Last updated on January 12, 2010

Medicare is a health insurance plan for those 65 and older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD). According to the federal Centers for Medicare & Medicaid Services (CMS), Medicare serves approximately 40 million beneficiaries.

The vast majority of Medicare beneficiaries have the Original Medicare plan. This is the traditional fee-for-service arrangement, which means you can see any health care provider who accepts Medicare. You must pay a deductible, and then Medicare will pay its share of the costs and you will pay yours.

How does Medicare work?

The Original Medicare plan, also called Traditional Medicare and Fee-for-Service (FFS) Medicare, is the most widely used and best understood option through which Medicare beneficiaries receive their health care. Health care providers are paid based on the services they provide.

In general, your options are less restricted with traditional Medicare than with any other Medicare option. For example, you can go to any doctor, hospital, or other health care provider that accepts Medicare. However, your expenses are more likely to be higher than with other options because you may also need to purchase Medicare supplement insurance (Medigap). Medigap policies can help defray some of the costs not covered by traditional Medicare.

Who pays for the Medicare plan?

The Medicare plan is funded by federal taxes and administered by CMMS. Beneficiaries also have “out-of-pocket” costs: They must pay Medicare premiums, deductibles and copays, and Medigap premiums if they choose to purchase this supplemental insurance. Beneficiaries must pay for their routine physical exam visits, assistive care, most dental care, routine foot care, and hearing aids.

Who is eligible for Medicare?

To qualify, you or your spouse must have worked for at least 10 years in Medicare-covered employment, be age 65 or older, and be a US citizen or permanent resident. A person under 65 with a disability or chronic kidney disease may also qualify for Medicare.

Are there income limits or medical requirements?

There are no income limits for Medicare. There are medical requirements for the provision of services, as an individual must have a medical necessity for such services. services, because an individual must have a medical need for those services.

How do I sign up for Medicare?

Some people are automatically enrolled in Medicare. Enrollment is automatic if you are under age 65 and already receiving Social Security or Railroad Retirement benefits. If you are disabled, you will be automatically enrolled in Medicare Part A and Part B beginning 25 months after you are declared disabled.

Most people must join a Medicare plan. The enrollment period begins three months before you turn 65 (or immediately if you need regular dialysis or a kidney transplant) and is valid for seven months thereafter. If you request it in advance you could avoid possible delays in your Part B coverage. If you have questions about Medicare eligibility or enrollment, call Social Security toll-free at (800) 772-1213, weekdays from 7:00 am to 7:00 pm, US Eastern Time. You can also enroll online by visiting www.socialsecurity.gov.

To apply for Medicare, contact any Social Security Administration office. (If you or your spouse worked for the railroad, contact the Railroad Retirement Board of Directors.) If you don't sign up during those 10 months, you'll have to wait up to three months starting January 1 and Part B of your coverage It won't start until July.

What happens if I wait to sign up?

Don't put off signing up for Medicare. If you wait 12 months or more to enroll, the premiums you pay will likely be higher. However, you do have some options if you have group health insurance based on your or your spouse's (or family member's) current employment.

Even if you continue to work after you turn 65, you should sign up for Medicare Part A. Part A could help pay for part of the health care expenses that your employment plan doesn't cover.

However Part B is another story. It may not be a good idea to sign up for Medicare Part B if you have health insurance through your job. You would be required to pay the monthly Part B premium, and Part B benefits may be of limited value when your employer's plan is the primary party responsible for paying your medical bills. However, under certain circumstances you will have to pay an extra 10 percent per year as a penalty for not immediately signing up for Part B.

What is the Medicare HMO Plan?

Medicare health maintenance organizations (HMOs), where available, provide all services covered by Medicare under Parts A and B and may provide additional benefits—such as prescription drug coverage—that are not offered under Medicare traditional. However, Medicare HMO plans are not available to everyone in some regions of the country.

What does a private fee-for-service (PFFS) Medicare plan mean?

PFFS plans are Medicare plans offered by private insurers and are hybrids of Medicare HMO plans and traditional fee-for-service Medicare plans. There is no provider network, which could be especially important to beneficiaries living in rural areas that have historically lacked private Medicare insurance options.

Can I enroll in more than one plan?

No, you cannot enroll in more than one Medicare health plan at the same time.

What do I do if I want to leave a Medicare HMO plan or a PFFS plan?

You should be careful when you change the way you get Medicare services. This is especially true when you leave a managed care plan, either voluntarily or involuntarily. Since Medigap insurance is not required when you are in a managed care plan, beneficiaries returning to traditional Medicare have certain rights to purchase Medigap insurance.

Where can I find help changing plans?

You should contact your State Health Insurance Assistance Program (SHIP) for help.

If you have questions about the Medicare plan, or if you are interested in changing the way you receive your Medicare health care fund services, contact your local SHIP office. Sometimes special rules and consumer protections apply when you change health plans. Also, if you or your spouse have health insurance through a previous employer or union, you should contact your benefits representative before making any new plan options. Otherwise, you could lose future options or benefits.

Financial aid and benefits

There are several programs available to help low-income beneficiaries pay part of their Medicare out-of-pocket costs. For each of these programs the income requirements vary.

What programs can help you if your income is low and you can't pay your premiums, deductibles, or Medigap?

The Qualified Medicare Beneficiary (QMB) Program pays your Medicare premiums, deductibles, and coinsurance.

The Targeted Low Income Medicare Beneficiary (SLMB) Program pays your Medicare Part B premium.

The Qualified Individual 1 (QI-1) Program pays your Medicare Part B premium.

The Qualified Individual 2 (QI-2) Program pays you a small part of your Medicare Part B premium. Individuals who qualify for any of these programs can apply for services at local Medicaid offices.