Medicare
What is Medicare?
Medicare is a federal health
insurance program created in 1965 to help pay medical costs incurred by people
over the age of 65, people with certain disabilities, and people with end-stage
renal disease. Coverage consisted of two parts: Part A (hospital insurance) and
Part B (medical insurance). These parts together are known as Original
Medicare. The 1997 Balanced Budget Act created Part C (originally called Medicare + Choice). Part C allowed
private companies to offer Medicare benefits as well as benefits not offered by
Medicare. In 2003, the Medicare Prescription Drug, Improvement, and
Modernization Act, the first major revision of the Medicare program since its
creation, was signed into law. It preserved and strengthened the original plan,
and offered important new prescription drug and preventive benefits (Medicare
Part D), as well as extra help to people with low incomes.
Medicare Part A (hospital insurance)
Generally
called hospital insurance, Part A covers services associated with inpatient
hospital care (i.e., the costs associated with an overnight stay in a hospital,
skilled nursing facility, or psychiatric hospital, such as charges for the
meals, hospital room, and nursing services). Part A also covers hospice care
and home health care.
Medicare Part B (medical insurance)
Generally
called medical insurance, Part B covers other medical care. Physician
care--whether it was received while you were an inpatient at a hospital, at a
doctor's office, or as an outpatient at a hospital or other health-care
facility--is covered under Part B. In addition, ambulance service, laboratory
tests, and physical therapy or rehabilitation services are covered. Part B also
covers 100 percent of the cost of many preventive services and an annual
wellness visit.
Example(s): Mom goes into the hospital for four days for treatment of
her broken hip. Medicare Part B covers the cost of taking an ambulance to the
hospital. Medicare Part A covers her room, meals, nursing care, emergency room
charges, charges for the use of a wheelchair, physical therapy, and the cost of
medications administered while she is in the hospital. Medicare Part B pays for her physician bills, including
those incurred while in the hospital and those for her physical therapy after
she leaves the hospital.
Medicare Part C
(Medicare Advantage)
A Medicare Advantage plan is a
private health-care plan that contracts with Medicare to provide Part A and
Part B benefits. Most also offer prescription drug (Part D) coverage. Several
types of Medicare Advantage plans may be available, including health
maintenance organization (HMO) plans, preferred provider organization (PPO)
plans, private fee-for-service (PFFS) plans, and special needs plans (SNPs).
You can choose to enroll in either Original Medicare or a Medicare Advantage
plan.
Medicare Part D
Medicare
Part D covers the costs of prescription drugs. All Medicare beneficiaries are
eligible to join a Medicare prescription drug plan offered by private companies
or insurers that have been approved by Medicare.
Who administers the Medicare program?
The
Centers for Medicare and Medicaid Services (CMS), a division of the U.S. Department of Health and Human Services,
has overall responsibility for administering the Medicare program. While the
Social Security Administration processes Medicare applications and claims, the
CMS sets standards and policies, and manages the official government website
for Medicare, www.medicare.gov.
Tip: Because the majority of Medicare beneficiaries also receive
Social Security benefits, local Social Security offices also provide information
about and assistance with Medicare. You can also access information by visiting
www.ssa.gov (Social Security Administration site) and at www.medicare.gov, or
by calling (800) Medicare.
Who is eligible for coverage under
Medicare?
Eligibility for Part A
You
may be eligible for Medicare Part A if:
·
You
are age 65 or older and you are eligible for Social Security benefits
·
You
are a qualified Railroad Retirement beneficiary
·
You
are a dependent or a survivor of an individual age 65 or over who is entitled
to Medicare Part A benefits or a dependent of an individual under age 65 who is
entitled to Social Security retirement benefits
OR
·
You
are under age 65 and disabled, and
·
You
have permanent kidney failure, requiring dialysis or a transplant
·
You
have been receiving Social Security benefits for at least 24 months because you
meet the Social Security Administration's definition of permanent and total
disability (i.e., you are unable to hold
gainful employment in any job), or Under special circumstances, you are
entitled to Railroad Retirement benefits because of disability
Tip: Individuals who do not meet the eligibility requirements for
premium-free hospital insurance can voluntarily enroll in Medicare Part A and
pay a monthly premium. If you enroll in premium Medicare Part A, you must also
enroll in Medicare Part B.
Eligibility for Part B
You
may be eligible for Medicare Part B if:
·
You
are entitled to Part A hospital insurance (by entitlement to Social Security or
Railroad Retirement Act retirement or disability benefits, Medicare-qualified
government employment, or end-stage renal disease benefits) and you are a
citizen of the United States, or
·
You
are 65 or older, a U.S. resident, and either a U.S. citizen or an alien legally
admitted for permanent residence who has continuously resided in the United
States for at least five years prior to your enrollment month
Special eligibility requirements for
federal, state, and local government employees
Federal employees who were
originally exempt from Medicare because they were not covered under Social
Security may qualify for Medicare. To compensate for their not having been
eligible to accrue Social Security credits throughout their career, they may
qualify for benefits with less than 40 credits or may be able to get their work
credited for purposes of becoming Medicare eligible. Almost all federal
employees hired after 1983 are covered under Medicare. State and local
government employees who were originally exempt from Medicare may qualify
depending on their state's agreement with Medicare. State and local employees
hired after March 31, 1986, are covered under Medicare
provisions.
Caution: Unlike the state health insurance
program, called Medicaid, eligibility for Medicare is not contingent on having
low income and few assets. You may be eligible for coverage under both Medicare
and Medicaid.
How do you sign up for Medicare?
Enrollment is usually automatic
Any
individual who receives Social Security benefits before age 65 or who applies
for Social Security benefits at age 65 will be automatically enrolled in Medicare. However, if you retire
after age 65, remember to enroll in Medicare at age 65 anyway, because your
enrollment won't be automatic. Individuals who will be automatically enrolled
in Medicare will receive notification by mail from the Social Security
Administration, usually three months before your 65th birthday.
Tip: You can decline to enroll in Medicare Part B. If you have
been automatically enrolled in Part B, you will be notified that you have a
certain amount of time to decline coverage.
If you decline Part B coverage, will
you have another chance to enroll later?
In
your 65th year, you have seven months to enroll in Part B during the initial
enrollment period, commencing at three months before your 65th birthday and
lasting until 4 months after. If you decline Part B coverage that year, you can
also enroll in later years during the annual general enrollment period from January
1 through March 31 each year. Coverage will begin
in July of the year you enroll. However, the cost of the Part B monthly premium
increases 10 percent for each 12-month period that you did not enroll although
you were eligible, unless you did not enroll because you were still covered
under an employer insurance plan. In that case, you need to enroll within eight
months after termination of your coverage under your employer's plan (the
special enrollment period).
How much does it cost to enroll in
Medicare?
You
do not pay a premium for enrolling in Medicare Part A. However, you will pay a premium for Part B. If you do not want to
pay the Part B premium, you may decline to receive Part B coverage. You must be
enrolled in Parts A and B to get Medicare through a managed care plan, and if
you choose a managed care plan under Part C, you may also have a monthly charge
from the plan.
Medicare
coverage costs the same for any eligible individual, regardless of his or her
medical condition. The various costs associated with Medicare, including the
deductibles and Part B monthly premium, are usually adjusted annually, using
factors such as the Consumer Price Index.
Cost of Medicare Part A coverage
There
is no premium for eligible
individuals. If you are 65, but not eligible for Medicare coverage, you may
still be able to purchase it. In 2014,
you'll pay up to $426 (down from $441 in 2013). You must buy Parts A and B
together, so you will also have to pay the Part B monthly premium, which for
most beneficiaries is $104.90 in 2014 (certain beneficiaries will pay more).
You cannot buy Part A coverage alone.
If
you are admitted to a hospital as an inpatient, you will be required to pay a
deductible, plus coinsurance costs after 60 days as an inpatient. In 2014, the
deductible is $1,216 (up from $1,184 in 2013).Coinsurance costs are $304 (up
from $296 in 2013) a day for days 61 through 90,per benefit period, and $608
(up from $592 in 2013) a day for each lifetime reserve day used.
Example(s): Uncle Pat is admitted to the hospital in January of 2014. He
is required to pay a deductible of $1,216. Medicare will pay the balance of his
costs for 60 days. Should he still be in the hospital after 60 days, he will
then be required to pay $304/day. Medicare will pay the balance. After 90 days,
his coinsurance obligation is $608/day, because he will need to use his
lifetime reserve days. Medicare will pay nothing after 150 days.
Cost of Medicare Part B coverage
For
2014, the standard monthly premium is $104.90 (certain beneficiaries will pay
more). There is an annual deductible of $147 (the same as in 2013), and you are
also required to pay a portion of your costs, usually 20 percent of the bill.
Example(s): In 2014, Dr. Brown treated Uncle Pat while he was in the
hospital. Dr. Brown's bill is covered under Part B, even though he treated
Uncle Pat while in the hospital. Unless Uncle Pat already paid his deductible
(because he already incurred $147 worth of Part B claims), he will also have to
pay the deductible for his Part B coverage. This deductible is in addition to
the $1,216 deductible under Part A. Uncle Pat will also have to pay 20 percent
of Dr. Brown's bill.
Cost of Medicare Part C coverage
The
plan may charge a monthly fee, along with associated costs.
Cost of Medicare Part D coverage
Most
plans charge a monthly premium. Premiums vary. You may also need to satisfy an
annual deductible and pay a share of your prescription costs.
How are Medicare payments determined?
The
general rule is that Medicare
pays for those costs it determines are reasonable and necessary for diagnosing
or treating your illness or injury.
What are reasonable and necessary
costs?
As
a cost-control measure, Congress enacted complicated procedures for predetermining the dollar amounts Medicare will pay
for the specific health care provided.
Part
A costs are determined by calculating the average cost to diagnose and/or treat
the principal diagnosis. Diagnoses are categorized into diagnosis-related
groups, called DRGs. Part B costs are determined by calculating the cost of
each variable in treating your illness or injury,
such as the degree of expertise needed by the physician and the specific
procedures used. Medicare will pay managed care plans directly under Part C.
Costs may be adjusted for factors such as regional variations and the type of
health-care facility providing the treatment.
Limits on charges under Medicare
If
the health-care provider (whether it is a hospital, a physician, or other kind
of provider) accepts Medicare assignments, the provider has agreed to accept
the amount Medicare will pay as payment in full. Your Medicare carrier can give
you the list of providers that accept Medicare assignments. It is illegal for a
provider accepting Medicare assignment to charge you more than these amounts.
Providers annually have the opportunity to sign a contract with Medicare that
they will accept assignments or can also choose to accept Medicare assignment
on an ad hoc basis.
In
addition, even without assignment, a provider generally cannot charge more than
15 percent above the Medicare approved amount, except in three situations:
·
You
have agreed that neither you nor the provider will submit a claim to Medicare
and you plan to pay out-of-pocket
·
You
are participating in Medicare's medical savings account plan and are using
funds from your assets to pay for the services in question
·
Medicare
approves a higher amount because of extenuating circumstances in your case, as
documented by your provider
The
15 percent limit only applies to certain services, not supplies or equipment.
If
you are concerned that you are being billed in violation of Medicare
regulations (e.g., that Medicare is being billed for services you did not
receive or that a provider is performing unnecessary procedures), you can
report it by calling the U.S. Department of Health and Human Services's
toll-free fraud and abuse hotline at (800) HHS TIPS ((800)447-8477).
How do you cover medical expenses over
and above what
Medicare
pays?
Many
individuals who are enrolled in Original Medicare purchase supplemental
insurance known as Medigap to
augment Medicare coverage. You should also understand the claims process and your
rights if you disagree with the claims determination.
How Medicare claims are paid under
Original Medicare
The claims process
Most
health-care providers accept Medicare assignment and will submit your claims
directly to Medicare. Providers who do not accept Medicare assignments are
supposed to submit claims to Medicare for any Medicare-covered services and
can't charge you for submitting a claim. If they don't submit a claim or if you
have any questions, call (800) 633-4227. TTY users should call (877) 486-2048.
Every
three months, you'll receive a Medicare Summary Notice (MSN) in the mail that
includes all services and supplies that were billed to Medicare during that
three-month period, what Medicare paid, and what you may owe the provider.
You'll need to check this information against your own receipts and bills
you've received from your health-care providers. You can also sign up to view
your Medicare claims on-line.
Claims review and hearing procedures
If
you disagree with a determination from Medicare that it will not pay a
charge, you can appeal. The appeals process has five levels. There are similar,
but separate, procedures for resolving claims under Part C. For more
information on the claims or appeals process visit www.medicare.gov.
IMPORTANT
DISCLOSURESBroadridge Investor Communication Solutions, Inc. does not provide
investment, tax, or legal advice. The information presented here is not
specific to any individual's personal circumstances.To the extent that this
material concerns tax matters, it is not intended or written to be used, and
cannot be used, by a taxpayer for the purpose of avoiding penalties that may be
imposed by law. Each taxpayer should
seek independent advice from a tax professional based on his or her individual
circumstances.These materials are provided for general information and
educational purposes based upon publicly available information from sources
believed to be reliable—we cannot assure the accuracy or completeness of these
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materials may change at any time and without notice.
