As major changes are made in Medicare, it becomes even more confusing. Who is this program for? What are its' eligibility requirements? What services does it cover? Here are some answers.

What is Medicare?

Medicare is a health insurance program for people age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD). According to the federal Centers for Medicare & Medicaid Services (CMS), Medicare serves about 40 million beneficiaries.

The large majority of Medicare beneficiaries have original Medicare. This is the traditional fee-for-service arrangement, which means you can go to any health care provider who accepts Medicare. You must pay a deductible, and then Medicare pays its share of the costs and you pay your share.

Medicare & You You can call the Medicare Choices Helpline at (800) 633-4227 and ask for a Medicare handbook. This toll-free number is staffed by English- and Spanish-speaking customer service representatives from 8 a.m. to 4:30 p.m. Hearing-impaired individuals using a telephone device for the deaf can call (877) 486-2048. You can also view the handbook on Medicare's official Web Site.

How does Medicare work?

Original Medicare, also called traditional Medicare and Medicare fee-for-service (FFS), is the most widely used and best understood choice through which Medicare beneficiaries receive their health care. Health care providers are paid based on the services they provide.

In general, your choices are less restricted with traditional Medicare than with other Medicare choices. For example, you can go to any doctor, hospital, or other health care provider who accepts Medicare. But your costs are likely to be higher than with other choices because you may also need to buy Medicare supplement (Medigap) insurance. Medigap policies can help defray some of the costs not covered by traditional Medicare, including prescription medicines.

Who pays for Medicare?

Medicare is financed by federal taxes and administered by the CMS. Beneficiaries also have "out-of-pocket" costs: They must pay Medicare premiums, deductibles, co-payments, and Medigap premiums if they choose to purchase this additional insurance. Beneficiaries must also pay for their own routine physicals, custodial care, most dental care, dentures, routine foot care, and hearing aids.

Who is eligible for Medicare?

To be eligible, you or your spouse must have worked for at least 10 years in Medicare-covered employment, be age 65 or older, and be a citizen or permanent resident of the United States. A younger person with a disability or with chronic kidney disease also might qualify for Medicare.

Are there income limits or medical requirements?

There are no income limits for Medicare. There are medical requirements for the delivery of services, because an individual must have a medical need for those services.

Can you explain the two parts of Medicare, Part A and Part B?

Medicare Part A: This "hospital insurance" helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice, up to certain limits. Most Medicare beneficiaries qualify for premium-free Part A. In 2003, the deductible was $840 and covers the first 60 days of a hospital stay. Beneficiaries pay coinsurance for longer stays and pay the entire amount per day after 150 days.

Medicare Part B: This "medical insurance" helps pay for medical services — physician, ambulance, outpatient therapy, and a wide range of other services, equipment and supplies, including: X-rays, emergency care, limited chiropractic services, artificial limbs and eyes, medical supplies, neck and other braces, kidney dialysis and kidney transplants, breast prostheses following a mastectomy, preventive services, and various other items. The annual Part B deductible is $100 for 2003.

Part B is optional, and 2001 premiums are $58.70 per month.

What is Medigap?

Because not all needed services are covered by Medicare and because Medicare requires deductibles and coinsurance, many people purchase Medigap insurance to help them cover some of those extra services and costs. Medigap policies are offered by private insurance companies.

To help beneficiaries compare these policies, the government has mandated that only 10 standard Medigap policies may be sold (except in Minnesota, Massachusetts, and Wisconsin). These policies are referred to by the letters A through J. 

Because Medicare does not pay for all health care services, you have the option of buying supplemental coverage. Medigap policies are sold by private health insurance companies.

In 1992, Congress mandated that Medigap policies be standardized into 10 plans, lettered A through J, to make it easier for consumers to shop for coverage and avoid scams. All companies that sell Medigap plans must sell at least Plan A, which offers the "basic benefits." But not all companies offer the full range of Medigap plans, and some plans might not be available at all in your state. Insurers in Massachusetts, Minnesota, and Wisconsin are permitted to sell somewhat different combinations of benefits.

Two of the plans, F and J, have the option of a high deductible and, under federal law, states can allow insurance companies to add "innovative benefits" to any of the 10 plans. Discounts for coverage such as eyeglasses or prescription drugs from mail-order pharmacies are also allowed. In addition, any of the plans can be sold as a "Medicare SELECT" policy. Those policies generally cost less because you must use specified hospitals and doctors, except in emergencies.

Plans H and I offer the basic prescription-drug benefit. After you pay your $250 per year deductible, the plan pays 50 percent of the costs of your prescription drugs up to a maximum of $1,250 per year. Plan J offers the extended prescription-drug benefit. After you pay your $250 per year deductible, the plan pays 50 percent of the costs of your prescription drugs up to a maximum of $3,000 per year.

There is one important consideration to keep in mind: Although the plans themselves are standardized, the premiums are not. In fact, the costs can vary widely, even by hundreds of dollars, from one insurer to the next. That means it is vital to shop around not only for the plan best suited to your needs but also for cost.

The chart below provides an overview of the benefits offered by each plan.

Click the plan letter for coverage details Medigap benefits A B C D E F* G H I J* Basic benefits Part A: Inpatient hospital deductible — Part A: Skilled-nursing facility co-insurance — — Part B: deductible — — — — — — — Foreign travel emergency — — At-home recovery — — — — — — Part B: excess charges — — — — — 100% 80% — 100% 100% Preventive care — — — — — — — — Prescription drugs — — — — — — — * Plans F and J have a high-deductible option. A dash in a column means that benefit is not offered.

How do I enroll in Medicare?

Some people are enrolled in Medicare automatically. Enrollment is automatic if you are not yet age 65 and you already are receiving Social Security or Railroad Retirement benefits. If you are disabled, you will be automatically enrolled in both Part A and Part B of Medicare beginning with your 25th month of disability.

Most people have to enroll in Medicare. The enrollment period begins three months before you turn age 65 (or right away if you require regular dialysis or a kidney transplant) and continues for seven months. Applying early can help you avoid a possible delay in the start of your Part B coverage. If you have questions about Medicare eligibility or enrollment, call Social Security's toll-free number, (800) 772-1213, weekdays from 7:00 a.m. to 7:00 p.m., EST. You may also enroll online by visiting www.socialsecurity.gov.

To apply for Medicare, contact any Social Security Administration office. (If you or your spouse worked for the railroad, contact the Railroad Retirement Board.) If you don't enroll during these 10 months, you'll have to wait until the three months beginning on Jan. 1, and your Part B coverage won't start until July.

What happens if I wait to enroll?

Don't put off signing up for Medicare. If you wait 12 or more months to enroll, your premiums are likely to be higher. However, you have some options if you have group health insurance based on your own or your spouse's (or a family member's) current employment.

Even if you continue to work after your 65th birthday, you should sign up for Part A of Medicare. Part A might help pay some of the health care costs not covered by your employer plan.

Part B is a different story, however. It might not be a good idea to sign up for Medicare Part B if you have health insurance through your employer. You would be required to pay the monthly Part B premium, and your Part B benefits could be of limited value when the employer plan is the primary payer of your medical bills. However, you must weigh foregoing Part B with having to pay — for the rest of your life — the extra 10 percent per year penalty for not immediately signing up for Part B.

What is a Medicare HMO?

Medicare health maintenance organizations (HMOs) provide all Medicare-covered services under Parts A and B and may provide additional benefits — such as prescription drug coverage — that are not offered with traditional Medicare. However, Medicare HMOs are not widely available in some regions of the country.

Medicare HMO dropouts Finding and keeping a Medicare HMO can be tricky. More than a million beneficiaries nationwide have had to find new coverage when their health insurers dropped their Medicare HMO plans, citing inadequate government reimbursements and escalating drug costs.

To be eligible for a Medicare HMO, you must have both Part A and Part B and must not have ESRD. You also must live in the geographic area served by the plan.

Many Medicare HMOs charge premiums in addition to your Part B premium. For your health care to be covered by your HMO, that care must be provided either by the HMO or by a provider to whom you have been referred by your HMO. The only exceptions are emergency or urgently needed care. Neither Medicare nor the HMO will pay for non-emergency services delivered by providers outside the HMO.

Every January a Medicare HMO can change the premiums charged and the benefits offered. (The list of in-network health care providers can change any time.) Therefore, making your Medicare HMO choice is an annual decision.

Medicare HMOs can offer a Point of Service (POS) option. Under the POS option, you can receive services from providers who are outside of the HMO network. However, you must pay higher out-of-pocket costs.

Beneficiaries who are happy with traditional Medicare do not have to change. Those who want more information about their available choices can call (800) 633-4227.

What is a Medicare private fee-for-service (PFFS) plan?

PFFS plans are Medicare plans offered by private health insurers and are hybrids of Medicare HMOs and traditional Medicare fee-for-service plans. While most PFFS plans do not cover prescriptions — a benefit typically provided by Medicare HMOs — it has no network restrictions, and allows you to visit any Medicare-approved doctor or hospital of your choice. This no-network option could be particularly important to beneficiaries who live in rural areas that historically have lacked private Medicare insurance options or have lost their Medicare HMOs.

When can I join a Medicare HMO or PFFS plan?

During the month of November, Medicare health plans must accept new members for coverage beginning Jan. 1 the following year. Some Medicare health plans may also accept new members at other times of the year, but they may limit the number of new members in their plans. A plan can tell you if it is signing up new members. To join, call the plan and ask for an enrollment form.

Can I join more than one plan?

No, you can't join more than one Medicare health plan at the same time.

What if I want to leave a Medicare HMO or PFFS plan?

In 2003, you may leave a plan at any time and for any reason by writing to the Social Security Administration. The plan should send you a letter with the date your plan coverage ends. When you leave a plan, you are automatically returned to traditional Medicare, unless you join another Medicare HMO or PFFS plan.

You must take care when you change how you receive Medicare services. This is particularly true when you leave a managed care plan, whether voluntarily or involuntarily. Because Medigap insurance is not needed when you're in a managed care plan, beneficiaries returning to traditional Medicare have certain rights to buy Medigap insurance.

Where can I get help when changing plans?

You should contact your State Health Insurance Assistance Program (SHIP) for help. 

Did your HMO let you know it's dropping its Medicare patients? Are you shopping for a Medicare supplement policy but don't know where to start? Are you a new Medicare recipient with questions? There's an agency in your state that should be able to help.

The State Health Insurance Advisory Program (SHIP) is a federally funded, state-administered program that helps elderly and disabled Medicare recipients understand their rights and options for health care.

All 50 states and six U.S. territories have some sort of SHIP program. Each one has a different name: In Connecticut, it's called Choices. In California, it's called the Health Insurance Counseling and Advocacy Program (HICAP). Services will also differ depending on where you live but should include:

• Assistance with Medicare bills.
• Advice about buying a Medicare supplement policy (also known as Medigap).
• Advice about long-term care insurance.
• Help with payment denials or appeals.
• Explanations of Medicare rights and protections.
• A forum for comments about care and treatment.
• Assistance with choosing a Medicare health plan.

To find the SHIP program in your state

If you have questions about Medicare, or if you are interested in changing the way you receive Medicare-funded health care services, contact your local SHIP office. Special rules and consumer protections sometimes apply when you change health plans. Additionally, if you or your spouse have health insurance through a former employer or union, contact your benefits representative before you make any new plan choices. Otherwise, you could lose future options or benefits.

Financial help and benefits

There are several programs available to help low-income Medicare beneficiaries pay for some of their Medicare out-of-pocket expenses. For each of these programs the income requirements vary, but in all cases, in order to qualify, your resources cannot exceed $4,000 for individuals and $6,000 for couples annually.

What programs can help you if your income is low and you can't afford the premiums, deductibles, or Medigap?

The Qualified Medicare Beneficiary (QMB) Program pays for your Medicare premiums, deductibles, and coinsurance. To qualify, you must have income at or below $716 monthly for individuals and $958 for couples.

The Specified Low Income Medicare Beneficiary (SLMB) Program pays for your Medicare Part B premium. To qualify, you must have income at or below $855 monthly for individuals and $1,145 for couples.

The Qualified Individual 1 (QI-1) Program pays for your Medicare Part B premium. To qualify, you must have income at or below $960 monthly for individuals and $1,286 for couples.

The Qualified Individual 2 (QI-2) Program pays a small portion of your Medicare Part B premium. To qualify, you must have income at or below $1,238 monthly for individuals and $1,661 for couples. Individuals who may be qualified for any of these programs can apply at their local Medicaid offices.

What are some of the benefits covered by Medicare (Part B)?

• Artificial limbs and eyes
• Braces — arm, back, leg, and neck.
• Eyeglasses.
• Immunosuppressive drug therapy (limited), extended coverage available for transplant patients, including some ESRD patients.
• Kidney dialysis and kidney transplants.
• Medical supplies, such as ostomy bag, surgical dressings, splints, casts, and some diabetic supplies.
• Prosthetic devices, including breast prosthesis after mastectomy.
• Transplants (under certain conditions), including heart, lung, kidney, pancreas, and liver.
• X-rays.

What are some of the preventive services that Medicare (Part B) covers?

• Mammogram screening: This option is available annually to all women with Medicare, age 40 and older. The beneficiary pays 20 percent of the Medicare-approved amount with no Part B deductible.

• Pap smear and pelvic examination once every three years, for all women with Medicare. (However, women at high risk for cervical or vaginal cancer, and women of childbearing age who have had an abnormal Pap smear in the preceding three years, may have an annual exam.) You have no coinsurance and no Part B deductible for the Pap smear. For doctor services and all other exams, you pay 20 percent of the Medicare approved amount with no Part B deductible.

• Colorectal cancer screening: Fecal occult blood test once every year; flexible sigmoidoscopy once every four years; colonoscopy once every two years for those at high risk for cancer of the colon; and barium enema (doctor can substitute for sigmoidoscopy or colonoscopy) for all Medicare beneficiaries age 50 or older. (No age limit for colonoscopy.) You pay no coinsurance and no Part B deductible for the fecal occult blood test. For all other tests, you pay 20 percent of the Medicare approved amount after the annual Part B deductible.

• Diabetes monitoring: Glucose monitors, test strips, lancets, and self-management training for all Medicare beneficiaries with diabetes (insulin users and non-users). You pay 20 percent of the Medicare approved amount after the annual Part B deductible.

• Bone mass measurement for beneficiaries at risk for losing bone mass. You pay 20 percent of the Medicare approved amount after the annual Part B deductible.

• Vaccinations: Flu shot once every year; pneumonia shot (one might be all you need); hepatitis B shot (for those at medium to high risk for hepatitis) for all Medicare beneficiaries. There is no coinsurance and no Part B deductible for flu and pneumonia shots if the doctor accepts assignment. For hepatitis B shots, you pay 20 percent of the Medicare approved amount after the Part B deductible.

• Prostate cancer screening: Digital rectal examination once every year; Prostate Specific Antigen (PSA) test once every year for all men with Medicare age 50 and older. Generally, you pay 20 percent of the Medicare approved amount after the yearly Part B deductible. There is no coinsurance and no Part B deductible for the PSA test.