Written by:
Gina-Marie Reitano, Esq.
Most of us are familiar with the terms Medicare and Medicaid, but we don’t necessarily know what the difference between them are. In a nutshell, Medicare is something everyone gets, either two years after being declared disabled by the Social Security Administration, or at age 65. This is the standard form of health care for the elderly, although there are many options and many versions, which will be explained in detail next time. Medicaid is the payor of last resort for the poor, disabled, elderly and in some cases, children or the underemployed. Again, many versions and many options, but this is the plan to which the ubiquitous five -year lookback period applies.
The history of these insurance plans is not only interesting, but helpful in understanding how they work. Although a universal health care plan for Americans was called for by President Truman in 1945, the plan itself was not signed into law until President Lyndon B. Johnson did so in 1965. Although Social Security was enacted as part of the New Deal by President Roosevelt in 1935, Medicare did not come into effect for more than thirty (30) years. What most Americans take for granted as the ultimate form of health insurance has only been around for 45 years.
Medicare is funded through Social Security. Thus, you can only obtain Medicare if you receive Social Security and are age 65 or older or disabled. That means that if you choose to collect Social Security at age 62, which is still an option for Americans, although you do not receive your full benefit (see ssa.gov for a rundown of the percentages you receive based upon your birthdate), (There is an option to collect at earlier ages, but the amount will be smaller. See SSA.GOV <http://ssa.gov/> for more details).
Medicare is not available until you are 65. Conversely, you can also wait to collect your social security benefit until 67 or older (the age at which maximum benefits are available to those born in 1960 or later) then you are still eligible for Medicare. You just have to apply for it and pay for it. The key thing to remember to know is that you have to apply for Medicare. It does not automatically go into effect. There is no question you will receive it if you meet the criteria but it is necessary that you go through the step of applying for it.
Medicare.gov sets out all the details regarding Medicare, including the deductibles and the cost. Be careful to go to the actual Medicare website though, as there are others which are really just advertisements for Medicare providers, which are private companies that seem cheaper but severely limit your coverage. The cost of Medicare is minimal when compared to a private policy providing the same coverage.
Medicare has various “parts” which delineate the coverage available. For example, there is Part A, which is Hospital Coverage. Part A is free so long as you are 65 and older and paid a proscribed amount of Medicare tax during your lifetime. If you received a W-2 Form from your employer each year at tax time you’re your employer when you worked, then you are eligible because you paid Medicare tax out of each paycheck. If you were self-employed, there was a period of time when payment was optional but most accountants include it in your tax liability. There is a deductible (meaning, you have to pay this amount before the insurance kicks in) of $1484 per year (which can change) and then the first 60 days per year in the hospital are fully covered. After those first 60 days have been used up you must pay $371 per day as coinsurance. This may seem like a lot to pay, but if you consider that the average hospital stay costs $2,607 per day, you can see that Medicare is still picking up most of the bill. You can purchase a separate insurance policy, called Medigap insurance or secondary insurance to cover your contributions, and if you worked for a union this coverage may be available at no cost under your retirement plan. Part A will also cover up to 100 days of rehabilitation care in a Rehab/Skilled Nursing Facility so long as you are making progress actively working with a physical or occupational therapist on a daily basis. You get the first 20 days for free after you pay your deductible, and then the remaining up to 80 days are paid for 80% by Medicare and 20% by you. The limitation is that Again, in order for Medicare to pay for rehab, you must be working with a physical or occupational therapist daily and making progress at rehabilitation so I If you stop doing therapy or stop improving plateau you may be discharged from rehab and placed on ‘long-term’ status, which is not covered. The most significant difference between Medicare and private insurance providers is that the provider then decides whether you are still eligible to be covered and most of those companies severely limit coverage for obvious reasons. The average cost of rehabilitative care is $17,081. Thus coverage for these services is very important.
Medicare Part B covers all most medical services and equipment outside the hospital and rehab/skilled nursing facility, including tests and doctors’ visits so long as the doctor accepts Medicare (most do). It does not cover long term care (nursing homes), dental, vision, hearing aides, dentures and foot care. No, it doesn’t make sense, but that’s how it is. Again a Medigap policy will help with these expenses.
Medicare Part C is not really part of Medicare at all. It is “Medicare Advantage” which is a euphemism for a plan that is not really administered by Medicare at all. an option to buy into a private insurance plan that provides medical services at a low cost that are compliant with Medicare, and which also often include the medical services that Medicare does not include (dental, vision, hearing aides, dentures and foot care).
It is an assignment of your Medicare coverage to a private company. The private company gets your premiums from the government, and they decide how much coverage you get. The statement that the Medicare service provider cannot give you less than you get from Medicare is also misleading. These private insurance plans have to supply the same coverage, BUT they can place their own criteria on the coverage. For example, most Medicare Part C service providers only cover the first 10 days of rehab. This is the coverage touted by Joe Namath and other celebrities and may include low cost benefits like transportation and meals but in the end the average person winds up with less coverage.
Medicare Part D is an optional program provided by private insurance companies you can enroll in to pay for some of your prescription costs. Again, this is limited. Payment for the program is based upon a sliding scale. If you have medication coverage through your former employer or union, you may not need Part D. If you pick up a secondary insurance like AARP, prescription coverage will be included.
If patients do not enroll in a Part D private prescription plan, then Medicare still pays for medications, but the patient may still have to pay some of the cost of some drugs. In addition, there is a limit to how much Medicare will pay. Medicare will pay up to $4130 in drug costs, after which the patient is again responsible for paying for a portion of their own drugs. This is the dreaded “Donut Hole” or Part D Medicare Coverage Gap. That sounds like a lot, but if you realize the donut hole may seem like a distant threat since $4130 is a lot of money, but if you consider the cost of some common drugs, it adds up quickly. For example, if you take a statin for high cholesterol (avg. cost $33 per month to $600 per month based upon the medication), Plavix as a blood thinner (avg cost $225 per month), and insulin (cost per vial is $250 with up to 6 vials needed per month) and a medication for COPD (avg cost $250 per month per medication), you can easily fall into the donut hole which would only provide $344 per month in coverage.
For example, if you take medications for high cholesterol, a blood thinner, insulin, and an inhaler, you will reach the Donut Hole in 4 months. Once you have reached the Donut Hole, Medicare will only pay 344 a month for your meds, which may leave you paying hundreds a month for the rest of your medications. Why does the Donut Hole even exist? Because when the law was written, some lawmakers wanted to “discourage patients from taking too many drugs” and thought the Donut Hole would discourage the use of medication.
Some things can be done to limit your exposure, such as using generic drugs, but for most seniors this is an issue. Thus, the need for Medigap or secondary insurance, which will be the topic of our next article.
Medicaid is a program administered on a state-by-state basis that provide medical care for the poor and elderly. The Federal Government gives money each year to State Governors to fund Medicaid programs. Some states have generous coverage for the poor and elderly. Some states have refused to accept federal money, and provide very little Medicaid services to their needy citizens. In general, Medicaid covers nursing home care, medical care, and medications for free or at an extremely low cost. Eligibility is usually limited to individuals who are below the poverty line, and proof of this must be provided upon application. Many elderly patients in nursing homes are Medicaid patients, having applied with the help of social workers. Because Medicaid is administered by states, the eligibility for coverage, and the services that are covered vary state-by-state.