Medicare is a social insurance program administered by the United States
Government, providing health insurance coverage to people who are aged 65 and
over, or who meet other special criteria such as a disability. Medicare operates
as a single-payer health care system. It was originally signed into law on July
30, 1965, by President Lyndon B. Johnson as amendments to Social Security
legislation. At the bill-signing ceremony President Johnson enrolled former
President Harry S. Truman as the first Medicare beneficiary and presented him
with the first Medicare card.|
The Centers for Medicare and Medicaid Services (CMS), a component of the
Department of Health and Human Services (HHS), administers Medicare, Medicaid,
the State Children's Health Insurance Program (SCHIP), and the Clinical
Laboratory Improvement Amendments (CLIA). Along with the Departments of Labor
and Treasury, CMS also implements the insurance reform provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). The Social
Security Administration is responsible for determining Medicare eligibility and
processing premium payments for the Medicare program.
The Chief Actuary of CMS is responsible for providing accounting information and
cost-projections to the Medicare Board of Trustees in order to assist them in
assessing the financial health of the program. The Board is required by law to
issue annual reports on the financial status of the Medicare Trust Funds.
Since the beginning of the Medicare program, CMS has contracted with private
companies to assist with administration. These contractors are commonly already
in the insurance or health care area. Contracted processes include claims and
payment processing, call center services, clinician enrollment, and fraud
In general, individuals are eligible for Medicare if they are a U.S. citizen or
have been a permanent legal resident for 5 continuous years, and they are 65
years or older, or they are under 65, disabled and have been receiving either
Social Security benefits or the Railroad Retirement Board disability benefits
for at least 24 months from date of entitlement (first disability payment), or
they get continuing dialysis for end stage renal disease or need a kidney
transplant. Roughly 25 to 30% of people with MS rely on Medicare as their primary
source of health coverage.
Before age 65, you are eligible for Medicare hospital insurance if you:
||Get Social Security disability benefits and have amyotrophic lateral
sclerosis (Lou Gehrig's) disease; or
||have been a Social Security disability beneficiary for 24 months;
||have worked long enough in a federal, state, or local government job
and you meet the requirements of the Social Security disability program.
Many beneficiaries are dual-eligible. This means they qualify for both Medicare
and Medicaid. In some states for those making below a certain income, Medicaid
will pay the beneficiaries' Part B premium for them (most beneficiaries have
worked long enough and have no Part A premium), and also pay for any drugs that
are not covered by Part D.
In 2007, Medicare provided health care coverage for 43 million Americans.
Enrollment is expected to reach 77 million by 2031, when the baby boom
generation is fully enrolled.
When an individual qualifies for Social Security, there is a 24 month waiting
period before Medicare begins. This becomes a big problem for those who can't
work. They typically can't afford COBRA coverage and or private insurance during
the waiting period. Those who have a spouse that has health insurance through
their employer are fortunate but are typically the exception.
As with many ill-conceived programs that the government operates, some things
don't quite make sense. It doesn't make sense that the government program that
an individual paid into can find you disabled and eligible for SSDI, yet make
you wait for 2 years before medical coverage for the very same disability is
available. Treatments and medications are needed, but they become impossible to
pay for and typically given up during this time. If an insurance policy has been
paid into, Social Security and Medicare, and the qualifications have been met,
then any policy should begin at that point.
As in the sample Medicare card above, there are separate lines with for Part A
and Part B, each with its own effective date. There are no lines for Part C or
D, as a separate card is issued for those benefits by the private insurance
company. The original Medicare program has two parts: Part A (Hospital
Insurance), and Part B (Medical Insurance). Only a few special cases exist where
prescription drugs are covered by original Medicare, but as of January 2006,
Medicare Part D provides more comprehensive drug coverage. Medicare Advantage
plans are another way for beneficiaries to receive their Part A, B and D
benefits. All Medicare benefits are subject to medical necessity.|
Part A: Hospital Insurance
Part A covers inpatient care in hospital and including critical access hospitals
and rehabilitation facilities. The deductible and 20% copay applies to most
services. Covered services for Part A include blood, home health services,
hospice care, hospital stays, and skilled nursing facility care. The amount and
length of coverage varies and is listed in the Medicare 2009 benefits guild.
If a beneficiary uses some portion of their Part A benefit and then goes at
least 60 days without receiving facility-based skilled services, the 100-day
clock is reset and the person qualifies for a new 100-day benefit period.
These benefits are basic, however, but do cover a broad amount of hospital
costs. The Part A benefit is not meant to act as a long-term coverage, but
rather as a short-term "get in & get out" coverage.
Part B: Medical Insurance
Part B medical insurance helps pay for some services and products not covered by
Part A, generally on an outpatient basis. Part B is optional and may be deferred
if the beneficiary or their spouse is still actively working. There is a
lifetime penalty (10% per year) imposed for not enrolling in Part B unless
actively working or covered by another health plan that has equal or better
benefits. The deductible and 20% copay applies to most services.
Part B coverage includes physician and nursing services, x-rays, laboratory and
diagnostic tests, influenza and pneumonia vaccinations, blood transfusions,
renal dialysis, outpatient hospital procedures, limited ambulance
transportation, immunosuppressive drugs for organ transplant recipients,
chemotherapy, hormonal treatments such as lupron, and other outpatient medical
treatments administered in a doctor's office. Medication administration is
covered under Part B only if it is administered by the physician during an
office visit such as those given by IV.
Part B also helps with durable medical equipment (DME), including canes,
walkers, wheelchairs, and mobility scooters for those with mobility impairments.
Prosthetic devices such as artificial limbs and breast prosthesis following
mastectomy, as well as one pair of eyeglasses following cataract surgery, and
oxygen for home use is also covered.
Complex rules are used to manage the benefit, and advisories are periodically
issued which describe coverage criteria. On the national level these advisories
are issued by CMS, and are known as National Coverage Determinations (NCD).
Local Coverage Determinations (LCD) only apply within the multi-state area
managed by a specific regional Medicare Part B contractor, and Local Medical
Review Policies (LMRP) were superseded by LCDs in 2003. Coverage information is
also located in the CMS Internet-Only Manuals (IOM), the Code of Federal
Regulations (CFR), the Social Security Act, and the Federal Register.
Part C: Medicare Advantage Plans
With the passage of the Balanced Budget Act of 1997, Medicare beneficiaries were
given the option to receive their Medicare benefits through private health
insurance plans, instead of through the original Medicare plan (Parts A and B).
These programs are known as "Part C" or "MA Plans". Pursuant to the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, these plans are
often more attractive to Medicare beneficiaries by the addition of prescription
Medicare has a standard benefit package that covers medically necessary care
members can receive from nearly any hospital or doctor in the country. For
people who choose to enroll in a Medicare Advantage health plan, Medicare pays
the private health plan a capitated rate, or a set amount, every month for each
member. Members typically also pay a monthly premium in addition to the Medicare
Part B premium to cover items not covered by traditional Medicare (Parts A & B),
such as prescription drugs, dental care, vision care and gym or health club
Medicare Advantage plans are required to offer coverage that meets or exceeds
the standards set by the original Medicare program, but they don't have to cover
every benefit in the same way. If a plan chooses to pay less than Medicare for
some benefits, like skilled nursing facility care, the savings may be passed
along to consumers by offering lower copayments for doctor visits. Medicare
Advantage plans use a portion of the payments they receive from the government
for each enrollee to offer supplemental benefits. Some plans limit their
members' annual out-of-pocket spending on medical care, providing insurance
against catastrophic costs over $5,000, for example. Many plans offer dental
coverage, vision coverage and other services not covered by Medicare Parts A or
B, which makes them a good value for the health care dollar.
For those living with severe or disabling chronic conditions, the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA) will start Medicare
Advantage Special Needs Plans (SNPs) beginning in 2010. This is another add-on
to Medicare that should help those with more severe or greater disabling
Part D: Prescription Drug Plans
Medicare Part D went into effect on January 1, 2006. Anyone with Part A or B is
eligible for Part D. It was made possible by the passage of the Medicare
Prescription Drug, Improvement, and Modernization Act. In order to receive this
benefit, a person with Medicare must enroll in a stand-alone Prescription Drug
Plans (PDPs) or Medicare Advantage plans (MA-PDs) with prescription drug
coverage. These plans are approved and regulated by the Medicare program, but
are actually designed and administered by private health insurance companies.
Unlike Original Medicare (Part A and B), Part D coverage is not standardized.
Plans choose which drugs (or even classes of drugs) to cover, at what level (or
tier) they wish to cover it, and are free to choose not to cover some drugs at
all. Plans that cover excluded drugs are not allowed to pass those costs on to
Medicare, and plans are required to repay CMS if they are found to have billed
Medicare in these cases.
The biggest problem with this plan is the coverage gap for "donut hole" that
exists. There is currently a 25% co-pay for prescriptions up to the current
$2,700 ceiling. Once Medicare has paid that amount, the individual has to pay
100% of the cost of all medications until it goes up to the current catastrophic
coverage amount of $6,154. The co-pay for the catastrophic coverage is 5% of the
For the disease modifying drugs the MS patients need, the first month will use
the 1st ceiling of coverage and will cost $725 out-of-pocket, then $3,454 before
hitting the catastrophic coverage threshold. So once the catastrophic coverage
point hits, the individual will pay $4,179 somewhere around 2 to 3 months into
the year. Average MS treatment costs would add on around $2,500 in out-of-pocket
costs for the rest of the year giving a total amount of $6,679 that has to be
paid just for medications.
Most people find that first $4,179 a bit difficult or impossible to find in this
short amount of time and will skip or delay treatments because of this. How
lawmakers arrived with these numbers and expected the individuals living on SSDI
to pay for it will never be known, but for those who actually live in the "real
world," it's difficult or nearly impossible to accomplish.
Out-of-Pocket Costs & Premiums
Neither Medicare Part A nor Part B pays for all of a covered person's medical
costs. There are premiums, deductibles and coinsurance, which the covered
individual must pay out-of-pocket. Some people may qualify to have other
governmental programs (such as Medicaid) pay premiums and some or all of the
costs associated with Medicare. The deductible amount for 2009 is $135 and a 20%
copay applies to most services.|
Most Medicare enrollees don't pay a monthly Part A premium, because they (or a
spouse) have had 40 or more quarters in which they paid Federal Insurance
Contributions Act taxes. Medicare-eligible persons who don't have 40 or more
quarters of Medicare-covered employment may purchase Part A for a monthly
premium of up to $443 for 2009.
All Medicare Part B enrollees pay an insurance premium for this coverage. The
standard Part B premium for 2009 is $96.40 per month. Your premium may be higher
if you are single and your modified adjusted gross income is greater than
$85,000 for 2009 also if you are married and your a modified adjusted gross
income is greater than $170,000 for 2009.
Medicare Part B premiums, whatever amount they may be, are typically deducted
from beneficiaries' monthly Social Security check
Deductible and coinsurance
Part A — For each benefit period, a beneficiary will pay:
||A Part A deductible of $1,024 (in 2008) for a
hospital stay of 1-60 days.
||A $256 per day co-pay (in 2008) for days 61-90 of a
||A $512 per day co-pay (in 2008) for days 91-150 of a
hospital stay, as part of their limited Lifetime
||All costs for each day beyond 150 days.
||Coinsurance for a Skilled Nursing Facility is
$128.00 per day (in 2008) for days 21 through 100
for each benefit period.
||A blood deductible of the first 3 pints of blood
needed in a calendar year, unless replaced. There is
a 3 pint blood deductible for both Parts A & B.
Part B — After a beneficiary meets the 2009 yearly deductible of $135.00, they
will be required to pay a co-insurance of 20% of the Medicare-approved amount
for all services covered by Part B. They are also required to pay an excess
charge of 15% for services rendered by non-participating Medicare providers.
The deductibles and coinsurance charges for Part C and D plans vary from plan to plan.
Medicare supplement (Medigap) policies
You can elect to purchase a type of supplemental coverage, called a Medigap
plan, to help fill in the holes or coverage gaps in the Original Medicare (Part
A and B) plans. These Medigap insurance policies are standardized by CMS, but
are sold and administered by private companies. Some Medigap policies sold
before 2006 may include coverage for prescription drugs. Medigap policies sold
after the introduction of Medicare Part D on January 1, 2006 are prohibited from
Other Health Insurance
When you have other insurance, Medicare has rules to determine which pays first.
The first to pay is the "primary payer" and pays up to the coverage limits. The
second to pay is the "secondary payer" and usually pays any of the remaining
The basic rule is that when you are retired, Medicare will be primary and the
private healthcare will be secondary. If you are under 65, generally the private
healthcare is primary and Medicare is secondary. There are some instances that
can change this order, but generally this is how it stands.
Social Security Planner
Centers for Medicare & Medicaid
Centers for Medicare Advocacy
CMS Internet-Only Manuals