Medicare Facts You Need To Know
Medicare is a federal health insurance program for persons 65 or older, persons of any age with permanent kidney failure, and certain disabled persons.
Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a federal agency in the Department of Health and Human Services. Social Security Administration offices across the country take applications for Medicare, collect premiums, and provide general information about the program. Various commercial insurance companies are under contract with CMS to process and pay Medicare claims, and groups of doctors and other health care professionals have contracts to monitor the quality of care delivered to Medicare beneficiaries.
CMS also forms partnerships with the thousands of providers of health care services: hospitals, nursing homes, and home health agencies; doctors; suppliers of medical equipment; clinical laboratories; and managed care plans such as health maintenance organizations (HMOs).
Medicare consists of Hospital Insurance (Part A), Medical Insurance (Part B), Medicare Advantage (Part C) (formerly known as Medicare+Choice), and Prescription Drug Insurance (Part D).
Hospital Insurance (Part A) provides institutional care, including inpatient hospital care, skilled nursing home care, post-hospital home health care, and, under certain circumstances, hospice care. Part A is financed for the most part by Social Security payroll tax deductions which are deposited in the Federal Hospital Insurance Trust Fund. Medicare beneficiaries also participate in the financing of Part A by paying deductibles, coinsurance and premiums.
Medical Insurance (Part B) is a voluntary program of health insurance which covers physician’s services, outpatient hospital care, physical therapy, ambulance trips, medical equipment, prosthesis, and a number of other services not covered under Part A. It is financed through monthly premiums paid by those who enroll and contributions from the federal government, both of which are deposited into the Federal Supplementary Medical Insurance Trust Fund. The government’s share of the cost of Medicare Part B is approximately 75%.
Medicare Advantage (Part C) permits contracts between CMS and a variety of different managed care and fee-for-service organizations. Most Medicare beneficiaries can choose to receive benefits through the original Medicare fee-for-service program or through one of the following Medicare Advantage plans:
•Coordinated care plans, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Provider Sponsored Organizations (PSOs). A PSO is defined as a public or private organization, established by health care providers, that provides a substantial proportion of health care items and services directly through affiliated providers who share, directly or indirectly, substantial financial risk.
•Religious fraternal benefit society plans that may restrict enrollment to members of the church, convention or group with which the society is affiliated. Payments to these plans may be adjusted, as appropriate, to take into account the actuarial characteristics and experience of plan enrollees.
•Private fee-for-service plans that reimburse providers on a fee-for-service basis, and are authorized to charge enrolled beneficiaries up to 115% of the plan’s payment schedule (which may be different from the Medicare fee schedule).
The Department of Health and Human Services contracts with private insurance companies for the processing of payments to patients and health care providers. These private insurance companies are called fiscal intermediaries under Part A and are selected by the health care providers. Under Part B, these private insurance companies are called carriers and are selected by the Department of Health and Human Services.
Medicare Prescription Drug Insurance (Part D) was added to Medicare by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. In exchange for a monthly premium, Medicare Part D participants receive limited coverage for prescription drug benefits up to a catastrophic coverage threshold, above which Part D will cover roughly 95% of prescription drug costs.