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What is Medicare?

What is Medicare?

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Continuing with the Medicare Series (See all the posts here: https://www.meriahnichols.com/medicare) This post has linked headings, so you can browse the title in the Table of Contents below and go straight to what you want to learn.

What is Medicare Exactly?

Medicare is a U.S. government-run health insurance program for qualified workers age 65+ and some people with disabilities. It is run by the federal government or the government for our whole country. 

Where Does the Money for Medicare Come From?

The money that pays for Medicare comes from 2 trust funds held by the U.S. government (Medicare 2021). 

The first fund, the Hospital Insurance fund, pays for Part A costs such as inpatient hospital stays, limited home health services, and limited stays in skilled nursing facilities. I will talk more about the parts of Medicaid later (Medicare 2021). 

The money from the hospital insurance fund comes from:

  • Payroll taxes
  • Income taxes on Social Security retirement benefits
  • Interest on trust fund investments
  • Premiums, or monthly payments, from people who don’t get Part A for free (2021).

The second trust fund is called the Supplementary Medical Insurance fund. It pays for Part B costs such as outpatient care (services that are not overnight hospital care). It also pays for Part D care (prescription medicine). 

The money for this fund comes from:

  • monthly premiums 
  • interest earned on trust fund investments. 

Typically, everyone enrolled in Part B and/or D pays a premium (Medicare 2021).

What are the Parts of Medicare?

Medicare has 4 parts, each represented by letters.

Part A: Inpatient hospital care and some limited home health care, limited nursing home care

Part B: Outpatient care such as doctor’s visits and some limited home health care

Part C: Is also called an advantage plan (MA plan), which allows the government to contract with a private company to deliver Medicare benefits. 

Part D: Prescription drug coverage (Bunis 2021).

You can receive Part D benefits in two ways:

  • A separate drug plan
  • An MA “Part C” plan that includes drug coverage 

You have to have Parts A & B to join an MA plan or a separate drug plan. Not all MA plans cover prescription medications (Medicare 2021b). 

What is Meant by Part C vs. Original Medicare?

Original Medicare is the traditional way to receive benefits. The government pays a provider directly for services in Parts A and B (Center for Medicare Rights 2021). Most Americans use Original Medicare and most providers accept it. 

The other choice is to package benefits together with a Medicare Advantage Plan (MA) which is also called Part C. 

You can think of an MA plan (Part C) as a way to combine the parts of Medicare into one plan (Bunis 2020).

Those in an advantage plan still receive the services in Part A & Part B, but may be offered additional services not covered by regular Medicare such as dental benefits (Center for Medicare Rights 2021).

You can also get Part D, drug coverage, through an MA plan, or as a separate benefit (Center for Medicare Rights 2021). Not all Medicare Advantage plans cover drugs. 

Most Medicare Advantage plans do have drug coverage, but you might be allowed to join a standalone drug plan if your MA plan does not cover drugs. You cannot join a standalone drug plan if your MA plan already offers prescription coverage (EHealth 2021).

If you have an MA plan, you still pay a premium for Part B (and Part A if you don’t get it for free). 

 The MA plans have to place a limit on out-of-pocket costs for A & B (Center for Medicare Rights 2021).

Every MA plan is different.

If you are going to buy an MA plan, check out:

  • What providers participate
  • What coverage rules apply
  • Cost-sharing rules
  • Any additional premiums (Center for Medicare Rights 2021).

You can learn more about Original Medicare vs. Part C here: The Choice Between Original Medicare and Part C

Here is a chart that compares Original Medicare and Part C Original vs. Part C Chart

Find out when you can sign up for an MA plan or go back to Original Medicare here: Part C Enrollment

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