The Ins and Outs of Medicare

Medicare turned 40 in 2005, while surrounded by plenty of controversy. One of the primary issues is whether the program should be privatized in hopes of saving it from possible extinction in the next 20 to 30 years. Meanwhile, Medicare continues as the national health insurance program designed to

provide health care for people 65 and over, as well as many individuals who are disabled. Funded by tax dollars from employee earnings and matched by employers, the two-part program continues to provide both basic hospital insurance and medical insurance. Medicare currently covers some 40 million Americans.

Despite the ongoing political battles, Medicare has made some recent improvements. For example, workers who have not yet reached retirement age are now able to establish tax-free health savings accounts to put away money to cover various health-related costs.

In addition, a prescription drug card is now available. While this is not a Medicare drug plan, recipients will be able to save money on certain prescription drugs. For people with low incomes, additional assistance will be provided. The cards are offered by individual companies, such as HMOs and PPOs.

While Medicare provides assistance to millions of people, many gaps in coverage still remain, such as a $912 deductible for the first 60 days of a hospital stay, and a $228-per-day co-pay for days 60 to 90 of a hospital stay. These, among other gaps, have created a need for seniors to have additional coverage through Medicare HMOs — also known as Medicare Advantage. These plans are offered to seniors by health insurance companies in compliance with federal Medicare regulations. They can help lower costs and minimize paperwork. Medicare Supplemental Insurance Plans, known as Medigap Plans, are also available from health insurers to help pay for what Medicare doesn’t cover during the gap periods.

In 2006, a new drug benefit plan (Part D) replaces the current prescription drug cards. Medicare recipients will have the option to join the program, which will cost about $35 per month or $420 per year. Once someone becomes eligible for Medicare, he or she will have a specified time period in which to sign up. If the person signs up later, there will be an additional fee. Plans will vary, but there should be a standard $250 deductible annually. After the deductible, Medicare will cover 75 percent of drug costs up to $2,250. Once again, there will be a Medicare gap. The recipient has to spend an additional $2,850 in out-of-pocket drug costs. At that point the Medicare Drug Benefit Plan will continue with payments, this time covering 95 percent of drug costs.

It’s important to pay attention as Medicare news unfolds, since there will likely be changes throughout the coming years. For more information, go to Medicare's Web site.