Back to basics: All about Medicare

If you're a baby boomer on the verge of retirement, you probably have lots of questions about exactly how Medicare works. You may have heard that additional coverage is available, and you may want to know more about those options.

First, let's start with Original Medicare, the standard medical coverage from the U.S. government. There are two parts:

• Part A covers hospitalization and is available to most people at age 65.
• Part B covers doctor visits, tests and other health care services. It doesn't cover prescriptions. You pay a set amount every month for Part B, but you can have the amount subtracted directly from your Social Security check. You may need to pay an annual deductible before Part B coverage starts. Then, Medicare generally pays 80% toward the cost of your medical bills, and you pay 20%.

If, after investigating Original Medicare in more detail, you decide you need more coverage, you'll want to check out Medigap (Medicare supplemental insurance) plans. Medigap helps pay some of the health care costs, and may also cover certain things, that Original Medicare doesn't cover. Standardized Medigap plans are available from many health insurers. Depending on the plan you choose, it may cover the deductible, coinsurance and copays. But Medigap plans don't cover prescriptions.

The plans that can make Medicare easier for you are called Medicare Advantage plans (considered Medicare Part C). You purchase Medicare Advantage plans from private insurers. They make coverage simpler because one company manages all your claims and payments. All Medicare Advantage plans must provide coverage as good as or better than Original Medicare, and many include prescription coverage.

If your Medicare Advantage plan doesn't cover prescription drugs, or if you want to add prescription drug coverage to Original Medicare, you'll want to look into Medicare Part D. This is prescription drug coverage you can purchase from a private insurer. It helps reduce your out-of- pocket cost for prescription drugs. Part D can be added to Original Medicare, Medigap or Medicare Advantage plans. But beware: Late penalties may apply if you don’t enroll when you first become eligible for Medicare or you don’t have credible coverage.

Topics: Medicare