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Medicare

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Medicare

Medicare is a national health insurance program created and administered by the federal government in the United States to address the medical needs of older American citizens. Medicare is available to U.S. citizens 65 years of age and older and some people with disabilities under age 65.

Introduction

Medicare is the federal government’s principal health care insurance program for people 65 years of age and over. In addition, the program covers people of any age who are permanently disabled or who have end—stage renal disease (people with kidney ailments that require dialysis or a kidney transplant). The Medicare program insures 39 million Americans and spends $213 billion a year on their care.

For the most part, Medicare pays only for "acute" care — care that the program’s administrators view as reasonable and necessary to diagnose or treat an illness or injury. In other words, the program does not pay for most preventive or chronic health care. Medicare consists of three major programs: Part A, which covers hospital stays; Part B, which covers physician fees; and the recently—added Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options.

Although Medicare was originally conceived as a program that would relieve older persons of the burden of paying for health care, Medicare beneficiaries now pay a greater percentage of their incomes for out–of–pocket health care expenses than they did before Medicare was enacted in 1965. In addition to paying a monthly premium, Medicare recipients are often required to pay a portion of the cost of the services they receive. This "cost–sharing" may take the form of a deductible or co—insurance amount. Deductibles, co–insurance amounts and premiums usually increase each January. In addition, there are many services and items, such as prescription drugs, and long–term nursing home or in—home care that Medicare does not cover. To help with this cost–sharing and the items that Medicare does not cover, Medicare beneficiaries often purchase private insurance policies called "Medigap" policies.

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Eligibility

Medicare is an "entitlement" program, meaning you do not have to be poor to get Medicare. There are two parts of Medicare, each with their own eligibility requirements. Medicare Part A is available for anyone who is over age 65 or who is permanently disabled and who is eligible for Social Security.

You are eligible for Medicare Part A if you:
  • Are a United States resident who has reached age 65 and are either a U.S. citizen or a legally admitted alien who has resided in the U.S. continuously for at least five years;
  • Are a disabled person of any age who has been entitled to Social Security, widows, or Railroad Retirement disability benefits for 25 months;
  • Have end–stage renal disease that requires dialysis treatment or a kidney transplant.
Medicare Part B is available for anyone over age 65 regardless of Social Security eligibility.

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Medicare Part A

Medicare Part A covers institutional care in hospitals and skilled nursing facilities, as well as certain care given by home health agencies and care provided in hospices.

Any person who has reached age 65 and who is entitled to Social Security benefits is eligible for Medicare Part A without charge. That is, there are no premiums for this part of the Medicare program.

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Hospital Coverage

Medicare pays for 90 days of hospital care per "spell of illness," plus an additional lifetime reserve of 60 days. A single "spell of illness" begins when the patient is admitted to a hospital or other covered facility, and ends when the patient has gone 60 days without being readmitted to a hospital or other facility. There is no limit on the number of spells of illness. However, the patient must satisfy a deductible before Medicare begins paying for treatment. After the deductible is satisfied, Medicare will pay for virtually all hospital charges during the first 60 days of a recipient’s hospital stay, other than telephone and television expenses.

Medicare Coverage

  • A bed in a Semiprivate Room, (a room with at least one other patient — Medicare will pay for a private room only if it is "medically necessary.")
  • All Meals
  • Regular Nursing Services
  • Operating Room, Intensive Care Unit, or Coronary Care Unit Charges
  • Medical Supplies
  • Drugs Furnished by the Hospital
  • Laboratory Tests
  • X–Rays
  • Use of Appliances
  • Medical Social Services
  • Physical & Occupational Therapy
  • Speech Therapy
  • Blood Transfusions (after the first three pints of blood)

However, Medicare will not pay for treatments or procedures that it considers medically unproven or experimental.

If the hospital stay extends beyond 60 days, the Medicare beneficiary begins shouldering more of the cost of his or her care. From day 61 through day 90, the patient pays coinsurance. Beyond the 90th day, the patient begins to tap into his or her 60–day lifetime reserve. During hospital stays covered by these reserve days, beneficiaries must pay coinsurance. This reserve is not reset after each "spell of illness." Once it has been exhausted, the beneficiary will receive coverage for only 90 days when the next spell of illness occurs. However, studies show that the average length of a hospital stay covered by Medicare is eight days.

Medicare Part A also pays for stays in psychiatric hospitals, but payment is limited to a total of 190 days of inpatient psychiatric hospital services during a beneficiary’s lifetime.

Fighting a Hosptial Discharge

If you are admitted to a hospital as a Medicare patient, the hospital may try to discharge you before you are ready. You may need more time to recover from surgery or your hip fracture may not be fully healed, but the hospital may want the room back. While the hospital can’t force you to leave, it can begin charging you for services. Therefore, it is important to know your rights and how to appeal. Even if you don’t win your appeal, appealing can buy you crucial extra days of Medicare coverage.

Before a hospital can discharge you, it must give you a written notice of discharge. If you do not receive a notice and the hospital is threatening to discharge you or begin charging you for services, you can ask for the hospital to give you its discharge decision in writing. You can’t appeal your discharge until you receive the notice–called a Hospital–Issued Notice of Non–coverage or Notice of Discharge and Medicare Appeal Rights–in writing.

Once you receive a notice, you should immediately contact your local Medicare Quality Improvement Organization (QIO). A QIO is a group of doctors and other professionals who monitor quality of care. They are paid by the federal government and not affiliated with a hospital or HMO. The phone number should be on the notice.

It is very important to contact the QIO right away. You must contact the QIO by noon on the first business day after you receive the notice. If you do this, you will not have to pay for your care while you wait for your discharge to be reviewed. If you don’t contact the QIO by noon, the hospital can begin charging you on the third day after you receive the notice.

The QIO will conduct a review of the discharge. The QIO doctors will review the medical necessity, appropriateness, and the quality of hospital treatment furnished to you. The hospital cannot discharge you while the QIO is reviewing the discharge decision, and you will not have to pay for the additional days in the hospital. If you don’t agree with the QIO’s decision, you can ask it to reconsider. It must issue a decision within three days.

If, after the reconsideration, the QIO still agrees with the hospital’s decision, you can appeal to an administrative law judge (ALJ). You will probably need legal counsel to help you through this process. You can appeal the ALJ’s decision to the Department of Health and Human Services, Departmental Appeals Board (DAB) the ALJ rules against you. Finally, if you don’t agree with the DAB decision, you can appeal to federal court as long as $1,000 is at stake. States may have there own discharge protections. You can find the law in your state, from the QIO in your state.

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Skilled Nursing Facility Coverage

Medicare Part A covers up to 100 days of "skilled nursing" care per spell of illness. However, the conditions for obtaining Medicare coverage of a nursing home stay are quite stringent.

Requirements:

  • The Medicare recipient must enter the nursing home no more than 30 days after a hospital stay that itself lasted for at least three days (not counting the day of discharge);
  • The care provided in the nursing home must be for the same condition that caused the hospitalization (or a condition medically related to it); and
  • The patient must receive a "skilled" level of care in the nursing facility that cannot be provided at home or on an outpatient basis.

In order to be considered "skilled," nursing care must be ordered by a physician and delivered by, or under the supervision of, a professional such as a physical therapist, registered nurse or licensed practical nurse. Moreover, such care must be delivered on a daily basis. (Few nursing home residents receive this level of care.)

As soon as the nursing facility determines that a patient is no longer receiving a skilled level of care, the Medicare coverage ends. And, beginning on day 21 of the nursing home stay, there is a significant copayment equal to one–eighth of the initial hospital deductible. This copayment will usually be covered by a Medigap insurance policy, provided the patient has one.

A new spell of illness can begin if the patient has not received skilled care, either in a skilled nursing facility (SNF) or in a hospital, for a period of 60 consecutive days. The patient can remain in the SNF and still qualify as long as he or she does not receive a skilled level of care during that 60 days.

Nursing Home Coverage

Nursing homes often terminate Medicare coverage for SNF care before they should. Two misunderstandings most often result in inappropriate denial of Medicare coverage to SNF patients. First, many nursing homes assume in error that if a patient has stopped making progress towards recovery then Medicare coverage should end. In fact, if the patient needs continued skilled care simply to maintain his or her status (or to slow deterioration) then the care should be provided and is covered by Medicare.

Second, nursing homes may wrongly believe that care requiring only supervision (rather than direct administration) by a skilled nurse is excluded from Medicare’s SNF benefit. In fact, patients often receive an array of treatments that don’t need to be carried out by a skilled nurse but which may, in combination, require skilled supervision. In these instances, if the potential for adverse interactions among multiple treatments requires that a skilled nurse monitor the patient’s care and status, then Medicare will continue to provide coverage.

When a patient leaves a hospital and moves to a nursing home that provides Medicare coverage, the nursing home must give the patient written notice of whether the nursing home believes that the patient requires a skilled level of care and thus merits Medicare coverage. Even in cases where the SNF initially treats the patient as a Medicare recipient, after two or more weeks, often, the SNF will determine that the patient no longer needs a skilled level of care and will issue a "Notice of Non–Coverage" terminating the Medicare coverage.

Whether the non–coverage determination is made on entering the SNF or after a period of treatment, the notice asks whether the patient would like the nursing home bill to be submitted to Medicare despite the nursing home’s assessment of his or her care needs. The patient (or his or her representative) should always ask for the bill to be submitted. This requires the nursing home to submit the patient’s medical records for review to the fiscal intermediary, an insurance company hired by the Health Care Financing Administration to administer the Medicare program.

The review costs the patient nothing and may result in more Medicare coverage. While the review is being conducted, the patient is not obligated to pay the nursing home. However, if the appeal is denied, the patient will owe the facility retroactively for the period under review. This should be addressed. If the fiscal intermediary agrees with the nursing home that the patient no longer requires a skilled level of care, the next level of appeal is to an Administrative Law Judge. This appeal can take a year and involves hiring a lawyer. It should be pursued only if, after reviewing the patient’s medical records, the lawyer believes that the patient was receiving a skilled level of care that should have been covered by Medicare. If you are turned down at this appeal level, there are subsequent appeals to the Appeals Council in Washington, and then to federal court. Learn more.

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Hospice Care

If the Medicare beneficiary has no more than six months to live, Medicare will pay for unlimited hospice care. This can be at home or in a hospice facility, and includes services not generally covered by Medicare. These services include home health aide and homemaker services, physical therapy, counseling, as well as physician and nursing services. There is also a provision for "respite care"–up to five consecutive days of inpatient care to give the patient’s primary at—home caregiver some relief. The patient must pay 5 percent of the cost of this respite care.

Hospice benefit recipients are responsible for up to a $5 copayment for each prescription drug, but otherwise there are no deductibles or other copayments for this benefit. Bear in mind, however, that in electing hospice care, the beneficiary is choosing to receive noncurative medical and support services rather than treatment toward a cure for the terminal illness.

Because Medicare’s hospice home care benefit does not cover full–time care, it is not an option unless there is a full–time caretaker in the home.

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Medicare Part B

Medicare Part B basically covers "outpatient" care: office visits to medical specialists, ambulance transportation, diagnostic tests performed in a doctor’s office or in a hospital on an outpatient basis, physician visits while the patient is in the hospital, and various outpatient therapies that are prescribed by a physician. Part B also covers home health services if the beneficiary is not enrolled in Medicare Part A.

Medicare recipients who are eligible for Part A are automatically enrolled in Part B unless they opt out. Part B enrollees pay a monthly premium that is adjusted annually. This premium pays for about one–quarter of Part B’s actual costs; the federal government pays for the other 75 percent through general tax revenues. This cost–sharing makes Part B something of a bargain, and many Medicare recipients buy it unless their present or former employer provides comparable coverage.

Moreover, there is a financial incentive not to delay enrollment; those who wait to enroll in Part B after they become eligible for Medicare will pay a penalty. For each year that an individual puts off enrolling, his or her monthly premium increases by 10 percent — permanently. Thus, a person who waits five years to enroll in Part B will pay premiums 50 percent higher than she otherwise would. (This penalty does not apply if the individual is covered by an employer group plan that is available only to current employees.)

Items Excluded from Coverage

The specifics of what is covered and what is not covered under Part B are complex and change periodically in response to efforts to contain health care costs.
  • Prescription Drugs (not administered by a physician)
  • Routine Physical Checkups
  • Eye Glasses or Contact Lenses
  • Hearing Aids
  • Orthopedic Shoes, (except for diabetics)
  • Custodial Care
  • Cosmetic Surgery
  • Immunizations (except pneumococcal vaccines)
  • Dental Services
  • routine foot care

Medicare Part B recipients must satisfy an annual deductible. Once the deductible has been met, Medicare pays 80 percent of what Medicare considers a "reasonable charge" for the item or service. The beneficiary is responsible for the other 20 percent.

However, in most cases what Medicare calls a "reasonable charge" is less than what a doctor or other medical provider normally charges for a service. Whether a Medicare beneficiary must pay part of the difference between the Medicare—approved charge and the provider’s normal charge depends on whether or not the provider has agreed to participate in the Medicare program.

If the provider participates in Medicare, he or she "accepts assignment," which means that the provider agrees that the total charge for the covered service will be the amount approved by Medicare. Medicare then pays the provider 80 percent of its approved amount, after subtracting any part of the beneficiary’s annual deductible that has not already been met. The provider then charges the beneficiary the remaining 20 percent of the approved "reasonable" charge, plus any part of the deductible that has not been satisfied.

Some states either require all licensed physicians to participate in the Medicare program or require even non–participating providers to accept the Medicare–approved rate as full payment.

But many states have no such requirements. If a Medicare beneficiary in one of these states is treated by a non–participating provider who is charging more than the Medicare–approved rate, the beneficiary must pay the usual 20 percent of the Medicare–approved charge plus an additional 15 percent of the Medicare–approved amount (called a "limiting charge"). It is against the law for providers in any state to charge Medicare patients more than an additional 15 percent of the Medicare—approved charge.

Example: Doctor Jones bills Mrs. Smith $150 for an office visit that Medicare says should cost only $100. Mrs. Smith must pay Dr. Jones $35 — 20 percent of the approved charge ($20) plus an additional 15 percent of the approved charge ($15).

In such "non—assignment" cases, Medicare pays the beneficiary 80 percent of the approved amount and the beneficiary must pay the provider the entire charge that is due.

In the above example, however, not all of the charge is due: Doctor Jones is taking a loss of $35 in treating Mrs. Smith. Doctor Jones must accept this loss as the price of treating a Medicare patient. However, beneficiaries may now enter private contractual arrangements with physicians under Medicare Part C.

Physician Violations

Other physician practices that violate Medicare Part B’s rules include:
  • Requiring patients to waive their right to Medicare benefits and making them pay privately for Medicare—covered services;
  • Requiring beneficiaries to pay for services such as telephone conversations with the doctor, prescription refills, and medical conferences with other professionals for which they were never previously charged;
  • Requiring beneficiaries to sign a paper agreeing to pay privately for all services that Medicare will not cover and then using this waiver to make beneficiaries pay for a service that Medicare covers as part of a package of related procedures;
  • Suing beneficiaries in small claims court for amounts above the 15 percent "limiting charge";
  • Billing for services that do not have a set fee and claiming that no charge limits apply to these services.

Medicare patients do not have to share the cost of all services under Medicare Part B. Medicare pays for certain services in full, including diagnostic laboratory tests, home health services, second opinions on surgery (or third opinions if the two earlier opinions disagree), expenses for pneumococcal vaccine, and costs to kidney transplant donors. In all these cases, the deductible does not apply and the 20 percent copayment is waived. On the other hand, Medicare will pay only 50 percent of the "approved" rate for the treatment of mental disorders on an outpatient basis.

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Home Health Benefit

If you qualify, Medicare will cover your home health benefits entirely and with no limit on the length of time you are covered. Medicare home health benefits can mean the difference between you or a family member continuing to stay at home, or your health deteriorating until hospital care or nursing home placement become necessary. But due to changes made as part of the Balanced Budget Act of 1997, home health benefits are being denied Medicare patients in more and more cases.

Home Health Requirements

You are entitled to Medicare coverage of your home health care if you meet the following requirements:
  • You are confined to your home (meaning that leaving it to receive services would be a "considerable and taxing effort").
  • Your doctor has ordered home health services for you; and
  • At least some element of the services you receive are "skilled" (intermittent skilled nursing care, physical therapy or speech therapy).

What you get:

If you need an element of "skilled" care, then you will also be entitled to Medicare coverage of social services, part—time or intermittent home health aide services, and necessary medical supplies and durable medical equipment. You can receive up to 35 hours of services a week, although few beneficiaries actually get this level of service. You are entitled to the same level of services whether you are a member of an HMO or are enrolled in traditional fee–for–service Medicare.

What you pay:

Nothing, with the exception of 20 percent of the cost of medical supplies and equipment, which is covered by some Medigap policies. While the government insists that it has not changed the criteria for who is eligible for home care services, home health agencies have inevitably cut back on services they provide in order to make their own budgets balance.

What you can do:

All this means that Medicare recipients must advocate for the services they need. If you have to appeal a termination of service, the good news is that most people who appeal Medicare home health benefits win their cases. At the first level of review, 39 percent are successful, and on appeal to an administrative law judge, 81 percent are successful. The bad news is that you have to pay privately for the care in order to have an appealable issue. This is because the issue on appeal is not the termination of a service, but the denial of Medicare payment for the service. As a result, many beneficiaries simply try to make do without the care or hire help on their own without the training and supervision provided by home health agencies.

Most Medicare beneficiaries are not informed of their appeal rights when given notice that their home health care benefits will be terminated. Attorneys have filed a nationwide class action suit on behalf of homebound seniors seeking advance notice of any termination of benefits for Medicare home health coverage, as well as notice of the ability to appeal such a denial before the termination occurs.

If your benefits or those of a family member are reduced or terminated, you should take the following steps:
  1. Ask your home health agency to explain the cutback and write down its answer. Ask the agency to give you written notice of the cutback or termination of service.
  2. Ask your physician to call the agency to urge it not to cut back the services and to provide a letter verifying the level of care you need. This can be essential to whether you ultimately receive the benefits you deserve.
  3. Consult your attorney or a Medicare assistance agency in your state to determine whether you likely would be successful on appeal.
  4. If you decide to appeal, do so immediately, and arrange with the home health agency to pay privately for the services pending the result of the appeal.

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Medicare Part C

In the Balanced Budget Act (BBA) of 1997, Congress made changes in the Medicare program aimed at keeping it solvent at least until 2007. One of these changes was the expansion of alternatives to traditional Medicare. The new law relabeled these alternatives "Medicare Choice," which many refer to as Medicare Part C. Under the old law, beneficiaries could choose between Health Maintenance Organizations (HMOs) and traditional fee–for–service Medicare.

Beginning in 1999, the menu of options expanded to include:
  • Preferred Provider Organizations (PPOs). Allow the use of doctors and hospitals outside the plan network for an extra out–of–pocket cost.
  • Provider Sponsored Organizations (PSOs). Networks established by doctors and hospitals.
  • Private fee–for–Service Plans. A Medicare–approved private health insurance plan for which Medicare pays part of the cost. Plans would provide an unlimited choice of providers and could charge unlimited premiums.
  • Medical Savings Account (MSA) Plans. This offers a way for Medicare recipients to opt out of the federal program altogether and reap some savings if they stay healthy. Each year, Medicare would give an enrollee a voucher equal to the average annual cost of treating a Medicare beneficiary. The enrollee would use part of the voucher’s value to purchase a private health insurance policy with a high deductible (not to exceed $6,000), called a "catastrophic" policy. The remainder of the voucher’s value could be invested in a tax–free MSA, which would be available to pay for any treatment costs. If the recipient stays healthy, he or she can pocket money left in the account. The MSA option is currently a demonstration program available to up to 390,000 Medicare enrollees.
  • Beneficiaries who so desire may enter contractual agreements for specific services with physicians who have agreed not to participate in Medicare for two years. Medicare would not pay any part of the cost for these services and there are no limits on what the physician can charge.

Until 2002, Medicare beneficiaries were able to switch among traditional Medicare and these other new options easily, typically with just a month’s notice. However, now nine months’ notice is usually required to switch. But beneficiaries who are happy with the way they are receiving Medicare can stay with that program, unless the program stops participating in Medicare. New Medicare enrollees who do not choose a particular program will automatically be enrolled in traditional Medicare.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA), enacted in 2003, changed the name of these private Medicare alternatives to Medicare Advantage and raised payment levels to local plans and would–be a regional Preferred Provider Organizations (PPOs).

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Appealing Medicare Decisions

While the federal government makes the rules about Medicare, the day–to–day administration and operation of the Medicare program are handled by private insurance companies that have contracted with the government. In the case of Medicare Part A, these insurers are called "intermediaries," and in the case of Medicare Part B they are referred to as "carriers." In addition, the government contracts with committees of physicians – "Peer Review Organizations (PROs) – to decide the appropriateness of care received by most Medicare beneficiaries who are inpatients in hospitals.

Sometimes an intermediary, carrier or PRO will decide that a particular treatment or service is not be covered by Medicare and will deny the beneficiary’s claim. Many of these decisions are highly subjective and involve determining, for example, what is "medically and reasonably necessary" or what constitutes "custodial care." If a beneficiary disagrees with a decision, there are reconsideration and appeals procedures within the Medicare program. Once Medicare’s review process has been exhausted, the matter can be taken to court if the amount of money in dispute exceeds either $1,000 or $2,000, depending on the type of claim. Medicare beneficiaries can represent themselves during these appeal proceedings, or they can be represented by a personal representative or an attorney. The Medicare Rights Center estimates that only about 2 percent of Medicare beneficiaries appeal denials of care, but 80 percent of those who do appeal win more care.

Even if Medicare ultimately rejects a disputed claim, a beneficiary may not necessarily have to pay for the care he or she received. If a recipient did not know or could not have been expected to know that Medicare coverage would be denied for certain services, the recipient is granted a "waiver of liability" and the health care provider is the one who suffers the economic loss. In cases where this limited waiver of liability does not apply, however, the beneficiary is liable for any costs of care that Medicare does not cover. For example, a patient is financially responsible for any services normally provided under Medicare Part B if provided by a nonparticipating provider who did not "accept assignment" of the claim.

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Medigap Policies

What with all the deductibles, copayments and coverage exclusions, Medicare now pays for only about half of the medical costs of America’s senior citizens. Much of the balance not covered by Medicare can be covered by purchasing a so–called "Medigap" insurance policy.

Insurance companies may sell only policies that fall into one of 12 standard benefit packages, ranging from basic coverage to the most comprehensive coverage. Previously there were ten plans, but as part of the new Medicare law that went into effect January 1, 2006, two additional plans were added. Plans A through J have one set of basic benefits while plans K and L have another.

All Medigap policies must provide at least the following core benefits:
  • Coinsurance for days 61 – 90 of a hospital stay.
  • Coinsurance for days 91 – 150 of a hospital stay (lifetime reserve days).
  • All hospital approved costs from day 151 – 365.
In addition plans A through J also cover the following:
  • The cost of the first three pints of blood not covered by Medicare.
  • The 20 percent coinsurance for Part B medical charges.
Plan K offers the following benefits:
  • 50 percent of the coinsurance for Part B medical services and 100 percent of preventative services
  • 50 percent of the first three pints of blood
  • 50 percent of hospice care cost sharing
Plan L offers the following benefits:
  • 75 percent of the coinsurance for Part B medical services and 100 percent of preventative services
  • 75 percent of the first three pints of blood
  • 75 percent of hospice care cost sharing

The plans provide a combination of eight other areas of coverage on top of the basic set. These areas of coverage include the coinsurance for days 21 to 100 in a skilled nursing facility, the Part A and Part B deductibles, foreign travel emergencies, and prescription drug coverage.

The 12 available Medigap policy packages are identified by the letters A through L (see chart below). Each plan package offers a different combination of benefits, allowing purchasers to choose the combination that is right for them. However, each plan package is the same across insurance companies — thus, a C package from one insurer will be identical to a C package offered by another. Of course, the more Medigap coverage you purchase, the more you will have to pay in premiums.

States may authorize the sale by insurance companies of the basic plan package and any number of the other nine approved combinations of benefits, so there may be fewer than 12 options to choose from in your state. Also, if you live in Massachusetts, Minnesota or Wisconsin, different types of standardized Medigap plans from the ones outlined below are sold.

A Medicare recipient cannot be denied a Medigap policy if he or she applies for one within six months of enrolling in Medicare Part B. Otherwise, claims relating to pre–existing conditions can be denied only during the first six months that the policy is in effect. However, federal law does not require that fee–for–service Medigap policies be offered to those who enroll in Medicare Part B because they are disabled.

Medigap policies do not fill all the gaps in Medicare coverage. The biggest gap they fail to bridge is for custodial care in a nursing facility or for skilled care in a nursing home beyond the first 100 days. For coverage of this type of care, you must either purchase long—term care insurance or qualify for Medicaid coverage.

Medigap also does not cover vision care, eyeglasses, hearing aids or dental care unless such treatment or equipment is needed as the result of an injury. In addition, Medigap plans do not cover prescription drugs. Before January 1, 2006, prescription drugs were covered in three plan packages (plans H, I and J). But under the Medicare Improvement Act, which created a Medicare prescription drug program, Medigap policies offering prescription drug coverage may no longer be sold. For more on this, see the discussion on Prescription Drug Coverage below.

A 2001 report by the General Accounting Office found that it pays to shop around for a policy. Premiums vary widely not only from state to state, but within states as well. For example, researchers found that in Texas a 65—year—old consumer could pay anywhere from $300 to $1,683 for plan A, depending on the insurer. In Ohio, plan F could range from $996 to $1,944 for an applicant of the same age.

To help you find and compare Medigap programs available in your area, the Medicare program offers a Web site called Medigap Compare. This interactive tool gives contact information for insurance companies in your state that sell Medigap policies, and offers basic information about the policies of some (but by no means all) of these insurers, including which plans they offer; if the plans are offered to persons at or over age 65, under 65 with disabilities and/or End–Stage Renal Disease (ESRD); how they price their plans based on what rating method they use; and if you need to be a member of a certain organization to buy one of their plans.

Also, the Center for Medicare Advocacy offers excellent online information about Medigap. Learn More.

Benefits Covered by Standardized Medigap Policies

Benefits Plan
A		 Plan
B		 Plan
C		 Plan
D		 Plan
E		 Plan
F*		 Plan
G		 Plan
H		 Plan
I		 Plan
J*		 Plan
K		 Plan
L
Coverage for: X X X X X X X X X X X X
  • Part A coinsurance
  • 365 additional hospital days during lifetime
Part B coinsurance: X X X X X X X X X X X
50%		 X
75%
Blood products: X X X X X X X X X X X
50%		 X
75%
Skilled nursing facility coinsurance n/a n/a X X X X X X X X X
50%		 X
75%
Part A deductible n/a X X X X X X X X X X
50%		 X
75%
Part B deductible n/a n/a X n/a n/a X n/a n/a n/a X n/a n/a
Part B balance billing** n/a n/a n/a n/a n/a X X n/a X X n/a n/a
Foreign travel emergency n/a n/a X X X X X X X X n/a n/a
Home health care n/a n/a n/a X n/a n/a X n/a X X n/a n/a
Preventive medical care n/a n/a n/a n/a X n/a n/a n/a n/a X X X
.

* Plans F and J also have a high–deductible option that requires the beneficiary to pay before receiving Medigap coverage. This deductible is in addition to separate deductibles for prescription drugs and foreign travel emergency which are required in these plans with or without the high–deductible option.

** Some providers do not accept the Medicare rate as payment in full and "balance bill" beneficiaries for additional amounts that can be no more than 15 percent higher than the Medicare payment rate. Plan G pays 80 percent of balance billing; plans F, I, and J cover 100 percent of these charges.

Source: HCFA, 2013 Choosing a Medigap Policy: Guide to Health Insurance for People With Medicare. Read more.

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Help with Paying for Medicare

If you don’t qualify for Medicaid and can’t afford a Medigap policy, you may be able to get help paying for the costs of Medicare.

There are three Medicare assistance programs, called Medicare Savings Plans:
  • Specified Low–income Medicare Beneficiary (SLMB): The SLMB program pays for Medicare Part B Premium.
  • Qualifying Individual (QI–1) Program: The QI–1 program is an expansion of the SLMB program that you must apply for each year. It pays for Medicare’s Part B Premium.
  • Qualified Medicare Beneficiary (QMB): The QMB program pays for Medicare Part A premiums, Medicare Part B premiums and deductibles, and coinsurance and deductibles for Part A and Part B.

To qualify for these programs, you must be eligible for Medicare Part A (even if you are not enrolled) and have limited income and resources. The income and resource requirements can vary from state to state, so check with your state before applying. In general the following limits are applied.

Program Income Limits

  • QMB Monthly income must be at or below 100 percent of the poverty level.
  • SLMB Monthly income must be between 100 percent and 120 percent of the poverty level.
  • QI–1 Monthly income must be between 120 percent and 135 percent of the federal poverty level.
  • Personal assets, including cash, bank accounts, stocks and bonds must not exceed $4,000 for an individual and $6,000 for married couples. Your house and car do not count as personal assets. Some states allow additional resources above these figures, for example, New York has no resource limits for the QI—1 Program.

To apply for one of these programs, contact your state Department of Social Services office or the equivalent agency in your state.

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Medicare Managed Care (Medicare Advantage)

We’ve all heard about managed care, and many of us have first–hand experience with this new health care arrangement. Managed care is a strategy to reduce health care costs by discouraging providers from performing unneeded services and by promoting preventive medicine.

The basic idea of managed care is that a health plan is paid a flat monthly fee for each patient under its care. If the plan’s costs in caring for that patient are less than the fixed fee, the plan makes money. But if the patient is quite sick and requires many costly medical services, then the plan may lose money on that particular patient. In this way, plans have an investment in keeping costs down.

When Medicare costs started skyrocketing along with the rest of the health care sector, Congress looked to managed care as a partial remedy. As a consequence, the Medicare program now contracts with managed care plans to provide services to Medicare beneficiaries who choose the managed care option (now called Medicare Advantage). The managed care plan receives a fixed monthly fee to provide services to each Medicare beneficiary under its care. As a Medicare managed care enrollee, you receive all the coverage you would receive under regular Medicare, except without the large copayments and deductibles you would normally pay. In addition, you often receive coverage for products and services that Medicare doesn’t cover, such as prescription drugs or custodial care. Generally, you do not need a supplemental Medigap policy if you join a managed care plan. Sound too good to be true? In a way, it is.

Restrictions on Providers and Services

First, managed care plans keep their costs down by limiting a patient’s freedom to choose which doctors and other providers the patient can see. The most prominent type of managed care plan, the Health Maintenance Organization (HMO), maintains a list or network of health care providers (doctors, hospitals, etc.) that their patients are allowed to use. The plan has negotiated special rates with these network providers. If you see a provider who is not in the network, the plan will not pay the bill, and neither will Medicare.

If a managed care plan you are considering joining restricts access to providers, it is important to determine whether your doctors and other providers are in the plan’s network. But bear in mind that managed care plans drop providers from their networks if they start costing the plan too much money. So just because your doctor is a member of the network now doesn’t guarantee that he or she will be part of the network later.

Another way plans strive to reduce costs is to require that all care be funneled through a primary care physician. This doctor makes all decisions about whether or not to refer you to a specialist. You cannot make an appointment with a specialist on your own. The primary care physician is strongly encouraged to take care of all medical problems herself and refer you to a specialist only when absolutely necessary. Medicare does require, however, that managed care plans allow patients with serious conditions, such as heart disease, kidney failure and cancer, to see specialists without referrals from their primary care physicians. Also, routine preventive women’s heatlh care screening must be available without a referral.

For many, managed care’s most disagreeable cost–cutting strategy is the common requirement that your primary care physician obtain the plan’s approval before you can receive certain medical services. If the plan administrators disagree with your physician that a procedure is medically necessary, the plan may refuse to pay for it. Plans also attempt to reduce costs by allowing their members shorter periods of hospital and nursing home care than Medicare beneficiaries generally receive. In addition, managed care plans provide fewer rehabilitative services like home health care and outpatient therapies than does traditional Medicare.

Not all managed care plans are so restrictive, but the less restrictive plans are more expensive. Some offer what’s known as a "point of service" option that allows you to see physicians or other providers that are not in their network. If you go outside of the network, however, you will pay a higher portion of the bill than if you saw an in—network physician.

Given the restrictions of managed care, if you are considering joining a particular plan, it is a good idea to talk with your doctor about his experiences with that plan. How is the plan about approving treatments, referring patients to specialists or allowing patients to remain in the hospital if they are not ready to leave? Does the plan frequently overrule the doctor? You might also want to ask the same questions of the doctor’s billing staff.

The True Cost of Medicare Managed Care

Given all these restrictions, you would think that managed care would cost less than a Medigap policy. Maybe, maybe not. While many managed care plans charge you no premium over and above your Medicare Part B premium, others, such as those offering a "point of service" option or unlimited prescription drug coverage, charge a small additional premium.

In addition, you may be responsible for copayments. These are charges plan members must pay out of pocket when they receive certain kinds of care, such as an office visit or a prescription drug. The copayment usually ranges from $5 to $15, depending on the managed care plan. If you see a lot of doctors or take an array of prescribed medications, the costs can add up. The plan may also only cover medications listed in its "formulary"–the list of drugs it approves. For drugs not in the formulary, the copayment may be higher or the plan may pay nothing at all. Bear in mind that managed care plans often change the drugs in their formulary, so a medication covered now may not be covered later.

Another consideration is the extent of the plan’s service area. If your plan’s service area is limited, you may lack access to a broad range of providers. On the plus side, managed care plans may offer coverage that goes well beyond regular Medicare coverage.

This coverage may include:
  • Short–term custodial care
  • 100 percent coverage of needed medical equipment
  • Chiropractic care, acupuncture and acupressure
  • Foreign travel coverage
  • Eye examinations
  • Dental work
  • Hearing tests and hearing aids
  • After–hours care
  • Comparison Shop Online

Medicare operates a helpful Web site that allows you to compare health insurers that offer Medicare managed care plans in your area. You can see how the plans stack up according to such useful indices as premium, prescription drug coverage, doctor and hospital choice, outpatient surgery costs, and much more. Also included is information on plan members leaving managed care plans. Starting in 2001, Medicare began asking people who chose to leave a managed care plan the reasons why they left. These reasons will soon become part of the Medicare Compare site. To go to the site, Learn More.

Another great source of information for those trying to negotiate the managed care maze is the Health Insurance Counseling and Advocacy Program (HICAP). This independent group, which is funded by state agencies on aging and by private donations, counsels seniors about Medicare managed care and Medigap policies available to them in their area. HICAP offices have a different (usually toll-free "800") main number in each state.

You can also contact your State Health Insurance Assistance Program (SHIP). The telephone number for the SHIP in your State is available by calling 1-800-MEDICARE (1-800-633-4227). SHIP volunteers are available to discuss your individual situation and provide information on options available to you.

Appealing Managed Care Plan Decisions

Your plan may overrule your doctor and refuse to cover a treatment or procedure that it deems to be medically unnecessary or experimental. By one count, nearly one–third of Medicare managed care plan enrollees say they were denied coverage for treatment by their plans. Such denials of coverage can be enraging or even life–threatening. If your plan will not pay for, does not allow, or stops a service that you think should be covered or provided, you can file an appeal. However, this appeals process is run by the plan. After you file the appeal, the plan will review its decision. If the plan does not decide in your favor, the appeal is reviewed by an independent organization.

Medicare managed care beneficiaries sued the Medicare program, claiming that it was not adequately protecting their right to appeal adverse decisions by managed care plans. This suit was settled and resulted in new regulations that strengthen Medicare beneficiaries’ appeal rights under managed care. Medicare must now require managed care plans to let you know four days before they end your home health, nursing home, or certain outpatient rehabilitation care. This advance written notice must explain:

Why your HMO thinks that services are either not needed or are not covered

  • How you can go about obtaining a fast appeal of the decision from an independent decisionmaker outside the HMO if you think the services are covered; and
  • That payment for the costs of your care will continue at least until noon of the day following the decision by the independent decisionmaker.
  • Medicare officials are also revising some of the requirements covering managed care organizations that terminate hospital services for Medicare beneficiaries.
  • You should check your plan’s membership materials or contact the plan for details about your appeal rights.

Entering and Leaving Medicare Managed Care

You generally must be enrolled in Medicare Part A and Part B before you can enroll in a Medicare managed care plan. If you want to join a Medicare managed care plan, you should contact the plan and ask if it is accepting new member enrollments or if it has a waiting list. Plans must accept you if you apply within the first six months of signing up for both Parts A and B of Medicare. They also must enroll you during the "open enrollment" month of November for coverage beginning January 1. Some plans have continuous open enrollment, meaning that they will accept Medicare beneficiaries at any time.

Managed care plans do not always have to accept new enrollments, however. Some plans have approved limits on the number of beneficiaries they can enroll (called "capacity limits"). Once a plan has reached its capacity limit, it does not have to accept any new enrollments. Still, if a managed care plan refuses to accept your enrollment, it must provide a written denial.

It is be fairly easy to leave a managed care plan and return to regular Medicare if you so choose. You can leave a plan in one of three ways. You can:
  • Call the plan you wish to leave and ask for a disenrollment form; or
  • Call 1-800-MEDICARE (1-800-633-4227) to request that your disenrollment be processed over the phone; or
  • Call the Social Security Administration or visit your Social Security Office to file your disenrollment request.

In most cases, you are disenrolled the month after your request is made as long as your request was filed before the 10th day of the month. If your request was made after the 10th of the month, you will be disenrolled the first day of the second calendar month after your request was made.

You need not fill out a disenrollment form if you decide to join another managed care plan. You will be automatically disenrolled from your old plan when your new plan enrollment becomes effective.

After you leave Medicare managed care, you automatically return to the regular Medicare program. It is very likely you will be able to continue seeing the same doctors and other providers you were seeing in the managed care plan, if this is your wish.

Avoiding the Medigap Gap

One risk of enrolling in Medicare managed care is that when you leave you may not be eligible for the Medigap policy you had before you shifted to Medicare managed care. When you return to regular Medicare, you are only guaranteed the right to buy a Medigap policy designated "A", "B", "C", or "F" that is offered by insurers in your state. None of these policy types offers a prescription drug plan.

Medigap policies that contain prescription drug coverage are available, but insurers may refuse to sell you a policy because of your health status, may impose waiting periods for pre–existing conditions, or may charge you more based on these conditions. However, insurers cannot refuse you coverage for even the more generous Medigap policies provided certain conditions are met:
  • The Medigap policy you dropped is still being sold by the same insurance company; and
  • This was the first time you had ever been enrolled in any kind of Medicare managed care plan; and
  • You leave (unenroll from) the managed care plan within 12 months of joining the plan; and
  • You apply for your previous Medigap policy no later than 63 days after coverage from your managed care plan terminates.
  • Before you disenroll from your managed care plan you should make sure the Medigap policy you had is still available from the original insurer.

Plan Withdrawals From Medicare

Managed care plans voluntarily enter into 12–month contracts (January – December) with the Medicare program to serve Medicare enrollees. Each year, managed care plans can choose whether or not to renew their contracts, and they generally must notify Medicare officials by July 1 if they are not going to renew. Covering Medicare patients has not turned out to be as lucrative as some insurers had hoped it would be. As a consequence, many managed care plans have withdrawn from the Medicare program, to such a degree that Medicare beneficiaries in many parts of the country no longer have access to a managed care plan of any kind. Thousands of former managed care enrollees have been forced to return to regular Medicare, with many of them losing prescription drug coverage.

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Prescription Drug Coverage (Medicare Part D)

The first—ever federally subsidized drug program for seniors, in which private health insurers will offer limited insurance coverage of prescription drugs to elderly and disabled Medicare recipients, took effect January 1, 2006. The new drug benefit will be available only through insurers that contract with Medicare to market drug plans. Beneficiaries who wish to enroll in the drug benefit program have until May 15, 2006, to choose a plan without paying a penalty.

What will the new drug benefit cost and what will you get?

Medicare recipients who elect to be covered by the new drug benefit will pay premiums. Some plans will charge more, some less. Some plans will reportedly charge premiums of $20 a month or even less.

After meeting your deductible, you will pay 25 percent of drug costs in a year, with Medicare footing the bill for the other 75 percent. Coverage will then stop completely until your payments for covered drugs reach $5,100. (This is sometimes called the "doughnut hole".) If your costs for covered drugs exceed $5,100, coverage will kick back in, with Medicare paying about 95 percent of costs above $5,100 (called "catastrophic coverage").

This means that beneficiaries must have $3,600 in out–of–pocket costs to reach the $5,100 threshold, at which point the program’s catastrophic coverage takes effect. This $3,600 figure is the sum of the $250 deductible plus 25 percent of costs up to $2,250 ($500) plus the $2,850 that must be spent before you can get out of the doughnut hole. One way to avoid the coverage gap is to pick a plan with low drug prices, since it is accumulating drug costs that brings you closer to the gap — not low premiums, co—payments or deductibles. (We are describing Medicare’s basic prescription drug coverage, which all insurers must offer. Insurers may also offer more generous coverage and charge a higher premium for it.)

Bear in mind that only payments for drugs that are covered by your plan count towards the out–of–pocket threshold. Also, any help with paying for Medicare Part D costs that you receive from an employer health plan or other insurance does not count toward this limit. Drugs purchased abroad (such as from Canada) will not be covered by the Medicare benefit and will not count toward the out–of–pocket limit.

What will you save?

Fortunately, you don’t need an advanced degree in statistics to determine what the drug benefit will mean to you. AARP, which used its considerable political might to assure passage of the new drug benefit, has created a calculator for beneficiaries to determine their potential savings under Medicare Part D.

Note: that the calculations apply only to individuals who pay 100 percent of their prescription drug costs. Results will not be accurate for low–income Medicare beneficiaries or those who currently have some form of prescription drug coverage.

Will drugs you take be covered?

All Part D enrollees will have at least two Medicare private drug plans to choose from, and in most areas a number of plans. At last report, between 11 and 23 health insurers will offer Medicare prescription drug plans in each region nationwide. The insurers may choose the medicines — both brand–name and generic — that they will include in a plan’s "formulary," the roster of drugs the plan covers and will pay for. However, each plan formulary must include at least two drugs in each drug class, and must cover a majority of the drugs in certain classes, such as antidepressants and anti–cancer agents.

Since each drug plan will offer a different formulary, and the same drug may vary in price from plan to plan, the most important job for a Medicare beneficiary signing up for Part D is to determine whether the prescription drugs they need – or anticipate needing — will be covered under a particular plan and how much they will cost. In most regions, there will be no shortage of choices. California, for example, is projected to have 40 plans competing for business.

Plans will differ in the monthly premiums they charge, deductibles, the drugs they cover, the cost of those drugs, limitations on drug purchases, and the convenience of the plan’s pharmacy network, among other factors. A comparison tool is available on Medicare’s Web site www.medicare.gov that allows you to search for Medicare private drug plans in your region and compare their costs, covered drugs and pharmacy networks. The information is also available by calling 1-800-MEDICARE. In addition, the Medicare & You 2013handbook provides information about the Medicare private drug plans in your area.

But it’s possible that all your diligent research could come to nothing because after you have enrolled in what seems to be the best plan, the plan may discontinue coverage or increase the cost of any particular drug! Can you then switch plans? Only those eligible for both Medicare and Medicaid (see below) may switch plans whenever they want. Other beneficiaries will be locked into their choice for a full year.

There is a process by which a plan may grant you an "exception" to its formulary if you are using a drug that is removed from the plan’s formulary for reasons other than safety, or your doctor believes the drugs on the plan’s formulary will not work for you. In the case of nursing home residents, Medicare requires that all Part D plans give beneficiaries a "temporary supply" of non–formulary drugs while an exception is being considered.

Medicare Part D does not cover certain drugs, including barbiturates and benzodiazepines, which are prescribed for older people to treat insomnia, seizure disorders, anxiety, panic attacks, and muscle spasms. States have the option of providing Medicaid coverage for the excluded drugs. Each Medicare drug plan will likely give you a list of local pharmacies where you can obtain their covered drugs.

Who may enroll?

Anyone who has either Medicare Part A or Medicare Part B (or both) can get Medicare Part D, Medicare’s prescription drug coverage. Bear in mind, however, that Medicare Part D will not pay for drugs that could have been paid for under Medicare Part A or Medicare Part B. These drugs will not be covered even if the beneficiary does not have either Part A or Part B.

When should you enroll?

It depends on your status as a Medicare beneficiary. The following explanation is from the Medicare Rights Center’s Medicare Drug Coverage 101, an excellent resource:

"You can enroll in the Medicare drug benefit (Part D) during your Initial Enrollment Period (IEP).

If you currently have Medicare or will be eligible for Medicare in January 2006, your IEP will be between November 15, 2005, and May 15, 2006.
If you will become eligible for Medicare during February 2006, your IEP will be between November 15, 2005, and May 31, 2006.
If you will become eligible for Medicare during or after March 2006, your IEP for Part D will be the same as for Part B. It will be a seven–month period that includes the three months before the month you become eligible, the month you are eligible and three months after the month you become eligible."

How do you enroll?

Once you have chosen the Medicare private drug plan you want to enroll in, you can contact the company offering the plan and ask for a paper application, or complete an online application on the plan’s Web site, if the plan allows online applications. The online application also may be available on Medicare’s Web site www.medicare.gov.

If you cannot enroll yourself, a representative who is authorized under state law can enroll for you. This could include a health care proxy, an agent acting under a power of attorney, or another surrogate decision maker as defined by state law. If you are in a Medicare HMO or PPO, you can enroll in a plan offered by the company that sponsors your Medicare health plan.

Late enrollment penalties

Medicare beneficiaries may be subject to significant financial penalties for late enrollment. For every month you delay enrollment past the Initial Enrollment Period, the Medicare Part D premium will increase at least 1 percent.

Example: if the average national premium in 2007 is $40 a month, and you delay enrollment for 15 months, your premium penalty would be $6 (1 percent x 15 x $40 = $6), meaning that you would pay $46 a month, not $40, for coverage that year and an extra $6 a month each succeeding year.

Beneficiaries are exempt from these penalties if they did not enroll because they had drug coverage from a private insurer, such as through a retirement plan, at least as good as Medicare’s. This is called "creditable coverage". Your insurer should have let you know if their coverage will be considered creditable.

Subsidies for low–income beneficiaries

Assistance for low–income Medicare beneficiaries is available to help them pay the premiums, deductibles, co—payments and coverage gap of the new drug benefit. In fact, the new program offers the greatest benefit to those with the lowest incomes, who could pay next—to—nothing for their drugs.

What if you’re enrolled in both Medicare and Medicaid?

Many low–income individuals have coverage under both Medicare and Medicaid. Medicaid has been covering prescription drugs for these "dual eligibles," but the new law will change that. Beginning January 1, 2006, Medicaid stopped covering prescription drugs. Therefore, unlike other Medicare recipients who have until May 15, 2006, to enroll in a prescription drug plan, individuals covered by both Medicare and Medicaid had to enroll by January 1, 2006.

If dual eligibles did not enroll themselves, the Department of Health and Human Services automatically enrolled them in a plan. If you have original Medicare, you will have been enrolled in a stand–alone drug plan whose premium is at or below the standard plan premium in your area. If you have an HMO or PPO, you will have been enrolled in the lowest premium prescription drug plan offered by that company.

If you are a dual eligible, you should make sure the plan you were assigned covers the drugs you need and the pharmacies you visit. If it doesn’t, you will need to choose a different plan. Call 1-800-MEDICARE or go to www.medicare.gov to compare plans. If you are a dual eligible enrolled in a drug plan that stops covering a drug you need, you can change your drug plan once a month. As noted above, other beneficiaries are locked into their choice for a full year.

What about my drug discount card?

If you purchased a drug discount card, you can use the card until your Medicare drug coverage begins.

Impact on Medigap Drug Coverage

Three Medigap plans covered prescription drugs (Plans H, I, and J). If you have one of these plans, you have several options. You can do one of the following:
  • Keep your Medigap policy and not enroll in the Medicare prescription drug benefit.
  • Keep your Medigap policy and enroll in the Medicare prescription drug benefit.
  • Switch your Medigap policy and enroll in the Medicare prescription drug benefit.

The three Medigap plans offering drug coverage cannot be sold after January 1, 2006, to anyone eligible for Medicare Part D. The plans may be sold without the prescription drug coverage. However, existing Medigap policies may be renewed. But be aware that if you keep your Medigap policy and later decide you want to enroll in Medicare, you may have to pay a premium penalty. You won’t have to pay a penalty if your Medigap plan is considered as good as the Medicare prescription drug plan. Medigap issuers should have send notice to let you know if your Medigap plan is as good as Medicare prescription coverage.

If you decide to enroll in the Medicare prescription drug benefit, you can either choose a different Medigap policy or you can keep your current Medigap policy and drop the drug benefit. If you keep your current policy, your Medigap premium will be adjusted to reflect the elimination of the drug benefit.

If you want to enroll in the Medicare prescription drug plan and switch Medigap plans, you can enroll in Medigap Plans A, B, C, F, or two new Medigap Plans, K or L. You won’t have to wait for coverage of pre—existing conditions as long as you enroll in a Medicare drug plan before May 1, 2006, and enroll in the new Medigap policy within 63 days after the new drug benefit begins. Learn More.

What if you already get retiree drug coverage from your former employer?

Be careful. Be very, very careful. If you sign up for Medicare Part D, you will lose your company’s retiree drug coverage, and reportedly about half the companies will cancel your medical insurance as well. If your retiree drug coverage is "creditable" — that is, if it is equal to or better than what Medicare is offering — then you won’t have to pay a late–enrollment penalty if you decide to switch to Medicare Part D later. In other words, there’s no rush and don’t let a salesperson steamroll you into signing up for Medicare’s benefit. Even if it isn’t "creditable," you still need to carefully consider your options. If you sign up for a Medicare drug plan and lose your medical insurance in the process, you may not be able to get it back. Before you sign up, ask your employer if you can drop your drug coverage without losing your other supplemental insurance. You should have gotten a letter stating whether or not your former employer’s plan’s coverage is "creditable."

Should you sign up?

Administration officials, have been traveling the country to encourage Medicare beneficiaries to sign up for the new drug benefit. The administration is reportedly spending $300 million in this effort. The drug plans want you to sign up as well. They could get up to $48 billion in premium revenue a year, depending on how many of Medicare’s 43 million beneficiaries enroll.

For those who have high drug costs and no drug coverage now, or who qualify for a low–income subsidy Medicare Part D may be a huge help. The poorest among the elderly and disabled will pay virtually nothing for their drugs.

For those who may not be able to afford the premium and who don’t have high drug costs, it’s a tougher call. Those who can afford it may decide to buy into the program even if they don’t have high drug costs as insurance protection against runaway costs later. But those who already have drug coverage through a private plan that they believe will continue need to closely compare the benefits. The benefit they have now may well be richer than what Medicare is offering. Those who continue with a drug plan that is equal to or better than Medicare’s will not be assessed a late enrollment penalty. Those who sign up with Medicare Part D will lose their current drug coverage and risk losing all their health benefits under the private plan.

Bear in mind that except for low–income beneficiaries, the drug benefit will not, and never was intended to, pay for all prescription drug costs. Beneficiaries will still shoulder a large share of those expenses. A recent study published in Health Affairs concluded that the average potential enrollee is expected to pay 44 percent of her drug costs with her own money. The researchers found that 38 percent of beneficiaries will have prescription expenses high enough to reach the $2,250 benefit cutoff, and that they will end up covering 67 percent of their total drug costs with their own money.

Restrictions on Drug Plan Marketing

As noted, billions of dollars are at stake in convincing Medicare recipients to sign up for this new benefit. The Centers for Medicare & Medicaid Services (CMS) has issued marketing guidelines for companies offering prescription drug plans. Approved drug plans are prohibited from making door—to–door sales calls or sending unsolicited e–mails. Plans also must comply with the National Do–Not–Call Registry rules, honor "do not call again" requests, and abide by federal and state calling hours and any other relevant requirements. (Federal rules do not allow telemarketers to call before 8 a.m. or after 9 p.m. State rules may differ.)

Plan marketing representatives are not allowed to request personal information such as Social Security Numbers, bank account numbers, or credit card numbers.

Beware of scams

Con artists are already using the new drug benefit as a wedge to convince unsuspecting Medicare recipients to part with personal information like bank account numbers. Residents of at least 13 states have reported a scam in which criminals attempt to sell fake Medicare prescription drug cards for the Part D benefit. Since plans can’t market until October, any contacts before that time are suspect. Anyone who is unsure about a contact should call Medicare at 1-800-MEDICARE.

Social Security will be contacting low—income Medicare recipients who have incomplete applications or who haven’t sent one in. Social Security representatives generally will not ask for Social Security numbers, bank account numbers, credit card numbers or life insurance policy numbers. If beneficiaries are unsure a caller is really from Social Security, they can verify the call by contacting the agency at 1-800-772-1213.

For more information . . .

The new Medicare drug benefit is a complicated program (the program’s rules and explanatory materials run to 1,172 pages). No single article can address all the questions or issues that beneficiaries may have.

Following are some sources for more detailed information:
  • The National Consumer Voice for Quality Long—Term Care (formerly NCCNHR) has developed two new consumer fact sheets on Medicare Part D, one for nursing home residents and one for assisted living residents. These fact sheets help consumers understand the who, what, and where of Medicare Part D in consumer–friendly language. They are in a question and answer format and can be accessed via the Consumer Voice website.
  • 2013 Medicare & You Handbook, Centers for Medicare & Medicaid Services.
  • Medicare Drug Coverage 101: Everything You Need to Know About the New Medicare Prescription Drug Benefit, The Medicare Rights Center.
  • The New Medicare Prescription Drug Coverage: What You Need to Know, AARP.
  • The Facts About Medicare Prescription Drug Plans, Centers for Medicare & Medicaid Services.
  • Definitions of Selected Health Insurance Terminology Under Medicare Part D, Center for Medicare Advocacy, Inc.
  • AARP’s Drug Benefit Calculator
  • Medigap Update, The Center for Medicare Advocacy.
  • Resources on the Medicare Prescription Drug Benefit, Kaiser Family Foundation.
  • Interactive map for state—specific information on Medicare Part D, National Mental Health Association.
  • (Some of the above documents are in PDF format. If you do not have the free PDF reader installed on your computer, download it here.)

    • Have further questions about Medicare? The Medicare Rights Center operates a toll—free hotline where you can get answers from counselors. The hotline is open Monday through Thursday, 9am-2pm Eastern Time. Call (800) 333-4114.

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    Frequently Asked Questions About Medigap

    • Who should buy Medigap insurance?
    • How do I select a Medigap policy?

      • Who should buy Medigap insurance?

      Everyone should have one policy except for those who have other coverage or who cannot afford a Medigap policy. Many people over age 65 who are still working are covered by their employers’ plans. Others may choose to receive their care from a health maintenance organization or a Medicare plan that restricts access to selected physicians. Both types of plans can take the place of Medigap insurance. If you can qualify for Medicaid, then you don’t need a Medigap policy, since Medicaid will pay for your copayments and deductibles. Despite this fact, one study found that half of Medicaid recipients pay for Medigap insurance anyway. In addition, if you’re close to being eligible for Medicaid, the state may still pay for your Medicare copayments and deductibles, as well as your Part B premium, under the Qualified Medicare Beneficiary (QLMB) program . Insurance agents who sell Medigap policies must inquire whether the potential buyer is eligible for Medicaid and whether he or she already has Medigap coverage. In the latter case, the agent must make a fair and accurate comparison of the existing policy and the new one the agent is offering for sale. Agents may not use high—pressure tactics and buyers have a 30—day free—look period, permitting them to return the policy for a full premium refund within that time.

      How do I select a Medigap policy?

      The most important rule to follow with respect to Medigap policies is to choose only one. To purchase more than one wastes your premium dollar since double coverage provides no benefit except extra payments when you are ill. Since all policies must provide the same core benefits, there is much less need to compare policies to see which provides the best coverage. Of course, you can still compare companies for price, solvency and customer service.

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