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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

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.