ISSUE #14
Managing Your Medicare Coverage

Most Americans who are age 65 and older depend on Medicare for their health insurance. Medicare, which was established in 1965, is funded with Medicare taxes, which are paid by working Americans, and by Medicare premiums, which are paid by Medicare recipients. Medicare has become increasingly complex, and the consumer is now faced with more choices. To assist you, we have provided some basic information below:

1. Hospital Coverage -- Part A of Medicare covers hospital stays, as well as limited nursing home care and home health care. Most recipients do not have to pay for Part A coverage, as long as they (or their spouse) have had at least 40 quarters of covered employment. In 2005, Part A pays for your first 60 days of hospital care, after you meet an annual deductible of $912. After 60 days, you pay coinsurance of $228/day for days 61-90 and $465/day for days 91-150. As you can see, prolonged hospital stays can be quite expensive.

2. Physician Coverage -- Part B of Medicare covers physician bills, outpatient services and medical equipment. Part B is optional and requires a monthly premium payment which is $78.20 in 2005. Part B also requires an annual $110 deductible, after which Medicare covers 80% and you pay 20%. Part B also covers a variety of clinical tests as well as your annual flu shots.

3. Medigap Insurance -- The out-of-pocket costs with Medicare can be high, especially with long hospital stays and high physician bills. You can purchase supplemental coverage, called Medigap insurance, to cover these co-payments. Medigap insurance is offered by private insurance companies. These policies are regulated, and there are ten different plans that have been approved by the government. Some offer additional benefits beyond basic coverage. Make sure you shop around, as prices can vary considerably.

4. Open Enrollment -- The best time to purchase a Medigap policy is during your open enrollment, which consists of your first six months of coverage by Part B. During your open enrollment period, the insurance company cannot decline your application nor can it charge you a higher premium, even if you have health problems. After your open enrollment expires, you may still be able to purchase Medigap coverage, but your premium could be higher, if you have any medical problems.

5. Medicare Advantage -- Instead of the traditional Medicare programs, you may wish to consider the Medicare Advantage plan, which provides coverage through a managed care network, like an HMO. If you enroll, you will not need a Medigap policy, although you may have to pay an additional premium. You may also be offered extra services, such as vision and hearing care. Exercise caution, as some Medicare HMOs have gone out of business in the past, forcing their patients back into traditional Medicare.

6. Drug Benefit -- A basic drug benefit will be offered to all Medicare recipients, starting in January, 2006. The benefit formula can be confusing. This drug plan will cost you $35 per month, and it has a $250 annual deductible. Medicare will cover 75% of the cost of drugs between $250 and $2,250 each year, while you pay a 25% co-payment. You must then pay all drug costs between $2,250 and $3,600. After that, Medicare pays 95% and you pay 5%. There will be financial assistance provided for low-income recipients who cannot afford the coinsurance.

7. Preventive Benefits -- You can receive a one-time wellness medical exam during your first 6 months in Plan B at no charge to you. Preventive benefits now include a blood screening test to detect cardiovascular disease, which you can have once every five years. Medicare also offers a diabetes screening test twice a year for people at high risk for diabetes. These screening tests require no deductible or co-payment from you.

8. Limitations -- Medicare provides only limited coverage for skilled nursing care, and no coverage for assisted living, which you may need if you develop a severe chronic condition, like Alzheimer’s disease. It is also important to remember that Medicare does not cover health care outside of the United States, so if you travel or live abroad, you will need supplemental insurance.

9. More Information -- You can get a wealth of information about Medicare, including a booklet on choosing a Medigap policy, on the internet at www.medicare.gov. You can also call the toll-free Medicare number at 800-633-4227.

This publication has been prepared as an educational resource to help the reader identify areas of potential concern. The publisher is not engaged in rendering legal, accounting or other professional services. The information contained in this publication should not be acted upon without first obtaining the advice of a professional adviser. 2004 © Florida Philanthropic Advisors, LLC. Material may not be used without permission.

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