The ABCDs of Medicare

Commentary by Vlad Fridman MD, PGY-3

On July 30, 1965, then president Lyndon B. Johnson signed into law an amendment to the Social Security legislation establishing a national health care program for the elderly called Medicare. In fact, at the signing, former president Harry S. Truman was enrolled as the first Medicare beneficiary and received the first Medicare card. Then it was simple. Currently, Medicare is a complicated health insurance program that is comprised of multiple parts, various co-payment and deductible schedules, and also separate plans and additional coverage plans offered by private health insurance companies. In the United States, Medicare is available to US citizens or permanent residents who are in the country for 5 years or more, and who are 65 years or older, those less than 65 years or who have been receiving social security disability benefits, and people with end stage renal disease or ALS.

First, let’s talk about all the parts of Medicare. The original Medicare program had two parts: Part A and Part B. Part A covers hospital stays and skilled nursing facility costs. However, certain criteria must be met for coverage to be valid. The hospital stay needs to be more than 3 days, and if a nursing facility is necessary, it must be as a consequence of the condition diagnosed during the hospitalization. Furthermore, a specific nursing skill need must be present for the nursing home stay to be covered. Nursing home visits due to non-skilled requirements, such as for activities of daily living, are not covered under Medicare A. Part B covers most services that are performed on an outpatient basis. Doctor’s visits, x-rays, laboratory tests, durable medical equipment such as canes and walkers, medications given during doctor visits such as chemotherapy and many similar services are covered under Medicare Part B.

Medicare Part C was initiated after the passage of the Balanced Budget Act of 1997, and its goal was to provide more options to patients by allowing private health insurance companies to offer Medicare-based health insurance plans. These plans are highly regulated by the government, however they have different coverage guidelines than Medicare part A and B. Companies that offer Part C plans obtain a specific per-person sum of money from the U.S. government, and then redistribute it to meet certain health care goals and not others. For example, an individual with a part C plan might have much less co-payments and deductibles on routine medical care, but have to pay much more for a skilled nursing facility (if the need arises for such a facility) than he would have to pay under regular Medicare.

In January 2006, Medicare Part D became active, creating the first ever Medicare-based prescription drug plan. This part of Medicare is administered through private health insurance companies, and no specific governmental guidelines exist about what drugs, or class of drugs, must be covered. Although Medicare regulates part D plans, the many available drug plans vary widely in their coverage and fees, and require a lot of research by the subscribers prior to choosing the optimum plan for their medical and financial situations.

The cost schedules associated with Medicare are as complicated as all of the parts that make it up. Part A is free, unless the recipients have less than 40 quarters Medicare-taxed employment in their lifetime. In this case, the recipients can expect to pay a premium of $233 per month if they have 30-39 quarters of contributing into Medicare, or $423 if they have less than 39 quarters of Medicare-taxed employment (based on 2008 figures). The deductibles for hospital stays and other covered expenses under Part A are high, and can reach as high as $1,000. The standard premium for part B is $96.40 (2008 data), however higher premiums are charged to individuals who have an annual income higher than $80,000 or couples whose annual income is higher than $160,000. Part C and Part D costs are based on the specific plans that the individuals sign up for. Recipients can also sign up for additional Medicare coverage under Medigap plans, which are separate private company plans that charge premiums and aim to cover the co-payments and deductibles that are associated with Medicare, as well as some non-Medicare covered treatments.

Overall, the Medicare program attempts to provide medical coverage to the elderly and to the disabled. However, as the population gets older, the baby boomer generation goes into retirement, and as the number of Medicare tax-paying employees gets lower, the Medicare program might head into a financial crisis. In fact, trustees for Medicare just issued their annual analysis, warning that Medicare funds are expected to be depleted by 2019. Even more concerning, within the year, Medicare is expected to begin paying out more than it collects in taxes. Until the program is changed though, the ABCDs of Medicare will be an important part of the health care insurance plan of every eligible senior or disabled person in America.

Information for this blog entry has been obtained from:
1. The Official U.S. Government Site for People with Medicare. www.medicare.gov
2. The Senior Resource Center for Medicare Information. www.medicare.org
3. U.S. Department of Health and Human Services. www.cms.hhs.gov
4. Wikipedia-Medicare (United States). www.en.wikipedia.org

Share: Twitter | Facebook | Email