Most retirees have two main senior health insurance options--Medicare and managed care. Medicaid is a program that pays for medical assistance only for those seniors with low incomes or disabilities.
As long as you have contributed enough through FICA taxes, you will be eligible for the best senior health care option--retired or not--for Medicare when you turn 65. Apply for Medicare coverage three months before your 65th birthday.
Senior health care provided by Medicare is divided into four components:
Part A–Hospital Insurance
Part B--Medical Insurance (Optional)
Part C–Additional Insurance Coverage
Part D--Offers voluntary prescription drug coverage offered via private vendors
Let's look at each of these components of Medicare senior health coverage.
Part A is called hospital insurance. It covers most costs of your stay in the hospital, as well as some follow-up costs after being in the hospital. It also pays some outpatient medical services, including medically necessary equipment and supplies, senior health care at home, and physical therapy. Under most circumstances, you do not have to pay a premium for Part A.
Part B is medical insurance. It's optional. If you elect it, the monthly premium is deducted from your Social Security check. It provides for certain out-of-hospital treatments and is intended to help pay doctor's bills for treatment in or out of the hospital. It also covers many other senior health care medical expenses you incur when you are not in the hospital, such as the costs of necessary medical equipment and tests.
Medicare Part B has spawned additional senior health insurance coverages:
Its Original Medicare Plan and Medigap insurance.
Medicare Part C coverage: Medicare Managed Care Plan (like an HMO) and Medicare Private Fee-for-Service Plan.
With the Original Medicare Plan, you pay your Part B monthly premium and then pay for additional services as you use them. With this plan, you might also choose to buy Medicare Supplement Insurance, or "Medigap" insurance. The term 'Medigap' implies that these insurance policies will cover the gaps in Medicare payments. Medigap does not fill all the gaps in senior health insurance but it helps.
Part C: Medicare Managed Care and Private Fee-for-Service plans are offered by private insurance companies. Managed care plans generally fall into two main varieties: health maintenance organizations (HMOs) and preferred provider organizations (PPOs). HMOs are generally less expensive than PPOs, but usually more restrictive in their services and choice of doctors.
With these latter two plans in Part C, you must continue to pay your Part B premiums, and you may also have to pay an additional premium to the insurance company, as well as any related deductible or co-insurance payments; however the services you receive may be more comprehensive than those offered through the Original Medicare Plan.
When considering senior health care option, compare the costs and local availability of Medigap with the Medicare Managed Care and private fee-for-service programs. Be prepared for heath problems in retirement. They are part of aging. Do not wait until they happen to cover the costs as it will be too late.
Related information: Medicaid Annuities