While Social Security was established in the 1930’s to protect retirees from poverty, it was not until the 1960’s that federal programs were enacted to ensure healthcare to seniors. As part of the “Great Society” program of President Lyndon Johnson, Medicare was signed into law on July 30, 1965. The program insured 19 million people in its first year, with an initial budget of $10 Billion.[1] Medicare now insures about 56 million people[2] and its budget has swelled to almost $600 Billion annually. Medicare spending represents 15% of the federal budget.[3] In fact, almost one in every 5 dollars spent on healthcare in the United States is spent by the federal government on Medicare.
Since being enacted, Medicare has undergone significant overhauls in every decade. In 1972, Medicare was expanded to cover some disabled people under age 65. The 1980’s saw the addition of Medicare supplemental insurance under federal oversight, the addition of hospice services to Medicare benefits and other rules to make Medicare more affordable and comprehensive. In the 1990’s, Medicare Advantage was created to enable various Medicare benefits to be administered efficiently under comprehensive policies. In 2003, Medicare Part D was added to add optional prescription drug benefits to Medicare insurance plans. In 2010, the Affordable Care Act included several reforms to contain Medicare costs and make the system more efficient. [4] Despite occasional problems and continued tweaking, Medicare remains one of the most popular federal programs, as opinion polls consistently show that majorities of Americans support the program.[5]
Though Medicare remains an exceedingly complex system, in this course, we will demystify this sometimes-Byzantine network of rules by first presenting an overview of the Medicare framework, including eligibility and coverage, and then focusing on the minutia of the costs, benefits and responsibilities of the system’s users.
The Four Parts of Medicare Coverage
Medicare is administered under four parts, that were established by three different pieces of legislation over the course of four decades. Today, the four parts complement each other to comprise the Medicare system.
Medicare Part A covers inpatient care at hospitals, nursing home care in some cases, hospice care and some forms of rehabilitative home health care.[6] Part A is sometimes referred to as “hospital insurance.” Part A is free for most eligible retirees.
Medicare Part B covers doctor visits, outpatient care, medical equipment, preventive services and services from other healthcare providers. Part B covers what we generally think of as being covered by health insurance. Medicare under Part B is heavily subsidized, but does require the payment of premiums, which vary based on income.
Medicare Part C governs the administration of benefits under Parts A and B through private insurance companies that follow rules set forth by the Medicare statutes and regulations. Part C is also referred to as “Medicare Advantage.”
Medicare Part D covers prescription drugs and also requires the payment of premiums, though, like Part B, these are heavily subsidized and far below market rates for the benefits they provide.
Eligibility
American citizens and lawful permanent residents (“green card” holders) are eligible for full Medicare benefits if they have earned 40 “Social Security credits.”[7] A person earns a Social Security credit by earning a threshold income that is subject to payroll tax in a given year. The threshold amount increases each year based on national wage averages and was $1,320 as of 2018.[8] A person can earn up to four credits per year. So, a person who earns at least $5,280 per year (as of 2018) earns four credits towards the Social Security and Medicare threshold. Thus, ten years on the workforce is usually enough to earn full Medicare benefits. Spouses of people who have earned 40 Social Security credits are also fully eligible for Medicare.
People over age 65 who receive Social Security benefits (or comparable benefits from the Railroad Retirement Board) are automatically enrolled in Medicare Parts A and B. While Part A is free, the Part B premiums are deducted automatically from the recipient’s Social Security benefits unless she opts out of Part B.
People under age 65 can also be eligible for Medicare if they:
– Are disabled and have been entitled to Social Security disability benefits for at least 24 months (which need not necessarily be consecutive);
– Receive a disability pension from the Railroad Retirement Board and meet certain conditions;
– Have amyotrophic lateral sclerosis (“Lou Gehrig’s” disease); or
– Have permanent kidney failure requiring regular dialysis or a kidney transplant (though this last possibility has certain social security tax qualifications).[9]
People over age 65 who do not qualify for full Medicare benefits because they did not earn the full 40 working quarter credits and do not otherwise qualify may still choose to enroll in Medicare, though they will be required to pay premiums, even for Part A, which is typically free to those who qualify. They can choose to do so as soon as they reach the normal initial enrollment period for Medicare.
The premiums that noneligible people pay for Part A depends on the number of working credits the person earned and varies from year to year. As of 2018, people who paid Medicare taxes for at least 30 quarters (and thus earned at least 30 working credits) must pay monthly premiums of $232. People who earned fewer than 30 credits must pay monthly premiums of $422 for Part A.[10] People who choose to sign up for Part A when not eligible for full benefits must also enroll in Medicare Part B.[11]
Timing
The timing for enrollment in Medicare varies depending on the status of the applicant. Those who are not automatically enrolled in free Part A can sign up for it during the Initial Enrollment Period, which is the 7-month period starting 3 months prior to the month the applicant turns 65 through the 3 months following the month she turns 65, including the month of her 65th birthday. The start date when coverage takes effect depends on when during the enrollment period and that person enrolls. If he signs up during the first 3 months, coverage starts the first day of his birthday month. The start date of coverage is delayed for people who enroll during their birthday months or during the subsequent 3 months.
People are strongly advised to sign up for Medicare during their Initial Enrollment Periods to avoid paying a higher premium. However, a person may be eligible for a later “Special Enrollment Period” during which he may enroll without penalty. A Special Enrollment Period may be available if he is covered under a group health plan in his or his spouse’s current employment. The applicant may then choose to sign up for Medicare
- anytime he is still covered by the by the group health plan; OR
- during the 8-month period that begins the month after the employment ends or when the coverage ends, whichever comes first.
People who are covered under COBRA, retiree health plans and individual health coverage are not eligible for Special Enrollment Periods when their current coverage ends, as those types of coverage are not considered to be based on current employment.
People who did not sign up for Part A and/or Part B during their Initial Enrollment Period and do not qualify for a Special Enrollment Period can sign up between January 1 and March 31 each year. The start of coverage will be delayed until July 1 of that year and a higher Part A and/or Part B late enrollment premium may be imposed.
Medicare Rights, Denials and Appeals
Medicare beneficiaries have certain protections including the right to:
- Be treated with dignity and respect at all times
- Be protected from discrimination
- Have personal and health information kept private
- Get information in a way they understand from Medicare, health care providers, and Medicare contractors
- Have questions about Medicare answered
- Have access to doctors, other health care providers, specialists, and hospitals
- Learn about their treatment choices in clear language that they can understand, and participate in treatment decisions
- Get Medicare-covered services in an emergency
- Get a decision about health care payment, coverage of services, or prescription drug coverage
- Request a review of certain decisions about health care payment, coverage of services, or prescription drug coverage
- File complaints, including complaints about the quality of their care.
Medicare benefits are typically administered by private health and prescription drug plans who choose to participate in Medicare. If a plan suspends its participation in Medicare, people covered under that plan may select other plans during Medicare Open Enrollment between October 15 and December 7. Coverage under the new plan begins the following January 1.
Like other health and prescription drug plans, Medicare or an associated Medicare plan may limit or deny coverage or payment for a submitted claim if the claim is not covered. This could include denial of payment for health care services, supplies, or prescription drugs and includes reversals of coverage for already paid expenses. If this occurs, the Medicare beneficiary has the right to appeal this decision. The dispute may, for example, pertain to the shares of payment for which the beneficiary is deemed to be responsible.
The procedures for filing an appeal depend on the type of Medicare coverage that the patient has, with some differences between those covered by Original Medicare and those who have a Medicare Advantage plan. The main differences impact the time frame for filing an appeal and depend on the nature of the plan. For Original Medicare (Parts A and B), the item under dispute will be identified in the Medicare Summary Notice. The patient must indicate which item she wishes to dispute, explain the reason for her disagreement, and send the information to the Medicare Administrative Contractor. The appeal must be filed within 120 days of the date that the patient received the Medicare Summary Notice. A decision is generally received from the coordinator within 60 days after it gets the request.
In the case of prescription drugs, the patient has the right to get a “coverage determination” from his Medicare drug plan even before the drug is purchased. This is a written explanation of the plan’s decision about whether the drug is covered, whether the patient has met the plan’s requirements to have the drug covered, and how much the patient will be required to pay for the drug. The patient may ask for an exception to the plan’s rules and to cover the drug, such as if he or the prescriber believes he needs a drug that is not on the plan’s list of covered drugs, that a coverage rule should be waived, or if he believes he should pay less for purchasing a higher tier (more expensive) drug if he cannot take any of the approved lower tier (less expensive) drugs for the same condition.
Depending on the plan, the patient or the prescriber may make a request for a coverage determination by phone or in writing. They may ask for an expedited request if the prescription has not yet been filled or if the prescriber tells the plan administrator that the life or health of the patient may be at risk by waiting. If an exception is requested, the prescriber must provide a statement explaining the medical justification for the exception. An expedited appeal may also be requested if the patient or provider believes that the Medicare-covered services are ending too soon. An independent reviewer will decide if the services should continue.
If the patient requires assistance in filing an appeal, she can appoint a representative to help. This may be a family member, friend, advocate, attorney, doctor, or anyone else who may act on her behalf. She may also get help from the applicable State Health Insurance Assistance Program.
[1] https://www.medicareresources.org/basic-medicare-information/brief-history-of-medicare/
[2] https://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
[3] https://www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/
[4] https://www.medicareresources.org/basic-medicare-information/brief-history-of-medicare/
[5] https://www.cnbc.com/2015/07/16/medicare-medicaid-popularity-high-ahead-of-birthday.html
[6] https://www.medicare.gov/pubs/pdf/10050-Medicare-and-You.pdf Page 15
[7] https://www.aarp.org/health/medicare-insurance/info-04-2011/medicare-eligibility.html
[8] https://faq.ssa.gov/link/portal/34011/34019/Article/3829/How-do-I-earn-Social-Security-credits-and-how-many-do-I-need-to-qualify-for-benefits
[9] https://www.aarp.org/health/medicare-insurance/info-04-2011/medicare-eligibility.html
[10]https://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol/index.html
[11] https://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-costs.html