What Is Medicare

Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria. The medicare program also funds residency training programs for the vast majority of physicians in the United States. Medicare operates as a single-payer health care system. The Social Security Act of 1965 was passed by Congress in late-spring of 1965 and signed into law on July 30, 1965, by President Lyndon B. Johnson as amendments to Social Security legislation. At the bill-signing ceremony President Johnson enrolled former President Harry S. Truman as the first Medicare beneficiary and presented him with the first Medicare card.

The Different Parts of Medicare

The different parts of Medicare help cover specific services if you meet certain conditions. Medicare has the following parts:

Medicare Part A (Hospital Insurance)

Helps cover inpatient care in hospitals.
Helps cover, skilled nursing facility, hospice, and home health care

Medicare Part B (Medical Insurance)

Helps cover doctors’ services and outpatient care
Helps cover some preventive services to help maintain your health and to keep certain illnesses from getting worse.

Medicare Part C (Medicare Advantage Plans) (like an HMO or PPO)

A health coverage choice run by private companies approved by Medicare
Includes Part A, Part B, and usually other coverage including prescription drugs

Medicare Advantage Plans (part c)

With the passage of the Balanced Budget Act in 97, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans, instead of through the original Medicare plan (Parts A and B). These programs were a more attractive plan for prescriptions and later became known as we do today as the "Medicare Advantage" (MA) plans or Medicare Part C.

Traditional or "fee-for-service" Medicare has a standard benefit package that covers medically necessary care members can receive from nearly any hospital or doctor in the country. For people who choose to enroll in a Medicare Advantage health plan, Medicare pays the private health plan a fixed amount every month. Members typically also pay a monthly premium in addition to the Medicare Part B premium to cover items not covered by traditional Medicare (Parts A & B), such as prescription drugs, dental care, vision care and gym or health club membership. In exchange for these extra benefits, enrollees may be limited in the providers they can receive services from without paying extra. Typically, the plans have a "network" of providers that patients can use. Going outside that network may require permission or extra fees.

The plans offered under Medicare Advantage insurance are better and almost required to be by providing coverage that meets or exceeds the standards set by the original Medicare program. They however don’t have to cover every benefit in the same way. If a plan chooses to pay less than Medicare for some benefits, like skilled nursing facility care, the savings may be passed along to consumers by offering lower co-payments for doctor visits. Medicare Advantage plans use a portion of the payments they receive from the government for each enrollee to offer supplemental benefits. Some plans limit their members’ annual out-of-pocket spending on medical care, providing insurance against catastrophic costs over $5,000, for example. Many plans offer dental coverage, vision coverage and other services not covered by Medicare Parts A or B, which makes them a good value for the health care dollar, if you want to use the provider included in the plan's network or "panel" of providers.

Because the 2003 payment formulas overpay plans by 12 percent or more compared to traditional Medicare, in 2006 enrollees in Medicare Advantage Private Fee-for-Service plans were offered a net extra benefit value (the value of the additional benefits minus any additional premium) of $55.92 a month more than the traditional Medicare benefit package; enrollees in other Medicare Advantage plans were offered a net extra benefit value of $71.22 a month more. However, Medicare Advantage members receive additional coverage and medical benefits not enjoyed by traditional Medicare members, and savings generated by Medicare Advantage plans may be passed on to beneficiaries to lower their overall health care costs. Other important distinctions between Medicare Advantage and traditional Medicare are that Medicare Advantage health plans encourage preventive care and wellness and closely coordinate patient care.

Medicare Advantage Plans that also include Part D prescription drug benefits are known as a Medicare Advantage Prescription Drug plan or a MA-PD.

Enrollment in Medicare Advantage plans grew from 5.4 million in 2005 to 8.2 million in 2007. Enrollment grew by an additional 800,000 during the first four months of 2008. This represents 19% of Medicare beneficiaries. A third of beneficiaries with Part D coverage are enrolled in a Medicare Advantage plan. Medicare Advantage enrollment is higher in urban areas; the enrollment rate in urban counties is twice that in rural counties (22% vs. 10%). Almost all Medicare beneficiaries have access to at least two Medicare Advantage plans; most have access to three or more. Because of the 2003 law's overpayments, the number of organizations offering Fee-for-Service plans has increased dramatically, from 11 in 2006 to almost 50 in 2008. Eight out of ten beneficiaries (82%) now have access to six or more Private Fee-for-Service plans.

Each year many individuals dis-enroll from MA plans. A recent study noted that about 20 percent of enrollees report that "their most important reason for leaving was due to problems getting care." There is some evidence that disabled beneficiaries "are more likely to experience multiple problems in managed care." Some studies have reported that the older, poorer, and sicker persons have been less satisfied with the care they have received in MA plans. On the other hand, found that Medicare Advantage enrollees spent fewer days in the hospital than Fee-for-Service enrollees, were less likely to have "potentially avoidable" admissions, and had fewer re-admissions. These comparisons adjusted for age, sex and health status using the risk score used in the Medicare Advantage risk adjustment mechanism.

Twenty percent of Black-American and 32 percent of Hispanic-American Medicare Beneficiaries were enrolled in Medicare Advantage plans in 2006. Almost half (48%) of Medicare Advantage enrollees had incomes below $20,000, including 71% of minority enrollees. Others have reported that minority enrollment is not particularly above average. Another study has raised questions about the quality of care received by minorities in MA plans.

The Government Accountability Office reported that in 2006, the plans earned profits of 6.6 percent, had overhead (sales, etc.) of 10.1 percent, and provided 83.3 percent of the revenue dollar in medical benefits. These administrative costs are far higher than traditional fee-for-service Medicare.

Overview

Medicare has a standard benefit package that covers medically necessary care that beneficiaries can receive from nearly any hospital or (except in Alaska) doctor in the country. For people who choose to enroll in a Medicare private health plan, Medicare pays the private health plan a set amount every month for each member. Members may have to pay a monthly premium in addition to the Medicare Part B premium. Medicare Advantage subscribers generally pay a fixed amount (a copayment of $20, for example) every time they see a doctor just as with Original Medicare. The copayment can be higher to see a specialist just as with Original Medicare.

The private plans are required to offer a benefit “package” that is at least as good as Medicare’s and cover everything Medicare covers, but they do not have to cover every benefit in the same way. Plans that pay less than Medicare for some benefits, like skilled nursing facility care, can balance their benefits package by offering lower copayments for doctor visits. Private plans use some of the excess payments they receive from the government for each enrollee to offer supplemental benefits. Some plans put a limit on their members’ annual out-of-pocket spending on medical care, providing some insurance against costs over $5,000, for example. Many plans use the excess subsidies to offer dental coverage and other services not covered by Medicare and can leave members exposed to high medical bills if they fall seriously ill. As with traditional Medicare, private plan members can incur high out-of-pocket costs.

In 2006 enrollees in Medicare Advantage Private Fee-for-Service plans were offered a net extra benefit value (the value of the additional benefits minus any additional premium) of $55.92 a month more than the traditional Medicare benefit package; enrollees in other Medicare Advantage plans were offered a net extra benefit value of $71.22 a month more.

Medicare Advantage Plans that also include part d prescription drug benefits are known as a Medicare Advantage Prescription Drug plan or a MAPD.

Enrollment in Medicare Advantage plans grew from 5.4 million in 2005 to 8.2 million in 2007. Enrollment grew by an additional 800,000 during the first four months of 2008. This represents 19% of Medicare beneficiaries. A third of beneficiaries with Part D coverage are enrolled in a Medicare Advantage plan. Medicare Advantage enrollment is higher in urban areas; the enrollment rate in urban counties is twice that in rural counties (22% vs. 10%). Almost all Medicare beneficiaries have access to at least two Medicare Advantage plans; most have access to three or more. The number of organizations offering Fee-for-Service plans has increased dramatically, from 11 in 2006 to almost 50 in 2008. Eight out of ten beneficiaries (82%) now have access to six or more Private Fee-for-Service plans.

According to research by the Kaiser Family Foundation, a record 11.1 million people (approximately 25% of all Medicare beneficiaries) were enrolled in Medicare Advantage plans as of March 2010, up from 10.5 million in March 2009. In their report, Kaiser noted that while most Medicare beneficiaries have dozens of private Medicare Advantage plans available in their community, enrollment is highly concentrated among a small number of firms in nearly all states.

Although the Patient Protection and Affordable Care Act of 2010 does not eliminate Medicare Advantage, it does do away with the subsidies which the federal government first used to establish the Medicare Advantage program and which many Medicare Advantage health insurance plans use to offer supplemental benefits. These subsidies (which added an additional $14 billion to the Medicare program last year alone) will gradually be reduced until they are eliminated altogether. In 2011, these Medicare Advantage subsidy payments will be frozen at 2010 levels. After that, Medicare Advantage subsidy payments will be reduced an average of 12% per year until they are brought in line with traditional Medicare payments.

What is being measured?

For plans covering health services, the overall score for quality of those services covers 36 different topics in 5 categories:

• Staying healthy: screenings, tests, and vaccines: Includes how often members got various screening tests, vaccines, and other check-ups that help them stay healthy.
• Managing chronic (long-term) conditions: Includes how often members with different conditions got certain tests and treatments that help them manage their condition.
• Ratings of health plan responsiveness and care: Includes ratings of member satisfaction with the plan.
• Health plan member complaints and appeal: Includes how often members filed a complaint against the plan.
• Health plan telephone customer service: Includes how well the plan handles calls from members.

For plans covering drug services, the overall score for quality of those services covers 17 different topics in 4 categories:

• Drug plan customer service: Includes how well the drug plan handles calls and makes decisions about member appeals.
• Drug plan member complaints and Medicare audit findings: Includes how often members filed a complaint about the drug plan and findings from Medicare’s audit of the plan.
• Member experience with drug plan: Includes member satisfaction information.
• Drug pricing and patient safety: Includes how well the drug plan prices prescriptions and provides updated information on the Medicare website. Includes information on how often members with certain medical conditions get prescription drugs that are considered safer and clinically recommended for their condition.

For plans covering both health & drug services, the overall score for quality of those services covers all of the 53 topics listed above.

Where does the information for the Overall Plan Rating come from?

For quality of health services, the information comes from sources that include:

• Member surveys done by Medicare
• Information from clinicians
• Information submitted by the plans
• Results from Medicare’s regular monitoring activities

For quality of drug services, the information comes from sources that include:

• Results from Medicare’s regular monitoring activities
• Reviews of billing and other information that plans submit to Medicare
• Member surveys done by Medicare

Medicare Part D (Medicare Prescription Drug Coverage)

Helps cover the cost of prescription drugs
May help lower your prescription drug costs and help protect against higher costs in the future

Drug coverage

Some Medicare supplemental plan policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medicare supplemental plan policies could be sold with drug coverage. This time frame coincides with the introduction of the benefit.

Medicare beneficiaries who enroll in a Standalone Part D plan may not retain the drug coverage portion of their Medicare supplemental plan policy. People with Medicare supplemental plan polices that include drug coverage who enrolled in Medicare Part D by May 15, 2006 had a guaranteed right to switch to another Medicare supplemental plan that has no prescription drug coverage. Beneficiaries choosing to retain a Medicare supplemental plan with drug coverage after that date have no such right; in that case the opportunity to switch to a Medicare supplemental plan without drug coverage is solely at the discretion of the private insurance company issuing the replacement policy, but the beneficiary may choose to remove drug coverage from their current Medicare supplemental plan policy and retain all other benefits.

The vast majority of Medicare beneficiaries who hold a Medicare supplemental plan policy with drug coverage and then enroll in a Part D Plan after May 15, 2006 will have to pay a late enrollment penalty. The only exception is for the few beneficiaries holding a Medicare supplemental plan policy with a drug benefit that is considered "creditable coverage" (i.e. that it meets four criteria defined by the Centers for Medicare and Medicaid Services); a Medicare supplemental plan policy with prescription drug coverage bought before mid-1992 may pay out as much as or more than a Medicare Part D plan. Medicare supplemental plan policies sold in Massachusetts, Minnesota, and Wisconsin with prescription coverage may also pay out as much as or more than Part D.

Medicare Open Enrollment is from Nov. 15 - Dec. 31

Each year plans change what they cost and what they cover. The next general open enrollment starts on November 15. During this time, people with Medicare can add, drop or change their coverage. They can also select a health plan for their 2011 coverage.

You'll find helpful Medicare tools and information on this page. Use these resources to compare the cost or benefits of Medicare health plans in your area. Get answers to your Medicare questions. Learn how to lower health care costs and stay healthy. By working together for better health, we can reach those who are unaware, unsure, or unable to make their health plan decisions and apply for the extra help.

Medicare is a major effort on the part of the United States government to provide affordable medical insurance for seniors over the age of 65, as well as people with certain disabilities. While other countries have more thorough health coverage programs, funding for Medicare has always been a sensitive political issue in the U.S. Recent changes and the addition of a prescription plan have caused a lot of controversy. Regardless of these issues, Medicare is a vital means of paying for health care for many Americans. An estimated 42.3 million people benefited from Medicare programs in 2004.

Some people elect to purchase a type of supplemental coverage, called a Medicare supplemental plan, to help fill in the holes in Original Medicare (Part A and B). These Medicare supplemental plan insurance policies are standardized by CMS, but are sold and administered by private companies. Some Medicare supplemental plan policies sold before 2006 may include coverage for prescription drugs. Medicare supplemental plan policies sold after the introduction of Medicare Part D on January 1, 2006 are prohibited from covering drugs. Medicare regulations prohibit a Medicare beneficiary from having both a Medicare Advantage Plan and a Medicare supplemental plan policy. Medicare supplemental plan policies may be purchased by beneficiaries that are receiving benefits from Original Medicare (Part A & Part B).

Some have suggested that by reducing the cost-sharing requirements in the Medicare program, Medicare supplemental plan policies increase the use of health care by Medicare beneficiaries and thus increase Medicare spending. One recent study suggests that this concern may have been overstated due to methodological problems in prior research.

Eligibility

A person must be enrolled in part A and B of Medicare before they can enroll in a Medicare supplemental plan. During the open enrollment period which begins within 6 months of turning 65 or enrolling in Medicare Part B at 65 or older, a person may obtain a Medicare supplemental plan on a guaranteed issue basis (i.e. no medical screening required). Outside of open enrollment, the issuing insurance company may require medical screening and may obtain an attending physician's statement if necessary. Medicare supplemental plan insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan.

Medicare recipients under age 65

Recipients of Social security disability insurance (SSDI) benefits or patients with kidney failure (ESRD) are entitled to Medicare coverage regardless of age, but are not automatio people under 65, and even if they do, they may use medical screening. However, a slight majority of states require insurers to offer at least one kind of Mecally entitled to purchase Medicare supplemental plan policies unless they are at least 65. Under federal law, insurers are not required to sell Medicare supplemental plan policies tdicare supplemental plan policy to at least some Medicare recipients in that age group. Of these states, 25 require that Medicare supplemental plan policies be offered to all Medicare recipients.

Products available

Medicare supplemental plan offerings have been standardized by the Medicare center (CMS) into ten different plans, labeled A through N, sold and administered by private companies. Each Medicare supplemental plan offers a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medicare supplemental plan (these 'older' plans are no longer marketed) offering minimal benefits will cost more than current plans offering full benefits. The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group. Since Medicare supplemental plan is private insurance and not government sponsored, the rules governing the sale and offerings of a Medicare supplemental plan insurance policy can vary from state to state. Some states such as Massachusetts, Minnesota, and Wisconsin require Medicare supplemental plan insurance to provide additional coverage than what is defined in the standardized Medicare supplemental plans.

Some employers may provide Medicare supplemental plan coverage as a benefit to their retirees While Medicare supplemental plan offerings have been standardized since 1992, some seniors who had Medicare supplemental plan prior to 1992 are still on non-standard plans. Those plans are no longer eligible for new policies.

Over the years new laws have brought many changes to Medicare supplemental plan policies. For example, marketing for plans E, H, I and j have been stopped as of May 31, 2010. But, if you were already covered by plan E, H, I or J before June 1, 2010, you can keep that plan. Medicare supplemental plan M and N took effect on June 1, 2010, bringing the number of offered plans down to ten from twelve.