Medicare Program specifics

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).

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.

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.

Medicare is partially financed by a tax of 2.9% (1.45% withheld from the worker and a matching 1.45% paid by the employer) on wages or self-employed income to a specified maximum (currently there is no maximum).

Medicare has several parts:

Part A (Hospital Insurance), and Part B (Medical Insurance, helps cover doctors' services, outpatient hospital care, and some other medical services that Part A does not cover). Neither Part A nor Part B pays for all of a covered person's medical costs. The program contains deductibles and co-pays (payments due from the covered individual). Previously, certain medical needs such as drug prescriptions were excluded. Beginning in January 2006, Medicare Part D will provide coverage for prescription drugs through a complex coverage model.

Medicare Part A: (Hospital Insurance) Premium Most people do not pay a monthly Part A premium because they or a spouse has 40 or more quarters of Medicare-covered employment. For Medicare eligible members who do not have 40 or more quarters of Medicare-covered employment, Part A may be purchased for a monthly premium of: ($206.00 per month in 2005) for people having 30-39 quarters of Medicare-covered employment. ($375.00 per month in 2005) for people who are not otherwise eligible for premium-free hospital
insurance and have less than 30 quarters of Medicare-covered employment.

Medicare Part B: (Medical Insurance) Premium 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. ($78.20 per month in 2005)

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.

Medicare also covers medical devices, such as scooters and power chairs for those with mobility impairments.

Part D: Medicare Part D went into effect on January 1, 2006. Anyone with Parts A and B is eligible for Part D. It was made possible by the passage of the Medicare Prescription Drug, Improvement, and Modernization Act.

Criticism

Like all health systems, whether funded and managed by governments or privately, Medicare faces continuing severe financing issues. In the United States, health care is a matter of intense continuing public debate. 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.

According to an article in the Journal of American Physicians and Surgeons, in a random sampling of questions asked to Medicare customer service representatives, 96% of the answers given were incorrect