Medicare has been serving millions of seniors since 1965. Over the last 50 years, several Medicare programs have been expanded to include drug coverage and protection for terminally ill beneficiaries. Like the Affordable Care Act, Medicare has been hotly debated since it was signed into law. While almost no one disputes the idea of allowing seniors to take advantage of low-cost health insurance, the debate centers on where the funding should come from and how large a role the government should play in sustaining this entitlement program. Health care providers have also taken advantage of the system, conducting tests that are costly and questionable because they know that Medicare will cover them. These and other similar expensive practices have contributed to widespread Medicare fraud.
As part of the terms of the ACA, the government is cracking down on fraud and wasteful spending, particularly in Medicare Part A. Medicare can be complex, and it’s often misunderstood even by those who have it. There are four parts to the program: Part A, Part B, Part C (Medicare Advantage) and Part D (prescription drug coverage). In this article, we’re going to talk about Part A, which is hospital coverage. You’ll learn what it is, how it’s funded, what it covers and your options for enrolling. Knowing what Part A covers and how it’s used will help you understand the recent influx of news stories on hospital coverage under Medicare.
Medicare Part A: Hospital Insurance
Part A covers hospital stays and related expenses. If your doctor determines that you need to be admitted to a hospital for treatment, then Medicare Part A will cover many of the expenses. These include meals, semi-private rooms, drugs required for treatment, supplies, equipment and anything else that’s medically necessary for your stay, including general nursing care. Hospital coverage refers to the following types of facilities:
- Acute care hospitals
- Critical access hospitals
- Inpatient rehabilitation centers
- Long-term care hospitals
- Inpatient care for qualifying clinical research studies
- Mental health facilities
Private-duty nursing is not covered under Medicare Part A, and you won’t get a private room unless it’s medically necessary. Also, if there’s a separate charge for having a phone or TV in your room, then Medicare won’t cover these things either. You’ll also be responsible for your own personal care items.
It’s important to understand what Medicare Part A covers because some doctors attempt to circumvent the system by keeping patients in an outpatient status even while patients are staying in hospital. It’s a situation known as “observation status.” Observation status allows doctors to run tests and treat patients at a hospital under observation without formally admitting them to the hospital – resulting in excess out-of-pocket expenses for the patient since Medicare Part A won’t cover these treatments. The practice itself is not illegal, but the problem comes from not alerting patients to the situation. A recent bipartisan law, the Notice Act, now requires doctors to inform patients if they’re being put into observation status. This way, Medicare beneficiaries will know what to expect and the charges that they might incur. Patients who get put into observation status started receiving notices in January 2017.
If you’re in a hospital and you have Medicare Part A, ask your doctor whether you’re being admitted or kept under observation status. The difference could save you thousands of dollars. Part A covers necessary hospital expenses, so make sure you know how you’re being treated from an insurance standpoint.
Funding Behind the Program
Medicare spending made up 15 percent of the federal budget in 2017 according to the Kaiser Family Foundation. That translates into $591 billion. During that same year, benefit payments amounted to $702 billion, 42 percent of which was for care under Medicare Part A alone (original and Medicare Advantage) Kaiser reported in 2017 that Medicare spending has actually slowed down in recent years, and the Congressional Budget Office expects modest growth over the next decade. From last year to this year, spending percentages also changed, with spending for Part A dropping (47 to 42 percent) and spending for Parts B and D increasing. As a program, Medicare draws funding from three primary sources:
- General revenues (41 percent)
- Payroll taxes (37 percent)
- Beneficiary premiums (14 percent)
The remaining 8 percent is funded collectively through transfers from states, taxation of Social Security benefits, interest and various other nominal sources. Medicare Part A draws 87 percent of its funding through an earnings tax. For individuals who earn less than $200,000 a year, the tax rate is 2.9 percent (of which the employee pays half while the employer pays the other half). Individuals who earn more than this pay 2.35 percent. Funding is channeled through the Medicare Hospital Insurance trust fund. The trust fund is often used to gauge Medicare’s financial stability as a whole. There are several economic and demographic factors that contribute to Medicare’s solvency, including:
- Payroll tax contributions
- Health care spending
- An aging Baby Boomer generation
- A smaller ratio of workers to retirees
Each year, the Medicare Trustees issues reports on the solvency of the Medicare Trusts, including Part A, to determine financial viability of the program. By 2009, the board was projecting that Part A would become insolvent by 2017. That didn’t happen thanks to cost-cutting measures and requirements under the ACA, which appear to be having some positive effects on the long-term sustainability of Part A funding. But there’s still work to be done. Payment and delivery reforms are still being implemented to reduce spending and lengthen the life of the trust fund. The trustees’ report this year indicated that Medicare Part A would become insolvent by 2026, three years sooner than they predicted last year.
The Cost of Hospital Coverage
Most beneficiaries do not pay a monthly premium for original Medicare Part A, which is why it’s called “premium-free Part A.” The reason for this is because Medicare is funded partly through employment taxes. If you work and pay into the Medicare program, then you most likely will get Part A for free. Some people do have to pay a monthly premium, though, based on how much they paid into the system while they worked. The full cost for Medicare Part A is $437 a month in 2019 if you did not pay Medicare taxes from your payroll check for at least 30 quarters, which equals 7 1/2 years.
- Special note: If you don’t sign up for Medicare when you first become eligible, and you’re one of the enrollees who has a monthly premium, then you may have to pay a penalty fee if you decide to sign up later. The fee is 10 percent on top of the premium payment. Penalty fees last for twice the number of years that you could have been enrolled in Part A but weren’t. So, for example, if you waited three years to sign up for Part A after you were initially eligible, then you would have to pay the higher premium for six years. This only applies to people who would have had to pay the monthly premium in the first place.
Even if you get Part A for free – and again, most Medicare enrollees do – you will still be responsible for coinsurance and a deductible based on the type of care that you receive. To qualify for covered services under Part A, you’ll have to have an order from your doctor outlining the need for a hospital stay of at least two midnights. There are other requirements, so check with your doctor first to make sure you qualify for Medicare coverage. Your costs under Part A include the following per benefit period in 2019:
- A $1,364 deductible
- $0 coinsurance for days 1 through 60
- $341 coinsurance per day for days 62 through 90
- $682 coinsurance per day for days 91 and beyond
Starting on day 91, your benefits reach a “lifetime reserve day” period that lasts for 60 days. After that, you’ll be responsible for all of your costs. Any medications, equipment and other medically necessary supplies are covered as they pertain to your hospital stay. But as noted earlier, you’ll have to cover extra costs, like expenses related to TV or in-room phones if these things aren’t provided already.
How and When to Sign Up for Medicare Part A
Some people get enrolled in Medicare Part A automatically. If you currently draw Social Security benefits, for instance, then you’ll get a card in the mail three months before you turn 65. If you have to sign up for Medicare – and most people do – then you’ll become eligible starting three months before your 65th birthday. Your initial eligibility period lasts for seven months: three months leading up to your 65th birthday, the month of that birthday and the 3-month period following your birthday month. To apply, you can:
- Apply on the Social Security website
- Visit a local Social Security office in person
- Call the Social Security Administration directly
Railroad workers have special instructions and should contact the Railroad Retirement Board for more information. Enrolling in Medicare Part A is voluntary, so you don’t have to take advantage of it if you don’t want to. However, remember that there is a penalty fee for those who have to pay the premium if you decide that you do want the coverage after your initial eligibility period ends. Part A is generally free to Medicare beneficiaries who pay into the system, so it can be a good form of insurance to have once you retire, especially since you may need more hospital services as you get older.
Important Information about Medicare Part A
If you’re nearing your 65th birthday, then you’ve probably become familiar with Medicare pamphlets in the mail and advertisements online. Despite the volume of information available online and through print media concerning Medicare, many people find the task of sorting through the clutter daunting and time-consuming.
Rest assured that we’re here to simplify your search for better information by offering detailed and straightforward articles on everything you need to know about Medicare. Let’s start with Medicare Part A and what this portion of Medicare covers.
Understanding Medicare Part A
Medicare Part A helps cover costs associated with inpatient hospital care, care for those living in skilled nursing facilities, hospice care and additional hospital-related services. Sometimes referred to as the “hospital insurance” program, Medicare Part A will cover most forms of medical care related to the hospital. However, this does not include long-term care or custodial care. There are other limitations to Medicare Part A. The following medical services are not covered:
- Cosmetic surgery
- Dentures and the majority of dental care
- Eye exams necessary for prescriptions
- Hearing aids and relevant exams
- Routine foot treatments and care
No portion of Medicare covers the above medical services; if you need them then you’ll need to buy supplemental insurance. For the most part, Medicare Part A does not require a premium. But you still may be responsible for copays, coinsurance payments and deductibles, depending on your situation. In the following sections, we’ll give you more information on the eligibility requirements, enrollment deadlines, cost and other information applicable to Medicare Part A.
Medicare Part A Eligibility Requirements
Eligibility requirements for Medicare Part A are fairly straightforward. In general, Medicare is designed for Americans aged 65 or older. However, some special requirements allow those with certain disabilities or terminal illnesses to enroll in the Medicare program. You will need to enroll in Medicare during your personal Initial Enrollment Period (IEP). We’ll discuss enrollment requirements in detail in another section.
Medicare eligibility also depends on factors aside from age. For example, a person who receives disability payments through the Social Security Administration (SSA) will automatically be enrolled in Medicare Parts A and B once they turn 65. Other irregular situations affect your Medicare eligibility as described below.
- People under the age of 65 may be automatically enrolled in Medicare if they meet certain requirements in terms of illness or disability.
- People with terminal illnesses, such as end-stage renal disease (ESRD) will automatically be enrolled in Medicare Part A. The same is true for those with amyotrophic lateral sclerosis (AML, or Lou Gehrig’s disease). If you or your spouse suffers from a similar illness, then you will need to speak with a Medicare representative about coverage.
- If you have a disability and have been receiving disability insurance for at least the past 24 months, then you should receive a Medicare card before the start of your 25th month.
- If you receive benefits from Social Security or the Railroad Retirement Board (RRB), then you will automatically be enrolled in Medicare on the first day of the month when you turn 65. For example, if your birthday is June 17, then your Medicare coverage would start on June 1.
- If your birthday falls on the first of the month, then your Medicare coverage will actually start on the first of the previous month.
What happens if you’re still working when you become eligible for Medicare? You can still enroll in Medicare Part A if you’re not yet retired. In fact, it’s best if you sign up as soon as you’re eligible. Otherwise, you may have to pay a fee every month indefinitely if you sign up after your initial enrollment.
Part A is premium-free for most people, so you should take advantage of hospital coverage, even if you’re still working or plan to continue working for decades. Make sure you meet with your company’s plan administrator to determine how your work insurance combines with Medicare Part A. Most company plans aren’t affected unless you have Part B, but check with your insurer just to be safe.
Medicare Enrollment Deadlines and Penalties
Like other forms of insurance, Medicare has set enrollment times in which you need to sign up for a plan. Unlike other types of insurance, Medicare gives you a personalized initial enrollment period. You have a total of seven months to enroll initially in Medicare: three months before your 65th birthday, the month that includes your 65th birthday and the three months following the month of your 65th birthday. For example, let’s say that your birthday is August 5. You have from May 1 through November 30 of the year you turn 65 to enroll in Medicare Part A, assuming that you need to enroll at all.
Why wouldn’t you need to enroll in Medicare Part A? For some people, enrollment in Medicare Part A is automatic. Those who already receive disability benefits, Social Security or Railroad Retirement benefits will be automatically enrolled in both Medicare Parts A and B when applicable. For people with disabilities, automatic enrollment begins on the 25th month that they receive disability benefits. For others, the enrollment begins on the first of the month when they turn 65. If you’re automatically enrolled in Medicare Part A, then you don’t need to do anything. If not, then you’ll need to sign up within your IEP in order to avoid the penalty fee.
For the most part, Medicare Part A beneficiaries do not pay a premium for coverage. As discussed in detail below, Medicare Part A is usually “premium-free,” because most beneficiaries already paid into the system while they worked. However, some people do have to pay if they meet certain qualifications. If you have to pay a premium, but fail to enroll on time for Medicare Part A, then you may face a penalty of 10 percent when you do enroll. The penalty period lasts for twice the number of years that you didn’t sign up for Medicare when you had the chance. If that sounds confusing, then here’s an example:
- Jim Franklin was eligible for Medicare Part A from April 1 through October 31 the year he turned 65.
- Jim didn’t sign up for Medicare during that time. In fact, he waited three years to sign up, because he wasn’t ready to retire and didn’t give the issue much thought.
- Because Jim earns above the individual limit for premium-free Part A, he’ll have to pay a premium.
- Jim decides to enroll in Medicare at age 68 – three full years after his initial eligibility.
- Unless Jim qualifies for a special enrollment period, Jim’s penalty fee will be 10 percent above the standard premium for the next six years.
You can see why it’s important to consider all of the factors when choosing a Medicare plan, as penalty fees may build over time. However, keep in mind that not everyone pays a premium for Medicare Part A. Most people don’t. You should also note that you won’t be stuck with the same Medicare plan for the rest of your life once you enroll. Each year, you’ll be given the chance to review your coverage and choose options that better suit your needs.
The Cost of Medicare Part A
How much will you pay for Medicare Part A? The answer to this question depends on your situation, but most people don’t pay a premium for Part A coverage. If you’ve paid Medicare taxes throughout your work history, then you probably qualify for premium-free Part A coverage the same holds true for your spouse if he or she is the one receiving benefits. There are other situations that qualify you for premium-free Part A coverage. You don’t have to pay a premium for Medicare Part A if you meet the following conditions:
- You or your spouse’s employment was considered Medicare-covered government employment.
- You currently receive retirement benefits from the Railroad Retirement Board or Social Security.
- You qualify for benefits from Social Security or the RRB, but haven’t applied for them yet.
- You are younger than 65, but have received disability benefits from Social Security or the RRB for at least 24 months.
- You are under 65 and meet certain conditions relevant to ESRD.
What happens if you do have to pay a premium for Part A coverage? Most people don’t pay a premium for hospital insurance under Medicare. But some people either didn’t work enough to qualify or didn’t pay enough payroll taxes to the Medicare program. People in these situations may have to pay as much as $437 per month for coverage. The Medicare website offers a handy PDF file that outlines the costs associated with Medicare Part A for 2019. The costs are as follows:
- For hospital stays, you’ll pay a deductible of $1,364 per benefit period. For the first 60 days of your benefit period, you won’t pay a deductible. After that, you’ll pay $341 for days 61 through 90. After day 90, you’ll pay $682 for each “lifetime reserve day,” up to a maximum of 60 days over the course of your lifetime.
- For a stay at a skilled nursing facility, your deductible is zero for the first 20 days of your benefit period. After that, you’ll pay $170.50 for each day between days 21 and 100 of your benefit period. After day 100 of the benefit period, you’ll be responsible for all of your costs.
You should also note that there may be other costs associated with Medicare Part A if you have to buy it, rather than enrolling for free. For example, you could incur the cost of Part B, as well. If you have to buy Part A, then you most likely have to buy Part B, per the requirements and cover the cost of premiums for both portions. In the next section, we’ll discuss some ways to help reduce your financial burden when it comes to Medicare.
Medicare Part A Financial Assistance
For people who have to pay a premium for Medicare Part A, the cost can be stressful, particularly when they’re on a fixed income or have limited resources. Even those who don’t have to pay a premium may find the out-of-pocket costs, copayments and deductibles pricier than they can afford. Fortunately, there are ways to reduce your financial burden when it comes to Medicare Part A.
One of the options for cutting costs is to take advantage of a Medicare Savings Program. This state-run program is designed to help offset the cost of Medicare costs, such as copayments, coinsurance and deductibles. There are four programs available to people with income from work:
- The Qualified Medicare Beneficiary Program (QMB)
- The Qualified Disabled and Working Individuals Program (QDWI)
- The Qualifying Individual Program (QI)
- The Specified Low-Income Medicare Beneficiary Program (SLMB)
Eligibility requirements vary for these programs, but each one is designed to help mitigate the cost of Medicare Part A for: people with disabilities, people with lower incomes or people who qualify in other ways beyond income limitations. Income limits vary if you live in Alaska or Hawaii, and income limits are subject to change each year.
If you’re eligible for Medicare Part A and think that you may meet certain income requirements, then you should contact your state Medicaid Program to find out if you qualify for a Medicare Savings Program. As a Medicare beneficiary, you’ll most likely encounter the term “assignment” when you begin seeking treatment with your new benefits. The concept of assignment refers to the fact that medical providers who participate in Medicare must accept the amount approved by Medicare as full payment for services that are covered by Medicare.
In other words, you can’t be charged a different amount or be expected to pay more for services covered by Medicare if your provider accepts assignment. This concept helps offset the cost of medical treatments, because it ensures that you only pay the Medicare-approved amount for covered services. Assignment helps reduce costs by:
- Potentially lowering your out-of-pocket costs
- Preventing you from overpaying for services
- Ensuring that you don’t incur additional charges related to filing claims
Some providers may opt to accept assignment for individual services, rather than all services covered by Medicare. Referred to as “nonparticipating” providers, these doctors or suppliers haven’t signed the agreement on assignment, which means certain treatments may not be covered. If your provider doesn’t accept assignment, then there may be consequences, as follows:
- You may be responsible for full payment for your medical charges at the time of service.
- When filing a claim, you may have to submit the form yourself for reimbursement.
- Your provider cannot charge you any fee for submitting a Medicare claim. But if they do, you have recourse. You can call (800) MEDICARE (633-4227) to report illicit activity.
- Your provider can charge you up to 15 percent more for certain medical services. But they have to adhere to the “limiting charge” for Medicare-covered services.
Choosing a doctor who accepts assignment could save you substantial money over the course of your medical history. However, it’s not always easy to find a physician or provider that you feel comfortable with long-term. If you’re not sure whether your doctor participates in the assignment policy, then you should ask your provider or check out the Medicare website for more information.
Medicare Part A Special Enrollment Period
As discussed earlier, you may qualify for an SEP that allows you to sign up for Medicare beyond the initial enrollment period (IEP) or the general enrollment period, without incurring any late fees or penalty charges. For example, if you’re still working at age 65, then you may qualify for an SEP if you lose your job or work-based insurance. Other conditions that may allow you to enroll late include:
- Being under 65 and still working
- Your spouse’s age and work status
- Your status as a U.S. resident at the time of enrollment
- Whether you have ESRD or a qualifying disability
- Whether you have retiree coverage
In general, most people need to enroll in Medicare Part A by their 65th birthday to avoid paying late fees or incurring extra charges. However, you may be able to apply late, depending on your situation. If you feel that you qualify for an exception to the rule, then you should contact your local Social Security office for more information or check eligibility requirements in detail on the Medicare website.
Benefits of Medicare Part A
You might be wondering about the future of Medicare or how the recent changes in the healthcare industry as a result of the Affordable Care Act affect your coverage. More information on how Obamacare affects Medicare can be found in subsequent pages. For the most part, Medicare Part A is premium-free for people older than 65 and those with certain medical conditions.
This means you have access to affordable hospital care without a costly premium. You most likely already pay into the Medicare system through payroll taxes. And this means that you can only benefit from the program when it comes to hospital insurance.