What Does Medicare Cover?

Medicare coverage can be confusing and, if miscalculated, very costly. In this article, we'll clarify some common misconceptions about Medicare, as well its rules of eligibility.

Medicare 101
In 1965, President Lyndon Johnson signed the original Medicare program into law. The program originally covered two portions:

Part A - Hospital insurance
Part B - Medical insurance

Part A covers a large portion of hospital-related costs for eligible people over the age of 65 and only includes medically necessary and skilled care, not custodial care. Persons not eligible for coverage can participate in the program if they pay a monthly fee

Part B is optional and pays a portion of non-hospital provided medical care, such as doctor visits and other outpatient services. There is a monthly fee for this program. The fee was $93.50 in 2007 and is likely to rise in the future. Part B coverage is subject to various deductibles and co-pays.

The Medicare program still fulfills its original role, but was expanded in 1997 and refined in 1999 to include:

Part C - "Medicare" + Choice, now known as "Medicare Advantage"

Part C gives Medicare beneficiaries the opportunity to enroll in private healthcare plans and receive all Medicare services, including Part A and Part B, from a private provider. It operates like the healthcare coverage provided by most employers. A menu of offerings is available with a variety of coverage options, co-payments and monthly costs. The private provider also covers services not provided by Parts A and B. Part C is available in most areas and provides a convenient way to receive medical services.

In 2006, the program expanded again to offer:

Part D - Prescription drug coverage

Part D is an optional insurance program that charges a monthly fee in exchange for prescription drug coverage. The monthly cost varies widely depending on the coverage options you choose. Like employer-provided health care plans, Part D holds an open enrollment session November 15 - December 31 each year, during which time program participants can choose to change their coverage options. While Part D is a voluntary program, Medicare recipients have to seriously review their healthcare needs immediately upon eligibility because the cost of Part D increases each year for individuals who choose not to participate immediately upon eligibility.