Understanding Medicare

Jun 27, 2016

Understanding Medicare

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What is Medicare?

Administered by the U.S. government in 1966, the social insurance program provides health insurance for citizens over 65 years old or those with disabilities. Just this year it has provided insurance for over 50 million Americans.

How Medicare Helps

On average, Medicare covers about half (48 percent) of the health care charges for those enrolled. The enrollees must then cover the remaining approved charges either with supplemental insurance or with another form of out-of-pocket coverage. Out-of-pocket costs can vary depending on the amount of health care a Medicare enrollee needs. The program is broken down into four different parts, A, B, C, and D. Part A covers hospital bills and medical expenses. This includes food, room and board, and medical tests. Part B covers other medical expenses like physician, nursing, and other physical therapy visits. Part C covers other unforeseen expenses as well as offers a payment plan that was not implemented until 1996. Part D is the biggest portion of the program and it covers prescription drugs. The plan offers reduced prices for many prescription drugs that will be offered.

Eligibility

All U.S. citizens who are 65 or older and have been legal residents for at least five years are eligible for Medicare. Some people younger than 65 and with disabilities will be eligible if they receive Social Security Disability Insurance.

Medicare Part A premiums are entirely waived, if at least one the following circumstances apply:

  1. They are 65 years or older and U.S. citizens or have been permanent legal residents for 5 continuous years, and they or their spouse (or qualifying ex-spouse) has paid Medicare taxes for at least 10 years.
  2. They are under 65, disabled, and have been receiving Social Security Disability Insurance benefits or Railroad Retirement Board benefits.
  3. They get continued dialysis for end stage renal disease or are in need of a kidney transplant.

Benefits

Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers many prescription drugs, although some are covered by Part B. Part C health plans, the most popular of which are branded Medicare Advantage, are another way for Original Medicare (Part A and B) beneficiaries to receive their Part A, B and D benefits (basically Part C is a public supplement option that can be compared with supplemental Medicare coverage from a former employer or private so-called Medigap insurance).

Part A: Part A covers inpatient hospital expenses, including overnight stays, food, and tests among other things. However, there are a few limitations to Part A.

  1. Part A. will only cover a hospital stay for up to 90 days.
  2. The beneficiary is also allocated "lifetime reserve days" that can be used after 90 days. These lifetime reserve days require a copayment of $644 per day as of 2016, and the beneficiary can only use a total of 60 of these days throughout their lifetime.
  3. Under the new “Two-Midnight” rule, if a physician admits a Medicare beneficiary as an inpatient with an expectation that the patient will require hospital care that “crosses two midnights,” Medicare Part A payment is “generally appropriate.” However, if it is anticipated that the patient will require hospital care for less than two midnights, Medicare Part A payment is generally not appropriate.

Part A will also cover brief stays at a rehab facility or a skilled nursing facility if certain criteria are met:

  1. A preceding hospital stay must last longer than three days and nights.
  2. The rehab or nursing facility stay must occur after a doctor has identified ailment during the preceding hospital stay.
  3. If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing supervision then the nursing home stay would be covered.

Part B: Part B generally covers some outpatient expenses that part B does not cover. Part B coverage kicks in after the patient has reached their deductible and it will cover about 80% of the expenses. This covers a variety of things including doctor visits, lab tests, medication administered by a physician, and a variety of other outpatient treatments. It also covers walking aids and other at-home equipment needed.

Part C: The most widely known and popular portion of Medicare, part C or the Medicare Advantage plan is the most widely used option. This monthly payment can be chosen to ease the burden Original Medicare beneficiaries who choose to enroll in a capitated Part C Medicare Advantage health plan instead give up none of their rights as an Original Medicare beneficiary, receive the same standard benefits—as a minimum—as provided in Original Medicare, and they get an annual out of pocket (OOP) limit not included in Original Medicare. However they must typically use only a select network of providers except in emergencies, typically restricted to the area surrounding their legal residence.

Part D: Passed by the Medicare Modernization Act, Part D covers prescription drug plans. This section is not standardized, giving patients the option to choose specific “levels” of prescription drugs they would like to have covered.

Out-Of-Pocket Cost: Unfortunately Medicare does not cover everything, so it will be important to manage your finances when it comes to paying for other healthcare necessities. There are three main instances where you’ll be giving up some of your money.

Premiums: Medicare-eligible persons who do not have 40 or more quarters of Medicare-covered employment may buy into Part A for a monthly premium of:

  • $248.00 per month (as of 2012) for those with 30–39 quarters of Medicare-covered employment, or
  • $451.00 per month (as of 2012) for those with fewer than 30 quarters of Medicare-covered employment and who are not otherwise eligible for premium-free Part A coverage.

Premiums are also offered for the three other parts as well.

Deductibles and Coinsurance: These occur when your insurance plan does not cover all of a medical expense. You will essentially be “splitting the bill” with your insurance provider. Depending on the type of plan, some plans will cover more of the expenses than others.

Medigap

Medigap insurance provides coverage for many of the co-pays and some of the co-insurance related to Medicare-covered hospital, skilled nursing facility, home health care, ambulance, durable medical equipment, and doctor charges. Medigap's name is derived from the notion that it exists to cover the difference or "gap" between the expenses reimbursed to providers by Medicare Parts A and B for the preceding named services and the total amount allowed to be charged for those services by the United States Centers for Medicare and Medicaid Services (CMS). This is essentially an insurance plan that will foot the bill of your other insurance plan.

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Frequently Asked Questions

Will Medicare pay for long-term care services like nursing homes?

For things like rehabilitation that will last no more than 100 days, then it is possible for Medicare to cover the costs. Keep in mind that you must also have had a prior hospital stay of at least three days, and are admitted to a Medicare-certified nursing facility within 30 days of this stay. Medicare will cover 100% of the cost for the first 20 days, however, you’ll have to pick up the cost starting the 21st day.

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Due to our financial situation, I simply cannot afford to put my parents in a home, but having them live with me isn’t exactly ideal. Are there any other affordable options?

We realize that senior care communities can be costly, but there are a few things to be considered. Many healthcare providers will help offset the costs of moving to a senior care community. If that’s still not financially possible, look into having a home care aid come to your parents' house a few times a week. These home care aids can be hired through an agency or independently and can provide a variety of services to take care of senior loved ones. Don’t let money get in the way of providing the care your parents deserve.

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