Medicare (United States)

This article refers to Medicare, a United States insurance program. For similarly named programs, see Medicare.

Medicare is a health insurance program administered by the United States government, covering people who are either age 65 and over, or who meet other special criteria. It was first passed on July 30, 1965 by President Lyndon B. Johnson as amendments to Social Security legislation.

Administration

The Centers for Medicare and Medicaid Services (CMS), a component of the Department of Health and Human Services (HHS), administers Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), and the Clinical Laboratory Improvement Amendments (CLIA). Along with the Departments of Labor and Treasury, CMS also implements the insurance reform provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Social Security Administration is responsible for determining Medicare eligibility and processing premium payments for the Medicare program.

Taxes imposed to finance Medicare

Medicare is partially financed by payroll taxes imposed by the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act of 1954. In the case of employees, the tax is equal to 2.9% (1.45% withheld from the worker and a matching 1.45% paid by the employer) of the wages, salaries and other compensation in connection with employment. Until December 31, 1993, the law provided a maximum amount of wages, etc., on which the Medicare tax could be imposed each year. Beginning January 1, 1994, the compensation limit was removed. In the case of self-employed individuals, the tax is 2.9% of net earnings from self-employment, and the entire amount is paid by the self-employed individual.

Benefits

Generally, Medicare is available for people age 65 or older, younger people with disabilities, and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant). People under 65 and disabled must be receiving disability benefits from either Social Security or the Railroad Retirement Board for at least 24 months before automatic enrollment occurs. In 2003, Medicare provided health care coverage for 41 million Americans. Enrollment is expected to reach 77 million by 2031, when the baby boom generation is fully enrolled.

The "Original Medicare" program has two parts: Part A (Hospital Insurance), and Part B (Medical Insurance). Neither Part A nor Part B pays for all of a covered person's medical costs. The program contains premiums, deductibles and co-pays (payments due from the covered individual). Only a few special cases exist where prescription drugs are covered by Original Medicare, but as of January 2006, Medicare Part D provides more comprehensive drug coverage. Medicare Advantage plans are another way for beneficiaries to receive their Part A, B and D benefits.

Part A: Hospital Insurance

Part A covers hospital stays. It will pay for nursing home stays as well if certain criteria are met:

The hospital stay must be of at least 72 hours with the count starting at the first midnight after admission and not counting any hours of the discharge date.
The nursing home stay must be for something found wrong during the hospital stay or for the main cause of hospital stay. For instance, hospital stay for broken hip and then nursing home stay for physical therapy would be covered.
If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing supervision then the nursing home stay would be covered.
The care being rendered by the nursing home must be skilled. Medicare part A does not pay for custodial, non-skilled, or long-term care activities, including activities of daily living (ADLs) such as personal hygiene, cooking, cleaning, etc.

The maxmium length of stay that Medicare Part A will cover in a skilled nursing facility per ailment is 100 days. The first 20 of those days would be paid for in full by Medicare with the remaining 80 days requiring a co-payment (currently as of 05/21/2006, $119.00 per day). Many insurance companies will have a provision for skilled nursing care in the policies they sell.

Part A premium

Most people do not pay a monthly Part A premium, because they (or a spouse) have had 40 or more quarters where they paid FICA taxes. For Medicare eligible beneficiaries who do not have 40 or more quarters of Medicare-covered employment, Part A may be purchased for a monthly premium of:

$216.00 per month (in 2006) for people having 30-39 quarters of Medicare-covered employment.
$393.00 per month (in 2006) for people who are not otherwise eligible for premium-free hospital insurance and have less than 30 quarters of Medicare-covered employment.

Part B: Medical Insurance

Part B helps cover doctors' services, outpatient hospital care, and some other medical services that Part A does not cover, such as durable medical equipment (DME). Medicare's DME coverage included payment for canes, walkers, wheelchairs, and mobility scooters for those with mobility impairments, depending on medical necessity.

Part B is optional coverage and may be deferred if the beneficiary or their spouse is still actively working. There is a lifetime penalty (10% per year) imposed for not taking Part B if not actively working.

Part B premium

Everyone with Medicare Part B pays an insurance premium for this coverage, which for 2006 is $88.50 per month. It is common for this premium to be automatically deducted from a beneficiaries monthly Social Security check. Some people may qualify to have other governmental programs pay this premium for them.

Part C: Medicare Advantage plans

For the last 20 years, the Federal government has offered Medicare beneficiaries the option to receive their Medicare benefit through private health insurance plans, instead of receiving it from the Original Medicare plan (Part A and Part B). At one time the Medicare program called these Medicare + Choice plans, but they have often been colloquially referred to as Part C. The Medicare Modernization Act changed compensation and business practices for insurers that offer these plan. In conjunction with this, CMS re-branded these plans as Medicare Advantage (MA) plans. In addition to offering comparable coverage to Part A and Part B, Medicare Advantage plans may also offer Part D coverage.

Part D: Prescription Drug plans

Medicare Part D went into effect on January 1, 2006. Anyone with Part A or B is eligible for Part D. It was made possible by the passage of the Medicare Prescription Drug, Improvement, and Modernization Act. In order to receive this benefit, a person with Medicare must enroll in a stand-alone Prescription Drug Plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD). These plans are approved and regulated by the Medicare program, but are actually administered by private health insurance companies.

Payment for services

Medicare processes over one billion fee-for-service claims per year, making it the nation’s largest purchaser of managed care ^*. In 2003, Medicare accounted for almost 13% of the entire Federal Budget. Based on the CMS projections, 33 cents of every dollar spent on health care in the U.S. is paid by Medicare and Medicaid (including State funding). Looked at from three different perspectives, 61 cents of every dollar spent on nursing homes, 47 cents of every dollar received by U.S. hospitals, and 27 cents of every dollar spent on physician services is funded by Medicare or Medicaid.

With regard to physicians, Medicare uses the Resource-Based Relative Value Scale (RBRVS) to determine how much money each doctor should earn, although it is criticized for not paying doctors enough because of the low conversion factor. Because of the nature of RBRVS, it is possible to pay all doctors more or less depending on how much money the person paying (CMS in this case) is willing to pay.

For institutional care such as hospital and nursing home care, Medicare uses prospective payment systems. A prospective payment system is one in which the health care provider receives a set amount of money for each episode of care provided to a patient, regardless of the actual amount of care used. The actual allotment of funds is based on a list of diagnosis-related groups (DRG). The actual amount depends on the kind of diagnosis made at the hospital. There are some issues surrounding Medicare's use of DRGs because if the patient uses less care, the hospital gets to keep the remainder. This, in theory, should balance the costs for the hospital. However, if the patient uses more care, then the hospital has to cover its own losses. This results in the issue of "upcoding," when a physician makes a more severe diagnosis to hedge against accidental costs.

Criticism

Medicare faces continuing financing issues. In its annual report to Congress, the Medicare Board of Trustees stated that the program's hospital insurance trust fund could run out of money before the end of the next decade. The trustees have made such projections in the past, but this one was much bleaker than the outlook reported just last year.

Part of the cost of Medicare is fraud, which Medicare estimates costs it billions of dollars a year.

Legislation and Reform

1960 PL 86-778 Social Security Amendments (Kerr-Mill aid)
1965 PL 89-97 Medicare
1988 PL 100-360 Medicare Catastrophic Coverage Act
2003 PL 108-173 Medicare Prescription Drug, Improvement, and Modernization Act

President Bill Clinton attempted an overhaul of Medicare through his ambitious health care reform plan in 1993-1994 but it proved unsuccessful.

In 2003 Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act, which President George W. Bush signed into law on December 8, 2003.

Part of this legisalation included fixing loop holes in the Medicare Secondary Payer Act that was enacted in 1980. By fixing the loopholes, Congress strengthend the Workers' Compensation Medicare Set-Aside Program (WCMSA) that is monitored and administered by CMS.

References

Lawrence R. Huntoon, M.D., Ph.D., "Medicare: Incompetence-Based Bureaucracy", Journal of American Physicians and Surgeons, Winter 2004.

External links

Governmental links - current

CMS official web site at cms.hhs.gov
- Medicare at cms.hhs.gov
Medicare.gov — the official website for people with Medicare
- Official Medicare publications at Medicare.gov — includes official publications about current Medicare benefits
  - Medicare & You handbook for 2006 at Medicare.gov — includes information about current Medicare benefits
- Information about the 1-800-MEDICARE helpline from Medicare.gov — a 24X7 toll-free number to call with questions about Medicare
- Medicare Modernization Act at Medicare.gov
- Medicare Plan Choices at Medicare.gov — basic information about plan choices for Medicare beneficiaries, including MA Plans
  - Medicare Personal Plan Finder at Medicare.gov — more detailed information about MA Plans; can do tailored searches
- Prescription Drug Coverage homepage at Medicare.gov — a central location for Medicare's web-based information about the Part D benefit
  - Enroll in a Medicare Prescription Drug Plan at Medicare.gov — the web-based tool for enrolling online in a Part D plan
  - Landscape of plans — state-by-state breakdown of all plans available in an area, both stand-alone PDPs, as well as MA-PD plans
My.Medicare.gov — Medicare's secure online service where beneficiaries can access their own personal Medicare information

Governmental links - historical

Medicare Is Signed Into Law page from ssa.gov — material about the bill-signing ceremony
Historical Background and Development of Social Security from ssa.gov — includes information about Medicare
Detailed Chronology of SSA from ssa.gov — includes information about Medicare
Early Medicare poster from ssa.gov

Non-governmental links

Congressional Research Service (CRS) Reports related to Medicare from the University of Texas Libraries
Medicare Rights Center — Education and advocacy organization.
Kaiser Family Foundation — Wide range of free information, including a drug benefit calculator, about the Medicare program and other U.S. health issues.
- State Health Facts — Data on health care spending and utilization, including Medicare; provided by the Kaiser Family Foundation.
HealthDecisions.org — Medicare information from America’s Health Insurance Plans (a national association of American health insurers).

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