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Medicare Benefits and Eligibility

Medicare is the U.S. government's health-care program for people age 65 and over. President Harry Truman proposed the idea in 1945, and President Lyndon B. Johnson signed Medicare into law in 1965. A major change came in 2003, when the Medicare Modernization Act added an outpatient prescription-drug benefit to the original Medicare package. Medicare Advantage plans, which often include hospitalization, doctor services and prescription drug coverage, are an option to original Medicare. As Baby Boomers reach 65, they are expected to apply for Medicare benefits in droves.

  1. Who Is Eligible for Medicare

    • To receive Medicare benefits you must be 65 years old, or meet certain conditions. People younger than 65 with end-stage renal disease, those who have been entitled to Social Security disability benefits for 24 months, have Lou Gehrig's disease or have worked in a government job where Medicare taxes were paid may also be eligible. You may also qualify if you are the spouse of a living, deceased or divorced beneficiary. There are several other situations that will qualify you for benefits.

    Original Medicare

    • Under traditional Medicare, you can use any doctor who accepts Medicare payment.
      Medicare includes inpatient care in hospitals, called Part A. There is no charge for this hospital insurance. Doctor services, outpatient care and preventive care such as examinations and laboratory tests are covered in Part B. Most people pay a basic monthly premium for this benefit, with higher earners paying more. The premium for the Part D prescription drug coverage varies from plan to plan.

    The Donut Hole

    • A coverage gap dubbed the "donut hole" occurs in Medicare Part D, prescription drug coverage, after Medicare has paid out a certain dollar amount for drugs. Your plan may require you to pay a deductible before drug coverage begins. You will then begin to receive Medicare prescription drug benefits. When you reach your dollar limit, you enter the donut hole when you are responsible for all costs for prescription drugs. Once you have paid a certain amount out of pocket, the donut hole ends and you pay only a small percentage for each prescription until the end of the year.

    Medigap Insurance

    • Because Medicare Parts A and B pay only certain medical costs, many people choose to buy a "Medigap" insurance policy to make up the difference. Under original Medicare, you pay a deductible before coverage begins. Medicare then pays a percentage of the bill, and you are responsible for paying the rest. The amount that you may owe as you incur hospitalization and doctor bills can add up, so many people choose to buy Medigap insurance to cover those expenses.

    Medicare Advantage Plans

    • Some people join a Medicare Advantage plan (Part C) to avoid the expense of an additional Medigap policy. These Advantage plans provide coverage similar to Parts A and B of original Medicare, along with many of the benefits provided by Medigap insurance. A Medicare Advantage plan may be a managed care plan (HMO), a preferred provider plan (PPO), a private fee for service plan or a specialty plan. Some Advantage plans charge the same monthly premium as Medicare Part B, and others charge a higher premium. Many Advantage plans include prescription drug coverage (Part D).

    Signing Up

    • You should sign up for Medicare at your nearest Social Security office three months before your 65th birthday, even though the full retirement age is no longer age 65. Medicare benefits will begin at the beginning of your birthday month. If you miss this deadline and enroll during your initial enrollment period, coverage will begin at the beginning of the following month. You may also enroll during the annual coordinated election period each year, or during special enrollment periods.

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