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MEDICARE
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Medicare Part A
Hospital Care
Skilled Nursing Facility Care
Home Health Care
Hospice
Medicare Part B
Qualified Medicare Beneficiary
Specified Low Income Medicare Beneficiary
Medigap Insurance Policy
Medicare Advantage
Medicare Part D

Congress approved Medicare in 1965 to pay some of the cost of health care services for the aged. In order to receive this assistance with the current cost of health care, a person must be 65 years of age or older and entitled to Social Security retirement insurance or Railroad Retirement cash benefits. A person who has received Social Security disability benefits or Railroad Retirement Disability Income for 24 months or longer is also entitled to receive Medicare assistance regardless of his or her age. However, an application to enroll in Medicare must be filed. An application for Medicare can be filed after receiving 21 months of disability benefits. Persons of any age who have end-stage renal disease or amyotrophic lateral sclerosis can also apply for this coverage.

There are three basic threshold criteria for Medicare coverage:
1. The care and supplies to be provided must be medically reasonable and necessary for diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.
2. The care and supplies must be prescribed by a doctor.
3. The services and the supplies must be obtained through a Medicare-certified provider.

Medicare seldom pays all the costs of health care. In many areas of coverage, the patient is required to pay a specified deductible amount each year or during each illness. In addition, the patient may have to pay for a portion of the cost. Medicare calls this a coinsurance payment or co-payment.

The present Medicare program provides two separate packages of benefits, Part A and Part B. A person who is 65 years of age and who is entitled to Social Security or Railroad Retirement benefits is automatically enrolled in Medicare Part A and will be deemed to have enrolled in Medicare Part B. A person who is not receiving Social Security or Railroad Retirement Benefits must enroll for Medicare Part A during the initial enrollment period. This period begins in the third month before the person attains age 65 and extends for the next seven months. A person who takes early Social Security retirement is automatically enrolled in Medicare when he or she attains age 65.

A person aged 65 and older (or a person under age 65 who is disabled) who has not received credit from Social Security for 40 quarters of coverage may enroll in Medicare Part A, but he or she may have to pay a $461 per month premium in 2010 if the individual has 29 or fewer quarters of Social Security credits. Eligible individuals with 30-39 quarters of Social Security credits must pay a $254 per month premium in 2010.

Medicare Part A

Medicare Part A covers acute hospital care, a limited number of skilled nursing facility days, home health care and hospice care.

Hospital Care

Hospital coverage is available when the care and treatment needed  can only be rendered on an inpatient basis at a hospital or a critical access hospital. Hospital coverage can be extended if a patient who would otherwise be discharged requires a skilled nursing facility level of care and no appropriate placement in a Medicare-certified skilled nursing facility is available.
The spell of illness concept is central to coverage for hospital and skilled nursing facility care. A spell of illness begins on the day a patient first receives inpatient care. It ends when a Medicare beneficiary has not been in a hospital or skilled nursing facility as an inpatient for 60 consecutive days, or has not received a Medicare-covered level of care for 60 days. There can be more than one spell of illness in a given calendar year. This will give rise to a second deductible, new coinsurance amounts and a new set of hospital days.

Medicare Part A will pay for inpatient hospital care that is medically necessary for treatment or diagnosis after the patient meets the initial first day deductible which is $1,100 in 2010. Benefits cover 90 days of inpatient hospital care for each spell of illness. There is a $275 per day deductible for the 61st through 90th day in the hospital during the same spell of illness in 2010. In addition, a patient is allowed a maximum of 60 lifetime reserve days with a $550 per day deductible in 2010. Each year, there is an adjustment to the initial deductible, coinsurance amount and lifetime reserve daily amount. This adjustment is normally published in October of the year preceding the new calendar year in which the new deductible will apply.

Maximum Coverage for Hospital Care (2010)

Days in Hospital

How Much You Pay

How Much Medicare Pays

First 60 days

$1,100 for first day

Balance

61-90 days

$275/day

Balance

91-150 days

$550/day

Balance

After 150 days

All Costs

Nothing

Medicare covers a lifetime maximum of 190 days of inpatient psychiatric hospital care. This is in addition to the coverage for hospital care described above. However, a person can only use 150 of these days for this care in one benefit period. Also, this care is subject to the same deductibles and co-insurance which is described above for other forms of hospitalization.

Coverage under Part A includes the hospital room on a semiprivate basis, nursing services, operating room costs, prescriptions and medical supplies, laboratory tests and x-rays provided by the hospital as part of its services. While in a hospital, physician services are not covered under Part A. The physician services while in a hospital will be billed under Medicare Part B. Certain luxury items (private rooms, private duty nurses, television, and telephone) are not covered by Medicare. Medicare does not pay for the first three units of blood that is received in a hospital in any calendar year. This blood deductible is in addition to the deductibles and coinsurance described above. However, the Part B blood deductible may apply.

LIFE SITUATION #4
Joseph, who is over 65, was hospitalized for 20 days, received 30 days of skilled care in a nursing facility, and went home for 62 days before being readmitted to a hospital. The first spell of illness ended 60 days after the expiration of Josephs stay in the nursing facility. A new spell of illness will be triggered by the second hospitalization. A new in-patient hospital deductibles must be paid.

Skilled Nursing Facility Care

There are many restrictions that apply to Medicare coverage for skilled nursing facility care. Skilled nursing care requires that the care must be provided by or requires the supervision of skilled nursing personnel or other skilled rehabilitation services, which as a practical matter can only be provided in a skilled nursing home facility on an inpatient basis. Medicare never extends coverage to a patient who needs custodial care only. For each spell of illness, Medicare Part A will pay all the costs for a covered skilled nursing home stay for the first 20 days and all but $137.50 per day in 2010 for up to an additional 80 days as long as all of the following conditions are met:

1. The individual was a patient in a hospital for three consecutive days not including the day of discharge. In addition, the patient must be admitted to the skilled nursing facility within 30 days of discharge from the hospital. (Note: there are a few limited exceptions to the requirement that the admission must occur within 30 days of discharge from the hospital).
2. A doctor must certify that the patient needs skilled nursing home care.
3. The services the patient needs must include either daily skilled nursing or skilled rehabilitation services (or a combination of these services).
4. The services are provided by or under the supervision of a trained individual.
5. The services are received on a daily basis, which means therapy services at least 5 days per week and/or nursing care 7 days per week.
6. The services are provided by a Medicare-certified skilled nursing facility.
7. The skilled services must be provided on an inpatient basis.

A Medicare beneficiary is entitled to receive coverage for skilled care in a nursing home (subject to the following co-payments in 2010):

Days in SNF

How much you pay

How much Medicare Pays

First 20 days

Nothing

100 percent of approved amount

Additional 80 days

$137.50/day

Balance

Beyond 100

All Costs

Nothing

Home Health Care

A Medicare home health benefit can be available under Medicare Part A or Medicare Part B. However, Medicare Part A home health care benefits are limited to 100 visits and must follow a prior hospital or skilled nursing facility stay. The threshold criteria for home health care is as follows:
1. The patient must be generally confined to the home. This means that this individual’s condition must be such that the patient requires assistance to leave home (such as crutches, cane, walker, or assistance of another person, etc.) or that leaving the home without assistance is not advisable, and that leaving home requires a considerable effort. This is often known as the homebound requirement.
2. The home health care must be included in a plan of care by a doctor.
3. The patient must require skilled care. This means speech or physical therapy Service or intermittent skilled nursing care. Occupational therapy will count toward the required skilled care, if it had been originally provided in conjunction with physical therapy, speech therapy, or skilled nursing.
4. The services rendered must be medically reasonable and necessary.
5. The services must be provided by, or under arrangements with, a Medicare certified home health agency.

Once these criteria have all been met, several medical services are fully paid for by Medicare, including the following:
1. Part-time or intermittent nursing care provided by or under the supervision of a registered professional nurse.
2. Physical, occupational, and speech therapy.
3. Medical social services under the direction of a physician.
4. Part-time home health aide services.

Hospice

To be entitled to Medicare hospice coverage, a person must be certified as terminally ill. This means that a physician must state that in his or her clinical judgment the person’s life expectancy is six months or less if the illness follows its expected course. In addition, the patient must waive all rights to Medicare payments for the duration of the hospice care for any regular Medicare services related treatment of the terminal illness. Instead, the patient elects to receive palliative services provided under the arrangement of the hospice or provided by an attending physician, if the attending physician is not an employee of the hospice.

The primary advantage of hospice Medicare is that a terminal patient’s broad needs can be met with a hidden array of services for a longer period of time. Hospice care provides the terminally ill patient with a holistic approach that concentrates on the patients pain management, offers specialized care, and attempts to meet the spiritual and emotional needs of the patient and his or her family. The hospice patient is liable for coinsurance amounts only for respite care and drugs. However, the coinsurance cannot exceed $5 per prescription. It is important to remember that only medications for palliative purposes are covered under the hospice benefit.

Medicare hospice is often more economical to the patient and the patients family than hospital, home health, and nursing home care. This is because the increased care allowed the hospice patient is provided regardless of the patient’s ability to pay. For instance, the hospice provider pays for all of the cost of the hospice patients prescriptions that are necessary for the patient’s control of the pain at home and the related symptoms associated with the terminal illness. However, in some instances the regular home health benefit may provide equal or better coverage.

Medicare hospice provides physician services, nursing services, social services, counseling services to the terminally ill and family members, short-term inpatient care provided in a hospice inpatient unit or in a hospital or skilled nursing facility, medical appliances and supplies, drugs, home health aid services, homemaker services and physical therapy provided for symptom control or to help the patient maintain activities of daily living.

The hospice benefit is divided into periods. The first two benefit periods are 90 days, followed by an unlimited number of 60-day periods. A person may designate another hospice one time in each election period.

In addition, a person may opt out of, and return to, Medicare hospice coverage at any time. Medicare Part A coverage that was waived when the Medicare hospice benefit was elected is automatically resumed with the effective cancellation date. To opt back into hospice, a new election form and physicians certificate is necessary.

It is important to remember that Medicare Advantage plans may provide but are not required to provide hospice care to their beneficiaries. A beneficiary may change the designation of the particular hospice from which the care will be received once each election period.

Medicare Part B

Medicare Part B is a voluntary program for persons who are 65 years of age or older who are citizens or who have been a lawful permanent resident for five years preceding the date of the application. The major benefit under Medicare Part B is payment of the physician’s charges for surgery, consultations, office visits and the physician’s visits to the patient’s hospital or nursing homeroom. Durable medical equipment, outpatient physical therapy, X-rays, and diagnostic tests are also covered. Medicare Part B also covers home health visits not covered under Part A.

Medicare Part B does not cover prescription drugs that do not require administration by a physician, routine physical checkups, eyeglasses, eye exams to prescribe eyeglasses, hearing aids or hearing exams for hearing aids, dental services and routine foot care. Ambulance transportation is only covered when other modes of transportation would be harmful to the patient. For a non-emergency trip to be covered, the patient must not be able to rise out of bed without assistance, be unable to walk and unable to sit in a chair or wheelchair. Ambulance service that is not an emergency must be certified in advance with a doctor’s written order certifying that the patient meets these criteria.

Preventive care services, checkups and comfort items are for the most part not covered under Medicare. However, certain preventative care services are now covered under Medicare Part B due to laws being passed that specifically include these services. These services include, for Medicare eligible persons, an annual mammogram for women enrolled who are age 40 and older, Pap smears and pelvic exams for beneficiaries considered a high risk following an abnormal Pap smear. A woman not in this group is entitled to a Pap smear and a pelvic exam once every two years. The deductible does not apply to these procedures. Prostate screening for men over age 50 and colorectal cancer screening tests for beneficiaries age 50 or older are also included.

A person who is enrolled under Medicare Part A is assumed to want coverage under Medicare Part B. A person covered under Medicare Part A may decline to be covered under Medicare Part B before the coverage begins or within 2 months after being notified that Medicare Part B coverage has commenced.
Medicare Part B has an annual deductible requirement of at least $155 in 2010. Each year, before Medicare pays anything, the patient must incur medical expenses equal to the deductible, based on Medicare’s approved reasonable charge, not on the provider’s actual charge. In addition, there is a coinsurance amount which the patient must pay. This is equal to 20 percent of the Medicare approved amount.
Most Medicare Beneficiaries will continue to pay the same $96.40 Part B premium amount in 2010. Beneficiaries who currently have the Social Security Administration withhold their Part B premium and have incomes of $85,000 or less (or $170,000 for joint filers) will not have an increase in their Part B premium. New Part B beneficiaries will pay $110.50 per month because they were not having their premium deducted from their Social Security. Individuals with annual incomes greater than $85,000 and less than $107,000 and married couples with annual incomes greater than $170,000 and less than $214,000 in 2010 will pay a monthly premium of $154.70 each. Individuals with annual incomes greater than $107,000 and less than $160,000 and married couples with annual incomes greater than $214,000 and less than $320,000 in 2010, will pay a monthly premium of $221.00 each. Individuals with annual incomes greater than $160,000 and less than $214,000 and married couples with annual incomes greater than $320,000 and $428,000 in 2010 will pay a monthly premium of $287.50 each. Individuals with annual incomes greater than $214,000 and married couples with annual incomes greater than $428,000 in 2010 will pay a monthly premium of $353.60. The income test is determined from the gross income reported by the Medicare beneficiary on his or her income tax return filed 3 years ago.

A major problem with Medicare Part B is the difference between the cost of medical items or services, particularly physician’s services, and the Medicare-approved reasonable charge. When an item or service is determined to be covered under Medicare, it is reimbursed at 80 percent of the reasonable charge for the item or service, and the patient is responsible for the remaining 20 percent.

Unfortunately, the reasonable charge set by Medicare is often substantially less than the actual charge. The result of the reasonable-charge reimbursement system is that the Medicare payment, even for items and services covered by Part B, is often inadequate. The patient is left with out-of-pocket expenses. When a physician accepts assignment, he or she agrees to accept the Medicare-approved amount as full payment. Medicare will pay 80 percent and the patient is responsible to pay the 20 percent co-payment. When a physician does not accept assignment, the patient is liable for the co-payment plus a balance above the Medicare fee schedule amount. However, under federal law there is a set limit (limiting charge) that the physician may charge. A physician not accepting assignment for payment of a Medicare claim may submit a balanced bill that does not exceed 115 percent of the Medicare-approved amount. The patient’s Medicare Summary Notice will state the approved charge for the doctor’s services.

LIFE SITUATION #5
Mary is treated by a doctor who does not accept Medicare assignment. This physician’s actual charge is $100, but the Medicare fee schedule states the allowable charge is only $70. This doctor may charge Mary only 115 percent of the scheduled amount, or $80.50, for this service, since the doctor has not agreed to accept assignment of the Medicare benefit. Mary would be responsible for paying the physician the entire $80.50 and then requesting Medicare to reimburse her $56 ($70 x 80 percent). If the doctor accepted assignment, the doctor would file Mary’s claim and request her to pay $14 ($70 x 20%).

Qualified Medicare Beneficiary

A Qualified Medicare Beneficiary is a person 65 years of age or a disabled individual who has a countable income at or lower than the Federal poverty level that is $674.00 per month in 2010 and countable assets less than $4,000 ($6,000 for a couple). The Medicaid program in the state where the beneficiary resides pays the Qualified Medicare Beneficiary’s Medicare Part B premium, the Medicare Part A deductibles and the Medicare Part A coinsurance. The Federal statute is referred to as the Qualified Medicare Beneficiary Program.

Specified Low Income Medicare Beneficiary

A Specified Low Income Medicare Beneficiary is a person 65 years of age or a disabled individual who has a countable income between 100 and 120 percent of the Federal poverty level and countable assets less than $4,000 ($6,000 for a couple). The Medicaid program in the state where the beneficiary resides pays the Specified Low Income Medicare Beneficiary’s Part B premium. However, the Medicare Part A deductible and the Medicare Part A coinsurance must be paid by the Medicare beneficiary.

Medigap Insurance Policy

“Medigap” is the term used to describe the supplemental insurance policy needed to cover the health care costs, deductibles and co-pay amounts not provided by Medicare. This policy is important for Medicare recipients who rely on traditional Medicare coverage. There are 12 different Medigap policies. These plans are known as Medigap Plan A through L. More coverages are provided as the letters increase. By example, a Medigap policy C pays for the skilled nursing home deductible for the 21st to 100th day while the Medigap policy A does not. The Medigap Insurance policies are sold by private companies. Prior to the year 2006, there were ten standard Medigap plans that were labeled A through J. Beginning January 1, 2006, Medigap Plans H, I and J cannot be sold or renewed to anyone who is enrolled in or eligible for Medicare Part D. Two new Medigap policies are also to be offered beginning January 1, 2006. Plan K covers 50% of the cost-sharing applicable under Medicare Parts A and B, except for the Part B deductible that is $155 per year in 2010. It also covers 100% of the cost-sharing required for preventive benefits, all inpatient hospital co-insurance and 365 extra lifetime days of coverage of inpatient hospital services. There is also to be a limitation on annual out-of-pocket expenses under Parts A and B of $4,620 in 2010, that will be adjusted for inflation in subsequent years. Plan L will be the same as Plan K except that it will cover 75% of cost-sharing applicable under Parts A and B and the limit on annual out-of-pocket expenses is $2,310 in 2010. Neither the existing nor the new Medigap policies cover any of the cost sharing associated with the prescription drug benefit provided under Medicare Part D.

Medicare Advantage

The ever increasing cost of the Medicare deductibles, the Medicare supplement and the additional cost of the Medicare Part D prescription drug plan will eventually drive most of the 35 million fee-for-service Medicare beneficiaries into joining the 4.6 million Medicare beneficiaries presently enrolled in a Medicare Advantage plan. These services are found in the Part C of the Medicare Statutes. This is known as a Medicare Advantage plan. A Medicare Advantage plan is owned by a private company that provides all of a beneficiary’s health care and prescriptions through the plans health care providers for a capitated rate paid by the Centers for Medicare and Medicaid. The Medicare Advantage company must provide all the services currently available under Medicare Parts A and B. The primary physician who is assigned to the Medicare Advantage beneficiary serves as a gatekeeper to specialists. Thus, the beneficiary’s health care cost is reduced while his or her health is maintained.

A Medicare Advantage beneficiary loses the right to select any doctor and must select from a panel of physicians offered by the plan. Every year in November, the Center for Medicare and Medicaid conducts an annual coordinated election period during which time all Medicare beneficiaries are able to choose between the original Medicare program and a Medicare Advantage plan between November 15th and December 31st of each year. An election becomes effective on January 1st of the ensuing year. A beneficiary who becomes eligible for a Medicare Advantage Plan in the year 2007 or thereafter may only change plans during the first three months after he or she becomes eligible for Medicare or on December 31st whichever date is sooner. Beneficiaries who fail to make an election will remain in the original Medicare fee for service plan or the Medicare Advantage Plan in which he or she is currently enrolled. Those who do not make an election, but are already on a Medicare Advantage plan remain in that plan. Although Medicare Advantage may seem to save beneficiaries more money at first, they will only save money if they use the plans doctors for all their care. In addition, because Medicare Advantage plans only have one-year contracts, the provider can decide to change its costs and even leave the Medicare program.

Medicare Part D

Medicare’s prescription drug program began on January 1, 2006. This program known as Medicare Part D provides limited financial assistance with drug expenses to persons enrolled under Medicare Part A or Part B who pay the additional Part D premium to a private company. These prescription drug plans offered pursuant to Medicare Part D are provided by private companies. Thus, a person eligible for Medicare must affirmatively enroll in a voluntary prescription drug coverage program under Medicare Part D for one year at a time. Medicare Advantage Plans normally provide prescription coverage.
It is important to understand that the drugs offered by different plans vary. This new law does not authorize the establishment of specific lists of medications that must be offered by the Medicare Part D formularies. In general, once a person selects a prescription drug plan, he or she is locked in to the drug plan and cannot change until the next annual enrollment period. This is true even though the plan in which he or she enrolls changes the formulary or cost sharing arrangement, with enrollment in the new plan becoming effective January 1 of the following year. The annual enrollment period for Medicare Part D is between November 15th and December 31st of each year. During this period, a person who is eligible for Medicare can enroll in a plan or change his or her enrollment from one plan to another. An individual who is already in a plan can decide if he or she wants to remain in the same plan for the current year or if he or she wants to select another plan. Individuals enrolled in a Medicare Advantage plan may also change plans once during the enrollment period which is the first three months of each year. The initial enrollment date for a person who becomes eligible for Medicare Part D after March 1, 2006 corresponds to the initial enrollment period which is the seven month period running from three months before eligibility for Medicare and ending three months after the first month of eligibility. There is a late penalty for failure to timely enroll when a person is first eligible. The penalty is 1% of the national average premium for every month that a person delays enrollment. Thus, a person who becomes eligible to enroll in Part D at age 65 delays enrolling until age 66 can be assessed a 12 percent penalty on his or her premium for the remainder of his or her life. The amount of the penalty will vary each year as the national average premium changes. However, this penalty is waived if a person had creditable coverage with an employer or through the Veterans Administration or Tricare. Creditable coverage means that the employer’s drug plan is equivalent to the Part D benefit.

The monthly premium that a Medicare beneficiary will have to pay on a monthly for Part D drug benefit varies from company to company and depends on the formulary being provided by that company. A Medicare beneficiary who elects to pay this premium will then pay an annual deductible for prescriptions. The annual deductible for 2010 is the first $310 of prescription drug expenses incurred during 2010 for drugs on the plans list of covered drugs or formulary. This annual deductible will increase each ensuing year. The enrolled Medicare beneficiary then pays a coinsurance amount equal to 25 percent of his or her prescription costs, for formulary drugs, in excess of the annual deductible up to the initial coverage limit in 2010 of $2,830. The Medicare beneficiary’s prescription drug plan sponsor is to pay the remaining 75 percent until total drug expenses paid for by the plan and the beneficiary reach $2,830. The enrolled Medicare beneficiary then pays the next $3,610.00, in prescription drug expenses in 2010 before receiving any additional financial assistance. This additional prescription drug expense to the Medicare beneficiary is referred to as the doughnut hole since the plan pays nothing toward this additional prescription drug expense. There is no additional prescription drug assistance until an enrolled Medicare beneficiary’s annual prescription drug expense for formulary drugs and monthly expenses exceeds $4,550 in 2010 plus his or her monthly premiums. A person with total prescription drug expenses for formulary drugs exceeding $6,550.00 in a year then pays a co-payment of $2.50 for each generic for each generic drug and $6.30 for any other drug prescription, or 5 percent of the cost of the prescription drug, whichever is greater.

The annual premium and the deductibles are expected to increase each year as the cost of this additional Medicare benefit increases. Prescription costs will be treated as incurred by the Medicare beneficiary only if they are paid by the eligible beneficiary or by another individual on behalf of the eligible beneficiary. If the eligible individual is reimbursed for such costs through insurance, a group health plan, or other third-party payment arrangement, the prescription cost may not count toward the eligible beneficiary’s incurred share of cost, or $4,550.

A low-income subsidy is available to pay the cost of the Medicare Part D beneficiary who has an income less that 100 percent of the federal poverty level and countable resources of not more than $6,600 for an individual and $9,910 for an individual. A person entitled to a low-income subsidy pays no deductible and coinsurance. A person with income of less than 100% of the poverty level will also pay no more than $1.10 for a generic prescription and no more than $3.30 for a non-preferred brand prescription.