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Understanding Medicare, Medigap and Medicaid
By Maggie Pouncey
Know how the system works so you can take advantage of what it has to offer.
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Note: All listed deductible, coinsurance and premium rates are for 2002. Amounts are adjusted every autumn, and changes are effective in January. Also, consider reading AARP.org's glossary of Medicare terms before you jump into this article.
MEDICARE A
- What it is: One half of the Original Medicare Plan known as hospital insurance. Under certain conditions, it also covers limited stays in nursing homes (known as skilled nursing facilities, or SNF), home health agency (HHA) care, hospice care, inpatient psychiatric care and blood transfusion. Medicare A will not pay for a stay in an assisted-living facility, but it may cover the cost of some services—such as home health care and doctors' visits—provided in such a facility.
- Who qualifies: People 65 and older, younger people with disabilities and people with end-stage renal disease. The Social Security Administration (SSA) oversees eligibility and enrollment. The best time to apply for Medicare A is at the first opportunity to do so: the seven-month period that starts three months before a person's 65th birthday. Those who miss that chance can always apply later without seeing a reduction in benefits. And anyone receiving a Social Security check automatically should be enrolled in Medicare A. To find out more about enrollment call the SSA at 800-772-1213, or visit www.ssa.gov.
- What it covers: For each benefit period, all costs, less an $812 deductible, for the first 60 days of a hospital stay (semi-private rooms only; TVs and telephones not included). For the next 30 days, all costs minus a $203-a-day co-payment. In addition, each beneficiary gets 60 nonrenewable Lifetime Reserve Days, which can be added as needed onto the first 90 days of a hospital stay. Medicare A covers the cost of these days less a $406-a-day co-payment. Each benefit period begins on the first day a beneficiary enters the hospital and ends after he or she has gone 60 consecutive days without hospital care. SNF coverage lasts a maximum of 100 days during a benefit period (note: the average nursing home stay is currently 2 1/2 years). There is a $101.50-per-day co-payment for days 21 to 100 in this period.
- What it costs: For a beneficiary or his or her spouse who has worked and paid Medicare taxes for at least 10 years, Part A is premium-free. In some cases, the insurance can be purchased even if no Medicare taxes have been paid. For information on this, go to www.medicare.gov.
MEDICARE B
- What it is: The other half of the Original Medicare Plan, this fee-for-service plan pays for some outpatient hospital and mental-health services, doctors' services (not routine physical exams but many preventive screenings), laboratory fees, medical equipment such as wheelchairs and, in rare cases, prescription drugs. People with other health insurance—from an employer or former employer, for example—can use that to augment Medicare B or can simply choose not to sign up for Medicare B.
- Who qualifies: Same as Medicare A, except that those who don't sign up at their first opportunity can do so only during limited annual open-enrollment periods in subsequent years.
- What it covers: Eighty percent of the approved cost of a given service, as defined by Medicare. (Doctors who "accept assignment" agree that the approved cost will constitute payment in full. Those who don't can charge up to an additional 15 percent, and the beneficiary will be reimbursed only 80 percent of the approved cost by Medicare.) Medicare B also covers 50 percent of most outpatient mental-health services; 80 percent of physical, occupational and speech therapy; and 100 percent of most part-time skilled home health care.
- What it costs: Monthly premiums of $54; an annual deductible of $100; co-insurance (the uncovered 20 percent of the assigned cost); additional charges if a doctor does not accept assignment. Premiums are usually deducted from monthly Social Security payments. Beneficiaries who delay enrolling in Medicare B beyond their first chance to do so may wind up paying higher premiums. Call 800-MEDICARE for specifics.
MEDICARE+CHOICE
- What it is: Sometimes called Medicare C, this government-subsidized, privately sold insurance offers alternatives to the Original Medicare Plan. You can choose among managed-care plans (think HMOs) or fee-for-service plans (the latter is a newer Medicare+Choice option). These plans are not available everywhere.
- Who qualifies: You must be enrolled in Medicare A and B in order to sign up for a Medicare+Choice plan. You can investigate local plans by state or zip code at www.medicare.gov/mphcompare/home.asp. If you try one of these plans and are not happy, you can always switch back to the Original Medicare Plan.
- What it covers: Medicare+Choice plans must offer at least the same coverage as the Original Medicare Plan. Some plans offer prescription-drug or additional hospital benefits. The HMO versions replace Original Medicare's 20 percent coinsurance with a lower co-payment.
- What it costs: Beneficiaries must continue to pay their monthly Medicare B premiums. Beyond that, costs vary, with private companies—not the government—determining what fees are acceptable. Overall out-of-pocket costs may wind up lower than with the Original Medicare Plan, even though additional premiums and, in the case of fee-for-service plans, deductibles may be required.
MEDIGAP
- What it is: A supplement meant to fill in the "gaps" in Original Medicare coverage, this insurance is sold by private companies in plans that run from A through J (least to most comprehensive as defined by standards common to most states). Medigap plans are not subsidized by Medicare. A Medigap plan is of little use to anyone enrolled in a Medicare+Choice plan.
- Who qualifies: Again, only those already enrolled in Medicare A and B can purchase this insurance. Anyone over 65 should sign on during the six-month period (known as open enrollment) immediately following his or her enrollment in Medicare B. Waiting may result in coverage being denied.
- What it covers: Medigap policies help cover such Medicare costs as deductibles, co-payments and coinsurance. The more comprehensive plans may also provide some coverage for prescription drugs, routine eye exams or dental care.
- What it costs: The more benefits a Medigap plan provides, the higher the cost. In New Jersey, for example, monthly premiums for a 75-year-old range from $99 to $225 (on top of the $54 Medicare B monthly premium). Visit the Medigap Compare feature of the Medicare Web site to see a regional breakdown of companies selling Medigap plans.
MEDICAID
- What it is: Jointly funded by state and federal governments, Medicaid offers health insurance to those who are low-income and 65 or older, disabled or eligible for other government aid. Beneficiaries must meet various restrictions. Medicaid programs vary from state to state.
- Who qualifies: Eligibility varies by state. Most people who receive federally assisted income-maintenance payments (such as Supplemental Security Income) and some comparable groups that do not receive cash payments must also receive Medicaid coverage.
- What it covers: This is also at the discretion of individual states. Medicaid will help certain Medicare beneficiaries with their out-of-pocket expenses. Medicaid also covers prescription drugs, hearing aids, eyeglasses and other services not covered by Medicare. Medicaid nursing-home benefits outlast those offered by Medicare (which always end after 100 days in each benefit period).
- What it costs: People who qualify for both Medicare and Medicaid should have very few, if any, out-of-pocket health-care costs. Go to www.hcfa.gov/medicaid/medicaid.htm for more information.
IMPORTANT: To be eligible for Medicaid nursing-home coverage, one must have few assets (usually less than $2,000, excluding a home) and little income that isn't already paying for nursing-home care. The maximum amount of income someone can have to be eligible varies by state. Special rules also cover each applicant's assets and how they were used up to five years before an application to Medicaid is made (the so-called "look-back" period). If assets have not been handled properly, the applicant's Medicaid nursing-home coverage may be jeopardized. To be safe, consult an attorney versed in these issues before attempting to qualify for Medicaid coverage.
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