Medicare is a health insurance program for people ages 65 or older, people with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant) and some people with disabilities under age 65. It is administered by the Centers for Medicare and Medicaid Services, a subagency of the Department of Health and Human Services. Hospital insurance (Part A) helps pay for inpatient hospital care and certain follow-up care after you leave the hospital. Medical insurance (Part B) helps pay for your doctor’s services, outpatient hospital care, and some other medical services and supplies that Part A does not cover. In addition, types of care provision alternative to the traditional Medicare fee-for-service structure often are referred to as Part C (or Medicare Advantage), and prescription drug coverage as Part D.
Federal and postal workers pay 1.45 percent of their salaries for coverage under Medicare’s hospital insurance. If you are age 65 or older, you are eligible for hospital insurance if you have government service (alone or in combination with private-sector service) that equals the amount of work needed for Social Security benefits at age 62 (even if you are not also eligible for Social Security benefits). In no case will any individual need more than 10 years of employment (in the federal government alone or in combination with private-sector service) to be eligible for Medicare’s hospital insurance at age 65.
Medicare eligibility starts at age 65 for you and your spouse. Therefore, if you have a younger spouse, it may be advisable to continue under one of the low-option Federal Employees Health Benefits program plans until the spouse reaches age 65. If you are still working at age 65, FEHB insurance coverage will continue as primary insurer, with Medicare as the secondary insurer until you retire. If your spouse reaches age 65 while you are still working, federal health insurance coverage will also continue as primary insurer for your spouse.
While you do not have to pay a monthly premium for Part A if you meet eligibility conditions, you must pay for Part B if you want it (rates vary by taxable income; see below). It is deducted from your Social Security or civil service retirement benefit payments. Costs under the Part C and Part D programs vary by the type of coverage and the amount of benefits used.
For general information about Medicare, contact a local Social Security Administration office, or phone (800) 633-4227 or (800) 772-1213, TTY (800) 325-0778, or go to www.medicare.gov or www.ssa.gov.
For information about the relationship between Medicare and the FEHB, and how that relationship might affect your decisions under Medicare and/or FEHB, see FEHB and Medicare in Chapter 2, Section 1.
My.Medicare.gov—The Medicare beneficiary portal at https://my.medicare.gov allows beneficiaries to view eligibility and entitlement information, enrollment information including prescription drug plans, deductibles, and address of record information. Additionally, it allows beneficiaries to order replacement Medicare cards and provides access to online forms and publications, preventive service information, and the option for Web chat assistance for technical questions. Users also may view adjudicated claims information and search for a specific claim.
Preventive Benefits—Preventive benefits provided by Medicare include, among others: a one-time “welcome to Medicare” physical exam and annual wellness exams; cardiovascular disease screening and behavioral therapy; screening for depression and for breast, cervical, colon, and prostate cancer; screening and counseling for alcohol abuse and obesity; flu, pneumococcal, and Hepatitis B shots; bone mass measurements; diabetes screening, supplies, and self-management training; and glaucoma tests. See www.medicare.gov/coverage/preventive-and-screening-services.html.
Hospital Insurance (Part A)
Eligibility, Enrollment and Premiums—Most people are enrolled automatically for Part A at age 65 without needing to take any action. Those who retire on disability under age 65 may be eligible if the disability conforms to standards set by the Social Security Administration, which generally require that an individual be unable to engage in any substantial gainful activity. For more information about enrolling in Part A, contact a local Social Security office or phone (800) 772-1213, TTY (800) 325-0778.
Only a small portion of beneficiaries pay a Part A premium, mainly those with fewer than 40 calendar quarters of Medicare-covered employment personally or by a spouse. For them, a monthly premium of $407 applies if they have fewer than 30 quarters; $224 if they have between 30 and 39 quarters.
Benefits—Medicare hospital insurance can help pay for medically necessary inpatient hospital care and inpatient care in a skilled nursing facility, home health care, hospice care, and nursing home care as long as custodial care is not the only care you need.
For inpatient hospital or skilled nursing facility care, a benefit period starts when you enter a hospital. It ends when you have been out of a hospital or other facility that provides skilled nursing or rehabilitation services for 60 days in a row. After that you begin a new benefit period the next time you enter a hospital. There is no limit to the number of benefit periods you can have for inpatient hospital or skilled nursing facility care. However, special limited benefit periods apply to hospice care.
If you need inpatient care, hospital insurance helps pay for up to 90 days in any participating hospital in each benefit period. For the first 60 days, hospital insurance pays for all covered services except for the first $1,260. You pay this deductible only once in each benefit period. For the 61st through 90th day, hospital insurance pays for all covered services except for $315 a day.
If you need more than 90 days of hospital care in a benefit period, you can use some or all of your 60 “reserve days.” Reserve days are not renewable. For each reserve day you use, hospital insurance pays for all covered services except for $630 a day.
Covered services include semi-private room, all meals, regular nursing services, operating and recovery room costs, hospital costs for anesthesia services, intensive care and coronary care, drugs, lab tests, X-rays, medical supplies and appliances, rehabilitation services, and preparatory services related to kidney transplant surgery.
Under special conditions, hospital insurance can help pay for care in a psychiatric hospital, in a U.S. non-participating hospital, or in a qualified Canadian or Mexican hospital.
If you need inpatient skilled nursing or rehabilitation services after a hospital stay, hospital insurance helps pay for up to 100 days in a participating skilled nursing facility in each benefit period. You must have been in the hospital for at least three days and meet certain other conditions. Hospital insurance pays for all covered services for the first 20 days and all but $157.50 a day for up to 80 more days. Covered services include semiprivate room, all meals, regular nursing services, rehabilitation services, drugs, medical supplies, and appliances.
Under certain conditions, hospital insurance can pay for hospice care for people with a terminal illness. Covered services include physician services, nursing care, outpatient drugs for pain relief and symptom management, short-term inpatient care, therapies and homemaker-home health aide services. There is a co-payment of up to $5 for outpatient prescription drugs. You also pay 5 percent of the Medicare-approved payment amount for inpatient respite care.
Hospital insurance can pay the approved cost of home health visits from a participating home health agency. You must be confined to your home and meet certain other conditions. The number of home health visits covered by Medicare varies with each illness or injury.
Covered services include part-time skilled nursing care, physical therapy, and speech therapy. If you need one or more of those services, hospital insurance also covers part-time services of home health aides, occupational therapy, medical social services, and medical supplies and equipment.
Medical Insurance (Part B)
Eligibility, Enrollment and Premiums—Almost anyone who is 65 or older or who is eligible for Part A hospital insurance can enroll for Part B medical insurance. The standard monthly premium is $104.90, which applies to the large majority of enrollees. For those with individual taxable income in the prior tax year above $85,000 or joint taxable income above $170,000, a surcharge applies, starting at $42 a month and ranging up to $230.80 a month.
If you are receiving Social Security benefits, you will be automatically enrolled for medical insurance unless you say you don’t want it at the same time you become entitled to hospital insurance.
There is a seven-month initial enrollment period for medical insurance. This period begins three months before you turn 65 and ends three months after that month. For example, if you are eligible for medical insurance in July, your initial enrollment period starts April 1 and ends October 31.
If you don’t take medical insurance during your initial enrollment period and then later decide you want it, you can sign up during a general enrollment period. A general enrollment period is held January 1 through March 31 of each year. But if you enroll during a general enrollment period, your protection won’t start until the following July and your monthly premium will be 10 percent higher than the basic premium for each full 12-month period you could have had medical insurance but were not enrolled.
A special enrollment period is provided if you are covered under FEHB or another qualifying group health plan when you are first eligible to get Medicare. The plan coverage must be based on your current or active employment or the current or active employment of your spouse. (If you are disabled, the plan coverage may be based on the current or active employment of any family member.) It cannot be a plan for retired people. Under the special enrollment period rules, you may enroll in medical insurance during any month that you are covered under the group health plan or you may enroll during the eight-month period that begins the first full month that you are no longer covered under the group health plan based on current employment.
If you enroll while covered under the group health plan or during the first full month you no longer have group health plan coverage based on current or active employment, medical insurance begins the month you file your application, or at your option, the first day of any of the following three months. If you enroll during the balance of the special enrollment period, medical insurance begins the month after the month of enrollment. In addition, all months during which you are covered under the group health plan based on current or active employment will not be counted as months during which you could have had medical insurance in determining if your premium should be increased.
If you already get Social Security or Railroad Retirement benefits, you are automatically enrolled in Medicare Part B but have the option of declining that coverage. If your aren’t automatically enrolled, and wish to be, contact the Social Security Administration to get enrolled—contact a local Social Security Administration office or phone (800) 772-1213 (TTY (800) 325-0778). Under certain conditions, enrollment can be made online at www.ssa.gov.
Benefits—Medicare’s medical insurance helps pay for your doctor’s services and supplies that are not covered by the hospital insurance provided under the program. Each year, after you meet the annual medical insurance deductible, medical insurance generally will pay 80 percent of the approved charges for other covered services you receive during the rest of the year. The annual deductible is $147.
Medical insurance covers doctors’ services no matter where you receive them in the United States—in a doctor’s office, the hospital, your home, or elsewhere. Covered doctor’s services include surgical services, diagnostic tests, and X-rays that are part of your treatment; medical supplies furnished in a doctor’s office; services of the office nurse; and drugs that are administered as part of your treatment and cannot be self-administered. (Note: Medicare payment for laboratory services by your doctor will be made only when the doctor takes “assignment,” that is, agrees to accept Medicare payment as payment in full.)
Medicare does not cover delivery of medical services outside the United States, except under special circumstances in Mexican and Canadian hospitals.
Medical insurance covers outpatient hospital services you receive for diagnosis and treatment of an illness or injury, such as care in an emergency room or outpatient clinic of a hospital, and unlimited number of home health visits if all required conditions are met.
Under certain conditions or limitations, medical insurance also covers: ambulance transportation; artificial limbs and eyes; chiropractors’ treatment for subluxation of the spine; diagnostic testing prior to a hospital stay; durable medical equipment such as wheelchairs or oxygen equipment for use in your home; home dialysis equipment, supplies, and periodic support services; home and office services of independent physical therapists; independent laboratory tests (when performed under “assignment” as described above); optometrists’ services for fitting of corrective lenses after cataract surgery; oral surgery (but not routine dental care); outpatient maintenance dialysis; outpatient physical therapy and speech pathology services; outpatient psychiatric services; pneumococcal, influenza and hepatitis B vaccinations; podiatrists’ services; therapeutic shoes for certain individuals with diabetes; surgical dressings, splints, casts, colostomy supplies, and braces; training for home dialysis; X-rays and radiation treatments.
A detailed listing of what Medicare covers is at www.medicare.gov.
Medicare Health Plan Choices
Medicare health plan choices include the Original Medicare Plan, a traditional fee-for-service program, and Medicare Advantage (sometimes called Part C), which offers several types of coverage. In every Medicare health plan, you pay the monthly Medicare Part B premium and get all the Medicare Part A and Part B covered services. An open enrollment period is held each autumn (dates vary), during which anyone can join, switch or drop a Medicare Advantage plan for the succeeding calendar year. Coverage changes also are allowed in certain other situations, such as moving out of a regional plan’s coverage area.
Original Medicare Plan—The Original Medicare Plan is available nationwide and allows you to go to any doctor, specialist, or hospital that accepts Medicare. Generally, a fee is charged each time you get a service or supply.
You pay a deductible amount for your health care each year before Medicare pays its part. Then Medicare pays its share and you pay your share (coinsurance). After you get a health care service, you get an explanation of Medicare benefits or a Medicare summary notice that lists the amount you may be billed.
What you pay out-of-pocket depends on whether your doctor or supplier agrees to “accept assignment” (i.e., bill only up to certain maximums for Medicare reimbursement), how often you need health care, what type of health care you need, whether you get health care while traveling outside of the United States (since in most cases you would pay for this care), and whether you get services or supplies not covered by Medicare.
Medigap plans, also known as Medicare Supplemental Insurance plans, are sold by private companies to fill in coinsurance, co-payments, deductibles, and other “gaps” in the Original Medicare Plan. In most states, a Medigap policy must be one of a set of standardized policies, each with a different set of benefits. A lower-cost variant is Medicare SELECT plans, which generally require enrollees to use certain hospitals and doctors except in emergencies. New Medigap plans offering prescription drug coverage are no longer being sold due to the availability of Medicare Part D drug coverage, although prior enrollees could keep those plans. A Federal Employees Health Benefits program enrollee in the Original Medicare Plan generally doesn’t need to purchase a Medigap policy since FEHB acts in much the same way, coordinating with Medicare to provide more comprehensive coverage than Original Medicare alone. See FEHB and Medicare in Chapter 2, Section 1.
Medicare Advantage—Medicare Advantage is a Medicare private health plan option featuring health maintenance organization plans, private fee-for-service plans, medical savings account plans, special needs plans, and local or regional preferred provider organization plans.
A Medicare HMO is a health plan offered by private insurance companies. Medicare pays a set amount of money every month to the private insurance company. In most managed care plans, you can only go to certain doctors and hospitals that agree to treat members of the plan. Generally, you can only see a specialist when you get a referral from your primary care doctor. Some managed care plans offer a point-of-service option allowing enrollees to go to other doctors and hospitals outside the plan. Most of the time this option costs more, and gives more choices.
A private fee-for-service plan is a Medicare health plan offered by a private insurance company. Medicare pays a set amount of money every month to the private insurance company. The private insurance company provides health care coverage to people with Medicare who join this plan. The insurance company, rather than the Medicare program, decides how much it pays, and how much the enrollee pays, for services. Enrollees can go to any doctor or hospital that accepts the plan’s payment. In a private fee-for-service plan, you may pay more if the plan lets doctors, hospitals, and other providers bill you more than the plan pays for services. If this is allowed, there may be a limit to what they can charge, and you must pay the difference.
Medical savings account plans have high deductible health insurance coupled with a savings account into which Medicare deposits money and whose funds are available to pay certain medical expenses.
Special needs plans may limit all or most of their membership to people in certain institutions (like a nursing home), eligible for both Medicare and Medicaid, or with certain chronic or disabling conditions. Plans are available in limited areas. The plan must be designed to provide Medicare health care and services to people who can benefit the most from things like special expertise of the plan’s providers, and focused care management. Plans also must provide Medicare prescription drug coverage. In most of these plans, there are extra benefits and lower co-payments than in the Original Medicare Plan.
Medicare PPOs consist of networks of doctors, hospitals and other providers; beneficiaries can use providers outside of the network for an additional cost. Regional PPOs are available in most parts of the country; local PPOs are available in some areas. If you have Medicare, you can join any of these types of plans if: you have both Part A and Part B; you live in the service area of the plan; and you do not have end-stage renal disease (permanent kidney failure requiring dialysis or a kidney transplant). Enrollees also get all regular Medicare-covered services and all Medicare rights and protections.
What you pay out-of-pocket depends on whether the plan charges a monthly premium in addition to the Part B premium, how much the plan decides you must pay for each visit, the type of health care you need and how often you get it, and how much the plan charges for extra benefits.
Prescription Drug Benefits
The Medicare prescription drug benefit (Medicare Part D) is available to all those with Medicare Part A and/or Part B. For 2015, most enrollees pay a monthly premium averaging about $32. A premium surcharge is imposed on enrollees with individual taxable income in the prior tax year above $85,000 or joint taxable income above $170,000, ranging from $12.30 to $70.80 per month.
There is a $320 deductible. Above the deductible:
• Medicare pays 75 percent of drug costs between the deductible and $2,960;
• beneficiaries pay for drug costs above $2,850 until their total out-of-pocket cost, including the deductible, is $4,700; and
• Medicare pays 95 percent of drug costs after the individual’s total out-of-pocket cost hits $4,700.
Public Law 111-148 of 2010 ordered closing this “donut hole” structure. A subsidy (35 percent in 2015) for generic drugs in the gap is being increased annually so that in 2020 there will be only a 25 percent enrollee share up to the point where 95 percent coverage begins. A separate subsidy for brand-name drugs (55 percent in 2015) similarly is being phased in. The entire cost of a brand-name drug counts toward the amount needed to qualify for the 95 percent coverage level even though the enrollee pays only part of the price; for generic drugs, only the amount the enrollee pays counts.
An open enrollment period is held each autumn (dates vary), with elections effective with the succeeding calendar year.
All drug plans have to provide at least a standard level of coverage, which Medicare sets, but beyond that they vary in what prescription drugs are covered, how much enrollees have to pay, and which pharmacies enrollees can use. Plans may offer more coverage and additional drugs for a higher monthly premium. There are Medicare prescription drug plans that add coverage to the Original Medicare plan, and there also are drug plans that are a part of Medicare Advantage plans, in some areas.
The prescription drug benefit includes additional assistance for people with low income and limited assets. Most significantly, people with Medicare who are also fully eligible for Medicaid with incomes below 100 percent of the federal poverty level (and with no separate asset test) receive a full subsidy of the premium and deductibles and minimal co-pays. Other beneficiaries with low income and limited assets receive premium and deductible assistance and have limited cost sharing. Participation in the prescription drug benefit is voluntary. Because the Federal Employees Health Benefits program provides prescription drug coverage as part of its basic cost, generally with superior benefits, federal retirees who continue FEHB coverage, as most do, typically do not elect this Medicare benefit. However, electing Part D coverage may be advantageous for some, especially those eligible for Medicare low-income subsidies.
Typically, if you don’t join Part D when you are first eligible, you have to pay a higher premium if you choose to join later. However, if you have other coverage that offers the same or better benefits, you won’t have to pay a higher premium if you decide to join Part D later. That exemption applies to those enrolled in FEHB; all of its plans include a prescription drug benefit that has been determined to be at least comparable to that available under Part D. If you lose your FEHB (or Tricare or CHAMPVA) coverage and you join a Medicare drug plan, in most cases you won’t have to pay a penalty, as long as you join within 63 days of losing coverage.