I’m usually not in the Medicare Advantage side of the business, so I’m working with more generalized knowledge but several people have been asking for an overview of how Medicare works and why they do some of the things that they do.
The first and most important thing about Medicare from a policy point of view is that Medicare as an entity is absolutely massive. It is the biggest payer for healthcare in the world, so commercial and other public paying programs tend to frequently follow Medicare’s policy lead. The other thing that is important is that Medicare has significant political restrictions on how it can act. It is not a typical insurance company so some of the bad policy results are intentional political decisions.
There are four basic parts of Medicare. Medicare Part A is hospital insurance. This covers in-patient and facility costs. Medicare Part B is the doctor’s insurance, it covers professional services costs. Medicare Part C is Medicare Advantage which is Medicare replacement plans that is sold by non-governmental insurance carriers. Part C rolls Part A and B into a single plan. Medicare Part D is the presription drug benefit. Finally there are Medicare supplemental policies that are add-ons/gap fillers for Medicare A and B.
Today we’ll just look at what A and B cover and how those services are paid for from an individual perspective.
Medicare A and B cover most medically neccessary services at approved providers. There are limitations. The most notable limitation is that Medicare Part A will only pay 90 days of hospital care in a year with sixty lifetime reserve days. Other limitations include Medicare Part A won’t pay for the first three units of blood used and psych care is limited to a lifetime of 190 days.
There is a $1,260 hospital Medicare Part A deductible and large co-pays for long term hospitalization. There is no co-insurance.
Medicare Part B is the professional/doctor’s insurance. It covers doctors, outpatient services, labs, medical equipment and diagnosistic treatement. From a beneficiary perspective, there is a small deductible ($147 per year) and then a 20% co-insurance on all non-preventative care. There is no limit to the co-insurance amount. This is different than PPACA which limits out of pocket to $6,600 per person for an individual policy.
As you can see, there is a big gap here. Prescription drugs are not covered at all. Part D Medicare are how people get their drugs covered.
The split deductible of $147 Part B/$1,250 for Part A is a bit odd from a plan design point of view. Most people will max their Part B deductible while not many people will max out their Part A deductible. This is how a single payer system works in the United States and it is not the most straightforward process even for the simple(r) part of the system.