Of Alphabet Soup and Donuts: Health Coverage for Seniors

I'd like to thank all our readers who've sent in such great responses to the columns. Lately, I've gotten some emails that go something like this: I'm 65 (or my mother is 65) and all the health plans you've talked about are for people under age 65 or employed. What about those of us who are over 64 and retired?

What they're talking about of course is the granddaddy of government healthcare—Medicare. We've talked about government programs such as risk pools and children's health plans, but those are designed and implemented by the state you live in. Medicare is a federal healthcare program. Like everything health insurance-wise, (and some would say governmental) Medicare has grown so convoluted and complex, it will take more than one column to break it down into smaller, easy-to-digest pieces. A good place to start is to understand the program that oftentimes gets confused with Medicare.

Medicaid, also a federal government health program, is implemented by the individual states. It was designed to help the truly destitute get access to basic healthcare. The criteria "may include your age, whether you are pregnant, disabled, blind, or aged; your income and resources (like bank accounts, real property, or other items that can be sold for cash); and whether you are a U.S. citizen or a lawfully admitted immigrant. The rules for counting your income and resources vary from state to state and from group to group. There are special rules for those who live in nursing homes and for disabled children living at home"

Medicare, on the other hand, is given to citizens or legal immigrants that are age 65 or older, "some disabled people under age 65, and people of all ages with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant)."

Some people confuse the eligibility age of Medicare because of another senior program, Social Security, which has different eligibility ages depending upon when you were born. Social Security has a tie-in with Medicare, but we'll get to that later.

So now that we know who is eligible, what exactly does Medicare cover? Medicare coverage is broken down into four (4) parts, lettered A, B, C, and D. Part A is funded by people who paid into the program via Medicare taxes taken out of their paychecks during their working lifetime. Generally, you are eligible to get Part A for no additional premium if you (or a spouse) receive or are eligible to receive Social Security. (Social Security has more involved eligibility requirements that we won't go into here). Part A covers hospitalization. Part B (if you want it) covers doctors and outpatient services. It also covers limited preventive services. It has a premium that needs to be paid that is different each year. For 2008 it is $96.40 a month.

These first two coverages are fairly straightforward with only a few wrinkles. Getting to Parts C and D is where it gets complicated. Part C is also called Medicare Advantage Plans and aren't really a part of Medicare at all but rather a replacement for Medicare offered by private insurance companies. You MUST take both part A and B to be eligible for Part C. Further complicating the issue are Medicare Supplemental plans (also called MediGap plans) offered by private insurance companies (that also happen to be lettered). We'll look at each in more detail in future columns.

All this information is well and good, but what most people want to know is, what does it cost and what does it cover? We've looked at some of the costs and touched upon hospitalization, doctors, outpatient services and preventive services. So what's missing? Prescription drugs. Prescription drugs account for a huge cost in the health care system and the senior citizen community is a high consumer of prescriptions drugs. Prior to January of 2006, Medicare did not cover outpatient drugs. Enter Medicare Part D. This is the program that attempted to address the need for affordable prescription coverage. I say ‘attempt' because, although something is better than nothing, Medicare Part D coverage is confusing and exposes people to some pretty hefty expense after a certain level of drugs have been covered (often called a ‘donut hole'). Further complicating the issue is the hundreds of Part D plans put out by private insurance companies. Have indigestion yet? Don't worry, over the next couple columns we'll look at how all these options fit together so that you can make some intelligent choices about your (or your parents') Medicare options.

Until next time, stay healthy!