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Understanding Medicare

By Jason Alderman

Most people are somewhat familiar with Medicare, since it's likely they or a family member are already covered by the government-provided health insurance program. But with its alphabet soup of options and complex rules, Medicare can be daunting to the uninitiated.

If you're approaching 65, here are some Medicare basics you'll need to know:

Medicare provides benefits to people age 65 and older and those under 65 with certain disabilities or end-stage renal disease. Most people's initial enrollment period is the seven months beginning three months before the month they turn 65. If you miss that window, you may enroll between January 1 and March 31 each year, with coverage beginning July 1.

Medicare offers numerous plans and coverage options, including:

Part A helps cover in-patient hospital, nursing facility and hospice services, and home health care. Most people pay no monthly premium and are automatically enrolled upon turning 65, or after receiving Social Security disability benefits for 24 months.

Part B helps cover doctor's services, outpatient care and some preventive services. It's optional and has a monthly premium. Most people are automatically enrolled at the same time as Part A. To opt out, follow the instructions that accompanied your Medicare card (mailed about three months before your 65th birthday). Weigh opting out carefully because there's often a sizeable penalty if you enroll later, unless you're currently covered by an employer's plan.

Part C (Medicare Advantage) plans are privately run HMO or PPO Medicare plans that provide coverage similar to Parts A and B, but may also include additional benefits such as prescription drugs, dental and vision coverage. In exchange for lower out-of-pocket costs and additional benefits, you're usually required to use the plan's provider network, which may be more restrictive than providers you could access through regular Parts A and B.

Part D helps cover prescription drugs. It's optional and carries a monthly premium. These privately run plans vary widely in terms of cost and medications covered. As with Part B, you may be charged a late-enrollment penalty if you don't sign up when first eligible and later decide to enroll. If you're in a Part C plan with drug coverage, you don't need Part D.

Many people purchase additional Medigap (or Medicare Supplemental) insurance, which is offered by private insurers and follows strict government coverage guidelines. Medigap helps pay for many items not covered by Medicare, including deductibles, copayments, coinsurance and, sometimes, coverage when traveling abroad.

Some employers and unions offer Medigap coverage to their retirees. Medigap plans can vary widely in terms of cost, covered benefits and states participating so compare your options carefully. Note that Medigap policies do not pay for Medicare Advantage plan deductibles and copayments, so if you want to join an Advantage plan, you may want to cancel your Medigap coverage. Also, if you already have a Medicare Advantage plan, it's illegal for anyone to sell you Medigap insurance unless you are switching back to original Medicare Part A and B coverage.

Understanding and choosing the right Medicare options for your individual situation can be a complicated process. For assistance, call 1-800-633-4227 or visit, where you'll find:

  • Helpful publications, including "Medicare & You 2010"
  • Tools to compare prescription drug plans, hospitals, nursing homes and Medigap plans in your area
  • A resource to find local doctors and other health practitioners who participate in Medicare
  • Services covered by various Medicare plans
  • Enrollment instructions.

This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.

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