Settlement Eases Medicare Rules

By Lori Eason, CFP(R)

Following a national class action lawsuit settlement, the government has decided to revise its Medicare manual. The new language will ensure broader availability of Medicare coverage for skilled nursing, home health and outpatient care. Before I go into the details, I'd like to refresh your memory on the different parts to Medicare since it is quite complicated, but very important given it is pretty much the only cost-effective health insurance available these days for senior citizens.

 

The Social Security Act of 1965 created Medicare to provide insurance for people over 65. While there were originally only 2 parts to Medicare, there are now 4 parts: Parts A, B, C and D. Part A provides hospital and skilled nursing care coverage and is paid for by the government as long as the insured has 40 or more quarters of Medicare-covered employment. It is financed mostly by the Medicare tax of 2.9% split between employer and employee. A deductible of $1,184 does apply. Part B covers physicians and other out-of-hospital expenses. The insured person contributes to the cost through a monthly premium, currently $104.90 with a deductible of $147 per year. Medicare Advantage plans are private plans that can help supplement Medicare benefits for an additional premium and are referred to as Part C. In 2006, Part D, a prescription drug discount plan, became effective.

 

A key point to remember is that Medicare does not cover long term care. While Medicare does pay for some short-term nursing home stays, the requirements to qualify for benefits are very specific and it is not intended for long-term stays.  Among the requirements is an inpatient hospital stay of 3 consecutive days or more.  One notable illness that often does not meet this requirement is Alzheimer's because the patient is often physically in okay shape, but mentally unable to care for his or herself.   If all requirements are met, Medicare pays the full cost of the nursing home for the first 20 days.  For days 21 through 100, Medicare covers the cost after the patient pays a daily copayment, currently $148.  After 100 days, Medicare pays nothing. 

 

Now I'll move on to the upcoming changes. According to current Medicare language, beneficiaries are required to show a likelihood of medical or functional improvement before Medicare will pay for skilled nursing and therapy services. Under the settlement of Jimmo v. Sebelius in October of 2012, the U.S. Department of Health and Human Services has agreed to relax these requirements. The government is set to revise its Medicare manual to make benefits available when care would only "maintain the patient's current condition or prevent or slow further deterioration." Standard nursing home care still won't be covered beyond its current limits (no more than 100 days), but it will expand access to skilled nursing, home health and outpatient care.

 

The lead plaintiff in the case is a 76 year old woman who has been blind since childhood and had her right leg amputated below the knee due to blood circulation problems. She received care from nurses and home health aides, but Medicare denied coverage saying her condition was unlikely to improve. At first, the Obama administration urged the judge to dismiss the lawsuit stating that the court lacked jurisdiction and that the plaintiffs had failed to state a claim for which relief could be granted. This motion to dismiss was denied. A proposed settlement was approved in October of 2012. The settlement was approved on January 24^th, 2013 during a scheduled fairness hearing and the Centers for Medicare and Medicaid Services will have one year to make the manual changes and carry out an educational campaign.

 

A spokeswoman for the U.S. Department of Health said the proposed settlement "clarifies" existing policy and that they do not expect change in access to services or costs. I completely disagree that the change in language only clarifies the current rules. Requiring that a beneficiary show a likelihood of improvement and requiring that the care maintains the condition or slows deterioration are very different things.

 

Some 10,000 cases in which Medicare beneficiaries' claims for skilled nursing and therapy were denied will have their claims re-examined. A public trustee of the Medicare program said that the proposed settlement would unquestionably increase costs but couldn't say by how much. Some argue that the program's higher costs for providing the additional coverage will rise but could be offset by allowing some beneficiaries to access physical therapy and home health care and avoid more expensive care in hospitals and nursing homes. While I could see this to a certain degree, there's no way the savings will be greater than the cost of expanding coverage. Medicare spending is expected to top $590 billion this year without the proposed changes.