Module 11
SMI trust fund financing
Both Part B and Part D accounts are primarily financed by contributions from the general fund of the US Treasury and to a lesser degree by beneficiary premiums Part B: beneficiary premiums are generally set at a level that covers 25% of the average expenditures for aged beneficiaries Part D: beneficiary premiums are to represent on average 25.5% of the cost of standard coverage; beneficiaries with income above certain thresholds are required to pay an income-related monthly adjustment amount Part D receives payments from the states Income from interest earnings on its invested assets and miscellaneous income
Additional financing for Part A
1) A portion of the income taxes levied on Social Security benefits paid to high-income beneficiaries 2) Premiums from certain persons who are not otherwise eligible and choose to enroll voluntarily 3) Reimbursements from the general fund of the US Treasury 4) Interest earnings on its invested assets 5) Other small miscellaneous income sources
3 benefits to making a one-time estimate of health care costs during retirement
1) Clients will be aware of the potential costs and may be motivated to manage them 2) By seeing several estimates, clients will understand that costs may vary widely 3) In discussions with their financial planners, clients may come to realize that the bulk of their health care spending will probably occur in later retirement
Health care services covered by Part A of Medicare insurance (Hospital Insurance/HI)
1) Inpatient hospital care 2) Skilled nursing facility (SNF) 3) Home health agency (HHA) care 4) Hospice care
Primary types of Medicare Advantage plans
1) Local coordinated care plans (LCCPs), including health maintenance organizations (HMOs), provider-sponsored organizations, local preferred provider organizations (PPOs), other certified coordinated care plans and entities that meet the standards set forth in the law 2) Regional PPO plans, which offer coverage to one of 26 defined regions; required to provide beneficiary financial protection in the form of limits on out-of-pocket cost sharing 3) Private fee-for-service (PFFS) plans, which were not required to have networks of participating providers through 2010; after, still the case in areas with fewer than 2 networks based LCCPs and/or regional PPOs 4) Special needs plans, restricted to beneficiaries who are dually eligible for Medicare and Medicaid, live in long-term care institutions, or have certain severe and disabling conditions
3 steps financial planners suggest to help manage health care costs during retirement
1) Make a one-time estimate of how much clients might pay for their retirement health care 2) Encourage retired clients to reevaluate their plans each year during Medicare's annual enrollment period 3) Encourage retired clients to track their health care expenses
Reasons why people are more concerned about their medical expenses during retirement when other expenses are greater
1) Medical expenses are unpredictable 2) Health care spending increases at faster rates than other types of spending
Payment for fee-for-service beneficiaries are responsible for charges not covered by the Medicare program and for cost-sharing aspects of Parts A and B
1) Paid by the Medicare beneficiary 2) Paid by a third party, such as an employer-sponsored retiree health plan or private Medigap insurance 3) Paid by Medicaid, if the person is eligible
Major groups other than persons 65+ who are Medicare eligible
1) Persons entitled to Social Security or Railroad Retirement disability cash benefits for at least 24 months 2) Most persons with end-stage renal disease (ESRD) 3) Certain otherwise noncovered aged persons who elect to pay a premium for Medicare coverage 4) Persons with Lou Gehrig's disease who are allowed to waive the 24-month waiting period
Medicare Part B benefits (Supplementary Medical Insurance/SMI)
1) Physicians' and surgeons' services, including some covered services furnished by chiropractors, podiatrists, dentists, and optometrists 2) Services provided by Medicare-approved practitioners who are not physicians, including certified registered nurse anesthetists, clinical psychologists, clinical social workers (other than in a hospital or SNF), physician assistants, nurse practitioners, and clinical nurse specialists in collaboration with a physician 3) Services in an emergency room, outpatient clinic or ambulatory surgical center, including same-day surgery 4) Home health care not covered under Part A 5) Laboratory tests, X-rays, other diagnostic radiology services 6) Certain preventive care services and screening tests 7) Most physical and occupational therapy and speech pathology services 8) Comprehensive outpatient rehabilitation facility services 9) Radiation therapy and renal dialysis and transplants 10) Approved durable medical equipment for home use 11) Drugs and biologicals that are not usually self-administered 12) Certain services specific to people with diabetes 13) Amulance services when other methods of transportation are contraindicated Must be medically necessary/a prescribed preventive benefit Subject to a deductible and coinsurance
Major challenges facing the Medicare system
1) The solvency of the HI trust fund (fails the test of short-range financial adequacy): annual expenditures are projected to exceed annual assets in the near future 2) The long-range health of the HI trust fund (fails the long-range test of close actuarial balance) 3) The rapid growth projected for SMI costs as a percent of GDP 4) The substantial reductions in Part B physician payment rates required under the SGR system in current law 5) The likelihood that the lower payment rate updates to most categories of Medicare providers, as mandated by the ACA, will not be viable in the long range
Fee schedule
A comprehensive listing of maximum fees used to pay providers
Persons eligible for Medicare Part B
All citizens 65+ and all disabled persons entitled to coverage under Part A are eligible to enroll in Part B on a voluntary basis by payment of a monthly premium
Beneficiary's fee-for-service payment share for Part B services
Annual deductible Monthly premiums Coinsurance payments for Part B services Deductible for blood Certain charges above the Medicare-allowed charge Payment for any services not covered by Medicare Coinsurance usually falls between 20-50% No deductibles or coinsurance for certain services, such as clinical lab tests, HHA services, and some preventive care services
Specific steps a retiree can take to estimate his/her medical expenses
Call their insurance companies to find out how much they have paid in cost sharing (deductibles, copayments, and coinsurance) Add the premiums they have paid, including Part B premiums Add estimates of how much they have paid for services that Medicare does not cover (routine dental/vision care, hearing aids, over the counter drugs)
Home health agency (HHA) care benefit in Medicare Part A
Covered by Parts A and B Part A covers the first 100 visits following a 3 day hospital stay or a SNF stay Part B covers any visits thereafter Must be a plan of treatment and periodic review by a physician Full-time nursing care, food, blood, and drugs are not provided
Late spending pattern of health care costs
Combination of health care inflation and greater use of medical services
Inpatient hospital care benefit in Medicare Part A
Costs of a semiprivate room Meals Regular nursing services Operating and recovery rooms Intensive care Inpatient prescription drugs Laboratory tests X-rays Psychiatric hospitals Inpatient rehabilitation and long-term hospitalization when medically necessary All other medically necessary services and supplies provided by the hospital Initial deductible payment is required of beneficiaries who are admitted to a hospital, plus copayments for all hospital days following day 60 within a benefit period
Hospice care benefits provided by Medicare Part A
Coverage for services to terminally ill persons with life expectancies of 6 months or less who elect to forgo their standard Medicare benefits for treatment and to receive only hospice care Pain relief Supportive medical and social services Physical therapy Nursing services Symptom management If a patient requires treatment for a condition that is not related to the terminal illness, Medicare will pay for all covered services necessary for that condition No deductible, small coinsurance
Skilled Nursing Facility (SNF) benefit in Medicare Part A
Coverage only provided if the care follows within 30 days of a hospitalization of three days or more and is certified as medically necessary Coverage is similar to those for inpatient hospital care Include rehabilitation services and appliances Limited to 100 days per benefit period Copayment required for days 21-100 Does not cover nursing facility care if the patient does not required skilled nursing or skilled rehabilitation services
Agencies and entities at the federal and state levels that have administrative responsibilities for the Medicare program
Department of Health and Human Services (HHS): overall responsibility for administration of the program Within HHS: Centers for Medicare and Medicaid Services (CMS) Social Security Administration (SSA): initially determines an individual's Medicare entitlement, withholds Part B premiums from the Social Security benefit checks of most beneficiaries, maintains Medicare data, other responsibilities Medicare Board of Trustees: 2 appointed members of the public and 4 members who serve b/c of their positions in the federal gov't; oversees the financial opersations of the HI and SMI trust funds State agencies: identify, survey, and inspect provider and supplier facilities and institutions wishing to participate in the Medicare program
Purpose of Medicare Part C/Medicare Advantage
Expands beneficiaries' options for participation in private-sector health care plans Offered by private companies and organizations and are required to provide at least those services covered by Parts A and B, except hospice services May provide extra benefits, such as vision or hearing May reduce cost sharing or premiums
Quality Improvement Organizations (QIOs)
Groups of practicing health care professionals who are paid by the federal gov't to improve the effectiveness, efficiency, economy, and quality of services delivered to Medicare beneficiaries Ensure that Medicare pays only for services and goods that are reasonable and necessary, and that are provided in the most appropriate setting
Determination of a beneficiary's fee-for-service payment share for skilled nursing care under Part A
Medicare fully covers the first 20 days of SNF in a benefit period Copayment required days 21-100 After 100 days, Medicare pays nothing
Financing of Medicare Part A
Handled through the HI trust fund Fund financed primarily through a mandatory payroll tax 1.45% of earnings + match by employer, or 2.9% for self-employed Paid on all covered wages and self-employment income without limit Additional Part A payroll tax of 0.9% will be collected on earned income in excess of $200k for those filing singly and $250k+ for those filing jointly Cannot be changed without legislation
Payments made to providers of nonphysician Part B services
Home health care is reimbursed under the same prospective payment system as Part A Most hospital outpatient services are reimbursed on a separate prospective payment system Most payments for clinical laboratory and ambulance services are based on fee schedules Most durable medical equipment paid on a fee schedule but in some areas is paid on a competitive bidding process (to be expanded everywhere)
Payments made to providers of physician services
If a doctor/supplier agrees to accept the Medicare-approved rate as payment in full (takes assignment), then payments provided must be considered as payments in full Provider may not request any added payments beyond the initial annual deductible and coinsurance If the provider does not take assignment, the beneficiary will be charged for the excess (which may be paid by Medigap insurance) Participating physicians agree before the beginning of the year to accept assignment for all Medicare services they furnish during the year
Beneficiary's fee-for-service payment share for Part D benefits
Initial deductible After meeting the deductible, beneficiary pays 25% of the remaining cost up to an initial coverage limit Coverage gap between the initial coverage limit and a threshold of OOP costs Catastrophic coverage provided after the OOP threshold, requiring the enrollee to pay the greater of 5% coinsurance or a small defined copayment amount Most beneficiaries are enrolled in plans with low or no deductibles, flat payments for covered drugs, and additional partial coverage in the coverage gap
Health care services not covered by Medicare
Long-term nursing care Custodial care Certain other health care needs, such as dentures and dental care, eyeglasses, and hearing aids Could be included under the Medicare Advantage program
Additional responsibilities of pre-MAC fiscal intermediaries
Maintaining records Establishing controls Safeguarding against fraud and abuse Assisting both providers and beneficiaries
Rate of inflation that should be used for retiree medical care costs
No consensus for the rate of inflation Medicare trustees project that per person costs will increase at a 4.3% average annual rate Other organizations use different rates Planners should choose 2-3 rates to project different scenarios
Premiums for Part A
No premiums for most covered people Most aged people who are otherwise ineligible for premium-free Part A coverage can enroll voluntarily by paying a monthly premium, if also enrolled in Part B
Development of Medicare administrative contractors (MACs)
Nongovernment organizations or agencies under contract to serve as the fiscal agent between providers and the federal gov't who process fee-for-service claims Apply the Medicare coverage rules to determine appropriate reimbursement amounts and make payments to the providers and suppliers This original system replaced by MACs
Determination of a beneficiary's fee-for-service payment share for hospital care under Part A
One-time deductible amount at the beginning of each benefit period Additional coinsurance payments required on days 61-90 Another coinsurance payment required for the "lifetime reserve" of 60 additional hospital days
Part of Medicare has the greatest cost variation from year to year
Part D
Are Part B and SMI synonymous?
Part D activities are handled within the SMI trust fund but in a separate account fund so no SMI = Part B and Part D Separate accounts to ensure that funds from one part are not used to finance the other
Medigap policies
Private health insurance that pays, within limits, most of the health care service charges not covered by Parts A/B Offered by BCBS and various commercial health insurance companies
Functions of a MAC
Processes and pays fee-for-service claims for both Part A and Part B services to all providers and suppliers within its geographic jurisdiction Selected through a competitive procedure Single point of contact for beneficiaries, providers, and suppliers for all claims-related business
Payments made to providers of Part A inpatient hospital services
Reimbursement mechanism known as the prospective payment system (PPS) Each stay is categorized into a diagnosis-related group (DRG) Each DRG has a predetermined amount associated with it that serves as the basis for payment Adjustments are applied to the DRG amount to calculate payment Payments for skilled nursing care, home health care, inpatient psychiatric hospitals, and hospice are made under separate prospective payment systems
Benefit period concept in Medicare Part A
Starts when the beneficiary first enters a hospital and ends when there has been a break of at least 60 consecutive days since inpatient hospital or skilled nursing care was provided No lifetime limit on the number of benefit periods covered Inpatient hospital care is limited to 90 days of inpatient hospital care available in a benefit period Copayment requirements for days 61-90 If a beneficiary exhausts the 90 days, they can elect to use days of Medicare coverage from a nonrenewable "lifetime reserve" of up to 60 total additional days of inpatient hospital care
Medicare Part D
Subsidized access to prescription drug insurance coverage on a voluntary basis, upon payment of a premium, to individuals entitled to Part A or enrolled in Part B, with premium and cost-sharing subsidies for low-income enrollees Can enroll in either a standalone plan or an integrated Medicare Advantage plan that offers Part D coverage Coverage can consist of either standard coverage or an alternative design that provides the same actuarial value May also offer supplemental coverage exceeding the value of basic coverage for an additional premium
Physician charges
The less of the submitted charges or the amount determined by a fee schedule based on a relative value scale
Vulnerabilities and actions taken in managing and adjudicating Medicare claims
Vulnerable to improper payments, from inadvertent errors to fraud and abuse Additional groups whose duties include the prevention, reduction, and recovery of improper payments