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How Medicare Works

Centers For Medicare and Medicaid Services 2014 Guide to Medicare
Medicare is the federal health insurance program for people over 65 years of age and people with certain disabilities or End-Stage Renal Disease (permanent kidney failure). There are four parts to Medicare:

  • Part A Hospital Insurance
  • Part B Optional Medical Insurance
  • Part C Optional Medicare Advantage Insurance
  • Part D Optional Prescription Drug Insurance

2014 Medicare Part A
Helps pay for care in hospitals, some skilled nursing facilities, hospice, and some health care. For most people, Part A is premium-free because they paid Medicare taxes.

Hospitalized Medicare Covers Individuals Pay
1-60 days Most confinement costs after the required Medicare Deductible. $1,216 Deductible
61-90 days All eligible expenses, after the patient pays a per-day co-payment. $304 per Day
91-150 days All eligible expenses except per-day co-payment. 60 Lifetime Reserve Days may not be reused. $608 per Day
151 days or more Nothing 100%
Skilled Nursing Confinement
Must be receiving skilled nursing care in a Medicare approved skilled nursing facility that begins within 30 days after hospitalization of at least 3 days.
All eligible expenses for the first 20 days; then all eligible expenses for days 21-100, after patient pays a per-day co-payment. $152.00 per-day
Co-payment days 21-100. All costs after 100 days

2014 Optional Medicare Part B
Optional coverage to help pay for doctors, outpatient hospital care, and some other medical services not covered by Part A. The chart below shows the Part B monthly premium amounts based on income. These amounts change each year. There may be a late-enrollment penalty.

If Yearly Income is Individual Pays 

Single Individual Return

 Married Joint Return

A late fee is possible

 $85,000 or less $170,000 or less $104.90
$85,000 - $107,000 $170,000 - $214,000 $146.90
$107,000 - $160,000 $214,001 - $320,000 $209.80
$160,000 - $214,000 $320,001 - $428,000 $272.70
Above $214,000 Above $428,000 $335.70

Medicare General Enrollment Period is from January 1 through March 31 of each year at a Social Security Administration office. Part B coverage will start on July 1 of that year.

Special Part B Enrollment Periods - while covered by employer or union group health plan or within 63 days of the date when the employer or union group health plan coverage ends, or when employment ends.

Expense Medicare Covers Individuals Pay
Medical Expenses
Physician's services for inpatient and outpatient medical/surgical services; physical/speed therapy, diagnostic tests
80% of approved amount $147 Deductible
20% of approved amount
Clinical Laboratory Services
Blood tests, urinalysis
Generally 100% of approved amount Nothing for services
Home Health Care
Part-time or intermittent skilled care, home health aide services, durable medical supplies and other services
100% of approved amount; 80% of approved amount for durable medical equipment Nothing for services; 20% of approved amount for durable medical equipment
Hospital Outpatient
Hospital services for the diagnosis or treatment of an illness or injury
Medicare payment to hospital, based on outpatient procedure payment rates Coinsurance based on outpatient payment rates
Blood After first 3 pints of blood, 80% of approved amount First 3 pints plus 20% of approved amount for additional pints

Part C Optional Medicare Advantage Plan Monthly
An alternative to traditional Medicare, Part C is another way to get Medicare benefits. It combines Part A, Part B, and, sometimes, Part D (prescription drug) coverage. Medicare Advantage Plans are managed by private insurance companies approved by Medicare. These plans must cover medically-necessary services. However, plans can charge different copayments, coinsurance, or deductibles for these services.

Part D Optional Medicare Prescription Drug Plan
This optional coverage may help lower an individual's prescription drug costs and help protect against higher costs in the future.