What is the Medicare Process and How Does it Work?

More people than ever are asking that question, because in the next few years, the first wave of the Baby Boomer generation will reach age 65. And that means millions of people, or a lot more than the number of people who actually attended Woodstock, will now qualify for Medicare coverage.
Our good friend Gary isn't old enough for Medicare, but his parents will turn 65 in just a few months. So Gary thought he'd be a good son and help his mom and dad by finding out everything he could about how Medicare works. What Gary discovered is that Medicare reminds him of the alphabet blocks his mother gave him to play with when he was little.

There is:

  • Part A, hospital insurance;
  • Part B, medical insurance;
  • Part C, an option to get Medicare through a private insurance company; and
  • Part D, which is prescription drug coverage.

So, just like he does when he's assembling his kids' toys, Gary started with Part A.

Part A is the basic Medicare plan that all Americans qualify for when they reach age 65. Gary's parents will automatically be signed up to receive Medicare Part A when they sign up for Social Security. And Medicare Part A is free.

Part A works differently than the health insurance plans many of us have at work, where we pay a premium every month whether we need medical care or not. Medicare Part A is known as a fee-for-service plan, meaning Gary's parents will only be charged when they visit a hospital. Figuring out Part A, or what is basically hospital insurance, was the easy part.

Gary's parents have a few decisions to make for the rest of their Medicare coverage. They have the option of adding Part B or D, or choosing the optional Part C. Why do they need these other parts?

Gary discovered that while Part A covers hospital costs, Part B covers medical costs such as doctor visits and preventive screenings. As with Part A, Gary's parents are automatically enrolled in Medicare Part B. Unlike Part A, however, it's not free. Gary's parents will pay a monthly premium. They could choose to opt out by contacting the Medicare office and canceling the Part B coverage and choosing a private insurer. But since the cost of Part B is minimal, Gary thinks his parents should keep the Part B coverage.

The prescription drugs that Gary's parents need are covered by Medicare Part D. These benefits are delivered through private plans that contract with Medicare. They are paid with a monthly premium.

The last part Gary looked at is Part C.

Part C, or Medicare Advantage, is an optional plan that combines the coverage of Parts A and B, but works more like the health insurance we receive at our workplace. Private insurance companies that are approved by Medicare provide this type of coverage. In most cases, Part C is a lower-cost alternative to the Medicare Plan, and providers usually offer extra benefits and include prescription drug coverage, Part D. Also, it's not free.

Another difference that Gary discovered is that Part C plans often have networks, and if his parents choose one of these plans, they will need to use the doctors or hospitals that belong to the network.

Even after Gary helped his parents review the Medicare process, they knew they still didn't have all the answers. So, from time to time, they go on the Internet and visit www.hhs.gov, which is the Health and Human Services Web site. Private insurance company Web sites also have information about the various parts of Medicare.

Today, Gary's parents feel much better about their upcoming Medicare enrollment. And now, you or your parents can too.

Summary - The Medicare Process

  • Medicare is divided into Parts A, B, C and D.
  • Part A is basically hospital insurance.
  • Part B is medical insurance.
  • Part D is prescription drug insurance.
  • Part C is an option called Medicare Advantage that lets you get Parts A and B, and sometimes Part D, through a private insurance company approved by Medicare.