Medicare and Medicaid

Medicare:  $602 billion in net outlays;  15% of the budget

  • Medicare is a national health insurance entitlement program for nearly all Americans 65 and older.
  • The program also covers workers who have become disabled and people diagnosed with end-stage renal disease or amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).
  • Medicare has four parts:
    Part A Hospital Insurance (HI), financed by current workers’ payroll taxes and covers hospital services, post-hospital services, and hospice care;
    CRS: Medicare Part A_Page 7
    CRS: Medicare Insolvency Projections
    CRS: Medicare Skilled Nursing Facility Primer–Benefit Basics and Issues
    Part B Supplementary Medical Insurance (SMI), financed by general tax revenues and premiums, and provides optional coverage for physician services, outpatient hospital care, home health care and medical equipment;
    CRS: Medicare Part B Premiums
    CRS: Medicare Home Health Benefit Primer (Parts A and B)
    Part C “Medicare Advantage”provides managed care options for beneficiaries enrolled in Parts A and B;
    CRS Medicare Advantage_Page 17
    Part D Prescription Drug Coverage, financed by general tax revenues and premiums, and provides optional prescription drug coverage for the elderly and disabled.  CRS Medicare Part D Prescription Drug Benefit
  • Medicare pays doctors, hospitals, and most other providers using a “prospective payment system” under which predetermined payment amounts are established for specific services, with annual “updates” and limitations on patient cost-sharing (deductibles, coinsurance, and co-payments).
  • Medicare was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under the age of 65.
  • The program is administered by the Centers for Medicare & Medicaid Services (CMS), and by private entities that contract with CMS to provide claims processing, auditing, and quality control services.
  • In FY 2016, the program covered approximately 57 million persons (48 million aged and 9 million disabled).
  • Spending under the program (except for a portion of administrative costs) is considered “mandatory” spending, i.e. it is not subject to annual appropriations decisions.
  • Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met; this is what makes Medicare an “entitlement.”
  • The Affordable Care Act (ACA) (P.L. 111-148 and P.L. 111- 152) 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.
    CRS Medicare in the ACA
  • More recently, the Medicare Access and CHIP Reauthorization Act of 2015 (also known as the “Doc Fix” or “SGR Repeal”) changed the method for calculating updates to Medicare payment rates to physicians and altered how physicians and other practitioners will be paid in the future.
  • Solvency:  the Medicare program is expected to require modifications in order to be financially sustainable in the long run. The Hospital Insurance (Part A) trust fund has been estimated to become insolvent in 2030. Additionally, although the Supplementary Medical Insurance (Part B) trust fund is financed in large part through federal general revenues and cannot become technically insolvent, spending growth is expected to put increasing strains on the country’s ability to finance the benefits.  CRS Medicare Financial Status in Brief
  • CRS: Medicare Primer
  • Kaiser Family Foundation: Medicare Primer 
  • CBO: Medicare Overview
  • CRS: Medigap Primer
  • CRS: Medicare Access and CHIP Reauthorization Act (aka “MACRA” “SGR Repeal” “Doc Fix”)
  • CBO: Medicare Pages
  • CBO: New Projections on Raising Medicare Age Finds Less Savings
  • CBO: A Premium Support System for Medicare – Illustrative Options
  • Ways and Means Committee:  Medicare Legislative History

Medicaid:  $377 billion in outlays;  10% of the budget

  • Brief Overview: Medicaid is a joint federal-state program that pays for health care services for low-income Americans.
  • Unlike Medicare, which is available without regard to income, Medicaid is designed primarily for people who have incomes at or below the Federal Poverty Level (FPL).
  • To qualify for Medicaid, beneficiaries must also fall within one of the several dozen specific eligibility categories that divide into three general groups: (1) families with children, (2) elderly people, and (3) people with mental or physical disabilities.
  • While the Federal government usually pays more than half the cost of Medicaid services, the program itself is administered by the States—subject to minimum Federal requirements on basic benefits that must be provided.
  • Medicaid pays for a broad range of services with an emphasis on: comprehensive care for children; mental health services; and long-term care for the elderly and disabled.
  •  As a result of the Affordable Care Act (ACA) and a subsequent Supreme Court ruling, each state has the option to expand eligibility for Medicaid to all nonelderly adults with income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level, or FPL). The people who will be newly eligible for Medicaid consist primarily of non-elderly adults with low income.  CRS: ACA Medicaid Expansion
  • The federal government’s share of Medicaid’s spending for benefits varies among the states. That share historically has averaged about 57 percent. Beginning in calendar year 2014, the federal government pays all of the costs of covering enrollees newly eligible under the ACA’s coverage expansion. From 2017 to 2020, the federal share of that spending will decline gradually to 90 percent, where it will remain thereafter. According to CBO’s estimates, those changes will result in a federal share of Medicaid’s spending that averages 60 percent by 2020.
  • Under the terms of Federal funding, required Medicaid services include inpatient and outpatient hospital services, services provided by physicians and laboratories, and nursing home and home health care.
  • Groups that must be eligible for Medicaid include children in low-income families and families who would have qualified for the former Aid to Families with Dependent Children program, certain other children in low-income families and pregnant women, and most elderly and disabled individuals who qualify for the Supplemental Security Income program.
  • States may choose to make additional groups of people eligible (such as individuals with income above the standard eligibility limits and those who have high medical expenses relative to their income) or to provide additional benefits (such as coverage for prescription drugs and dental services), and they have exercised those options to varying degrees.
  • Many states seek and receive federal waivers that allow them to provide benefits and cover groups that would otherwise be excluded.
  • Currently, almost half of Medicaid’s enrollees are children in low-income families, and just under one-third are either the parents of those children or low-income pregnant women.
  • The elderly and disabled constitute the remaining almost one-quarter of enrollees.  Expenses tend to be higher for beneficiaries who are elderly and disabled, many of whom require long-term care, than for other beneficiaries. In 2012, about 32 percent of federal Medicaid spending for benefits was for long-term services and supports, which include institutional care provided in nursing homes and other facilities as well as care provided in a person’s home or in the community. Overall, the elderly and disabled account for almost two-thirds of Medicaid’s payments for benefits.
  • CBO: Overview of the Medicaid Program
  • CRS Medicaid Primer
  • Kaiser Family Foundation: Medicaid Primer

Medicare v. Medicaid

  • Medicare is an entitlement based on age (65 or older) or disability without regard to income;  Medicaid is a means-tested entitlement where eligibility is based on being at or near the Federal poverty level.
  • Medicare is a health insurance program similar to private sector health insurance, with specified coverage and beneficiary cost-sharing;  Medicaid is a health coverage program where States pay healthcare providers for services on behalf of beneficiaries, usually without any cost-sharing.
  • Medicaid assists millions of low-income Medicare enrollees (called “dual eligibles”) by paying Medicare premiums, deductibles and coinsurance.
  • Medicare is funded by federal payroll (HI) taxes, general tax revenues, and premiums; Medicaid is funded jointly by the Federal and State governments.
  • Medicare is national health insurance administered by the Federal Centers for Medicare and Medicaid (CMS); Medicaid is administered by the States.