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Medicare

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.

  1. Medicare: Generally
    1. What is it?
    2. Who pays for it and who runs it?
    3. Who is eligible?
    4. How does an individual enroll?
    5. Are there income or medical requirements for receiving services?
    6. How does it work?

    7. - 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)

    8. What if I can't afford the Part B premium?
    9. What if I disagree with a decision made by Medicare about paying for care?
    10. Does Medicare cover long term care?
    11. Other health insurance for seniors
  2. Medicare: Drug coverage

    1. Discount cards available June 2004
    2. Coverage beginning in 2006
  3. Resources

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 beneficiary’s 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 company’s 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 your circumstances.
  • 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 care programs.

  • 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 can’t 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 medical expenses.

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 taken.

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.)

C. Resources
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.

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