What is Medicare? A Guide to Coverage and Costs

 

Medicare is a federal program in the United States that provides insurance coverage for Americans aged 65 or older, people under 65 with specific disabilities, or end-stage renal disease. Whether you're considering signing up for Medicare or you're already enrolled but want to learn more about your coverage and costs, this gives you the basics.

Medicare's Purpose

Medicare was created as President Lyndon B. Johnson's Great Society during the 1960s. Medicare has four primary purposes:
To pay for hospital, skilled nursing home, home health services, hospice services, and some other medical care

To pay part of the cost of doctors' fees if you went to a doctor who agreed to accept Medicare's approved fee schedule

To give financial help to people with limited incomes to buy some of their medications and medical supplies

To help states pay for some of the costs of health care for aged persons who are state residents.

How does Medicare work?

Medicare is a program that reimburses doctors and hospitals for the costs of health care provided to patients. The national plan, or "Parts A and B," pays for doctor visits, tests, hospital stays in an approved facility, and other services that Medicare regards as medically necessary. Medicare also pays for a wide range of home health services in most states.

Medicare's Determinations

Each service Medicare covers is called a beneficiary benefit package. The national plan has a list of these benefit packages called the "excluded items," which are divided into three categories:
Inpatient hospital services and hospice care are not part of a comprehensive inpatient rehabilitation or skilled nursing facility. Doctors may bill for these services only after patients have left their facilities

Services are provided to people with end-stage renal disease who are not already enrolled in Medicare and don't need a kidney transplant. These services include dialysis treatments, primarily home dialysis and outpatient hemodialysis. Doctors may bill for these services after patients have left their facilities

Services for people who are not eligible for Medicare without having some disability or who aren't older than 65.

Inpatient hospital services and hospice care are not part of a comprehensive inpatient rehabilitation or skilled nursing facility. Doctors may bill for these services only after patients have left their facilities

Hospice care is covered by the Part A payment rate, the more expensive coverage. This means that prices are higher than for other types of care for beneficiaries in both parts of Medicare. These programs may, in some cases, be covered by the Part B payment rate, the less expensive part of Medicare.

Home health services are excluded from the Part B payment rate. This means Medicare pays doctors for these services at a higher rate than most other types of care under Part B. These programs may cover home health services as well as physical therapy.

Medicare's Coverage

Medicare covers doctor fees, hospital stays in approved facilities, and other medical expenses. It does not cover emergency visits. However, it covers nursing home care, the costs of non-medical services, or dental and vision expenses.

What Happens if Medicare Drops Coverage?

Medicare doesn't pay its total cost for certain types of care or treatments, such as nursing home care or the costs of non-medical services in hospitals. Claims submitted by physicians and hospitals can be rejected or reduced, even if reasonable. If you have any complaints about how your claim was handled, you can contact your local Social Security office and file a formal grievance.

How much does Medicare cost?

The program is fairly similar in Parts A and B, but they have different benefits, payment levels, and payment rates.

Part A pays doctors' fees, hospital services, and other medically necessary services like home health care, prescription drugs, and medical supplies not covered by all other insurance programs. Medicare pays the same amount for each service, regardless of which hospital or doctor provided it. If a doctor bills for more than Medicare's fee schedule allows, the patient will have to pay the difference.

Part B pays most doctors' fees and other expenses, like home health services and medical supplies. It pays the actual costs of these services. It doesn't pay the total cost of care received by beneficiaries with end-stage renal disease or those not eligible for Part B without some disability.

The program is similar in Parts A and B, but they have different benefits, payment levels, and payment rates.

How Much Can You Save on Medicare?

Once you know what benefits you receive and what expenses are covered under your plan, you can calculate exactly how much it will cost. To do this, you will have to pay for medical services in advance as if your plan covered them. If these services do not turn out to be covered by your plan, the difference between actual costs and what the insurance company pays will be added to your balance, which is called a "deductible."

To save money on Part A coverage, you will have to pay a higher deductible than paying the total price. The deductible is your share of your plan's medical expenses not covered. In addition, there may be co-payments for some services.

How Much Matter Can You Save on Part B?

The amount you can save on Part B coverage depends on how much in "coinsurance" (payments to doctors and other providers) you agree to during the enrollment period. The coinsurance rate is a fixed percentage that applies to all services at all Medicare-approved providers. The coinsurance percentage differs in Parts A and B; it ranges from 10% to 25% for each service or supply.
Medicare is an essential program for seniors and the disabled, but it's not all-inclusive. You can still find ways to insure yourself if you manage your care. Most insurance companies offer Medicare supplement insurance and Medigap plans that offer additional coverage, such as lower deductibles or higher coinsurance rates.

Medicare Part A covers doctor's fees, hospital services, and other medically necessary services like home health care, prescription drugs, and medical supplies not covered by all other insurance programs. Medicare pays the same amount for each service, regardless of which hospital or doctor provided it.