you are applying to a provider who is not participating in Medicare, you will incur greater expenses. The cost you will have to pay in this case depends on whether your Medicare has a fixed limit on the expenses you can be charged (also referred to as the "charge limit") by a non-participating provider. The charge limit is normally over 15% of the Medicare-approved amount. At the same time you should know that some providers do not accept the "charge limit" (such as some medical equipment suppliers) and in this case Medicare will not reimburse you for excess charges.

Medicare Part B is voluntary, but it really helps pay for the covered medical services and items when they are medically necessary. Like with any other type of insurance coverage, it is advisable to make informed decisions about the necessity and validity of enrolling in Medical Insurance. It may turn out that with this type of insurance you are buying peace of mind.

Some HMOs offer Medicare Advantage Prescription Drug Plans. You can choose whether to accept this option or to buy a stand-alone Prescription Drug Plan. At the same time you should remember that if your HMO does not offer Part D benefits, you cannot use a stand-alone Prescription Drug Coverage unless you are enrolled in Medicare Part D.

Medicare Advantage Preferred Provider Organization (PPO) operates under many rules of HMO. This plan allows you to pay less if you apply to doctors and hospitals indicated in your plan. Usually there is a network of providers who cooperate with a particular insurance company. But as a PPO enrollee you may use the services of other providers, though in this case you may incur additional medical costs. The good news is that PPO recipients usually have an annual limit on their out-of-pocket expenses which vary depending on the plan.

Generally you do not need a referral to see a specialist or any provider outside the network. If you choose to enroll in PPO, you are likely to get your Prescription Drug Coverage through your plan. To start your PPO coverage you should pay a deductible.

Medicare Advantage Fee-For-Service Plan (PFFS) allows you to apply for medical services to any providers who accept this plan's term and conditions of payment. The PFFS beneficiaries are not required to maintain a network of providers. Yet you should know that some doctors or hospitals may refuse to accept the terms and conditions of the PFFS plan if they work in conjunction with Original Medicare. Thus, if the plan's terms of participation and payment rates are those of Medicare, providers of PFFS can refuse to treat a patient any time they find the conditions unacceptable. With this plan you can have extra benefits which Original Medicare does not cover, such as extra days in hospital. Your PFFS plan may offer Medicare Prescription Drug Coverage but if it does not, you can join a separate Medicare Prescription Drug Plan. Beneficiaries' premiums, co-payments and deductibles are generally lower than in the Fee-for-Service system within Original Medicare.

Medicare Cost Plan (a type of HMO) allows you to apply to specialists or hospitals outside the plan's network, but in this case the Medicare services offered in Part A and Part B will be covered under the conditions set in the Original Medicare Plan, whereas the Medicare Cost Plan will pay for emergency services and urgently needed services beyond the Original Medicare domain. Many Medicare Cost Plans provide Prescription Drug Coverage. If your plan does not, you can get your Prescription Drug Coverage through a stand-alone Medicare Prescription Plan.

Medicare Advantage Medical Savings Account (MSA) covers your health care expenses (hospital and medical services from Part A and Part B) through a tax-free, interest-bearing bank account funded by Medicare. If you have spent all the money from your account there are two ways to cover health care services you might need. Unless you have reached the highest deductible you will have to pay out-of-pocket. If you have surpassed the fixed limit of your deductible, your plan will pay for all Medicare-covered services. This considered, Medical Savings Account Plans are usually subdivided into two parts:

A high-deductible Medicare Advantage MSA Health Plan covers your Part A and B benefits once you meet the plan's high yearly deductible; and

A Medical Savings Account is a bank account into which Medicare deposits money for you. You can use this money to pay for health care costs, including meeting the health plan's deductible. Any money you do not use will remain in the account and be added to Medicare's next deposit.

A significant feature of MSA plan is that you cannot enroll if you are already receiving the benefits of another coverage before your MSA plan's high deductible is met. Therefore, you should bear in mind that neither of the following insurance policies is compatible with MSA: Medicaid, Medigap, Employer Group Health Plan, Retiree Coverage, Veteran's Coverage, Federal Employee Health Benefits Plan.

It is also important to remember that an MSA does not include Prescription Drug Coverage. To receive this benefit, you need to enroll in a stand-alone Medicare Prescription Drug Plan.

On the whole, Medicare Advantage Plans are commonly regarded as an addition to the Original Medicare Plan and an alternative to Medicare Supplement (Medigap) Plans. If you are considering the options of Medicare Advantage and Medigap policies to meet your needs, you should keep in mind that if you have one of Medicare Advantage Plans (Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Medicare Cost Plans, Medicare Medical Savings Account Plans), Medigap policy will be redundant.

In order to join Medicare Advantage Plans you have to be Medicare Parts A and B beneficiary and to continue paying the required Part B premium. People with the

It is recommended to check the details of coverage carefully as some of the plans may not offer the drugs you need. It can be helpful to make a list of the drugs you need, the brand names offering them, possible substitutes for each drug, dosage amount and dosage schedule. Then you can easier tailor a plan to your needs. Remember that plans may change year to year, therefore, it is advisable to check your coverage on a regular basis to make sure that your Prescription Drug Plan, either PDP or MA-PD, still meets your needs.

You must know that your drug coverage plan can choose the drugs to offer to the beneficiaries and correspondingly take off certain drugs of the formulary. In this case you are to receive a notice 60 days before the old coverage stops. The situation may have some solutions. You only need to choose the one that suits you most. You can ask your insurance company to cover the drug for a higher premium. The situation is known as exception. In this case your physician is to certify the necessity of this particular drug for your diagnosis. The company may refuse to extend your plan by including the drug in question. If your application is denied, you can appeal the decision through a series of instances.

Another way to get your Drug Coverage is to switch to another plan which has the drug in question on its formulary. It is important to speak to an insurance agent to make sure when you are allowed to switch to another plan. You may do it either once a month or within an established period.

Convenience is also a determining factor in choosing a prescription drug plan. Check up what pharmacies are part of the plan and whether they accept mail orders.

Prescription drugs are an essential component of health care. Medicare Prescription Drug Plans, both PDP and MA-PD, can ensure tangible protection against unexpected drug expenses, which are sometimes soaring, and excessive drug bills in the future. As we grow older, most of us need drugs to maintain our health. Even if now it seems you are perfectly healthy and do not need to think about Drug Coverage, it is sensible to consider joining.

Earlier some Medigap policies used to offer prescription drug coverage, but after 2006 they do not offer this benefit to new enrollees. If you signed up for a plan with drug coverage when it was available (Plans H, I or J), you can keep it unless you enroll in Medicare Part D. And you may not keep your Medigap policy with prescription drug coverage and at the same time sign up for Medicare Prescription Drug Coverage. Thus, to cover drug costs you have to make an option of enrolling either in a Stand-alone Drug Plan or a Medicare Drug Plan. If you enroll in a Medicare Prescription Drug Coverage Plan, it is advisable to contact the insurance company providing your Medigap policy to adjust your premium correspondingly.

You should know that under certain conditions Medigap policies may turn out to be redundant. It is crucially important to carefully examine the available options. If you are in any of the Medicare Advantage Plans, you do not need Medigap coverage as the benefits duplicate each other. A Medigap plan is also redundant if you are a full Medi-Cal recipient. Medicaid recipients as well as people who are eligible for coverage under the Qualified Medicare Beneficiary Program (QMB) or the Specified Low-Income Medicare Beneficiary Program (SLMB) do not need Medigap policies as their insurance policies usually cover their health care costs. They still may apply for Medigap, if they want to, but it will incur extra costs. As practice shows, Original Medicare beneficiaries generally do not sign up for Medicaid or QMB, and the real choice for Medicare beneficiaries is usually limited by Medicare Advantage Plans and Medigap Plans.

Remember that if you had a prior coverage (for example, another Medigap policy or any of the Medicare Advantage plans), you may have to be exposed to the waiting period for coverage of a pre-existing condition. However, no pre-existing condition exclusion will be imposed on you if you had a prior coverage for at least 6 months before your initial Medicare enrollment period.

If you are considering a Medigap policy as a supplementary option to extend your coverage provided by Original Medicare, you should also be aware of the restrictions imposed on some groups of citizens who do not qualify for Medigap Insurance. Thus, you are not allowed to use your spouse's Medigap Plan, so you must purchase separate policies. Individuals with the end-stage renal disease are not eligible for Medigap policies either.

On purchasing a Medigap policy, you may find your policy inappropriate and change your mind. In this case you are allowed to cancel your policy within 30 days. You will receive a refund of the previously paid premium.

If you have chosen a Medigap policy as an additional option to provide yourself with the benefits you might need, it is recommended to apply for it before the Medicare initial enrollment period begins. It will ensure that your Medigap coverage will go into effect simultaneously with Medicare.

Medicare Part A is normally free. No monthly premium is required for the benefits you receive. If you do not qualify for Medicare Hospital Insurance (e.g. you are not entitled to Social Security or Railroad Retirement benefits or if you are disabled but have lost your Medicare privileges due to a substantial income) and you have reached the age of 65, you can buy this insurance policy and become a voluntary enrollee. In this case a premium will be charged.

Eligibility for Medicare Part B (Medical Insurance) does not essentially differ from eligibility for Part A. The same categories of citizens qualify for Medical Insurance. As a general rule, three months before your 65-th birthday you will get a notification of your eligibility for Medicare Parts A and B from Social Security Administration. You will get a special card marking you as a Medicare enrollee. You return the card only if you do not want to sign up for Medicare Part B. The cards may differ in color thus showing what parts of Medicare you have signed up for: red, white or blue for hospital insurance, medical insurance or both correspondingly. Your Medical Insurance will automatically go into effect on the first day of the month when you turn 65, unless you opt out of it. (It is the average situation, of course, and in case you are disabled, you can apply for Medicare benefits at any time provided you have been eligible for Social Security disability benefits.) Enrolling in Part B normally requires a monthly premium which is based on your income.

Signing up for a Medicare Advantage Plan (Part C) is possible if you are already receiving Medicare benefits from Part A and Part B. You will receive a special card from your provider in accordance with which you will get all the services offered in your plan.

Enrollment in Part D (Prescription Drug Coverage) is optional. If you have decided to apply for it, you will have to join a Medicare private drug coverage plan. The Part D premium depends on the drug coverage plan you choose. Like in other types of insurance, if you do not sign up for Medicare Part D within the initial enrollment period, you will have to pay penalties.

The date of your enrollment in Medicare can become a decisive factor granting timely health care and determining your convenience. That is why it is important to know that there are special Enrollment Periods when you may sign up for Medicare.

If you are not getting Social Security benefits you should apply to Social Security office three months before you turn 65 - this is the beginning of your seven months initial enrollment period. If you start three months before your 65-th birthday you have seven months to enroll in Medicare without having to pay penalties.

The date when your insurance becomes effective depends on the date of your enrollment. Remember that the date when you enroll is important for Part B and Part D beneficiaries and for the applicants who are not automatically entitled for Medicare Part A. Accordingly, if you do not turn down acceptance to Medicare Part B within the first three months of your initial enrollment period, your medical insurance protection (both parts - A and B) becomes effective right when you become eligible, i.e. on the first day of the month when you turn 65. If you enroll during the month when you turn 65, your coverage goes into effect on the first day of the month following the month of your 65th birthday. If you enroll within three months following the month of your birthday, your coverage becomes effective two months after the enrollment.

Besides the seven months initial enrollment period, there is the general enrollment period which opens one more opportunity to submit an application for Medicare from January 1 through March 31 of any year following the year when you turn 65. In this case your coverage will come into force on July 1.

You should remember, though, that late enrollment is fraught with penalties. When it comes to Medical Insurance (Part B), your monthly premium increases 10 percent for each 12 months you qualified for but did not enroll in Medicare Part B. If you delay enrolling in Prescription Drug Coverage (Part D) you generally pay 1 percent of the average national premium for each month of the delay.

If you have insurance through your employer, you can enroll in Medicare at any time while you have the company health insurance and during seven months after the termination of work. It is the special enrollment which has its own peculiarities and thus requires special treatment. You should know that if the company you are working for has 20 or more employees (100 employees if you are disabled) your employer health insurance will pay for you. And you needn't worry about signing up for Medicare while your employer health insurance is valid. You can do it at any time. But if there are fewer than 20 employees (fewer than 100 in case of your disability) your employer insurance will pay only after Medicare