Medicare Program Structure

Enrollment

Before an individual reaches age 65, he or she must decide whether to enroll in Medicare Part A or Part B or both. If eligible beneficiaries want Medicare coverage to start the month they reach age 65, they should contact their local Social Security office 3 months before their 65th birthday. If they decide not to sign up for Medicare until after their 65th birthday, the Medicare Part B effective date is delayed. For each 12-month period an individual delays enrollment in Medicare Part B, he or she will have to pay a 10% Part B premium penalty.

An eligible beneficiary may delay enrollment without a penalty or a waiting period, however, if the individual (or spouse) was still employed and covered by an employer’s group health plan at the time of eligibility. Individuals who do not enroll within the 3-month period before becoming age 65 must wait and enroll during the general enrollment period, which is January 1 through March 31 of each year. Medicare Part B coverage becomes effective on July 1 of that year. Unless an eligible person has an employer-provided group health plan, declining Medicare may not be a good idea. If Medicare coverage is declined when the individual first becomes eligible, “late enrollment” carries two penalties. (See next section on Premiums and Cost-Sharing Requirements.)

Premiums and Cost-Sharing Requirements

Medicare Part C (Medicare Advantage Plans)

The Balanced Budget Act of 1997, which went into effect in January 1999, expanded the role of private plans under what was originally called Medicare + Choice to include managed care plans such as preferred provider organizations (PPOs), provider-sponsored organizations (PSOs), private fee-for-service (PFFS) plans, and medical savings accounts (MSAs) coupled with high-deductible insurance plans. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 renamed the program “Medicare Advantage” and created another option: regional PPOs.

Medicare Part C coverage not only includes Part A and Part B coverage but also pays for services not covered under the original Medicare plan, such as preventive care, prescription drugs, eyeglasses, dental care, and hearing aids.

For a Medicare beneficiary to qualify for one of these Medicare Advantage options, he or she must be eligible for Medicare Parts A and B and must live in the service area of the plan. As mentioned, an individual is generally not eligible to elect a Medicare Advantage plan if he or she has been diagnosed with ESRD. There are exceptions to this eligibility rule, however, such as individuals who are already members of a Medicare Advantage plan when they are diagnosed with ESRD and individuals who received a kidney transplant and no longer require a regular course of dialysis treatments.

Medicare Fact: If a beneficiary enrolls in a Medicare Part C plan, he or she does not need a supplemental plan (Medigap).

Other Medicare Health Plans

Some plans provide both Parts A and B coverage and some also provide prescription drug coverage (Part D). Details of the Medicare Cost Plans and Demonstration/Pilot Programs are explained on page 83 respectively of the Medicare and You handbook for 2012.

The PACE program is discussed later in this chapter.

Medicare Part D (Medicare Prescription Drug Benefit Plan)

Medicare Part D offers prescription drug coverage to all seniors eligible for Medicare. These plans are run by insurance companies or other private organizations approved by Medicare. The cost of drugs within each plan can vary.

Owing to the new healthcare reform law, the Standard Part D benefit now provides some coverage in the “donut hole”—between the point at which Medicare Part D stops paying for prescriptions and the point at which catastrophic coverage for drugs becomes effective. Although Part D does not provide a benefit for brand name drugs in the donut hole until 2013, the manufacturers of the brand-named drugs will provide a 50% discount to most Part D enrollees. By 2020, the Part D donut hole will be completely phased out through the combination of the additional Part D benefit and brand discount.

Individuals qualifying for both Medicare and Medicaid benefits (dual eligibles, sometimes referred to as Medi-Medi) who receive the full Medicaid benefits package no longer have prescription drug coverage under Medicaid but can enroll in Medicare Part D. Medicare pays the Part D deductible for all dual eligibles and for their monthly premiums, if they enroll in an average or low-cost Part D plan. These subsidies eliminate the gap in coverage (donut hole) for dual eligibles that Medicare beneficiaries who do not qualify for Medicare and Medicaid face. Dual eligibles are responsible, however, for small copays ranging from $2.50 to $6.30. Dual eligibles residing in nursing homes or other institutions are exempt from copays because they already are contributing all but a small portion of their income to the cost of their nursing home care.

Changing Medicare Health or Prescription Drug Coverage

Beneficiaries can change their Medicare health or prescription drug coverage during the annual open enrollment period. Beginning in the fall of 2011, the annual enrollment period dates changed, giving enrollees more time to join or switch their Medicare health or prescription drug plan. Rather than November 15 to December 31, the new enrollment period is between October 15 and December 7. Therefore, if a change was made during this period in 2011, new coverage will began on January 1, 2012.

Programs of All-Inclusive Care for the Elderly (PACE)

Programs of All-Inclusive Care for the Elderly (PACE) is a combination Medicare/Medicaid program that provides community-based long-term care services to eligible recipients. If an individual qualifies for Medicare, all Medicare-covered services are paid for by Medicare. If he or she also qualifies for Medicaid, he or she must pay either a small monthly payment or pay nothing for the long-term care portion of the PACE benefit. Those who are not Medicaid-eligible must pay a monthly premium to cover the long-term care portion of the PACE benefit and a premium for Medicare Part D drugs. However, there is no deductible or copayment for any drug, service, or care approved by the PACE team.

To view the fact sheet “Quick Facts about Programs of All-Inclusive Care for the Elderly (PACE),” visit the Evolve site.

Medicare/Medicaid Dual Eligibility

Dual eligibility, as stated earlier, refers to the status of individuals who qualify for benefits under both the Medicare and Medicaid programs. Most dual eligibles are low-income elderly or individuals younger than 65 years with disabilities. Medicare does not pay for all health services, just basic physician and hospital care. In addition, Medicare beneficiaries have to meet a yearly deductible and pay a monthly premium and a 20% copayment (cost sharing) for all covered services. Dual eligibles rely on Medicaid to pay Medicare premiums and cost-sharing (deductibles and copays) expenses and to pay for the needed benefits Medicare does not cover such as long-term care.

Medicare Supplement Policies

The traditional Medicare program provides valuable coverage of healthcare needs, but it leaves uninsured areas with which elderly and disabled Americans need additional help. To ensure that they are adequately protected, many seniors purchase a Medicare supplement policy (also referred to as a Medigap policy). A Medicare supplement policy is a health insurance plan sold by a private insurance company to help pay for healthcare expenses not covered by Medicare and Medicare’s deductibles and coinsurance. An individual may qualify for supplemental insurance through an employer-sponsored retirement plan or, more commonly, through a Medigap plan.