Medicare
Chapter 4
Employee Benefit & Retirement Planning
What is it?
Federal health insurance program that covers
- most people age 65 and older
- those who have permanent kidney failure
- those disabled under strict Social Security rules
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
What is it?
4 parts:
(1) Hospital (Part A)
(2) Medical Insurance (Part B)
(3) Medicare Advantage (Part C)
(4) Prescription Drug Insurance (Part D)
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Hospital Insurance (Part A)
provides institutional care
inpatient hospital care
skilled nursing care
post-hospital home health care
hospice care, under certain conditions
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Medical Insurance (Part B)
VOLUNTARY program of health insurance
physician’s services
outpatient hospital care
physical therapy
ambulance trips
medical equipment
prosthetics
other services not covered under Part A
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Medicare Advantage (Part C)
contracts with private managed care and fee-forservice organizations
choose benefits through Medicare fee-for-service OR through
Medicare Advantage plans:
– coordinated care plans (HMO, PPO, PSO)
– religious fraternal benefit society
– private fee-for-service
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Prescription Drug Insurance (Part D)
Prescription drug insurance program added to
Medicare by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003
voluntary program began in 2006
covers portion of prescription drug costs not generally
covered by other Medicare programs
offered through private health plans
can stay with traditional Medicare and enroll in a drug-only
plan or choose Medicare Advantage plan with
comprehensive benefits
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Medicare Supplement Insurance
“Medigap” insurance
helps pay deductibles and co-insurance incurred under
Medicare Parts A and B
may pay for items or services not covered by Medicare
will NOT cover out-of-pocket expenses
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Eligibility and Enrollment Hospital Insurance
(Part A)
Available to
all > 65 entitled to monthly Social Security or Railroad
Retirement cash benefits
disabled under Social Security > 24 months
certain dependents or survivors
those with end stage renal disease
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Eligibility and Enrollment Medical Insurance
(Part B)
Potential enrollees include
– all persons entitled to Hospital Insurance (Part A)
– citizens or lawful aliens > age 65
Enrollment period
– seven full calendar months after first eligible
– late enrollments, re-enrollments pay higher premium
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Eligibility and Enrollment Medicare Advantage
(Part C)
Potential enrollees include
– all persons entitled to Hospital Insurance (Part A) and
– enrolled in Medical Insurance (Part B)
Enrollment period
– first three months of eligibility
– first three months of the year
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Eligibility and Enrollment Prescription Drug
Insurance (Part D)
Potential enrollees include
– all persons entitled to Hospital Insurance (Part A) and
– enrolled in Medical Insurance (Part B)
Enrollment period
– open enrollment November 15 to December 31
– if new Medicare beneficiary, Part D initial enrollment is
same as for Part B
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Eligibility and Enrollment Medicare Supplement
Insurance
Potential enrollees include
– all persons age 65 and older
Enrollment period
– open enrollment six months after age 65 and enroll in
Medicare Part B; pre-existing conditions may be excluded
for first six months
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Inpatient hospital care
– up to 90 days each ‘benefit period’
– patient pays
•
•
•
deductible of $1,068 (2009) for first 60 days
coinsurance of $267 a day (2009) for each
additional day up to a maximum of 30 days
– each person has non-renewable lifetime “reserve” of 60
additional hospital days with coinsurance of $534 a day
(2009)
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Post-hospital extended care in a skilled nursing
facility
–
–
–
up to 100 days in each “benefit period”
patient pays nothing first 20 days
after 20 days, patient pays coinsurance of $133.50 a day (2009)
for each additional day up to a maximum of 80 days
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
First 100 post-hospital home health service visits
– after a hospital or skilled nursing facility stay
– services must be under treatment plan established by
physician
– patient pays 20% cost-sharing for durable medical
equipment
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Hospice care for terminally ill patients
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Inpatient hospital care
– except for deductible and coinsurance amounts, Medicare
helps pay for inpatient hospital service for up to 90 days in
each benefit period
– first benefit period starts the first time the patient receives
inpatient care after Hospital Insurance
– coverage begins
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Inpatient hospital care
– benefit period ends when patient out of hospital or skilled
nursing or rehabilitative services for 60 days in a row
(including day of discharge)
– after one benefit period has ended, another will start when
patient again receives inpatient care
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Skilled nursing facility care - must meet 5 conditions
1. need daily skilled nursing or rehab. Services that can only be
provided in skilled nursing facility
2. in hospital for at least 3 days in a row before admitted to
skilled nursing facility
3. admitted to skilled nursing short time after leaving hospital
(usually 30 days)
4. care in skilled nursing facility is for condition treated in hospital
or that arose while receiving care in the skilled nursing facility
for condition treated in the hospital
5. medical professional certifies that patient needs and receives
skilled nursing or skilled rehab. services daily
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Skilled nursing facility care
– no lifetime limit on amount of skilled nursing facility care under
Hospital Insurance
– except for coinsurance, plan can pay cost of up to 100 days’
post-hospital care in each benefit period, regardless of
number of benefit periods
– after 100 days of coverage in a benefit period, patient must
pay full cost of skilled nursing facility care
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Home health care – Hospital Insurance pays for first 100
days in “home health spell of illness” if all 6 of the
following conditions are met
1. care is post-institutional home health service
2. care includes intermittent skilled nursing care, physical
therapy, or speech therapy
3. person is confined at home
4. person under care of physician who determines need for
home heath care and sets up home health plan
5. home health agency participates in Medicare
6. services delivered in home or skilled facility
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Home health care
“home health spell of illness” means consecutive days
– beginning with first day person furnished post-institutional
home health services (when entitled to Part A benefits)
– ending with close of first period of 60 consecutive days person
was NOT hospital inpatient NOR provided home health
services
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Hospice care
– focus on pain relief vs. cure
– Medicare pays for home care, inpatient care (when needed)
and other services such as homemaker services and
counseling
– care covered under Hospital Insurance when beneficiary
eligible for Hospital Insurance benefits
– doctor certifies terminally ill
– statement filed electing to limit benefits (can revoke later)
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Hospital Insurance (Part A)
Hospice care
– no deductibles
– beneficiary pays only small coinsurance
•
outpatient drugs – lesser of 5% of drug cost or $5
•
inpatient respite care – 5% of amount paid by Medicare for
respite care day
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• Medicare usually pays 80% of approved charges for
doctor’s services after patient pays first $135 (2009)
• Medicare also covers
1. medical and surgical services
2. diagnostic tests and procedures that are part of treatment
3. radiology and pathology services
4. treatment of mental illness (limited)
5. X rays
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• Medicare also covers
6. services of doctor’s office nurse
7. drugs and biologicals that cannot be self-administered
8. transfusions of blood and blood components
9. medical supplies
10. physical / occupational therapy and speech-language
pathology services
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• Medicare does NOT cover
1. most routine physical exams and related tests
2. most routine dental and foot care
3. exams to prescribe and fit eyeglasses and most hearing aids
and eyeglasses and hearing aids
4. immunizations except annual flu or those required because of
injury or immediate risk of infection
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• Medicare does NOT cover
5. cosmetic surgery, except if accidental injury or needed to
improve function
6. most prescription drugs
7. custodial care at home or nursing home
8. orthopedic shoes
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• Major outpatient hospital services covered by Medicare
1. emergency room or outpatient clinic, including same day
surgery
2. lab tests billed by hospital
3. mental health care in certain circumstances
4. X-rays and other radiology services billed by hospital
5. certain medical supplies
6. drugs and biologicals that cannot be self-administered
7. blood transfusions administered to patient as out-patient
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
• payments made by Medicare can be made directly to
– doctor or supplier: “assignment”
doctor or supplier agree to accept amount approved by Medicare
carrier as total payment for covered services
– patient
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Insurance (Part B)
•
115% limit
–
if doctor does not accept assignment, the most that can be
charged is 115% of what Medicare approves
–
115% limit applies to fees for services billable under
physician fee schedule (e.g. physical and occupational
therapy, suppliers, injections, etc.)
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medical Advantage (Part C)
•
required to provide current Medicare benefit package
except hospice services
•
may offer supplemental services
•
may select providers if benefits available to all
enrollees
•
required to pay for emergency services without prior
authorization
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Prescription Drug Insurance (Part D)
• standard benefit for most participants
• if income below 150% poverty, have no cost-sharing for
expenses above $5,726.25 (2009)
• co-pays:
–
$2.40 generic and $6.00 if name brand drugs if income
between 135% and 150% poverty (2009)
–
5% if income above 150% poverty
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Prescription Drug Insurance (Part D)
• sponsoring organizations may offer alternative
coverage if certain specific criteria are met
• Part D plans may also provide supplemental coverage
if certain specific criteria are met
• discount cards offer opportunity to get negotiated
discounts, but not all drugs covered and not all
pharmacies accept the cards
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medicare Supplement Insurance
• Congress established federal standards for Medigap
policies in 1990
• most states limit sale to no more than 12 standard
policies, designated by letters A through L
• Plan A is basic policy offering “core package of benefits”
that, in general, extend coverage for Hospital Insurance
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medicare Supplement Insurance
• Plans B through J each have different combination of
benefits, but all include the core package
• In 2006 and later years
– some Medigap plan participants may enroll in Part D or
maintain drug coverage through Medigap policy
– two new standard plans (K and L) are available that do not
include entire core benefit package, but instead offer
catastrophic coverage
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Benefits: Medicare Supplement Insurance
• Medicare SELECT is similar to Medigap EXCEPT
– SELECT may limit Medigap benefits to items and services
provided by certain selected health care professionals
– may pay only partial benefits when patient gets health care
from other health care professionals
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Hospital Insurance (Part A)
• financed by payroll tax paid by
– workers, employers, and self-employed subject to Social Security
or Railroad Retirement
– all federal, state, local government employees
•
hired after 1986
•
not covered by state retirement system
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Hospital Insurance (Part A)
• tax rate 1.45% for employee and employers; 2.90% for
self-employed
• federal income tax deduction for 1/2 of the Hospital
Insurance self-employment tax
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Medical Insurance (Part B)
• financed through premiums paid by
–
Most persons enrolled pay the basic premium ($96.40 / mo,
2009; designed to cover 25% of costs)
–
Funds from federal government (covers remaining costs)
–
Higher income taxpayers (greater than $85,000 income for
single taxpayers or $170,000 for married filing jointly) pay a
greater share of the total cost
• Annual premiums announced in fall of previous year by
Centers for Medicare & Medicaid Services (CMS)
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Medicare Advantage
(Part C)
• financed through same taxes and premiums as
traditional Hospital insurance and Medical Insurance
programs
• plan may charge additional premiums for additional
benefits offered through plan
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Prescription Drug
Insurance (Part D)
• partly financed through premiums paid by participants
(average $28 per month for 2009)
• late enrollment penalty may be charged
• those with other sources of prescription drug coverage
may be able to retain without penalty
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Taxation and Financing: Medicare Supplement
Insurance
• Medigap insurance is private insurance funded through
premiums paid by plan participants
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
True or False?
1.
Participation in all parts of Medicare is voluntary.
2.
The new Medicare Part D is a voluntary program that
pays for all prescription drug costs.
3.
A person who retires at age 62 can join Medicare by
paying an additional premium.
4.
Under Medicare Part A, Medicare pays for all
inpatient hospital costs up to 90 days each benefit
period.
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
True or False?
5.
Hospice care focuses on relief from pain versus on
finding a cure.
6.
Medical Insurance (Part B) does not cover routine
physical exams and most immunizations.
7.
All the various Medigap policies must contain the
same core package of benefits.
8.
All of Medicare is financed with payroll tax imposed
on most employers and employees.
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Medicare
Chapter 4
Employee Benefit & Retirement Planning
Discussion Question
Discuss the pros and cons of having the federal
government involved in the provision of health insurance
for the elderly.
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