Dealing with the costs of a serious or chronic disorder can be as distressing as dealing with the disorder itself. The costs are often beyond the personal resources of most people. For older people, most health care expenses are paid for by the following:

• Medicare: It helps people who are age 65 or older, who are disabled, or who need kidney dialysis.
• Medicaid: It helps certain people who are poor or disabled.
• Other government programs such as the Department of Veterans Affairs (VA): The VA provides health care for honorably discharged veterans who meet certain eligibility requirements.

These programs are supplemented by private insurance or personal funds, including those of family members.

Understanding how Medicare, Medicaid, or other government programs work is complicated. What is completely paid for, what is partly paid for, who pays for how much of what, and how the payments are arranged can be difficult to understand. The programs change frequently, and for Medicaid, the regulations vary from state to state. The government and health care foundations provide current information about these programs on the Internet and in booklets available by mail. But part of the problem is the complexity and fragmented nature of the health care system and of the payment system for health care.

Health care can be paid for in two ways (see also Making the Most of Health Care: How Health Care Is Paid For):

• Fee-for-service: Health care practitioners and institutions are paid for each hospital stay, each visit to a practitioner, each test, and each treatment.
• Capitation: Practitioners and institutions are paid a fixed amount to provide health care for a specific group of people regardless of how many visits, tests, or procedures those people have or how much they cost.

Some health care plans are managed. Managed care (see Making the Most of Health Care: Understanding Managed Care) simply means that a health care plan gives directions to health care practitioners and institutions about what care should be provided and when. These directions are intended to help ensure better, more consistent care and to control costs. Managed care can include HMOs, preferred provider organizations (PPOs), point-of-service (POS) plans, or a combination.

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Who Pays for What? Type of Care Services Covered by Hospital care Inpatient care, including mental health care General nursing and other hospital services and supplies Drugs used during hospitalization A semiprivate room (a private room only if medically necessary) Meals Medicare Part A Medicare Part C (Medicare Advantage) Medicaid Department of Veterans Affairs (VA)* Short-term care in a certified skilled nursing facility (nursing home) Skilled nursing care Social services Drugs used in the facility Medical supplies and equipment used in the facility Dietary counseling Physical, occupational, and speech therapy (if needed) to meet the person's health goals Transportation by ambulance (when other transportation endangers health) to the nearest facility providing needed services unavailable at the skilled nursing facility A semiprivate room Meals Medicare Part A if people need short-term care temporarily after a hospital stay Medicare Part C if people need short-term care temporarily after a hospital stay Medicaid VA* Outpatient care Doctor's, nurse practitioner's, and physician assistant's fees Emergency department visits Transportation by ambulance (when other transportation endangers health) Outpatient surgery (with no overnight stay in the hospital) Rehabilitation (physical, occupational, and speech therapy) Diagnostic tests, such as x-rays and laboratory tests Outpatient mental health care Outpatient dialysis A second opinion if surgery is recommended and a third opinion if opinions differ For people with diabetes, diabetes supplies, self-management training, eye examinations, and nutrition counseling Smoking cessation Durable medical equipment, such as wheelchairs, hospital beds, oxygen, and walkers Medicare Part B Medicare Part C Medicaid VA* Home health care Personal care, including help with eating, bathing, going to the bathroom, dressing Part-time skilled nursing care Physical, occupational, and speech therapy Home health aide services Social services Medical supplies, such as wound dressings, but not prescription drugs Medicare Part A if people are homebound and need part-time skilled nursing care or rehabilitation on a daily basis Medicare Part B Medicare Part C Medicaid VA Preventive care Screening tests for prostate and colorectal cancer Mammography Papanicolaou (Pap) test Bone density measurements Glaucoma tests Influenza, pneumococcal, and hepatitis B vaccinations Diabetes screening Cholesterol screening Medicare Part B Medicare Part C Medicaid VA* Extra benefits Prescription drugs Eyeglasses Hearing aids Medicare Part C Medicare Part D (prescription drug plans) Medicaid in some states VA* Long-term care in an assisted living community Varies greatly from community to community Meals Help with daily activities Some social and recreational activities Some health care Medicaid in a few states (partial coverage) VA* in some situations Long-term care in a skilled nursing facility (nursing home) Varies from state to state Medicaid VA* Hospice care Physical care and counseling Room and meals only during inpatient respite care and short-term hospital stays Medicare Part A Medicare Part C *For the Veterans Administration, the rules of eligibility vary for different services and change frequently.

Last full review/revision February 2009 by Amal Trivedi, MD, MPH