Medicare

Medicare helps older people pay for health care services. But it pays only for services it considers appropriate. These services are called covered services. Costs for covered services are called allowable charges. However, Medicare does not pay for all of the costs for covered services. The first time a certain service is needed, people must usually pay a small fixed amount (called a deductible) before Medicare pays anything. If people need the same service again after a specified time has passed, they have to pay another deductible. After the deductible has been paid, people usually also have to pay a certain percentage of the costs (called a copayment) each time they use a service. For example, the deductible for outpatient services (such as a doctor's visit) may be $100 each calendar year, and the copayment for each use of outpatient service may be 20% of the allowable charges. This arrangement means that people pay the first $100 of their outpatient bills. Then, for the next year, they pay 20% of the allowable charges each time they use a service, and Medicare pays the rest. When the calendar year is over, they must pay another deductible for services used in the next year.

Medicare offers two types of health care plans: the original Medicare plan and Medicare + Choice. Medicare + Choice offers alternative plans for health care, including managed care and fee-for-service care.

Original Medicare plan: Available nationwide, this plan operates on a fee-for-service basis. It has two parts, Part A and Part B.

• Part A (often referred to as hospital insurance) covers hospital services and some outpatient services commonly needed for a short time after a hospital stay.
• Part B (often referred to as medical insurance) covers outpatient services, including doctors' fees.

With the original Medicare plan, choice of doctor and hospital is not limited. However, some doctors require that the person pay the bill and fill out the paperwork (file the claim) for reimbursement by Medicare. Other doctors file the claim themselves and receive payment directly from Medicare.

Some doctors do not accept Medicare payments as full payment (that is, they do not accept "assignment" from Medicare). They may charge more for a service than Medicare pays. (Medicare pays a set amount—what it considers a usual, customary, and reasonable amount—for each service it covers.) These doctors charge up to an extra 15% of the Medicare-approved amount. Paying any extra charges is the person's responsibility. So a person should ask doctors in advance if they accept Medicare as full payment.

Part A is automatic for most people when they reach age 65. Anyone who is eligible for Social Security, Railroad Retirement, or Civil Service Retirement benefits has Part A. Such people are sent their Medicare card about 3 months before their 65th birthday. Part A is paid for by a federal tax that is automatically deducted each month from payroll checks (as for Social Security). Thus, people who are enrolled in Part A do not have to pay monthly fees for it. People who continue to work after age 65 should enroll in Part A during open enrollment (the 6-month period starting 3 months before their 65th birthday and ending 3 months after). Enrolling after this period often costs more. People who are not eligible may be able to purchase Part A.

Part A helps pay for hospital care, care in a skilled nursing facility (if services are needed daily after a related 3-day stay in a hospital), and hospice care. Hospice care is available only for people with a life expectancy of no more than 6 months. When hospice care is selected, the hospice organization manages all benefits from Medicare (and Medicaid).

For people who are homebound and need part-time skilled nursing care or rehabilitation, Part A helps pay for home health care, including help with personal care (such as bathing, going to the bathroom, and dressing).

Part A pays for care on the basis of benefit periods. A benefit period begins when a person is admitted to a hospital or skilled nursing facility and ends when the person has been out of the facility for 60 days in a row. If a person is readmitted after the 60 days, a new deductible must be paid. There is no limit to the number of benefit periods.

Part B is optional. If people are eligible for Part A, they are eligible for Part B. People who choose to enroll can purchase Part B insurance for a fee paid each month. The fee is usually deducted from their Social Security, Railroad Retirement, or Civil Service Retirement check. The best time to sign up for Part B is during open enrollment. Otherwise, the rates may be higher. At age 65, some people are still working, or their spouse is still working. Many of these people have health insurance through their or their spouse's employer. These people have a delayed enrollment option, which enables them to enroll in Part B later but at the open-enrollment rate. The open-enrollment rate for Part B changes every year. In 2003, the rate was $58.70 a month for most people.

Part B helps pay for many services and supplies that are used on an outpatient basis and that are medically necessary. For example, it helps pay for doctor's fees, emergency department visits, and outpatient surgery (with no overnight stay in the hospital). It also helps pay for transportation by ambulance when other types of transportation are likely to be unsafe, rehabilitation, diagnostic tests, outpatient mental health care, and reusable (durable) medical equipment for home use such as wheelchairs. Part B may pay for home health care for homebound people when Part A does not. If surgery is recommended, Part B helps pay for a second opinion and, if opinions differ, a third opinion.

Part B helps pay for some preventive care. Examples are an annual influenza (flu) vaccine and screening tests such as mammography, Papanicolaou (Pap) tests, bone density measurements, and tests for prostate cancer and colorectal cancer. It helps pay for glaucoma tests for people who are at increased risk because they are black and over 50, have diabetes, or have a family history of glaucoma. For people with diabetes, Part B pays for some costs of monitoring sugar (glucose) levels in the blood.

Neither part A nor part B covers the following:

• Private-duty nursing
• Telephone and television in the hospital
• A private hospital room (unless medically necessary)
• Most prescription drugs and all nonprescription drugs
• Personal care at home or in a nursing home unless people also need skilled nursing care or rehabilitation
• Hearing aids
• Vision care
• Dental care
• Care outside the United States, except in certain circumstances
• Experimental procedures
• Some preventive care
• Cosmetic surgery
• Most chiropractic services
• Acupuncture

Medicare + Choice: For this plan, Medicare makes arrangements with other organizations, such as insurance companies, hospital systems, or managed care organizations, to provide care. This plan is available in many areas of the United States.

Medicare + Choice may be a fee-for-service or managed care plan. In fee-for-service plans, a person can choose any doctor or hospital, and the plan pays for a share of the cost. However, a private company, not Medicare, decides how much a service costs, so costs may be higher.

Medicare managed care is handled by a health maintenance organization (HMO) or preferred provider organization (PPO). In HMOs, a person chooses a primary care doctor within the HMO's network. (The network includes doctors, medical clinics, and hospitals that the HMO or other managed care organization has selected and contracted with to care for its members.) The primary care doctor may refer the person to other health care practitioners as needed. Practitioners must be part of the HMO network for the HMO to cover care. Emergency care when a person is out of the area is an exception. In PPOs, a person can, within some limits, choose doctors outside the PPO's network. But the monthly fee for PPOs is higher than that for HMOs. Some HMOs offer a point-of-service option for an additional monthly fee. As in PPOs, a person with this option can choose some doctors outside the HMO's network, and the HMO pays for part of the costs.

Some Medicare + Choice plans offer coordination of care, lower or no deductibles and copayments, and extra benefits. For example, the plans may help pay for prescription drugs, eyeglasses, hearing aids, and preventive care. Some plans cover services not usually covered by the original Medicare plan. An example is an assessment by an interdisciplinary team that specializes in caring for older people. Medicare + Choice requires people to pay the same fee (sometimes less) as that for Part B. Often, there is an additional monthly fee. Medicare + Choice plans vary from state to state.

When deciding about Medicare options, people should consider what they want in terms of out-of-pocket costs, extra benefits, choice of doctors, convenience, and quality.

Another Medicare Option

Programs are being designed to provide more comprehensive, better-integrated health care for older people. An example is the Program of All-Inclusive Care for the Elderly (PACE). This program is an optional benefit of Medicare and uses funds from Medicare and Medicaid. As a type of managed care, it may require a monthly fee. PACE is designed for older people frail enough to need care in a nursing home. However, the goal of the PACE program is to enable older people to live at home as long as possible. In PACE, an interdisciplinary team assesses the participant's needs, develops a care plan, and provides all necessary health care. It includes medical and dental care, adult day care (including transportation to and from the facility), health and personal care at home, prescription drugs, social services, rehabilitation, meals, nutritional counseling, and hospital and long-term care when needed. PACE is available in 13 states.

See the sidebar Changes in Medicare.