What is Medicare?

Medicare is a health insurance program that is run by the United States Federal Government as part of the Social Security Act. First instituted in 1965, Medicare was originally set up to provide medical care for elderly people who had no other way to pay for health care. The program also pays for most of the residency training programs for doctors in the United States.

Auntie Lou says, "What did old people do before Medicare?"

Medicare is limited to people who are 65 or older. Coverage can also be available to permanently disabled people who are younger than 65 and to people that have been diagnosed with End-Stage Renal Disease (ESRD) (kidney failure) or with Amyotrophic Lateral Sclerosis (ALS also known as Lou Gehrig's disease). It is a common misconception that if you are 65 you are automatically eligible for Medicare benefits. This is not the case. You must also have been a legal permanent resident of the United States for five years and either you or your spouse must have paid Medicare taxes for at least 10 years. If the second section of this criterion is not met the Medicare recipient can pay an additional monthly Part A premium to receive Medicare benefits.

Anyone who enrolls in Medicare will automatically be placed in the "Original Medicare" program if they do not choose the alternative Medicare Advantage Plan. The Original Medicare program is a pay for service plan in which the government pays a set amount for each type of medical service (usually 80%) and the patient pays the remaining cost of care. Additional supplemental insurance can be used to help pay the patient's cost of care. Supplemental insurance is either paid for using monthly premiums or it is paid for through a section of a previous employer's pension plan. Even with supplemental insurance it is not uncommon for Medicare patients to still have out-of-pocket expenses related to their health care.

Medicare Advantage (Called Part C or MA Plans) is an Alternative program to Original Medicare. Medicare Advantage Plans are run by private insurance companies and are reimbursed by Medicare. Most MA plans are similar to HMOs or PPOs. Like Original Medicare, these plans also have premiums, co-payments and yearly deductibles.

Medicare bills can be very difficult to pay on a fixed retirement income so it is important to thoroughly investigate all Medicare and supplemental insurance options in order to choose the best Medicare program for your retirement.