Medicare, the federal government’s healthcare program, is celebrating its 50th anniversary. Since 1965, millions of Americans age 65 and over have relied on it for vital medical services. And, this program is available to younger people with certain disabilities (more on that later). Original Medicare (or Traditional Medicare) — comprised of Part A (hospital insurance) and Part B (medical insurance) — typically springs to mind with this program.
Currently, 55 million men and women are covered by Original Medicare, whether both Parts or one of the two.
Generally, when you turn 65, and you receive Social Security benefits, you’re automatically enrolled in Original Medicare. You can also sign up during your entire 65th birthday month and the three months before and after; this is known as the Initial Enrollment Period (IEP).
Should you miss this seven-month birthday window, you can also enroll during the General Enrollment Period, running from Jan. 1-March 31, 2016. Those 65 or older who are still working, but receiving employer-provided healthcare coverage, can delay Medicare enrollment without any financial penalties. Other groups automatically enrolled are:
- Americans under 65 year with certain disabilities, including end-stage renal disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS, or Lou Gehrig’s disease)
- Those under 65 receiving Social Security Disability Insurance (SSDI) benefits for at least 24 months
- Individuals of any age receiving U.S. Railroad Retirement (RRB) benefits
Medicare Part C (Medicare Advantage; private insurance plans) and Medicare Part D (prescription drug coverage) plans have their own enrollment processes. So, with only a few weeks until the 2016 OEP, let’s discuss some relevant dates, costs and updates to Original Medicare.
Important Original Medicare enrollment dates
As long as you enroll during the Initial Enrollment Period, your 2016 coverage will begin on July 1, 2016. If you do need to enroll in Part A, you’ll be required to enroll in Part B, as well. If you miss the IEP, you need to take action during the General Enrollment Period.
Beyond these enrollment periods, you should also be aware of the Medicare Open Enrollment Period (OEP), which runs each year, from Oct.15-Dec 7. This coverage will start January 1 of the following year. During the OEP, beneficiaries can make changes to their coverage, including:
- Those with Medicare Parts A and B can switch to a Part C plan.
- Those with Medicare Part C can switch back to Parts A and B.
- Anyone with or signing up for Medicare Parts A or B can join, drop or switch a Part D prescription drug plan.
When it comes to Medicare, and especially Original Medicare, you really need to enroll on time. Failing to do so could mean paying more expensive Part B premiums, for life. Under federal law, your Part B (medical services) could rise by 10 percent for each year you qualified for Medicare but didn’t enroll.
Next year’s Part A and B costs
Thanks to a federal law, Social Security recipients are shielded from higher Medicare premiums. Generally, Part A coverage is premium-free, as long as you and your spouse have paid taxes into the Medicare system in the U.S. during your careers. However, if you and your spouse worked and paid between 7.5 and 10 years, your monthly premium will be $224; fewer than 7.5 years means a premium of $407. But Part A does require members to pay deductibles and coinsurance for hospital services. The 2016 deductible will be $1,288; in 2015, this was $1,260.
For the first 60 days, Medicare Part A pays all allowed hospital care costs. From day 61-9, you’ll pay a daily coinsurance amount; in 2016, this will be $322 per day for 2016. All Medicare annual benefits are used from day 90 on, although enrollees are eligible for a lifetime reserve of up to 60 additional days of care. The coinsurance amount is double the figure for days 61-90; you’ll pay $644 per day in 2016.
Medicare Part A covers skilled nursing facilities (SNFs) for the first 20 days, with no deductible. SNFs provide skilled nursing care and, generally, skilled rehabilitative and related health services. From days 21-100, in 2016, you’ll pay a coinsurance amount of $161 per day. From day 100 on, you pay all costs, with no provision for lifetime reserve days.
However, for Part B, all Original Medicare beneficiaries pay a monthly premium. By law, this premium covers 25 percent of the cost of outpatient care, while the government pays the rest. Those beneficiaries with higher incomes pay more, as their premiums cover a bigger percentage of costs. Workers and employers pay an equal amount in payroll taxes to fund hospitals and nursing home care.
The good news is that for 2016, most beneficiaries will pay around the same monthly premium amount. Overall, about 70 percent of Americans can expect to pay $104.90 per month next year, like 2015. But due to a recent bipartisan budget bill signed by President Obama on Nov. 28, some Medicare beneficiaries had expected higher Part B premiums and deductibles in 2016. But these estimated 17 million Americans will actually pay less, about $119 per month for Part B premiums, rather than $159.30.
However, new beneficiaries, as well as upper-income retirees can expect to pay higher premiums. In particular, there are higher amounts kicking in for single filers making $85,000 or more and joint filers with incomes of $170,000 or more. In addition, beneficiaries will have to pay an extra $3 per month to help pay down a government loan to government Medicare to offset lost revenue. As for annual deductibles, all Part B beneficiaries will pay 15 percent more in 2016, about $166; this is the first increase since 2013.
Exploring Medicare Parts A and B
The government classifies Original Medicare as a “fee-for-service” plan, enabling members to visit any nationwide Medicare provider. Original Medicare typically provides most services free of charge. However, some may require beneficiaries to pay 20 percent of the Medicare-approved cost , along with a deductible.
Medicare Part A, which provides hospital insurance, refers to inpatient care in such facilities as: long-term care hospitals (LTCHs, more than 25 days); acute care hospitals (ACHs); critical access hospitals (CAHs); skilled nursing facilities (SNFs); inpatient rehabilitation facilities; those for mental healthcare; home and hospice healthcare long-term care.
Medicare Part B involves medical insurance, which covers a wide range of services, considered either medically necessary or preventive. Medicare defines “medically necessary” as those “health-care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.” Covered Part B services and supplies must also meet medical practice’s accepted standards.
As for preventive services, these are healthcare services and supplies that prevent or detect illness at an early stage, when treatment is most likely to work. Part B allows yearly wellness visits and a one-time “Welcome to Medicare” preventive visit. Among the specific services covered by Part A and Part B are:
- Ambulance services
- Artificial limbs and eyes (if ordered by doctors)
- Bone mass, measurements
- Chiropractic services (if medically necessary)
- Clinical laboratory and diagnostic tests
- Doctor visits
- Drugs (related to inpatient treatment)
- General nursing
- Home health care
- Mental health (inpatient, outpatient, partial hospitalization)
- Nutrition therapy services
- Occupational, physical and speech therapy
- Prescription drugs
- Second opinions (before surgery)
- Semi-private rooms
- Shots, including flu, hepatitis B and pneumonia
- Smoking cessation counseling
- Telehealth, which refers to remote, electronic provider consultations and interactions
- Various screenings, including: alcohol, cardiovascular, cancer, depression, diabetes, HIV, obesity and sexually transmitted infections
- Durable medical equipment (DME), home use, long-lasting, prescribed by doctors, considered medically necessary. DME includes: beds (hospital); blood sugar (glucose) monitors, test strips; canes, crutches, walkers, wheelchairs; oxygen equipment, accessories