Medicare

Medicare

Once you reach age 65, you will be eligible for Medicare, the federal medical insurance program administered by the Centers for Medicare & Medicaid Services (CMS). While this is a federal government program, your claims are actually processed by insurers in your region. Medicare will be your primary insurance provider. If you choose the traditional fee-for-service Medicare plan, you will almost certainly need to use your company’s retiree benefits, if any, or purchase a Medicare supplement policy - known as a Medigap policy -- which we will discuss in the next section.

Medicare consists of four parts: Part A – Hospital Insurance, Part B – Medical Insurance, and Part C – Medicare Advantage, a private plan alternative to traditional Medicare; and. Part D - Prescription Drug Insurance. If you are entitled to Social Security benefits, you are automatically eligible to receive Part A. There is no cost to you. You’ve actually been helping to fund this program through your payroll withholding tax. Part B is an optional program for which you pay a monthly premium, and it has strict requirements as to when you must enroll. If you are not entitled to Social Security benefits, you may voluntarily enroll in Part A and Part B if you are age 65 or over and pay the monthly premiums.

IMPORTANT NOTE: By not enrolling in Medicare Part B within the proper time frame, you run the risk of not having adequate insurance to pay for doctors’ services (in or out of the hospital), outpatient services, medical tests, or home health care, if needed.

Because Part B covers so many essential services, we strongly recommend you apply for this program so there is no lapse in coverage. If you have company retiree medical benefits, those benefits may only pay what Part B does not, so it is essential that you enroll.

Because Part B covers so many essential services, we strongly recommend you apply for this program so there is no lapse in coverage. If you have company retiree medical benefits, those benefits may only pay what Part B does not, so it is essential that you enroll.

Keep in mind that decisions as to whether to choose the traditional fee-for-service Medicare combined with a Medicare Supplemental policy, or one of the managed care plans, will need to be carefully evaluated.

How To Apply For Benefits

If you are receiving Social Security benefits prior to age 65, you will receive a card when you turn 65 notifying you of your enrollment in Medicare Parts A and B. Part A, in this case, is automatic and at no cost to you. If you choose not to elect Part B, simply sign the form that is sent to you and send it back. Otherwise, the premiums for Part B will be automatically deducted from your monthly Social Security check. The monthly premium is subject to change each year.

If you are not entitled to Social Security benefits, you may voluntarily enroll in Medicare at your nearest Social Security office. You must be age 65 or over and enrolled in Part B in order to enroll in Part A. In this case you will need to pay a monthly premium for both Medicare Part A and Part B. The monthly premiums are subject to change annually.

If you are planning to retire at age 65, you have a seven-month window in which to enroll in Medicare benefits. If you enroll before the month of your 65th birthday, you will then be eligible for benefits on the first day of the month in which you reach age 65. If you wait to enroll during the month of your 65th birthday, coverage will start on the first day of the following month. If you enroll more than one month (but within the three months) following the month of your 65th birthday, coverage will start on the first day of the third month following the month of enrollment.

IMPORTANT NOTE: While Part A is retroactive, none of your Part B bills will be paid during the waiting period. So if you’re going to enroll in Part B, do it sooner rather than later. If you fail to enroll within the initial seven-month enrollment period, you will have to wait until the next general enrollment period -- January 1 through March 31 of any subsequent year. However, your actual coverage will not begin until July of the year you enroll. If you fail to enroll more than a year after you’re eligible, it will cost you an additional 10% for each year you wait to enroll. If you continue to work past age 65, you will have a special enrollment period, after you retire, to enroll in Medicare Part B, without waiting for the general enrollment period.

In general, Medicare is secondary payer, under specified conditions, for services covered under a group health plan. This means that claims are first submitted to the group health plan. If the group health plan does not pay all of the expenses on the claim, Medicare may pay secondary benefits for Medicare-covered services to supplement the amount paid by the employer plan.

What if you plan to continue working at your company after you reach age 65?

In a large company, your benefits will likely continue unchanged. But, it’s a good idea to enroll in Part A anyway. You might be eligible for benefits from Medicare that your employer plan doesn’t pay. No sense in enrolling in Part B until you retire, since the extra cost for the Part B premium probably isn’t worth any Medicare benefits that you might receive after plan benefits are paid. If you’re with a small company (typically under 20 employees), check your post-65 medical coverage with your employer.

SUGGESTION: As long as you’re working, you can delay enrolling in Part B coverage until you are no longer covered under your employer’s plan (when you terminate employment). And there will be no penalty increase in your monthly premium.

Generally, if you are entitled to Medicare Part A and are enrolled in Medicare Part B, you are eligible to enroll in any Medicare Advantage option that is available in your area. The enrollment period is from November 15 to December 31 of each year. Enrollments are effective the following January 1.

What Traditional Fee-For-Service Medicare Pays

Medicare has separate methods of payment for Part A and Part B: Part A provides coverage based on benefit periods; Part B covers you on a calendar year basis.

Part A: Each category of service (see following table) has its own schedule of payments based on a benefit period. For example, the benefit period for hospitalization begins the first day you are admitted and ends after 60 consecutive days. If you are admitted from the hospital directly to a skilled nursing facility where you remain, the benefit period does not end until you’ve not received skilled care for 60 consecutive days. Each time a new benefit period begins you are responsible for paying the deductible (see table below).

Part B: You have a deductible every calendar year ($131 in 2007). After that, Medicare pays between 80 and 100% of the approved amount (see following table). Many doctors and other service providers accept what is known as “on assignment,” meaning Medicare’s approved schedule of charges is considered payment in full. Otherwise, you may have to pay for charges above what is approved by Medicare, although Medicare does limit how much a doctor can exceed its approved limits.

Medicare Part A: Hospital Insurance*

Services

Benefit

Medicare Pays

You Pay (2007 figures)

HospitalizationSemi-private room, meals, general nursing, other hospital services and supplies

100% of approved amount after you pay portion

$992 in total for days 1-60

100% of approved amount after you pay portion

Beyond 150 days

Nothing

All costs

Skilled Nursing Facility Care2Semi-private room, meals, skilled nursingand rehabilitativeservices, other services and supplies3

100% of approved amount

Nothing

Beyond 100 days

Nothing

All costs

Home Health CarePart-time skilled nursing care, physical therapy, occupational therapy, speech-language therapy, home health aide services, durable medical equipmentand medical supplies and other services

No limit as long as you meet Medicare criteria

100% of approved amount; 80% ofapproved amount for durable medical equipment

Nothing for home health care services; 20% of approved amount for durable medical equipment

Hospice CareServices for theterminally ill including drugs for symptom control andpain relief, medical and support services, and other services

Unlimited as long as doctor certifies need

All but limited costs for outpatient prescription drugs and inpatient respite care

Limited costs: A copayment of up to $5 for outpatient prescription drugs and 5% of the approved amount for inpatient respite care.

Blood

Unlimited

All but first 3 pintsper calendar year

For first 3 pints (unless you or someone else donates blood to replace what you used)

* Source: U.S. Department of Health and Human Services

1. This 60 day reserve benefit can be used only once in a lifetime.

2. To qualify, you must be admitted to a Medicare-approved facility generally within 30 days after being discharged from a hospital where your stay lasted at least 3 days.

3. Neither Medicare nor private Medigap insurance will pay for most nursing home care.

Medicare Part B: Medical Insurance*

Services

Benefit

Medicare Pays

You Pay (2007 figures)

Medical ExpensesPhysician’s services, outpatient medical and surgical services, physical and speech therapy, diagnostic services

All medically necessarydoctor’s services in and out of the hospital

80% of approved amount (after $131deductible-paid once per calendar year)(The 80% is reduced to 50% for most outpatient mental health services.) 

$131 deductible-paid once per calendar year, plus 20% of approved amount, and limited charges above approved amount.**

Clinical LaboratoryServicesBlood tests, urinalysis,biopsies, etc.

All medically necessaryservices

Generally 100% ofapproved amount

Nothing for services

Home Health CarePart-time or intermittentskilled nursing care,home health aideservices, medical equipment and supplies and other services

No limit as long as youmeet eligibility criteria

100% of approved amount; 80% ofamount for durable medical equipment

Nothing for services; 20% of approved amount for durable medical equipment

Outpatient HospitalTreatmentServices for the diagnosis or treatment of illness or injury

Unlimited if medically necessary

Based on hospital cost

A coinsurance or copayment amount which may vary according to the service.

Blood

Unlimited if medically necessary

80% of approvedamount (after$131 deductible and starting with 4th pint)

First 3 pints plus 20%of approved amount foradditional pints (after $131 deductible) or you pay nothing if you  or someone else donates blood to replace what you used.

* Source: Department of Health and Human Services

** A person pays for charges higher than the amount approved by Medicare unless the doctor or supplier agrees to accept Medicare’s approved amount as the total charge for services rendered.

Medicare Part C: Medicare Advantage

The Medicare Advantage program is a private plan alternative to the traditional fee-for-service Medicare coverage. All Medicare Advantage plans must provide coverage for the services that are currently provided under Medicare Parts A and B, other than hospice care. Medicare Advantage plans may also offer supplemental benefits that are not covered under the traditional fee-for-service Medicare plan. Most Medicare beneficiaries may choose any Medicare Advantage option that is available in their geographic area. These options include the following: 

• Health maintenance organization (HMO) - An HMO is a managed care plan in which beneficiaries pay a small copayment for services as opposed to deductibles and copayments under the traditional Medicare plan. Most HMOs require the beneficiary to select a primary care physician (PCP) from those that are part of the plan. The PCP is responsible for managing the beneficiaries’ medical care, and can make referrals to specialists.
• Preferred provider organization (PPO) - A PPO is similar to an HMO, but with more flexibility. The Medicare beneficiary can 1) visit any doctor in the health care network without a referral, or 2) go to any doctor outside of the network at an additional cost.
• Provider sponsored organization (PSO) - A PSO is organized by groups of doctors and hospitals to offer health care items and services. PSOs are similar to HMOs except they are run by medical providers, not insurance companies. These provider-controlled organizations will contract directly with Medicare.
• Private fee-for-service plan - This plan allows the beneficiary to obtain service from a nonparticipating provider and pay out-of-pocket expenses equal to the provider's full fee minus the amount of Medicare reimbursement up to the Medicare fee schedule. Under the current Medicare system, providers cannot accept fees above the Medicare limits from Medicare beneficiaries.

What Traditional Fee-For-Service Medicare Doesn’t PayClear up any confusion now about what standard Medicare covers and doesn’t cover, so you avoid costly surprises later on. While traditional Medicare covers a good portion of your doctor and hospital bills, you’ll still need other insurance, unless you end up qualifying for Medicaid. Medicaid is a federal medical insurance program for people with very low incomes and virtually no assets, which you could end up on if you don’t have the proper insurance in the first place.

Here’s what Medicare doesn’t cover:

• Most prescription drugs. (Medicare offers a prescription drug benefit for a premium of about $35 per month, with a $250 deductible and various copayment amounts depending on the amount of your drug costs.  Individuals with low income and limited assets will get help paying the premiums and deductible.)
• Routine physicals or routine dental work, dentures, glasses, routine eye exams or routine foot care, immunizations, and anything else it considers preventive care. (Medicare covers some preventive services such as a one-time wellness physical exam upon enrolling in Medicare Part B, mammography, pap smears, diabetes screening test and outpatient self-management, prostate and colorectal cancer screening, bone density measurements, cardiovascular screening blood tests, and vaccines.  Some Medicare HMOs and some of the plan options under Medicare Advantage may include additional services such as prescriptions, dental care, and eye care.)
• Private duty nurses or homemaker services. 
• The first three pints of blood. 
• Cosmetic surgery
• Treatment that it doesn’t consider medically necessary. Medicare can deny what it considers to be an unreasonable length of stay in a hospital. (It will pay only for those days it deems medically necessary.) 
• It only pays charges that it considers are reasonable and customary. So you may have a bill from your doctor that exceeds Medicare’s limit. Medicare will pay 80% of what it considers to be the normal charge for the service; you’re required to pay the additional 20% plus the excess over the reasonable and customary charge (unless the doctor or supplier agrees to accept Medicare's approved amount as the total charge for services rendered).
• Skilled nursing care is limited and it does not cover CUSTODIAL care. It won’t pay long-term nursing home care costs or costs you incur by having an aide assist you with day-to-day basic living activities (dressing, eating, bathing or communicating). Neither Medicare nor Medigap insurance will pay for most nursing home care. See Long-Term Care Insurance for more information.
• Medical treatment outside the United States (except in limited cases). 
• Experimental drugs or procedures.