There is plenty of confusion about Medicare today, especially with the enactment of the Affordable Care Act (ACA) in recent years. Misconceptions persist about this important program, which we aim to dispel below. First, let’s define what Medicare is and why it exists.
A Brief History of Medicare
Medicare was created in 1965 in response to growing difficulties among older individuals trying to get private health insurance. In fact, a national study conducted not long before Medicare was enacted showed that 56% of Americans over the age of 65 did not have health insurance.
President Teddy Roosevelt was among the first to get the discussion going about the need for national health insurance, and the issue was later pushed by Presidents Truman and Kennedy. It wasn’t until after Lyndon B. Johnson took office, however, that Medicare was officially established. Medicare was passed in 1965, and in the program’s first year (1966) 19 million individuals signed up for coverage. Since its inception, Medicare has helped improve the health and longevity of millions of older Americans.
Let’s look at some common of the common myths and misconceptions about the program.
Myth #1: Medicare and Medicaid Are the Same Thing
Medicare is designed to provide health insurance for individuals ages 65 and over, while Medicaid provides health insurance to those with low incomes and few resources. Medicare sometimes covers individuals under the age of 65—including those with end stage renal (kidney) disease, or Lou Gehrig’s disease. Some people are eligible for both Medicare and Medicaid (known as Medicare-Medicaid enrollees, or dual eligibles), however they must apply separately.
Myth #2: Medicare Is Free Health Care
Medicare is not a free program; it has varying costs, depending on a person’s income and which plans a person chooses. Generally, an individual who has worked at least 10 years (or long enough to earn at least 40 work credits) will pay nothing for Medicare Part A. The majority of Americans will pay $104 for Medicare Part B; those with incomes of $85,000 or higher will pay more for Part B. Medicare Part C (Medicare Advantage plans, which become primary to Original Medicare Parts A and B and are purchased through carriers like Blue Shield of California) sometimes have an additional premium. Medicare Part D (prescription drug plans) and Medicare supplement (Medigap) plans have variable premiums, depending on the plan chosen.
Myth #3: Medicare Costs the Same for Everyone
Medicare costs vary depending on eligibility and income. For example, a person with fewer than 30 work credits who is 65 or older and is a U.S. citizen or has been a legal resident for at least five years may qualify for Medicare, but must pay for Part A, which can be as much as $426 per month in 2014. Additionally, the cost for Part B varies based on income level, but for most people the cost is $104 per month. Medicare Advantage plans, prescription drug plans, and Medigap plans have variable premiums.
Myth #4: People Can Enroll in Medicare Anytime
When a person is first eligible for Medicare, they have a 7-month initial enrollment period to sign up for Part A and/or B. For example, a person who is eligible at age 65 can sign up three months before their birthday, during their birthday month, and during the three months following their 65th birthday. Those who didn’t sign up for Parts A and/or B when they first became eligible and who aren’t eligible for a special enrollment can enroll during the annual open enrollment period of January 1-March 31 each year.
Myth #5: People Can’t Switch Plans If They Have Preexisting Conditions
Original Medicare (Parts A and B), Medicare Advantage, and Medicare Part D (prescription drug) plans generally will not deny people coverage for preexisting conditions. Medicare supplement (Medigap) plans may have more restrictive underwriting criteria for individuals who did not enroll in a supplement plan when they first become eligible. In general, people should be able to switch plans during open enrollment without being denied for preexisting conditions.
Myth #6: Medicare Covers Long-Term Care
This is one of the most long-standing myths about Medicare. It is commonly believed that Medicare will cover long-term care assistance with the activities of daily living, such as bathing, eating, and dressing (referred to as “custodial care”), however this is not the case. Medicare covers care in a nursing home, skilled nursing facility, hospice, and some home health care services. It does not cover 24/7 care at home, homemaker services, personal care, or home meal delivery.
Myth #7: Medicare Supplement Plans (Medigap) Are Unaffordable
Medicare supplement plans help cover copayments, deductibles, and coinsurance that Medicare does not cover. There is a wide range of Medigap plans to choose that vary in cost. Individuals who see a doctor or specialist frequently or who have a chronic condition can greatly benefit from Medigap insurance, which could potentially save a person thousands of dollars a year. Some plans, such as Medicare supplement Plan F, fill in all the gaps Medicare leaves behind, so patients incur no out-of-pocket expenses.
Myth #8: People Living Longer Will Bankrupt Medicare
Due to modern medical advancements people are living longer. This doesn’t necessarily translate to out-of-control Medicare costs, however. While Medicare covers most hospital expenses, nursing homes tend to be the biggest expense that people of advancing age incur. Medicare only covers a limited amount of skilled nursing home expenses. In 2014, Medicare covers 1-20 days in a skilled nursing home in full. For days 21-100 there is a copayment of $152 per day for each benefit period. Ultimately this means that the Medicare beneficiary absorbs most of the costs of nursing home care and all the costs of assisted living and other custodial care options.
Myth #9: Medicare Plans Can Be Purchased through the ACA Marketplace
The federal and state-based health insurance exchanges established under the Affordable Care Act are specifically designed to help individuals under the age of 65 obtain affordable health insurance. Medicare beneficiaries are not impacted and still enroll in coverage through their insurance agent or online at medicare.gov.