Medicare: What is it and how does it work?

Medicare is a federal health insurance program, not a needs-based program, for most elderly Americans (over the age of 65), people under 65 who qualify for disability income and persons who are suffering from end-stage renal disorders. It was first created in 1965 as part of the Social Security Act. For those 65 and older, they may receive Medicare if they are entitled to Social Security or railroad retirement benefits. If not entitled to Social Security, any individual who is a resident citizen or permanent resident alien of the United States who may be entitled to receive Part B Medicare coverage may purchase Part A coverage as well. Monthly premiums are charged for Part A and Part B coverages. Once you reach the age of 65, you can start receiving Medicare benefits.

Medicare Part A is hospital insurance and covers inpatient hospital stays, care in a skilled nursing facility, hospice care and some home health care. Medicare Part A only pays for a limited amount of skilled nursing care. For those who have Original Medicare (Part A and B), as long as the patient has been admitted to a hospital (as an “inpatient” and not under observational status) for at least 3 days, Medicare will pay for rehabilitation at skilled nursing care at 100% for up to 20 days. During day 21 to 100, Medicare will continue to pay, however, there is a co-pay of $157.50 per day (for 2015 – this changes on an annual basis). If the patient has supplemental insurance, this will usually take care of the co-pay. Once 100 days has passed, the patient must either privately pay for skilled nursing care (at the average cost of $8,346 per month), have long term care coverage that pays for the care, or qualify for Medicaid to pay for the care.

Medicare Part B is medical insurance which covers certain doctors’ services, outpatient care, medical supplies, and preventative services.

Some people opt out of “original Medicare” and, instead, choose a Medicare Advantage Plan which is also known as Medicare Part C. This is health care that is offered my private health insurance companies and provides the beneficiary with all the Part A and Part Be benefits. Medicare Advantage Plans include HMO’s, PPO’s, private fee-for service plans, special needs plans and Medicare Medical Savings Account Plans. Most services in a Part C plan are covered through the plan and not paid for through Original Medicare. Additionally, most Medicare Advantage Plans offer prescription drug coverage. It is important to note that coverage for skilled nursing care is not the same under a Part C plan as it is under Original Medicare and the amount of time the Plan will pay for in skilled nursing depends on the particular health insurance company.

Medicare Part D is prescription drug coverage that can be added to Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-For-Serive plans and Medicare Medical Savings Account plans. Part D plans are offered by insurance companies or other private companies approved by Medicare.

If you have questions about the type of coverage you have, you can check your “red, white and blue” Medicare card, check the other insurance cards you have been given, check with your Medicare health or drug plan enrollment, or call Medicare at 1-800-MEDICARE (1-800-633-4227).

Authored by Laurie E. Ohall
Reviewed by Jill Burzynski