1. “We’re in the cross hairs like never before.”
The Centers for Medicare & Medicaid Services, or CMS, the federal agency that administers Medicare and other health programs, got smacked with cuts early this month as lawmakers failed to avert the sequester, $1.2 trillion in spending cuts designed to help trim the country’s budget deficit. Hospitals and doctors face 2% cuts in the amounts that Medicare reimburses them for services rendered to recipients—cuts of $10.7 billion this year and $118.8 billion over nine years, according to a report by consulting firm Tripp Umbach.
While patients themselves won’t see any direct reduction in their benefits, experts say the ripple effects of the sequester could indeed hit older Americans. Doctors and hospitals had warned that their industries would have to slash more than 200,000 jobs this year alone if the sequester went through.
Even if lawmakers were to restore the cuts, Medicare would remain in their sights, experts say. “Whether you’re a Republican or a Democrat, the fact of the matter is that something’s got to give,” says Ross Blair, CEO of PlanPrescriber.com, a Medicare division of eHealth, an online health insurance marketplace. Current and future projected rates of spending, Blair says, are “unsustainable.” The federal insurance program—which covers 49 million Americans, those ages 65-plus and those of any age with disabilities—accounts for 16% of federal spending, or $551 billion in 2012.
To be sure, spending cuts to the popular program won’t come easy. While far from perfect, Medicare has provided vital coverage to hundreds of millions since its inception in the mid-1960s, experts say. “Medicare is more than a line item in the budget,” says Stuart Guterman, executive director of the Commission on a High Performance Health System at the Commonwealth Fund, a private foundation. “It’s one of the most successful programs ever.”
CMS officials declined to comment on this issue. But as Jonathan Blum, deputy administrator and director of CMS’s Center of Medicare, said when he spoke about health-care delivery-system reform before the Senate Committee on Finance in February, CMS “has been working diligently to implement the changes and innovations” that lawmakers outlined in President Obama’s signature health-care legislation, the Affordable Care Act. CMS “has already made real progress, demonstrated by decreasing readmissions to hospitals and a reduced growth in Medicare costs,” Blum said.
2. “Think Social Security is broke? Just look at Medicare.”
With the debate raging over the astronomical cost of entitlement programs, experts say, it’s easy to forget that Medicare and Social Security are two different programs under very different financial strains. In the short term, at least some parts of Medicare are worse off than Social Security, according to a 2012 report from the Social Security and Medicare Boards of Trustees. The Medicare hospital trust fund—which funds Medicare Part A—“faces depletion earlier than the combined Social Security Trust Funds,” according to a summary of the report. Hospital trust funds are expected to run out completely in 2024, versus in 2033 for Social Security. Medicare Part B, which funds doctors’ visits and other outpatient expenses, and Part D, which covers prescription drug benefits, are funded differently and “will remain adequately financed into the indefinite future,” according to the report.
It’s easy to see why parts of Medicare are in such bad shape, experts say. A couple earning average annual wages of $44,600 each who turn 65 in 2020 will receive a total of $427,000 in lifetime Medicare benefits, but will have paid only $153,000 in lifetime Medicare taxes, according to an analysis by the Urban Institute, a research organization that studies social and economic issues. (All figures are in 2012 dollars.) By contrast, the couple will receive $632,000 in lifetime Social Security benefits after paying a total of $700,000 in Social Security taxes.
The picture doesn’t look much better going forward. Medicare trustees project that Medicare costs will grow from approximately 3.7% of gross domestic product in 2011 to 5.7% of GDP by 2035, and will increase gradually thereafter to about 6.7% of GDP by 2086. And baby boomers account for a big part of this projected growth. Roughly 10,000 baby boomers will turn 65 every day over the next couple of decades, according to the nonpartisan Pew Research Center. The vast majority of people 65 and over rely on Medicare and not employer-based coverage, experts say.
Medicare officials say the program is working hard to address its many challenges. “The Affordable Care Act included important reforms to improve the quality of health care for Medicare and Medicaid beneficiaries and, in doing so, lower costs for taxpayers and patients,” Blum testified before the Senate Committee on Finance.
3. “Marketing isn’t our strong suit.”
In 2011, Medicare launched a free, new benefit: annual “wellness” visits for recipients. Only 9% of beneficiaries took advantage of this benefit in 2012. And in a poll released last spring by the John A. Hartford Foundation, a philanthropy focused on training and research on geriatric health care, more than half of respondents said they had never heard of the wellness visit. See: Medicare ‘wellness’: Worth a second look?
Experts say it can take time for a new benefit to gain traction with both patients and doctors, but there’s another issue at play: When Medicare communicates with the public, the program’s written materials tend to be on the hefty side. “Medicare & You,” the official handbook for 2013, runs 140 pages. Some elder advocates praise the booklet as clearly written and relatively jargon-free—making it helpful for those who bother to crack the cover. Still, Medicare’s mailings are “intimidating by size,” says Mary Dale Walters, senior vice president of Allsup Medicare Advisor, a Belleville, Ill.-based provider of Medicare consultation services. “People look at the envelope and panic.” What’s more, those with private Medicare Advantage plans usually get a thick packet from their own plan each year, adding to the overload, Walters says. Those who took the time to look would discover that the wellness visit is mentioned on pages 50 and 51 of “Medicare & You.” (The booklet has an index.)
But there are ways to cut through the paperwork, some experts point out. Retirees and caregivers can visit Medicare.gov to find details like whether a particular service is covered, how much premiums cost, and other information. People can call 800-Medicare, or 800-633-4227, for help with a variety of issues; those who are placed on hold will hear a recording mentioning the new wellness visit.
4. “Don’t expect a five-star plan.”
Medicare’s five-star quality-rating system, outlined in the Affordable Care Act, ranks Medicare policies sold by private insurers, known as Medicare Advantage plans. These plans are referred to collectively as Part C, and beneficiaries can choose a Medicare Advantage policy in lieu of traditional Parts A and B, which are often referred to as “original Medicare.”) These scores are based on multiple performance measures—in 2011, for example, CMS used 53 different measures derived from plan and beneficiary surveys and administrative data, according to the Kaiser Family Foundation, a nonprofit foundation that analyzes major health care issues.
For 2013, there are about 11 five-star plans nationwide, according to CMS data. Consumers can switch to a five-star plan at any time during the year—they don’t have to wait for the annual open enrollment period. But “it’s a challenge” for beneficiaries to research all the offerings to see whether a five-star plan is available in their area, Walters says. There are an average of 22 Medicare Advantage plans in each market nationwide, she notes.
A spokesperson for CMS says “a five-star rating is Medicare’s highest mark of excellence, and can only be obtained by those plans that are truly providing the highest quality care to beneficiaries.” More than 37% of Medicare Advantage enrollees are now in a four- or five-star plan, Blum said in his Senate testimony.
In 2012, Medicare Advantage plans that receive four or five stars began to receive bonus payments aimed at encouraging more plans to meet the standards. Baby boomers, who have become accustomed to rankings in other aspects of their consumer lives, will likely embrace this system as they age into Medicare, experts say. “You see how consumers flock to cars that Consumer Reports rates highly,” says Joe Baker, president of the Medicare Rights Center, an advocacy group. “The expectation is that it will happen in the Medicare Advantage market as well.”
Indeed, Blum testified that the quality ranking system has already gained traction among beneficiaries: The higher the quality ranking, he said, the more likely it is that a beneficiary will enroll in a specific program.
5. “We’re not popular with many doctors.”
Roughly 20% of physicians across all disciplines limit the number of Medicare patients they will take on at any given time, according to a 2010 study by the American Medical Association, the organization’s most recent look at the issue. For primary care physicians, this number jumps to 31%.
The reason? Among doctors who limit Medicare patients, 85% say they think Medicare payment rates are often too low, according to the study. And 78% say they think “the ongoing threat of future payment cuts makes Medicare an unreliable payer.” The threat of future payment cuts stems largely from Congress’s inability to permanently fix the formula that Medicare uses to reimburse doctors to allow for increased payments, according to some critics, including the AMA.
Although some doctors limit the number of Medicare patients, very few don’t accept the insurance at all, experts say. This group primarily includes those in wealthy urban areas who have decided not to take any insurance—government or commercial—Baker says. See: Retirees risk ‘income overconfidence’.
6. “We get ripped off a lot.”
Thousands of doctors and other medical professionals have sharply increased the rates at which they bill Medicare for treating older patients, according to an investigation released last fall by the Center for Public Integrity, a nonprofit investigative news organization. Medicare allows doctors to pick from among five different codes to bill their services, from a low number for a simple visit to a higher number for a complex visit; the system largely relies on the honor system of doctors choosing the billing code that accurately reflects their level of service. From 2001 to 2010, this practice padded practitioners’ fees by $11 billion or more, signaling possible medical billing abuse, the study found.
According to the Center for Public Integrity investigation, doctors have increasingly abandoned the lower-level codes for the better paying ones, a practice known as “upcoding.” The study—which analyzed a representative 5% sample of Medicare patients and their claims, submitted by more than 400,000 medical practitioners and 7,000 hospitals and clinics starting in 2001—found no evidence that Medicare patients are sicker and older than in the past, which if true might have justified doctors billing at the higher rates. “Medicare is susceptible to fraud not only because of its size and complexity, but because the system itself makes it easy to defraud the government,” says Ken Nolan, a partner at Nolan & Auerbach, a health-care fraud law firm. “Most of the scrutiny, if any, is made after the payment is made—not before, as in traditional business transactions.” Dr. Jeremy A. Lazarus, president of the American Medical Association, said in a statement that more analysis was needed on the issue: “Attributing the trend solely to fraudulent and abusive behavior remains an unproven assumption.”
That said, fraud recoveries have increased to a record $4.2 billion collected in 2012, and $14.9 billion over the past four years, Blum told the Senate Committee on Finance. In addition, the Centers for Medicare & Medicaid Services recently launched a fraud prevention system, which aims to identify aberrant and suspicious billing patterns before payment, he said.
7. “We don’t cover a lot of the care seniors need most.”
If your aging mother needs care in a nursing home or even in her own home, she will have to meet some strict criteria to get Medicare to cover it. For the most part, Medicare pays for nursing home care only for those who were hospitalized for at least three days for an illness or injury and who require “skilled” care that only a medical professional like a registered nurse can provide. Even then, it only covers or partially covers up to 100 days per benefit period. (A benefit period begins the day you’re admitted as an inpatient to a hospital or skilled nursing facility and ends after you haven’t had any inpatient hospital care, or skilled nursing care, for 60 days in a row.)
Qualifying to get reimbursement for home health care is also difficult, as you must meet all of the following criteria: be homebound; require skilled nursing care, physical therapy, speech-language pathology services or continued occupation therapy; and be getting regular services from your doctor under a plan of care he or she has ordered. Medicare does not cover meals delivered to a home, cleaning and laundry services or, in most cases, help with personal care like bathing, dressing or using the bathroom. See: 10 things assisted-living homes won’t tell you.
What’s more, original Medicare doesn’t cover hearing aids, dentures or most dental services. (Medicare Advantage plans vary and may cover some of the services not covered by traditional Medicare.)
Many people are shocked when they learn of these restrictions: “It’s a big knowledge gap,” Walters says. But the onus to educate shouldn’t fall only on the government, some say: Companies could do a much better job of teaching their employees what to expect once they retire, so there are fewer such surprises, says Edmund F. Murphy III, head of defined contributions at Putnam Investments, which oversees companies’ 401(k) plans. See: 12 questions to answer before you retire.
A spokesperson for CMS notes that the organization aims to engage with members of Congress, aging and disabled community members, and experts to “explore solutions to the nation’s long-term care needs.”
8. “And you’ll pay for the coverage we do provide.”
Many people reach age 65 thinking Medicare is free, according to Baker, of the Medicare Rights Center. In reality, it’s anything but. Premiums for Part B (medical insurance for doctors’ visits and other outpatient expenses) are $104.90 monthly if a recipient’s annual income is $85,000 or less; beneficiaries pay on a sliding scale after that, with the highest monthly premium $335.70 for those with gross incomes above $214,000. Beneficiaries don’t pay a monthly premium for Part A (hospital insurance) if they paid Medicare taxes and earned 40 Social Security credits while working (people can earn a maximum of four credits a year; for 2013, $1,160 earns one credit). The average premium for Part D, or optional drug coverage, is around $30 per month.
On top of the premiums, seniors in original Medicare pay 20% of the cost of all doctors’ visits aside from some preventative services that are free. (That percentage climbs higher if a doctor doesn’t accept Medicare’s reimbursement rate for a given procedure, and also for certain treatments, like mental health coverage.) Hospital coverage, or Part A, requires a deductible of $1,184 for each benefit period in 2013 and then various coinsurance payments depending on the length of stay. The annual Part B deductible is $147.
Many beneficiaries buy a supplemental, or Medigap, policy to help cover these out-of-pocket costs. But these don’t come cheap either: a comprehensive supplemental policy that eliminates almost all out-of-pocket expenses can cost as much as $350 a month, Blair of PlanPrescriber.com says.
To be sure, in most cases, these costs remain much lower than what people ages 55 to 64 currently pay for individual health insurance. The average individual policy for someone in that age range (with a $3,194 deductible) cost $588 monthly in 2012, according to eHealth, although costs can run much higher in states that have more stringent rules for insurers. See: Brill: Make health care more like Medicare.
And Medicare is hardly stockpiling the cash: As Blum testified, every workday, Medicare pays out more than $1 billion from some 4.6 million claims.
9. “Paws off that cash, Grandpa: Your settlement is ours.”
Let’s say something goes terribly wrong, you sue your doctor for malpractice and win. Don’t go counting the money just yet. If Medicare paid some of your doctor bills, it can recoup out of the malpractice settlement what it paid out in claims, says Joan Robert, a partner at elder law firm Kassoff, Robert & Lerner. (Medicare only gets money for what it paid, not a percentage of punitive damages, she says.) A spokesperson for CMS says that claims are handled in this manner “in order to protect the Medicare trust funds when other sources of payment are available.” See 10 things 401(k) plans won’t tell you.
The lawyers involved in the case should make sure that Medicare gets repaid as part of any malpractice settlement, says Glenn Jarrett, an elder law attorney in Burlington, Vt. This will help ensure that malpractice victims don’t get surprised if CMS tries to collect later, after they have already spent the money on something else, he notes. Medicare must be paid within 60 days of the receipt of the settlement from the “third party,” according to a fact sheet for attorneys on the CMS website. (The “third party” is usually the insurance company of the doctor or other person found liable.) If Medicare isn’t repaid in a timely manner, the fact sheet notes, interest may be assessed.
10. “Did we turn you down? Keep trying.”
When Medicare denies a claim, experts say, recipients will often simply pay out of pocket, even if they can’t afford it. That’s the wrong strategy. Oftentimes, it’s better to appeal, says Judith Stein, the executive director of the Center for Medicare Advocacy. “People are denied Medicare like any other kind of insurance,” she says. “Insurance wants your money and doesn’t want to give it back.” Only about 2.5% of people with original Medicare appealed their denied claims in 2011, but of those that did, 33% were granted a full overturn of their denial with Part A, and 50% were granted a full overturn with Part B, according to CMS data.
Filing an appeal is not hard, experts say. Those with original Medicare need only fill out a Redetermination Request Form and send it to their Medicare administrator within 120 days of the date they received their Medicare Summary Notice (the form that Medicare sends when it pays or denies a claim). Those in a Medicare Advantage plan need to read the materials the plan sends each year to learn how to appeal.