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Medicare
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State Health Facts | The Henry J. Kaiser Family Foundation

Medicare

The Original Medicare Program


WHAT IS MEDICARE?

Medicare is a Federal health insurance program primarily for people 65 and older.  However, it is also for certain disabled people and people with permanent kidney failure.  it was introduced in 1965 and actually went into effect in 1966.  It is run by the Health Care Financing Administration (HCFA) of the U.S. Department of Health and Human Services.

THE TWO PARTS OF MEDICARE

There are two parts to the original Medicare program.

Hospital Insurance (Part A) helps pay for inpatient hospital care, some skilled nursing care, home health care, and hospice care.

Medical Insurance (Part B) helps pay for doctors, outpatient care, and numerous other medical services and supplies that are not covered by Part A.

WHO IS ELIGIBLE FOR MEDICARE?

  • You must be a citizen or a permanent resident who has lived in the United States for at least 5 years
  • If you are 65 or above, you or your spouse must have worked at least 10 years in Medicare-covered employment.

OR

  • If you are under age 65, you may qualify if you have a permanent disability and have received Social Security or Railroad Retirement Board disability benefits for 24 months or...if you are a kidney dialysis or kidney transplant patient.
ENROLLING IN MEDICARE

Automatic Enrollment - If you are receiving Social Security or Railroad Retirement Board benefits when you turn 65 or if you have received disability benefits for 24 months, you will be automatically enrolled in both Part A and Part B of Medicare.

Applying for Medicare - You need to apply for Medicare if you are not receiving Social Security or Railroad Retirement Benefits 3 months before you turn 65, or if you require regular dialysis or kidney transplant.  To apply , contact a Social Security Administration office or, if you or your spouse worked for the railroad, the Railroad Retirement Board.

INTERMEDIARIES AND CARRIERS

The Federal government contracts with private insurance organizations called Intermediaries and Carriers to process your Medicare claims.  The Intermediaries process claims for Part A and the Carriers process claims for Part B.

PEER REVIEW ORGANIZATIONS (PROs)

These are groups of practicing doctors and other health care professionals who are paid by the Federal government to review the care given to Medicare patients.  Each state has PRO that decides, for Medicare payment purposes, whether the care is reasonable and necessary, is provided in the appropriate setting, and if it meets the standards of quality accepted by the medical profession.  The PROs have the authority to deny payments if these requirements are not met.

 

 


The Original Medicare Program


UTILIZATION REVIEW COMMITTEES (URCs)

This group performs basically the same tasks as the PROs.  The primary difference between the PROs and the URCs is who provides their payment.  The URCs are paid by the facility (hospital or nursing home) rather than by the government.

THE DRG AND PROSPECTIVE PAYMENT SYSTEMS

Under the Prospective Payment System, hospitals are paid fixed amounts by Medicare based on the principal diagnosis for each hospital stay.  These payment categories are called Diagnostic Related Groups (DRGs).  This system was implemented in October of 1983 primarily as a cost-containment measure.

At that time, Medicare took the ailments and injuries that could happen to an individual and divided them into specific groupings.  There are currently almost 500 of these groupings.

They also assigned a specific dollar amount to each DRG grouping as a designated amount the hospital would be paid based on the principal diagnosis of the patient.  The hospital receives this fixed amount regardless of the length of time a person stays in the hospital.  If a patient remains in the hospital for one day or twenty days... the hospital receives the exact same amount of money.

The DRG System is one of the most misunderstood aspects of the Medicare program.  It is an area that should be fully understood by Medicare recipients to avoid the possible financial ramifications that could occur as a result of not being correctly informed.


Medicare Part A Covered Services


Covered Services

Hospital Stays:  Semi-private room, meals, general Nursing, and other hospital services and supplies such as operating and recovery room costs, rehabilitation services, special care units and x-rays (but not private duty nursing, a television or telephone in your room, or a private room unless medically necessary).*

 

 

What You Pay

  • An admission charge of $768 during days 1-60 of a hospital stay.  Medicare pays all other covered expenses.

  • $192 per day for days 61-90 of a hospital stay.

  • $384 per day for days 91-150 of a hospital stay. **

  • All costs from the 151st day on of a hospital stay.

 

Skilled Nursing Facility Care

Semi-private room, meals, skilled nursing and rehabilitative services, and other services and supplies such as medical supplies, wheelchairs, blood transfusions, and drugs furnished by the facility while there. *

For Each Benefit Period You Pay

  • Nothing for the first 20 days

  • Up to $96.00 per day for the 21st through the 100th day.

  • All costs from 101st day on.

 

Home Health Care

Intermittent skilled nursing care, physical therapy, speech language therapy, pathology services, home health aid services, durable medical equipment (such as wheelchairs, hospital beds, oxygen and walkers) and supplies.*

 

What You Pay

  • Nothing for Home Health Care Services.
  • 20% of approved amount for durable medical equipment (such as wheelchairs, hospital beds, oxygen and walkers).

 

Hospice Care

Pain and symptom relief and supportive services for the management of a terminal illness.  Home care is provided.  It also covers necessary inpatient care and a variety of services otherwise not covered by Medicare.

What You Pay

  • Limited costs for outpatient drugs and inpatient respite care (care given to a hospice patient so that the usual care giver can test.)

 

Blood

From a hospital or skilled nursing facility during a covered stay.

What You Pay

  • You pay for the first 3 pints of blood.

 

*You must meet certain conditions in order for Medicare to cover these services.

**You have 60 lifetime reserve days that may only be used once.


Medicare Part B Covered Services


Covered Services

Medical Services:  This includes doctor bills, inpatient and outpatient medical and surgical services and supplies, physical, occupational and speech therapy, diagnostic test, and durable medical equipment.

 

What You Pay

  • $100 deductible (pay once per year).

  • 20% of approved charges after the Part B deductible.

  • 50% for most outpatient mental health.

  • 100% of all excess charges if your doctor does not accept assignment.*

Laboratory Tests & Services:  Blood tests, urinalysis, x-rays, kidney dialysis and transplants.

What You Pay

  • You pay nothing for these services.
Home Health Care:  Part B will help cover these costs if you don't have Part A.  You must meet certain requirements in order for Medicare to cover these services.

 

What You Pay

  • Nothing for services if you meet the requirements.
  • 20% of approved amount for durable medical equipment.
Blood:  Covered as an outpatient, or as part of a Part B covered service.

 

What You Pay

  • You pay for the first 3 pints of blood.

    Part B also Helps Pay for :

  •    Speech language pathology services

  •     Artificial limbs and eyes

  •     Arm, leg, knee and neck braces

  •     Some preventative services

  •     Very limited outpatient drugs

  •     Limited chiropractic services

  •     Breast prosthesis (after a mastectomy)

  •     Limited ambulance services

  •     The services of practitioners

  •     Emergency care

 

*Your Part B out-of-pocket expenses depend on whether your health care provider "accepts assignment" or not.

Medicare determines the approved charges for Part B services.

  • If your doctor accepts assignment, he or she agrees to accept Medicare's approved charges as payment in full (with no excess charges).

  • If your doctor does not accept assignment, he or she may charge up to 15% above the Medicare approved amount.

NOTE:  Other insurance can help cover medical expenses not covered by parts A or B Medicare.  Information on your choices is provided on the following pages.


Is Medicare Enough?


Even though Medicare covers many health care costs, you will still have to pay Medicare's coinsurance and deductibles.  Plus, there are many medical services that Medicare does not cover or does not cover completely.  The result... you will have to pay these health care costs out of your own pocket.  This is why you should consider coverage in addition to Medicare.

Medigap Insurance- "Medigap" is the name given to supplemental plans sold by private insurers to fill in the "gaps" in the original Medicare plan.  To make shopping for a plan easier, federal law requires that insurers offer only plans that fit the 10 standard plans approved by the government.  These are called "Standardized" plans and are designated with letters A through J.  Regardless of what the insurer calls its plan, benefits for each letter designation are identical from company to company.  So, if you purchased a Plan C, the benefits would be exactly the same with all companies.  However, there could be differences in cost and service.

Choosing a Plan- The best time to purchase a policy is during your Medigap open enrollment period.  For a period of six months from the date you are first enrolled in Medicare Part B and are  age 65 or older, you have the right to purchase the Medigap policy of your choice.  you cannot be turned down or charged higher premiums because of poor health during this period.  However, once your six month open enrollment period ends, you may not be able to buy the policy of your choice.  Original Medicare with a supplemental policy (Standard supplement and Medicare Select) is the coverage preferred by most retirees, with Medicare Select rapidly becoming the most popular in the nation.

Medicare Select- Today as never before, it is increasingly difficult for health care consumers, particularly seniors, to be able to see a doctor of their own choosing.  This becomes even more challenging when your medical need requires a specialist.  This is due to new rules and regulations.  Yet survey after survey reveals that Americans care deeply about being able to choose their own doctor and maintaining that personal relationship.  The Medicare Select program protects this choice while at the same time offering its beneficiaries substantial savings.  Medicare Select also offers seniors important features which eliminate many of the hassles associated with health insurance reimbursement.  It offers Freedom of Choice by allowing you to choose your own doctor.  It eliminates the Part A deductible thereby saving you hundreds of dollars per year.  And, Medicare Select premiums are normally lower than traditional Medicare supplemental premiums.

Medicare Select is the same s standard Medigap insurance in nearly all respects.  The only difference between Medicare Select and standard Medigap insurance is that is that insurers have networks of hospitals for you to use in non-emergence situations in order to receive full benefits.  You may use any hospital in the case of an emergency.

When choosing a Medicare supplement, it is important to remember that you do not need more than one Medigap policy.  Choose the plan that offers the services you want at the price you can afford.

If having access to quality health care, the freedom to choose your own doctors, and saving money are concerns of yours, then Medicare Select may be your best choice.


Medicare Choices


Starting in 1999, Medicare offers more ways to receive your benefits through other health plan choices.  Medicare allows you to choose the way you receive your benefits.  You may choose the Original Medicare Plan,  which is the traditional payment-per-service arrangement.  In addition, there are now several other options from which you may choose.  Not all options may be available in your area.

* Medicare Managed Care Plans

A Managed Care Plan involves a group of doctors, hospitals, and other health care to Medicare beneficiaries in exchange for a fixed amount of money from Medicare every month.

This would include:

Health Maintenance Organizations (HMOs),

Preferred Provider Organizations (PPOs),

Provider Sponsored Organizations (PSOs),

* Private Fee-For Service Plans

You choose a private insurance plan that accepts Medicare beneficiaries.  The insurance plan, rather than the Medicare program, decides how much to reimburse for the services you receive.

* Medicare Medical Savings Account Plan

This is a test program for some Medicare beneficiaries.  It is a health insurance policy with a high deductible.

One of the new health plan choices may be right for you.  The choice is yours.  No matter what you decide, you are still in the Medicare program.


Medicare + Choice (M&C)


Your Medicare choices are explained in the new Medicare + Choice program which offers Medicare beneficiaries up to six different coverage options including traditional Medicare and Medicare HMOs (Health Maintenance Organizations).  Traditional Medicare (fee-for-service) is the only option that is available to everyone on Medicare.  This option couples Medicare with a Medigap policy or with the expanding Medicare Select program.  The other options may not be available in every area.

The new options are:  Medicare Provider-Sponsored Organizations (PSOs), which are very similar to HMOs except they are run by doctors and hospitals; Medicare Preferred Provider Organizations (PPOs), which are similar to HMOs but allow you to see providers outside the network.  They do not require that you choose a primary care physician - you can go directly to any doctor associated with the plan; Medicare Private Fee-For-Service (PFFS) plans, which are more like traditional Medicare except you may pay more out-of-pocket expenses; and Medicare Medical Savings Accounts (MSAs), which have two parts, an insurance policy and a savings account - Medicare will pay your insurance premium and deposit a specified amount in your MSA each year to pay for your health care.

Medicare beneficiaries do not have to change plans.  By doing nothing, they stay in traditional Medicare, and coverage continues.  They will be wise, however, to explore other plans and compare their costs and benefits.

Medicare beneficiaries have the right to switch to a new Medicare option (except an MSA plan) whenever they want until January 1, 2002.  After January 1, 2002, they will be able to choose only once a year (with certain exceptions), but they may not be able to get the same supplemental coverage.  All of these programs will be discussed in more detail later in this booklet. 

To help you understand your choices more fully, we have provided an overview of Medicare and your coverage options on the following page.


Other Medicare Health Plan Choices With M+C


Medicare + Choice (M+C)

In addition to Medigap policies, you may have other Medicare health plan choices available to you.  To be eligible for these other health plan choices, you must:

  • Have both Part A and Part B of Medicare.

  • Continue to pay the monthly Part B premium.

  • Live in the plan's service area (counties in which the plan is offered).

  • Not have permanent kidney failure.

Health Maintenance Organization (HMO)

An HMO is a group of healthcare providers and facilities that work together.  Medicare pays the HMO to provide your care.  You will be assigned to a primary care provider who will oversee all of your care in the HMO.  You will most likely need his or her approval to see a specialist and you will probably be limited to seeing only providers who belong to the HMO.

HMOs With Point of Service (POS) - Under the POS option, the plan allows you to receive certain services outside of the plan's established provider network.  In return you will be responsible for a portion of the costs.

Provider-Sponsored Organizations (PSOs) - PSOs are just like HMOs except they are actually run by the doctors and hospital who provide the care.

Preferred Provider Organizations (PPOs) - PPOs allow you to visit any provider in the plan at any time.  Additionally it could pay the costs of providers who are not part of the network.

Private Fee-For-Service Plans - These are private insurance plans that accept Medicare beneficiaries.  You pay extra if the costs for medical services are higher than the Medicare rates.

Medical Savings Accounts (MSAs) - MSAs combine a high deductible insurance policy with a savings account to pay for Medicare approved expenses.  MSAs are not widely available.

You should look very closely at the pros and cons of M + C and Original Medicare before you make a decision.  You may have more services available under M + C but you may have to use their providers.  Your care may not be covered outside of the plan's service area unless it is an emergency.  If you want to go back to original Medicare, you may not be able to purchase the Medigap policy of your choice because of health conditions.


This booklet provides general information about Medicare.  It is not intended to replace information from the Federal or State governments or private insurance companies.

To receive a hard copy of this booklet please call The Association of Retired Americans at 1-800-806-6160 or e-mail us at ara@indy.net.


 

 


 

 

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