What is Medicare?
Medicare is a federal government-sponsored health insurance program intended to help people 65 or older pay their medical bills. (People younger than 65 who have certain disabilities may also be eligible.)
The program covers some, but not all, medical expenses; and it is important to know that Medicare does not cover most long-term care costs.
Medicare is a “pay as you go” system similar to Social Security that is financed by a 2.9% payroll tax, half (1.45%) paid by workers and half by their employers, as well as by monthly premiums deducted from
Social Security checks. Unlike Social Security, however, there is no upper income limit above which earnings are not taxed for Medicare.
While you apply for Medicare through the Social Security Administration, it is run by the Centers for
Medicare and Medicaid Services, a division of the U.S. Department of Health and Human Services. As a beneficiary, however, you deal mostly with the private insurance companies that actually handle the claims at your local level.
The amount Medicare pays is based on the average “reasonable and necessary” cost for the specific care you need — in the area of the country where you receive it. So Medicare benefits are not based on your financial resources or ability to pay.
Key take away - Like Social Security, Medicare is an earned benefit that many qualifying retirees depend on to help pay for at least a portion of their health care.
Medicare Coverage Choices
Most people get their Medicare health care coverage in one of two ways.
1. Original Medicare Plan - Choose Part A (hospital), Part B (medical) and Part D (prescription drug) coverage from the government and buy a Medigap insurance policy from a private provider. This strategy offers you greater choice of doctors; however costs may be higher than in Medicare Advantage Plans.
2. Medicare Advantage Plan - Choose Part C (which includes Part A and Part B coverage) from a private provider like an HMO or PPO. Many of these plans also include Part D, but if your provider’s plan does not, you may choose to receive Part D from the government. Generally you must see doctors in the plan, however your costs may be lower than in the Original Medicare Plan, and you may get extra benefits.
Key take away - your costs vary depending on your plan, coverage and the services you use.