Medicare and Supplemental Insurance Basics

Medicare is a truly massive government program, with nearly 60 million Americans currently enrolled.  It's also quite expensive, eating up 15-percent of the total U.S. federal budget - nearly as much as is allocated to defense spending each year.

Given its scope - and the profound effect it has on both the U.S. budget and healthcare system - Medicare is a program that affects virtually everyone, directly or indirectly. Many of us know little about the program and the vital role it plays for millions of retirement-aged and disabled Americans.

With that in mind, let's take a closer look at the basics of Medicare - and why you may still need to opt for supplemental insurance even if you're covered.

Medicare Explained

Most people are familiar with the concept of government-provided healthcare. While many western nations have opted for a fully nationalized system, where healthcare is government-run and funded through taxes, the U.S. has a hybrid private/public healthcare infrastructure. Under this dual system certain groups of people qualify for federal healthcare - veterans, the disabled, the poor, retirees, etc. - while the majority receive their coverage from a private insurer, often as part of an employment package.

Medicare and Medicaid are the two largest federal healthcare programs. While Medicaid is designed to serve poor, pre-retirement aged people, Medicare is open to anyone who meets the age criterion. The typical qualification age is 65, those it's possible to qualify earlier if you have a medical disability or end-stage renal disease.

Because so many Americans maintain employer-based healthcare, Medicare is an exceptionally important program for those nearing or in retirement. The availability of government-provided healthcare allows workers to retire without fear of crippling medical bills or the expense of paying for private coverage.

The Most Common Medicare Misconception

While Medicare is an invaluable program for millions of Americans, it's not a perfect, one-stop healthcare solution. Many Americans are under the false impression that Medicare pays for everything, and that's simply not true. Here are a few of the things Medicare typically does not cover:

•    Routine dental work

•    Hearing aids

•    Eyeglasses

•    Eye exams

•    Cosmetic surgery

•    Long-term care

•    Medical care outside the U.S.

Obviously, many of these items are things that retirement-aged people will need with some frequency. Long-term care, in particular, is often a massive expense - retirees are generally only allowed 100 days of care in an approved facility. Once that cap is reached, Medicare enrollees must either move to Medicaid or find some other arrangement.

One way to help cover these costs is the purchase of a supplemental insurance policy that pays for services that Medicare excludes. It's vitally important that you read through these policies closely, however, as they vary considerably with regard to what is covered and the deductibles that are required.

The Takeaway

Medicare is a critically important healthcare program for millions of Americans. It's important to realize that Medicare does not cover everything you'll likely need. Consider pursuing supplemental coverage to fill any gaps in your Medicare coverage.