How Does Medicare Work?
Retirement PlanningAs you near retirement, securing proper health care is an important step. For Americans 65 years or older, Medicare becomes a crucial part of that discussion.
Medicare is a government-operated health care system designed to provide care for those in or nearing retirement. Designed in 1965, this system provided a benchmark for quality care for aging Americans.
The system, while incredibly progressive for its time, has many nuances to consider. For many retirees, it may not be able to fully cover their health needs long-term with the changing medical landscape. It is important to understand the differences between Medicare and most Employer plans to help you obtain the best coverage for your health needs.
What Medicare does cover:
In its original form, Medicare is broken up into two parts: Part A and Part B. Let’s take a closer look at the specifics of each part to see how it functions as part of the overall health care package.
Part A: Hospital Insurance
Part A is put in place in order to cover a portion of facility medical expenses such as:
- Inpatient hospital visits
- Nursing home care
- Home health services
- Hospice services
It is important to know that part A does require out-of-pocket expenses like medical deductibles and establishes limits for the amount of time the system will cover the cost of care. For example, if you require skilled nursing care Part A will cover up to 21 days but after that, you will be responsible for a co-insurance payment that varies on the type of care needed.
Part B: Medical Insurance
Part B is centered around preventative care.
- Necessary care for the purpose of diagnosing or treating medical conditions in an outpatient fashion.
- Preventing or detecting illness
- Under certain circumstances, it will cover medically necessary equipment such as a wheelchair.
With Part B, recipients are responsible for copays, coinsurance, annual deductibles, and a monthly premium which can get costly. Part B does offer some cost waivers such as ambulance needs, lab tests, and medical equipment. Most also cover yearly flu shots as preventative care.
What Medicare does not cover:
While Medicare can cover hospital visits, nursing needs, and preventative care there are a few crucial things that the system does not accommodate, chief among them is prescription medication.This is one of the biggest flaws of the system, as medicine has evolved and prescription medication has become an ingrained facet of the medical landscape many retirees with Medicare are stuck with the full medication payment which is often financially out of reach. If you know that you will be in need of prescription medication long-term, there is an additional part of Medicare, Part D, that you may be able to add to your existing plan.
Original Medicare (Part A and Part B) also do not have a vision and/or dental plan. These services are bundled into different additions you can incorporate into your medical plan.
Additional Medical Needs
Since original Medicare does not cover all of a person’s medical needs, there are additional parts to the system that you can add on should you need it.
- Advantage plans
- Medicare Advantage plans combine Part A, Part B, and Part D (should you require it) into one overarching plan. This lowers your out-of-pocket costs and often includes limited dental and vision coverage.
- Part D, Prescription Drug Plan
- This stand-alone plan allows you to purchase additional prescription insurance to cover the costs of medication.
- Supplement Insurance Plans
- These plans are offered by private insurance companies and are designed to help cover the remaining costs of your Original Medicare (Part A and Part B). Supplement plans work alongside your current plans and are not a substitute.