Broker Check

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 dependentof 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 SecurityAdministration'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 MedicarePart 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 employeesFederal 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 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 coverageMost 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.

Question: How do I enroll in Medicare?

Answer:You'll be automatically enrolled in Medicare when you turn 65 if you're already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the Social Security Administration will notify you that you're being enrolled.

Although there's no cost to enroll in Medicare Part A (Hospital Insurance), you'll pay a premium to enroll in Medicare Part B (Medical Insurance). If you've been automatically enrolled in Part B, you'll be notified that you have a certain amount of time after your enrollment date to decline coverage. Even if you decide not to enroll in Medicare Part B during the initial enrollment period, you can enroll later during the annual general enrollment period that runs from January 1 to March 31 each year. However, you may pay a slightly higher premium as a result.

If you decide to postpone applying for Social Security past your 65th birthday, you can still enroll in Medicare when you turn 65.The Social Security Administration suggests that you call (800) 772-1213 three months before you turn 65 to discuss your options.You can apply by visiting your local Social Security office. If you are unable to visit your local office, you may be able to enroll over the phone.