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What Is Medicare?

Understanding the Main Components of Medicare

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Updated October 10, 2011

Medicare is a health insurance program. To be covered under Medicare, you must fall into one of three categories. Medicare is for people 65 or older, people under age 65 with qualifying disabilities, or people with any stage of end-stage renal disease (permanent kidney failure that requires dialysis or a kidney transplant).

Four Parts of Medicare

To understand Medicare, you must understand its different parts. There are four parts -- Medicare Part A, Medicare Part B, Medicare Part C, and Medicare Part D. It's important to know the services that are covered under each part.

Medicare Part A is also referred to as "hospital insurance" because it is the portion that covers inpatient care in hospitals and helps cover care in a skilled nursing facility, hospice, and home health care. (What Does Medicare Part A Cover?)

Medicare Part B is the "medical insurance" portion that helps to cover services provided by your doctor or other health care provider, outpatient care, durable medical equipment, certain aspects of home health care, and some preventive services. (What Does Medicare Part B Cover?)

Medicare Part C is more typically known as a "Medicare Advantage Plan." It is one of two ways you can get your Medicare coverage, i.e., via Original Medicare or a Medicare Advantage Plan. (More About Medicare Advantage Plans)

Medicare Part D is the "prescription drug coverage" portion of Medicare. Part D is run by Medicare-approved private insurance companies. Signing up for Medicare Part D should help lower the cost of your prescription drugs. To get the most savings, you should consider the monthly premium and covered drugs when choosing a Part D provider. (More About Medicare Prescription Drug Plans)

Your Medicare Coverage Options

We alluded to the two ways you can get your Medicare coverage, but let's take a closer look at the differences between Original Medicare and Medicare Advantage Plans. Obviously, the right vehicle for you is the option that provides the most coverage at the most reasonable cost.

Original Medicare includes Medicare Part A and/or Part B. You can choose any doctor, hospital, or other health care provider that accepts Medicare. Usually, there is a monthly premium that you pay for Medicare Part B -- and either you or a supplemental Medigap plan pays your deductibles and co-payments (co-pays). Medigap policies (also known as Medicare Supplement Insurance Policies) are extra, optional coverage provided by private insurance companies. Medigap is so-named because it fills the gaps in Original Medicare coverage. The cost and coverage of Medigap insurance varies. You may also enroll in a Medicare Prescription Drug (Part D) plan to help cover the cost of your prescription drugs. If you are interested in either a Medicare Prescription Drug (Part D) plan or Medigap plan, do your homework and compare.

Medicare Advantage Plans include both Medicare Part A and Medicare Part B. The plans are similar to HMOs and PPOs. Medicare-approved private insurance companies provide Medicare Advantage Plans. In most cases, with a Medicare Advantage Plan, you must use doctors, hospitals, and other health care providers within the plan. If you choose a provider outside the plan, expect to pay more or all of the cost of services.

If you choose to enroll in a Medicare Advantage Plan, there usually is a monthly premium in addition to the monthly premium you pay for Medicare Part B and there is a co-pay for covered services. Costs, coverage, and rules vary among the Medicare Advantage Plans.

Most Medicare Advantage Plans have some level of prescription drug coverage included in the plan. In certain Medicare Advantage Plans that do not not offer prescription drug coverage, you can join a Medicare Prescription Drug (Part D) plan. However, be very cautious about the rules. If you are in a Medicare Advantage Plan that does include prescription drug coverage and you choose to also join a Medicare Prescription Drug (Part D) plan, you will be disenrolled from the Medicare Advantage Plan and returned to Original Medicare. The reason -- you can't have prescription drug coverage through both.

Sources:

Medicare & You 2012. The Official U.S. Government Medicare Handbook. Centers for Medicare & Medicaid Services.

Medicare Basics. Medicare.gov. Accessed 10/8/2011.
http://www.medicare.gov/navigation/medicare-basics/medicare-basics-overview.aspx

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