Medicare | A Primer
What is Medicare? Medi-gap? Why are there parts A, B, C and D? What do they mean? These are all questions I have had and addressed at various points in my financial career. I have not, however, written an article that explains this information. That changes today.
President Lyndon B. Johnson signed Medicare into law as part of the Social Security Act on July 30, 1965. At this time, there was only Medicare, not parts A,B,C, or D. Medicare typically provides coverage for the cost of hospitalization and other medical care for Americans aged 65 and older. You are eligible if you paid into social security during your working life and meet minimum work requirements.
The Parts of Medicare
Part A – Hospital Insurance
Part B – Medical Insurance
Part C – Medicare Advantage
Part D – Prescription Coverage
Everyone who is eligible for Medicare receives Medicare Part A benefits automatically. Most eligible people do not have to pay a premium to get Part A. Part A initially covered inpatient hospital and skilled nursing facility care and was later expanded to include home health and hospice facility care. Long-term or custodial care is not covered under Medicare part A, B, C, or D.
Medicare part B is optional and you must pay a premium. This part adds coverage for medically necessary services, physical therapy, and some preventive screenings.
The passage of the Balanced Budget Act of 1997 added C to Medicare part A and B. Part C allows you to have your Medicare benefits administered through private health insurance plans. The insurer provides your benefits, not the government. Part C plans with prescription drug benefits are known as “Medicare Advantage” plans.
Medicare Advantage is not Medicare Supplemental (MediGap) insurance. Generally speaking, Medicare advantage premiums are lower, but they cover fewer expenses. These plans are offered by private companies.
Medicare Supplemental Insurance is only available if you are receiving benefits from Part A and B, not if you have chosen Medicare part C. MediGap insurance pays after Medicare pays. The premiums tend to be higher than Medicare advantage plans, but the coverage is more complete.
Part D is an optional Medicare program which went into effect on January 1, 2006 and covers prescription drugs, requires a premium, and is offered through private companies. Anyone with Part A or B is eligible for Part D.
Medicare started out as hospital insurance. Later, medical coverage was added to the hospital coverage. Then, part C was added for private insurance companies. Finally, drug coverage was added. As a result, it became Medicare Part A, B, C, and D.