Medicare is the United States health insurance program for individuals age 65 and older, and also younger citizens who have specific disabilities which have enabled them to qualify for Medicare early. Though original Part A & Part B provide a cornerstone of health coverage, beneficiaries quickly learn that the program is not designed to cover everything. As you begin to consider your options for filling in the gaps, it is first essential to know your Medicare 101 – or what the original program covers – so that you can adaquetly choose your supplement.

There were two essential parts to Medicare when President Johnson signed the program into law some 50-odd years ago. Your hospital insurance is covered under Part A. These benefits includes inpatient stays in a hospital or skilled nursing unit, as well as home health care, blood and even hospice (end of life) care. One is eligible for Medicare Part A after he or she (or a spouse) has worked 40 quarters during their lifetime, during which their paycheck was taxed to pay for their hospital insurance in the future. For this reason, most Americans do not owe any premiums for their hospital benefits once they reach age 65.

Part A was designed to cover a portion of your hospital costs while you make up the rest in the form of deductibles and co-insurance. The deductible for Medicare Part A has risen steadily throughout the years and currently, in 2011, is $1132. Unfortunately this is not a calendar year deductible. Instead, you will pay the hospital deductible any time you enter the hospital when you have already been in the hospital in the last 60 days. More alarming is that long hospital stays can rack up significant charges. After the first 60 days, you will begin to accrue a daily hospital copay of several hundred dollars per day, which increases in amount until you run out of benefits after 150 days.

The second part of Medicare is call Part B, or Outpatient coverage. You are responsible to pay a monthly premium for Part B, which is about $115.40 for most beneficiaries, although people with higher incomes may be required to pay more based on their last year’s tax return. For some people with very low incomes, there is assistance through Medicaid with helping to pay some or all of your Part B premiums.

A visit to your primary care doctor is considered the most common form of outpatient care, but it’s important to realize that Part B covers a variety of services includin higher-cost items like magnetic resonance imagining (MRI), labwork, surgical procedures, and even expensive treatements for cancer and kidney failure. Because Medicare expects you to pay both an annual Part B deductible ($162 in 2011) as well as 20% of all your outpatient services, you can incur signficiant medical spending because there is no stop-loss to what you pay each year on original Medicare.

These “holes” in Medicare prompt many beneficiares to enroll in some type of supplemental coverage. Medigap plans were created shortly after the advent of original Medicare and were designed to help consumers pay for some of the deductibles and co-insurance required of them for their medical services. In the last 1990′s, we also saw the creation of private health plans, called Medicare Advantage, as an option in which beneficiares could join a plan and get access to their medical care throug that plan’s network of physicians and hospitals. Drug coverage for retail prescriptions also became available in 2006 to help consumers obtain medications at a copay, similar to what they might have experienced with group health coverage in the past.

Medicare is a complicated program with many parts, so knowing these basics is just the beginning of what you’ll need to get a handle on before you choose a supplemental plan. Licensed insurance agents who work in the Medicare market can be a great resource for you as you sort through the various plan options and try to choose one that suits you. Contact an independent insurance agent in your state to find out which plans are available in your county, and get quotes and benefit information so you can begin narrowing the field until you find the right plan for you

Danielle Kunkle is a Medicare Supplement Accredited Advisor and VP at Boomer Benefits, a Texas agency which specializes in Texas Medicare supplements. She and her staff have helped thousands of Medicare beneficiaries research and find suitable coverage to supplement their Texas Medicare coverage.

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