Medicare Frequently Asked Questions
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 and what does each part cover?
Answer: According to The Basics: Medicare, National Health Policy Forum (2011), Medicare consists of four parts and covers the following:
Part A (Hospital Insurance program)
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. Individuals who receive Social Security cash benefits are entitled to Medicare Part A benefits. Some pay a monthly premium to enroll. Part A covers the following services:
- Inpatient care in hospitals
- Blood for transfusions
- Home health care that follows a minimum of a three day hospital stay
- Hospice care
- Religious nonmedical health care institutions
- Skilled nursing facility care for 100 days per benefit period following a minimum three-day hospital stay (not custodial or long-term care)
Part B (Supplementary Medical Insurance program)
Most people pay a monthly premium for Part B. It pays for some medical services that Part A does not as well as supplies when they are medically necessary. Part B covers the following services:
- Doctors’ services, including office visits
- Laboratory and blood tests
- Blood for transfusions
- One-time “Welcome to Medicare” preventive physical exams and annual wellness exam (within six months of enrollment in Part B)
- Mammograms
- Pap smears
- Tests for diabetes, glaucoma, prostate and colorectal cancer, and cardiovascular disease
- Certain orthopedic shoes and inserts for those with diabetes
- Wheelchairs and other medical equipment
- Outpatient hospital services
- Some services of physical, occupational, and speech therapists
- Home health care that is not preceded by a hospital stay
- Some outpatient mental health care services
- Certain prescription drugs that are not self-administered by the beneficiary
- Ambulance services
- Kidney dialysis
- Smoking cessation
- Physician visits and tests under clinical research studies
- Ambulatory surgery center services
- Some services provided by nonphysicians such as physician assistants and nurse practitioners
Part C (Medicare Advantage program)
Covers Part A and B services and most prescription drugs for beneficiaries who enroll in private health insurance plans such as 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)
Provides outpatient prescription drug coverage 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: How is Medicare financed?
Answer: According to The Basics: Medicare, National Health Policy Forum (2011), Medicare is financed by the following:
- Part A
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
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
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
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
- Disproportionate Share Hospital (DSH)
A special reimbursement program which is aimed at making up the short fall for hospitals when care is provided to a patient who has little or no funds to cover the costs. There are DSH programs for Medicare, Medicaid, and pharmacies, known as the 340B program. - 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 and other providers and designations, please refer to the Centers for Medicare & Medicaid Services website. For more information on billing practices for these and other rural providers, please refer to the Medicare Billing Information for Rural Providers, Suppliers, and Physicians, Centers for Medicare & Medicaid Services, 2011.
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 Fact Sheet: Medicare at a Glance, Kaiser Family Foundation (2011), 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
Last reviewed 02/22/2012
