Medicare is a federal health insurance program for persons 65 or older, persons of any age with permanent kidney failure, and certain disabled persons.
Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a federal agency in the Department of Health and Human Services. Social Security Administration offices across the country take applications for Medicare, collect premiums, and provide general information about the program. Various commercial insurance companies are under contract with CMS to process and pay Medicare claims, and groups of doctors and other health care professionals have contracts to monitor the quality of care delivered to Medicare beneficiaries. CMS also forms partnerships with the thousands of providers of health care services: hospitals, nursing homes, and home health agencies; doctors; suppliers of medical equipment; clinical laboratories; and managed care plans such as health maintenance organizations (HMOs).
Medicare consists of Hospital Insurance (Part A), Medical Insurance (Part B), Medicare Advantage (Part C) (formerly known as Medicare+Choice), and Prescription Drug Insurance (Part D).
Hospital Insurance (Part A) provides institutional care, including inpatient hospital care, skilled nursing home care, post-hospital home health care, and, under certain circumstances, hospice care. Part A is financed for the most part by Social Security payroll tax deductions which are deposited in the Federal Hospital Insurance Trust Fund. Medicare beneficiaries also participate in the financing of Part A by paying deductibles, coinsurance and premiums.
Medical Insurance (Part B) is a voluntary program of health insurance which covers physician’s services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, prosthesis, and a number of other services not covered under Part A. It is financed through monthly premiums paid by those who enroll and contributions from the federal government, both of which are deposited into the Federal Supplementary Medical Insurance Trust Fund. The government’s share of the cost of Medicare Part B is approximately 75%.
Medicare Advantage (Part C) permits contracts between CMS and a variety of different managed care and fee-for-service organizations. Most Medicare beneficiaries can choose to receive benefits through the original Medicare fee-for-service program or through one of the following Medicare Advantage plans:
- Coordinated care plans, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Provider Sponsored Organizations (PSOs). A PSO is defined as a public or private organization, established by health care providers, that provides a substantial proportion of health care items and services directly through affiliated providers who share, directly or indirectly, substantial financial risk.
- Religious fraternal benefit society plans that may restrict enrollment to members of the church, convention or group with which the society is affiliated. Payments to these plans may be adjusted, as appropriate, to take into account the actuarial characteristics and experience of plan enrollees.
- Private fee-for-service plans that reimburse providers on a fee-for-service basis, and are authorized to charge enrolled beneficiaries up to 115% of the plan’s payment schedule (which may be different from the Medicare fee schedule).
The Department of Health and Human Services contracts with private insurance companies for the processing of payments to patients and health care providers. These private insurance companies are called fiscal intermediaries under Part A and are selected by the health care providers. Under Part B, these private insurance companies are called carriers and are selected by the Department of Health and Human Services.
Medicare Prescription Drug Insurance (Part D) was added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. In exchange for a monthly premium, Medicare Part D participants receive limited coverage for prescription drug benefits up to a catastrophic coverage threshold, above which Part D will cover roughly 95% of prescription drug costs.
1. In general, what is the Hospital Insurance (Part A) protection provided by Medicare?
Persons protected have benefits paid for certain hospital and related health care services when they incur expenses for such services.
A person entitled to Social Security monthly benefits or a qualified railroad retirement beneficiary is automatically entitled to Hospital Insurance protection beginning with the first day of the month of attainment of age 65. An individual who is insured for monthly benefits need not actually file to receive the benefits. Under limited circumstances, services furnished in Canada or Mexico, or in some cases in the Caribbean, or aboard ship in United States territorial waters, may be paid by Medicare, but otherwise, services furnished outside the United States are not paid for by Hospital Insurance.
Medicare is the secondary payer if a person is covered by an employer group health insurance plan, is entitled to veterans benefits, workers’ compensation, or black lung benefits. Medicare is also the secondary payer if no-fault insurance or liability insurance (such as automobile insurance) is available as the primary payer. Although Medicare is sometimes the secondary payer when liability insurance is available, Medicare may make a conditional payment if it receives a claim for services covered by liability insurance. In these cases, Medicare recovers its conditional payment from the settlement amount when the liability settlement is reached.
Medicare is the secondary payer during a period (generally 30 months) for individuals who have Medicare solely on the basis of their end-stage renal disease, if they have employer group health plan coverage themselves or through a family member.
2. In general, what is the Medical Insurance (Part B) protection provided by Medicare?
Persons protected have benefits paid for certain physicians’ services (including surgery), home health services (other than post-hospital home health services), clinical laboratory services, durable medical equipment, and some other items and services not covered by Hospital Insurance (Part A) protection.
Medical Insurance (Part B) protection is financed through monthly premiums paid by each person who enrolls (or by the state where the person is enrolled under a federal-state agreement) and through contributions appropriated from federal general revenues. The premium for Part B varies according to a person’s income. The standard monthly premium for Part B coverage beginning January 1, 2013 is $104.90. Those with higher incomes may pay as much as $335.70 in 2013.
3. Who can provide services or supplies under Medicare?
Health care organizations and professionals providing services to Medicare beneficiaries must meet all licensing requirements of state or local health authorities. The organizations and persons listed below also must meet additional Medicare certification requirements before payments can be made for their services:
- Skilled nursing facilities
- Home health agencies
- Hospice programs
- Independent diagnostic laboratories and organizations providing X-ray services
- Organizations providing outpatient physical therapy and speech pathology services
- Facilities providing outpatient rehabilitation facilities
- Ambulance firms
- Independent physical therapists (those who furnish services in the patient’s home or in their offices)
- Facilities providing kidney dialysis or transplant services
- Rural health clinics
All hospitals, skilled nursing facilities, and home health agencies participating in the Medicare program must comply with Title VI of the Civil Rights Act, which prohibits discrimination because of race, color, creed, or national origin.
Medicare does not pay for care received from a hospital, skilled nursing facility, home health agency, or hospice that is not certified to participate in the program. These providers are referred to as non-participating. But Hospital Insurance can help pay for care in a qualified non-participating hospital if (1) the patient is admitted to the non-participating hospital for emergency treatment, and (2) the nonparticipating hospital is the closest one that is equipped to handle the emergency. Under Medicare, emergency treatment means treatment that is immediately necessary to prevent death or serious impairment to health.
If the nonparticipating hospital elects to submit the claim for Medicare payment, Medicare will pay the hospital directly except for any deductible or coinsurance amounts. If the hospital does not submit the claim, the patient may submit the claim and receive payment. In this case, the patient would reimburse the hospital.
4. In general, what benefits are provided under the Hospital Insurance (Part A) program?
The program, which is compulsory, provides the following benefits for persons age 65 or older and persons receiving Social Security disability benefits for 24 months or more:
- The cost of inpatient hospital care for up to 90 days in each benefit period (for 2013, the patient pays a deductible amount of $1,184 for the first 60 days plus $296 a day for each day in excess of 60). There are also 60 non-renewable lifetime reserve days with coinsurance of $592 a day in 2013.
- The cost of post-hospital skilled nursing facility care for up to 100 days in each benefit period (the patient pays $148.00 a day in 2013 after the first 20 days).
- The cost of 100 post-hospital or post-skilled nursing facility home health service visits in a spell of illness made under a plan of treatment established by a physician, except that there is 20% cost-sharing payable by the patient for durable medical equipment (other than the purchase of certain used items). Additional coverage for home health care services which do not meet the Part A coverage criteria and visit limitations may be available under Medical Insurance (Part B). (See Q 1008.)
- The cost of hospice care for terminally ill patients.
5. In general, what benefits are payable under Medical Insurance (Part B)?
Medical Insurance (Part B) is offered to almost all persons age 65 or over on a voluntary basis. In addition, the program is offered to all disabled Social Security and Railroad Retirement beneficiaries who have received disability benefits for at least 24 months. For 2013, there is an annual deductible of $147, paid by the patient. This annual deductible is adjusted to reflect the amount of Medicare Part B costs. Medical Insurance pays 80% of the approved charges above the deductible for the following services:
- Physicians’ and surgeons’ services, whether furnished in a hospital, clinic, office, home, or elsewhere, excluding routine or yearly physical exams.
- A one-time initial wellness physical within 6 months of enrolling in Medical Insurance (Part B).
- Screening blood tests for early detection of cardiovascular disease.
- Diabetes screening tests for those at risk of getting diabetes.
- Home health care visits, if not covered under Hospital Insurance (Part A) (but with no cost-sharing except for durable medical equipment, other than the purchase of certain used items). In the past, few home health care visits were covered under Medical Insurance (Part B) but this has changed because of the creation of separate Hospital Insurance and Medical Insurance home health benefits in 1998.
- Outpatient hospital services for the diagnosis or treatment of an illness or injury.
- Diagnostic x-ray tests (including certain portable X-ray services in the home), diagnostic laboratory tests, and other diagnostic tests (no cost-sharing).
- Outpatient physical therapy and outpatient speech-language pathology services furnished by participating hospitals, skilled nursing facilities, home health agencies, outpatient therapy clinics, or by others under arrangements with, and under the supervision of, such organizations.
- Outpatient physical therapy services and outpatient speech-language pathology services provided in a hospital or skilled nursing facility to its inpatients who have exhausted their inpatient days, or are otherwise not entitled to Hospital Insurance benefits.
- Outpatient physical therapy services and occupational therapy services furnished by a licensed, independently practicing physical therapist or occupational therapist in his or her office or the patient’s home, provided the patient is under the care of a physician.
- Rural health clinic services and federally qualified health center services.
- Prosthetic devices (other than dental) which replace all or part of a covered body part, including replacement of such devices.
- Home dialysis supplies and equipment, self-care home dialysis support services, and institutional dialysis and supplies.
- Chiropractor’s treatment by manual manipulation of the spine to correct a subluxation of the spine. But the cost of the chiropractor’s X-ray, if any, is excluded.
- Podiatrist’s services (excluding the treatment of flat foot conditions, subluxations of the foot, and routine foot care that does not require treatment by a podiatrist or physician).
- Leg, arm, back, and neck braces, and artificial legs, arms, and eyes, including replacements where necessary because of a change in the patient’s condition.
- Rental or purchase of durable medical equipment.
- X-ray, radium, and radioactive isotope therapy, including materials and services of technicians.
- Surgical dressings, and splints, casts, and other devices for reduction of fractures and dislocations.
- Ambulance services, under certain circumstances.
- Blood clotting factors for hemophilia patients and items related to its administration.
- Hospital services incident to a physician’s services to an outpatient (including drugs and biologicals which cannot be self-administered).
- Antigens prepared by a physician for a particular patient.
- Annual flu shot (no cost-sharing).
- Pneumococcal vaccine and its administration (no cost-sharing).
- Hepatitis B vaccine and its administration (if beneficiary considered at high or intermediate risk of contracting disease).
- Certified nurse-midwife services.
- Partial hospitalization services provided by a community mental health center or hospital outpatient department.
- Screening pap smear and pelvic exams.
- Prostate cancer screening tests.
- Annual screening mammography for all women age 40 and over (the Part B deductible is waived).
- Colorectal cancer screening.
- Diabetes monitoring and self-management benefits.
- Bone mass measurements.
- The cost of an injectable drug for the treatment of a bone fracture related to post-menopausal osteoporosis.
- Eyeglasses following cataract surgery.
- Services of nurse practitioners and clinical nurse specialists in rural areas for the services they are authorized to perform under state law and regulations.
- Oral cancer drugs if they are the same chemical entity as those administered intravenously and currently covered. Off-label cancer drugs are covered in some cases.
- Necessary medical supplies.
- Immunosuppressive drug therapy.
- Lung and heart-lung, liver and kidney transplants under certain circumstances.
The cost of psychiatric treatment outside a hospital for mental, psychoneurotic, and personality disorders is covered. But coinsurance is usually 50% instead of 20%.
6. Is there any overall limit to the benefits a person can receive under Medicare?
Under Hospital Insurance (Part A), benefits begin anew in each benefit period. In addition, there are no dollar limits under Medical Insurance (Part B) except for psychiatric care and independent physical and occupational therapy. Under Hospital Insurance, care in a psychiatric hospital is subject to a lifetime limit of 190 days. (The time a patient has spent in a hospital for psychiatric care immediately prior to becoming eligible for Medicare counts against the special 150-day limit in the first hospitalization period, but not against the 190-day lifetime limit.)
Separate calendar year caps on coverage of independent occupational therapy and physical and speech therapy services returned January 1, 2006. The annual limitation was initially enacted for 1999, but Congress granted and then extended a moratorium on implementation through the end of 2002. Implementation was further delayed by administration decision until September 1, 2003. The limitation was then eliminated effective December 7, 2003. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 eliminated the annual limit through the end of 2005. In the Deficit Reduction Act of 2005, Congress added a provision for the Secretary of Health and Human Services to make an exception to the annual limit if the provision of additional services is “medically necessary.” The exceptions process allows for specific diagnoses and procedures to receive Medicare coverage even after a beneficiary has met his or her therapy cap for the year. Alternatively, a provider can request an exception if the particular problem to be treated is not automatically covered under the given exceptions. This exceptions process was scheduled to end June 30, 2008, but was extended through December 31, 2009.
Medicare may limit benefit payments for services for which other third-party insurance programs (e.g., workers’ compensation, automobile or liability insurance, and employer health plans) may ultimately be liable. The Spending Reduction Act of 1984 establishes the statutory right of Medicare to (1) bring an action against any entity that would be primarily responsible for payment with respect to the item or service, (2) bring an action against any entity (including any physician or provider) that has been paid with respect to the item or service, and (3) join or intervene in an action against a third party.
7. What care is not covered under Medicare?
Medicare does not cover custodial care when that is the only kind of care the patient needs.
Care is considered custodial when it is primarily for the purpose of helping with daily living or meeting personal needs and could be provided safely and reasonably by persons without professional skills or training. Much of the care provided in nursing homes to people with chronic, long-term illnesses or disabilities is considered custodial care. For example, custodial care includes help in walking, getting in and out of bed, bathing, dressing, eating, and taking medicine. Even if an individual is in a participating hospital or skilled nursing facility or the individual is receiving care from a participating home health agency, Medicare does not cover the stay if the patient needs only custodial care.
Medicare does not pay for services that are not reasonable and necessary for the diagnosis or treatment of an illness or injury. These services include drugs or devices that have not been approved by the Food and Drug Administration (FDA); medical procedures and services performed using drugs or devices not approved by FDA; and services, including drugs or devices, not considered safe and effective because they are experimental or investigational. In addition, Medicare does not pay for most outpatient prescription drugs (except under Medicare Part D), routine or annual physical exams, most dental care and dentures, routine foot care, routine eye care, hearing aids and cosmetic surgery.
If a doctor places an individual in a hospital or skilled nursing facility when the kind of care the individual needs could be provided elsewhere, the individual’s stay will not be considered reasonable and necessary, and Medicare will not pay for it. If an individual stays in a hospital or skilled nursing facility longer than necessary, Medicare payments will end when inpatient care is no longer reasonable or necessary.
If a doctor (or other practitioner) comes to treat a person or that person visits the doctor for treatment more often than is medically necessary, Medicare will not pay for the “extra” visits.
Medicare will not pay for services performed by immediate relatives or members of a patient’s household. Medicare also will not pay for services paid for by another government program.
Doctors cannot make self-referrals for certain designated health services. Designated health services include (1) clinical laboratory services, (2) physical therapy services, (3) occupational therapy services, (4) radiology services, including MRI, CAT scans, and ultrasound services, (5) radiation therapy services and supplies, (6) durable medical equipment and supplies, (7) parenteral and enteral nutrients, equipment, and supplies, (8) prosthetics, orthotics, and prosthetic devices and supplies, (9) home health services, (10) outpatient prescription drugs, and (11) inpatient and outpatient hospital services.
The law prohibits a doctor who has a financial relationship with an entity from referring Medicare patients to that entity to receive a designated health service. The prohibition also applies if a doctor’s immediate family member has a financial relationship with the entity. A financial relationship can exist as an ownership or investment interest in or a compensation arrangement with an entity. The law is triggered by the mere fact that a financial relationship exists; it does not matter what the doctor intends when making a referral.
An entity cannot bill Medicare, Medicaid, the beneficiary, or anyone else for a designated health service furnished to a Medicare patient under a prohibited referral. If a person collects any amount for services billed in violation of the law, a refund must be made. A person can be subject to a civil money penalty or exclusion from Medicare if that person (1) presents or causes to be presented a claim to Medicare or bill to any individual, third-party payer, or other entity for any designated health service the person knows or should know was furnished as the result of a prohibited referral, or (2) fails to make a timely refund.
Under Medicare law a person will not be held responsible for payment of the cost of certain health care services for which the person was denied Medicare payment if the person did not know or could not reasonably be expected to know that the services were not covered by Medicare. This provision is often referred to as a “Waiver of Liability.” The waiver provision applies only when the care was denied because it was one of the following: (1) custodial care, (2) not reasonable or necessary under Medicare program standards for diagnosis or treatment, (3) for home health services, the patient was not homebound or not receiving skilled nursing care on an intermittent basis, or (4) the only reason for the denial is that, in error, the patient was placed in a skilled nursing facility bed that was not approved by Medicare.
Also, the limitation of liability provision does not apply to Medical Insurance services provided by a nonparticipating physician or supplier who did not accept assignment of the claim. However, in certain situations Medicare will protect the patient from paying for services provided by a nonparticipating physician on a non-assigned basis that are denied as “not reasonable and necessary.” If a physician knows or should know that Medicare will not pay for a particular service as “not reasonable and necessary,” the physician must give the patient written notice — before performing the service — of the reasons why he believes Medicare will not pay. The physician must get the patient’s written agreement to pay for the services. If the patient does not receive this notice, he is not required to pay for the service. If the patient pays for the service, but did not receive a notice, he may be entitled to a refund.
8. What are quality improvement organizations?
Quality Improvement Organizations (QIOs) are groups of practicing doctors and other health care professionals who are paid by the federal government to review the care given to Medicare patients. Each state has a QIO that decides, for Medicare payment purposes, whether care is reasonable, necessary, and provided in the most appropriate setting. QIOs also decide whether care meets the standards of quality generally accepted by the medical profession. QIOs have the authority to deny payments if care is not medically necessary or not delivered in the most appropriate setting.
QIOs investigate individual patient complaints about the quality of care and respond to (1) requests for review of notices of noncoverage issued by hospitals to beneficiaries, and (2) requests for reconsideration of QIO decisions by beneficiaries, physicians, and hospitals.
The QIO will tell the patient in writing if the service received was not covered by Medicare.
If a patient is admitted to a Medicare-participating hospital, the patient will receive An Important Message From Medicare, which explains the patient’s rights as a hospital patient and provides the name, address and phone number of the QIO in the patient’s state.
If a patient believes he has been improperly refused admission to a hospital, forced to leave a hospital too soon, or denied coverage of a medical procedure or treatment, the patient should ask for a written explanation of the decision. This written notice must fully explain how the patient can appeal the decision, and it must give the patient the name, address and phone number of the QIO where an appeal or request for review can be submitted.
If a patient disagrees with the decision of a QIO, the patient can appeal by requesting a reconsideration. Then, if the patient disagrees with the QIO’s reconsideration decision and the amount in question is $200 or more, the patient can request a hearing by an Administrative Law Judge. Cases involving $2,000 or more can eventually be appealed to a federal court.