This is an overview of a complex program. Readers will need to
refer to other resources for detailed information about Medicare.
Seniors and caregivers are urged to take advantage of the State
Health Insurance Program (SHIP) by calling the local Area Agency
on Aging or the state SHIP counselor. This service is available
to all Medicare-eligible seniors, regardless of income. (See LINKS
on this web site.)
Medicare was added to the Social Security program in 1965 to provide
a safety net of medical care for retirees. Benefits for disabled
workers were added later.
- Medicare: Generally
- What is it?
- Who pays for it and who runs it?
- Who is eligible?
- How does an individual enroll?
- Are there income or medical requirements for receiving services?
- How does it work?
- Part A: Hospital Insurance
- Part B: Medical Insurance, Supplemental policies
- Part C: Medicare + Choice (HMOs, PPOs, etc.)
- Part D: New prescription drug program (For more details,
see B, below)
- What if I can't afford the Part B premium?
- What if I disagree with a decision made by Medicare about
paying for care?
- Does Medicare cover long term care?
- Other health insurance for seniors
- Medicare: Drug coverage
- Discount cards available June 2004
- Coverage beginning in 2006
A. Medicare: Generally
1. What is it? Medicare is a national
health insurance program for retired workers 65 and over and many
of their dependents and survivors, some younger disabled workers,
and those with end-stage renal disease (ESRD). It was added to the
Social Security program in 1965 to provide a safety net of medical
care to retirees. Benefits for disabled workers were added later.
2. Who pays for it and who runs it? Traditional
Medicare was composed of two programs: Part A (hospital insurance)
is paid for by payroll tax contributions from workers and employers.
Part B is paid for partly by taxes, partly by monthly premiums
and partly from general revenue. The program is administered by
the federal Center for Medicare and Medicaid Services (CMS), formerly
the Health Care Finance Administration (HCFA). Costs have escalated
in recent years and much attention is being given to possible solutions
that will also be politically attractive. Thus far a lot of energy
has been spent in arguing from extreme viewpoints; we can all hope
legislators will seek a realistic middle ground soon.
3. Who is eligible? To be eligible retirees
must have worked at least ten years in Medicare-covered employment
(most employment is covered), have reached Full Retirement Age (formerly
65) and a citizen or permanent resident of the U.S. Younger people
who receive Social Security disability qualify for Medicare in the
25th month after the date of disability. Those with ESRD or ALS
qualify with no waiting period. Note that even if you elect to receive
Social Security Retirement Benefits at 62, you are still not eligible
for Medicare until age 65 (or the Full Retirement Age for someone
of your birth year).
4. How does an individual enroll? If
you are eligible for Social Security retirement benefits, three
months before reaching your full retirement age (65 years and 4
months for those retiring in 2004) you should call Social Security
(1-800-772-1213) and apply for Part A (hospital insurance) even
if you do not apply for retirement benefits then. Beneficiaries
who begin receiving benefits at 62 will automatically be enrolled
in Part A at age 65. If you intend to retire, or will keep working
but not be covered under a qualified employer health insurance plan,
you should also apply for Part B.
If you do not apply for Part B within seven months of reaching
full retirement age and your situation does not fit within an exemption,
your Part B premium will be increased slightly for each month of
delay when you do apply. Also, if you miss that first eligibility
period you can only apply between January 1 and March 31 of each
year, and there will be a waiting period for coverage to begin.
If you keep working and are covered under a qualifying employer
plan, you may wait until seven months after you retire to elect
Part B. Check with Social Security and your employer to be sure
the plan qualifies.
5. Are there income or medical requirements
for receiving services? Since Medicare is earned through
worker contributions there is no income limit for services. But
services must be medically necessary.
6. How does it work? The reimbursement
process, rules for coverage and internal workings have become enormously
complicated. The basic structure, though, is fairly simple: The
original program consisted of Part A (hospital coverage) and Part
B (other medical coverage). Costs escalated in the latter part of
the 20th century, and Congress added an array of managed care options
(Part C) in an effort to restrain costs for the government and consumers.
- Part A: Hospital Insurance. Most beneficiaries
pay no premium. Part A covers almost all of the first 60 days
in the hospital after payment of a deductible for each benefit
period. The 2004 deductible is $876.
There are substantial charges for each
day after the first 60, and the patient
pays all of the charges after 150 days,
but stays of even 60 days are extremely
rare. The benefit period ends
60 days after discharge. If you are hospitalized
again after that there is another deductible.
(That is also unusual.)
- Part B: Medical Insurance. Unlike
Part A, Part B must be elected. There is an annual deductible
of $100 and there is a monthly premium deducted from the beneficiarys
Social Security or Railroad Retirement check ($66.60 a month in
2004, expected to go up to $78.10 in 2005.) It is hard to think
of a reason not to elect Part B. SS beneficiaries with limited
incomes may be eligible for assistance with the premiums; see
QMB and SLMB, below.
Beneficiaries who continue working and
believe they will be covered under a qualifying
employer health plan should check with
Social Security to confirm that the election
can be delayed without penalty.
- Part B covers part of the costs of physician services,
therapy, some non-routine vision services, radiology services,
blood for transfusions (after the first three pints), surgical
dressings and supplies, some ambulance services, and a number
of other medical services. Medicare usually covers 80% of allowable
charges; the patient or his/her supplemental insurance company
pays the rest. A few services have no coinsurance or deductible
charges (such as home health, flu shots).
- Supplemental policies,
or Medigaps. Because
Medicare does not cover some services
and there are deductibles and co-payments
for most services, many beneficiaries
choose to buy supplemental insurance from
private companies. Beneficiaries must
elect Part B to be eligible to buy these
policies. There are ten Medigap policies,
designated A through J.
Coverage under each category is mandated
by the government. The combination of
coverages become more extensive
and more expensive as one moves
up the alphabet.
- Decisions about Medigap policies are
annual, because premiums tend to increase
every year. It is important to remember
that the coverage under each policy must
be exactly the same as every other companys
coverage under that letter designation.
Prices, however, are not controlled, and
there are often substantial differences
in price between equally reliable companies.
The SHIP counselor can be helpful in determining
what coverage is likely to be best for
- Part C , or C+ Choice provides
a number of managed care options, of which by far the most popular
were HMOs. Some of the other choices are PPOs (preferred-provider
organizations), POS (point of service options) and Medical Savings
Accounts (not generally available). Beneficiaries must continue
to pay Part B premiums. Often there is no added premium or a very
low one. Some participants were pleased with their HMOs or other
choices and in most cases overall costs of care were less with managed
- Unfortunately, many HMOs have left the program, complaining
that participation was not profitable enough. Approximately two
million beneficiaries have lost HMO coverage in the last four
years. Well over a million peope were affected by companies that
left the program in the last two years. In some communities, particularly
rural areas around the country, there is no managed care option
available at all. HMOs exist in only five counties in Alabama.
Where there are choices, beneficiaries have generally been satisfied.
Participants were able to move fairly easily from one to the other
through 2001. There are now only limited periods when a beneficiary
may change from one plan to another.
- NEW - PART D - Prescription Drug Coverage. Legislation passed in late 2003 provided for limited prescription drug coverage to begin in 2006. An interim program starting in June, 2004, offers drug discount cards that may be helpful to some beneficiaries. For further detail see the final section of this site (Part B), just before "Resources".
7. What if I cant afford the Part B premium?
Medicaid programs in each state have funds available to help
lower-income seniors pay these premiums. In Alabama this help is
available regardless of how many assets the beneficiary has. The
programs are designated as QMB (Qualified Medicare Beneficiary),
SLMB (Special Limited Medicare Beneficiary) and, while funds last,
QI-1 (Qualifed Individual-1). Thus far QI-1 funds have not run out
in any year. However, these helpful programs are slated to end on
9/30/04 if Congress does not act to reauthorize them.
QMB covers not only the Part B premium but also pays all co-payments
and deductibles. It does not pay for medicine. SLMB and QI-1 pay
only the Part B premium. If your income is less than $796 for an
individual or $1,426 for a couple, call your local Medicaid office
and ask about these programs.
8. What if I disagree with a decision made by
Medicare? By all means, appeal. There is an appeal process
provided that is not easy to negotiate but it is often possible
to change an adverse decision if you persist. The Area Agency on
Aging legal service provider in your area may be able to help. Medicare
also provides information on how to appeal when it denies reimbursement.
9. Does Medicare cover long term care?
In a few cases Medicare covers part of rehabilitative care in a
skilled care facility. If a beneficiary is in the hospital at least
three days (not counting the day of discharge), is discharged to
a skilled care facility from the hospital, and the treating physician
certifies that skilled care is needed, Medicare will pay all costs
for the first 20 days. If the doctor certifies that further skilled
care is required, Medicare will pay part of up to another 80 days,
but there is a co-payment of $109.50 a day (in 2004). This is as
much as most nursing homes charge in Alabama.
Medicare does not pay anything for custodial care, or for those
who go to the nursing home from home or an assisted living facility
rather than a hospital.
Other Health Insurance
The person who through leaving employment or for some reason reaches
50 or over and without health insurance coverage is in a difficult
position. The problem becomes acute for those over 60. Finding coverage
at all is hard and finding something afforadable is even harder.
Here are the few options we have found:
(a) The Alabama Health Insurance Plan is designed only
for people who have exhausted coverage (including COBRA) through
a former employer and have no other health care coverage avilable.
It is administered by the State of Alabama through BC/BS and United
Health Care. There is only a 63-day window of opportunity after
job termination for former employees to apply for AHIP coverage.
The time enrolled in an employer's plan + COBRA is creditable coverage
and can eliminate waiting periods for pre-existing coverage. AHIP
provides pretty good coverage but it is expensive, especially for
seniors. There are fee-for-service-plans and managed care plans
with two levels of deductibles. A spouse can be covered only if
(s)he has no other source of coverage.
(b) ALFA insurance offers health insurance underwritten and administered
by Blue Cross. ALFA does not increase rates, so it is likely that
a person in poor health or with a risky history would just be rejected.
The rates are reasonable by today's standards, ALFA has a web site
that provides a ball-park quote by age, smoker status and county
of residence. This gives no guidance as to who might be rejected
or accepted. To be insured an individual must join ALFA, the annual
fee is less than $25.00.
(c) Affinity groups (clubs, societies or groups of people with
common interests) have been a resource in the past, but few now
offer health insurance. For those who have ties to a group that
still does, this might still be a resource.
(d) A few independent brokers offer options. Isurers are looking
for healthy policy-holders, though, and applicants with any pre-existing
conditions at all who are not rejected outright can probably expect
to be rated up; to experience a waiting period - possibly a long
one; or even to have a significant risk area excluded entirely.
Usually the deductibiles are high; these policies are designed to
protect against devastating costs rather than to help with routine
B. Medicare: Drug Coverage
The legislation enacted in late 2003 does not actually make prescription
drug coverage part of Medicare, but requires those who choose the
voluntary drug benefit to enroll in a private plan in order to obtain
the coverage provided. The coverage slated to become effective in
2006 if no changes intervene promises to be costly, complicated,
and of uncertain value to many beneficiaries. While some may be
helped, others will enjoy little benefit and a few may be worse
off under the new program.
The new program requires beneficiaries to spend at least $3,600
before 95% coverage begins; some will spend much more. On average,
people in the U.S. spend over 65% more than Canadians for their
prescrition drugs. One of the most criticized aspects of the new
legislation is its specific prohibition againt CMS' negotiating
with pharmaceutical firms for better prices, as the VA has so successfully
done at great savings to taxpayers. Another criticism is the ban
on reimportation of American-made drugs from Canada. It is possible
that the administration will soften its stand in response to the
outrage over this issue.
Some limited coverage for drugs became available in June 2004 with
"drug discount cards", which will be effective through
December 2005. The new discount card program may offer help to some
beneficiaries but it has several limitations and drawbacks.
There are over 70 cards available, each offering discounts on different
groups of drugs. Making choices is difficult and seniors have been
slow to sign up. It takes time to research and readers are urged
to visit the CMS we site and toher sites, such as www.medicarerights.org,
for help in deciding whether one of the new cards would be helpful
for them, and if so, which one.
Part 1 of this Section outlines major aspects of the drug discount
card. Part 2, which will be added later, will provide information
on the coverage to take effect in 2006.
PART 1. The drug discount plan effective in June 2004 provides
that participants pay an annual enrollment fee of up to $30 to receive
a card to be used at participating pharmacies, unless they qualify
for assistance with the cost. Discounts on prescription drugs covered
by the card selected may range from 10 to 25 per cent. There is
no discount on drugs not included in a card's "formulary" (list
of covered drugs). Each discount card should include at least one
drug in each major category of medicines.
There are already scams being operated in Alabama and elsewhere.
Legitimate cards may not be sold door-to-door or over the telephone.
Two Alabama sponsors have been approved by CMS, but dozens more
of national programs are available. Before signing up, check CMS
web site, or call CMS at 1-800-633-4227. Also check www.medicarerights.org.
You will need to do some research to compare the cards available
in your area, the drugs each includes, and the prices they charge
for your most expensive prescriptions.
The CMS web sit is gradually being improved to make it more usable,
but the process is still confusing. CMS is also adding workers to
respond to the flood of calls to its 800 number. A visitor to the
CMS site can type his/her zip code and see the drug prices and services
offered by each sponsor in that area. Even with this help, making
a choice is confusing. Prepare to spend some time on this! Have
ready a list of your drugs, the makers, dosage and times per day
Do not pay more than $30 for any card. Do
not buy over the telephone or from a door-to-door peddler
- legitimate cards cannot be sold that way. Do
check to be sure (1) that a Medicare card will actually save you
money, and (2) that the card you choose is certified by Medicare.
Low income participants (singles with annual incomes of less than
$12,569; couples, less than $16,862) do not have to pay the enrollment
fee and will receive a $600 credit on prescriptions in 2004 and
another $600 in 2005. They may pay co-payments of 5% to 10% on their
prescriptions, so the value of not paying the annual fee will be
eroded. Even so, those who qualify for the low-income cards should
probably register for one. The benefit to those who do not meet
the low-income limit is less assured. Other programs may be more
useful; however, drug manufacturers are anxious to make this program
work and they are offering some attractive discounts.
Not every drug will be included by every card provider, so each
participant will need to find the best deal considering his/her
most expensive medications. Card providers can also change prices
from week to week, while participants will only be able to change
from one card to another during a six-week open enrollment period
at the end of 2004.
Do not assume that every card will be a good deal for you, or even
that the Medicare discount card will be better for you than other
options, unless you qualify for the low-income card.
(PART 2 will be added later.)
1. Medicare provisions are codified as Title XVIII
of the Social Security Act, 42 U.S.C. §1395 et seq.; regulations
are located at 42 CFR § 400 et seq. Medicare Part C is found
at Social Security Act §§ 1851-59.
2. The Center for Medicare and Medicaid Services
(formerly HCFA) has free materials explaining the general Medicare
program and particular programs (home health care, hospice, ESRD,
etc.). Call 1-800-633-4227; for hearing-impaired individuals using
a special telephone device, 1-877-486-2048. The web site is www.medicare.gov.
3. An excellent resource for attorneys is The
Medicare Handbook, by staff of the Center for Medicare Advocacy,
Judith A Stein and Alfred J. Chiplin, Jr., Editors-in-Chief; published
by Aspen Publishers, Inc. and updated annually (Panel Publishers
Customer Service Department can be reached at 1-800-234-1660). These
are the legal experts on this subject. See: www.medicareadvocacy.org.
4. An excellent resource for consumers, perhaps
the best resource, is the web site mentioned in the article above
in connection with the new prescription drug coverage. The site
is packed with information on that and other Medicare topics, and
is readable and easy to use. The web address is www.medicarerights.org.