Medicare was originally established to provide limited health care benefits to individuals age 65 and older, as well as those diagnosed with End-Stage Renal Disease (ESRD). Subsequent amendments expanded eligibility to include individuals who have received Social Security Disability benefits for more than 24 consecutive months and those diagnosed with Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig’s Disease. 11.1
In most cases, Medicare serves as an individual’s primary source of coverage. However, when an individual is also covered under a group health insurance plan, Medicare may function as either the primary or secondary payer, depending on the coordination of benefits rules. 11.1
An individual’s first opportunity to enroll in Medicare is called the Initial Enrollment Period (IEP). This period begins three months before the month of the individual’s 65th birthday and extends for a total of seven months, ending on the last day of the third month following the month the individual turns 65. 11.1
If an individual does not enroll during the Initial Enrollment Period, enrollment must be deferred until the General Enrollment Period, which occurs annually from January 1 through March 31. 11.1
When an individual’s employer-sponsored health coverage terminates, a Special Enrollment Period (SEP) of eight months is available. During this time, the individual may enroll in Medicare Part B without being subject to the 10% late enrollment premium penalty. 11.1
“Original Medicare” consists of Part A and Part B. Part A provides hospital insurance and covers most inpatient hospital expenses, excluding services performed by physicians and surgeons. Most beneficiaries qualify as “fully insured” under Social Security and are not required to pay a premium for Part A. Individuals age 65 or older who are not fully insured may still obtain Part A coverage by paying a monthly premium. 11.1
Medicare Part A generally covers medically necessary services associated with admission to an acute care hospital. A per-benefit-period deductible applies at the time of admission. A benefit period begins on the day the beneficiary is admitted and ends after the individual has been out of the hospital for 60 consecutive days. 11.2
Covered medically necessary expenses are paid at 100% for hospital days 1 through 60. For hospital days 61 through 90, a daily copayment is required, and Medicare continues to pay 100% of covered expenses beyond that copayment. 11.2
After 90 days of hospitalization within a benefit period, Medicare coverage is limited to the use of “lifetime reserve days.” These days require a higher daily copayment and are limited in number; once used, they are not replenished. 11.2
Medicare does not cover the cost of the first three units of blood received by a beneficiary within a calendar year. If these units are not replaced through third-party donation, the beneficiary is responsible for the associated charges. 11.2
Under Medicare Part A, if a beneficiary has been hospitalized for at least three consecutive days, coverage may extend to certain related nonhospital services. In addition, hospice benefits are available to provide pain management and supportive care for terminally ill individuals and their families. 11.2
Part A also provides limited coverage for care in a skilled nursing facility (SNF) following discharge from an acute care hospital, provided the hospitalization lasted at least three days. Medicare pays 100% of covered skilled nursing care for days 1 through 20. For days 21 through 100, a daily copayment is required, and any charges beyond covered amounts are the responsibility of the beneficiary. 11.2
Medicare Part B covers professional services provided by physicians and surgeons in both inpatient and outpatient settings. It also includes coverage for medically necessary outpatient services, such as emergency room visits, laboratory testing, X-rays and diagnostic imaging, certain immunizations, and medically necessary transportation. Enrollment in Part B requires payment of a monthly premium. 11.3
Medicare Part B operates on an 80/20 coinsurance basis. After the annual deductible is met, Medicare pays 80% of approved charges, and the beneficiary is responsible for the remaining 20%. 11.3
Part B also covers medically necessary outpatient services such as physical therapy, occupational therapy, and certain home health care services. In addition, it provides coverage for specific health care supplies and durable medical equipment (DME). 11.3
Individuals enrolled in both Medicare Part A and Part B have the option to receive their benefits through a managed care plan known as Medicare Advantage (Part C). Medicare Advantage plans replace Original Medicare (Parts A and B) with coverage provided through Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Enrollees must continue to pay the Part B premium (and any applicable Part A premium if not fully insured under Social Security), in addition to any premium required by the Medicare Advantage plan. 11.4
Individuals who are newly eligible for Medicare Part B may enroll in a Medicare Advantage plan at the time of their Part B enrollment. If the initial or annual enrollment periods are missed, individuals may still enroll during the Annual Election Period, which runs from October 15 through December 7 each year. Additionally, individuals may disenroll from a Medicare Advantage plan and return to Original Medicare during applicable enrollment periods. 11.4
Enrollment in a Medicare Advantage plan eliminates the need for a Medicare Supplement (Medigap) policy. Purchasing a Medicare Supplement policy while enrolled in Medicare Advantage will result in automatic disenrollment from the Medicare Advantage plan. 11.4
To enroll in a Medicare Part D Prescription Drug Plan (PDP), an individual must be eligible for either Medicare Part A or Part B. 11.5
Individuals enrolled in both Medicare Part A and Part B are eligible to purchase a Medicare Supplement (Medigap) policy. Those who enroll within six months of their Part B effective date are guaranteed issue, meaning they cannot be declined or denied coverage based on health status. 11.6
Medicare Supplement (Medigap) insurance policies include a 30-day free look period, allowing applicants to review the policy and return it for a full refund if dissatisfied. Any replacement of an existing policy must result in a clear and measurable improvement in the insured’s coverage or benefits. For example, replacing a Plan C with another Plan C that has the same premium would be considered a prohibited transaction because it does not enhance the insured’s position. 11.6
At the time of application, applicants must be provided with a Buyer’s Guide to Medicare Supplement Insurance, an Outline of Coverage, and any additional materials required by state regulations. These documents are intended to support informed decision-making. 11.6
Medicare Supplement insurance, also known as Medigap, is standardized under federal law. As of June 1, 2010, available plans are identified by letter designations, including Plans A, B, D, F, High Deductible F, G, K, L, M, and N. 11.7
Medicare Supplement Plan A provides the basic, or “core,” benefits. These include Part A coinsurance for up to 365 additional days after Medicare benefits are exhausted, Part B coinsurance (typically 20% of approved charges), coverage for the first three units of blood each year, and Part A hospice care coinsurance or copayments. 11.7
All other Medicare Supplement plans (Plans B through N) include the core benefits found in Plan A, along with additional coverage features. Insurers that offer any Medicare Supplement plans beyond Plan A are required to make Plan A available to applicants. 11.7
Medicare Supplement (Medigap) policies may impose a pre-existing condition waiting period; however, this period cannot exceed six months from the policy’s effective date. Pre-existing conditions may not be permanently excluded from coverage. 11.8
Medicare Supplement policies are required to automatically adjust benefits in response to changes in Medicare deductibles, copayments, or coinsurance amounts. This ensures continued alignment with Medicare cost-sharing requirements. 11.8
Medicare Supplement insurance must be issued on a guaranteed renewable or noncancellable basis. Coverage cannot be terminated, and premiums cannot be increased due to a decline in the insured’s health status. 11.8
When a Medicare Supplement policy is issued on a group basis, the insured must be given the option to convert to an individual policy with the same benefits if the group plan is terminated by the sponsor. 11.8
The application for a Medicare Supplement policy must include questions regarding any existing Medigap coverage. Agents are prohibited from selling policies that duplicate benefits already provided by Medicare or from issuing more than one Medicare Supplement policy to the same insured. 11.9
The replacement of a Medicare Supplement (Medigap) policy with one that has the same premium but provides reduced benefits is prohibited. A replacement notice must be provided to the applicant at the time a replacement application is completed. 11.9
When a Medicare Supplement policy replaces an existing policy that has been in force for at least six months, the new policy may not impose additional pre-existing condition waiting periods or deny claims based on pre-existing conditions. 11.9
Medicare Select is a type of Medicare Supplement plan that operates through a managed care network. Policyholders receive the highest level of benefits and lowest out-of-pocket costs when using network providers. If the Medicare Select program is discontinued, insured individuals must be allowed to convert to a comparable Medicare Supplement plan without providing evidence of insurability. 11.10
Medicaid is a joint federal and state program designed to assist individuals with limited income and resources in paying for health care expenses. This program may also provide support to individuals who are eligible for Medicare. 11.12
Individuals who may qualify for Medicaid assistance include those age 65 and older, individuals who are blind or disabled, persons without access to affordable employer-sponsored health insurance, pregnant women, individuals residing in institutional settings (such as skilled or intermediate nursing facilities), children under age 21, and individuals with End-Stage Renal Disease (ESRD) requiring dialysis. Eligibility is generally based on income and household size. 11.12
Long-Term Care Insurance (LTCI or LTC) provides coverage for services delivered outside of an acute care hospital setting. These policies are structured to offer benefits for a minimum duration of 12 consecutive months. 11.13
LTC benefits may be provided through individual or group policies, as well as through riders attached to life insurance policies or annuities. Because Medicare offers only limited coverage for long-term care services, LTC insurance or riders serve as an important source of additional protection, supplementing coverage that might otherwise only be available through Medicaid. 11.13
The primary benefit of an LTC policy is a specified daily benefit amount that is used to pay for covered services. Generally, higher daily benefit limits result in higher premium costs. 11.13
LTC policies must be issued on a guaranteed renewable or noncancellable basis for life. While pre-existing conditions may be subject to a temporary exclusion, they cannot be excluded beyond six months after the policy becomes effective. Additionally, longer benefit periods are associated with higher premiums. 11.13
LTC policies typically include an elimination period, which may extend up to one year. The elimination period represents the time during which the insured is responsible for covering care costs before benefits begin. Longer elimination periods generally result in lower premium amounts. 11.13
The six Activities of Daily Living (ADLs) are bathing, continence, dressing, eating, toileting, and transferring. An individual is considered impaired when they are unable to perform an ADL independently or require supervision (stand-by assistance) to complete the activity safely. Although mobility or ambulation is not classified as a separate ADL, it may be included within the definition of transferring. Eligibility for benefits is typically triggered when the insured is unable to perform at least two ADLs or requires stand-by assistance to perform them. 11.13
The elimination period in a Long-Term Care policy is applied as a lifetime maximum, meaning it must be satisfied only once before benefits become payable. 11.14
Prior hospitalization is not required to qualify for Long-Term Care benefits. However, the insured must be certified by a qualified health care professional—such as a physician, nurse practitioner, or medical social worker—as being chronically ill. This includes having limitations in at least two ADLs or the presence of a cognitive impairment, such as Alzheimer’s disease. 11.14
Long-Term Care benefits are not restricted to skilled nursing facility care and may include a range of services provided in various care settings. 11.14
Many Long-Term Care policies that include home care benefits also provide coverage for respite care. This benefit allows a primary caregiver temporary relief by covering the cost of a substitute caregiver or short-term institutional care while the primary caregiver rests or recovers. 11.14
Most Long-Term Care (LTC) policies include a waiver of premium provision. After a qualifying event occurs and the elimination period has been satisfied, premiums are waived following a specified waiting period for as long as the disability continues. If the insured recovers, premium payments resume. 11.14
Some LTC policies offer nonforfeiture benefits, such as a return of premium or a reduced paid-up benefit, allowing the insured to retain some value if the policy is discontinued. 11.14
LTC policies may not permanently exclude coverage for pre-existing conditions. Additionally, once the policy has been in force for more than six months, claims cannot be denied on the basis of a pre-existing condition. 11.14
Any replacement of an LTC policy must result in a material improvement in the insured’s position. This typically means enhanced benefits (which may involve a higher premium) or equivalent benefits at a lower cost. Replacing a policy with identical coverage at the same or greater cost is prohibited. 11.16
LTC policies are prohibited from including certain limiting provisions, such as defining benefits based on “usual, customary, and reasonable” charges, restricting coverage to skilled nursing care only, or issuing replacement policies that introduce new or extended elimination periods (except in cases where the policy provides an increased benefit duration). 11.14
Long-Term Care (LTC) policies must include a 30-day free look period, allowing the applicant to review the policy and return it for a full refund if dissatisfied. In addition, an Outline of Coverage must be provided at the time of initial solicitation and prior to presenting the application. 11.15
LTC policies must offer an optional inflation protection provision, although purchase of this feature is not mandatory. Common options include automatic benefit increases (either simple or compound) and guaranteed purchase options that allow the insured to increase coverage in the future. 11.14
An Extension of Benefits provision must be included in LTC policies. This provision ensures continued coverage if institutionalization begins while the policy is in force and continues without interruption after the policy terminates. The extension may be limited to the remaining benefit period or the maximum benefit amount. 11.15
Home Care Only policies are required to provide coverage for a range of services, including home health care, adult day care, custodial care (outside of institutional settings), homemaker services, hospice care, and respite care. 11.15
Standard exclusions in LTC policies are similar to those found in other disability insurance policies. These typically include disabilities resulting from war or acts of war, civil unrest (such as riots or insurrections), conditions covered under Workers’ Compensation or similar laws, intentionally self-inflicted injuries, alcohol or drug dependency (unless caused by prescribed and properly administered medication), injuries related to the commission or attempted commission of a felony (or other crimes, depending on the policy), and services received outside the United States. 11.15
Most Long-Term Care (LTC) insurance policies are designed to meet Internal Revenue Service (IRS) requirements for “qualified” status. To be considered qualified, the policy must comply with the NAIC Model Act and provide coverage exclusively for long-term care services. It may not reimburse expenses that are payable by Medicare, must be issued on a guaranteed renewable basis, and any cash value associated with the policy cannot be borrowed against or assigned (although it may be exchanged for another qualified contract). Premiums may be tax-deductible, subject to limitations based on the insured’s age and adjusted gross income, and benefits received are generally not taxable. 11.17