How Will Health Reform Affect Medicare? Part D, Donut Holes, Limits, and More

When it comes to health insurance, few topics gain as much interest from WebMD readers as Medicare and the impact that health reform will have on seniors’ health care benefits.

Here are answers to some of your most frequently asked Medicare-related questions.

Q: Will Medicare have a lifetime limit or has that been eliminated?

A: Generally, there are no lifetime limits on how much Medicare will spend on your medical treatment over the course of your lifetime, a fact that has nothing to do with health reform.

But there are exceptions.

For example, there is a lifetime limit of 190 days for inpatient psychiatric care, which has not changed under the Affordable Care Act. That limit may be lifted in the future, however. Sens. John Kerry (D-Mass.) and Olympia Snowe (R-Maine) just introduced a bill eliminating psychiatric care caps. If passed, this would ensure that beneficiaries receive psychiatric care benefits that are equal to the medical benefits provided under Medicare.

Medicare also limits the number of days it will pay for hospital stays that exceed 90 days. Hospitalization that lasts between 91 and 150 days will draw on a 60-hospital day lifetime reserve that can be used to cover the costs of long-term hospital stays. “Every day you draw from those days is gone forever,” says Judith Stein, executive director of the national nonprofit, nonpartisan Center for Medicare Advocacy.

Q: What about annual limits to care?

A: For some types of treatment, there are limits to how much Medicare will spend on care each year. Those limits depend entirely on the type of service and/or the setting in which it’s provided.

For example, in 2010 there was an annual cap of $1,860 for a combination of speech and physical therapy and another $1,860 for occupational therapy, unless the service was provided in a hospital outpatient clinic or emergency room. “If you go to an outpatient center, under Medicare there is a dollar cap,” Stein says.

Q: Are there limits to how much of my own money I will have to spend in a year for care?

A: No. There is no limit to how much money you may have to spend on your care, which is why Medigap plans -- which pick up the cost of co-pays, deductibles, and other expenses -- are so important.

When it comes to understanding the potential for out-of-pocket costs, seniors should be aware of something called benefit periods, or what is often referred to as “spell of illness,” Stein says.

A benefit period starts on the day you enter the hospital or skilled nursing facility and ends after you have had no such care for 60 consecutive days. Each new benefit period requires you to pay an inpatient hospital deductible, which in 2011 is $1,132 (the amounts change each year).

There is no limit to the number of benefit periods a person can have.  “It could happen more than once a year that you have to meet the deductible,” Stein says. “But once you’re in the hospital you’ll have no co-pays for 60 days and not owe anything to the hospital if your stay is considered medically necessary.”

If your stay in the hospital lasts between 61 and 90 days, however, you’ll pay $283 a day. Days 91 though 150 will cost you $566 a day in co-pays and also draw from your 60-hospital day lifetime reserve.

Medicare allows for 100 days in a nursing home during a benefit period, during which you’ll pay no co-pay for the first 20 days. But in 2011, a stay between 21 and 100 days will require a co-pay of $141.50 each day.

Q: Is the "donut hole" for prescription drugs going away, and if so, when?

A: Yes, but it's going to be a gradual process.

Effective January 2011, seniors who buy Medicare Part D covered brand-name prescription drugs will receive a 50% discount and a 7% discount on generics once they reach the gap in prescription drug coverage known as the donut hole.

In 2012, the discount for brand name drugs will be 75%, and each year following, seniors will pay an increasingly smaller amount until the donut hole closes completely in the year 2020.

Q: What will health care reform do to assist seniors with low-to-moderate income who have Medicare and private health insurance yet still have high out-of-pocket medical expenses?

A: The biggest impact health reform will have on costs is the closing of the drug benefit donut hole discussed above. Seniors (and everyone else) are also now eligible for free preventive care and wellness visits.

In addition, there are a number of Medicare Savings Programs (MSPs) available to beneficiaries of limited income. These programs, which were in place prior to health reform, assist Medicare recipients in various ways to pay for co-pays, premiums, deductibles, and co-insurance.

To find out more about the MSP programs in your area, check Medicare.gov. And for a clear and simple-to-understand chart outlining each program, its benefits, as well as income and asset limits, visit the Medicare Savings Programs page on the California Health Advocates web site.

You can also find information on Federal, state, and private assistance programs in your area at www.benefitscheckup.org, a service of the nonprofit National Council on Aging.

Q: Can doctors refuse to accept more Medicare patients?

Yes. Doctors do have the right to stop treating additional Medicare patients.

But doctors cannot abandon current patients and cannot take one new patient and not the next, Stein says.

Due to long-standing efforts (long before health reform) to amend the Medicare physician reimbursement formula, many doctors recently stopped taking new Medicare patients out of concern that their rate of reimbursement would be reduced by 21% as of Jan. 1, 2011.

That cut in pay has once again been postponed and should relieve, at least temporarily, some of the pressure doctors feel, which may make them more willing to see Medicare patients.

Q: Where can I obtain the actual Medicare regulations that state what is covered and what is not? I don't mean the small booklet sent to us every year.

A. State Health Insurance Counseling and Assistance Programs (SHIPs) connect you with counselors in your state who can answer your specific Medicare-related questions and help you to better understand your benefits. These are invaluable resources for seniors and their families who are looking for detailed information.

To find the SHIP near you, visit the Medicare Helpful Contacts page on Medicare.gov.

Another great resource is the nonprofit Center for Medicare Advocacy’s web site. In addition to information on a wide range of Medicare-related topics, you’ll find all the Medicare rates for 2011.

If you have traditional Medicare, you can also visit the Your Medicare Coverage page on Medicare.gov, where you can enter your Medicare ID number to call up specific information about your benefits.

Also on Medicare.gov is detailed information about how Medicare covers hospital services, including premiums, deductibles, and copayments.You can find that in the Medicare & You handbook.

You can also call 800-MEDICARE (800-633-4227).

If you’ve signed onto a Medicare Advantage plan, the specifics of your coverage can be obtained from the insurance company through which you receive your benefits. Call the customer service number on the back of your insurance card to obtain a copy of your benefits handbook if you don’t already have one or to speak with a representative who can answer your questions.

Q: If I move to a new state, how do I switch my Medicare Advantage plan outside of the open enrollment period?

A: You can qualify, for various reasons, to make changes during what’s considered a special enrollment period for qualifying events, or major life changes. If you move to a new geographic location, that counts as a qualifying event.

Again, your SHIP is a great place to go for information about how to switch plans. And the Center for Medicare Advocacy’s web site and Medicare.gov both offer information about special enrollment periods.