"Today, one in seven Americans receive Medicare benefits. This number grows daily as does the gap in funding. We cannot wait any longer to put politics aside and have an honest, straight-forward conversation about how we can save Medicare."
Common Questions about Medicare
(SOURCE : Congressional Research Service report “Medicare Primer”)
Thoughts on Medicare
Medicare is a very important program upon which millions of Americans rely. When the Medicare program was created in 1965, it was based on versions of health insurance which were available at that time. Clearly, health care has changed a lot since then, and Medicare should be reformed and updated to reflect the nature of health care today. Reform is challenging because of the rapid increases in medical costs, but action must be taken to preserve this program for current beneficiaries and to strengthen it for future generations.
The proposal in the fiscal year 2015 House-passed proposes reforms to Medicare that would give younger beneficiaries who become eligible for Medicare beginning in 2024 the option of choosing among several private plans or traditional Medicare through a newly created Medicare Exchange. Plans would have to accept all people eligible for Medicare who apply, regardless of age or health status. Medicare would provide a premium-support payment that would pay for or offset the premium, depending on the cost of the plan chosen by the senior. Low-income seniors would receive additional assistance to help cover costs and wealthier seniors would have to pay more.
I believe that it is important to face these challenges openly and honestly. It is wrong to scare seniors when their benefits will not be affected. It is also wrong to pretend that there is no problem and that nothing needs to change. I am hopeful that we can take action now that will ensure that these programs contribute to our national quality of life for many years to come.
What is Medicare?
Medicare is a federal insurance program that pays for some health services of qualified citizens. It was established in 1965 under the Social Security Act as a federal entitlement program meant to provide health insurance to individuals 65 and older. In recent years, Medicare has been expanded to include some disabled individuals under the age of 65.
Medicare is comprised of four parts (A-D), covering hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services.
What are the four different parts of Medicare?
Part A: Hospital services, skilled nursing care, and home health and hospice care. Medicare Part A is mainly funded by a dedicated payroll tax of 2.9% of earnings, shared equally between employers and workers. You must pay into the system for 40 quarters before being eligible.
Part B: Covers physician services, outpatient services, and some home health and preventive services. Part B is voluntary, meaning you must enroll by choice, and it is funded through beneficiary premiums (set at 25% of estimated program costs for the aged) and general revenues (the remaining amount, approximately 75%).
Part C: Also known as Medicare Advantage (MA), Part C is a private plan option for beneficiaries that covers all Part A and B services, except hospice. Individuals choosing to enroll in Part C must also enroll in Part B. Part C is primarily funded through the Hospital Insurance and Supplementary Medical Insurance funds. These members may choose to enroll in a private health plan and then Medicare pays a set amount to cover the expenses of the private fund leaving the beneficiary with a smaller copayment.
Part D: covers prescription drug benefits. Funding is included in the Supplementary Medical Insurance trust fund and is financed through beneficiary premiums (about 25.5%) and general revenues (about 74.5%). Part D provides coverage of outpatient prescription drugs to Medicare beneficiaries who choose to enroll.
What is “Medicare Advantage?”
Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits.
Under Medicare Advantage, private health plans are paid as a per-person amount to provide all Medicare covered benefits (except hospice) to people who enroll in their plan. Some plans under Medicare Advantage, such as health maintenance providers (HMOs), may require enrollees to receive care from a restricted network of medical providers; enrollees may be required to see a primary care physician who will coordinate their care and refer them to specialists as necessary.
Other types of private plans, such as private fee-for-service (PFFS) plans, may look more like original Medicare, with fewer restrictions on the providers an enrollee can see and minimal coordination of care.
In general, MA plans offer additional benefits or require smaller co-payments or deductibles than original Medicare. Sometimes beneficiaries pay for these additional benefits through a higher monthly premium, but sometimes they are financed through plan savings.
Who is eligible for Medicare?
Individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States.
Individuals may also qualify for Medicare coverage if they are a younger person with a permanent disability, have End-Stage Renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, Lou Gehrig’s disease). In addition, individuals with one or more specified lung diseases or types of cancer who lived for six months during a specified period prior to diagnosis in an area subject to a public health emergency declaration by the Environmental Protection Agency (EPA) as of June 17, 2009, are also deemed entitled to benefits under Part A and eligible to enroll in Part B.
How many people are enrolled in Medicare? How much does it cost to keep the program operational?
Medicare is an entitlement program, which means the government is required to pay for covered services provided to eligible persons so long as specific criteria are met.
Medicare currently serves approximately one in seven Americans and virtually all of the population aged 65 and over.
In FY2011, the program will cover an estimated 48 million persons (40 million aged and 8 million disabled) at an estimated total cost of about $569 billion, accounting for approximately
3.7% of GDP.
How has Medicare changed since 1965?
Since 1965, the Medicare program has undergone considerable change.
The Medicare Prescription Drug, Improvement, and Modernization Act (also called the Medicare Modernization Act or MMA created Medicare Part D, which provides coverage of outpatient prescription drugs to Medicare beneficiaries who choose to enroll in this optional benefit. The law, which passed Congress in 2003, produced the largest overhaul of Medicare in the program's history.
Part D plans must meet certain minimum requirements; however, there are significant variations among them in benefit design, including differences in premiums, drugs included on plan formularies, and cost-sharing for particular drugs. Medicare's payments to plans are determined through a competitive bidding process, and enrollee premiums are tied to plan bids. Part D also provides enhanced coverage for low-income enrolled individuals.
In 2010, the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152), were signed into law.
They made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits.
In addition, there were a number of laws, especially during the 1980s and 1990s, which included provisions designed to further stem the rapid increase in program spending though modifications to the way payments to providers were determined, and to postpone the bankruptcy of Medicare Part A.
What is predicted to happen to Medicare in the future?
In the absence of congressional action, the Medicare program will be unsustainable in the long run. The Part A trust fund has been estimated to go broke in 2024. And although the Part B trust fund is financed in large part through federal general revenues and cannot become insolvent, Medicare spending growth and other massive government spending projects will put increasing strains on Congress’s competing priorities.
Information Source: Information from the Congressional Research Service report “Medicare Primer.”