Know what you need to know about Medicare.
The Medicare program turned 50 in 2015 and currently provides healthcare benefits for more than 50 million Americans. And while Medicare is how millions of retirees pay for healthcare, it's a complicated system with multiple parts, and it doesn't pay for everything.
We asked three of our contributors to discuss something about Medicare that everyone needs to know, and here's what they had to say.
The big picture of what is and what isn't covered
Selena Maranjian: You can get by for much of your life without knowing a lot about Medicare, but as we get older, most of us need to start paying attention. One of the key things to know about it is what it does and doesn't cover. Here's a quick summary of that. First off, know that the main parts of Medicare are referred to as Parts A, B, C, and D. Parts A and B, respectively covering hospital expenses and medical expenses, make up what it now often referred to as original or "traditional Medicare. That's because you can now opt for Part C instead of A and B -- with Part C being a Medicare Advantage plan that's offered by a private insurer, aiming to give you at least as much coverage as original Medicare, and often more than that. Part D offers prescription drug coverage, including insulin supplies.
More specifically, Part A covers hospital inpatient care, skilled nursing facility care, and some home healthcare and hospice care. Part B covers physicians' services, service from other healthcare providers, certain therapies, lab tests, home healthcare, durable medical equipment (such as blood sugar monitors, wheelchairs, or crutches), and some preventive services such as screenings and vaccines.
What's not covered? Well, lots of things. Most healthcare services that are considered "medically necessary" are covered, but always check if you're not sure. For example, original Medicare generally doesn't cover vision, hearing, or dental expenses, but some Medicare Advantage plans will do so. Medicare generally won't cover basic home health help, such as assistance with bathing or toileting -- unless the patient is also receiving skilled nursing care. Alternative medicines or treatments (such as acupuncture, acupressure, homeopathy, or chiropractic care) are generally not covered. Care you receive while outside the U.S. is not covered, either. When it comes to Part D drug coverage, don't expect coverage for weight-loss pills, erectile dysfunction treatments, fertility drugs, or over-the-counter medicines, among other things.
You can expect a lot of financial assistance with healthcare costs via Medicare -- but also be prepared to shoulder a portion of the costs yourself.
You'll have to pay premiums and deductibles for some things
Dan Caplinger: One confusing thing about Medicare is that each of its different parts involves paying for healthcare services in different ways. Medicare Part A, which covers hospital and most inpatient expenses, doesn't charge a monthly premium as long as you or your spouse worked for at least 10 years and paid into the Medicare system through payroll tax withholding. It does, however, charge a deductible and require copayments for certain services.
By contrast, Part B coverage for medical services like doctor visits does involve paying a monthly premium. Typically, you'll pay an annual deductible out-of-pocket, and then cover 20% of the remaining cost of a doctor visit or other service, with Medicare covering the rest.
Part D prescription drug coverage sometimes has monthly premiums and sometimes doesn't, depending on the private provider you choose. Part D plans vary in the drugs they cover and the benefits they provide, so it's difficult to generalize. Typically, though, you can find low-cost Part D plans that provide basic coverage, or higher-cost plans that include a wider variety of prescription drugs and involve less out-of-pocket cost.
Navigating payment options with Medicare can be tricky. But if you're diligent, you can find the combination of services that's right for your budget.
There's a big thing Medicare doesn't cover that you'll probably need
Jason Hall: One of the most important things to know about Medicare is one things that it doesn't pay for in the majority of cases: long-term care. According to the U.S. Department of Health and Human Services, 70% of people turning 65 will need long-term care at some point, with men needing an average of 2.2 years of care, while women on average need 3.7 years of care.
Medicare doesn't pay for most kinds of long-term care, simply because the majority of that care isn't provided by skilled providers such as nurses and may not be medical in nature. For example, many elderly require help with daily activities such as bathing, preparing meals, and even using the bathroom, and this non-skilled care isn't covered by Medicare. Further, alternatives that may help pay for unskilled care, such as Medicaid and the Department of Veterans Affairs only cover a fraction of the population.
The result is that 80% of long-term care is provided by family members, often because there isn't an affordable alternative, and the average caregiver spends 20 hours per week providing care. This can be a huge burden on a family.
What can you do? Depending on how long you have before you retire and start using Medicaid, the best hedge is creating as much wealth as you can via retirement savings such as 401(k) and Roth and traditional IRAs, but you may want to consider insurance plans if you're closer to retirement. There are a number of alternatives, including hybrid long-term care/life insurance plans that may meet your needs.
