Overview

A. Medicare Introduction

B. Medicare enrollment and premiums

1. Enrollment

2. Premiums

3. 2007 changes: Higher basic premium

4. 2007 changes: Phasing in the new Part B income-related premium

C. Medicare Administration

1. Hospital Services

2. Nursing Home Services

3. Home Health Care

4. Hospice

Medicare Part B Benefits

F. Medicare Managed Care

1. Annual Coordinated Election Period (ACEP)

2. Open Enrollment Period (OEP)

G. Medicare Part D - prescription drug plans

H. Medicare Appeals

MEDICARE DEDUCTIBLES AND CO-PAYMENTS

• Care must be determined to be medically necessary

• No coverage for:

  • custodial care or routine doctor visits

  • routine dental care and most dental services

  • Eye exams or eyeglasses

  • Hearing aids

  • Most prescription drugs once you leave the hospital unless you enroll in a Part D plan.

• Limit on number of days for hospital and nursing home coverage

• Three-day hospital stay is required before nursing home care can be covered

• Deductible and co-payment for hospital, nursing home and Pt. B services.

• Late enrollment in Medicare Parts B and D may cause you to pay a higher monthly premium.

• Medicare may be secondary payor to:

  • Employer Group Health Plan

  • Worker's Compensation

  • Liability Insurers payment toward medical expenses.

• Home Care must be provided by a Certified Home Health Agency.

• Hospice program must be Medicare approved.

• Medicare HMOs may limit your choice of physician, hospital, nursing home or other providers and may provide less long term care coverage than traditional fee-for-service Medicare.

• Medicare Part D plans are confusing and provide limited drug coverage, with the model plan having a deductible, co-pays and a large gap in coverage.

A. Medicare Introduction

Medicare provides almost universal federal medical insurance for "the aged," U.S. residents age 65 and older. If you or your spouse are eligible for Social Security, both of you will be Medicare eligible. Congress built Medicare onto the Social Security system that provides retirement, survivors and disability benefits to individuals. Special provisions allow individuals who are not automatically enrolled in Medicare to enroll by paying a premium.

Medicare also covers two groups of individuals under age 65. These individuals:

(1) have received 24 months of Social Security Disability (SSD) benefits

or,

(2) are medically determined to have end-stage renal disease, or are disabled by Amyotrophic Lateral Sclerosis (ALS) also known as Lou Gehrig’s disease.

Medicare is the primary medical insurance (pays first) for enrollees except where Congress has legislated otherwise.

Medicare benefits are separated into Hospital Insurance and Supplemental Medical Insurance. The Hospital Insurance benefit, commonly known as Part A, provides basic protection against the costs of a hospital stay, care in a nursing home, home health services, and hospice care. Supplemental Medical Insurance, Part B, covers as much as 80% of other medical services, including physicians, outpatient care, ambulance and durable medical equipment.

The Medicare statute restricts coverage to services that are ". . . reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." This criteria pushes care to the least expensive site, e.g. a nursing home rather than a hospital. Custodial care is a major exemption from coverage.

B. Medicare enrollment and premiums

1. Enrollment - Medicare automatically enrolls aged individuals in Medicare Parts A and B at the time of their entitlement to retirement benefits. Disabled individuals are enrolled after receipt of 24 months of disability benefits. Part B is voluntary, but the individual must act to decline the coverage. The benefits are available until death or for up to two years after the end of disability.

You can enroll in Part B during your Initial Enrollment Period (7 months - starts three months before the month of your 65^th birthday, ends 3 months after the month of your birthday). If you decline to do so, there are two later periods for enrollment:

• Special Enrollment Period. This applies if you or your spouse work past age 65 and have a group health plan through the employer or union. You can enroll in Medicare Part B at any time up to 8 months after the coverage ends or the employment ends (whichever is first.)

• General Enrollment period. You can sign up for Medicare Part B from January 1 to March 31 of each year. The coverage starts July 1 of that year. Medicare charges 10% more on the Part B premium for each year that a person delays enrolling in Part B, unless they enroll during the Special Enrollment period, or in other, limited circumstances.

2. Premiums - Medicare Part A does not cost anything except if you lack the connection to the Social Security system needed for automatic enrollment. In that case, you can buy Medicare coverage at the average cost of Part A services, or $393/month for 2006. For lower income individuals, the state Medicaid program may pay this Medicare Part A enrollment premium.

Medicare Part B enrollment carries with it an agreement to pay a premium that covers 25% of the program. The 2006 Part B premium is $88.50/month ($1,062/yr.).

3. 2007 changes: Higher basic premium - The basic Medicare Part B premium will increase to $93.50/month for 2007. This increase makes the Medicare Savings Programs (QMB, SLMB and QI1) more important since these programs cover the basic Part B premium. A person who is eligible for one of the MSPs, and applies, will save over $1,100 for the year Less than one-third of those eligible are enrolled in Medicare Savings Programs (MSPs), according to a new report by the National Academy of Social Insurance (NASI).

4. 2007 changes: Phasing in the new Part B income-related premium - Congress added a surcharge to the 2007 Part B premiums for enrollees with income over $80,000 (for an individual) or $160,000 (for a couple who filed their taxes jointly). Approximately 5% of Medicare enrollees will pay more based on their income.

Medicare has set the surcharges based on 2005 income and IRS filing status (single, married filing jointly, etc.). Those below the threshold will continue to pay a premium that covers 25% of the Part B costs. By 2009, after the 3 year phase-in, the wealthiest enrollees (income over $200,000/year) will pay more than 3 times the basic premium (80% of the Part B costs).

Medicare will notify affected individuals before the end of 2006 about the additional 2007 premium they owe, as well as about any other changes in their Social Security benefits.

C. Medicare Administration

The initial Medicare coverage determinations are made by fiscal intermediaries (Part A) or carriers (Part B). These entities are insurance companies that have a contract to process the Medicare claims process for particular benefits on a regional basis.

Medicare does not have a prior approval process for determining coverage before service delivery. The provider does not know whether the fiscal intermediary agrees with its determination as to coverage until after the fact. Providers must screen each case for Medicare eligibility and exclusions, the most important of which are custodial care and lack of medical necessity. In simplest terms, custodial care is care that can be provided by a lay person without special skills and not requiring or entailing the continued attention of trained or skilled personnel. You are entitled to presume that Medicare will cover inpatient hospital, long term care and physician's services unless the provider tells you of the possible non-coverage. If the provider does not notify you of possible noncoverage when care is provided, you are not liable for that care.

To participate in the Medicare program, providers must agree:

not to charge, except [for deductibles or coinsurance amounts], any individual or any other person for items or services for which such individual is entitled to have payment made under this title...

42 U.S.C. §1395cc(a)(1)(A).

Medicare participating physicians accept the Physician's Fee Schedule as full payment for service.

A Medicare Summary Notice (MSN) is a summary of claims for health care services that Original Medicare processed for you during the previous three months. The statement includes submitted charges, the amount that Medicare paid and the amount you may be required to pay. The MSN is not a bill. MSNs are now only mailed four times a year (quarterly).

4. Medicare Part A Benefits

1. Hospital Services

Medicare provides a renewable inpatient hospital benefit of 90 days per spell of illness. A spell of illness begins with the first day on which an individual is furnished inpatient hospital services or nursing home care. It ends with 60 consecutive days of not being an "inpatient." The patient can use a one-time benefit of 60 Life Time Reserve days after exhausting the renewable benefits.

The care covered is that skilled care that could only be provided in a hospital, rather than in another setting, with two exceptions. A hospital may not charge a beneficiary for custodial care or care that is medically unnecessary until the hospital or its Utilization Review committee properly determines that the beneficiary no longer requires inpatient hospital care and puts the beneficiary on notice. Personal liability begins the third day following the date the patient is provided with proper notice of the determination and her right to an appeal.

Covered "inpatient hospital care" also includes periods when a beneficiary needs a skilled level of nursing home care rather than hospital care, but no available nursing home bed has been offered to the patient. The primary responsibility for developing an adequate discharge plan belongs with the hospital and its social work or discharge planning department. Until the hospital develops the plan, and offers a nursing home bed, the patient who needs skilled nursing care is to be treated as a hospital inpatient for purposes of Medicare benefits.

2. Nursing Home Services

Medicare's nursing home coverage is restricted in several ways. There must be a prior three day hospital stay. The care must be “skilled” rather than “custodial.” 100 days of coverage per spell of illness is the maximum benefit. The resident owes substantial copayments for covered days 21 to 100 ($119/day for 2006). Still, the coverage is a start and is significant where the nursing home stay is a short, rehabilitative stay.

The key to skilled care is the need for professional involvement. Patients who require therapy five times a week are receiving skilled care. Any patient whose care is "so inherently complex that it can be safely and effectively performed only by, or under the supervision of, professional or technical personnel." is also receiving skilled nursing care. A patient may need skilled services to prevent further deterioration or preserve current capabilities. Very few nursing home residents receive only custodial care, as Medicare defines that term. Most nursing home residents need a medical professional to observe and assess their condition, or manage and evaluate their care plan. They would not be in the nursing home but for a complex, but not acute, set of conditions. Before a nursing home can charge a Medicare participant for care, it must provide a notice of noncoverage, at the time of admission or a change in level of care from skilled to custodial. The notice should state the specific basis for the expected denial and notify the beneficiary that a demand bill can be submitted to Medicare. If a submission is requested, billing the patient is prohibited until Medicare reviews the claim. If the nursing home fails to tell a patient that Medicare might not cover the care, and Medicare later determines that the care was only "custodial" or not medically necessary, the nursing home cannot charge the resident for the care.

3. Home Health Care

Medicare covered home health care consists of nursing or therapy services with home health aide services added on. The services must be provided through a certified home health agency (CHHA). To qualify, the individual must

• have a physician's plan of care for home care.

• be homebound, defined as needing assistance in leaving the home.

• need therapy and/or some skilled care but not too much.

A skilled service is defined by the same standards for covered care in a nursing home. Examples include wound care, teaching a patient or their family how to manage the treatment regimen, or skilled therapy. The skilled nursing care which qualifies one for Medicare coverage must be recurring, at a minimum, a home visit at least once every 60 or 90 days. Full time nursing for an extended period would not qualify for Medicare coverage.

Individuals who meet the qualifying criteria are entitled to coverage, for as long as needed, of all medically necessary therapy (physical, speech, or, for continuing care cases, occupational) and skilled nursing services. In addition, the CHHA can provide home health aide services up to 35 hours a week, or more in exceptional cases. Medicare covers even more hours for finite, predictable periods. Coverage is long-term if continued skilled services are needed to treat, or maintain, the patient's condition. If the individual needs more care, other programs (private pay, insurance, Medicaid) can add-on to the Medicare-covered services.

The apply, call a CHHA and request an assessment. The agency, with assistance from the individual, their family and the treating physician, will perform a medical and social assessment to determine the appropriateness of home care and the availability of Medicare coverage.

4. Hospice

Hospice is a specialized program for patients who are terminally ill, i.e., physician certified as having a life expectancy of no more than six months. Hospice coverage includes counseling for the individual and their family, respite care and pain medication. While receiving hospice coverage, the Medicare beneficiary is not eligible for Medicare coverage of curative treatments. However, there is no restriction on the beneficiary choosing to go back to full Medicare coverage.

As with home care, a certified agency must provide the services. Hospice programs are being developed in many previously unserved areas, but access to a Medicare approved hospice program is not universal. Some programs offer primarily home care, while others regularly use hospital or nursing home beds.

The only out of pocket cost for this coverage is a co-payment of $5 or 5% (whichever is less) for prescriptions, and a 5% co-payment for the cost of institutional respite care. There are no day limits on home care, hospice or Medicare Part B coverage.

4. Medicare Part B Benefits

Medicare Part B provides coverage for physician and other medical services, e.g. ambulance, medical equipment, outpatient services. Among the explicit exclusions are routine doctor visits, most foot care, dental care, eye examinations, hearing aids and examinations, and cosmetic surgery.

Generally, Medicare pays 80% of allowable charges for Medicare Part B services after an annual deductible is met. From 1965 until 2004, the deductible was $100. The deductible now increases every year, from $110 in 2005 to $124 for 2006.

The amount a physician can bill a Medicare enrollee is limited in most instances to the Medicare Fee Schedule, with payment split between Medicare (80%) and the enrollee (20%). The few New York physicians who choose to "balance bill,” i.e., change more than the Fee Schedule, have their maximum billing capped 5% over the Medicare fee.

Congress has, in recent years, improved Medicare coverage for several early detection tests, and added several new benefits. For example, Pneumocele pneumonia, hepatitis B and influenza vaccines are covered in full under Medicare Part B.

Persons beginning Pt. B coverage on or after 1/1/05 are entitled to an Initial preventive physical exam . The “Welcome to Medicare” exam can include vaccines, screening tests, an electrocardiogram, a mental health assessment, hearing and vision tests and a review of the beneficiaries' ability to perform activities of daily living (ADLs) such as bathing, dressing, eating and getting in and out of bed. Doctors should question beneficiaries about their diets, physical and social activities, work histories and use of alcohol, tobacco or illicit drugs. Medicare will cover patient education efforts to address medical problems detected in the examination.

F. Medicare Managed Care - “Medicare Advantage” plans

Medicare pays a participating managed care program a flat fee per month for each enrollee. In return, the managed care program promises to provide the full array of Medicare benefits, and often, some additional benefits. The primary care physician becomes the gatekeeper for care. Her failure to obtain prior authorization for e.g. specialty care, or nursing home services, will jeopardize the coverage.

Until this year, an individual could disenroll from a Medicare Managed Care plan and return to traditional Medicare coverage at the start of the following month. Disenrollment may be the most effective option when an individual's care needs are not being met within the Medicare Managed Care plan. However, for 2007 and future years, the options for disenrolling are limited to the following:

1. Annual Coordinated Election Period (ACEP) - a Medicare Managed Care plan enrollee may change his or her election to original Medicare or to a different Medicare Managed Care plan, or from original Medicare to a Medicare Managed Care plan from November 15 through December 31 of every year.

2. Open Enrollment Period (OEP) - a Medicare Managed Care plan enrollee may disenroll during the first 3 months of the year. A change of election made during an OEP in 2006 and later years is limited to the same type of plan in which the individual making the election is already enrolled. For example, an individual who is enrolled in an Medicare Managed Care plan with a Part D drug plan may elect another Medicare Managed Care plan with a Part D drug plan or disenroll by enrolling in original Medicare with coverage under a free-standing Prescription Drug Plan(PDP). An individual who is in original Medicare and is enrolled in a PDP may elect a Medicare Managed Care plan with a Part D drug plan. However, the individual may not elect a Medicare Managed Care plan that does not provide qualified prescription drug coverage.

G. Medicare Part D - prescription drug plans

Overview: An individual with Medicare can choose to enroll in a prescription drug plan.

Currently, 45 private Prescription Drug Plans (PDPs) offer the drug benefit to traditional Medicare enrollees in New York. Medicare Advantage (MA) members (such as Senior Blue, Senior Choice or Encompass65 members) can enroll only in the MA’s drug plan.

The Costs to you:

Premium: The monthly premiums range from $0/month to more than $80/month ($960/yr). The 2006 New York benchmark premium is $29.83/month (2007 amount: $24.45). Individuals who qualify for the full low income subsidy (LIS) get a credit equal to the benchmark applied toward their plan premium. For 2007, plans with a premium within $2 of the benchmark cannot charge the extra cost to an individual who got the full LIS for 2006.

Annual deductible: Your deductible can be no more than $250 for 2006, increasing to $265 next year. Many individuals qualify for a low income subsidy that will lower premium and deductibles.

The Benefit to you: Each drug plan offers a benefit package, but these differ from plan to plan. However, every plan must give you at least the value of a basic plan set out in the Medicare law. The basic plan covers the following amounts each year:

First tier coverage: You pay 25% and Medicare pays 75% of the $2,000 of drug costs above the deductible. Your out-of-pocket cost for the initial $2,250 of drugs is $750 in 2006. For 2007 you will pay $800 out of the first $2,400 of covered drugs.

Second tier (the hole) : You are responsible for the next $2,850 (2006); $3,050 (2007).

Third tier (Catastrophic coverage): After $5,100 in incurred drug costs (your share: $3,600) Medicare will provide much greater help. You will pay the greater of a 5% coinsurance or $2 for generics/$5 for brand name drugs. For 2007, this threshold will increase to $5,451.25 (your share $3,850), and the co-pays increase to $2.15 and $5.35.

If you qualify for Extra Help, you do not pay a deductible, the initial co-pay is reduced from 25% of the drug cost to no more than $5 per prescription, the hole and third tier co-pays are eliminated

Enrollment: The open enrollment period for current Medicare enrollees is November 15 to December 31, 2006. Individuals who newly qualify for Extra Help can enroll now.

Late enrollment penalty: You may pay a higher premium if you did not enroll during your initial period of eligibility. The penalty amount is 1% of the premium each month you remain unenrolled. The penalty will not apply if you have “creditable coverage”, such as a Group Health Plan, EPIC, TRICARE, PACE or VA coverage. The penalty also is waived if you qualify for Extra Help.

H. Medicare Appeals

There is a good deal of discretion involved in making Medicare coverage determinations. To correct errors, and provide some measure of consistency and fairness, an appeal process exists for each Medicare Part, as well as for Medicare managed care participants. The appeal processes are intricate, with as many as four levels of administrative review, but productive. Over half of the determinations at each appellate level, excluding dismissals and withdrawals, result in a full or partial determination favorable to the fee-for-service Medicare claimant.

The Part A appeal process is:

1. Reconsideration

2. Administrative Law Judge (ALJ) hearing ($110 minimum)

3. Appeals Council

4. Federal Court ($1,090 minimum)

For Part B, a carrier review and a separate carrier hearing replace the reconsideration step. The dollar threshold increases to $500 for ALJ hearings.

An enrollee should not take an initial Medicare denial too seriously. The procedure for appealing the initial denial, called reconsideration under Part A, consists of obtaining a second opinion on the submission. A reviewer of the same rank as the initial decision maker, with the same file and information, takes another look at the claim. About one-half of the time Medicare provides additional coverage on reconsideration.

The Administrative Law Judge (ALJ) hearing is a full review of the case, with opportunity to develop the record. The single most important addition to the file, where the level of care is at issue, is a letter from the client's treating physician.