Getting The Most From Medicare

Please take a moment to read our disclaimer.

The majority of Americans age 65 or older are entitled to Medicare, the federal healthcare program for older people. It covers many, but not all, healthcare bills. To fill the gaps left by the Medicare program, many people purchase private supplemental insurance known as "medigap" policies. But that still leaves one major hole in the healthcare system for the elderly--long-term care.

With nursing home bills averaging about $40,000 a year, many people wipe out their life savings trying to pay for care. Then they turn to Medicaid, the government healthcare program for the poor. More recently, those seniors who can afford the often steep premiums have turned to private long-term care insurance as a way of financing their healthcare needs.

1. What does Medicare cover?

2. How do I apply for Medicare benefits?

3. What happens if an individual can't afford to pay the Medicare premiums?

4. Who pays for medical bills that Medicare does not cover?

5. Are there different types of medigap policies to choose from?

6. What are the advantages of choosing a Medicare HMO?

7. What are the disadvantages of choosing a Medicare HMO?

8. Who pays for nursing-home bills or long-term care expenses incurred at home?

9. What is long-term care insurance?

10. What happens if I can't afford a private insurance policy for long-term care?

1. What does Medicare cover?
Medicare, the federal healthcare program for those 65 and older and for people of any age with permanent kidney failure, consists of two separate parts. The hospital insurance portion, known as Part A, covers most hospital care, some follow-up care, and some care received in a skilled nursing home. The medical insurance portion, Part B, covers 80 percent of approved doctor's services.

2. How do I apply for Medicare benefits?
Enrollment in Parts A and B is automatic when a person completes the form for Social Security benefits. If a person receives Social Security benefits prior to turning 65, enrollment in Medicare will be automatic when he or she turns 65. Assuming the person has enough quarters of work (at least 40) to be fully insured, Part A Medicare coverage is free. People are charged a monthly premium--usually deducted from Social Security benefits--to pay for Part B coverage of doctors' bills.

3. What happens if an individual can't afford to pay the Medicare premiums?
Certain older and disabled individuals with low incomes and limited assets may qualify for free Medicare coverage. Depending on the level of need, the state Medicaid program may pay for your Medicare Part B monthly premiums to cover doctor's services under the Specified Low-Income Medicare Beneficiary (SLMB) program. Or in more severe cases, the state may pay both Medicare Part A and Part B premiums, deductibles, co-payments, and other out-of-pocket medical expenses under the Qualified Medicare Beneficiary (QMB) program. For more information about these programs, call the Health Care Financing Administration's toll-free Medicare hot line, (800) 638-6833. To apply for benefits under these programs, contact your state Medicaid office or local social services agency.

4. Who pays for medical bills that Medicare does not cover?
Most seniors purchase supplemental insurance policies, known as "medigap" policies, to help pay for what Medicare does not cover. These cover deductibles, co-payments, and other out-of-pocket costs that Medicare beneficiaries have to pay.

5. Are there different types of medigap policies to choose from?
Medigap policies are sold by private insurers, not the government. Consumers can choose from ten standard benefit packages designated A through J . Package A costs the least, and J provides the most extensive--and expensive--coverage.

The core coverage that must be provided in all insurers' Plan A packages, as well as all other policies, includes Medicare Part A co-payments for days 61 to 90 of a hospital stay; an additional 365 days of in-patient hospital care once Medicare coverage has been exhausted; 20 percent co-payment for Medicare Part B services once the Part B deductible is met; and the first three pints of blood used in a calendar year. The more expensive plans include coverage for such expenses as the Part A and B deductibles, foreign travel emergencies, prescription drug costs, and preventative medical screening.

6. What are the advantages of choosing a Medicare HMO?
For the last few years, the federal government has contracted with private managed-care organizations to give Medicare beneficiaries an alternative--often at a lower cost--to the standard Medicare program. While the majority of Medicare beneficiaries continue to choose traditional Medicare coverage, increasing numbers are turning to Medicare HMOs as a way of saving money and receiving extra services such as prescription drugs, eyeglasses, hearing aids, and certain preventative screening tests not normally covered by traditional Medicare.

7. What are the disadvantages of choosing a Medicare HMO?
Consumer advocates worry that older patients, who often require more medical services than their younger counterparts, may not get the best medical treatment in the HMO system, which focuses on preventative care and aims at limiting certain medical procedures to cut costs. Often, HMO participants are required to select a primary-care physician who acts as a gatekeeper for additional medical services and whose authorization is required before the patient can seek the care of a specialist.

8. Who pays for nursing-home bills or long-term care expenses incurred at home?
To the shock of many older Americans, there are only three ways to pay for most long-term care expenses: personal savings, private long-term care insurance, or Medicaid, the government healthcare program for the poor. This situation forces many people to spend their life savings paying for care, only to end up on Medicaid. Others hire attorneys to shift assets to appear poor enough on paper to qualify for Medicaid.

9. What is long-term care insurance?
While Medicare and medigap supplemental insurance policies usually provide benefits to help pay for hospital care and doctor services, they provide very limited payments for the cost of long-term care at home or in a nursing home. More than 100 companies now sell private long-term care insurance to cover the cost of nursing-home care. But long-term care insurance can be expensive and may not be worth buying unless the individual has substantial assets to protect. And the longer a person waits to purchase long-term care insurance, the more it costs--assuming the person is healthy enough to qualify for coverage. The type of benefit you choose--the amount of the daily benefit, the length of the waiting period before benefits begin, inflation protection, and so on--all affect the premium.

Depending on your age, some or all of the premiums may be included as part of medical expenses and deducted from your income taxes if the total of all medical costs exceeds 7.5 percent of your adjusted gross income. Individuals 40 and younger can include up to $200 of the cost of their long-term care insurance as a medical expense. Those 70 and older can write off up to $2,500 dollars a year against the price of their LTC insurance premium.

10. What happens if I can't afford a private insurance policy for long-term care?
Frankly, many people can't. While the average premium is about $2,500 a year, long-term care insurance can be significantly more expensive depending on your age and the type of coverage you choose. Most people must dip into their own savings to pay for long-term care. But with nursing home costs averaging $40,000 a year--higher in more expensive areas of the country--a nursing home resident can easily exhaust a lifetime of savings on his or her care. Once that happens, most patients turn to Medicaid, which already pays the long-term care costs of more than half of the nation's nursing-home residents. Some are poor enough to qualify for Medicaid right from the start.

back to Q&A