Long-Term Care Planning: Original Medicare
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Understanding the framework of Medicare programs is the first step to figuring out how these programs may or may not apply to you or your parent and how they may relate to other kinds of healthcare or long-term care insurance. Original Medicare includes Parts A, B, and D benefits. (Part C applies only to Medicare Advantage and is just another way of packaging Parts A, B, and D benefits.)
Original Medicare eligibility
Part A: Medicare Part A covers inpatient care in a hospital, rehabilitation services in a skilled nursing facility or rehabilitation hospital, hospice care, home healthcare (under certain conditions), and inpatient care in a religious nonmedical healthcare institution (a place for Christian Scientists who need assistance but have religious objections to conventional medicine).
Medicare Part A does not require additional premiums for eligible beneficiaries; if you do not have enough working quarters to qualify, you can enroll and pay a monthly premium. There is a deductible (amount you have to pay before Medicare starts paying) if you are hospitalized; in 2014 this is set at $1,216 for each benefit period of 60 days.
Hospital stays these days are generally very short, and patients who require further care are frequently transferred to a rehabilitation program in a skilled nursing facility. If this happens to you or your parent, it does not mean that you have been placed permanently in a nursing home.
Although the Medicare benefit period ends at 100 days, you may be discharged much earlier, perhaps within two to three weeks. You don’t have to pay any fees for the first 20 days of each benefit period. For days 21 through 100, you pay a coinsurance amount per day of $152, and if you stay past day 100, you pay all costs for each day, unless you have additional insurance that covers these costs.
To be eligible for Medicare coverage of a rehabilitation program in a skilled nursing facility, you must have been hospitalized as an inpatient for three days prior to the transfer. Some hospitals have been classifying patients as being in observation status, that is, not formally admitted to the hospital, even though they may be in a bed on a hospital unit getting the same treatment as an officially admitted patient.
This has financial implications; their stay is not covered under Medicare Part A, which has a one-time deductible for the stay, but under Part B, which bills for every service separately as if the hospital were an outpatient setting. Moreover, days spent in observation do not count as inpatient days toward the three-day nursing facility requirement, so the patient is responsible for the entire cost of the rehab stay.
This policy is being contested and may change, but for now it is worth asking at every hospital stay whether the patient is admitted or under observation.
Part B: Medicare Part B is an optional component that helps cover medically necessary services like doctor’s visits, outpatient care, durable medical equipment, and many preventive services like flu shots. You have to pay a monthly premium to be enrolled to obtain coverage for these Medicare services. But Part B is heavily subsidized, so unless you have very good private insurance, it almost always makes sense to choose this option.
Part D: Medicare Part D, which covers prescription drugs, is also optional but strongly advised. You pay a monthly premium, which changes every year. If you receive Social Security benefits, your Medicare premium for both Parts B and D are deducted from the check.
Additional Medicare eligibility
Medicare also covers younger people with end-stage kidney disease or amyotrophic lateral sclerosis (ALS), as well as people with other disabilities who have received benefits for a total of 24 months from the Social Security Administration or the U.S. Railroad Retirement Board. The months you wait for your application to be approved are counted in meeting this 24-month requirement.
If you or your spouse’s work history does not reach the required threshold but you meet the citizenship or residency requirements, you can still enroll in Medicare Part A (hospital coverage) and pay a monthly premium, as well as in optional Part B (outpatient coverage), for which everyone pays a monthly premium.
It is a good idea to do this because if you enroll later, you risk paying permanent late penalties. But if you are still working and covered by a group health-insurance plan, you can delay enrolling in Part B without a penalty until your employment ends.
Medicare doesn’t pay for everything. Even if it does cover a service, you generally have to pay the following fees:
A deductible (a certain amount of actual medical costs you incur before insurance starts to pay)
Coinsurance (your share of these costs after the deductible has been reached, typically 20 percent)
Copayments (the fixed amount you pay, for example, at a doctor visit)
Many people purchase Medicare Supplemental Insurance (Medigap) to help pay for these additional expenses. These policies are offered by private insurance companies and have to meet federal and state requirements. Medicare has information on how to find Medigap policies in your state. You can also compare Medigap policies at the Medicare.gov website.
Current Medigap policies don’t include prescription drug coverage, but if you have a policy purchased before 2006, it may still cover drugs. If you or your parent has an old policy labeled H, I, or J, you can still use it, but it’s drug coverage part is not nearly as good as Medicare Part D.
These policies have become more expensive as fewer and fewer people use them. On the other hand, if you switch to Part D now, you have to pay late penalties in addition to the plan’s premiums.