Medicare Frequently Asked Questions
Question: Who is covered by Medicare?
Answer: All people age 65 and older, regardless of their income or medical history are eligible for Medicare. In 1972 the Medicare program was expanded to include people under age 65 with permanent disabilities and those with end-stage renal disease or Lou Gehrig’s disease.
Most people age 65 and older are entitled to Medicare Part A if they or their spouse are eligible for Social Security payments and have made payroll tax contributions for 10 or more years.
People under age 65 who receive Social Security Disability Insurance (SSDI) generally become eligible for Medicare after a two-year waiting period, while those with End Stage Renal Disease and Lou Gehrig’s disease become eligible for Medicare when they begin receiving SSDI payments.
Question: What are the different parts of Medicare?
Answer: A description of the Medicare parts includes the following:
- Part A (Hospital Insurance) - helps cover inpatient care in hospitals, including critical access hospitals, and skilled nursing facilities (not custodial or long-term care). It also helps cover hospice care and some home health care. Most people do not have to pay a premium for Part A because either they or their spouse already paid for it through their payroll taxes.
- Part B (Medical Insurance) - helps cover doctors' services and outpatient care. It also covers some other medical services that Part A does not cover, such as some of the services of physical and occupational therapists, and some home health care. Part B helps pay for these covered services and supplies when they are medically necessary. Most people pay a monthly premium for Part B.
- Part C (Medicare Advantage program) - allows beneficiaries to enroll in a private plan, such as a health maintenance organization (HMO), preferred provider organization (PPO), or private fee-for-service (PFFS) plan. These plans receive payments from Medicare to provide Medicare-covered benefits, including hospital and physician services, and in some cases, prescription drug benefits. These plans offer combined coverage of Part A, Part B, and in some cases, Part D (prescription drug) benefits.
- Part D (Prescription Drug Coverage) - is the new outpatient prescription drug benefit that is delivered through private plans that contract with Medicare. The benefit includes additional assistance with plan premiums and cost-sharing amounts for low-income beneficiaries. People enrolled in Medicare drug plans pay a monthly premium.
Question: What services does Medicare cover?
Answer: According to The Basics: Medicare, National Health Policy Forum (2007), the following is covered by Medicare:
Part A covers some of the following services:
- Inpatient hospital care
- Skilled nursing facility care for 100 days per benefit period following a minimum of a three-day hospital stay
- Intermittent home health care following a minimum of a three-day hospital stay
- Inpatient psychiatric care for up to 190 days during a beneficiary’s lifetime
- Hospice care
Part B covers some of the following services:
- One-time “Welcome to Medicare” preventive physical exam (within six months of enrollment in Part B)
- Physician services (including office visits)
- Some screening tests, such as mammograms and pap smears; and tests for diabetes, glaucoma, prostate and colorectal cancers; and cardiovascular disease
- Medical equipment
- Outpatient hospital services
- Lab and diagnostic services
- Physical, occupational, and speech therapy
- Some home health care services not preceded by a hospital stay
- Some outpatient mental health care services
Part D covers:
- Most outpatient prescription drugs (individual drug plans have formularies)
Question: How is Medicare financed?
Answer: According to The Basics: Medicare, National Health Policy Forum (2007), Medicare is financed by the following:
- Part A is primarily financed through payroll taxes; employees and employers each pay 1.45 percent of wage earnings (self-employed individuals pay 2.9 percent). Revenue from the payroll tax is held in the Hospital Insurance Trust Fund and is used to pay Part A benefits.
- Part B is financed by beneficiary premiums and by federal general revenues. Premiums collected from beneficiaries cover about 25 percent of total annual costs for Part B services.
- Part C is not separately financed; these plans receive payments from Medicare to provide Medicare- covered benefits, including hospital and physician services, and in most cases, prescription drug benefits.
- Part D is financed through general revenues, premiums paid by Part D enrollees, and state contributions to Medicare drug costs.
Question: What are some rural implications of the Medicare program?
Answer: Because of the heavy dependence on Medicare revenues of most rural hospitals and health care delivery systems, Medicare has been a central issue to rural health care stakeholders. The network of providers that serves rural Americans is fragile and more dependent on Medicare revenue because of the high percentage of Medicare beneficiaries who live in rural areas. Additionally, rural residents on average tend to be older, lower income, and suffer from higher rates of chronic illness then their urban counterparts.
Question: What are the various Medicare rural provider types?
Answer: Due to the low volume of services provided, many rural providers face special circumstances that would make financial viability under traditional Medicare Prospective Payment Systems (PPS) difficult if not impossible. Many times the existence of those providers are essential for ensuring access to care for rural Medicare beneficiaries. As a solution, several types of special rural designations have been created, which are listed below:
- Critical Access Hospital (CAH): Rural hospitals with fewer than 25 acute care beds located at least 35 miles, or 15 by mountainous terrain or secondary roads, from the nearest hospital unless designated as a “Necessary Provider” by a state plan.
- Sole Community Hospital (SCH): Rural hospitals with fewer than 50 acute care beds located at least 50 miles from the nearest hospital. Medicare payment to these hospitals is based on either their own historical costs or the PPS.
- Medicare Dependent Hospital (MDH): Rural hospitals from whom Medicare represents at least 50% of all inpatient revenue.
- Rural Referral Center (RRC): Rural tertiary hospitals who receive referrals from surrounding small primary care hospitals. An acute care hospital can be classified as an RRC if it meets several criteria pertaining to location, bed size, and referral patterns.
- Rural Health Clinic (RHC): A clinic located in rural and medically underserved communities with payment on a cost-related basis for outpatient physician and certain nonphysician services.
For more information about these designations, please see Medicare Guide to Rural Health Services Information for Providers, Suppliers, and Physicians, Centers for Medicare & Medicaid Services, 2007.
Question: What are some future challenges affecting Medicare?
Answer: Medicare faces many challenges, including how to finance care for an aging population with a declining ratio of workers to beneficiaries.
According to the Medicare at a Glance, Fact Sheet, Kaiser Family Foundation (2007), federal spending on Medicare is expected to continue to grow with the aging population and the new drug benefit. The annual growth in Medicare spending is influenced by the increasing volume and utilization of services and higher prices for health care services. Part A Trust Fund reserves are projected to be exhausted in 2018.
Other future challenges include ensuring the successful implementation of the drug benefit, setting fair payments to providers and plans, improving care for those with multiple chronic conditions, and providing adequate financial protections for those with low incomes. Ensuring Medicare’s financial stability, while providing for the health care needs of an aging population, is a pressing challenge for the United States.
Sources: The Basics: Medicare, National Health Policy Forum, 2007; Medicare at a Glance, Fact Sheet, Kaiser Family Foundation, 2007; and Medicare Guide to Rural Health Services Information for Providers, Suppliers, and Physicians, Centers for Medicare & Medicaid Services, 2007.
Credits
Developed by: Michelle Goodman, MAA, Public Health Analyst, Office of Rural Health Policy and Caroline L. Cochran, MPA, Policy Coordinator, Office of Rural Health Policy
Please send comments to: Holly Gabriel, holly@raconline.org
Last revised 08/13/2007
