1. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company1 What is it? Federal health insurance program that covers - most people age 65 and older - those who have permanent kidney failure - those disabled under strict Social Security rules

2. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company2 What is it? 4 parts: (1) Hospital (Part A) (2) Medical Insurance (Part B) (3) Medicare Advantage (Part C) (4) Prescription Drug Insurance (Part D)

3. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company3 Hospital Insurance (Part A) provides institutional care inpatient hospital care skilled nursing care post-hospital home health care hospice care, under certain conditions

4. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company4 Medical Insurance (Part B) VOLUNTARY program of health insurance physician’s services outpatient hospital care physical therapy ambulance trips medical equipment prosthetics other services not covered under Part A

5. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company5 Medicare Advantage (Part C) contracts with private managed care and fee-for- service organizations choose benefits through Medicare fee-for-service OR through Medicare Advantage plans : –coordinated care plans (HMO, PPO, PSO) –religious fraternal benefit society –private fee-for-service

6. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company6 Prescription Drug Insurance (Part D) Prescription drug insurance program added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 voluntary program began in 2006 covers portion of prescription drug costs not generally covered by other Medicare programs offered through private health plans can stay with traditional Medicare and enroll in a drug-only plan or choose Medicare Advantage plan with comprehensive benefits

7. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company7 Medicare Supplement Insurance “Medigap” insurance helps pay deductibles and co-insurance incurred under Medicare Parts A and B may pay for items or services not covered by Medicare will NOT cover out-of-pocket expenses

8. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company8 Eligibility and Enrollment Hospital Insurance (Part A) Available to all > 65 entitled to monthly Social Security or Railroad Retirement cash benefits disabled under Social Security > 24 months certain dependents or survivors those with end stage renal disease

9. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company9 Eligibility and Enrollment Medical Insurance (Part B) Potential enrollees include –all persons entitled to Hospital Insurance (Part A) –citizens or lawful aliens > age 65 Enrollment period –seven full calendar months after first eligible –late enrollments, re-enrollments pay higher premium

10. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company10 Eligibility and Enrollment Medicare Advantage (Part C) Potential enrollees include –all persons entitled to Hospital Insurance (Part A) and –enrolled in Medical Insurance (Part B) Enrollment period –first three months of eligibility –first three months of the year

11. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company11 Eligibility and Enrollment Prescription Drug Insurance (Part D) Potential enrollees include –all persons entitled to Hospital Insurance (Part A) and –enrolled in Medical Insurance (Part B) Enrollment period –open enrollment November 15 to December 31 –if new Medicare beneficiary, Part D initial enrollment is same as for Part B

12. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company12 Eligibility and Enrollment Medicare Supplement Insurance Potential enrollees include –all persons age 65 and older Enrollment period –open enrollment six months after age 65 and enroll in Medicare Part B; pre-existing conditions may be excluded for first six months

13. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company13 Benefits: Hospital Insurance (Part A) Inpatient hospital care –up to 90 days each ‘benefit period’ –patient pays deductible of $1,068 (2009) for first 60 days coinsurance of $267 a day (2009) for each additional day up to a maximum of 30 days –each person has non-renewable lifetime “reserve” of 60 additional hospital days with coinsurance of $534 a day (2009)

14. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company14 Benefits: Hospital Insurance (Part A) Post-hospital extended care in a skilled nursing facility –up to 100 days in each “benefit period” –patient pays nothing first 20 days –after 20 days, patient pays coinsurance of $133.50 a day (2009) for each additional day up to a maximum of 80 days

15. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company15 Benefits: Hospital Insurance (Part A) First 100 post-hospital home health service visits –after a hospital or skilled nursing facility stay –services must be under treatment plan established by physician –patient pays 20% cost-sharing for durable medical equipment

16. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company16 Benefits: Hospital Insurance (Part A) Hospice care for terminally ill patients

17. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company17 Benefits: Hospital Insurance (Part A) Inpatient hospital care –except for deductible and coinsurance amounts, Medicare helps pay for inpatient hospital service for up to 90 days in each benefit period –first benefit period starts the first time the patient receives inpatient care after Hospital Insurance –coverage begins

18. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company18 Benefits: Hospital Insurance (Part A) Inpatient hospital care –benefit period ends when patient out of hospital or skilled nursing or rehabilitative services for 60 days in a row (including day of discharge) –after one benefit period has ended, another will start when patient again receives inpatient care

19. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company19 Benefits: Hospital Insurance (Part A) Skilled nursing facility care - must meet 5 conditions 1.need daily skilled nursing or rehab. Services that can only be provided in skilled nursing facility 2.in hospital for at least 3 days in a row before admitted to skilled nursing facility 3.admitted to skilled nursing short time after leaving hospital (usually 30 days) 4.care in skilled nursing facility is for condition treated in hospital or that arose while receiving care in the skilled nursing facility for condition treated in the hospital 5.medical professional certifies that patient needs and receives skilled nursing or skilled rehab. services daily

20. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company20 Benefits: Hospital Insurance (Part A) Skilled nursing facility care –no lifetime limit on amount of skilled nursing facility care under Hospital Insurance –except for coinsurance, plan can pay cost of up to 100 days’ post-hospital care in each benefit period, regardless of number of benefit periods –after 100 days of coverage in a benefit period, patient must pay full cost of skilled nursing facility care

21. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company21 Benefits: Hospital Insurance (Part A) Home health care – Hospital Insurance pays for first 100 days in “home health spell of illness” if all 6 of the following conditions are met 1.care is post-institutional home health service 2.care includes intermittent skilled nursing care, physical therapy, or speech therapy 3.person is confined at home 4.person under care of physician who determines need for home heath care and sets up home health plan 5.home health agency participates in Medicare 6.services delivered in home or skilled facility

22. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company22 Benefits: Hospital Insurance (Part A) Home health care “home health spell of illness” means consecutive days –beginning with first day person furnished post-institutional home health services (when entitled to Part A benefits) –ending with close of first period of 60 consecutive days person was NOT hospital inpatient NOR provided home health services

23. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company23 Benefits: Hospital Insurance (Part A) Hospice care –focus on pain relief vs. cure –Medicare pays for home care, inpatient care (when needed) and other services such as homemaker services and counseling –care covered under Hospital Insurance when beneficiary eligible for Hospital Insurance benefits –doctor certifies terminally ill –statement filed electing to limit benefits (can revoke later)

24. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company24 Benefits: Hospital Insurance (Part A) Hospice care –no deductibles –beneficiary pays only small coinsurance outpatient drugs – lesser of 5% of drug cost or $5 inpatient respite care – 5% of amount paid by Medicare for respite care day

25. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company25 Benefits: Medical Insurance (Part B) Medicare usually pays 80% of approved charges for doctor’s services after patient pays first $135 (2009) Medicare also covers 1.medical and surgical services 2.diagnostic tests and procedures that are part of treatment 3.radiology and pathology services 4.treatment of mental illness (limited) 5.X rays

26. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company26 Benefits: Medical Insurance (Part B) Medicare also covers 6.services of doctor’s office nurse 7.drugs and biologicals that cannot be self-administered 8.transfusions of blood and blood components 9.medical supplies 10.physical / occupational therapy and speech-language pathology services

27. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company27 Benefits: Medical Insurance (Part B) Medicare does NOT cover 1.most routine physical exams and related tests 2.most routine dental and foot care 3.exams to prescribe and fit eyeglasses and most hearing aids and eyeglasses and hearing aids 4.immunizations except annual flu or those required because of injury or immediate risk of infection

28. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company28 Benefits: Medical Insurance (Part B) Medicare does NOT cover 5.cosmetic surgery, except if accidental injury or needed to improve function 6.most prescription drugs 7.custodial care at home or nursing home 8.orthopedic shoes

29. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company29 Benefits: Medical Insurance (Part B) Major outpatient hospital services covered by Medicare 1.emergency room or outpatient clinic, including same day surgery 2.lab tests billed by hospital 3.mental health care in certain circumstances 4.X-rays and other radiology services billed by hospital 5.certain medical supplies 6.drugs and biologicals that cannot be self-administered 7.blood transfusions administered to patient as out-patient

30. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company30 Benefits: Medical Insurance (Part B) payments made by Medicare can be made directly to –doctor or supplier: “assignment” doctor or supplier agree to accept amount approved by Medicare carrier as total payment for covered services –patient

31. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company31 Benefits: Medical Insurance (Part B) 115% limit –if doctor does not accept assignment, the most that can be charged is 115% of what Medicare approves –115% limit applies to fees for services billable under physician fee schedule (e.g. physical and occupational therapy, suppliers, injections, etc.)

32. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company32 Benefits: Medical Advantage (Part C) required to provide current Medicare benefit package except hospice services may offer supplemental services may select providers if benefits available to all enrollees required to pay for emergency services without prior authorization

33. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company33 Benefits: Prescription Drug Insurance (Part D) standard benefit for most participants if income below 150% poverty, have no cost-sharing for expenses above $5,726.25 (2009) co-pays: –$2.40 generic and $6.00 if name brand drugs if income between 135% and 150% poverty (2009) –5% if income above 150% poverty

34. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company34 Benefits: Prescription Drug Insurance (Part D) sponsoring organizations may offer alternative coverage if certain specific criteria are met Part D plans may also provide supplemental coverage if certain specific criteria are met discount cards offer opportunity to get negotiated discounts, but not all drugs covered and not all pharmacies accept the cards

35. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company35 Benefits: Medicare Supplement Insurance Congress established federal standards for Medigap policies in 1990 most states limit sale to no more than 12 standard policies, designated by letters A through L Plan A is basic policy offering “core package of benefits” that, in general, extend coverage for Hospital Insurance

36. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company36 Benefits: Medicare Supplement Insurance Plans B through J each have different combination of benefits, but all include the core package In 2006 and later years –some Medigap plan participants may enroll in Part D or maintain drug coverage through Medigap policy –two new standard plans (K and L) are available that do not include entire core benefit package, but instead offer catastrophic coverage

37. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company37 Benefits: Medicare Supplement Insurance Medicare SELECT is similar to Medigap EXCEPT –SELECT may limit Medigap benefits to items and services provided by certain selected health care professionals –may pay only partial benefits when patient gets health care from other health care professionals

38. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company38 Taxation and Financing: Hospital Insurance (Part A) financed by payroll tax paid by –workers, employers, and self-employed subject to Social Security or Railroad Retirement –all federal, state, local government employees hired after 1986 not covered by state retirement system

39. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company39 Taxation and Financing: Hospital Insurance (Part A) tax rate 1.45% for employee and employers; 2.90% for self-employed federal income tax deduction for 1/2 of the Hospital Insurance self-employment tax

40. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company40 Taxation and Financing: Medical Insurance (Part B) financed through premiums paid by –Most persons enrolled pay the basic premium ($96.40 / mo, 2009; designed to cover 25% of costs) –Funds from federal government (covers remaining costs) –Higher income taxpayers (greater than $85,000 income for single taxpayers or $170,000 for married filing jointly) pay a greater share of the total cost Annual premiums announced in fall of previous year by Centers for Medicare & Medicaid Services (CMS)

41. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company41 Taxation and Financing: Medicare Advantage (Part C) financed through same taxes and premiums as traditional Hospital insurance and Medical Insurance programs plan may charge additional premiums for additional benefits offered through plan

42. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company42 Taxation and Financing: Prescription Drug Insurance (Part D) partly financed through premiums paid by participants (average $28 per month for 2009) late enrollment penalty may be charged those with other sources of prescription drug coverage may be able to retain without penalty

43. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company43 Taxation and Financing: Medicare Supplement Insurance Medigap insurance is private insurance funded through premiums paid by plan participants

44. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company44 True or False? 1.Participation in all parts of Medicare is voluntary. 2.The new Medicare Part D is a voluntary program that pays for all prescription drug costs. 3.A person who retires at age 62 can join Medicare by paying an additional premium. 4.Under Medicare Part A, Medicare pays for all inpatient hospital costs up to 90 days each benefit period.

45. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company45 True or False? 5.Hospice care focuses on relief from pain versus on finding a cure. 6.Medical Insurance (Part B) does not cover routine physical exams and most immunizations. 7.All the various Medigap policies must contain the same core package of benefits. 8.All of Medicare is financed with payroll tax imposed on most employers and employees.

46. Medicare Chapter 4 Employee Benefit & Retirement Planning Copyright 2009, The National Underwriter Company46 Discussion Question Discuss the pros and cons of having the federal government involved in the provision of health insurance for the elderly.