ABA Family Legal Guide

The Rights of Older Americans

Health and Long-Term Care Benefits

Medicare

What is the basic structure of the Medicare program?

The Centers for Medicare and Medicaid Services (CMS), a branch of the U.S. Department of Health and Human Services, is the federal agency responsible for administering Medicare.

Original Medicare has two main parts. The hospital insurance part, or Part A, covers medically necessary care in a hospital, skilled nursing facility, psychiatric hospital, home health care, or hospice care. Part B, the medical insurance benefits part, covers medically necessary physician's services, no matter where you receive them, outpatient hospital care, many diagnostic tests, rehabilitation services, and a variety of other medical services and supplies not covered by Part A.

The exact coverage rules and limitations are complex. The actual coverage determinations and payments to care providers are handled by insurance companies under contract with Medicare. These insurance companies are referred to as "fiscal intermediaries" under Part A and "carriers" under Part B. They determine the appropriate fees.

Medicare beneficiaries also have the option of joining a Medical Advantage program, known as Medicare Part C, or MA plans. These are health plans run by private companies. If you chose one, Medicare pays a set amount of each month to the plan, and in return, the plan must provide all of your Part A (Hospital Insurance) and Part B (Medical Insurance) benefits and must cover at least the medically-necessary services that the Original Medicare Plan provides. These plans may offer extra benefits such as hearing, vision, dental, or wellness programs, and must also provide Part D prescription drug coverage, at no extra cost. There are several types of Medicare Advantage Plans: Medicare Health Maintenance Organizations (HMO) plans, Preferred Provider Organization (PPO) plans, Private Fee for Service Plans, Medicare Special Needs Plans and Medical Savings Account Plans.

Finally, the newest benefit under Medicare is Part D, the Prescription Drug Benefit Program. It is an optional benefit provided through private insurance companies or Medicare Advantage plans in which you must choose to enroll. It covers part of the cost of outpatient generic and many brand-name medications. Each plan has significant flexibility (within certain guidelines established by the government) to decide what drugs to cover and to set its own premiums, deductibles, coinsurances, and co-payments. Each plan may limit coverage to a specific list of drugs, and the list can change during the year upon 60 days' notice to you and your treating doctor.