What is Medicare?
Medicare is a federal health insurance program established by Congress in 1965. It provides health care benefits for people 65 or older, people younger than 65 who have certain disabilities, and people of any age who have permanent kidney failure. While it gives basic protection against health care costs, it won't cover all your medical expenses or the costs of most long-term care. The Centers for Medicare and Medicaid Services (CMS) is the organization that manages Medicare. However, Social Security offices actually enroll applicants into the program and will give you specific information about it.
What does Medicare cover?
Medicare benefits are divided into two parts. Part A primarily covers inpatient hospital, skilled nursing facility care and home health care. Once enrolled in Medicare, you will receive these benefits automatically and do not pay premiums for them (you've already paid for them through your taxes). When you apply for Part A, you can enroll into Part B. This second part covers most doctors' bills, as well as some medical services and supplies. You can turn down Part B if you choose because it requires a monthly premium. We do not address Medicare Part D because of it's complexity and urge you to consult a Medicare Specialist.
"Medigap" insurance gives benefits Parts A and B don't offer. This kind of health coverage is sold by private companies specifically to complement Medicare insurance.
If you choose to have your Medicare medical services provided by a Health Maintenance Organization (HMO), you may not need to consider Medigap insurance. Information on the advantages and disadvantages of HMOs versus Fee-for-service is located below under "How should I receive my services: Fee-for-service or HMO?"
Who is eligible for Medicare?
People are eligible for the program if they:
- Are age 65 or older and eligible for Social Security or Railroad Retirement benefits;
- Are age 65 or older and the spouse or former spouse of someone who receives Social Security or Railroad Retirement Benefits;
- Worked long enough in a federal, state, or local government job to meet the Social Security disability program requirements (this is if they are under 65). Those 65 or older (or a spouse) must have 40 or more quarters of Medicare covered employment.
- Have been receiving Social Security disability benefits for at least two years (24 months);
- Have End Stage Renal (Kidney) Disease.
People who are not automatically eligible may enroll voluntarily if they:
- Are age 65 or older; and
- Are United States citizens or legal aliens who have resided in the United States continuously for at least five years; and
- Purchase both Parts A and B of Medicare, or Part B only.
How and when do I apply for Medicare?
Medicare applications are handled through your local Social Security office and are usually submitted when you apply for Social Security. To ensure that your entrance into Medicare is problem-free, you should contact your local Social Security office within three months before you turn 65. If you fail to enroll within this three-month period, you'll have to pay a penalty for late enrollment. This time frame is important particularly for those who have retired or plan to retire before age 65.
Medicare becomes effective for people following the regular application process on the first day of the month in which they turn 65. What does Part A of Medicare cover? Part A helps pay for Hospital Inpatient care. For each benefit period, Medicare pays all covered costs except the Part A deductible during the first 60 days and coinsurance amounts for hospital stays that last beyond 60 days and no more than 150 days. A "benefit period" begins when you are admitted to a hospital and ends when you have been out of the hospital or have not received skilled care in a nursing facility for 60 consecutive days. In addition to this "benefit period," you are given 60 "lifetime reserve" days that can be used only once.
Skilled Care in a Skilled Nursing Facility. Medicare provides 100 percent of expenses for the first 20 days of skilled nursing care after three consecutive days of hospitalization - not including the day of discharge. This nursing care must be physician-prescribed to be covered by Medicare. For days 21-100 in a skilled nursing facility, the beneficiary must pay a co-payment. Beginning with day 101, you are responsible for the costs yourself.
IMPORTANT: Medicare does not pay for custodial care if it makes up the bulk of services received in a nursing facility. (Custodial care is care given by someone who is not medically skilled. Help with dressing, walking, or eating are examples). Because many people in nursing facilities receive this type of care, it may be useful for you to keep in mind that Medicare does not pay for it.
Home Health Care. Medicare completely covers an unlimited number of home health visits, provided that a physician has determined you are home-bound and that the services:
- Follow a physician's prescribed plan of care;
- Require skilled nursing services on an intermittent basis; or skilled physical, occupational or speech therapy services; and
- Are provided by a licensed home health agency.
Hospice Care. If a doctor certifies - and a hospice medical director agrees - that the patient is terminally ill (is expected to have less than six months to live), and the patient chooses the hospice benefit over the standard Medicare benefits (must sign a statement waiving Medicare coverage), Medicare will pay for two 90-day periods followed by an unlimited number of 60-day periods. At the start of each period of care, your doctor must submit the appropriate authorization. (Hospice care keeps the patient as comfortable as possible - it doesn't provide cure-oriented treatment.)
What does Part B of Medicare cover?
Part B helps pay for:
- Physician services;
- Rehabilitation therapy services;
- Outpatient hospital services;
- Ambulance services; and
- A number of other medical supplies and services.
What does Medicare not cover?
- Custodial care -- This is given by a medically unskilled person to help a patient with the tasks of daily living, such as walking, bathing, or dressing. Even if you are in a hospital that participates in Medicare or are in a skilled nursing facility, Medicare will not cover the cost of the service if it is mainly custodial.
- Dental care and dentures .
- Routine checkups and tests directly related to those checkups (except for some screening, Pap smears, and mammograms which are covered).
- Most immunization shots (except for flu and pneumonia shots which Part B helps pay).
- Most prescription drugs (except for individuals who have elected for Part D)
- Routine foot care (with certain exceptions).
- Services outside the United States (with certain exceptions).
- Tests for, and the cost of, eyeglasses or hearing aids .
- Personal comfort items, like a phone or TV in your hospital room.
- Cosmetic Surgery
- Experimental Procedures
Do I have choices in how I receive Medicare benefits?
Yes - there are two choices. You can either use the traditional fee-for-service delivery system, in which you visit a hospital or doctor of your choice and pay a fee for services rendered, or you can join a Health Maintenance Organization (HMO) with a Medicare contract. An HMO is a network of health care providers (like general practitioners, specialists, and other medical experts) that offers comprehensive health care coverage.
What are some basic differences between Medicare fee-for-service and Medicare benefits provided by an HMO?
Medicare coverage is the same under both of these systems, but the delivery of benefits, the method of payment, and the amount of out-of-pocket money is different.
Most people currently use the fee-for-service system, They visit a doctor or a hospital, which they choose, and pay deductibles and coinsurance for Medicare's Parts A and B (as described above). The majority of fee-for-service users supplement their Medicare plan with Medigap insurance, or with retiree coverage from their former employer or union.
An increasing number of people receive Medicare benefits through HMOs. HMOs generally require less out-of-pocket money than Medicare fee-for-service, and sometimes provide benefits beyond those Medicare offers (such as preventive care for eyeglasses). Medicare users who join HMOs usually do not have to purchase Medigap insurance. While HMOs are considered to be a health care bargain, you should consider joining one with caution. There is much debate about the quality of health care HMOs offer, and some HMO patients have found their access to specialists restricted.
If I am considering Medicare fee-for-service, what should I know?
You should know about assignment, which will affect how much you pay for Medicare services. You should also know about Medicare supplemental insurance, which you will probably need.
Some health care providers who accept Medicare patients accept something called "assignment." Providers accepting assignment agree to charge only prices that Medicare approves. Providers who do not accept assignment can charge up to 15 percent more than Medicare-approved prices by federal law.
Here is an example of how assignment affects you:
Provider's actual charge for a service:
Medicare-approved charge for that service: $100
Medicare pays (with or without assignment)
80% of the approved charge: $80
You pay (with or without assignment)
20% of approved charge (coinsurance): $20
If the provider accepts assignment, you're total cost is $20 ($20 of coinsurance and nothing else). If the provider does not accept assignment, you are responsible to pay 15 percent more than Medicare's approved charge. Fifteen percent more than $100 (the approved charge) is $15. Your total cost is $35 ($20 of coinsurance plus $15 surcharge).
Before using a provider's service, ask first whether that provider accepts Medicare. Second, ask whether he or she accepts Medicare assignment. A provider who does not regularly accept assignment may do so on a case-by-case basis. Ask whether he or she is willing to accept you individually on an assignment basis.
Providers who accept assignment will not necessarily refer you to specialists who accept assignment. Ask your provider to try, whenever possible, to send you to specialists who accept assignment.
About Medicare supplemental insurance
Most people with fee-for-service Medicare find it necessary to supplement their Medicare coverage. This is often done by purchasing additional coverage from a private company. Such insurance is called "Medigap" because it is specifically designed to complement your existing Medicare coverage.
There are 12 standard Medigap plans developed by the National Association of Insurance Commissioners. Some or all of the plans are offered in most states. (Minnesota, Massachusetts and Wisconsin are exceptions because they have their own standardized Medicare supplemental insurance plans). The 12 standard plans are lettered from "A" to "L." A is the most basic; L is the most comprehensive. They pay most, if not all, of Medicare coinsurance amounts, and they may provide some coverage for Medicare's deductibles. Some of the plans cover services Medicare doesn't offer, such as outpatient prescription drugs, preventive screening and emergency medical care while traveling outside the U.S.
There are some things you should be aware of when considering Medigap coverage
- You should know that most of these policies place a maximum limit to the amount of benefits they will give you within a defined time period.
- You should know that some Medigap policies may not cover certain health conditions for the first six months. By federal law, all Medigap policies are required to cover your preexisting health condition after they have been in effect for you for those six months.
- Be careful not to be sold duplicate coverage you don't need. There are various anti-duplication provisions enacted into federal law to discourage anyone from selling you such duplicate coverage. Call 1-800-638-6833 (the Medicare toll-free Hot Line) for suspected violations.
- In some states, insurance companies may refuse to renew a Medigap policy bought before 1990. During this time, state law was not requred to say the Medigap policies had to be renewed automatically each year.
Medicare SELECT is Medicare supplement health insurance that is nearly the same as standard Medigap insurance. Essentially, buying Medicare SELECT is buying a standard Medigap insurance plan. The only difference is that with Medicare SELECT, the insurer requires you to use specific hospitals and sometimes specific doctors (except in an emergency) in order to receive full benefits. The advantage of SELECT plans is that they generally have lower premiums than Medigap policies.
I am considering Medicare services through an HMO, what should I know?
- The two kinds of HMOs;
- Joining an HMO;
- Possible benefits of belonging to an HMO;
- Possible disadvantages of belonging to an HMO;
- Payment of Medicare and the HMO; and
- Getting out of an HMO.
The two kinds of HMOs: Most HMOs are "risk" HMOs. They require you to use only physicians and other medical providers they have approved. They are paid a fixed amount by Medicare for your membership regardless of the cost of your care. If you use medical providers who do not work for the HMO, or are not approved by the HMO, you will be responsible for the bill: Medicare nor your HMO will pay it. (Emergencies or urgent care, however, will be paid for by the HMO or Medicare.)
The other kind of HMO is called a "cost" HMO. You can use health care providers outside the plan and the bill will be sent to Medicare. When you use "cost" HMO services, Medicare pays for the cost of services provided to you.
Joining an HMO: Many HMOs have contracts with the Health Care Financing Administration to serve Medicare beneficiaries. The requirements for your enrollment in these HMOs are:
- You must be enrolled in Medicare Part B;
- You cannot have elected care from a Medicare-certified hospice;
- You cannot be medically determined to have end stage renal disease (ESRD).
- However, if you are already a member of an HMO when you become eligible for Medicare, and that HMO has a contract with Medicare, you can remain in your HMO even if you have ESRD; and
- You must live within the service providing area for which the HMO has a Medicare contract.
Possible benefits of belonging to an HMO:
- HMOs with Medicare contracts provide all hospital and medical benefits covered by Medicare. Many of these HMOs provide benefits beyond those Medicare pays for. These may include preventive care, prescription drugs, dental care, hearing aids, and eyeglasses.
- HMO users do not have to pay the co-payments and deductibles of Medicare, nor do they need Medigap insurance.
- HMO copayment amounts are generally lower than what Medicare asks for, if they exist at all. HMOs do not usually have deductibles.
- Unlimited lengths of hospital stay are generally covered entirely by an HMO: in other words, you can return to an HMO for hospital services many times over for long periods of time without fear that benefits will end.
- The coordination of services at an HMO could enhance the quality of your health care. There is very little paperwork involved when using a HMO, and it can be easier to get all your health services from one health care source.
Possible disadvantages of belonging to an HMO:
Most HMOs will limit your access to specialists and services within their networks. If you have medical needs requiring specialized services, or if you don't want to take the chance of having your access limited to specialists in the future, you may want to consider joining an HMO carefully.
Some critics say HMOs discourage doctors from referring patients to specialists. The Teachers Protective Mutual Life Insurance Company (TPMLFI) cites a January 8, 1996 Time Magazine article that says US Healthcare, an HMO on the east coast, gives bonuses approaching $4,000 a month to its physicians for sticking to referral limits. On the other hand, the Massachusetts Association of HMOs claims HMO members are satisfied with the quality of services they are provided. They point to a recent survey that claims 79 percent of Massachusetts HMO members would recommend their health plan to a friend, while only 69 percent of those with fee- for-service coverage would do the same. (Note that this was not necessarily a survey of Medicare patients.)
It is important to keep in mind that most HMOs -- the "risk" HMOs -- are paid a flat fee by Medicare to provide you health services regardless of the actual costs of your health care. HMOs, in effect, take a "risk" on your health. One of the arguments for "risk" HMOs is that they strive to maintain your health because it is in their best interests. Theoretically, this means an HMO will be motivated to prevent your illnesses and treat them early. The negative side of the "risk" argument is that HMOs is that they seek to manage costs. To a certain extent they have to, because they are not being paid a fee for each individual service rendered. This may mean doctors will have higher-than-normal caseloads of patients or will be encouraged to maintain referral limits. The possibility that the negative aspects of "risk" HMOs may affect the quality of your medical care is an important consideration.
If you plan to travel frequently, you may not want to join a "risk" HMO: these HMOs require you to use services in only particular facilities. (A "cost" HMO, however, may be a reasonable option. "Cost" HMOs give you the freedom of being covered by Medicare for services provided outside their networks.)
Payment of Medicare and the HMO:
Most HMOs charge their own monthly premium in addition to a small copayment each time you use a service. In addition to these fees, you will also have to pay your Medicare premium. However, you will probably not need to pay Medicare deductibles or coinsurance or purchase a Medigap policy.
Getting out of an HMO:
To unenroll from an HMO, you should write a letter saying you want to leave your health plan. This letter can be sent to either the HMO office or the Social Security Administration (or the Railroad Retirement Board). You will be out of the plan the first of the following month. Make sure you have replacement coverage before dropping your old plan.
Are there Medicare programs for those with low incomes?
Yes -- there are two. One is the Qualified Medicare Beneficiary, or QMB program. The other is the Specified Low-Income Medicare Beneficiary, or SLMB program. Both are run by the Health Care Financing Administration and the agency in your state that provides medical assistance under the Medicaid program. If you qualify for the QMB program, your state will pay your monthly Medicare premiums, and you will not have to pay the Medicare deductibles and coinsurance. If you qualify for the SLMB program, your state will pay only your medical insurance (Part B) monthly premium.
Only your state can decide if you qualify for help under the QMB or SLMB programs. To find out if you qualify, contact your Medi-Cal office, social service office, or welfare office. For general information, you can ask Social Security for a copy of the leaflet Medicare: Savings for Qualified Beneficiaries (Publication No. HCFA 02184).
Where do I get more information?
You can write to the following address for Medicare publications, including Your Medicare Handbook:Medicare Publications Centers for Medicare & Medicaid Services (CMS) 7500 Security Boulevard Baltimore, MD 21244-1850
You can also get information 24 hours a day by calling Social Security's toll-free number: 1-800-772-1213. Service representatives work between 7 a.m. and 7 p.m. on business days. Lines are busiest early in the week and early in the month, so it is recommended to call at other times.