Consider This . . . The Medicare Maze

The Medicare program literally touches every American in some way. You may have parents or grandparents using this program. You may have a disabled friend or relative who receives benefits, or you may be one of the millions of baby boomers beginning to think about retirement and how Medicare relates to you and your future plans. If you avoided all of the possible links or associations with the 39,000,000 referenced beneficiaries as of 2000, then you most certainly are touched by any changes in the law that require more tax dollars from you through the Medicare payroll tax of 1.45 percent on every dollar you earn and an equal amount from your employer. Or you may be a general contributor through general income taxes which is the ultimate resource to fund expanded benefits and new beneficiaries that confront our lawmakers each and every year since President Lyndon Johnson signed the law in 1965.

The benefits are referred to as Medicare Part A and Part B and are available to every Social Security recipient at the age of 65.

Medicare Part A (hospital insurance) is available at no additional cost to all beneficiaries who have paid into the Social Security system for 40 or more employment quarters. For beneficiaries who have contributed for 30 to 39 employment quarters, the cost is $165 per month or ($1,980 per annum). And for beneficiaries who have contributed for less than 30 employment quarters, the cost is $300 per month or ($3,600 per annum). This may not be the least expensive plan for those who have to pay, but it might be the only place to buy such coverage.

Medicare Part B (medical insurance) is available to all beneficiaries of the Social Security system at a cost of $50 per month.

Much has been written about the scope of the coverage and the pros and cons. In the October 2001 issue of the AARP Bulletin, several issues were made clear. The prediction is that over the next 25 years, annual out-of-pocket medical costs are projected to rise by 66 percent from $3,142 to nearly $5,248 per beneficiary. The single biggest contributor to this escalation---and the one that gets the most press coverage---is prescription medications. Ironically, when a survey was taken, a $25 monthly assessment was viewed as too high and $50 was not possible. It does seem clear that both Democrats and Republicans favor some sort of prescription plan as part of Medicare. How that can be accomplished is the problem. In spite of the growing number of beneficiaries and a significant voting block, other government budget priorities and partisan bickering keep it in the background and off center stage.

There are several factors which tend to keep cost verses benefit shortfalls manageable. Today, we find many employees working beyond normal retirement in order to keep health benefits active through their employers or to secure the health care benefits from them in the future. Medicare becomes a secondary payer when a beneficiary has private insurance. This means that Medicare coverage pays some of what is left unpaid after employer coverage is used. When working is not an option, many consider supplemental plans called MediGap policies. These specialized policies were created to cover gaps in coverage and/or out-of-pocket costs left unpaid by Medicare. A list of the companies can be found by searching the Internet or calling a Medicare representative at 1-800-medicare (800-633-4227).

This is one government benefit that requires education and information for proper utilization and maximum benefit. The good news is that most health care professionals have participated in this environment long enough to be a real asset to you. The bad news is that some of those same skilled professionals havepbeen the perpetrators of fraud against Medicare. This fraudulent activity is often a result of our willingness as a patient to sign any documents, receive medical care, and ignore the reams of notices that come by mail. They do prosecute and jail offenders. I know there have been local offenders, and my own mother's favorite doctor is in his final year of incarceration. The fraud unit for Medicare is an active and aggressive unit, but your vigilance is required.

It is certainly clear by any casual reading of the materials that an entire section of the health care industry flourished under the Medicare umbrella. Publishers and lawyers have prospered as well-I found no fewer than a dozen books available covering Medicare. The Mercer Guide to Social Security and Medicare, 2001 29th edition is a great book and easy to follow and understand. I also found numerous web sites like or or or which go into greater details about coverage and practices than can be addressed in this brief airing.

There is no reason to approach this topic alone or uninformed. Just remember that you have been paying for Medicare on the installment plan for a long time even though the Medicare plan booklet just showed up. I encourage you to educate yourself now and check out what you purchased before you are 65.

If you have comments or suggestions, or have an idea for a future computer or business topic, e-mail me at or

Jimmy R. Hammond, CPA, is a resident of Annapolis and a consultant to businesses in Annapolis, Baltimore and Washington D.C.


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