Typically, people become eligible for Medicare Part A in the same way as they become eligible for Social Security: they work for ten years in jobs covered by the program. They also typically become eligible to receive benefits when they reach age 65. This is in contrast to Social Security, where individuals may choose to receive reduced benefits as early as age 62, and eligibility for full benefits depends on year of birth. Under Social Security, those born in 1937 or earlier can receive full benefits at age 65. However, those born after 1959 do not receive full benefits until age 67.
Thus, some people have Social Security benefits but are not yet eligible to receive Medicare hospital health insurance, while others may have Medicare hospital health insurance but are not yet eligible for full Social Security benefits.
Those who have reached the age of eligibility but who have not worked the sufficient number of years may purchase Medicare hospital health insurance coverage. In 2007, the premium for this coverage was $410 per month or less, depending on the number of years worked. Only about 1% of Medicare beneficiaries pay a premium for Part A coverage; almost all are eligible by virtue of their work experience. Some under-age-65 individuals can be eligible for Medicare hospital health insurance coverage due to disability or inclusion in the end-stage renal dialysis program. At the close of 2005, there were 42 million Part A Medicare beneficiaries [Boards of Trustees 2006].
Medicare Part A covers hospital, skilled nursing home, home health, and a handful of other largely inpatient benefits. The key to understanding this coverage, however, is the "spell of illness." Individuals are covered for 90 days of hospital care and 100 days of skilled nursing facility [SNF] care per spell of illness. A spell of illness is unrelated to any particular malady. Instead, a spell of illness begins when the person is hospitalized, and it ends when the person has been out of a hospital or skilled nursing facility for 60 days. Box 21-1 summarizes the major benefits covered under Medicare Part A. A hospital deductible is associated with each spell of illness. In 2007, the deductible was $992.
Once this is paid, there is no copay for the first 60 days of hospital care, but days 61 through 90 require a copay of $248 per day. There is also a one-time lifetime reserve that will cover days 91 through 150 of a hospital stay; these days may be used only once and require a copay of $496 per day. SNF care is covered for up to 100 days per spell of illness. This care is viewed as a lower-cost substitute for hospital care. A beneficiary must have spent a minimum of three days in a hospital for a related illness to be eligible. No copays are required for the first 20 SNF days; days 21 through 100 require a copay of $124 per day.
Note that the hospital deductible and copays have nothing to do with the size of the payment that a hospital may be paid for services under the prospective payment system. If a person were admitted for a stroke under a new spell of illness, the Centers for Medicare and Medicaid Services [CMS] would pay the hospital the rate for DRG-14 [a stroke], less the $992 deductible that the hospital would collect from the beneficiary.
The various copays are all tied by law to the size of the hospital deductible. The hospital copay is 25% of the deductible, the lifetime reserve copay is 50% of the deductible, and the SNF copay is 12.5% of that same deductible. Thus, when the CMS determines the deductible each year, the copays are automatically adjusted as well. The deductible itself is based on the deductible from the preceding year, adjusted for the%age increase used in updating the payment rates for hospitals. For 2007, this adjustment factor was 3.4% [Federal Register 2006]. Medicare Part A also covers up to 100 home health visits. These visits must require part-time or intermittent skilled nursing care or physical or speech therapy to homebound persons. There is no deductible or copay associated with these services, but they must follow a minimum three-day hospital stay.
Per spell of illness:
Lifetime reserve of 60 additional inpatient hospital days $496 copay for each day‡
Up to 100 home health visits following a three-day or longer hospitalization
Lifetime limit of 100 days of inpatient psychiatric care
Hospice care.
The hospital deductible under Medicare Part A is not per year or per hospitalization. It is per spell of illness. This has important implications for how much beneficiaries pay for hospital care and how much hospital coverage they actually have.
Suppose your grandmother were hospitalized in late January for a hip replacement and was hospitalized for four days. She would be responsible for the $992 deductible. If she were hospitalized in early March for a pulmonary problem, this would be regarded as the same spell of illness; she would not pay the deductible. If instead she had been hospitalized in May, after being out of the hospital [and an SNF] for 60 days, the pulmonary admission would have required payment of the deductible.
If your grandmother were admitted continuously for 90 days, she would pay the deductible associated with the first day of hospitalization and $248 each for days 61 through 90. If she continued to stay beyond the ninetieth day, she would tap into her lifetime reserve days, paying $496 for each day.
The more-typical example, however, is an individual who is in and out of a hospital but is not out for at least 60 days. This person exhausts the 90 days of coverage without ever triggering a new spell of illness. Thus, if your grandmother had the hip replacement, the pulmonary admission, a heart attack, and other medically unrelated admissions, without being out of a hospital [or an SNF] for 60 days, she could end up using her lifetime reserve days and ultimately exhaust her Medicare coverage for this spell of illness.
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01222010
1. Medical Savings Accounts and Flexible Spending Accounts
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