How Is Medicare Calculated?
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Qualifications
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If you are 65 or older, and a citizen of the United States---or if you have been a legal resident of the United States for 5 continuous years---you are eligible for Medicare, whether you are eligible for Social Security or not. You can join Original Medicare or one of Medicare's Advantage (Part C) plans, as well as one of a number of privately run prescription drug plans (Part D).
Part A
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After you have met the deductible (see below), you and Medicare will share the cost of your treatment, with Medicare paying by far the larger share. Medicare also covers the cost of some time-limited home health, nursing home and hospice care.
You won't pay a monthly premium if you (or your spouse) have 40 quarters of Medicare-covered employment. You will pay $244 a month if you have 30 to 39 quarters and $443 if you have less than 30 quarters.
You must pay the hospital deductible ($1,068 in 2009) before Medicare begins paying. Other parts of Part A have no deductibles. You also have to pay your share of the cost of the care you receive. The amount you will pay varies with the service provided.
In all cases, Medicare bases the amount it will pay on the Medicare-approved amount. For more information on costs for specific Part A activities, see Resources.
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Part B
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Part B covers your medical expenses outside of the hospital, such as doctor visits and outpatient treatments.
Medicare Part B has a monthly premium that starts at $96.40 for those earning less than $85,000 yearly (2009). For each additional $53,000 added to your income above $85,000, the premium goes up $53 a month until it maxes out at $213,000 and $308.30.
Part B has an annual deductible ($135 in 2009) and a co-pay (Medicare pays 80 percent, and you pay the remaining 20 percent).
Part C (Advantage)
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Private insurers provide Medicare Advantage plans. All Advantage plans provide Part A and Part B coverage, and some include Part D (prescription) benefits as well.
You must live within the coverage area of an Advantage plan to join one. The premiums, the coverage offered and the amount of co-pays vary significantly among companies. For more information and to compare available plans, see Resources below.
Part D
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Private insurers also provide Medicare Part D (drug) plans. As with the Advantage plans, monthly premiums and drug costs can vary significantly.
Prescription coverage includes both brand name and generic drugs. The insurance company bases its payments and your co-pay on a formulary (listing of drugs covered). You will pay a monthly premium and a yearly deductible and will share some of the cost of your prescriptions (co-pay). Do not fail to ensure the drugs you take on a regular basis are included in a company's formulary before you join its plan.
Your exact costs will vary depending on the plan you choose as well as the drugs you take. Some plans, Medicare says, may offer more coverage and additional drugs but will charge higher monthly premiums.
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