What is Medicare?

Benefit Chart

Supplement Chart

Medicare Information

Supplemental Coverage

What's Next?

Medicare Information

A BRIEF HISTORY

Medicare was established under Title XVIII of the Social Security Act of 1965. The purpose is to provide a health insurance program to various eligible Social Security recipients. In 1973 people with disabilities were also added to Medicare. The program is administered by the Center for Medicare/Medicaid Services formerly known as Health Care Financing Administration or HCFA.

Medicare Part A (Hospital insurance) is covered by part of the Social Security Tax (FICA) and as you know a percentage of your income (7.65% if employed, twice that if unemployed) is earmarked for this benefit. Today the ratio of workers paying Social Security taxes to retirees drawing benefits is 3.3 to 1. In other words, for every person drawing benefits, just over 3 people are paying into the system. As baby boomers retire this ratio is expected to worsen. By 2030, primarily because retirees will be living longer, this ratio is expected to drop to 2.1 workers per retiree.

Medicare Part B (Medical coverage, physician and outpatient services) is a voluntary program which is financed using various government revenues. Each participant is required to pay a monthly premium ($54 for 2002) which is set annually by the federal government. Part B only pays for 80% of approved charges and also has an annual deductible ($100 in 2002). There is the term -- "approved charges". This is where it can get confusing for most folks so let's tackle this one.

Let's say that this is January and you're visiting your physician for the first time this year. If your doctor accepts Medicare assignment he or she will accept payment in full from Medicare for services rendered. If the bill sent to Medicare was for $100 but Medicare decides the approved charge is only $75 Medicare will pay nothing (remember this is your first visit?) and you will end up paying the full $75 which is then applied to your $100 deductible. On your next visit, Medicare would pay 80% of that $75 charge minus the remaining deductible of $25 ($35) and you would end up paying the rest ($40). All visits after that are split 80/20. If on the other hand your physician does not accept Medicare assignment (a rare occurrence but it does happen) he will bill you 15% of anything Medicare won't approve - on top of the 20% you already have to pay. He can never charge you more than that.

Medicare Part B covers some preventative care such as annual mammograms and semi-annual pap smears; it will also cover colorectal and prostate cancer screening, diabetes services and supplies, annual flu shots and glaucoma screenings. All of these may be subject to the 20% co-pay under Part B. To find out all charges covered under this plan visit www.medicare.gov for detailed information. Prescriptions are not covered under either Part A or Part B and although lobbyists are hammering away at this it may be a long wait, so don't hold your breath.

Which leads us to the paramount question: "Just how much can I end up spending out of pocket without any supplemental coverage?" Good question and this is addressed in depth in the following table.

With all those fancy numbers it is evident that your out of pocket expenses could sky-rocket into the unmanageable realm. Since we would all prefer to remain with our feet planted firmly in our homes and divert second and third, or even reverse mortgages, let's explore the options then.