Medicare

Medicare

Medicare is a federal medical expense insurance program for people age 65 and older even if the individual continues to work. Medicare benefits are also available to anyone, regardless of age, who has been entitled to Social Security disability income benefits for 2 years or has a permanent kidney failure (End Stage Renal Disease - ESRD).

1. Nature, Financing, and Administration

Medicare is administered by The Center for Medicare and Medicaid Services (CMS), which is a division of the United States Department of Health and Human Services. Medicare is divided into 4 parts:

1. Part A (Hospital Insurance) is financed through a portion of the payroll tax (FICA);
2. Part B (Medical Insurance) is financed from monthly premiums paid by insureds and from the general revenues of the federal government; 
3. Part C (Medicare Advantage) allows people to receive all of their health care services through available provider organizations; and 
4. Part D (Prescription Drugs) is for prescription drug coverage.

Note, however, that the term Original Medicarerefers to Part A - Hospital Insurance, and Part B - Medical Insurance only. It covers health care from any doctor, health care provider, hospital or facility that accepts Medicare patients. It usually does not cover prescription drugs. Original Medicare does not require the patient to choose a primary care doctor, nor does it require a referral to see a specialist, as long as the specialist is enrolled in Medicare.

2. Part A - Hospital Insurance

Medicare Part A helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care.

Individual Eligibility Requirements

An individual is eligible for Medicare Part A, Hospital Coverage, if he or she qualifies for one of the following conditions:

• A citizen or a legal resident of the United States age 65 or over and qualified for Social Security or Railroad retirement benefits — Aged;
• Is 65 years old or over and entitled to monthly Social Security benefits based upon the spouse’s work record, and the spouse is at least 62;
• Is younger than 65, but has been entitled to Social Security disability benefits for 24 months — Disabled;
• Has End Stage Renal Disease (ESRD) — permanent kidney failure that requires dialysis or a transplant;
• Has ALS (Amyotrophic Lateral Sclerosis, or Lou Gehrig’s disease) — automatically qualifies for Part A the month disability benefits begin.

Individuals who are not receiving those types of benefits need to sign up for Part A, even if they are eligible for premium-free Part A.

Enrollment

Those who want to sign up for Medicare Part A have the following three options:

• Initial enrollment period: when an individual first becomes eligible for Medicare (starting 3 months before turning age 65, ending 3 months after the 65th birthday); 
• General enrollment period: between January 1st and March 31st each year; 
• Special enrollment period: at any time during the year if the individual or his/her spouse is still employed and covered under a group health plan.

Those who are not eligible for premium-free Part A can purchase the coverage for a monthly premium. If individuals fail to sign up for Part A when they are first eligible, the monthly premium may go up 10% unless the person becomes eligible for a special enrollment period.

Coverages and Cost-sharing Amounts

Inpatient Hospital Care — Hospital insurance helps pay for up to 90 days in a participating hospital in any benefit period, subject to a deductible. The first 60 days are covered at 100% of approved charges after the deductible is met. The next 30 covered days are paid, but they are paid with a daily copayment. Every Part A insured has a lifetime reserve of 60 days of hospital care. The lifetime reserve days have a copayment that is twice that of days 61 through 90, and they are nonrenewable. Covered services include semi-private room, meals, regular nursing services, operating and recovery room costs, hospital costs for anesthesia, intensive care and coronary care, drugs, lab tests, X-rays, medical supplies, appliances, rehabilitation services, and preparatory services related to kidney transplant surgery. Blood is also covered, except for the first 3 pints.

Under the inpatient hospital stay, Part A does NOT include private duty nursing, a television or telephone in your room. It also does not include a private room unless medically necessary. In addition, inpatient mental health care in a psychiatric facility is limited to 190 days in a lifetime.

Sixty (60) days of non-use of the inpatient hospital benefit starts a new benefit period and a new deductible.

Skilled Nursing Facility Care — Part A helps pay for up to 100 days in a participating skilled nursing facility in each benefit period, following a 3-day inpatient hospital stay for a related illness. To get this type of care, the insured's doctor must certify that daily skilled care is necessary. Covered expenses include semi-private room, meals, regular nursing and rehabilitation services, and other supplies.

Home Health Care — For an individual confined to the home and meeting certain other conditions, hospital insurance can pay the full approved cost of home health visits from a participating home health agency. There is no limit to the number of covered visits. Covered services include part-time skilled nursing care, physical therapy, and speech therapy. Hospital insurance also covers part-time services of home health aides, occupational therapy, medical social services and medical supplies and equipment.

Hospice Care — Under certain conditions, hospital insurance can help pay for hospice care for terminally ill insureds, if the care is provided by a Medicare-certified hospice. Covered services include doctor services, nursing services, medical appliances, supplies including outpatient drugs for pain relief, home health aide, homemaker services, therapies, medical social services, short-term inpatient care including respite care, and counseling.

Medicare Part A: Hospital Insurance Covered ServiceReference Chart

BENEFITS	MEDICARE PAYS	YOU PAY
HOSPITALIZATION:
First 60 days	All but the deductible	Deductible
Days 61-90	All but daily deductible	Daily deductible
After day 90 (up to 60 days)*	All but daily deductible	Daily deductible
After lifetime reserve days	Nothing	All costs
SKILLED NURSING FACILITY CARE:
First 20 days	100% of approved amount	Nothing
Days 21-100	All but daily deductible	Daily deductible
Beyond 100 days	Nothing	All cost
HOME HEALTH CARE:
For as long as you meet Medicare requirements for home health care benefits.	100% of approved amount; 80% of approved amount for durable medical equipment	Nothing for services; 20% of approved amount for durable medical equipment
HOSPICE CARE:
For as long as doctor certifies need	All but limited costs for outpatient drugs and inpatient respite care	Limited cost sharing for outpatient drugs and inpatient respitecare
BLOOD:
Unlimited if medically necessary	All but first 3 pints per calendar year	For first 3 pints**

* 60 lifetime reserve days. For each lifetime reserve day, Medicare pays all covered costs except for a daily coinsurance. **To the extent that three pints of blood are paid for or replaced under one part of Medicare during the calendar year. They do not have to be paid for or replaced under the other part.

3. Part B - Medical Insurance

Medicare Part B pays for doctor’s services and a variety of other medical services and supplies that are not covered by hospital insurance. Most of the services needed by people with permanent kidney failure are covered only by medical insurance.

Individual Eligibility Requirements

Part B is optional and offered to everyone who enrolls in Part A. Part B is funded by monthly premiums and from the general revenues of the federal government. Most people enrolled in Medicare Part B pay the standard monthly premium. However, if an insured's modified adjusted gross income reported on IRS tax return is above a certain amount, the insured may be required to pay a higher premium.

Enrollment

When you become eligible for Part A, you are told that you will get and have to pay for Part B unless you decline it. If you later decide you want Part B after initially declining it, you must wait until the next general enrollment period (Jan. 1 through Mar. 31) to enroll.

Coverages and Cost-sharing Amounts

After the annual medical insurance deductible is met, medical insurance will generally pay for 80% of the approved charges for covered expenses for the remainder of the year. There is no maximum out of pocket limit on the 20% coinsurance payable for Part B expenses.

Doctor Services – Part B covers doctor services no matter where received in the United States. Covered doctor services include surgical services, diagnostic tests and X-rays that are part of the treatment, medical supplies furnished in a doctor’s office, and services of the office nurse.

Outpatient Hospital Services – Part B covers outpatient hospital services received for diagnosis and treatment, such as care in an emergency room, outpatient clinic, or a hospital.

Home Health Visits – Medicare will pay for home health services as long as these services are recommended by the insured's doctor and the insured is eligible. However, these services are provided on a part-time basis with limits on the number of hours per day and days per week. The services that are not fully covered by Medicare will get coverage from Medicaid. 

Other Medical and Health Services – Under certain conditions or limitations, medical insurance covers other medical services and supplies. Some examples are as follows: ambulance transportation; home dialysis equipment, supplies, periodic support services, independent laboratory tests, oral surgery, outpatient physical therapy, speech pathology services, and X-rays and radiation treatments.

Prescription Drugs (limited coverage) – Only medicines that are administered in a hospital outpatient department under certain circumstances, such as injected drugs at a doctor’s office, some oral cancer drugs, or drugs that require durable medical equipment (like a nebulizer or infusion pump), are covered. Other than the examples above, insured under Part B will have to pay 100% for most prescription drugs, unless covered by Part D.

Outpatient Treatment of Mental Illness – Medicare covers outpatient treatment of an approved condition (such as depression or anxiety) in a doctor's office or other health care provider's office or hospital outpatient department. Generally, the enrollee pays 20% of the Medicare-approved amount (coinsurance); Part B deductible also applies. Note that inpatient mental health care is covered under Part A.

Yearly "wellness" visit: in addition to a "Welcome to Medicare" preventive visit available during the first 12 months, Medicare Part B covers annual "wellness" visit during which the insured and the provider can develop or update a personalized plan for disease prevention. There is no out-of-pocket cost for the insured for these visits if the doctor or other qualified health care provider accepts assignments. If the doctor or the health care provider performs additional tests or services during the same visit that are not covered under this preventive benefit, the insured may have to pay coinsurance, and Part B deductible may also apply.

Exclusions

Medical insurance under Part B of Medicare does not cover the following:

• Private duty nursing;
• Skilled nursing home care costs over 100 days per benefit period;
• Intermediate nursing home care;
• Physician charges above Medicare’s approved amount;
• Most outpatient prescription drugs;
• Care received outside the United States;
• Custodial care received in the home;
• Dental care (except dental expenses resulting from an accident only), cosmetic surgery, eyeglasses, hearing aids, orthopedic shoes, acupuncture expenses;
• Expenses incurred due to a war or act of war.

Claims Terminology and Other Key Terms

The following are claims terminology and other key terms applicable to Medicare:

• Actual Charge — The amount a physician or supplier actually bills for a particular service or supply.
• Ambulatory Surgical Services — Care that is provided at an ambulatory center. These are surgical services performed at a center that do not require a hospital stay unlike inpatient hospital surgery.
• Approved Amount — The amount Medicare determines to be reasonable for a service that is covered under Part B of Medicare.
• Assignment — The physician or a medical supplier agrees to accept the Medicare-approved amount as full payment for the covered services.
• Carriers — Organizations that process claims that are submitted by doctors and suppliers under Medicare.
• Coinsurance — The portion of Medicare’s approved amount that the beneficiary is responsible for paying.
• Comprehensive Outpatient Rehabilitation Facility Services — Outpatient services received from a Medicare participating comprehensive outpatient rehabilitation facility.
• Deductible — The amount of expense a beneficiary must first incur before Medicare begins payment for covered services.
• Durable Medical Equipment — Medical equipment such as oxygen equipment, wheelchairs, and other medically necessary equipment that a doctor prescribes for use in the home.
• Excess Charge — The difference between the Medicare-approved amount for a service or supply and the actual charge.
• Intermediaries — Organizations that process inpatient and outpatient claims on individuals by hospitals, skilled nursing facilities, home health agencies, hospices and certain other providers of health services.
• Limiting Charge — The maximum amount a physician may charge a Medicare beneficiary for a covered service if the physician does not accept assignment.
• Nonparticipating — Doctors or suppliers who may choose whether or not to accept assignment on each individual claim.
• Outpatient Physical and Occupational Therapy and Speech Pathology Services — Medically necessary outpatient physical and occupational therapy or speech pathology services prescribed by a doctor or therapist.
• Pap Smear Screening — Provides for a pap smear to screen for cervical cancer once every 2 years.
• Partial Hospitalization for Mental Health Treatment — A program of outpatient mental health care. 
• Participating Doctor or Suppliers — Doctors and suppliers who sign agreements to become Medicare-participating. For example, they have agreed in advance to accept assignment on all Medicare claims.
• Peer Review Organizations — Groups of practicing doctors and other health care professionals who are paid by the government to review the care given to Medicare patients.

Medicare Part B: Medical Insurance Covered Services
Reference Chart

BENEFITS	MEDICARE PAYS	YOU PAY
MEDICAL EXPENSES:
Medicare pays for medical services in or out of the hospital	80% of approved amount after the deductible	Deductible*, plus 20% of approved amount and limited charges above approved amount
CLINICAL LABORATORY SERVICES:
Unlimited if medically necessary	Generally 100% of approved amount	Nothing for services
HOME HEALTH CARE:
For as long as you meet Medicare requirements for home health care benefits	100% of approved amount; 80% of approved amount for durable medical equipment	Nothing for services; 20% of approved amount for durable medical equipment
OUTPATIENT HOSPITAL TREATMENT:
Unlimited if medically necessary	Medicare payment to hospital based on hospital cost	20% of billed amount after the deductible
BLOOD:
Unlimited if medically necessary	80% of approved amount after the deductible, and starting with 4th pint	First 3 pints plus 20% of approved amount for additional pints after the deductible**

* Once you have reached a specified dollar amount in expenses for covered services, the Part B deductible does not apply to any other covered services you receive for the rest of the year.
** To the extent that any of the three pints of blood are paid for or replaced under one part of Medicare during the calendar year. They do not have to be paid for or replaced under the other part.

4. Part C - Medicare Advantage

The Medicare Modernization Act of 2003 changed the name of Part C from Medicare+Choice to Medicare Advantage. Medicare Advantage plans must cover all of the services covered under the Original Medicare except hospice care and some care in qualifying clinical research studies. It may also offer extra coverage, such as vision, hearing, dental, and other health and wellness programs.

To be eligible for Medicare Advantage, beneficiaries must also be enrolled in Medicare Parts A and B. Medicare Advantage is Medicare provided by an approved Health Maintenance Organization or Preferred Provider Organization. Many HMOs or PPOs do not charge premiums beyond what is paid by Medicare. The advantages of an HMO or PPO for a Medicare recipient may be that there are no claims forms required, almost any medical problem is covered for a set fee so health care costs can be budgeted, and the HMO or PPO may pay for services not usually covered by Medicare or Medicare supplement policies, such as prescriptions, eye exams, hearing aids, or dental care.

Most Medicare HMOs require that medical services be received through the plan, except in emergencies. A few allow greater freedom of choice through point-of-service plans.

A Medicare Private Fee-for-Service Plan is a Medicare Advantage Plan offered by a private insurance company. Medicare pays a set amount of money every month to the private insurance company to provide health care coverage. The insurance company decides how much enrollees pay for the services they get.

Another section of Medicare Advantage Plan (Part C), Special Needs Plans, provides more focused and specialized health care for specific groups of people. This includes people who have both Medicare and Medicaid, who reside in a nursing home, or have certain chronic medical conditions.

5. Part D - Prescription Drug Insurance

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) was passed in November 2003. This act implemented a plan to add a Part D - Prescription Drug Benefit to the standard Medicare Coverages. This optional coverage is provided through private prescription drug plans (PDPs) that contract with Medicare. To receive the benefits provided, beneficiaries must sign up with a plan offering this coverage in their area and must be enrolled in Medicare Part A or in Parts A and B. In areas where no private plans are offered, the government will offer a standard plan. Medicaidrecipients are automatically enrolled.

If Medicare beneficiaries don't enroll when they are first eligible, they must pay a 1% penalty for each month they delayed enrollment.

Medicare beneficiaries may choose between stand-alone plans that offer coverage on a fee-for-service basis, or integrated plans that group coverages together, including PPOs and HMOs (known as Medicare Advantage).

The plans offered by private companies are restricted by some standards set by Medicare, but still have freedom to personalize their plans. Providers must cover drugs for certain classes, but do not have to cover every drug in each class.

Those who sign up for the standard Prescription Drug Benefit plan will have a monthly premium and a deductible. The monthly premium varies by plan. After the deductible is paid, the plan would provide prescription drug benefits until a benefit limit is reached. Once this limit is reached, a gap called a "donut hole" occurs, in which the beneficiary is responsible for a portion of prescription drug costs. This resets annually. Currently, Medicare offers discount on covered brand-name drugs and some coverage for generic drugs: the beneficiary is responsible for 25% of brand name prescription drug costs, and 37% of the plan's cost for covered generic drugs. Additional savings will be available annually until the gap is closed in 2020.

If the beneficiary's spending during the gap reaches the limit of coverage gap, catastrophic coveragewill start. Catastrophic coverage will cover 95% of prescription drug costs. The beneficiary pays the greater of the specified amount or 5%. The cost limit for generic drugs would be lower than for name brand drugs.

Additional assistance will be available for those with low income. There will be no gap in coverage for these beneficiaries.

6. Primary, Secondary Payor

While an individual becomes eligible for Medicareupon turning age 65, federal laws extend primary coverage benefits under the employer’s plan to active older employees regardless of age. In other words, employer plans usually continue to be primarycoverage, and Medicare is secondary coverage.

F. Flexible Spending Accounts (FSAs)

1. Definition

A Flexible Spending Account (FSA) is a form of cafeteria plan benefit funded by salary reduction and employer contributions. The employees are allowed to deposit a certain amount of their paycheck into an account before paying income taxes. Then, during the year, the employee can be directly reimbursed from this account for eligible health care and dependent care expenses. FSA benefits are subject to annual maximum and "use-or-lose" rule. This plan does not provide a cumulative benefit beyond the plan year.

There are 2 types of Flexible Spending Accounts: a Health Care Account for out-of-pocket health care expenses, and a Dependent Care Account (subject to annual contribution limits) to help pay for dependent's care expenses which makes it possible for an employee and his or her spouse to continue to work.

An FSA is exempt from federal income taxes, Social Security (FICA) taxes and, in most cases, state income taxes, saving 1/3 or more in taxes. If the plan favors highly compensated employees, the benefits for the highly compensated employees are not exempt from federal income taxes.

2. Eligibility

Child and dependent care expenses must be for the care of one or more qualifying persons:

• A dependent who was under age 13 when the care was provided and who can be claimed as an exemption on the employee's Federal Income Tax return;
• A spouse who was physically or mentally not able to care for himself or herself; or
• A dependent who was physically or mentally not able to care for himself or herself and who can be claimed as an exemption (as long as the person is earning gross income less than an IRS-specified amount).

Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves.

The insured may change benefits during open enrollment. After that period, generally, no other changes can be made during the plan year. However, the insured might be able to make a change under one of the following circumstances, referred to as qualified life event changes:

1. Marital status;
2. Number of dependents;
3. One of dependents becomes eligible for or no longer satisfies the coverage requirements under the Medical Reimbursement plan for unmarried dependents due to attained age, student status, or any similar circumstances;
4. The insured, the insured's spouse's or qualified dependent's employment status that affects eligibility under the plan (at least a 31-day break in employment status to qualify as a change in status);
5. Change in dependent care provider; or
6. Family medical leave.

3. Contribution Limits

The IRS limits the annual contribution for Dependent Care Accounts to a specified amount that gets adjusted annually for cost of living. This is a family limit, meaning that even if both parents have access to flexible care accounts, their combined contributions cannot exceed the amount. 

G. Health Savings Accounts (HSAs)

1. Definition

Health savings accounts (HSAs) are designed to help individuals save for qualified health expenses that they, their spouse, or their dependents incur. An individual who is covered by a high deductible health plan can make a tax-deductible contribution to an HSA, and use it to pay for out-of-pocket medical expenses. Contributions by an employer are not included in the individual's taxable income.

2. Eligibility

To be eligible for a Health Savings Account, an individual must be covered by a high deductible health plan (HDHP), must not be covered by other health insurance (does not apply to specific injury insurance and accident, disability, dental care, vision care, long-term care), must not be eligible for Medicare, and can't be claimed as a dependent on someone else's tax return.

3. Contribution Limits

HSAs are linked to high deductible insurance. A person may obtain coverage under a qualified health insurance plan with established minimum deductibles ($1,350 for singles and $2,700 for families in 2019).

Each year eligible individuals (or their employers) are allowed to save up to certain limits, regardless of their plan's deductible (current contribution limits are $3,500 for singles and $7,000 for families). When opening an account, an individual must be under the age of Medicare eligibility. For taxpayers aged 55 and older, an additional contribution amount is allowed (up to $1,000).

An HSA holder who uses the money for a nonhealth expenditure pays tax on it, plus a 20% penalty. After age 65, a withdrawal used for a nonhealth purpose will be taxed, but not penalized.

H. Healthy New York

The Healthy New York program was created to make standardized, comprehensive, and affordable health insurance coverage available to individuals, sole proprietors, and small businesses. Beginning January 1, 2014, Healthy NY no longer provides coverage for individuals or sole proprietors. The program is now limited to qualified small employers only. Small employers can purchase coverage directly from their insurer or from New York State of Health Marketplace through the Small Business Health Options Program (SHOP).

To qualify for the Healthy NY program for small employers, a New York state-based business must meet the following requirements:

• Have 1-50 eligible employees;
• Have at least 30% of employees who work 20 or more hours per week earn no more than a specified wage level (the salary requirement is adjusted annually for inflation);
• Not have provided group health insurance coverage to its employees within the last 12 months, or have provided limited coverage only.

Coverage under Healthy NY program may be extended to the following:

• Employees, including the business owner; 
• Employees' same-sex and opposite-sex spouses if residing in the household; 
• Employees' domestic partners, if the employer decides to make domestic partner coverage available (the employer may also decide whether to make coverage available to same-sex domestic partners, opposite-sex domestic partners, or both); 
• Employees' children to age 26. 

Coverage under the Healthy NY program may not be subject to any pre-existing condition limitations in a qualifying group health insurance contract.