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11.1 Medicare Overview

Medicare is a federal health insurance program originally established to provide hospital and medical coverage primarily for individuals age 65 and older. The program has since been expanded to include coverage for individuals of any age who meet certain qualifying conditions, including:

  • Diagnosis of chronic or permanent kidney failure, known as End-Stage Renal Disease (ESRD)
  • Receipt of Social Security Disability Income (SSDI) for at least 24 consecutive months

Medicare is administered by the Centers for Medicare & Medicaid Services (CMS), a division within the U.S. Department of Health and Human Services (HHS). CMS is responsible for overseeing the program and reviewing and approving Medicare claims.

Note: Medicare eligibility was originally aligned with eligibility for Social Security retirement benefits. Although the Full Retirement Age for retirement benefits has increased, eligibility for Medicare remains at age 65.

Primary vs. Secondary Payor​

For individuals age 65 or older who continue to work, Medicare typically serves as the secondary payer when the individual is covered under an employer-sponsored group health plan.

If the employer has 20 or more employees, the group health plan is considered primary and pays benefits first. Medicare then acts as the secondary payer, covering eligible expenses not fully paid by the employer’s plan, provided the services are covered by Medicare.

Employers with 20 or more employees are required to offer the same health insurance coverage, under the same terms and conditions, to employees and their spouses age 65 or older as they do to younger employees and spouses.

Medicare Products​

The original Medicare program consisted of Part A and Part B, both of which are government-provided programs designed to cover basic hospital and medical expenses. These coverages may still require the beneficiary to pay certain out-of-pocket costs, such as deductibles and coinsurance.

Medicare now includes four parts of coverage:

  • Part A – Hospital insurance provided by the federal government
  • Part B – Medical insurance covering outpatient services, also provided by the federal government
  • Part C (Medicare Advantage) – Combines Part A and Part B into a managed care plan offered through private insurance companies
  • Part D – Prescription drug coverage provided by private insurance companies

Medicare Enrollment Periods​

Once an individual becomes eligible, enrollment in Medicare Parts A and B is required for coverage to take effect. Several enrollment periods determine when an individual may enroll:

The Initial Enrollment Period is a 7-month window that begins 3 months before the individual’s 65th birthday month, includes the month of their birthday, and ends 3 months after that month. Coverage eligibility is based on the individual’s birth month.

The General Enrollment Period occurs annually from January 1 through March 31. It is intended for individuals who did not enroll in Medicare Part B when first eligible. Coverage for those enrolling during this period begins on July 1.

The Medicare Open Enrollment Period takes place each year from October 15 through December 7. During this time, individuals may make changes to their existing Medicare coverage.

The Special Enrollment Period applies to individuals age 65 or older who delayed enrollment because they were covered under an employer-sponsored group health plan. This period begins when that coverage ends (regardless of whether COBRA is elected) and lasts for 8 months, allowing enrollment in Part B without a late enrollment penalty.

Quiz​

1. Which of the following individuals would qualify for Medicare before age 65?

A. A person with a temporary injury lasting 6 months

B. A person receiving SSDI for 24 consecutive months

C. A person working full-time with employer insurance

D. A person who retires early at age 60

Correct Answer: B

Rationale: Medicare eligibility extends to individuals under age 65 who have received Social Security Disability Income (SSDI) for at least 24 months or have ESRD. Temporary conditions or early retirement do not qualify.

2. Which entity is responsible for administering Medicare and processing claims?

A. Social Security Administration (SSA)

B. Department of Labor (DOL)

C. Centers for Medicare & Medicaid Services (CMS)

D. Internal Revenue Service (IRS)

Correct Answer: C

Rationale: Medicare is administered by CMS, a division of the Department of Health and Human Services, which oversees the program and handles claims processing.

3. For a working individual age 65 or older covered by a large employer plan (20+ employees), which payer is primary?

A. Medicare

B. Social Security

C. Employer group health plan

D. Medicaid

Correct Answer: C

Rationale: When an employer has 20 or more employees, the group health plan is primary, and Medicare acts as the secondary payer for covered services not fully paid.

4. Which Medicare part provides prescription drug coverage?

A. Part A

B. Part B

C. Part C

D. Part D

Correct Answer: D. Part D

Rationale: Medicare Part D provides prescription drug coverage through private insurance companies. Parts A and B cover hospital and medical services, while Part C combines A and B.

5. Which statement best describes the Initial Enrollment Period (IEP)?

A. It lasts 3 months after age 65 only

B. It lasts 12 months starting at age 65

C. It is a 7-month period surrounding the individual’s 65th birthday month

D. It occurs annually from October to December

Correct Answer: C

Rationale: The Initial Enrollment Period (IEP) lasts 7 months, beginning 3 months before the 65th birthday month, including the birth month, and ending 3 months after, allowing individuals to enroll in Medicare.