Part 1: Medicare Basics

MEDICARE EXPLANATIONS 2011

Part 1:   Original Medicare

Medicare!   Part A!   Part B!   Advantage!   MediGap!  Supplements!  (Like it’s a pill, now?)

It’s that time of year again – Medicare Madness hits the Mailbox!    Even if you’re not (yet!) of an age to be affected you know someone who is drowning in a paper sea of Medicare offerings. SO what’s it all mean on THIS planet?   To help ease some of the confusion, here’s a quick overview of Medicare and all those maddening Medicare terms. 

ORIGINAL MEDICARE

This is the government’s social health insurance we’ve all gotten used to taking for granted since LBJ signed it into law back in 1965.    Medicare is what your “FICA” payroll deduction pays for:  that “FICA” stands for ‘Federal Insurance Contributions Act. (Bet you never knew what that stood for, did you?)   Even the tax comes in two parts:   the total FICA tab is 2.9% of your wages / salary / what-have-you.   If you’re lucky enough to still have a job for somebody else, then you pay half (or 1.45%) of the total.   Your employer pays the other half.   Of course, if you’re working for yourself, then you get to pay the full amount.   The self-employed can take a deduction for their “employer half” – but that’s a whole other article.

What Medicare is NOT

What Medicare is NOT is Medicaid – or MediCAL as it’s called here in California.    The names are similar enough to cause confusion, but the two programs are pretty much opposite sides of the social insurance coin.   YOU pay for your Medicare benefits over a minimum of 10 years of paying FICA taxes; the government is not gifting you Medicare benefits.   Medicaid is a program for individuals and families with limited incomes and resources.   Unlike Medicare  - where your FICA taxes pre-pay your benefits - Medi-CAL is funded jointly by Federal and State governments.  Where Medicare is managed by various Federal agencies, each individual state government manages its own Medicaid program. 

Medicare is also NOT Social Security.   Since the Social Security Administration is responsible for determining Medicare eligibility and processing your Medicare premium payments, there’s always a temptation to confuse the two.  

Don’t. 

Barring disabilities and other such niceties, as long as you’ve paid at least 10 years of FICA taxes,  you are automatically eligible for Medicare Part A when you turn 65.    You may not be eligible for full Social Security retirement benefits, however, until you’re 66 or – for the youngsters in the crowd – even age 67.   Social Security is the program that, as of this writing at least, pays you a monthly income based on your reported income during your working life.   Medicare just pays the medical bills.   Most of ‘em…

So what’s with all the moving parts, then?   

IT’S THE BUREAURACRACY, DARLIN’!!   

Back in LBJ’s day, the entitlement mentality had not yet taken hold of Washington.   The idea at the time was that the government should help seniors pay for catastrophic medical expenses, but that individuals would and should remain largely responsible for their own routine medical bills.   That’s why Medicare was designed in parts, so seniors would not be forced to rely on the government for services they could pay for themselves. 

Bureaucrats being bureaucrats, the bill’s authors simply labeled each part with a letter rather than investing in something so … creative… as names.   (Former members of the military will recognize this tendency with something akin to fondness.)   And so we have:

Part A – this is the part that pays the BIG bills, hospitalization, skilled nursing care, etc.   

              That’s why this is the only part that’s both PREMIUM FREE & automatic.

Part B -  you have to actively enroll in Part B and pay for it.   This is the part that covers

              the day-to-day routine expenses:  doctor visits, lab work, diagnostic tests, etc.  

Part C – This is the part that was added in 1997.   It established what are called

               Medicare Advantage plans.   More on these later

Part D -   Remember, outside of things like chemotherapy, neither Part A nor Part B

covers prescriptions.  So in 2006 Washington decided to strip prescription coverage out of Medicare Suppement plans and establish a new, separate part of Medicare to cover it.  And so Part D – the Medicare Prescription Drug Plan was born.