What is Medicare? What are the components and how are they financed? What are the problems facing Medicare? What are your solutions?
Medicare is a federal program designed to provide healthcare coverage to the vulnerable populations. It is totally funded by the federal government and beneficiaries. The Federal government decides what gets covered under each program. President Lyndon Johnson on July 30, 1965 established the Medicare program under title 18 of the Social Security Act, providing services to elderly people over 65. Later in 1972 it was extended to population below 65 with permanent disabilities and special conditions like end-stage renal failure and in later it is also made available to people with amyotrophic lateral sclerosis(ALS). It covers individuals disregard of their income or medical history. Before 1965 most of the seniors lacked medical insurance. Where as today, almost all of them are insured under Medicare. Today Medicare covers 58 million people, among them 46 million are of age over 65 and 9 million are under the age 65 with permanent disabilities. Median age of the beneficiaries is 73 and 12% are over 85. According to the calculations made in 2015 federal government spent $632 billion, which is 15% of the Federal budget and 21% of the total national healthcare spending. Medicare is divided in to four components A, B, C, D.
Part A is known as Hospital Insurance program. It covers the expenses of inpatient hospital care, skilled nursing facility, hospice care and limited home health services. It is funded by dedicated tax of 2.9% paid by employers and employees, 1.45% each increasing to 2.35% in 2013. Individuals are enrolled to part A if they or their spouses have paid taxes for 10 years or more. Part B is known as Supplemental Medical Insurance program. It covers physician services, outpatient hospital care, selective diagnostic and preventive services, mental health and home health visits. This is funded by beneficiaries premium and general revenues.
The beneficiaries with high income pay a higher income related monthly premium for part B. Individuals receiving social security at age 65 are automatically enrolled in part B program unless they opt out. Part C is known as Medicare managed care program. It provides care through local managed care plans and is referred as Medicare Advantage. This is funded by the Medicare and premium paid by the beneficiaries. Medicare pays a capitated rate for each enrollee. Around 32% of Medicare beneficiaries are currently enrolled in Medicare advantage plans like HMO, PPO, ACO. Enrolling in part C is one’s personal choice and not automatically enrolled. Part D was enacted in 2003, it is known as Prescription Drug Benefit. It is funded by beneficiary premiums and general revenue. Enrolment is voluntary. This provides subsidies for individuals with low income and assets after means-testing. The benefits are delivered through private plans like stand-alone prescription drug plans or Medicare Advantage prescription drug plans who make a contract with Medicare.
Challenges facing Medicare: Funding becomes a problem as people covered under Medicare (age>65) are increasing day by day. High spending of federal budget on Medicare leading to less focus and less spending on other important sectors like defense, education etc. Beneficiaries facing high out-of-pocket costs. Medicare itself is going to face lack of funds in future and beneficiaries pay around 30% of healthcare out of pockets for premiums, services and products not covered by Medicare. These costs are expected to rise in future. Millions of people are about to enter Medicare this may result in fewer workers per retiree to fund Medicare.