Introduction to Medicare

1. Introduction to Medicare The federal government’s entry into the health care and health insurance arena came about in 1965 with the creation of the Medicare program. Though the program has undergone a number of adaptations over the years, its mission remains unchanged: to ensure that the elderly and disabled are provided with a way to obtain and pay for needed health care and health services. It is a basic entitlement program and a significant and core component of our nation’s health-care system.

2. The Purpose of Medicare • Medicare is a federal health insurance program intended to help protect the elderly by ensuring that • they can get medical insurance coverage at an affordable rate after age 65. The federal government • funds Medicare through payroll tax contributions and general tax revenues. • Of all the great social programs, Medicare is arguably one of the most successful—it is the nation’s • largest single health insurance program and covers 46 million Americans.

3. Generally, a person is eligible for Medicare if • he or she (or his or her spouse) worked for at least ten years in Medicare-covered • employment; • he or she is 65 years old or older; and • he or she is a citizen or permanent resident of the United States. • A person might also qualify for coverage if he or she is a younger person with a disability or with • chronic kidney disease.

4. Overall, Medicare has accomplished two things: • 1. coverage is available without regard to medical condition; • 2. coverage is available at the same price for most recipients based on the standard eligibility • requirements. However, in 2007, the Part B Medicare premium increased for people whose income exceeded $80,00 as an individual, or $160,000 as a couple, according to the provisions of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA 2003).

5. Medicare Act of 1965 • When Medicare was created in 1965, it represented a troubled compromise, patched together, despite the incompatible goals of those who enacted the legislation. • Its supporters, concerned about rapidly rising medical costs, wanted to create a plan that would protect older people on fixed incomes from a system that forced them to spend all of their personal resources on medical care before being eligible for funds from public assistance. • Opponents of the program argued for a voluntary health insurance program that would be supported by government funds.

6. Even those who favored Medicare disagreed on many issues. For example, many of Medicare’s advocates did not want older people to regard it as charity and insisted that its benefits be identical for everyone regardless of income. • Others feared that an attempt to provide comprehensive insurance to the entire elderly population would dilute the benefits, making it impossible to offer extensive coverage to those who were most in need.

7. What emerged from this heated congressional debate was the Medicare Act of 1965, which identified age as its principal eligibility requirement. Everyone over 65 could sign up for Medicare with non medical tests to determine need. To satisfy those in Congress who were concerned about funding such a sweeping program, the plan was designed to provide only partial coverage. At that time, medical costs were not nearly as high as now, and Medicare usually covered a large share, if not most of a beneficiary’s bill

8. Medicare in the 1970s to Present • In 1972, Medicare was expanded to cover the severely disabled and people with end-stage renal disease. Also in the 1970s, responsibility for administering the Medicare program was given to the Health Care Financing Agency (HCFA). • In 2001, the name of this agency was changed to Centers for Medicare and Medicaid Services (CMS). (CMS is part of the Department of Health and Human Services.) The change included more than a name change. This agency was given control of several government medical care programs, including Medicare and Medicaid, and the State Children’s • Health Insurance Program (SCHIP). CMS’s mission is to control health-care costs associated with the programs assigned to it. The agency makes the rules and regulations that standardize payments for services, defines what type of care is reasonable for various health-care needs, and supervises the certification of Medicare providers.

9. CMS effectively controls all Medicare operations, including the four parts of Medicare: • Part A—Hospital Insurance • Part B—Medical Insurance • Part C—Medicare Advantage • Part D—Prescription Drug coverage

10. MMA 2003 • MMA 2003 added the most sweeping changes ever to existing Medicare law. • Medicare, Medicare supplement insurance, Medicare Advantage, and Medicaid can all contribute to paying for medical bills, but they are separate and distinct in their application. • The first three Medicare programs work together and are for financially independent people; • Medicaid helps people who have exhausted their financial resources almost entirely.

11. Skyrocketing Costs • As medical costs have increased, the federal government’s outlays for Medicare have soared. Costs to Medicare beneficiaries have also skyrocketed. Along with the rising costs of physician fees, other expenses have risen far in excess of general inflation. • In 1966 for example, the Medicare deductible for hospitalization was set at $40, which represented the average cost of a day in the hospital. • By1990, this deductible soared to $592. In 2008, the deductible had reached $1,024, which indicates that it will continue upwards under the present Medicare system.

12. The number of people enrolled in the Medicare program has increased by almost 100 percent since it began. • As we move further into the twenty-first century and the population ages, these numbers will soar because of improvements in health-care techniques and increases in longevity. • The Census Bureau has predicted that 20 percent of the population will be 65 or older by 2030—an estimated 78million people who will be eligible for Medicare. • And because older people account for over a third of all hospital stays, everyone may face the possibility of some substantial medical bills while covered by Medicare, thus increasing the cost of Medicare delivery

13. Mechanics of Medicare • Part A (Medicare Hospital Insurance) and Part B (Medicare Medical Insurance) combine to form what was commonly known as Medicare, and since 1998, comprise what is known as the Original Medicare plan. • These are the traditional fee-for-service Medicare plans in that a patient has some free choice regarding medical care.

14. Part A—Hospital Insurance • Medicare Part A, Hospital Insurance, is financed directly through Social Security taxes. • Local Social Security offices provide Medicare information and forms. The claims themselves are submitted by the hospital or other providing agency to large insurance companies, called intermediaries, which are designated by the Centers for Medicare and Medicaid Services to process those claims. • The hospital is always the party that submits Part A claims to the intermediary

15. Medicare hospital insurance helps pay for necessary medical care and services furnished by Medicare-certified hospitals, skilled nursing facilities, some skilled home health-care agencies, and hospices

16. The number of days that Medicare covers care in hospitals and skilled nursing facilities is measured in benefit periods, not annual periods. • A benefit period begins on the first day an insured receives services as a patient in a hospital or skilled nursing facility, and ends after he or she has been out of the hospital or skilled nursing facility and has not received skilled care in any other facility for 60 consecutive days. • The number of benefit periods a recipient can have is unlimited. So, logically, a person could have several benefit periods in a year, and each benefit period has its own deductible. • Certain Medicare supplement policies cover each deductible.

17. Inpatient Hospital Care • Medicare Part A helps pay for up to 150 days of inpatient hospital care in each benefit period, beginning with the deductible for days 1 to 60, and with coinsurance amounts for days 61 to 90, and higher coinsurance amounts for days 91 to 150.

18. Covered services include • a semi-private room and meals, • general nursing services, • operating and recovery room costs, • intensive care, • drugs, • laboratory tests, • x-rays, and • all other necessary medical services and supplies received in the hospital.

19. Skilled Nursing Facility Care • An insured may need inpatient, skilled nursing, or rehabilitation services after a hospital stay. • If he or she meets certain conditions, Part A helps pay for up to 100 days in a participating skilled nursing facility for skilled care only, in each benefit period. Medicare pays all approved charges for the first 20 days; the insured (or his or her Medicare supplement) pays a coinsurance amount for days 21 through 100.

20. Covered services include • a semi-private room and meals, • skilled nursing services, • rehabilitation services, • drugs • medical supplies

21. Home Health Care • If an insured meets certain rigid conditions, Medicare pays the full approved cost of covered home health-care services. • This includes part-time or intermittent skilled nursing services prescribed by a physician for treatment or rehabilitation of homebound patients. • The only amount the insured pays for home health care is a 20 percent coinsurance charge for medical equipment, such as a wheelchair or walker.

22. Hospice Care • Medicare helps pay for hospice care for terminally ill insured's who select the hospice care benefit. • There are no deductibles, but the insured pays limited costs for drugs and inpatient respite care.

23. Part B—Medical Insurance • Medicare Part B, Medical Insurance, is also called voluntary supplementary medical insurance (SMI) and is financed by payments from the federal government and by monthly premiums paid by people enrolled in the plan

24. Medicare Part B helps pay for • doctor’s services, • outpatient hospital services (including emergency room visits), • ambulance transportation, • diagnostic tests, • laboratory services, • some preventive care like mammography and Pap smear screening, • outpatient therapy services, • durable medical equipment and supplies, and • a variety of other health services.

25. Part B also pays for some home health-care services that Part A does not pay. Legislation enacted with MMA 2003 added some prescription drug features and expanded the following preventive benefit changes 1. a one-time initial preventive physical exam (the “Welcome to Medicare” benefit) within 6 months of when a person with Medicare first becomes enrolled in Part B; 2. screening blood tests for early detection of cardiovascular diseases; and 3. diabetes screening tests for at-risk people .

26. Medicare Part B pays 80 percent of approved charges for most covered services. • The insured is responsible for paying a deductible of $135 (as of 2008) per calendar year and the remaining 20 of the Medicare-approved charge. • The Part B deductible will rise each year according to an indexed calculation tied to inflation, which was created by MMA 2003. • The insured or a Medicare supplement policy has to pay limited additional charges if the doctor who cares for him or her does not accept assignment. Assignment means the doctor agrees to accept the Medicare-approved charge for services.

27. Part C—Medicare Advantage • Congress passed a law in 1997 that made many changes in the Medicare program. This law included a section called Medicare +Choice (renamed Medicare Advantage, or MA, in 2003) that created new health plan options called Part C. • A person enrolled in a Part C Medicare Advantage plan is still assured all of the basic Medicare benefits that he or she now enjoys. • In addition, Part C helps cover preventive care services to help the insured stay healthy at no extra cost, and several MA health plan choices.

28. The following health plan choices are currently available throughout the Medicare system: • the Original Medicare plan (Parts A and B); the Original Medicare plan with a supplemental insurance policy; and managed care plans (Medicare Advantage, or Part C) that have contracts with Medicare. • In 2006, Medicare Advantage plan choices were expanded to include regional preferred provider organization plans (PPOs). MMA 2003 created regional PPOs, which help ensure that beneficiaries in rural areas as well as urban areas have multiple choices of Medicare health coverage.

29. Part D—Prescription Drugs • With the enactment of MMA 2003, Congress added a completely new coverage—that of Part D— which relates to Medicare’s treatment of prescription drug purchases. In addition to Medicare taking the prescription drug responsibilities for low income beneficiaries from the Medicaid program and transferring them to the Medicare program, Medicare offers prescription drug insurance coverage for Medicare beneficiaries.

30. Services Medicare Does Not Cover • Medicare Part A does not pay for convenience items such as telephones and televisions provided by hospitals or skilled nursing facilities, nor does it pay for private rooms (unless medically necessary) or private duty nurses. • The only type of nursing home care Medicare pays for is skilled care in a skilled nursing facility • (SNF) for rehabilitation, such as recovery time after a hospital discharge. Medicare does not pay if an insured needs only custodial services (help with daily living activities like bathing, eating, or getting dressed). • Medicare Part B traditionally does not pay for most prescription drugs, with only a few exceptions. • MMA 2003 enacted Part D to cover medications. • Also, routine physical examinations or services not related to treating illness or injury are not covered. Part B does not pay for dental care or dentures, cosmetic surgery, routine foot care, hearing aids, eye examinations, or eyeglasses. Except for certain limited cases in Canada and Mexico, Medicare does not pay for treatment outside the United States.

31. Basics of Medicare

32. Basic Eligibility • Medicare was originally targeted to people over age 65 on the assumption that they would be retirees and would be without the benefit of employer-sponsored medical care. • The program has never covered people who take early Social Security retirement, although it does cover pre-65 individuals who are qualified for Social Security disability.

33. Because Medicare was designed to complement federal retirement benefits, eligibility is tied closely to eligibility for Social Security benefits. • As with Social Security, the availability of coverage is determined by an applicant’s age and the length of time the applicant or his or her spouse has worked in employment qualified under the Social Security Act regulations. • It must be noted here that people can qualify for and receive Medicare without enrolling for Social Security at age 65. • They simply enroll in Medicare Part A and pay the Part B premium as if they had also enrolled in Social Security

34. Generally, people are eligible for Medicare if • they or their spouses worked for at least ten years in Medicare-covered employment; • they are 65 years old; • they are citizens (by birth or naturalization) or permanent residents of the United States. A • person can also qualify for coverage if he or she is a younger person with a disability or with chronic kidney disease. • they are legal resident aliens who have lived in the United States for at least five years.

35. “Qualifying” Social Security wages are earnings on which Social Security payroll taxes or Social Security self-employment taxes are paid. • Whatever work situation applies, the number of Social Security credits needed for Medicare coverage is the same. • A person needs to have accumulated 40 quarters of qualified credits to be entitled to Medicare coverage. • Certain types of employment have been added to the program so that it is possible to qualify for Medicare benefits without having a full 40 quarters of eligible work. (These individuals should contact their Social Security office to discuss the specifics of their situation.)

36. Also, the premiums are high for both Part A and Part B due to a penalty imposed for delayed enrollment in Part A and the purchase of Part B. • These premiums are substantial. For instance, in 2008, for those who didn’t qualify for premium-free coverage, the monthly premium for Part A was $423 per person. • For those with 30 to 39 quarters of covered employment and for certain disabled persons with 30 or more quarters of covered employment, the premium was $233 per month.

37. An individual can get Part A at age 65 without having to pay premiums if • he or she is already receiving retirement benefits from Social Security or the Railroad Retirement Board; • he or she is eligible to receive Social Security or Railroad Retirement benefits but has not yet filed for them; • he or she or his or her spouse had Medicare-covered government employment; • he or she has received Social Security or Railroad Retirement disability benefits for 24 months; or • he or she is a kidney dialysis or kidney transplant patient.

38. Accuracy of Employment History • Accuracy of employment history is the key to obtaining Medicare benefits. The Social Security Administration keeps all records on file based on W-2 employer-reported earnings and Schedule SE self-employment taxes reported. • Generally, federal workers employed after 1983 are eligible for Medicare in the same way that private industry workers are, because they have paid the Medicare hospital insurance part of the Social Security tax. Federal workers employed before 1983 may qualify to have their work credited toward Medicare eligibility under special provisions of the regulations. • State and local government workers became eligible for Medicare-qualified employment in 1986. • There are also special regulations covering people who were employed in domestic work, farm work, or religious organizations that were exempt from Social Security tax payments. All of these atypical situations must be evaluated on a case-by-case basis with a Social Security representative.

39. Basic Enrollment—Initial, General, and Special Enrollment Periods • A person is enrolled in Medicare • automatically, or • by application.

40. If enrollees are not yet 65 and are already getting Social Security or Railroad Retirement benefits, they do not have to apply for Medicare—they are enrolled automatically in both Part A and Part B. • Then, about three months before their sixty-fifth birthday, they receive a Medicare card in the mail. • If they do not want Part B, then they must follow the instructions that come with the card for disenrollment

41. Disabled individuals are automatically enrolled in both Part A and Part B of Medicare beginning in • their twenty-fifth month of disability. They will receive the card in the mail about three months before • they are entitled to Medicare.

42. If enrollees are not receiving Social Security or Railroad Retirement Benefits, or if they require regular dialysis or a kidney transplant, then they need to apply for Medicare three months before turning 65, which is the beginning of the seven-month initial enrollment period. • By applying early, they can avoid a possible delay in the start of their Part B coverage. Application can be made by contacting any Social Security Administration office. If an enrollee or his or her spouse worked for the railroad, he or she should contact the Railroad Retirement Board. • Coverage for the initial enrollment period begins on the first day of the month in which the enrollee turns 65. This is true for both Parts A and B.

43. If an individual does not enroll during this seven-month period, then he or she will have to wait to enroll until the next general enrollment period. • General enrollment periods are held January 1 to March 31 of each year, and Part B coverage starts the following July.

44. If an individual waits 12 months or more to sign up, his or her premiums generally will be higher. • Part B premiums go up 10 percent for each 12 months that the person could have enrolled but did not, except in special cases, referred to as special enrollment periods. Under these special circumstances, the enrollee can delay Part B enrollment without having to pay higher premiums.

45. If enrollees are age 65 or over and have group health insurance based on their (or their spouse’s) current employment, orif the enrollee is disabled and has group health insurance based on his or her current employment or the current employment of any family member, then the enrollee has a choice: • he or she may enroll in Part B at any time while covered by the group health plan; or • he or she can enroll in Part B during the eight-month enrollment period that begins the month employment ends or the month he or she is no longer covered under the employer plan, whichever comes first.

46. If a person enrolls in Part B while covered by an employer plan or during the first full month when not covered by that plan, coverage begins the first day of the month the person enrolls. • If he or she enrolls during any of the seven remaining months of the special enrollment period, then coverage begins the month after enrolling. • If the person does not enroll by the end of the eight-month period, then he or she will have to wait until the next general enrollment period that begins January 1 of the next year. • The beginning of the month that the recipient enrolls is also the first month that he or she is entitled to the Medicare supplement open enrollment (guaranteed issue) period, which lasts for six months.

47. Even if a person continues to work after turning 65, he or she should sign up for Part A of Medicare. • Part A may help pay some of the costs not covered by the employer plan. It may not, however, be advisable to sign up for Part B if the person has health insurance through his or her employer. • He or she would have to pay the monthly Part B premium, and the Part B benefits may be of limited value as long as the employer plan was the primary payer of the person’s medical bills. • He or she would also trigger the six-month Medicare supplement open enrollment period, which can’t be changed or restarted.

48. An individual must enroll in (or keep) Part B coverage if he or she wants to be able to join any of the Medicare Advantage managed care plans (such as HMOs), Medicare medical savings accounts, Medicare supplement plans, or other Medicare health insurance options.

49. In summary, a person turning 65 or older can delay taking Part B Medical Insurance if • he or she or his or her spouse (of any age) continues to work; and/or • he or she is covered under a group health plan from that current employment.

50. If a person does not have group health plan coverage based on current employment, and he or she delays taking Part B, the monthly premium will increase by 10 percent for each 12 months that he or she could have had Part B and did not take it. • The person can also sign up within eight months after the employment ends or the group health coverage ends, whichever comes first.