Supplemental Security Income

Not all older persons living in the United States have Social Security benefits adequate to provide even the most basic necessities of life. This is true especially for persons who have spent their lives employed in the agriculture industry or as domestic workers and have been paid very low wages, often on a cash basis. Supplemental Security Income (SSI) was established in 1965 by Title XIX of the Social Security Act. SSI provides for a minimum level of economic support to persons age 65 and over, blind, or disabled regardless of their earning power in early life or when capable of working. SSI either provides “total support” or supplements a low Social Security benefit. In 2010, the SSI federal benefit for approximately 7 million people was a maximum of $674 per month for a single person and $1011 for a couple, although some states supplement this amount to some extent (SSA, 2010).

Other Late Life Income

Finally, financing late life may include private retirement or pension plans. Individuals may pay into the plans themselves (e.g., IRAs) or through their employers (e.g., 401K accounts). The private retirement, pension funds, or a combination of these are invested in private sector financial instruments (e.g., stocks, bonds, or real estate holdings) or perhaps in government treasury notes. Those funds are held for the beneficiary and may become part of his or her estate if the beneficiary dies before collecting the pension. Some private retirement annuities provide for several choices for receipt of funds after retirement. The retiree could elect to take his or her pension based on his or her own life only or based on the retiree’s and a spouse’s life. In other words, a person may set up a plan so that he or she receives all or most of the benefit during his or her lifetime rather than providing for any survivor benefit. Notification of the potential survivor of such a choice is not always required (Hooyman and Kiyak, 2008). The amount received is actuarially determined based on the life expectancy of one or two beneficiaries and whether a guaranteed minimum number of years are selected.

Overview

Medicare is an insurance plan for persons who are age 65, blind, or totally disabled, including those with end-stage renal disease. It combines the age-entitlement Medicare A with purchased B (Original Plan), C (Advantage Plans), and D (Prescription Plan). When one enrolls in Medicare, one selects the type of coverage and the premiums as one does with any other insurance plan. Medicare Part A was created to cover the costs of hospital and limited nursing home care (Box 20-1). Medicare Parts B & C were created as a purchasable and affordable voluntary insurance plan that covered outpatient and health care provider services in the forms of (1) fee-for-service, (2) preferred provider, and (3) managed care plan. Medicare Part D is a prescription drug plan.

Like Social Security, Medicare Part A was designed as a pay-as-you-go system; that is, taxes collected from employers and employees are used for payment of current Medicare beneficiaries and are not placed in a fund earmarked for taxpayers’ future medical expenses. Of the costs of Medicare Part B, Part C, and Part D, 75% comes from the general revenue of the federal government. The remainder comes primarily from the beneficiaries themselves in the form of premiums and co-pays.

Persons enrolled in Medicare pay a monthly premium for components B through D, usually deducted directly from their Social Security income. As of January 1, 2007, this premium is based on income as reported to the Internal Revenue Service. In the Original Medicare B and most other purchased plans, the patient is responsible for paying premiums to the insurer and is required to make a co-pay when services are received; in this way, the patient is sharing the cost. In the Medicare Advantage Plans (Medicare C), the patient is assigned to specific providers and vendors who have entered into a prior (prospective) agreement with the insurer about services provided and patient co-pays. These plans were created in an attempt to control the skyrocketing costs associated with the fee-for-service model. With the Medicare Advantage Plans, a provider or health care system receives a flat capitated rate from Medicare for each potential recipient of care. Within pre-established guidelines, all medically necessary services must be provided by that provider or health care system.

Medicare is administered by the Centers for Medicare and Medicaid Services (CMS) and is a part of the Department of Health and Human Services, a special entity created to improve the administration of the programs. In 2009, nearly 47 million persons were covered by some part of Medicare with total expenditures of $509 billion (CMS, 2009). In 2010, major changes in Medicare were made into law through the Affordable Care Act (ACA). Through roughly 165 provisions, the ACA will reduce costs by decreasing payment rate while at the same time reducing fraud and increasing coverage for preventive services and research (Trustees, 2010b). The impact of these changes remains to be seen.

Medicare Part A

Medicare Part A is a hospital insurance plan covering acute care and acute and short-term rehabilitative care and some costs associated with hospice care and home health care under certain circumstances. Those qualified automatically receive a Medicare card (red, white, and blue) indicating Medicare Part A coverage when he or she becomes eligible to receive Social Security income. Those who have not paid an adequate amount into the U.S. Social Security system may be eligible to purchase Part A coverage for a monthly fee ($450 per month in 2011). Coverage begins the first day of the month of eligibility. The coverage and co-payments vary by setting under the original fee-for-service plans. When acute care is needed, the co-payments can be quite high, especially for stays of over 60 days. The initial deductible is $1132 (as of 2011) with no co-insurance until day 91 when it is $283 per day for days 61 to 90 each benefit period. After the 90th day, a person begins using “lifetime reserve days”—up to 90 at $566 per day (CMS, 2011).

Rehabilitative care, usually provided in skilled nursing facilities, is paid for only if it occurs within a set time from a hospital discharge and as long as the patient requires what is called skilled care (only that which is provided by a licensed nurse or physical or occupational therapist). Medicare Part A will pay 100% of the first 20 days of a nursing home stay, with a co-pay of up to $141.50 per day for days 21 to 100 and no coverage after that (CMS, 2011). At any time the person no longer needs skilled care, Medicare coverage stops. Medicare does not cover additional charges that may be incurred during a long-term care stay, such as incontinence supplies or laundry.

Home health care under Medicare must consist of medically-necessary part time or intermittent skilled nursing, physical therapy, or speech-language pathology or a continuing need for occupational therapy. It must be provided at the written direction of a physician and through a certified agency. Ongoing supervision can be provided by either a physician or a nurse practitioner. The person receiving the care must be home-bound. It must be provided through a home health care and for the purposes of active rehabilitation as seen in the nursing home setting. There are no co-payments for home health care and limited co-pays for hospice care. When the assistance needed is limited to personal care or medication supervision, it is not covered by Medicare at all. There is not co-pay for these services but a 20% co-pay for any durable medical equipment that may be needed, such as hospital beds or oxygen equipment.

Hospice services (see Chapter 23) are usually provided in the home; for which there are no co-pays or deductibles. If short term respite or inpatient stays are necessary for the comfort of the patient or family support there is a 5% co-pay.

Medicare Part B

In the 7 months surrounding a person’s 65th birthday (from 3 months before), all persons who are eligible for Medicare Part A must select and apply for Part B or Part C (see below) through the Social Security Administration (www.socialsecurity.gov). Medicare Part B covers the costs associated with the services provided by physicians; nurse practitioners; outpatient services (e.g., laboratory services); qualified physical, speech, and occupational therapists. Beginning in 2011, most deductibles and other cost-sharing of preventive care has been removed, and the one-time-only wellness checkup has been replaced with an annual covered exam (Whitehouse, n.d.).

Medicare Part B is often referred to as “Original Medicare,” based on a traditional fee-for-service arrangement wherein the charge was individually determined by the provider and payment due at the time services rendered. At this time, there are two models for reimbursement—one in which the provider “accepts assignment” or accepts the fees set by Medicare or does not. Under the latter system providers may bill patients directly, and the patients in turn “file” or request reimbursement from their insurance company (e.g., Medicare, AARP, etc.) for whatever portion they are eligible for. If assignment is accepted, the patient cannot be billed any more than the difference between what the provider is reimbursed (about 80% for physicians and 85% of physicians rate for NPs) and the “allowable” charges; charges are determined on an annual basis by CMS and vary regionally. A provider who does not accept assignment may charge the patient up to 15% above the allowable charge. A combination of an increasing number of wealthy elders and fewer primary care providers has spawned a new industry of “boutique” services, including physician practices. For an additional “membership” or “convenience” or “surcharge,” the patient has heretofore unknown access to his or her choice of health care services and providers.

The advantages of the Original Medicare Plan include choice and access. Participants can seek the services of any provider they choose and do so without a referral. While the numbers are diminishing, providers all over the United States accept Medicare, and participants can change providers as often as desired. With the Original Medicare Plan, the patient is responsible for an annual deductible, co-pays, coinsurance charges, and a monthly premium. In 2011, this was $115.40 a month for persons with incomes of $85,000 or less as an individual or $170,000 or less as a family. The premiums rise gradually to $369.10 with incomes up to $214,000 individual and $428,000 family. The annual deductible was $162 (CMS, 2011).

Medicare Part C

Otherwise referred to as Medicare Advantage Plans (MAPs), Medicare Part C uses a prospective payment plan and include traditional health maintenance organizations (HMOs) and managed care plans. All traditional services covered by Medicare Part A and Part B must be provided, and additional services, co-pays, and deductibles are predetermined. Medicare Advantage Plans may or may not also provide prescription drug benefits; if so, they are referred to as MAP-PDs. Not all MAPs are offered at all locations in the United States. Those that have been granted Medicare per capita waivers cannot refuse applicants based on pre-existing health conditions. MAP premiums vary in price depending on location and range of services. The elder is referred to the Medicare website for more information or a counselor available through senior organizations (www.medicare.gov).

MAPs may provide a cost savings to the member as well as extra benefits. In most cases, a member of the plan pays no premium. However, special rules must be followed, and the member may be charged extra co-pays for additional services. The member is also restricted to certain providers and hospitals. There are fewer out-of-pocket costs unless an individual decides to see a provider or to seek a service without a referral or outside the system to which he or she has subscribed; such services are usually not covered at all. Referrals are required for all services other than that of the primary health care provider. The negative aspects of MAPs are the access barriers to services beyond primary care, such as specialists and high-tech procedures and treatments.

MAPs differ from other plans in that they are expected to emphasize preventive medicine, comprehensive care, periodic physical examinations, and immunizations. The best of these plans are complete health care systems with highly trained physicians, nurse practitioners, and nurses working out of single or regional and completely equipped medical centers. Some HMOs provide extensive health education services, support groups, and telephone support services to homebound patients. The supplemental services offered may save the participant a considerable amount in the costs of medications, assistive devices, and professional consultation charges.

The premium is in the form of a “capitated” payment. The MAP receives a set amount on a monthly or quarterly basis regardless of service use for each member enrolled and regardless of the amount of care given. All necessary care must be provided from this amount. The MAP assumes all of the liability for costs incurred for the care of the member based on the plan. This model has created abuses and horror stories in which elders were denied needed treatments to save money for the corporate providers. Patient protection laws now allow consumers to lodge complaints and initiate legal action against these abuses. The Center for Patient Advocacy supported a much-needed bill that became law in October 1999 (www.biapa.org). This law allows appeals when a MAP denies care, guarantees access to specialists when needed, ensures that health-related decisions are made by health care providers rather than bureaucrats, and holds the plans legally accountable for medical decisions that cause harm.

Medicare Part D

In 2003, the Medicare Modernization Act established a prescription drug benefit for eligible recipients of Medicare, known as Medicare Part D; the plan was implemented on January 1, 2006. It is an elective prescription drug plan (PDP) with associated out-of-pocket premiums and co-payments. All persons with either Medicare Part A or Medicare Part B are eligible to voluntarily purchase a Medicare Part D PDP. Help with the costs associated with Medicare Part D is available for persons with low incomes (below 150% of the poverty level) and those who receive Medicaid. For persons with both Medicare and Medicaid (called “dual eligibles”), the new plan wasn’t voluntary and replaced the former drug benefit under Medicaid. Dually eligible persons who did not choose a plan are arbitrarily assigned to a PDP.

The PDPs established under Medicare Part D are all commercial plans that have contractual arrangements with CMS. To be included as an option, the company must agree to follow the rules set forth by CMS and change as directed. With the agreement to provide the minimum level of benefits established by Medicare Part D regulations, the plan is deemed “credible” by the CMS and becomes accepted as equivalent (Stefanacci, 2006). Like other insurance plans, once enrolled in either Medicare Part D or another credible PDP, a person cannot change a plan until the next open enrollment period except under special circumstances. These circumstances include those who are admitted to, reside in, or are discharged from a skilled nursing facility and persons with dual-eligibility. Different than other plans, if the person does enroll in Medicare Part D at the same time as enrolling in Medicare Part B, late enrollment penalties are charged. Persons can change their plans during the “open enrollment” periods each year.

Most PDPs are set up in a similar way. Deductibles, co-pays, gaps, and limits are dependent on the premiums paid, ranging from about $25 to about $100 with an annual deductible of $250. After the person had spent $250, the PDP covered 75% of the cost of the approved drugs up to $2000, with a 25% co-pay (Medicare paid $1500, the person paid $500). The next $2850 in costs was paid directly by the individual (called the “donut hole”). When the total costs for approved drugs reached $5100 ($3600 out-of-pocket), the PDP paid 95% (5% co-pay) of all drug costs for the rest of the year. The premiums and co-pay amounts are expected to change annually and vary greatly from plan to plan. The deductible and donut-hole are repeated yearly. More than 8 million elders reached this “donut hole” or gap in 2007. The Affordable Care Act of 2010 attempted to address this, first with a rebate of $250 when the hole is reached, and beginning in 2011, pharmaceutical companies agreed to institute a 50% discount on brand name drugs purchased during that time (Whitehouse, n.d.). Although most PDPs have donut holes, a person may elect a plan with lower co-pays or broader drug coverage for a higher monthly premium (CMS, 2010).

Nurses, nurse practitioners, physicians, pharmacists, and community volunteers spend hours helping beneficiaries enroll at appropriate times and select the insurance plans that best meet their needs. This sometimes onerous task can be instrumental in promoting healthy aging.

TRICARE for Life

TRICARE is a Medigap policy provided by the Department of Defense for Medicare-eligible beneficiaries ages 65 and older and their dependents or widows or widowers older than age 65. This plan requires that the person enroll in both Medicare Part A and Part B and pay the premiums for Part B. As a Medigap policy, TFL covers those expenses not covered by Medicare, such as co-pays and prescription medicines. Dependent parents or parents-in-law may be eligible for pharmacy benefits if they turned age 65 on or after April 1, 2001, and are enrolled in Medicare Part B. For more information about this, see www.tricare.osd.mil.