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Most Americans these days retire around the age of 65 years, at which time the former employers generally stop paying for the health insurance. The health needs beyond this age are also different as the focus shifts to more on care side as opposed to the treatment. There are 4 health care programs available at this point. They include: Medicare, which is a federal social program administered by the state; Medigap, which is a private insurance to pay for the expenses not covered under Medicare; Medicaid, which is a joint Federal Government and State Government program to provide health care for people with limited income and resource; and the Long Term Care Insurance, which is a private insurance to pay for any health care needs at age 65 or above and reduces the dependence on overly restrictive Medicare program. ...Show details

Medicare is a federal health insurance program for people 65 years old or over and also for the people who have at least 2 years of disability. They are also called as social security recipients. The eligibility requirements also include paying into Medicare program for 40 quarters or more. Medicare is a deductible and coinsurance based program i.e. you are required to pay both the deductible and coinsurance. Medicare consists of two parts. Part A is for Hospital Insurance and Part B is for Medical Insurance. ...Show details

Medicare was signed into law in 1965 by President Lyndon Johnson. At that time first boomers had entered the labor market and 5.5 workers were paying into the Medicare system for each beneficiary. With those boomers now in their 60s, the ratio of workers to beneficiaries has dropped to 3.9 to 1. In 1965, the average Medicare beneficiary could live for another 5 years. These days, an American who reaches age 65 can expect to live 18 more years. Over the next 10 years, the number of beneficiaries will grow from 42 million in 2006 to 54 million. While reduced workers to beneficiary ratio is causing financial challenges, rising health care costs are worsening the long term viability of the program. Typically, Medicare covers only 45% of beneficiaries' total health costs. To pay for the remaining 55% expenses, many people rely on private insurance e.g. a Long Term Care Insurance.

  • This covers hospital care, skilled nursing care, home health services, and care in a hospice.
  • This part is funded by payroll taxes, both the employer and the employee pay for it.
  • Under hospital care, the benefits are grouped by benefit periods. A benefit period begins on the day of hospitalization and ends when the beneficiary is out of hospital or other skilled nursing or rehabilitation for 60 days in a row. If the hospitalization happens after 60 consecutive days, a new benefit period begins. There is no limit on the number of benefit periods one can have for the hospital or skilled nursing care. ...Show details
  • The first benefit period is for 60 consecutive days of hospitalization and requires a deductible of $1,216.
  • The second benefit period is for 61 to 90 days and requires a $304 per day payment as coinsurance by the insured individual.
  • The third benefit period is for more than 90 days. All the days in this period are counted as part of the 'Reserve Days' a lifetime maximum for which is 60 days. During this period the coinsurance also rises significantly to $608 per day.
  • Skilled nursing facility care is covered only if it is needed within 30 days of 3 consecutive day hospital stay for the same condition that requires admission to the nursing facility. The skilled care must be certified by a physician on a daily basis and the skilled nursing home facility must be certified by Medicare.
  • After all the above 4 conditions are met, benefits are payable for up to 100 days of skilled care with the following schedule:
    • First 20 days: Medicare pays 100% of the approved cost. Between the 21st day and the 100th day, the patient is required to make a copay of $152 per day.
    • If the beneficiary needs to stay beyond 100 days in a benefit period, all the charges are paid by the beneficiary.
    • Home health care visits by a Medicare approved home health agency are fully paid by Medicare. These services are provided on a periodic basis by a visiting nurse or home health aide. There is no deduction or coinsurance required or prior hospitalization needed for home health care services.
    • Hospice care is a Medicare program for the care to be provided in the patient's home by a Medicare approved hospice. Generally meant for terminally ill patients i.e. for individuals with life expectancy of 6 months or less, the focus of hospice care program is on providing care and not curing. Benefits are available for up to two 90 day periods, plus one 30 day period, and one extension period of unlimited length.
  • Part B covers for health care expenses related to outpatient visits, doctor's charges, ambulance, part time home health care and other medical services.
  • Part B is a voluntary program and the participant and the Federal Government share the monthly premiums.
  • It requires a $147 deductible per year and a copay of 20%. The monthly premium for Part B is $104.90 .
  • Future deductibles will be tied to the inflation rate. ...Show details

There is also a Part C or Medicare Advantage program which is separate from the original Medicare program. It provides managed care and fee for service features through private insurers. Some providers offer added benefits such as prescription drugs, eye exams, and hearing aids. Anyone who is eligible for Part A and B is also eligible for part C. The cost varies from provider to provider.

Prescription Drug benefit or Medicare Part D was introduced in 2006. With a monthly premium of about $35, it allows all the Medicare beneficiaries to get 75% of drug costs (up to annual maximum of $2,850) to be paid by this program. While the beneficiaries pay for all the drug costs between $2,250 and $5,100, all drug costs above $5,100 are covered at 95%. Those with low income may get additional subsidies. It also provides some tax benefits to the employers offering retiree prescription drug coverage. ...Show details

In 2007, Medicare Part B was linked to the income requiring beneficiaries in higher income group ($80K and over for individuals or $160K and over for married couples) to pay a higher premium. Finally, starting in 2010, private plans may compete with Medicare. Because of the restrictions of the Medicare program and the cost of coinsurance, one needs to seriously consider buying the Long Term Care Insurance. To supplement the Medicare insurance some companies offer private insurance under a program called Medigap. One would buy Medigap for medical care not covered by Medicare, including prescription drugs, co- payments, and coinsurance. Some of the plans may also cover other services e.g. eye and dental exams. Typically, individuals who have Medicare Advantage would not need a Medigap plan.