How Does the US Health Insurance Program Medicare Work?
There are all sorts of things we’re often expected to just magically know somehow. What’s the difference between a “coupe” and a “sedan”? What are most sweaters actually made of these days? Who were the original members of the Beatles? What’s the maximum possible “kissing number” for packed spheres beyond three dimensions?
When everyone else acts like they know, and clearly expect us to know, we do a very silly – and very human – thing. We smile and nod and pretend we’re 100% on board and informed. Sometimes we even tell ourselves we’ll “look it up” when we get home or once we have a moment, but we rarely do. And hey, there are times you just gotta fake it ‘til you make it! Absolutely. It’s just that this sort of “faking it” leaves us feeling a tiny bit, well… foolish. It can also become enough of a habit that we start lying to ourselves about what we do and don’t know.
There’s no shame in not knowing everything about everything. Coupes are smaller and usually have two doors; sedans are larger and often have four. Sweaters are traditionally made from wool (sheep) or cashmere (goats), although cotton, linen, synthetic fabrics, or blends of these and others aren’t unusual in the modern era. The Beatles were John Lennon, Paul McCartney, George Harrison, and Ringo Starr – who replaced drummer Pete Best early in the process (and before they came to the U.S.).
The “kissing number” thing is still being explored by the most advanced mathematicians in the world – many of whom are probably wearing cashmere and listening to the Beatles while they think deep mathematical thoughts. That one was a trick question of sorts. If you pretended to even know what the questions were asking, you were probably faking it on the other stuff as well – unless you’re one of the top mathematicians in the world. In that case, it’s nice to have you here and reading us, but don’t you have a thing with infinite bags of oranges and eleven dimensions you should be figuring out?
Medicare Parts A & B: The Original Federal Health Insurance
Medicare as we now think of it first came into existence in 1965, when President Lyndon B. Johnson signed it into law. Medicare (and its partner, Medicaid) were amendments to the Social Security Act – major government entitlement programs added to an existing massive government entitlement program. Like Social Security, the primary beneficiaries of Medicare are senior Americans who (as a whole) loudly and consistently oppose the whole idea of government entitlement programs.
This leads to wonderful signs, chants, and Facebook posts saying things like “keep the government out of my Medicare!” – which is a lot like complaining that someone’s trying to sabotage your water by getting it wet. (And here you felt silly for not remembering the name “Pete Best.”).
The original Medicare was built around a similar program initially intended for military families. Its goal was to provide health coverage and a degree of financial security for American seniors who were no longer covered by employer-based health insurance. Most hoped it would eventually expand to allow universal health care coverage. Like clean water, affordable electricity, paved roads, or police protection, there was this crazy idea in the 1960s and 1970s that as society advanced, it could afford to expand fundamental protections and reduce unnecessary suffering. Our ideal future was Star Trek, not the Hunger Games.
The original Medicare was built around a similar program initially intended for military families. Its goal was to provide health coverage and a degree of financial security for American seniors who were no longer covered by employer-based health insurance. Most hoped it would eventually expand to allow universal health care coverage. Like clean water, affordable electricity, paved roads, or police protection, there was this crazy idea in the 1960s and 1970s that as society advanced, it could afford to expand fundamental protections and reduce unnecessary suffering. Our ideal future was Star Trek, not the Hunger Games.
Health Insurance in the Past
In the mid-20th century, the primary reason people needed health insurance was to help pay for unexpected or extended hospital stays. It was largely to offset emergencies – accidents, severe illnesses, or conditions which became severe over time. Medicare Part A, which covered hospitalization, was the heart of the original Medicare. Medicare Part B was optional and helped pay for the doctors themselves. Other, less severe, health care needs – prescriptions, check-ups, flu shots, etc. – were considered affordable and predictable enough that people could pay for them out-of-pocket as they went.
Today, most doctors and medical facilities accept Medicare, but it’s not universal. If you’re not sure whether your preferred physician takes Medicare, just ask them. There’s at least one person in every office whose job it is to help patients sort this stuff out. Sometimes there are more people in charge of this sort of thing than actually practicing medicine!. They’re usually happy to help, because they like to get paid and surprises don’t help anyone in this equation.
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Do I Have To Pay For Medicare (Parts A & B)?
If you or your spouse paid Medicare taxes while employed, you generally don’t have to pay anything out-of-pocket to secure Medicare Part A coverage. You qualify for Part A at age 65 without paying additional premiums if you qualify for retirement benefits from Social Security (whether you’re already receiving them or not). You may qualify before then if you’ve received Social Security disability for two years or more, or if you have certain other medical conditions detailed on the Medicare.gov website.
If you don’t qualify for premium-free Part A, you can often purchase it. The price varies with how long you or your spouse worked and paid Medicare taxes. For 2021, the two primary price points are $259 a month or $471 a month. You can buy Part B without buying Part A, if you’re into that sort of thing, but if you buy Part A, you usually have to buy Part B as well.
Look, it’s a great program, but it’s still the government. Rules and details and small print are their things.
Part B you pay for. If you receive Social Security, it’s automatically deducted from your monthly benefits. Otherwise, you’re billed each month just like private insurance. The price is based on a standard premium amount, which in 2021 is $148.50. If you make too much money, you may be required to pay a slightly higher monthly premium. (No big surprise there.)
Medicare Parts C & D: Our Little Medicare Is Growing Up!
As health care continued to evolve, Medicare evolved with it. Coverage was expanded to some Americans under the age of 65, particularly those qualifying for disability payments under the Social Security system. (If you’re not sure whether or not you qualify, it’s easy enough to click through a few simple steps to find out.)
Medicare Part C
Medicare Part C, often called “Medicare Advantage,” is where things get really interesting. Unlike Medicare Parts A & B, Medicare Part C is regulated by the federal government but administered through private insurance companies. Medicare pays approved companies a set amount to take on the obligations of Parts A (Hospital) and B (Other Medical). The individual insurers then offer their own additional benefits and set their own premiums just like with any other insurance.
In theory, these additional costs are kept minimal both through the government’s involvement and the competitiveness of the market. The whole point of Medicare, after all, is affordable health care for seniors and others who qualify. What you really have to watch out for is that the insuring companies set the terms of care – whether it cost more to go out-of-network, whether you need a referral from a Primary Care Physician (PCP) in order to see a specialist, what sorts of co-pays or deductibles you may be responsible for, etc.
Here’s a theme you’ll hear repeated a lot around here – read the details. Ask questions. Take your time and talk it through, then make the best call you can, and don’t second-guess yourself to death.
Medicare Part D
Part D is both simple and complicated. The simple part is that it adds prescription drug coverage to the mix. The complicated part is that by the time Part D was added (2003), there were about eleventeen other varieties of officially approved but not-at-all standardized options operating under the general umbrella of “Medicare.” All purport to offer affordable health care for seniors and others who qualify, and all must satisfy certain federal regulations in order to qualify as federal health insurance – or at least as supplementary coverage for federal health insurance.
You can get Medicare Part D through many of those Part C plans mentioned above. Sometimes it can be added to one of the variations we’ll briefly discuss below. Or you can search for options at Medicare.gov.
It’s The Government – Of Course, It’s Complicated
Here are a few other types of Medicare you’ll hear discussed. Many of them vary from place to place and from provider to provider, so let’s all say it together this time – “Read the details. Ask questions. Take your time and talk it through, then make the best call you can and don’t second-guess yourself to death.”
Come to think of it, that’s a pretty good approach to life in general – not just health insurance.
I know, worst name ever, right? These are similar to Medicare Advantage plans (Part C) in that you add access to a wider range of doctors and medical facilities, and may have more benefits than Original Medicare (Parts A & B). You’re able to receive out-of-network coverage but still have many services covered through Medicare. (You don’t really want to know the details of that paperwork nightmare, do you?).
Here’s the thing, though – while Medicare Cost Plans have to be approved by Medicare, they’re run by private providers. They’re only available in certain areas, and their enrollment periods can be a bit like trying to visit Brigadoon. Some only accept a certain number before closing their enrollment windows. There’s no evidence they actually do fraternity-style hazing or require you to swear any profane oaths or get any weird tattoos to join, but it might be easier if they operated that way.
OK, it’s not quite that bad. You can get more information on specific plans available in your area on the Medicare.gov website.
There are two basic ways to get prescription coverage using Medicare. One is to find an Advantage Plan (Part C) or other Medicare Plan (like the Medicare Cost Plans mentioned above) which includes prescription drug coverage. You have to have Parts A & B already, and there may be an additional premium, but the savings could be significant as you get older. The other is to take out a separate Part D Medicare Drug Plan. You still have to have Parts A & B already, but you choose the prescription coverage separately, on your own, rather than as part of a package.
Yes, it’s one more thing to decide. One more expense. One more hassle. But as we age, we’re increasingly likely to require multiple prescriptions. WebMD reports that of the more than half of Americans who take prescription medication, the average number of prescriptions is four – and that doesn’t count over-the-counter medications or supplements.
You can get a better idea of your Part D options using Medicare’s own plan-finder tool online. Once you’re finished with this article, that is. Don’t just leave in the middle and do it right now. That would be rude!
You may be familiar with Health Savings Accounts (HSA). These are usually set up through your employer, and allow you to set aside money from your paycheck, pre-tax, to use for medical expenses throughout the year. An HSA gives you a personal savings account for ongoing treatments or unexpected care and reduces your personal income tax obligations as a nice bonus.
A Medicare Medical Savings Account does something similar, but it’s Medicare actually setting aside money for you to use as you see fit (within the confines of the plan). You choose your own providers and have more direct control of your care this way. An MSA can cover many medical expenses not otherwise covered by Medicare. The trade-off is that most MSA plans come with rather high deductibles. You’ll be expected to meet your annual deductible before the plan kicks in and helps you with the rest. Even during that time, however, doctors and other providers can’t charge you more than the Medicare limits. In other words, you get the same prices the federal government gets, which should limit your costs in most cases.
In most MSA plans, any funds you have left at the end of the year roll over into the next year, just like a traditional savings plan. You don’t automatically lose what you don’t immediately use.
Conclusion
Whatever else you think about bureaucracy and big government, Medicare’s track record is strong in terms of efficiency and effectiveness. The program is excellent at controlling costs and minimizing waste. Whether national health care is a good idea or not, there’s a reason its proponents point to Medicare as evidence of how effective it could be compared to the tangle of private insurance plans currently confusing everyone and creating endless paperwork all across the country. Plus, of course, there’s the tiny issue of so many people not having health coverage of any sort to begin with.
It’s impossible to give a properly detailed, yet easy to understand, summary of all possible Medicare scenarios and how they might impact you individually. We can try to give you a little more than “it’s federal health care” or “it’s designed to give seniors and other Americans who meet certain standards access to affordable health care,” but specifics? There are just too many variations – some in your control, others… not so much.
But here’s the takeaway.
If you understand the basics of Medicare – Part A (hospitalization), Part B (physicians and other care), Part C (Medicare Advantage), and Part D (prescription coverage) – you have an important foundation many others do not. You think you’re the only person ever smiling and nodding and hoping no one asks you a specific question because you’re not entirely sure what anyone’s talking about?
Second, you now recognize that while Medicare Classic (Parts A & B) are traditionally largely administered by the federal government (it’s part of the Department of Health and Human Services), states have substantial input and control over what many parts look like in their borders and private companies partner with the government to provide optional services as well. Sometimes that means they take on Parts A & B within the limits set by the government. It’s not exactly “free health care,” but it’s government-regulated and supported.
Finally, you realize that in many ways, Medicare is like any other insurance. In an effort to keep it adaptable and efficient, its evolved into a multi-faceted mess of options. The same thing that makes it confusing sometimes means there’s probably a combination that makes more sense for you than would be possible otherwise. You just have to take a deep breath. Read the details. Ask questions. Take your time and talk it through, then make the best call you can, and don’t second-guess yourself to death.
Let us know if we can help.