Medicare

Medicare Savings Program

A Medicare Savings Program (MSP) is a state-run program offered in each state that reduces Medicare costs for eligible persons. The program helps persons with limited income and financial resources pay for Medicare Part B premiums. It may also help pay for Medicare deductibles and coinsurance. Eligible persons apply to their appropriate state agency for assistance. Four Medicare Savings Programs are available: Qualified Medicare Beneficiary (QMB) Specified Low-Income Medicare Beneficiary (SLMB) Qualifying Individual (QI) Qualified Disabled & Working Individual (QDWI) Persons who qualify for QMB, SLMB, or QI also qualify for assistance in paying for Medicare prescription drug coverage (Part D).

Initial Enrollment Period

A person can enroll in Medicare up to three months before or up to three months after the month the person first becomes eligible for Medicare. For those who are not disabled this is at age 65. The initial enrollment period (IEP) is a seven-month period that includes the month in which the recipient turns 65. Those who enroll in the last four months of their IEP will not have coverage for up to three months after their eligibility date. Those who delay enrollment in Medicare Part A may also pay a penalty of 10 percent of the applicable premium for twice the length of time enrollment was delayed, unless they qualify for enrollment during a special enrollment period. Failure to enroll in Medicare B when a person is first eligible for it, or dropping Medicare Part B and then re-enrolling later, can also incur a late enrollment penalty that is imposed for as long as the person has Medicare. The monthly premium may be increased 10 percent for each 12-month period that the person was eligible for Part B but delayed enrollment. Enrollment may be deferred while a person has primary coverage under an employer's health plan, due to the person remaining employed at age 65. A person can also defer enrollment without a penalty while covered by an employer-sponsored health plan.

Paying for Medicare

Although Medicare eligibility begins at age 65, Medicare Part A coverage is available without a premium only for those who have reached their Social Security full retirement age (66 and eventually rising to 67). Those who defer Social Security retirement are eligible for free Part A coverage at age 65, even if they have not reached their full retirement age. Enrollment is not automatic, however, so they must act to enroll. Part A coverage is also free to those under age 65 who have qualified for Social Security disability benefits for at least two years, have been diagnosed with permanent kidney failure (end-stage renal disease, or ESRD), or have been diagnosed with ALS. Parts B, C, and D have monthly premiums that may be deducted automatically from one's Social Security retirement benefits.

Covered Drugs

Although Medicare has guidelines as to what types of conditions must be treated by a prescription drug plan, it does not specify the brands of drugs a plan must cover. The list of drugs covered by a plan is called the plan's "formulary." Formulary tiers tell Medicare beneficiaries how much, if anything, they must pay for certain drugs provided by their plan. Most plans have three tiers, though some have four: Tier 1: Generic drugs, which are usually the least inexpensive to the consumer Tier 2: Preferred brand name drugs Tier 3: Non-preferred brand name drugs Tier 4: Specialty drugs, which are usually the most expensive brand name drugs A formulary must include at least two drugs in each category, though they are not required to include all drugs.

Special Needs Plan

Another type of Medicare Advantage plan is the Special Needs Plan (SNP). SNPs are available only to individuals who: are institutionalized are dually eligible for both Medicare and Medicaid have severe or disabling chronic medical conditions

Part A Deductibles and Coinsurance

Before Medicare Part A pays benefits, the Medicare beneficiary must pay a deductible at the beginning of each benefit period. That deductible increases each year. After the deductible is paid, Medicare pays full benefits for the first 60 days of hospitalization. Medicare pays partial benefits for the remaining benefit period, from the 61st day to the 90th day, and the beneficiary pays a daily coinsurance amount. The Part A hospitalization benefit period, deductible, and coinsurance look like this: Days 1-60: All eligible hospital costs are covered after the beneficiary pays a deductible ($1,600 in 2023). Days 61-90: Beneficiary pays a daily coinsurance ($400 in 2023); Medicare pays the daily balance. 60-day lifetime reserve: Beneficiary pays a daily coinsurance ($800 in 2023); Medicare pays the daily balance. In summary, a beneficiary can receive up to 150 continuous days of hospital coverage in a single benefit period, if necessary (90 days of the benefit period plus the one-time 60-day reserve). However, a coinsurance payment requirement begins at day 61 and increases with reserve days.

Medicare Eligibility

Coverage under Parts A, B, C, and D is available to U.S. citizens and certain permanent residents who meet at least one of the following: are at least 65 years old have received Social Security disability checks for at least two years have end-stage renal disease (ESRD, a kidney disease requiring a transplant or dialysis) have amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease) Permanent legal residents must live in the United States for at least five years to qualify for Medicare. Key Point The age for Medicare eligibility remains 65 even though Social Security full retirement age (the age at which a person is eligible for full Social Security retirement benefits) is now 66 and is gradually increasing to age 67. Most people who are fully insured (with at least 40 quarters of coverage, or work credits) under Social Security are automatically enrolled in Part A. They pay no premium for Part A coverage. Coverage begins the first day of the month in which they turn 65 years old. If their birthday is on the first day of the month, coverage begins on the first day of the prior month. Those who are not automatically enrolled can enroll during the seven-month period that begins three months before they turn age 65, includes the month of their birthday, and ends three months after their birthday. Persons who are not fully insured (with at least 40 quarters of coverage, or work credits) under Social Security pay a premium for Medicare Part A coverage: Those with 30-39 quarters of coverage pay $278 every month (in 2023). Those with 0-29 quarters of coverage pay $506 every month (in 2023)

Part C: Medicare Advantage

For many years, Medicare Parts A and B made up the entire Medicare program. They are called Original Medicare. In 1997, Medicare was expanded to include Part C, which offers Medicare Parts A and B services through managed care plans, such as HMOs, PPOs, and private fee-for-service plans. Originally called Medicare+Choice, Part C is now called Medicare Advantage. Under Medicare Parts A and B, a person chooses a health care provider. The provider must be approved by Medicare and agree to accept Medicare's lower reimbursement amounts. Medicare Part C introduced managed care providers, such as HMOs and PPOs, into Medicare. By enrolling in Part C, a person chooses to receive health care from a Medicare-sanctioned HMO or PPO. These managed care providers contract with Medicare to provide services to Medicare beneficiaries for a fixed monthly payment from Medicare. Part C includes the benefits of Parts A and B (Original Medicare), may reduce out-of-pocket costs for senior health care, and may offer additional services if needed. These can include optional services and benefits. People who are currently enrolled in Parts A and B can switch to Part C.

Limiting Charges and Balance Billing

Health care providers who accept Medicare assignments adhere to Medicare's billing limits and bill the patient up to the amount that Medicare will pay. Health care providers who do not accept Medicare assignments may still treat Medicare patients, but they can charge more than Medicare's billing limits. Medicare limits this to 15 percent (the "limiting charge") over what Medicare typically pays for a service or procedure. Medicare then pays up to the typical limit, and the provider will bill the patient for the balance. This is in addition to any coinsurance payment. Example If Medicare's fee schedule lists a procedure at $1,000, the health care provider could bill the patient for up to $1,150. Medicare will pay $1,000 according to its fee schedule. The patient will be billed for $150 in addition to any coinsurance payment.

Part D: Prescription Drug Insurance

In 2006, Medicare was expanded to include prescription drug coverage (Plan D). Part D is optional and available to anyone covered under Part A or B. Those who want to receive their medical and drug benefits from a single source can buy a Medicare Advantage (Part C) plan that includes prescription drug coverage (Part D). Most Medicare Advantage plans include this coverage. This integrates all hospital, doctor, and prescription drug costs and benefits. Persons enrolled in Medicare Advantage plans without prescription drug coverage can enroll in a stand-alone Part D plan. Part D requires a monthly premium that varies from plan to plan. These plans may involve an annual deductible and usually require a coinsurance payment. Most Medicare drug plans have a coverage gap (the Medicare "donut hole") that requires the beneficiary to pay all drug costs after the beneficiary and the plan have spent a certain amount for covered drugs during the year. Once the beneficiary reaches the plan's out-of-pocket limit during the coverage gap, coverage resumes. For the rest of the calendar year, the beneficiary pays a small coinsurance amount for prescription drugs. Most Medicare drug plans have a coverage gap (the Medicare "donut hole") that requires the beneficiary to pay all drug costs after the beneficiary and the plan have spent a certain amount for covered drugs during the year. Once the beneficiary reaches the plan's out-of-pocket limit during the coverage gap, coverage resumes. For the rest of the calendar year, the beneficiary pays a small coinsurance amount for prescription drugs.

Part A Skilled Nursing Facility Coverage

In addition to covering hospital services, Medicare Part A covers medically necessary skilled nursing care. It pays the full cost for care in a skilled nursing facility for the first 20 days. Coverage continues beyond the first 20 days, but the patient then pays a coinsurance amount ($200 per day in 2023). Medicare benefits are not available for skilled nursing facility care that extends beyond 100 days. For care in a skilled nursing facility to be considered "necessary" and thereby covered by Medicare, it must meet certain criteria. The care must follow a hospital stay for the same or related condition. Admission to the facility must be within 30 days of the patient's discharge from the hospital. The patient must have been hospitalized for at least three days. Benefits First 60 days of hospitalization each benefit period 61st through 90th day of hospitalization each benefit period 91st through 150th day of hospitalization (lifetime reserve) First 20 days of skilled nursing facility care 21st through 100th day of skilled nursing facility care 101st day and after of skilled nursing facility care 2023 Copayment Participant pays the first $1,600 of the hospital bill Participant pays $400 per day Participant pays $800 per day Participant pays $0 Participant pays $200 per day Participant pays 100% of costs

Special Enrollment Period

Individuals who are covered under their employer's medical plan may defer coverage of Medicare Part B until they retire. A special enrollment period (SEP) allows them to sign up for Part B after their IEP without penalty. The SEP is available during the eight-month period that begins the month after employment or group coverage ends, whichever happens first. Those who enroll during an SEP do not pay a late enrollment penalty.

4 Medicare enrollment periods:

Initial enrollment period (IEP): up to three months before or after a person becomes eligible for Medicare. General enrollment period (GEP): January 1 to March 31 each year for those who did not enroll in Part B without reason during the IEP. Special enrollment period (SEP): eight-month period that begins the month after group coverage terminates during which individuals who delayed enrolling in Part B may enroll without penalty. Annual election period (AEP): October 15 through December 7 each year for individuals who want to change Medicare Advantage plans, switch from a traditional Medicare plan to a Medicare Advantage plan, or change Part D prescription drug plans.

Part A Home Health Care Coverage

Medicare Part A also covers home health care services, including: part-time or intermittent skilled care home health aide services durable medical equipment and supplies certain other services No prior hospitalization is required for this coverage. There is no limit on the number of home health care visits. Medicare Part A pays for all approved services. It also pays 80 percent of the approved amount for durable medical equipment, such as wheelchairs

Part A Benefit Period

Medicare Part A covers eligible hospital costs for up to 90 days in any single benefit period. A benefit period ends 60 days after release from the hospital. If a subsequent hospitalization benefit period is separated by at least 60 days from the previous period, a new 90-day benefit period will apply for the subsequent hospitalization. There is no limit to the number of 90-day benefit periods available to Medicare beneficiaries. Medicare beneficiaries have an additional reserve of 60 days. If any single hospitalization benefit period exceeds 90 days, the patient may tap into this reserve. A person only gets one 60-day reserve. A person can draw upon the reserve one day at a time until the 60 days are depleted. Once the reserve is used up, the person must pay for all hospital costs incurred beyond any subsequent 90-day benefit periods. Example Gwyneth is hospitalized for 90 days. Four weeks after being discharged, she is hospitalized again, this time for ten days. Because fewer than 60 days passed between the first hospitalization and the second, both hospitalizations will be treated as occurring within the same benefit period. Medicare Part A will pay for the first 90 days of hospitalization after Gwyneth pays her deductible and coinsurance amounts. She can pay the entire expense of the additional 10 days, or she can draw 10 days from her 60-day lifetime reserve and have Medicare pay some of the expenses after she pays the coinsurance amount. Fifty days will remain in her lifetime reserve.

Part A: Hospital Insurance

Medicare Part A is hospital coverage that covers: inpatient hospital costs skilled nursing facility costs home health care costs hospice costs Medicare covers these costs if they are reasonable and medically necessary. Medicare defines "medically necessary" treatment as that which is needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and meets accepted medical standards.

Part B Eligibility

Medicare Part B is voluntary and available to anyone who qualifies for Part A. No one may enroll in Medicare Part B if not enrolled in Part A. Unlike Part A, Part B requires a monthly premium.

Part D Eligibility

Medicare Part D (prescription drug plan) is available to those covered by Medicare Parts A, B, and C. It is available as a stand-alone plan. It can also be added to Original Medicare (Parts A and B) or included with Medicare Advantage (Part C).

Medicare Assignment and Participating Providers

Medicare assignment is the agreement between a health care provider and Medicare. Participating Medicare providers agree to charge no more than Medicare-approved amounts for specific treatments and services. Nonparticipating providers can also accept assignment on a case-by-case basis. Medicare-eligible individuals who are treated by participating providers pay less for covered services and treatment.

Medicare Coverage Overview

Medicare coverage is divided into four parts: A, B, C, and D. Parts A and B, called "Original Medicare," together provide complete medical coverage. They require deductibles and coinsurance, just like a reimbursement insurance policy. Parts C and D are recent additions to Medicare. They offer a managed care plan option (Part C) and a prescription drug program (Part D). Key Point Part A (hospital insurance) covers inpatient hospital care, skilled nursing home care, post-hospital home health care, and hospice care. Part B (medical insurance) covers physicians' services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, and some preventive services. Part B supplements Part A coverage. Part C (Medicare Advantage) is a managed care plan alternative to Original Medicare. Provided through commercial insurance companies, this comprehensive plan combines the coverage of Parts A and B and delivers it like a PPO. Part D adds prescription drug coverage to Medicare Parts A and B. It is provided through Medicare-approved commercial insurers.

Medicare

Medicare is a federal health insurance program, administered by the Centers for Medicare & Medicaid Services (CMS), for people age 65 and older and for certain disabled individuals. Medicare is a Social Security program that covers medical expenses for qualified individuals. Like Social Security, Medicare is funded primarily by payroll taxes. The CMS sets prices for most Medicare-approved medical services. Health care providers bill Medicare directly for services rendered to Medicare patients, so patients do not submit claim forms. Medicare benefits are paid directly to the health care provider. In this way Medicare functions like a preferred provider organization (PPO).

Private Fee-for-Service Plan

One type of Medicare Advantage plan is the Private Fee-for-Service (PFFS) plan, which is a Medicare-approved private insurance plan. Medicare pays the private plan for traditional Medicare-covered services, and the plan determines which additional services it will cover and what share of expenses the Medicare beneficiary will pay.

4 parts of Medicare

Part A (hospital insurance) covers inpatient hospital care, nursing home care, post-hospital home health care, hospice care. Automatically granted without premium at age 65. Part B (medical insurance) covers physicians' services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, some preventive services. Parts A and B together are Original Medicare. Part B is available to those eligible for Part A, but can be delayed if insured is covered under an employer plan. Part B incurs an income-based premium. Part C (Medicare Advantage) is a managed care plan alternative to Original Medicare. Part D adds prescription drug coverage to Original Medicare.

Part A Benefits for Hospice Care

Part A covers hospice care for terminally ill Medicare beneficiaries who: are eligible for benefits under Part A have been certified by a doctor as terminally ill (with a life expectancy of six months or less) waive other Medicare-covered treatment for terminal illness decline other treatment for terminal illness Covered hospice services include: nursing care medical social services counseling short-term inpatient care and respite care (temporary relief for those caring for family members at home) medical appliances and supplies services of a home health aide homemaker services drugs physical and occupational therapy The benefit period for hospice care begins with two consecutive 90-day periods and may continue with an unlimited number of 60-day extensions. Each benefit period can be extended if the beneficiary is recertified as terminally ill. The hospice benefit has no deductibles. Medicare pays reasonable costs of hospice care. Respite care allows the usual caregiver to rest in a Medicare-approved facility for up to five consecutive days at a time.

Part B: Medical Insurance

Part B of the Medicare program, available to those with Part A, covers medical care beyond hospitalization. There is no annual out-of-pocket maximum for Part B claims. However, benefit payments can differ when a person receives care from a non-Medicare-approved physician. Part B covers: doctors' services inpatient and outpatient medical and surgical services and supplies physical and speech therapy occupational therapy outpatient diagnostic tests and X-rays medical supplies home health care and hospice care not covered under Part A Part B excludes coverage for: prescription drugs vaccinations routine eye care and eyeglasses hearing aids and hearing exams dental care health care received outside the United States skilled nursing facility care cosmetic surgery personal comfort items

Coverage for Active Workers

Persons over age 65 who continue working and are covered under an employer's medical plan can also be covered under Medicare. Medicare coverage does not affect the amount of their future Social Security benefits. If they file a claim, the employer's plan is usually the primary payor and Medicare is the secondary payor. (If the employer has fewer than 20 employees, Medicare usually pays first.) Medicare only covers eligible expenses that the group medical plan does not cover.

General Enrollment Period

Qualified individuals who did not enroll in Part A or Part B during the IEP when they were first eligible can enroll during a general enrollment period (GEP) between January 1 and March 31 each year. Coverage will begin July 1. It may be necessary to pay a higher premium for late enrollment.

Annual Election Period

Qualified individuals who want to change Medicare Advantage plans, switch from a traditional Medicare plan to a Medicare Advantage plan, or change Part D prescription drug plans may do so during an annual election period (AEP). The AEP runs from October 15 through December 7; new coverage becomes effective the following January 1.

Creditable Coverage

Those eligible for Medicare Part D but covered by their employer's group health plans may decline Medicare Part D. To later add Part D coverage, they may have to pay a late enrollment penalty. No penalties are assessed if the group plan provides creditable coverage (the employer's drug coverage is at least comparable to Medicare Part D coverage). If the employer's health plan does not provide creditable coverage, individuals must enroll in Part D when they become eligible to avoid the late enrollment penalties. Key Point Failure to maintain creditable coverage for prescription drugs after age 65 may result in a lifetime penalty of 1 percent per month on the premium for each month that such coverage was delayed.

Part C Eligibility

Those eligible for Medicare Parts A and B qualify for Part C, Medicare Advantage plan. They must live in the service area of the managed care plan they select when enrolling in Part C. To enroll in Medicare Part C, a person must first have enrolled in both Parts A and B. That is because Part C is not financed separately. Medicare Advantage enrollees are still responsible for paying their Part B premium to Medicare, and Medicare pays the Medicare Advantage insurer to provide the Part C benefits. Depending on the benefits provided and the insurer providing them, it is possible that the Medicare Advantage enrollee will also have to pay an additional premium to the Medicare Advantage insurer.

Medicare Enrollment

Those who apply for Social Security retirement benefits at age 65 are automatically enrolled in Medicare Parts A and B. Part B requires a monthly premium. Those who do not want Part B coverage must contact the Social Security Administration to opt out. When they become eligible for Original Medicare (Parts A and B), enrollees may instead choose Part C (Medicare Advantage) coverage. A person who wants to enroll in Medicare at age 65 but defers Social Security retirement benefits must take steps to enroll in Medicare. This is because Medicare enrollment is not automatic if done before a person applies for Social Security retirement benefits.

Medicare Advantage Open Enrollment Period

Those who want to switch from a Medicare Advantage plan to another Medicare Advantage plan or to Original Medicare and Part D may do so during a Medicare Advantage Open Enrollment period that runs from January 1 through March 31 each year.

Part B Premiums and Deductibles

Unlike Part A, which is available without a premium to workers who have reached full retirement age, Part B requires a monthly premium based on the insured's annual income. The insured must also pay an annual deductible ($226 in 2023). Then Part B pays 80 percent of Medicare-approved health care charges. These charges are based on usual and customary charges in the community where the care is delivered. Medicare beneficiaries submit deductible and coinsurance payments directly to the provider. The provider bills Medicare for its portion of the charges, and Medicare reimburses the provider. If Medicare refuses payment, the beneficiary can appeal the decision to Medicare.