Medicare Information 2011

Medicare is one of the biggest insurance payers in the United States and is extremely important in terms of the total number of people served and also because of the precedence set by its claims payment practices.  We have included some articles below related to Medicare and includes benefit information directly from the Medicare website.


Articles:

Information on Medicare (Amounts for 2012 Provided)

Medicare is a federal program that provides insurance for people 65 and older and for people under 65 who who have permanent kidney failure or who have certain disabilities.  The Health care Finance Administration (HCFA) administers the program with the U.S. Department of Health and Human Services (HHS).

There are two parts of Medicare, Part A (Hospital Insurance) and Part B (Medical Insurance).  Part A covers hospital, home health care, hospice, and skilled nursing facilities.  This portion of Medicare is usually provided at no cost to the member, since most people either worked themselves or had spouses that worked and paid taxes.  Part B is provided as an option to eligible members, who pay an additional cost.  Part B covers physician and outpatient hospital care, as well as, some other services, such as lab and radiology tests.  There is also available Part D for Prescription Drugs.  For more information on Part D, please click here.  The cost for Part B is approximately between $99.90 and up a month, which may be deducted automatically from your Social Security check.

Aside from the premium costs, the Medicare program does forward some additional out of pocket expenses to the member.  For Part A, there is a deductible (approximately $1,156.00 per benefit period) and co-insurance of about $289.00 per day during an inpatient stay.  The cost per day increases after the 90th day.  In addition, Medicare pays just 80% for certain durable medical equipment, home health care visits and other items.  Medicare does not cover all items, and it is imperative to review the Medicare guidelines for what is and what is not covered.

The additional costs for Part B, aside from the monthly premium, include a deductible of $140.00 and co-insurance of 20%, since Medicare continues to pay just 80% for covered services.  The payment amount is determined by using an RBRVS payment methodology (Resource Based Relative Value Studies) that assigns a value for each medical procedure.

These sections cover the basics of the Medicare program and are available as general information only.  For additional information on Medicare, visit the Medicare website at http://www.medicare.gov/cost/ * information obtained from Medicare.gov 

The Latest on the Medicare Prescription Drug Program

The latest law on Medicare, "The Medicare Prescription Drug and Modernization Act of 2003" is the most comprehensive change to the Medicare system since its inception in 1965.  Some of the key elements in this act, include the following:

1. Discount Drug Card - Will provide subscribers up to 15% discount when purchasing prescription drugs.  This will be temporary until 2006, when a voluntary drug purchase plan will be in effect. 
2. Program Cost - Subscribers would be required to pay approximately $35 per month and a $250 annual deductible.
3. Coverage - The new plan will pay 75% of drug costs to $2250.  There will be no coverage from $2250 to $5100.  The plan will cover 95% of costs over $5100.
4. Out of Pocket Limits - Annual out of pocket limit is $3600 per year plus 5% over $5100.

For more information on Part D, Prescription Coverage, please click here.

Previous Medicare Articles

The Number of Seniors without Drug Coverage is Dramatically Increasing

Today, nearly 1/3 of all seniors go without prescription drug coverage.  The result is that they must pay out of pocket for their drug purchases, but this is a major expense.   The Federal Government’s health insurance program, Medicare, does not include a prescription drug benefit for its members.  HMO plans that have Medicare enrollees are also not required to offer prescription drug benefits to its members, which increases the numbers of elderly going without a prescription drug benefit.  The Federal Government is currently taking up this issue in Congress and they are trying to decide whether the Government should pay and/or can afford to expand Medicare’s benefit coverage to include prescriptions.  A major hurdle Congress must face before they can achieve victory is to confront drug manufacturers who do not wish to conform to Medicare’s price constraints.  Medicare pays its medical providers based on a payment methodology called Resource Based Relative Value Studies or RBRVS and on the Average Wholesale Price of a medication.  Drug manufacturers feel this would cut into their profits because Medicare’s payment will be substantially less than if one were to purchase the same medication/product on their own. 

Why are Drugs so Expensive?

There is a big debate in Congress on trying to determine if prescription coverage should be expanded to Medicare beneficiaries.  The issue has been raised because many Medicare recipients do not receive the medications they need due to their high costs.  Pharmaceutical companies are part of an industry that is quite lucrative.  They state that they can spend $500 million researching a particular drug before it is ready for the market.  This is the cost of innovation, as the public has seen a rise in new medications in recent years.  These same pharmaceutical companies are against having Congress expand prescription coverage to Medicare because the reimbursement that would be paid would be far less than what they would receive in an open market.  Medicare regulates the prices and this would decrease their profits. 

Employed with a home health care agency and home infusion company, a Director of Pharmacy was describing how much influence many pharmaceutical companies had in establishing their prices and prohibiting competition.  “The prices are initially high to recoup the costs of research and development, but after a certain time period, the profit begins to soar.”  This is interesting, knowing that you and other taxpayers help finance a pharmaceutical’s innovation, but you are still required to pay their high drug costs.  In the 1980s, when the United States was competing with Japan for innovative products, the government was willing to give money to these new products and many drug companies have taken advantage of this giving. 

There are ways to limit your liability on pharmaceuticals.  Just as office visits, surgeries, laboratory services and radiology all have rates health plans negotiate, payments for medications can also be negotiated using AWP (average wholesale price).  The Red Book is a publication, which provides the AWP for all types of medications and injectables.  Many health plans will negotiate at percentage of AWP, such as 95% or 110% of AWP.  If you have a health plan that pays at AWP, compare the AWP with your cost of the medication.  The cost should not exceed your payment, if it does, then you are probably either paying too much for the drug or you should re-negotiate a prescription/medication rate with your health plan.  The second way to reduce your drug costs is to purchase medications in bulk or participating in a group purchasing arrangement.  Medications account for a significant share of the total costs of a medical practice and it would be advantageous to review your prices, payments and costs of these products.

Medicare HMO plans are affecting Seniors

This year seems to be one of record premium increases with many health plans announcing premium increases of more than 30%.  These increases are affecting Medicare beneficiaries who have opted for a private health insurance plan.  In these situations, the Government pays the private health insurance company a set dollar amount to cover the medical expenses of Medicare enrollees who sign up for the private health insurance option.  These seniors enjoy the benefits of a private health plan with prescription drug coverage and having their medical expenses paid at 100%, unlike the 80% that Medicare reimburses.  The unfortunate circumstance is that many health insurance companies are terminating their agreements with the Government to no longer accept Medicare enrollees because they claim they can no longer afford it. 

This situation is disappointing to many seniors who face decisions on choosing where they will spend their fixed monthly incomes, either on the expense for their prescription drugs or on utilities and groceries.  There is the option of purchasing a Medicare supplemental plan that could provide prescription drug benefits and cover the 20% that Medicare does not pay for, but the coverage may be limited and the premiums may be more than most could afford.  These two options may not be good enough as many seniors return to the Medicare insurance program.

This is not to say that all plans are eliminating their Medicare agreement.  In areas where the payment rates are high, such as large metropolitan areas, many of the Medicare HMO plans are continuing.  But in those geographical regions where the Government payment rate is low, such as in the Midwest, many health plans have terminated their Medicare agreements.  It appears that almost 1,000,000 seniors will be affected by this change.  Currently, nearly 20% of the Medicare eligible members are enrolled in HMO plans.

Prescription drug coverage is a hot topic in the Presidential Arena.  Both sides differ on how this coverage will be provided to Medicare beneficiaries, on whether to expand the Medicare insurance program or to provide subsidies to private health plans to offer drug coverage.  But, whichever candidate is chosen and whichever plan is presented, the key is, that something is likely to occur and some form of help may be on the way.

Health Symphony provides information as a general resource and does not guarantee, expressed or implied, to any results obtained from its use.