An Introduction to Medicare

 

Who qualifies for Medicare?

Medicare is generally available to folks over 65 (unless you were born after 1937— then you may need to be over 65 or take a reduction in benefits); plus, it's there for the disabled and those with end-stage renal disease. Cancer patients who are under 65 often do not know that they can be insured by Medicare when they are disabled and receiving Social Security for 24 months, and lose other forms of insurance.

If you think you might be eligible for Medicare, check with your local Social Security office, or call the Social Security Administration at 1-800-772-1213.

There are four parts to Medicare: Parts A and B (also called “Original Medicare”), Part C (now known as Medicare Advantage), and Part D (Prescription Drug Benefit). To understand Medicare, you need to understand each of these different parts of the program and your cost-sharing requirements in each part. Parts A, B, and C are outlined below. Part D is discussed on its own page, Medicare Prescription Drug Coverage. More specific information about your out-of-pocket costs for each part is described on the page titled Medicare Patient Costs.

Medicare Basics


The Negative: What Medicare Does Not Cover 
Before we look at the coverage by Medicare, let’s look at what is excluded from coverage.

Preventive Care - Not covered with limited exceptions. Let’s face it — when Medicare started, preventive care was considered beside the point. In the 1960s, Medicare was limited to catastrophic illness and hospitalizations. Now we know better. So, in line with current information, Medicare now covers many “early detection” services for cancer, such as mammography, prostate screening, colon cancer screening, and cervical cancer screening. They now even have a “Welcome to Medicare” physical so you can get screened for all kinds of stuff before you get really sick and cost the federal government a fortune.

However, you must have that physical in the first 6 months of your Medicare coverage. But be aware that Medicare does not cover all screening tests, and they do not pay for other annual physicals. In 2007, you can now be screened for aortic aneurysms if you found to be at risk for them in your "Welcome" physical.

Over-the-Counter Drugs - Not covered. However, for prescription drugs, if you have signed up for a prescription drug plan, you have coverage. Until Jan. 1, 2006, Medicare did not cover most prescription drugs and products, such as insulin and self-administered injectibles. This lack of coverage was particularly bad for cancer patients because increasing numbers of wonderful cancer drugs are now in oral form. If you have not signed up for Medicare prescription drug coverage, as a cancer patient, you need to do so right now or face more fines.

Cosmetic or patient convenience items and services - Not covered. Forget about charging that face lift to Medicare. It also means that if you want to stay in the hospital an additional night because you are far from home, Medicare will not pay for it.

Long-term care - Not covered. If the nursing home does not provide what Medicare defines as a “skilled” level of care, it does not qualify for Medicare coverage. For less financially fortunate folks, Medicaid covers your long-term care.

Routine dental and optometry services - Not covered. The key here is “routine.” For patients with mouth disease caused by chemotherapy or radiation, some dental services can be covered.

Items and/or services considered not medically necessary - Not covered. This is a very common issue for cancer patients because you can often benefit from a cancer drug that is used in a way that was not approved by the U.S. Food and Drug Administration. Or, you might get a test that is not covered by the Medicare program because you have had the test more frequently than Medicare thinks is necessary.

Before you have one of these services, your physician’s office might give you a document to sign called an Advance Beneficiary Notice (ABN). This means that if Medicare does not pay, you can be billed for the service or item. If you cannot afford to pay for this service, and it is a drug, the drug company might pick up the bill. Alternatively, the drug companies may have policies to replace the drug for your physician after Medicare declines to pay. In either case, the drug company will make sure you get the drug.

What Medicare Does Cover and Who Pays the Bill


There are four parts to the Medicare program:

  • Part A
  • Part B
  • Part C
  • Part D

Medicare Part A
This part of Medicare is known as hospital insurance. But don’t be fooled. It covers lots of things: hospital stays, skilled nursing facility stays, home health care, hospice, inpatient psychiatric stays, and blood transfusions. If you get a Social Security check, you are automatically in Part A. To enroll for Part A, you need to apply roughly 10 months before your 65th birthday. But don’t panic — you can apply late. Other quick facts about Part A follow.

What Medicare pays under Part A - For each “benefit period” (each benefit period begins on your first day of hospitalization and ends when you spend 60 consecutive days out of the hospital), all your costs less an annual deductible ($952 in 2006; $992 in 2007) for the first 60 days of a hospital stay are fully covered. A private room, the first three units of blood received, telephone, and TV are not covered.

What Part A costs you or Medigap (supplementary insurance described later) -  Most folks with Medicare Part A are eligible for “premium-free” Part A because they or their spouses paid Medicare taxes while working. For the rest, Part A costs for 2007 are listed in the following table:
 

Part A Benefit 

2007 costs 

Monthly Premium

$410 (paid by about 1% o beneficiaries)

Deductible (hospital stay of 1-60 days)

$992

Daily payment for days 61-90

$248

Days 91-150 ‘lifetime reserve days’ (per day)

$496

Over 150 days (per day)

All costs

First 20 days of skilled nursing facility (SNF) care (per day)

$0

SNF Days 21-100 (per day)

$124

SNF Over 100 days

All costs

 

Who administers Part A - Private insurance companies contract with the Centers for Medicare and Medicaid Services (CMS) to pay hospitals and other providers under Part A. These contractors (who can be companies, such as Mutual of Omaha, Blue Cross, or Cigna) are called fiscal intermediaries, or FIs. Down the road (by 2010), these will combine with Part B administrators and will be called MACs (Medicare Administrative Contractors).

How hospitals get paid -  Most hospitals — except selected cancer facilities — and SNFs are paid a dollar figure on a per-discharge basis. Hospital payment is linked to your diagnosis or to procedures you receive (such as radiation therapy or chemotherapy). Because hospitals and SNFs are paid a lump sum each time you are in the hospital as an inpatient, they want to get you out as soon as you can possibly go home. That’s why Medicare covers home health care for some diagnoses and services.

Medicare Part B
Eighty-four percent of outpatient cancer care falls under Part B. Part B pays for some hospital outpatient and mental health services, physician services (including office-administered cancer treatment and drugs), diagnostic tests, laboratory tests, take-home equipment, physical therapy, and some home health care and some oral cancer drugs.

You qualify for Part B if you qualify for Part A. The big difference between Part A and Part B is that you can choose not to sign up for Part B if you are covered by another form of insurance. Plus, if you forget to sign up for Part B before your 65th birthday, you can do so only during limited open-enrollment periods each year, and you may be subject to a permanent penalty. This penalty is 10 percent for each 12-month period you do not sign up. Other important facts about Part B follow.

What is paid by Medicare under Part B - Eighty percent of the payment of what Medicare allows for medically necessary outpatient services (this is not always true — read the next section); 50 percent of outpatient mental health services; 80 percent of therapy services (occupational, physical, and speech); and 100 percent of Medicare-approved home health therapy.

What Part B costs you or Medigap (supplementary insurance described later) -Monthly premiums for Part B, which went up in 2005 to $78.20 per month, amount to a whopping $88.50 in 2006 and will be $93.50 in 2007 on average---but if you have a high income (over $80,000 per person or $160,000 per couple), you will pay more. Additionally, after you pay an annual, one-time deductible of $124 in 2006 or $131 in 2007, patients (or their Medigap) pay 20 percent of what Medicare allows for most outpatient services. It seems that each year, Medicare patients pay more of the cost.

However, like anything else in life, there are exceptions. Certain (but a vast minority of) physicians elect not to participate in the Medicare program, and they can elect to not take “assignment” on some services. If they do not accept assignment, you pay them at the time of service. What you might pay is up to 115 percent of the nonparticipating allowable fee.

And what you get from Medicare is 80 percent of that allowable. So, you may pay a spread of 35 percent. This sounds like a lot, and it is. But physicians cannot charge above the Medicare allowable for some things, like your Medicare drugs given in the office (cancer infusions!) and laboratory fees. That’s why most cancer physicians participate in Medicare. You should always make sure you know whether your doctor accepts assignment--it should be the very first question you ask. This means every doctor you see — radiologist, anesthesiologist, anybody.

For hospital outpatient services, you pay 20 percent of what Medicare allows. But for a few services, it is still slightly more due to Medicare system irregularities. For outpatient mental health services, you pay about 50 percent.

Who administers Part B - Hospital outpatient services are administered by the FIs (Fiscal Intermediaries) described above. Part B physician and laboratory services administered by contracting insurance agencies (like Blue Shield or National Heritage Insurance) are called Part B carriers. These carriers are powerful because they decide whether or not they should pay for your office treatment. Home equipment, such as portable infusion pumps, oxygen, and wheelchairs, as well as some cancer drugs given in a pump, fall under special carriers called the Durable Medical Equipment Regional Carriers (DMERCs). These four regional carriers serve all 50 states, approving payments for home equipment and a few oral or pump-infused drugs.

How Part B pays providers -  Most Part B services, physicians, and hospital outpatient and laboratory fees are paid on a fee schedule set by Medicare. Cancer drugs given in the office are on a separate fee schedule. Home equipment is paid on average regional costing and/or on an invoice basis.

Medicare Part C/Medicare Advantage 
Medicare Advantage can include HMOs and PPOs like most managed-care organizations, plus fee-for-service plans and Medical Savings Accounts. These are insurance plans that provide patients with different choices, such as HMOs, PPOs, or additional benefits. These plans are available regionally. To qualify, you must be enrolled in Medicare Part A and B. You can find out about plans on the Medicare website. The enrollment period for Medicare Advantage is from November 15 to December 31 each year.

What MA covers and pays - Medicare Advantage must cover the same list of services Medicare covers under Parts A and B, or the Original Medicare Program. However, like other health plans (but not “regular” Medicare), they can require referrals or authorizations. The good news is that they typically have lower co-pays than Part A and B, and they may offer some cool benefits, such as annual physical exams.

What Medicare Advantage (MA) costs - Medicare beneficiaries must continue to pay their Part B premiums. Beyond that, costs will vary as MA plans need to cover only what Medicare does. They can have a different fee schedule, different co-pays, and different treatment approval criteria. Some MA plans will waive your deductible and/or premiums for prescription drugs, which is allowed as long as they spend the same amount on your drugs as Medicare does.

Who administers MA - CMS contracts with different insurance companies in each region. These insurers administer their own programs. However, they may have names that indicate that they are Medicare Advantage, such as Senior Advantage or SeniorCare or Advantage 65. You can choose a plan at the Medicare website.

How MA pays providers (doctors and hospitals) - Like every other health plan, these must have a CONTRACT with your physician. The physicians who are contracted with and participate in the plan are then paid by the plan on a fee schedule or on a per-patient per-month basis. You need to find out if your cancer physicians participate in your MA plan, and you need to tell your doctors up front that you have a Medicare Advantage plan. If they do not participate, or if they do not get authorization, they can be out a lot of money for your cancer treatment. Always tell your physician or pharmacist that you have an MA plan.

Medigap

Medigap does exactly what it sounds like: It covers the gaps in Medicare coverage--EXCEPT Medicare prescription drug coverage (Part D) that comes out of your pocket.

What Medigap Covers 
There are currently 12 standardized benefit policies labeled A through L. Policy A contains the basic or “core” benefits. The other policies contain the core benefits plus one or more additional benefits. The following is a list of the benefits that are contained in the core policy:

Each plan offers a different combination of these benefits in addition to the core benefits. Additional benefits are:

  • Part A hospital coinsurance for days 61 to 90
  • Part A hospital lifetime reserve coinsurance for days 91 to 150
  • 365 lifetime hospital days beyond Medicare coverage
  • Parts A and B 3-pint blood deductible
  • Part B 20 percent coinsurance
  • Part A skilled nursing facility coinsurance for days 21 to 100
  • Part A hospital deductible
  • Part B deductible

May also include:

  • Part B charges above the Medicare-approved amount (if provider does not accept assignment)
  • Foreign travel emergency coverage
  • At-home recovery (home health aid services)
  • Preventive medical care

Plans K and L are considered high-deductible health plans. In exchange for lower premiums than plans A through J, they do not include your Part B deductible, and your out-of-pocket costs are higher. However, out-of-pocket costs are subject to an annual limit.

Policies A through L vary considerably. Beneficiaries should review the policy packages carefully and decide which coverage is appropriate for them. You can find more details about choosing coverage here.

What Medigap does NOT cover -  Medicare patients sometimes think that Medigap policies cover everything that Medicare does not cover. Well, here are the things that they NEVER cover:

  • Long-term care
  • Vision or dental care
  • Hearing aids
  • Private-duty nursing
  • Outpatient prescription drugs

Obtaining Coverage and Switching Medigap PoliciesThe best time to enroll in any of the policies is during “open enrollment.” This 6-month period begins once you turn 65 and start your Part B coverage. During this time, insurance companies cannot deny you enrollment, make you wait for coverage to start, or charge you more for pre-existing health conditions. If you miss open enrollment, these insurance companies can turn you down because of your health status, or charge you more money. Any time you switch Medigap plans, after your first enrollment, we advise you to read the fine print!

Medigap Costs
The next major consideration is cost. Medigap is not free; there is a monthly premium. However, lots of Medicare patients who are less fortunate might be surprised to discover that they can get Medicaid to be their Medigap (see Medicaid). For those who can afford Medigap, there are definite price differences from policy to policy.

There might also be a big difference in price from company to company for the same policy. For example, monthly premiums for companies selling Policy C in one state were found to range from $138.50 to $310, yet all the policies offer the exact same benefits. Thus, before purchasing one of the higher-priced policies, you should shop around! See our Medicare Webography or this page for suggestions or check the AARP website, but remember, they sell Medigap too!

Special Benefits for Medicare Cancer Patients

The Medicare Cancer Coverage Act of 1993
Sounds like an oldie but goodie, right? Well, it is, and this act is good for Medicare cancer patients. This act provides expanded coverage for more cancer drugs. This is the way it works: drugs are approved by the FDA for a certain diagnosis. But this act says that if the drugs are covered in compendia — a collection of medical publications — or in certain medical journals, cancer patients can get the drugs off-label (for diagnoses other than the FDA-specified diagnosis).

This benefits you because you can get a wider array of cancer drugs. The act also states that if a drug has an oral form and an injectable form, the oral form will be covered. In 1997, the act was updated to apply to oral and injectable antiemetics (antivomiting medications) used in cancer treatment. There are also state cancer coverage laws, which govern other insurance that covers the same or more expanded off-label coverage as Medicare.

Clinical Trials
Cancer remains incurable for many patients. For that reason, you may want to research the options available through the experimental treatments tested in clinical trials. A clinical trial is a research study that answers specific questions about emerging therapies and determines new ways to improve cancer care or to enhance your quality of life. Medicare covers only trials that meet their criteria.

Your doctor should tell you whether the trial meets those criteria. If you have questions, call 1-800-MEDICARE (1-800-633-4227) — Medicare’s toll-free number for beneficiaries that offers information about benefits. Medicare does cover certain costs associated with trials, but unless you are in special colon cancer trials, they do not cover the drug. Here is how Medicare covers — and doesn’t cover — clinical trials.


Covered costs may include:

  • Routine tests, procedures, and doctor visits
  • Services or items usually associated with the experimental treatment, such as costs to administer investigational drugs
  • Health care associated with being in a clinical trial, such as a test or hospitalization due to an unanticipated side effect or because the drug requires hospitalization

Non-covered costs include:

  • Investigational drugs, items, or services being tested in a trial. The exception to this is some trials for colorectal cancer.
  • Items or services used solely for the data collection needs of the trial.
  • Anything being provided free by the sponsor of the trial to the cancer clinic.
  • Any coinsurance and deductibles.
Medicare Quality of Cancer Care Demonstration Project 2006 
In order to assess and provide quality of care for cancer patients, Medicare initiated a 1-year demonstration project during calendar year 2006. In 2006, Medicare is looking at 13 cancers in terms of the reason for your visit with a doctor or other provider, the stage and type of cancer you have, and whether or not your doctor is following a standard protocol for your care. This project is voluntary for your doctor and can be charged only when you have a visit with him or her. Your payment will be $4.60 per time that this project is billed to Medicare. This Demonstration Project is not available in 2007.

This content was last reviewed August 15, 2010 by Dr. Reshma L. Mahtani.
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