Medicare Explained

Medicare is a health insurance program for the elderly and disabled in the USA. It was first passed on July 30, 1965 by President Lyndon Johnson as amendments to Social Security legislation.

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 [1]. 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 Medicrae 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.

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 Medcare 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.

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 powerchairs for those with mobility impairments.

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

more resources:

• Medicare
• Medicare Part D

Also see:
• What is APR

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This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Medicare United States".