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SCHEDULE A CALLMedicare is the federal government’s principal health care insurance program for people 65 years of age and over. In addition, the program covers people of any age who are permanently disabled or who have end-stage renal disease (people with kidney ailments that require dialysis or a kidney transplant). The Medicare program insures 39 million Americans and spends $213 billion a year on their care.
For the most part, Medicare pays only for “acute” care — care that the program’s administrators view as reasonable and necessary to diagnose or treat an illness or injury. In other words, the program does not pay for most preventive or chronic health care. Medicare consists of three major programs: Part A, which covers hospital stays; Part B, which covers physician fees; and the recently-added Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options.
Although Medicare was originally conceived as a program that would relieve older persons of the burden of paying for health care, Medicare beneficiaries now pay a greater percentage of their incomes for out-of-pocket health care expenses than they did before Medicare was enacted in 1965. In addition to paying a monthly premium, Medicare recipients are often required to pay a portion of the cost of the services they receive. This “cost-sharing” may take the form of a deductible or co-insurance amount. Deductibles, co-insurance amounts and premiums usually increase each January. In addition, there are many services and items, such as prescription drugs, and long-term nursing home or in-home care that Medicare does not cover. To help with this cost-sharing and the items that Medicare does not cover, Medicare beneficiaries often purchase private insurance policies called “Medigap” policies.
Medicare is an “entitlement” program, meaning you do not have to be poor to get Medicare. There are two parts of Medicare, each with their own eligibility requirements. Medicare Part A is available for anyone who is over age 65 or who is permanently disabled and who is eligible for Social Security.
You are eligible for Medicare Part A if you:
Medicare Part A covers institutional care in hospitals and skilled nursing facilities, as well as certain care given by home health agencies and care provided in hospices. Any person who has reached age 65 and who is entitled to Social Security benefits is eligible for Medicare Part A without charge. That is, there are no premiums for this part of the Medicare program.
Medicare pays for 90 days of hospital care per “spell of illness,” plus an additional lifetime reserve of 60 days. A single “spell of illness” begins when the patient is admitted to a hospital or other covered facility, and ends when the patient has gone 60 days without being readmitted to a hospital or other facility. There is no limit on the number of spells of illness. However, the patient must satisfy a deductible before Medicare begins paying for treatment. This deductible, which changes annually, is $912 in 2005.
After the deductible is satisfied, Medicare will pay for virtually all hospital charges during the first 60 days of a recipient’s hospital stay, other than telephone and television expenses.
What Medicare covers includes:
However, Medicare will not pay for treatments or procedures that it considers medically unproven or experimental.
If the hospital stay extends beyond 60 days, the Medicare beneficiary begins shouldering more of the cost of his or her care. From day 61 through day 90, the patient pays coinsurance of $228 a day in 2005. Beyond the 90th day, the patient begins to tap into his or her 60-day lifetime reserve. During hospital stays covered by these reserve days, beneficiaries must pay coinsurance of $456 per day in 2005. This reserve is not reset after each “spell of illness.” Once it has been exhausted, the beneficiary will receive coverage for only 90 days when the next spell of illness occurs. However, studies show that the average length of a hospital stay covered by Medicare is eight days.
Medicare Part A also pays for stays in psychiatric hospitals, but payment is limited to a total of 190 days of inpatient psychiatric hospital services during a beneficiary’s lifetime.
Medicare Part A covers up to 100 days of “skilled nursing” care per spell of illness. However, the conditions for obtaining Medicare coverage of a nursing home stay are quite stringent.
Here are the main requirements:
As soon as the nursing facility determines that a patient is no longer receiving a skilled level of care, the Medicare coverage ends. And, beginning on day 21 of the nursing home stay, there is a significant copayment equal to one-eighth of the initial hospital deductible ($114 a day in 2005). This copayment will usually be covered by a Medigap insurance policy, provided the patient has one.
A new spell of illness can begin if the patient has not received skilled care, either in a skilled nursing facility (SNF) or in a hospital, for a period of 60 consecutive days. The patient can remain in the SNF and still qualify as long as he or she does not receive a skilled level of care during that 60 days.
Nursing homes often terminate Medicare coverage for SNF care before they should. Two misunderstandings most often result in inappropriate denial of Medicare coverage to SNF patients. First, many nursing homes assume in error that if a patient has stopped making progress towards recovery then Medicare coverage should end. In fact, if the patient needs continued skilled care simply to maintain his or her status (or to slow deterioration) then the care should be provided and is covered by Medicare.
Second, nursing homes may wrongly believe that care requiring only supervision (rather than direct administration) by a skilled nurse is excluded from Medicare’s SNF benefit. In fact, patients often receive an array of treatments that don’t need to be carried out by a skilled nurse but which may, in combination, require skilled supervision. In these instances, if the potential for adverse interactions among multiple treatments requires that a skilled nurse monitor the patient’s care and status, then Medicare will continue to provide coverage.
When a patient leaves a hospital and moves to a nursing home that provides Medicare coverage, the nursing home must give the patient written notice of whether the nursing home believes that the patient requires a skilled level of care and thus merits Medicare coverage. Even in cases where the SNF initially treats the patient as a Medicare recipient, after two or more weeks, often, the SNF will determine that the patient no longer needs a skilled level of care and will issue a “Notice of Non-Coverage” terminating the Medicare coverage.
Whether the non-coverage determination is made on entering the SNF or after a period of treatment, the notice asks whether the patient would like the nursing home bill to be submitted to Medicare despite the nursing home’s assessment of his or her care needs. The patient (or his or her representative) should always ask for the bill to be submitted. This requires the nursing home to submit the patient’s medical records for review to the fiscal intermediary, an insurance company hired by the Health Care Financing Administration to administer the Medicare program.
The review costs the patient nothing and may result in more Medicare coverage. While the review is being conducted, the patient is not obligated to pay the nursing home. However, if the appeal is denied, the patient will owe the facility retroactively for the period under review. This should be addressed. If the fiscal intermediary agrees with the nursing home that the patient no longer requires a skilled level of care, the next level of appeal is to an Administrative Law Judge. This appeal can take a year and involves hiring a lawyer. It should be pursued only if, after reviewing the patient’s medical records, the lawyer believes that the patient was receiving a skilled level of care that should have been covered by Medicare. If you are turned down at this appeal level, there are subsequent appeals to the Appeals Council in Washington, and then to federal court.
If the Medicare beneficiary has no more than six months to live, Medicare will pay for unlimited hospice care. This can be at home or in a hospice facility, and includes services not generally covered by Medicare. These services include home health aide and homemaker services, physical therapy, counseling, as well as physician and nursing services. There is also a provision for “respite care” — up to five consecutive days of inpatient care to give the patient’s primary at-home caregiver some relief. The patient must pay 5 percent of the cost of this respite care.
Hospice benefit recipients are responsible for up to a $5 copayment for each prescription drug, but otherwise there are no deductibles or other copayments for this benefit. Bear in mind, however, that in electing hospice care, the beneficiary is choosing to receive noncurative medical and support services rather than treatment toward a cure for the terminal illness.
Because Medicare’s hospice home care benefit does not cover full-time care, it is not an option unless there is a full-time caretaker in the home.
Medicare Part B basically covers “outpatient” care: office visits to medical specialists, ambulance transportation, diagnostic tests performed in a doctor’s office or in a hospital on an outpatient basis, physician visits while the patient is in the hospital, and various outpatient therapies that are prescribed by a physician. Part B also covers home health services if the beneficiary is not enrolled in Medicare Part A. (See The Medicare Home Health Benefit below.)
Medicare recipients who are eligible for Part A are automatically enrolled in Part B unless they opt out. Part B enrollees pay a monthly premium that is adjusted annually. This premium, which is $78.20 a month in 2005, pays for about one-quarter of Part B’s actual costs; the federal government pays for the other 75 percent through general tax revenues. This cost-sharing makes Part B something of a bargain, and many Medicare recipients buy it unless their present or former employer provides comparable coverage.
Moreover, there is a financial incentive not to delay enrollment; those who wait to enroll in Part B after they become eligible for Medicare will pay a penalty. For each year that an individual puts off enrolling, his or her monthly premium increases by 10 percent — permanently. Thus, a person who waits five years to enroll in Part B will pay premiums 50 percent higher than she otherwise would. (This penalty does not apply if the individual is covered by an employer group plan that is available only to current employees.)
The specifics of what is covered and what is not covered under Part B are complex and change periodically in response to efforts to contain health care costs. Following are some of the items that are excluded from coverage:
Medicare Part B recipients must satisfy an annual deductible of $110 (in 2005). Once the deductible has been met, Medicare pays 80 percent of what Medicare considers a “reasonable charge” for the item or service. The beneficiary is responsible for the other 20 percent.
However, in most cases what Medicare calls a “reasonable charge” is less than what a doctor or other medical provider normally charges for a service. Whether a Medicare beneficiary must pay part of the difference between the Medicare-approved charge and the provider’s normal charge depends on whether or not the provider has agreed to participate in the Medicare program.
If the provider participates in Medicare, he or she “accepts assignment,” which means that the provider agrees that the total charge for the covered service will be the amount approved by Medicare. Medicare then pays the provider 80 percent of its approved amount, after subtracting any part of the beneficiary’s annual deductible that has not already been met. The provider then charges the beneficiary the remaining 20 percent of the approved “reasonable” charge, plus any part of the deductible that has not been satisfied.
Some states either require all licensed physicians to participate in the Medicare program or require even non-participating providers to accept the Medicare-approved rate as full payment.
But many states have no such requirements. If a Medicare beneficiary in one of these states is treated by a non-participating provider who is charging more than the Medicare-approved rate, the beneficiary must pay the usual 20 percent of the Medicare-approved charge plus an additional 15 percent of the Medicare-approved amount (called a “limiting charge”).
It is against the law for providers in any state to charge Medicare patients more than an additional 15 percent of the Medicare-approved charge.
Doctor Jones bills Mrs. Smith $150 for an office visit that Medicare says should cost only $100. Mrs. Smith must pay Dr. Jones $35 — 20 percent of the approved charge ($20) plus an additional 15 percent of the approved charge ($15).
In such “non-assignment” cases, Medicare pays the beneficiary 80 percent of the approved amount and the beneficiary must pay the provider the entire charge that is due. In the above example, however, not all of the charge is due: Doctor Jones is taking a loss of $35 in treating Mrs. Smith. Doctor Jones must accept this loss as the price of treating a Medicare patient. (However, beneficiaries may now enter private contractual arrangements with physicians under the new Medicare Part C — see below.
Other physician practices that violate Medicare Part B’s rules include:
Medicare patients do not have to share the cost of all services under Medicare Part B. Medicare pays for certain services in full, including diagnostic laboratory tests, home health services, second opinions on surgery (or third opinions if the two earlier opinions disagree), expenses for pneumococcal vaccine, and costs to kidney transplant donors. In all these cases, the $110 deductible does not apply and the 20 percent copayment is waived. On the other hand, Medicare will pay only 50 percent of the “approved” rate for the treatment of mental disorders on an outpatient basis.
If you qualify, Medicare will cover your home health benefits entirely and with no limit on the length of time you are covered.
Medicare home health benefits can mean the difference between you or a family member continuing to stay at home, or your health deteriorating until hospital care or nursing home placement become necessary. But due to changes made as part of the Balanced Budget Act of 1997, home health benefits are being denied Medicare patients in more and more cases.
You are entitled to Medicare coverage of your home health care if you meet the following requirements:
What you pay: Nothing, with the exception of 20 percent of the cost of medical supplies and equipment, which is covered by some Medigap policies.
While the government insists that it has not changed the criteria for who is eligible for home care services, home health agencies have inevitably cut back on services they provide in order to make their own budgets balance.
What you can do: All this means that Medicare recipients must advocate for the services they need. If you have to appeal a termination of service, the good news is that most people who appeal Medicare home health benefits win their cases. At the first level of review, 39 percent are successful, and on appeal to an administrative law judge, 81 percent are successful. The bad news is that you have to pay privately for the care in order to have an appealable issue. This is because the issue on appeal is not the termination of a service, but the denial of Medicare payment for the service. As a result, many beneficiaries simply try to make do without the care or hire help on their own without the training and supervision provided by home health agencies.
Most Medicare beneficiaries are not informed of their appeal rights when given notice that their home health care benefits will be terminated. Attorneys have filed a nationwide class action suit on behalf of homebound seniors seeking advance notice of any termination of benefits for Medicare home health coverage, as well as notice of the ability to appeal such a denial before the termination occurs. If your benefits or those of a family member are reduced or terminated, you should take the following steps:
Ask your home health agency to explain the cutback and write down its answer. Ask the agency to give you written notice of the cutback or termination of service.
Ask your physician to call the agency to urge it not to cut back the services and to provide a letter verifying the level of care you need. This can be essential to whether you ultimately receive the benefits you deserve.
Consult your attorney or a Medicare assistance agency in your state to determine whether you likely would be successful on appeal. If you decide to appeal, do so immediately, and arrange with the home health agency to pay privately for the services pending the result of the appeal.
In the Balanced Budget Act (BBA) of 1997, Congress made changes in the Medicare program aimed at keeping it solvent at least until 2007. One of these changes was the expansion of alternatives to traditional Medicare. The new law relabeled these alternatives “Medicare+Choice,” which many refer to as Medicare Part C. Under the old law, beneficiaries could choose between health maintenance organizations (HMOs) and traditional fee-for-service Medicare.
Beginning in 1999, the menu of options (at least on paper) expanded to include:
Until 2002, Medicare beneficiaries were able to switch among traditional Medicare and these other new options easily, typically with just a month’s notice. However, now nine months’ notice is usually required to switch. But beneficiaries who are happy with the way they are receiving Medicare can stay with that program, unless the program stops participating in Medicare. New Medicare enrollees who do not choose a particular program will automatically be enrolled in traditional Medicare.
The Medicare Prescription Drug, Improvement, and Modernization Act (MMA), enacted in 2003, changed the name of these private Medicare alternatives to Medicare Advantage and raised payment levels to local plans and would-be regional preferred provider organizations (PPOs).
While the federal government makes the rules about Medicare, the day-to-day administration and operation of the Medicare program are handled by private insurance companies that have contracted with the government. In the case of Medicare Part A, these insurers are called “intermediaries,” and in the case of Medicare Part B they are referred to as “carriers.” In addition, the government contracts with committees of physicians — “peer review organizations” (PROs) – to decide the appropriateness of care received by most Medicare beneficiaries who are inpatients in hospitals.
Sometimes an intermediary, carrier or PRO will decide that a particular treatment or service is not be covered by Medicare and will deny the beneficiary’s claim. Many of these decisions are highly subjective and involve determining, for example, what is “medically and reasonably necessary” or what constitutes “custodial care.” If a beneficiary disagrees with a decision, there are reconsideration and appeals procedures within the Medicare program. Once Medicare’s review process has been exhausted, the matter can be taken to court if the amount of money in dispute exceeds either $1,000 or $2,000, depending on the type of claim. Medicare beneficiaries can represent themselves during these appeal proceedings, or they can be represented by a personal representative or an attorney. The Medicare Rights Center estimates that only about 2 percent of Medicare beneficiaries appeal denials of care, but 80 percent of those who do appeal win more care.
Even if Medicare ultimately rejects a disputed claim, a beneficiary may not necessarily have to pay for the care he or she received. If a recipient did not know or could not have been expected to know that Medicare coverage would be denied for certain services, the recipient is granted a “waiver of liability” and the health care provider is the one who suffers the economic loss. In cases where this limited waiver of liability does not apply, however, the beneficiary is liable for any costs of care that Medicare does not cover. For example, a patient is financially responsible for any services normally provided under Medicare Part B if provided by a nonparticipating provider who did not “accept assignment” of the claim.
What with all the deductibles, copayments and coverage exclusions, Medicare now pays for only about half of the medical costs of America’s senior citizens. Much of the balance not covered by Medicare can be covered by purchasing a so-called “Medigap” insurance policy.
As the result of a law passed in 1992 that standardized Medigap policies, insurance companies may sell only policies that fall into one of ten standard benefit packages, ranging from basic coverage to the most comprehensive coverage.
All Medigap policies must provide at least the following core benefits (dollar figures are for 2005):
Nine additional policy models may provide a combination of eight other areas of coverage on top of the basic set. These areas of coverage include the coinsurance for days 21 to 100 in a skilled nursing facility, the Part A and Part B deductibles, foreign travel emergencies, and prescription drug coverage.
The 10 available Medigap policy packages are identified by the letters A (for the most basic package of benefits) through J, for the most comprehensive (see chart below). While the higher-letter plans are generally more comprehensive than the lower-letter plans, each plan package offers a different combination of benefits, allowing purchasers to choose the combination that is right for them. However, each plan package is the same across insurance companies — thus, a C package from one insurer will be identical to a C package offered by another. Of course, the more Medigap coverage you purchase, the more you will have to pay in premiums.
States may authorize the sale by insurance companies of the basic plan package and any number of the other nine approved combinations of benefits, so there may be fewer than 10 options to choose from in your state. Also, if you live in Massachusetts, Minnesota or Wisconsin, different types of standardized Medigap plans from the ones outlined below are sold.
A Medicare recipient cannot be denied a Medigap policy if he or she applies for one within six months of enrolling in Medicare Part B. Otherwise, claims relating to pre-existing conditions can be denied only during the first six months that the policy is in effect. However, federal law does not require that fee-for-service Medigap policies be offered to those who enroll in Medicare Part B because they are disabled.
Medigap policies do not fill all the gaps in Medicare coverage. The biggest gap they fail to bridge is for custodial care in a nursing facility or for skilled care in a nursing home beyond the first 100 days. For coverage of this type of care, you must either purchase long-term care insurance or qualify for Medicaid coverage.
Medigap also does not cover vision care, eyeglasses, hearing aids or dental care unless such treatment or equipment is needed as the result of an injury. Prescription drugs are covered in three plan packages (plans H, I and J), but there is a $250 deductible, and the plans pay only 50 percent of the costs thereafter up to an annual limit of $1,250 (plans H and I) or $3,000 (plan J). Once the Medicare prescription drug program provided in the Medicare Improvement Act takes effect in January, 2006, Medigap policies offering prescription drug coverage may no longer be sold.
A 2001 report by the General Accounting Office found that it pays to shop around for a policy. Premiums vary widely not only from state to state, but within states as well. For example, researchers found that in Texas a 65-year-old consumer could pay anywhere from $300 to $1,683 for plan A, depending on the insurer. In Ohio, plan F could range from $996 to $1,944 for an applicant of the same age. (For a news article on the GAO report, click here.)
To help you find and compare Medigap programs available in your area, the Medicare program offers a Web site called Medigap Compare. This interactive tool gives contact information for insurance companies in your state that sell Medigap policies, and offers basic information about the policies of some (but by no means all) of these insurers, including which plans they offer; if the plans are offered to persons at or over age 65, under 65 with disabilities and/or End-Stage Renal Disease (ESRD); how they price their plans based on what rating method they use; and if you need to be a member of a certain organization to buy one of their plans.
Also, the Center for Medicare Advocacy offers excellent online information about Medigap. Click on: www.medicareadvocacy.org/FAQ_Medigap.htm
If you don’t qualify for Medicaid and can’t afford a Medigap policy, you may be able to get help paying for the costs of Medicare.
There are three Medicare assistance programs, called Medicare Savings Plans:
To qualify for these programs, you must be eligible for Medicare Part A (even if you are not enrolled) and have limited income and resources. The income and resource requirements can vary from state to state, so check with your state before applying. In general the following limits are applied.
Program: QMB
Income Limit: Monthly income must be at or below 100 percent of the poverty level. For 2005, the income limits are $818 for individuals and $1,090 for couples.Program: SLMB
Income Limit: Monthly income must be between 100 percent and 120 percent of the poverty level. For 2005, the income limits are $977 for individuals and $1,303 for couples.Program: QI-1
Income Limit: Monthly income must be between 120 percent and 135 percent of the federal poverty level. For 2005, the income limits are $1,097 for individuals and $1,303 for couples.
Personal assets, including cash, bank accounts, stocks and bonds must not exceed $4,000 for an individual and $6,000 for married couples. Your house and car do not count as personal assets. Some states allow additional resources above these figures, for example, New York has no resource limits for the QI-1 Program.
To apply for one of these programs, contact your state Department of Social Services office or the equivalent agency in your state.
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