Medicare

Geriatric Essentials

• The Medicare Modernization Act establishes prescription drug coverage that becomes effective in 2006.
• Part B of Medicare now covers several preventive services, including an initial "Welcome to Medicare" physical examination within 6 months of enrolling in Part B.

Medicare, administered by the Center for Medicare and Medicaid Services (CMS), is primarily a health insurance program for the elderly (Medicare funds also support certain components of post-graduate medical training and programs that regulate and monitor quality-of-care). US citizens automatically become eligible upon turning 65 if they are eligible for benefits under Social Security, Civil Service Retirement, or Railroad Retirement. People of all ages with end-stage renal disease requiring dialysis or transplant and some people < 65 yr with certain disabilities are also eligible. The type and range of services that Medicare covers change regularly with new statutory and regulatory amendments (www.medicare.gov).

Physicians should understand basic Medicare rules, supply documentation used to determine whether patients are eligible for benefits, and make referrals to legal and social services for counseling and support.

If a patient's claim is denied, a Medicare Summary Notice is issued to the patient to provide information about services or supplies that Medicare does not cover. The denial of coverage may be reversed by a challenge made within 120 days of the notice. The challenge must be supported by an appeal in a fair hearing administrative forum, in which the insurance company handling Medicare claims reviews the case. If unsatisfied with the outcome of that review, the patient has the right to a hearing before a judge.

The original Medicare Plan has 2 parts: hospital insurance (Part A) and medical insurance (Part B). The original Medicare Plan (sometimes referred to as the "fee-for-service plan") is available nationwide. The Medicare Advantage Plans (formerly called Medicare + Choice Plans) encompass managed care plans, preferred provider organization plans, and private fee-for-service plans. Medicare Advantage Plans are available in many but not all areas of the country.

Part A

A complete description of Part A services and other provisions is available in Medicare & You 2005 (available on the Internet at www.medicare.gov or by calling 800-633-4227).

Part A is supported by a payroll tax collected from all people who are working and represents prepaid hospital insurance for Medicare-qualified retirees. Generally, only people who receive monthly Social Security payments are eligible, and those who are eligible do not pay premiums. Individuals who have never worked or who have not worked the minimum number of years required for Social Security eligibility cannot receive coverage. However, more than 95% of people 65 or older are enrolled in Part A (many people receive spousal eligibility or pay Part A premiums). Individuals who currently receive Medicare, but not Medicaid, and whose monthly income is between $589 and $769 (and couples whose monthly income is less than $1030) are eligible for the Medicare Savings Program, also referred to as the Qualified Medicare Benefit (QBM). Although such individuals are not eligible for Medicaid, Medicaid will cover the Medicare deductible, coinsurance, and Medicare Part B premiums. It will not pay for prescriptions.

Part A covers inpatient hospital care, post-hospital care in a skilled nursing facility or a rehabilitation facility, hospice care, and limited custodial care and home health care, under the circumstances outlined below. Care in a hospital or a skilled nursing facility is paid for on the basis of benefit periods. A benefit period begins when a person is admitted to a facility and ends when the person has been out of the facility for 60 consecutive days. If a person is readmitted after the 60 days, a new benefit period begins, and another deductible must be paid. If a person is readmitted in less than 60 days, an additional deductible is not paid, but the hospital or facility may not receive full payment for the 2nd admission.

Inpatient hospital care: Under Part A, 60 full days of hospitalization plus 30 coinsurance days represent the benefit period. The period is renewed when the beneficiary has not been in a hospital or skilled nursing facility for 60 days. Subject to the inpatient deductible and coinsurance requirements, payment can be made on the patient's behalf for up to 90 days of covered inpatient hospital services in each benefit period. The beneficiary pays only a deductible for the 60 full coverage days of the benefit period, which is established annually ($912 in 2005). If the patient's hospital stay exceeds 60 days, the beneficiary pays a daily co-payment equal to ¼ of the deductible ($228 per day for days 61 to 90 in 2005). If the patient's hospital stay exceeds 90 days, the beneficiary pays a daily co-payment equal to ½ of the deductible ($456 per day for days 91 to 150 in 2005). Days 91 to 150 during a hospital stay are designated as reserve days. Part A benefits permit 60 lifetime reserve days for use after a 90-day benefit period has exhausted. The 60 days are not renewable and can be used only once during a beneficiary's lifetime. Payment is automatically made for such additional days of hospital care after the 90 days of benefits have been exhausted unless the individual chooses not to have such payment made (thus saving the reserve days for a later time). Beyond 150 days the patient is responsible for all charges.

Virtually all medically necessary hospital services are covered, although mental health care is handled differently. Part A provides limited coverage for inpatient mental health care services. Medicare pays for a semiprivate room or, if medically necessary, a private room, but not for amenities. Other covered services include discharge planning and medical social services, such as identifying eligibility for public programs and referrals to community agencies.

Payment for inpatient hospital care is determined by the diagnosis-related group, which includes the beneficiary's principal diagnosis with some adjustment for age, severity, gender, comorbidity, and complications. A hospital's financial profit or loss is partially dependent upon the length of admission and costs of diagnosis and therapy for each patient. Under this arrangement, the financial pressure for early discharge and limited intervention may conflict with medical judgment. When a patient cannot be discharged home safely or to a nursing home because no bed is available, Medicare typically pays a relatively low per diem cost for an alternative level of care.

Inpatient care in a skilled nursing facility: Skilled nursing care and skilled rehabilitation services are covered in a complex fashion that can change every year. Skilled nursing and rehabilitation is covered only if initiated immediately or shortly after discharge from a hospital. The period of coverage is usually < 1 month (specific duration of coverage depends on documented improvement in the patient's condition or level of function).

The Medicare Prospective Payment System was initiated in 1998 and assigns patients to a resource utilization group system (RUGS III) according to the types and amounts of resources their care is expected to cost. Seven categories--special care, rehabilitation, clinically complex problems, severe behavioral problems, impaired cognition, reduced physical functioning, and a need for extensive services--are subdivided based primarily on the patient's functional dependence. The Prospective Payment System is updated annually. The goal is to increase efficiency and avoid excessive payment for patients who require little care. Prospective per diem rates cover routine, ancillary, and capital costs of care for a patient in a skilled nursing facility.

RUGS III uses data from the Minimum Data Set (MDS), the mandated uniform assessment instrument for nursing home patients. The MDS requires ongoing review of patients, making it possible to link patient outcomes with RUGS categories.

Home health care: Medical care provided in the home includes part-time or intermittent skilled nursing care; home health aide services incidental to skilled care; and physical, speech, and occupational therapy. These services are generally covered if they are part of a physician-approved care plan for a homebound patient, but there are limits on the extent and duration of coverage. Amounts of coverage have been curtailed recently by implementation of a prospective payment system. Medical supplies are covered when billed by a home health agency.

Hospice services: Medical and support services for a terminal illness are generally covered if a physician certifies that the patient is terminally ill (estimated life expectancy of 6 months). However, the patient must choose to receive hospice care instead of standard Medicare benefits.

Custodial care: Care of a medically stable patient who requires assistance with activities of daily living (ADLs), such as eating, dressing, toileting, and bathing is covered in the home only when skilled care (the services of a professional nurse or therapist under a physician-authorized plan of home care) is also required. Custodial care is covered in a skilled nursing facility when it is part of post hospital acute or rehabilitation care.

Part B

A complete description of Part B services and other provisions is available in Medicare & You 2005 (available on the Internet at www.medicare.gov or by calling 800-633-4227).

Part B is optional and requires the beneficiary to pay a monthly premium ($78.20 in 2005 for people enrolling promptly after reaching age 65). Premiums generally rise by 10% for each year's delay in enrollment; exceptions are for those currently covered by group insurance through employment of oneself, one's spouse, or a family member. Most state Medicaid programs pay Part B premiums for people who qualify for both Medicare and Medicaid. Social Security beneficiaries are automatically enrolled in Part B unless they decline the highly subsidized coverage; the federal government pays 75% of Part B costs, and beneficiaries pay 25%. Consequently, 95% of people aged 65 who retire with Social Security benefits elect Part B coverage and agree to have premiums deducted from their monthly Social Security checks. Those who decline coverage but later change their minds must pay a surcharge based on how long they delayed enrollment. Participants may discontinue coverage at any time but must pay a surcharge on the premium if they reenroll.

Part B covers a percentage of the cost of physician services; outpatient hospital care (eg, emergency department care, outpatient surgery), with certain restrictions; outpatient physical, speech, and occupational therapy; diagnostic tests, including portable x-ray services in the home; and durable medical equipment for home use. If surgery is recommended, Part B covers part of the cost of an optional 2nd opinion and, if these opinions differ, a 3rd opinion.

Part B also covers medically necessary ambulance services, certain services and supplies not covered by Part A (eg, colostomy bags, prostheses), drugs and biologicals that cannot be administered by the patient, spinal manipulation by a licensed chiropractor for subluxation demonstrated on x-ray, drugs and dental services if deemed necessary for medical treatment, optometry services related to lenses for cataracts, and the services of physician assistants, nurse practitioners, clinical psychologists, and clinical social workers. Outpatient mental health care, with certain limitations, is covered. Medicare does not cover intermediate or long-term nursing care (with the exception of Part A services noted above) nor does it cover routine eye, foot, or dental examinations. However, Medicare now covers several preventive services, including bone mass measurement, diabetes services (screening, supplies, and self-care training), colorectal cancer screening, prostate cancer screening and prostate-specific antigen tests, an initial physical examination (the "Welcome to Medicare" examination), glaucoma screening, vaccinations (influenza, pneumococcal), mammograms, and Papanicolaou (Pap) tests. Unless the patient is enrolled in a managed care program, Medicare generally does not cover outpatient drugs, although it does cover drugs that cannot be administered by the patient (eg, drugs given IV), some oral anticancer drugs, and certain drugs for hospice patients.

Under Part B, physicians may elect to be paid directly by Medicare (assignment), receiving 80% of the allowable charge directly from the program, once the deductible has been met. Patients whose physicians accept assignment are responsible only for meeting the deductible. A physician who does not accept assignment of Medicare payments (or does so selectively) may bill the patient up to 115% of the allowable charge; the patient receives reimbursement (80% of the allowable charge) from Medicare. Physicians are subject to fines if their charges exceed the maximum allowable Medicare fees. A physician who does not accept assignment from Medicare must give the patient a written estimate for elective surgery if it is > $500. Otherwise, the patient can later claim a refund from the physician for any amount paid over the allowable charge.

Medicare payments to physicians have been criticized as inadequate for the time involved in giving physical and mental status examinations and obtaining the patient history from family members. A Medicare fee schedule based on a resource-based relative value scale for physician services became effective in January 1992 in an attempt to correct this problem. The effects of the fee schedule on patient care and on the practice of geriatric medicine remain to be determined, but few physicians are satisfied. Paperwork and time involved in documentation have increased.

Medicare Advantage Plans

This program (formerly called Medicare + Choice) offers several alternatives to the traditional fee-for-service programs, including managed care, preferred provider organization, and private fee-for-service plans. Medicare Advantage Plans must cover at least the same level and types of benefits covered by Medicare A and B. However, Medicare Advantage Plans may include additional benefits, although participants may pay an additional monthly premium for those additional benefits.

Medicare Modernization Act

Health care funding for the elderly underwent significant change with passage of the Medicare Modernization Act in 2003. The primary effect of this legislation was to establish prescription drug coverage to become effective in 2006. A program of Medicare-approved drug discount cards was implemented in 2004, to provide savings of approximately 10 to 25% on prescription drugs. The cards are available through more than 30 private companies. Participation in the discount card program is voluntary, but participants must pay a $600 fee before the card is activated (the fee may be waived for single people with an annual income < $12,569 and married couples with an income < $16,862).

In 2006, under this voluntary prescription drug coverage program participants will choose a plan and pay a monthly premium of approximately $3 and the first $250 in drug costs (an annual deductible). Medicare will then pay 75% of costs between $250 and $2,250. Patients will pay 100% of drug costs > $2,250, until they reach $3,600 in out-of-pocket spending. Medicare will then pay 95% of costs exceeding $3,600 in a given year. Partial or complete waivers of premiums and deductibles will be available for those with low incomes and limited assets.

This topic was last updated May 2005.