Author: Dick Hartzen
With an aging population, do you understand what Medicare is all about if asked by a customer? What does it cover? What does it NOT cover? When can someone enroll? When does coverage start? What deductibles and coinsurance apply? What are the costs? What prescription drug coverage is included?
Franklin Delano Roosevelt was our 32nd president. He served from 1933 to 1945 as the only four term president. The Great Depression started with the stock market crash in 1929. Unemployment ran as high as 35%. Something had to be done to create new jobs. He created Social Security in 1935 to offer retirement benefits for qualified individuals. Younger people would be able to find employment with the retirement of older workers. Starting on 1939 Retirement Benefits would be available.
The current status of Social Security may be linked to the onset of the program. The retirement benefits were to begin at age 65. In 1935, the average life expectancy was until age 59 ½ . Benefits were to start 5 ½ years after the person reached the average life expectancy. The current mortality table shows an average age of 82.8. Benefits are being received for 23.3 years longer than anticipated. Current predictions include:
In 1939 Survivors Benefits were added to the Social Security Program. Disability Benefits were added in 1956 and 1960. In 1965 Medicare became an important addition. John F. Kennedy had pushed for health coverages for seniors during his campaign. Lyndon Johnson became president after the Kennedy assassination and finalized the Medicare program.
People who retired at 65 often found health insurance unavailable. Group insurance is designed to cover full time employees and not retirees. Group conversion may have been available, but was expensive. Individual policies being offered by health insurers usually required proof that the person was insurable. Medicare became a necessity. It offers coverage to those 65 or older, people collecting Railroad Retirement, disabled beneficiaries after 2 years of collecting benefits or people with certain renal conditions. A spouse age 65 may be eligible if the worker is at least 62. There are special rules for divorced spouses.
There are 3 parts to Medicare:
Hospital insurance (Part A) which is financed as a part of the FICA taxes paid,
Medical insurance (part B) which is financed as a part of the FICA taxes paid and a monthly premium requirement when given,
Prescription drug (Part D) requiring a premium when given.
A covered person may receive benefits under 2 qualifications:
Being “fully insured” (40 quarters of coverage) or
“Currently insured” (6 quarters of coverage in the preceding 13 quarters).
Disability also required that 10 of the previous 20 previous quarters were earned.
Part A is given to those that qualify automatically at age 65 whether employed or retired. There is no charge for Part A. Part B is given at the same time, but can be refused. There is a monthly charge for Part B and the coverage may not be wanted. Group coverage could be in effect if the person is still employed and may eliminate the need to pay for Part B. The coverage could be added if the group coverage ends. There is an open enrollment offered if Part B is rejected for other reasons. The open enrollment is the first quarter of the year and coverage would not become effective until July. There is also a 10% penalty for each year that the coverage was declined.
What does Medicare cover?
Part A: Hospital Insurance
• Inpatient care
• Skilled nursing care
• Home health care
• Hospice.
Part B: Medical Insurance
• Inpatient medical care
• Outpatient hospital care
• Inpatient and outpatient medical supplies
• Ambulance services
• X-rays
• Laboratory tests
• Durable medical equipment
• Certain qualified professionals other than doctors
• Physical and occupational therapy
• Speech therapy
• Partial hospitalization for psychiatric attention
• Home attention, if not under Part A
• Blood
• Yearly examinations
• Pap smears
• Pelvic and breast examinations
• Diabetes glucose monitoring and education
• Colorectal cancer screenings
• Bone mass measurements
• Flu and pneumococcal shots
What Medicare does not cover!
• Custodial care
• Most nursing home care
• Dental care and dentures
• Most routine exams and related shots
• Most immunization shots
• Most prescription drugs
• Routine foot care
• Tests for and cost of eyeglasses or hearing aids
• Services outside the U.S
Enrollment in Part B and effective date of coverage
If you enroll in this month of your initial enrollment period:
1st month.........date of eligibility
2nd month........date of eligibility
3rd month.........date of eligibility
4th month.........1 month after enrollment
5th month.........2 months after enrollment
6th month.........3 months after enrollment
7th month.........3 months after enrollment.
Deductibles and co-insurance under Part A
Part A contains a “benefit period” deductible. A “benefit period” starts on the date of entry in a hospital and does not end until 60 days after discharge. There can be several deductibles in a year. In 2009, the deductible is $1,068.00. Coverage is automatically provided for the first 60 days.
If confinement continues beyond 60 days, a daily co-payment (co-insurance) is required. In 2009, the daily co-payment is $267.00 (25% of the deductible). There are 30 more days of additional coverage given.
Coverage ends if the confinement continues beyond 90 days. There are 60 “lifetime reserve days” under Medicare. These days are not replaced after being used. In 2009, there is a daily co-payment of $534.00 required (50% of the deductible).
“Skilled nursing home coverage” is given if entry occurs within 30 days of a hospital discharge and a hospital confinement of at least 3 days. In 2009, the first 20 days are covered in full. The next 80 days requires a daily co-payment of $133.50 (12 ½ % of the deductible). Coverage ends after 100 days. Medicare pays less than 4% of the long term care costs nationwide.
Part B has a yearly deductible of $135.00 in 2009. Medicare would pay 80% of the approved Doctor charges, 100% of laboratory charges, 100% of home healthcare, 80 or 100% of outpatient therapy, 80% of ambulance charges, 50% of flu and pneumonia charges and 50% of outpatient mental healthcare. There is no stop loss or out of pocket limit that would apply..
Costs
Part A is given to those who qualify with no premiums to pay. The Federal Insurance Contribution Act (FICA) requires taxes. The tax rate is 7.65% for an employed and 15.3% for those who are self employed. In 2009, this was paid on earnings up to $106,800.00. Included in this amount was 1.45% for Medicare. Self employed would have paid in 2.9%. The Medicare portion does not have a limit on earnings.
Part B requires a monthly premium. The amount depends on a person’s income.
In 2009, income less than $85,000.00 for an individual and $170,000.00 for a family would require a monthly premium of $96.40. The premium would be as high as $308.30 for individuals earning above $213,000.00 with family income over $426,000.00.
Part D - Medicare Prescription Drug Coverage
In January 2006, Part D was added to Medicare. It was a needed program to assist seniors in paying for needed medication. The predicted original cost for this program was proven to be far less than the actual cost. Medicare approves plans offered from insurance or other private companies to participate in Part D. There is a premium requirement. The monthly premium depends on the benefits offered and can cost close to $100.00. Deductibles and co-payments are a part of Part D. Some of the costlier plans waive the deductible.
The initial deductible in 2010 is $310.00. After that amount has been paid, a co-payment applies until the amount paid by both (insured and insurer) reaches $2,830.00. At that point, the insured pays all costs until $4,550.00 has been spent. This is called the “donut hole”. After the $4,550.00 has been spent, a small co-payment applies for the balance of the year.
Copyright 2009 by Richard I Hartzen. Used with permission.
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