Medicare does not cover long term institutional care. This fact cannot be overemphasized. It covers most of the costs of skilled nursing care in an institutional setting for up to 100 days following a three day stay in the hospital.
Even so, Medicare coverage is essential for those who are eligible and not adequately covered by alternative health insurance. Original Medicare Part A covers hospital costs while Part B covers doctor bills and other outpatient costs. Part A has no premium while Part B requires a monthly premium (about $96.40 for most people in 2009).
Original Medicare Parts A and B have deductibles and copays. It makes sound financial sense to take out a Medicare Supplement policy (often called Medigap). Deductibles and copays can add up to large out-of-pocket costs unless a Medigap policy is in place.
As to prescription drug plans, Part D now provides some coverage. However, there is a large gap (often called "the doughnut hole") before catastrophic coverage begins. Once the beneficiary's annual out-of-pocket costs exceed about $4,500, the copay is only 5%. A Part D plan should be in place if for no other reason than the catastrophic coverage it provides. Premiums are as low as $15 per month. For those who don't sign-up when first eligible, there may be a premium increase of 1% for each month until signing up.
Medicaid Advantage plans are offered in the larger cities and metropolitan areas. An Advantage plan replaces original Medicare Parts A and B, but the Part B premium requirement continues. An advantage of an Advantage plan is that it covers more preventive care services and may include dental and other coverage. There may be no premium other than the Part B monthly premium, but there will be copays. These copays can add up for a chronic condition.
If you don't live in a geographical area served by an Advantage plan, the decision is easy. Get a Medigap plan and a stand-alone Part D drug plan.
In those geographical areas where Advantage plans are available, the decision may be a personal choice or it may be purely financial. A personal reason for many is the desire to continue with a particular physician, and that may mean original Medicare with a Medigap policy or an Advantage plan other than one where all providers have to be in the plan's network. A purely financial reason may be that quality Advantage plans that include drug coverage are available premium free with small copays for most services.
For institutionalized dementia patients, an Advantage plan may result in a patient's family members or friends having to transport the patient to service providers located away from the patient's residential care facility, which can cause stress to both the patient and the caregivers.
The Medicare rules are complex. In making a choice on whether original Medicare with a Medigap policy or an Advantage plan is best for you, a question to ask yourself is what health care services do I need now and will likely need in the future, and which plan will best cover the cost of these services with the least stress on me and my caregivers. Answering the question thoroughly will require thorough due diligence.