Ch. 6A.1 - What is Medicare? :: Eligibility, Costs, Enrollment, Coverage :: Advocate's Guide to Managed Health Care

The material in this chapter has been licensed by the Medicare Rights Center.

A. Medicare is the federal health insurance program that has been covering eligible persons who are 65 years of age or older since 1965. In addition, certain people with disabilities and those with end stage renal disease (ESRD) and Amyotrophic Lateral Sclerosis (ALS) are also eligible for Medicare coverage. Medicare is available to everyone who meets the requirements, regardless of income.

The federal government pays most of the costs of Medicare. In addition, people with Medicare share the cost of the program by paying monthly premiums, coinsurance payments, and deductibles, which are required for many of the services covered under both Parts A and B

A. Medicare Part A covers inpatient hospital care, inpatient care in a skilled nursing facility, some home health care services, and hospice care.

Medicare Part B covers services provided by physicians and other Medicare-approved medical practitioners; durable medical equipment, a variety of outpatient care services, and some home health services not covered under Part A. Medicare does not cover long-term nursing care or custodial care. Medicare coverage of preventive health services is limited to specific items. While the list has been growing over the past 10 years, a large number of preventive services are still not covered.

Medicare Part C refers to the managed care plans that provide Medicare-covered care (Part A, Part B and Part D benefits) to enrollees who choose to receive their benefits this way. Part C used to be called “Medicare + Choice,” but it has been renamed “Medicare Advantage.” This manual will refer to Part C plans as “private health plans” or “HMOs and PPOs.”

Medicare Part D is the new outpatient prescription drug benefit that began in 2006. Part D is only available through private companies. More information about the Medicare prescription drug benefit is in Chapter 6F.

In order to be eligible for Medicare people must fall into one of the categories described below:

For all people with Medicare, Part B costs $88.50 per month in 2006. Most people with Medicare do not pay a premium for Medicare Part A because they have worked in the U.S. for at least 40 quarters (or the individual’s spouse has worked for at least 40 quarters). Part A is always free for people with Medicare due to a disability that entitles them to a Social Security cash benefit called Social Secuity Disability Insurance (SSDI).

For individuals who do not qualify for premium-free Part A, the cost for Part A is $393 per month in 2006, for those who have worked less than 30 quarters in the U.S. For those who have worked at least 30 quarters in the U.S., but less than 40, Part A costs $216 per month in 2006. One can purchase Parts A and B, or Part A only, but not Part B only. Please note that quarters are only counted towards your Medicare if you contributed federal payroll taxes (FICA taxes) while working. Call the National Social Security Hotline at 1-800-772-1213 for details on your work history and to find out exactly how much your Part A premium will be.

The Medicare Part B premium will automatically be deducted from your Social Security check. If you have not worked enough quarters to receive Part A benefits for free, then that premium will also be deducted from your Social Security check. If your Medicare benefits begin before your Social Security benefits (as in some end-stage renal disease (ESRD) cases) or you are not currently receiving Social Security benefits, then you will be billed by Social Security for the premiums until your Social Security benefits start.

Q. When should my clients enroll in Medicare Part A and Part B to avoid paying penalties?

A. Most people will want to enroll in both Part A and Part B as soon as they become eligible for them to avoid paying penalties charged for late enrollment. Individuals who delay enrollment in Part A, will pay a monthly penalty equal to 10% of the current Part A premium for twice the number of months in each 12 month period they could have been, but were not, enrolled in Part A. For example, if Mr. C delays enrolling in Part A for three years, then he will pay 10% more for the Part A premium for a period of six months.

While the penalty for Part A eventually expires, the penalty for late enrollment in Part B is permanent for most people. The penalty for Part B is equal to 10 percent of the monthly premium for every 12-month period that the individual could have been enrolled in Part B but was not. For example, if Mrs. R delays enrolling in Part B for three years, then she will pay 30% more for the monthly Part B premium for as long as she is enrolled. Individuals who pay premium penalties while they are enrolled in Medicare because of a disability will no longer have to pay the penalty when they turn 65 if they re-enroll in Medicare at that time.

The annual premium penalty is based on premium amounts in each new calendar year. In certain cases, Part B enrollment can be delayed without incurring higher premiums. Months during which an individual is insured through a current employer or a spouse’s current employer are not counted as months during which the individual could have been enrolled in Medicare Part B but was not. This exception does not apply to individuals who are entitled to Medicare on the basis of end-stage renal disease (ESRD).

Enrollment in Medicare is automatic for most people. However, some people must apply for enrollment, either when they initially qualify or during the next general enrollment period. There are also special enrollment periods for people who are still working when they qualify for Medicare, and for people with ESRD and Amyotrophic Lateral Sclerosis (ALS).

A. People who are currently receiving Social Security Retiree Insurance or have been receiving Social Security Disability Insurance (SSDI) for 24 months, enrollment in Medicare is automatic. People who are eligible for Medicare due to age will get a Medicare card in the mail about 3 months before their 65th birthday. People who are eligible for Medicare due to disability (have been receiving Social Security Disability Insurance (SSDI) for 24 months) will get a Medicare card in the mail about 3 months before they become eligible for Medicare. The Social Security Administration (SSA) will automatically deduct the Part B premium (and the Part A premium, if applicable) from their Social Security check. People who are still working and want to delay enrolling in Medicare, must notify SSA.

Individuals diagnosed with ALS may be eligible for a special automatic enrollment process. They should go to their local Social Security office and file for Social Security Disability Insurance (SSDI). They should take documentation of their illness and treatment history with them. If they do not have their medical records, they do not need to delay their application for disability. Social Security office staff will contact their medical providers to confirm their disease status. Make sure they have all their doctors’ contact information with them.

Once their application is accepted, there is an automatic five-month waiting period before disability benefits begin. This is to ensure they are suffering from a permanent disability and to avoid duplicating coverage they might be receiving from previous employers. They do not need to enroll in Medicare separately. Their Medicare benefits will begin on the first of the month that they receive SSDI.

Q. How does enrollment in Medicare Part A and Part B work for people who are not automatically enrolled?

A. Those who are eligible for Medicare due to age, but are not yet receiving Social Security benefits, must apply for Medicare at the local Social Security office or the Railroad Retirement Board. They should apply during their initial enrollment period, a 7-month period that includes the 3 months prior to the person’s 65th birthday, the month of the birthday, and the 3 months following their birthday. However, it is best that application be made within the first three months to avoid a delay in starting Part B coverage.

General Enrollment Periods: Individuals who do not enroll during their Initial Enrollment Period have another opportunity to enroll during the General Enrollment Period , which lasts from January 1st through March 31st of each year. Individuals who enroll during this time will begin receiving Medicare in July of the same year. They will have to pay penalties for late enrollment (see page 3).

Individuals diagnosed with ESRD may be eligible for a special initial enrollment process. They must enroll in ESRD Medicare separately from enrolling in SSDI. Their Medicare coverage may begin before they receive Social Security Disability Insurance (SSDI). To enroll in Medicare, they should go to their local Social Security office and complete Medicare enrollment forms, clearly stating that their disability is ESRD on the enrollment forms. They must provide documentation of their illness and treatment history. If they do not have their medical records, they do not need to delay their application for disability. Social Security office staff will contact their medical providers to confirm their disease status. Make sure they have all their doctors’ contact information with them. When their Medicare coverage begins can vary as follows:

If the client once had Medicare coverage because of ESRD and later gets ESRD again, he/she can resume ESRD Medicare coverage without the usual waiting period. Medicare coverage is effective back to the first of the month that treatment resumes or the subsequent kidney transplant occurs

Q. What are “Special Enrollment Periods” for Medicare Part A and Part B for people who have insurance from an employer?

A. Individuals who are covered by employer insurance at the time they initially become eligible for Medicare receive a Special Enrollment Period (SEP). The SEP allows people to delay signing up for Part B without penalty. Note that an individual may be covered by employer insurance through his own current employment or that of a spouse.

During the special enrollment period—the duration of coverage by the employer insurance as well as the 8 month period following the month after the work employer coverage ends or the person stops working (whichever comes first)—a person can sign up for Medicare without penalty. If the individual signs up for Medicare during the special enrollment period, there is an additional form to complete that requests details about employee coverage and the number of people employed at the company.

Individuals can also enroll in Medicare while they are still working and have primary employer health insurance. For those who qualify for Medicare due to age, employer insurance is considered primary if the individual is actively working there are 20 or more employees in the company. For those who qualify for Medicare due to disability, employer insurance is considered primary if there are 100 or more employees in the company.

If their employer insurance is secondary, individuals must sign up for Part B or the employer insurance will not pay at all. If their employer insurance is primary, but the individuals would rather have Medicare Part B as primary coverage, they must stop participating in the employer plan and enroll in Part B, and must pay the Part B monthly premiums. In this case, the employer is prohibited by law from offering a supplemental policy to cover the deductibles and copayments.

Individuals can use the SEP more than once. If they stop working, they have eight remaining months in the SEP. If they do not sign up for Part B and begin working again before the end of the SEP, then a new SEP is initiated.

Similarly, individuals who enrolled in Medicare during their initial enrollment period or during a special enrollment period can disenroll from Medicare without penalty and re-enroll during the special enrollment period after their employee coverage ends.

The date individuals’ Medicare coverage begins depends on when during the special enrollment period they enroll. If they enroll in Part B while still working or during the first full month after the employer coverage ends (or they retire), the can choose to have their Medicare effective the month of application, or up to three months after the month of application. If they wait to enroll between the second to eighth months of the special enrollment period, coverage begins the first of the month after the month of enrollment. The Medicare card will arrive in the mail 4-6 weeks after Social Security processes the Medicare application. They can begin using the Part B benefits on the first day of the month of enrollment, even if the new Medicare card has not arrived in the mail.

If they do not enroll in Medicare during their initial enrollment period, and they are not covered by employer insurance at the time they initially became eligible for Medicare, they will never qualify for a special enrollment period, even if they later start working and have coverage through their new employer. They will have to pay Medicare premium penalties for the time that they were not covered by an employer and had not signed up for Medicare.

Q. What are “coordination periods” for Medicare Part A and Part B for people diagnosed with end stage renal disease (ESRD) who have insurance from an employer?

A. Individuals who are covered by an employer health plan at the time they become eligible for Medicare due to end-stage renal disease (ESRD) begin a 30-month “coordination period” when they become entitled to Medicare. During the coordination period, employer-based coverage is the primary payer (instead of Medicare) regardless of the number of individuals employed. In addition, coverage does not have to be based on current employment only. During the coordination period, individuals can choose whether to enroll in Medicare.

The coordination period begins in the first month during which individuals become entitled to Medicare, or the first month during which they would have been entitled to Medicare if they had filed an application for Medicare ESRD benefits.

How Medicare Works for People Who Have Other Coverage

A. Federal employees who retired before January 1, 1983 must either be eligible for a Social Security benefit based on their non-federal employment, or have a spouse with coverage, to obtain Part A without cost. Federal employees retiring on or after January 1, 1983, can have Medicare Part A coverage at age 65 without cost. Part B is available to any federal employee retiree aged 65 or older who is either a U.S. citizen residing in the United States, or a lawfully admitted alien who has continuously resided in the U.S. for five years prior to filing a Medicare application.

Federal employees who are 65 and over and still employed have their primary coverage under the Federal Employees Health Plan (FEHP). Medicare is a secondary payer for these persons.

For non-military federal retireesenrolled in fee-for-service plans, Medicare pays first for most services. The Federal Employees Health Benefit Plan (FEHBP) picks up the difference or, in some cases, pays for the services not covered by Medicare. FEHBP fee-for-service plans waive most of their deductibles, coinsurance and copayments (except for prescription drugs) for Part B enrollees. As a result, FEHBP fee-for-service plan enrollees with Parts A and B find that they have little or no out-of-pocket expenses.

Federal retiree HMOs (through the Federal Employees Health Benefit Program or FEHBP) provide coverage to all their subscribers, even if they don't have Medicare. So your clients do not need Medicare Part B as they would if they were in a fee-for-service plan. Since your clients’ HMO copayments may be small (such as $10 per doctor visit), it may not be worth paying the monthly Medicare Part B premium for Medicare to pay their out-of-pocket costs.

However, if at any point your clients want to switch to a fee-for-service plan (for example, if their doctor leaves the HMO's network), they would need Medicare Part B. If they wait to enroll in Part B until the need arises, they will have to pay a premium penalty for late enrollment. Some other things to consider:

Military federal retirees enrolled in Part B are eligible for TRICARE, a Department of Defense program that acts as a supplement to Medicare, if they:

In these cases, Medicare is the primary payer for Medicare-covered services provided by a Medicare provider, and TRICARE pays remaining expenses, including deductible or coinsurance amounts up to the Medicare allowed charge. More information on health coverage for veterans can be found in Chapter 8.

Q. How does Medicare work when medical expenses are covered by Workers’ Compensation?

A. Medicare will not pay for any items and services if payment has been made or can reasonably be expected to be made under a worker’s compensation law or plan. Medicare does, however, make conditional payments so that people with Medicare will not have to use their own money to pay for bills while waiting for a decision from worker’s compensation. When Medicare makes a conditional payment, individuals will receive a Medicare Summary Notice (MSN) saying how much and for what services Medicare paid. These conditional payments must be repaid to Medicare when worker’s compensation pays the claim.

Q. How does Medicare work when medical expenses are covered by automobile medical, no-fault insurance or liability insurance?

A. Medicare is the secondary payer in cases where no-fault insurance or liability insurance is available as the primary payer. Medicare may make a conditional primary payment if it receives a claim that shows that these insurers will not pay promptly. In those cases, Medicare will pay the claim; then, when the no-fault or liability insurer pays, Medicare recovers its conditional payments.

Q. What are the gaps in Medicare coverage which some people close by buying other insurance coverage?

A. Medicare does not cover all health care expenses. The major gaps in Medicare coverage are:

Q. What kinds of insurance are used to close the gaps in Original Medicare coverage?

What Medicare doesn't cover:

Among other gaps, Original Medicare has no coverage for vision and dental care. It also requires your clients to pay 20% of the cost of each doctor or clinic visit, and a hospital deductible.

Medigap insurance:

Many people on Medicare buy supplemental insurance policies, known as Medigap plans. There are 12 standard Medigap plans, labeled A through L. Generally, the coverage gets more comprehensive and more expensive as you get closer to L.

MANAGED CARE FOR PEOPLE ON MEDICARE

How Medicare Works for People Who Have Other Coverage