Industry Experience

Medicare

Medicare is a federal health insurance program for persons sixty-five or older, persons of any age with permanent kidney failure, and certain disabled persons. The program is administered by the Centers for Medicare & Medicaid Services (CMS). Medicare claims are processed and paid
by various commercial insurance companies under contract with CMS.

Part A – Hospital Insurance protection provides institutional care, including inpatient hospital care, skilled nursing home care, post-hospital home health care, and, under certain circumstances, hospice care.

  1. Enrollment. Any person eligible for Social Security monthly benefits is automatically eligible for Hospital Insurance protection, beginning with the first day of the month in which the person turns age sixty-five. An individual who is already receiving Social Security monthly benefits need not file again to receive Medicare Part A benefits. A person eligible for, but not yet receiving, Social Security monthly benefits may apply separately for Medicare Part A benefits. Most retired individuals pay no Part A premium.
  2. Coverage. For the first sixty days, all covered hospital expenses are paid in full except for an initial inpatient deductible ($1,316 in 2017). For the next thirty days, the patient must pay a daily coinsurance charge ($329 per day in 2017). Thereafter, the patient has available an additional lifetime reserve of 60 hospital days, during which the patient must pay a daily coinsurance charge ($658 per day in 2017). Skilled nursing facility care, home health care, and hospice care, are also covered, but intermediate and custodial care are not covered. Beyond 150 days there is no coverage.

Part B – Medical Insurance protection is a voluntary program of health insurance, which covers physician services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, prosthetics, and a number of other services not covered under Part A. This is also known as “Supplementary Medical Insurance (SMI).”

  1. Enrollment. Those who are receiving Social Security benefits are enrolled automatically at the time they become entitled to Hospital Insurance, unless they elect not to be covered for Medical Insurance. For persons born after 1938 normal retirement age is not age sixty-five. These persons must enroll before the beginning of the month in which age sixty-five is reached, in order to obtain coverage at the earliest possible date (unless they have elected early retirement, in which case they are enrolled automatically).
  2. Coverage. Medical Insurance helps pay for covered services received from a doctor in the doctor’s office, in a hospital, in a skilled nursing facility, in the patient’s home, or any other location. After the patient pays the first $166 of covered services in each calendar year, Medicare
    usually pays 80 percent of the approved charges for doctors’ services and the cost of other services. Medical Insurance under Medicare does not cover: 
    1. most routine physical examinations and tests directly related to such examinations;
    2. most routine foot care and dental care;
    3. examinations for prescribing or fitting eyeglasses or hearing aids, and most eyeglasses and hearing aids;
    4. immunizations (except annual flu shots and limited vaccinations for certain persons at risk);
    5. most cosmetic surgery;
    6. custodial care at home or in a nursing home. (Although Medicare does provide a limited benefit for home health care, it is the Medicaid system that provides for nursing home care.)

Part C – Medicare Advantage, previously known as Medicare+Choice, permits contracts between CMS and a variety of different managed care and fee-for-service organizations. These plans must provide all current Medicare-covered items and services, and they may incorporate extra benefits in a basic package, or they may offer supplemental benefits priced separately from the basic package.  Most Medicare beneficiaries can choose to receive benefits through the original Medicare fee-forservice program, or through a coordinated care plan (including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Provider-Sponsored Organizations (PSOs)), or a private fee-for-service plan that reimburses providers on a fee-for-service basis.

Part D – Prescription drug plans, provides a comprehensive voluntary prescription drug benefit available to everyone with Medicare. The plans are provided by insurance companies and other private companies approved by Medicare. Coverage is available under stand-alone plans, or through Medicare Advantage plans that integrate with health care coverage provided under Part C of Medicare. In 2017 the average basic premium is about $34 a month.

  1. Enrollment. There is an opportunity to enroll when joining Medicare, or during an annual open enrollment period running from November 15th to December 31st. Although enrollment is optional, those who fail to enroll will pay a penalty of about 1 percent for each month of delay (e.g., delaying enrollment for fourteen months will result in a 14 percent lifetime increase in premiums). Persons who have prescription drug coverage “at least as good” as the basic plan (see next paragraph) will not incur a penalty. However, not all drugs are available in every plan.

    In selecting a plan the enrollee must balance the three Cs of cost, coverage, and convenience.  For example, plans may charge a higher monthly premium in return for enhanced coverage offering a greater selection of drugs (set out in a “formulary”), lower deductibles, lower copays, and greater geographic coverage. Plan selection has been made difficult by the sheer number and variety of plans offered. A drug finder program can be found at www.medicare.gov.
  2. Coverage. All plans must provide coverage “at least as good” as the standard coverage set by Medicare. In 2017, under standard coverage, once the enrollee has paid a $400 annual deductible, the enrollee pays 25 percent and Medicare pays 75 percent of drugs costs on the next $3,700. The enrollee then pays 79 percent for generic drugs and 47.5 percent for brand name drugs on the next $4,950 (this represents the continued phase out of the donut hole coverage gap under The Patient Protection and Affordable Care Act of 2010). Thereafter, the enrollee pays 5 percent, and Medicare pays 95 percent of drug costs. Plans cover both generic and brand-name drugs. Low-income subsidies provide for no gap in coverage, and reduce, or eliminate, premiums, deductibles, and co-payments.

For those individuals who have retiree prescription drug benefits from their employers, substantial direct subsidies, and tax benefits, are offered to employers who maintain drug coverage for retired workers. The previous Medicare-approved drug discount cards have been phased out.

Medicare Premium Summary

Medicare Benefits Summary