Medicare Benefits. As of 2012, approximately 50 million people were Medicare beneficiaries.

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1 Medicare Benefits

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3 Medicare is the federal health insurance program for people age 65 and older, and those of all ages with certain disabilities, End-Stage Renal Disease (ESRD), or Lou Gehrig s disease (ALS). To be eligible for Medicare, a person or their spouse must have worked for at least 10 years in Medicare-covered employment and be a citizen or permanent resident of the United States. For certain chronic diseases or disabilities, a person must have worked for five out of the ten years prior to becoming disabled or sick. Medicare has been designed by federal regulation to encourage people to sign up as soon as they become eligible. Many government assistance plans also require Medicare enrollment when a person becomes eligible. Additionally, private individual and family insurance plans (not group coverage) may automatically end when a person reaches age 65. Medicare may be combined with group coverage, in some cases. As of 2012, approximately 50 million people were Medicare beneficiaries. 1

4 Medicare Parts Medicare coverage is broken down into various parts that cover different health care services. Medicare Part A, which is funded by the Hospital Insurance Trust Fund, covers inpatient hospital care, as well as skilled nursing facility care, home health visits and hospice care. Part A is premium-free for most people, but beneficiaries share in the costs through deductibles and co-insurance. Medicare Part B is funded by the Supplementary Medical Insurance Trust Fund, and it covers doctors visits, outpatient care and related medical and health services. It is available by voluntary enrollment to individuals age 65 and over or who are disabled. Part B beneficiaries pay an annual deductible and, in most cases, a 20 percent copayment. Beneficiaries who do not sign up within 7 months of becoming eligible may incur a permanent 10 percent increase in their premium for every year enrollment is deferred. Medicare Part D is also funded by the Supplementary Medical Insurance Trust Fund. Medicare contracts with private plans to provide prescription drug coverage, either as a stand-alone prescription drug plan or as part of Medicare Advantage (Part C). A person with either Part A alone, or Part A and Part B, is eligible for Part D. Part D plan members 2

5 pay a premium, pharmacy co-payments and, in many cases, a deductible. Part D plans may be available through employer-sponsored group insurance plans for those known as working aged Medicare beneficiaries, and for veterans through the Department of Veterans Affairs. As of September 2012, 32 million people were enrolled in Part D plans. Medicare Part C, also called Medicare Advantage, is an alternative Medicare program offered through private insurance companies to provide single-package coverage for Parts A and B health care (other than hospice care in some cases), and, in most cases they also offer Part D. Some Part C plans may also include vision, hearing, dental and health and wellness programs. Medicare Advantage members pay one premium and varying co-payments for services. A beneficiary must have Parts A and B before they can enroll in a Medicare Advantage Plan. Each year, beneficiaries have a chance to make changes to their coverage. From January 1 February 14, they can leave their Medicare Advantage plan and switch back to Traditional Medicare. During the Annual Enrollment Period (AEP), which happens during the fourth quarter of each year (the dates vary by year), beneficiaries can enroll in Part C from Traditional Medicare or switch their Medicare Advantage plan provider. As of 2012, 13.1 million people, about 25 percent of Medicare beneficiaries, were enrolled in Part C. Extra Help The Extra Help program helps low-income beneficiaries pay for Medicare Part D prescription drug premiums. To be eligible for Extra Help, an individual can earn no more than $16,755 in yearly income ($22,695 for a married couple) and have no more than $13,070 ($26,120 for a married couple) in resources. People who automatically qualify for Extra Help include beneficiaries with full Medicaid coverage, beneficiaries in a state Medicaid program that pays for their Part B premiums and beneficiaries who receive Supplemental Social Security Income (SSI) benefits. Medigap Medigap plans, also known as supplemental health insurance plans, are provided by private insurance companies to cover some of the cost-sharing obligations beneficiaries have in Medicare. Medigap plans pay for co-payments and deductible gaps that are not covered by Traditional Medicare. There is a six-month Medigap open enrollment period that begins the day Part B coverage starts for an individual beneficiary. During this period, insurance companies can neither deny nor increase premiums due to medical history. After this six-month period, however, insurance companies may either deny coverage or increase premiums. There were 9.8 million Medicare beneficiaries enrolled in Medigap coverage as of

6 Medicare Enrollment Periods There are four enrollment periods for Medicare Parts A and B: initial enrollment; special enrollment for working aged and working disabled; special enrollment for volunteers; and the transfer enrollment period for people enrolled in Part C. 1. Initial Enrollment The Initial Enrollment Period (IEP) occurs when a person reaches age 65. The IEP is seven months long, and includes the beneficiary s birthday month, the three months before, and the three months after. During the IEP, a beneficiary can enroll in Part A, Part B, Part D or Part C. If someone signs up during the last three months, the start date will be delayed by one to two months. If someone misses their entire IEP, they may sign up during an annual general enrollment period, which takes place between January 1 and March 31 each year. If they enroll in Part B after their IEP, there is a permanent penalty of 10 percent added to their premium for every year they defer enrollment after their IEP ends. 2. Special Enrollment If someone is over age 65 and working (known as the working aged) and has employer-sponsored coverage (but not COBRA), they may be able to delay enrolling in Part B until they no longer have that insurance. To avoid the lifetime penalty for missing the IEP, they require a letter from their employer stating that the employer s insurance is credible to (as good as) Medicare. The person then has an 8-month Special Enrollment Period (SEP) in which to sign up for Part B. People who are considering this option are advised to confirm eligibility of their employer s plan as credible with Social Security and to document the date, time, name of the representative they speak with and information provided. 3. Transfer from Part C to Traditional Medicare Beneficiaries who have Medicare Advantage (Part C) and wish to leave their plan and re-enroll in Traditional Medicare can do so each year between January 1 and February 14. They also have until February 14 to join a Medicare prescription drug plan (Part D). Coverage begins the first day of the month following enrollment. Beneficiaries with Disabilities Beneficiaries with disabilities who are under age 65 will qualify for Medicare through Social Security Disability Insurance (SSDI). These beneficiaries will automatically be enrolled in Parts A and B after they have received disability benefits from Social Security or particular disability benefits from the Railroad Retirement Board (RRB) for 24 months. 4

7 There are three criteria to qualify for SSDI: 1. The person must be unable to do the work he or she did before; 2. The person must be unable to adjust to other work because of the medical condition; and 3. The disability has lasted or is expected to last at least a year or result in death. In addition, a person must have worked and paid into Medicare for five out of the ten years prior to becoming disabled and must have a medical condition that meets the disability criteria. Once someone is approved for SSDI, which provides financial assistance, there is a five-month waiting period before they receive monthly SSDI income benefits, followed by another 24 months before Medicare benefits begin. Beneficiaries with End-Stage Renal Disease (ESRD) and Lou Gehrig s Disease (ALS) People diagnosed with ESRD or ALS are exempt from the 24-month waiting period required for those with other disabilities to qualify for Medicare. ESRD is defined as the loss of kidney function so severe that a person cannot live without dialysis or a kidney transplant. Amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig s disease, is a neurodegenerative disease that affects nerve cells in the brain and the spinal cord, causing loss of the ability to initiate and control muscle movement. 5

8 To qualify for Medicare because of ESRD, a beneficiary must have kidneys that no longer function and needs dialysis or a kidney transplant; and meet one of these three requirements: 1. The person has worked the required amount of time under Social Security (Soc. Sec.), the Railroad Retirement Board (RRB) or as a government employee; 2. The person qualifies for or is receiving Social Security or RRB benefits; or they are the spouse or dependent child of a person who meets this criteria; or 3. If the person has other coverage, Medicare will pay the amount remaining after the primary carrier pays. To enroll in Medicare, people with ESRD must call or visit a Social Security Office to enroll in both Part A and Part B in order to receive full Medicare benefits. The Part B premium $99 in 2012 is either taken out of the beneficiary s Social Security or RRB payments, or is billed every three months. For people with ALS, Part A and Part B coverage will begin automatically the month disability benefits begin. If ESRD is the reason a person is eligible for Medicare, their coverage ends 12 months after the last month of dialysis or 36 months after the month in which a kidney transplant is received. Coverage can be extended if a beneficiary begins dialysis again, receives a kidney transplant within 12 months of ending dialysis or receives a second kidney transplant within 36 months after the first one. Medicare spent $9.5 billion in 2010 on outpatient dialysis services for beneficiaries with ESRD. Dual Eligibles Dual eligible beneficiaries are eligible for both Medicare and Medicaid. Medicaid covers services not covered by Medicare, such as dental, long-term care and eyeglasses. It also helps cover Medicare s premiums and cost-sharing requirements, such as deductibles and co-payments. Since Medicaid coverage varies by state, the services covered for dual eligible beneficiaries vary as well. There are about 9 million dual eligible people, comprising 21 percent of Medicare and 15 percent of Medicaid beneficiaries. Medicare spends nearly 1.8 times, or nearly double, the amount of money on dual eligible beneficiaries than on other beneficiaries. 6