What I Need to Know About Medicare

Medicare was signed into U.S. law in 1965 by President Lyndon B. Johnson. Medicare was part of the Social Security Act of 1965, which also created Medicaid, a health insurance program for low-income individuals. Medicare was originally offered in only two parts, named A and B. In 1997, Medicare Part C was added, which allows beneficiaries to purchase Parts A and B from private insurance companies. Then, 2003, prescription drug insurance called Part D. Though Medicare is available to all U.S. citizens under certain circumstances, there is much people do not know about it.

Enrollment

• Most people are not eligible for Medicare insurance until they turn 65 years old. If you receive or are eligible for Social Security benefits before you turn 65, you may also be able to enroll in Medicare. If you are already getting Social Security when you turn 65, you will be enrolled in Parts A and B automatically, although you can decline Part B later if you choose. If you are not already receiving Social Security, you will have to contact the Social Security Administration yourself in order to join. Your initial enrollment period runs from three months before the month your turn 65 to three months after your birthday month, for a total of seven months.

Premiums

• Many Medicare beneficiaries receive Part A free of monthly premiums. If either you or your spouse has worked at a job where they paid 10 years, or 40 quarters, of Medicare taxes, you are eligible for premium-free Part A. Part B always entails a premium. In 2011, new Part B members pay $115.40 a month. Medicare Part C, often called Medicare Advantage, may or may not need premiums. This depends on which company you buy it from and which plan you purchase. Some MA plans have no monthly premiums in exchange for higher co-pays or deductibles. Part D stand-alone plans also have monthly premiums.

Benefits

• Each part of Medicare has its own benefits. Part A helps cover inpatient hospital costs, home health services and hospice care. Part B adds coverage for outpatient hospital services, preventive services, some vaccinations and doctor's visits. Medicare Advantage insurance companies can choose which, if any, extra benefits they offer in addition to A and B, but many include hearing, vision or dental coverage. Part D is insurance for prescription medications only.

The Part D Doughnut Hole

• One of the most misunderstood things about Medicare is the Part D "doughnut hole." Part D insurance offers help with the costs of prescription drugs only up to a certain amount. When the total retail cost reaches a certain level, Part D benefits stop. This initial coverage limit can vary slightly, but in 2011, most Medicare users had an initial coverage limit of $2,840. After you reach your initial coverage limit, you must pay all the costs of your prescriptions alone until you reach the catastrophic coverage threshold. New legislation that went into effect in 2011 allowed users a discount on both generic and brand-name drugs while in the hole. After you reach the catastrophic phase, benefits begin again.