What Does Medicare Really Cover?

Approaching retirement and curious to know how you’ll handle health care expenses? Medicare will likely play a role in helping you mitigate those costs in your golden years.

The federal government offers Medicare as an insurance program for permanently disabled Americans and those 65 or older. The Social Security Administration is responsible for funding the program, and most of its funding comes from a Medicare payroll tax you might have noticed on your pay stubs (it ranges from 1.45% to 3.8%, depending on your employment status and income level).

But what does Medicare actually cover? Read on for a quick overview.

Who’s Eligible for Medicare Coverage?

The majority of working Americans become eligible for Medicare coverage when they turn 65. You may also qualify if you’re younger and have been disabled for at least two years and receive Social Security benefits, if you receive kidney dialysis treatment, or if you are in end-stage renal failure.

In most cases, you’re automatically enrolled into Medicare once you start receiving Social Security payments. You need to opt out if you don’t want the coverage.

John K. Ross IV, an elder law attorney and partner at Ross & Shoalmire with multiple offices in Texas says eligibility is straightforward because it’s simply based on age. But the program does become much more complicated when you start digging into the details of what specific benefits make the most sense for you.

“Retirees need to make decisions around whether they’ll choose the traditional Medicare program versus Medicare Advantage,” he says. He adds that disputing Medicare’s coverage refusals is something most participants in the program will deal with at some point.

How Do You Enroll in Medicare Coverage?

You’ll be automatically enrolled into Medicare if you:

  • Already receive Social Security benefits
  • Are under 65 and are disabled, or have ALS
  • Receive benefits from the Railroad Retirement Board

But you need to sign up for Medicare if:

  • You don’t get Social Security benefits (which could be the case if you’re 65 or older but still working)
  • You have end-stage renal disease

If you need to manually apply, you can do so online here. You also have the option of going to your local Social Security office or calling to apply at 1-800-772-1213.

The Basics of What Medicare Really Covers (and What It Doesn’t)

The main part of Medicare is broken down into two parts: A and B.

What Medicare Part A Covers

It covers several broad categories of hospital care and services you receive while hospitalized.

That includes:

  • Hospital care limited to 90 days each benefit period and a lifetime reserve of 60 additional days for those who exhausted the initial 90 days coverage
  • Skilled nursing care
  • Home health services
  • Care in hospice for those with a life expectancy of less than six months

You can receive this coverage for free as long as you paid at least 10 years into Social Security.

“If you’re not eligible for free Part A coverage, the cost in 2017 is $413 per month if you paid into Medicare for less than 30 quarters while working,” says Desmond Henry, CFP® and founder of Afflora Financial Life Planning. “It costs $227 per month if you paid in between 30 and 39 quarters.”

What Medicare Part B Covers

Medicare Part B covers doctor’s visits and outpatient care. This can include medical equipment and physical therapy. It may cover some preventive care services, too, like screening for certain diseases including cancer and glaucoma.

Here’s a full list of what Part B provides for:

  • All outpatient services
  • Doctor’s visits and home health visits that don’t require a hospital stay
  • Medical equipment
  • Clinical research
  • Ambulance services
  • Durable medical equipment
  • Mental health and preventative services
  • Second option prior to surgery
  • Limited outpatient prescription drugs and drugs that cannot be self administered
  • Diagnostic tests

The costs for Part B are more complicated than Part A. “The standard Part B premium for 2017 is $134 per month, but this may be higher based upon your income level,” says Henry.

And as important as it is to understand what Medicare really covers, it’s also essential to know what the program does not offer to those on the plan.

“Medicaid does not pay for long-term care such as in-home sitters services, and assisted living and nursing-home costs,” says Ross.

Henry goes into even greater detail. “Medicare won’t pick up the tab for hearing aids, eye exams and glasses, and dental care,” he says.

Henry explains other services like cosmetic surgery and alternative medicine get excluded from coverage, too. “People don’t typically realize that Medicare generally does not cover medical expenses when you are outside the United States or territories, either,” he adds.

What Medicare Part C Covers

Medicare coverage gets more complicated when you look at additional parts of the program. There’s also Medicare Part C, which is also known as Medicare Advantage Plans.

Whereas Medicare is a program offered by the federal government, private insurance companies offer coverage with Medicare Advantage Plans (which the government still regulates).

Medicare Advantage must provide services that are comparable or “equivalent” to what’s covered by Medicare Parts A and B. Some Part C plans offer more services not included in traditional Medicare, including prescription drug coverage.

That might help you get the coverage you need if Medicare Parts A and B aren’t sufficient for you — but that also means there’s a huge variation between all the Medicare Part C plans available, both in terms of services provided as well as the costs of the plans.

Prices also depend on the state you live in, the provider you choose, and whether you choose an HMO or PPO plan. eHealthInsurance has a tool that can help you compare a variety of Medicare Advantage plans to see which one may work best for you.

Don’t Forget About Medicare Part D

Parts A and B of Medicare provide for both hospital care as well as outpatient services and doctor’s visits — but it doesn’t cover prescription drugs. That’s where Medicare Part D comes in.

Part D plans are also offered by private insurers and are separate policies from Medicare Parts A and B. Just like Part C coverage, Part D plans vary widely in what they cover and their costs.

What’s the Future for Medicare Under the Trump Administration?

The White House and Republicans in Congress have promised to repeal the Affordable Care Act and are in the process of proposing radical changes to the current health care system.

But most of the proposed changes affect Medicaid, not Medicare. There are proposals that would change the “funding mechanism” for the Medicare program, but beneficiaries are unlikely to feel those changes directly.

And there’s disagreement between the Trump administration and House Republicans over how Medicare should be handled moving forward. Trump has merely said he wouldn’t cut the program.

But Speaker Paul Ryan has talked about making the following changes:

  • Introducing exchanges to Medicare, allowing private insurers to compete with the traditional, government-run program.
  • Providing subsidies to help people pay their premiums, based on income.
  • Requiring insurers to offer coverage to all to ensure everyone in Medicare retained access to benefits.

Again, this is all just talk for now. The House’s initial bill to change the Affordable Care Act failed to pass, and any suggested changes are a long way from implementation.

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A Quick Guide to the Difference Between Medicaid & Medicare

Medicare and Medicaid may sound alike, but the health insurance programs are wildly different. Here's a quick primer.

Medicare and Medicaid may sound alike, but these government health insurance programs are dramatically different from one another. Here’s a brief overview.

What Is Medicare?

Administered by the federal government, Medicare is a health insurance program primarily for adults who are 65 years of age or older and have paid into the Social Security system for at least 40 quarters (about 10 years). An individual who lacks the necessary work credits can also benefit from the program through their spouse, as can individuals who are younger than 65 but have received Social Security Disability Insurance payments for at least two years.

What Medicare Covers

There are different parts to Medicare that make it a veritable “alphabet soup.” For example, Medicare Part A covers mostly in-patient hospital care and provides a minimal benefit for skilled nursing care and hospice care. Medicare Part B covers the costs of outpatient care, such as doctors’ visits, lab tests and preventative care. Medicare Part C is the Medicare Advantage program and an alternative to Medicare parts A and B.

Like most types of insurance, Medicare parts A, B and C include co-pays and deductibles. Generally, the amount of income you earn and the amount of assets you own are irrelevant for participation, so paupers, billionaires and everyone in between can be eligible.

Surprisingly, given that Medicare is primarily a program for individuals 65 and older, the program covers just a small portion of the cost of a nursing home stay. At most, it fully covers the costs associated with the initial 20 days of a stay and provides only partial coverage for the next 80 days. In addition, for a stay to be covered, a patient must meet certain requirements.

For example, the patient must have been hospitalized for at least three consecutive days directly prior to receiving care at a nursing home and that care must be considered medically necessary. Because of these requirements, patients or their families are often forced to pay out of pocket for nursing home care or seek relief from Medicaid.

What Is Medicaid?

Medicaid (known as Medi-Cal in California) is a federal-state program. It primarily acts as a safety net for those who can’t pay for healthcare.

Seniors can participate in Medicaid if they pass three tests: a medical necessity test, an asset test and an income test.

The medical necessity test requires that skilled nursing care is necessary to address the patient’s medical needs. The asset test places strict limits on how much property a patient and the patient’s spouse can own while benefiting from Medicaid. The income test limits how much individuals and couples may earn to be eligible for Medicaid.

There are ways to get around these eligibility tests if you or a loved one can’t pass them but want Medicaid to help pay for the cost of a nursing home stay. However, doing so may require the help of an attorney who practices elder law. A relatively new kind of law, elder law can help individuals preserve their assets and qualify for Medicaid. (Disclosure: The Wiewel Law firm, in Austin, Texas, specializes in estate planning.)

Remember, Medicaid planning is a complicated process and even a small error can mean the program will refuse to help pay for the cost of a nursing home stay. Be sure to speak with an expert if you have concerns.

Image: shapecharge

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