What is Medicare?

Medicare is a federal health insurance program for Americans age 65 or older, or for those who qualify because of a disability. Medicare is designed to help cover a large percentage of medical costs, but it does not cover all healthcare expenses. Today, there are several types of coverage under Medicare, including:

1. Medicare Part A & B (Original Medicare)
2. Medicare Supplement Plans (known also as Medigap & Medicare Supplement Insurance, private policies that cover the gaps in original Medicare, are unnecessary with Medicare Part C plans)
3. Medicare Part C (known as Medicare Advantage plans, takes the place of A & B)
4. Medicare Part D (known as Prescription Drug Coverage, offers drug coverage from private insurers)

Choosing the best coverage depends on what you want, your health needs, and your income level.

Brief History of Medicare

President Franklin Roosevelt first introduced the idea of a government health care system, but his efforts to pass such a system were unsuccessful. President Harry Truman also supported a national health insurance program. President Truman originally advocated a much larger program, but the Social Security Administration proposed a smaller plan which only covered those receiving Social Security benefits. President Lyndon Johnson signed the plan known as Medicare into law on July 30, 1965.

The Balanced Budget Act of 1997 introduced the Medicare Advantage program (first called Medicare+Choice), which offers additional health plans provided by private insurers. Instead of Medicare Parts A & B, Medicare Advantage (Part C) provides the benefits of Parts A & B plus additional coverage at higher premiums.

Medicare underwent a significant restructuring in 2003 with the Medicare Prescription Drug Improvement and Modernization Act. The law encouraged private companies to offer Medicare coverage plans, introduced Prescription Drug Coverage under Medicare Part D, and created Health Savings Accounts (HSA). In 2006, Medcare Part D became available for seniors. Medicare Part D is a voluntary program that encourages private companies to offer prescription drug insurance.

How it Works

In the United States, a portion of workers' paychecks is taken out and added to a national pool that supports Medicare. When workers become Medicare eligible, they can apply for and receive Medicare benefits. Most Americans will receive a letter in the mail from the Social Security Administration informing them when they are eligible.

Medicare Part A & B (Original Medicare)

Original Medicare consists of Parts A & B. Medicare Part A offers hospital insurance, and helps cover inpatient care costs in hospitals, such as critical access hospitals, long-term care hospitals, and inpatient rehabilitation facilities. Medicare Part A also helps to cover skilled nursing facility, hospice, and home health care expenses. Part A does not cover custodial or long-term care. When you sign up with Medicare, you are automatically enrolled in Part A.

If you are age 65 or older and you or your spouse paid Medicare taxes for a minimum of 10 years, you can get receive Medicare Part A benefits without having to pay monthly premiums. You are eligible for premium-free Part A benefits if:

1. You are eligible to receive retirement benefits from Social Security or the Railroad Retirement Board but you have not yet filed for them.
2. You are currently receiving retirement benefits from Social Security or the Railroad Retirement Board.
3. You or your spouse was employed in a Medicare-supported government job.

You may be able to buy (via a monthly premium) Plan A coverage if you or your spouse did not pay Medicare taxes and you are a citizen or permanent resident of the United States. Most seniors don't have to pay a monthly premium for Part A.

Medicare Part B is a voluntary program offering medical insurance, and helps cover doctor services, outpatient care, durable medical equipment costs (ex. wheelchairs), physical therapy, medical supplies, and certain preventive services. In general, Part B will pay 80% of Medicare-approved amounts for covered services. While doctor's services are covered, routine physical exams are not, except for a one-time "Welcome to Medicare" physical exam within the first six months of receiving Part B coverage.

While most seniors don't have to pay a premium for Medicare Part A, a monthly premium is required for Part B. If you wish to sign up for Part B, a monthly premium will be taken from your Social Security check. If you don't receive Social Security payments, you will receive a bill every 3 months.

With original medicare (Parts A & B), you have your choice of doctors, hospitals, and health providers. Generally, you pay your own deductibles and coinsurance, and pay a monthly premium for Part B. While original Medicare provides coverage for a large share of medical costs, it still has many gaps, including:

1. Covered Services
2. Prescription Drugs
3. Long Hospital Stays
4. Deductibles
5. Coinsurance
6. Copays

Medicare Supplements, Medigap Plans

While original Medicare is good coverage for most people, there are notable gaps in original Medicare. The largest gap is staying too long in a hospital or nursing home, as Medicare only gives 60 lifetime reserve days after a 90-day benefit period. This means after you have used all 60 lifetime reserve days, Medicare will not help. Another major gap in original Medicare is paying for nursing home rehabilitation services after a three-day hospital stay. Medicare only covers the first 20 days at full cost, and a significant copay is required thereafter. Medicare also does not cover prescription drug expenses.

If you like your current Medicare Part A & B coverage but just want to plug the gaps, you can choose to buy a Medicare Supplement Insurance (Medigap) policy. Medicare Supplement plans are offered by private insurers, such as Anthem Blue Cross, and offer various price and coverage options.

With Medicare Supplements, you keep existing Medicare coverage and pay a separate premium for extra protection. Medicare Supplements can be an effective and cost-effective solution to the Medigap dilemma.

Anthem offers several Medicare Supplement plans, including Plan A (Low Cost, Minimum Benefits), Plan F (Most Complete Coverage), Plan G (a cost/benefit compromise plan), & Plan N (an even greater compromise of cost/benefit).

Medicare Part C, Medicare Advantage Plans

Many seniors need additional coverage. Perhaps Medicare Parts A & B just aren't enough to cover your expenses, and you need something better. You may be looking for Medicare Part C Advantage plans.

Medicare Part C is offered by private insurance companies such as Anthem and replaces original Medicare Parts A & B. You pay a monthly premium in addition to your Medicare Part B premium and any copayments or coinsurance for covered services. Medicare Advantage plans include the same level of coverage that original Medicare does and offer many benefits that Medicare does not. Medicare Advantage Plans often offer extra coverage, including vision, hearing, dental, and health and wellness programs. Most plans also provide prescription drug coverage, making a separate Medicare Part D plan unnecessary.

Medicare Part D, Prescription Drug Benefits

Medicare Part D is Prescription Drug Coverage, offered by private insurers. Part D plans are completely voluntary, and serve to help seniors cover the high cost of prescription drugs. There are a variety of options and monthly costs for Part D plans. Insurers often create a formulary for each plan, which is simply a list of drug types that the plan covers.

If you currently have original Medicare (Part A & Part B), prescription drugs are not covered. To get prescription drug coverage, you need to select and join a Medicare Part D Prescription Drug Plan, or, for even more coverage, you can choose a Medicare Advantage Plan that includes prescription drug coverage.

If you currently have a Medicare Advantage Part C Plan, and want prescription drug coverage, in many cases you can get it through your Medicare Advantage plan. If your Medicare Advantage plan doesn't offer prescription drug coverage, you can join a Medicare Prescription Drug Plan.

Anthem and offers plans that provide Prescription Drug Benefits in Virginia. Anthem offers three Part D Prescription Drug plans (Anthem Blue).