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Medicare is a national social insurance program, administered by the U.S. federal government that guarantees access to health insurance for Americans ages 65 and older and younger people with disabilities as well as people with end stage renal disease. As a social insurance program, Medicare spreads the financial risk associated with illness across society to protect everyone, and thus has a somewhat different social role from private insurers, which must manage their risk portfolio to guarantee their own solvency. Medicare offers all enrollees a defined benefit. Hospital care is covered under Part A and outpatient medical services are covered under Part B. To cover the Part A and Part B benefit Medicare offers a choice between an open-network single-payer plan (traditional Medicare)and a network plan (Medicare Advantage, or Medicare Part C), where the federal government pays for private health coverage. A majority of Medicare enrollees have traditional Medicare (76 percent) over a Medicare Advantage plan (24 percent). Medicare Part D covers outpatient prescription drugs exclusively through private plans, either standalone prescription drug plans or through Medicare Advantage plans that offer prescription drugs A Medicare card, with several areas of the card obscured to protect privacy. There are separate lines for Part A and Part B, each with its own date. There are no lines for Part C or D, as a separate card is issued for those benefits by the private insurance company.
Program History
In 1965, Congress created Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. Before Medicare's creation, only half of older adults had health insurance, with coverage either unavailable or unaffordable to the other half. Older adults had half as much income as younger people and paid nearly three times as much for health insurance. Medicare also spurred the integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation. In 1972, Congress expanded Medicare eligibility to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments and those who have end-stage renal
disease (ESRD or Chronic kidney disease). Congress further expanded Medicare in 2001 to cover younger people with amyotrophic lateral sclerosis (ALS, or Lou Gehrigs disease). Initially Medicare consisted exclusively of Part A, which covers hospital and other inpatient services, and Part B, which covers outpatient care, physician visits, and other medically necessary services. Congress then added Medicare Part C (originally called Medicare plus Choice, then later changed to Medicare Advantage), which allows enrollees to receive their Medicare benefits through a private plan, under the Balanced Budget Act of 1997, while Medicare Part D was created under the Medicare Modernization Act of 2003. Regardless of a person's age, after receiving SSDI benefits for 24 months, they are eligible for Medicare, including Part A (hospital benefits), Part B (medical benefits), and Part D (drug benefits). The date of Medicare eligibility is measured from the date of eligibility for SSDI (generally 6 months after the start of disability), not the date when the first SSDI payment was received.
Administration
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). The Social Security Administration is responsible for determining Medicare eligibility and processing premium payments for the Medicare program.
Eligibility
In general, all persons 65 years of age or older who have been legal residents of the United States for at least 5 years are eligible for Medicare. People with disabilities under 65 may also be eligible if they receive Social Security Disability Insurance (SSDI) benefits. Specific medical conditions may also help people become eligible to enroll in Medicare. People qualify for Medicare coverage, and Medicare Part A premiums are entirely waived, if the following circumstances apply: 1. They are 65 years or older and U.S. citizens or have been permanent legal residents for 5 continuous years, and they or their spouse has paid Medicare taxes for at least 10 years. Or 2. They are under 65, disabled, and have been receiving either Social Security SSDI benefits or Railroad Retirement Board disability benefits; they must receive one of these benefits for at least 24 months from date of entitlement (first disability payment) before becoming eligible to enroll in Medicare. Or 3. They get continuing dialysis for end stage renal disease or need a kidney transplant. Or 4. They are eligible for Social Security Disability Insurance and have amyotrophic lateral sclerosis (known as ALS or Lou Gehrig's disease). Those who are 65 and older must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid Medicare taxes over the course of 10 years while working. People with disabilities who receive SSDI are eligible for Medicare while they continue to receive SSDI payments; they lose eligibility for Medicare based on disability if they stop receiving SSDI. The 24 month exclusion means that people who become disabled must wait 2 years before receiving government medical insurance, unless they have one of the listed diseases . Some beneficiaries are dual-eligible. This means they qualify for both Medicare and Medicaid. In some states for those making below a certain income, Medicaid will pay the beneficiaries' Part B premium for them (most beneficiaries have worked long enough and have no Part A premium), as well as some of their out of pocket medical and hospital expenses.
Benefits
Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers prescription drugs. Medicare Advantage plans, also known as Medicare Part C, are another way for beneficiaries to receive their Part A, B and D benefits. All Medicare benefits are subject to medical necessity. The original program included Parts A and B. Part D was introduced January 1st, 2006; before that, Parts A and B covered prescription drugs in a few special cases.
(LMRP) was superseded by LCDs in 2003. Coverage information is also located in the CMS Internet-Only Manuals (IOM), the Code of Federal Regulations (CFR), the Social Security Act, and the Federal Register.
Social insurance
Social insurance is any government-sponsored program with the following four characteristics: 1. The benefits, eligibility requirements and other aspects of the program are defined by statute; 2. explicit provision is made to account for the income and expenses (often through a trust fund); 3. it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and 4. the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most eligible individuals choose to participate. Social insurance has also been defined as a program where risks are transferred to and pooled by an organization, often governmental, that is legally required to provide certain benefits.
Coordination of coverage
An individual covered under COBRA may also be covered by another group health plan or Medicare as long as one of two conditions is met: 1. The other coverage was in force as of or prior to the coverage under COBRA, or, 2. The other coverage is subject to pre-existing conditions exclusions or limitations.
Medigap
Medigap (also Medicare supplement insurance or Medicare supplemental insurance) refers to various private supplemental health insurance plans sold to Medicare beneficiaries in the United States that provide coverage for medical expenses not or only partially covered by Medicare. Medigap's name is derived from the notion that it exists to cover the difference or "gap" between the expenses reimbursed by Medicare and the total amount charged. A person must be enrolled in part A and B of Medicare before they can enroll in a Medigap plan. During the open enrollment period which begins within 6 months of turning 65 or enrolling in Medicare Part B at 65 or older, a person may obtain a Medigap plan on a guaranteed issue basis (i.e. no medical screening required). Outside of open enrollment, the issuing insurance company may require medical screening and may obtain an attending physician's statement if necessary. Medigap insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan. Recipients of Social Security Disability Insurance (SSDI) benefits or patients with end-stage renal disease (ESRD) are entitled to Medicare coverage regardless of age, but are not automatically entitled to purchase Medigap policies unless they are at least 65. Under federal law, insurers are not required to sell Medigap policies to people under 65, and even if they do, they may use medical screening. However, a slight majority of states require insurers to offer at least one kind of Medigap policy to at least some Medicare recipients in that age group. Of these states, 25 require that Medigap policies be offered to all Medicare recipients. In California, Massachusetts, and Vermont, Medigap policies are not available to ESRD patients; in Delaware, Medigap policies are available only to ESRD patients. Medigap offerings have been standardized by the Centers for Medicare and Medicaid Services (CMS) into ten different plans, labeled A through N, sold and administered by private companies. Each Medigap plan offers a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medigap plans (these 'older' plans are no longer marketed) offering minimal benefits will cost more than current plans offering full benefits. The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group. Since Medigap is private insurance and not government sponsored, the rules governing the sale and offerings of a Medigap insurance policy can vary from state to state. Some states such as Massachusetts, Minnesota, and Wisconsin require Medigap insurance to provide additional coverage than what is defined in the standardized Medigap plans. Some Medigap policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medigap policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.
Under the new law, there is no government alternative to the private system--this was a potential provision that was dropped during the congressional tussle--but the number of people who qualify for the existing federal-state Medicaid program for the poor will be expanded. States (or the federal government) will run "exchanges" -- essentially marketplaces -- in which private insurers will sell insurance to individuals and small businesses, but this should mean more people will get private insurance, not fewer. Tax credits will also be offered to people who have trouble buying private insurance. Certainly, the law bolsters government regulation of the health care system, such as forcing insurance companies to no longer deny coverage to people who have existing medical conditions. People who currently do not have health insurance will be required to buy it. But the core of the health system in the United States will remain the existing private insurance market. The Patient Protection and Affordable Care Act (PPACA) informally referred to as Obamacare, is a United States federal statute signed into law by President Barack Obama on March 23, 2010. PPACA requires individuals not covered by employer- or government-sponsored insurance plans to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship, a provision commonly referred to as the "individual mandate". PPACA includes numerous provisions to take effect over several years beginning in 2010. Guaranteed issue and partial community rating will require insurers to offer the same premium to all applicants of the same age and geographical location without regard to most pre-existing conditions (excluding tobacco use). A shared responsibility requirement, commonly called an individual mandate, requires that all persons not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs, purchase and comply with an approved private insurance policy or pay a penalty, unless the applicable individual is a member of a recognized religious sect exempted by the Internal Revenue Service, or waived in cases of financial hardship. Medicaid eligibility is expanded to include all individuals and families with incomes up to 133% of the poverty level along with a simplified CHIP enrollment process. Health insurance exchanges (HIE) will commence operation in each state, offering a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance (with a government subsidy if eligible). Low income persons and families above the Medicaid level and up to 400% of the federal poverty level will receive federal subsidies on a sliding scale if they choose to purchase insurance via an exchange (persons at 150% of the poverty level would be subsidized such that their premium cost would be of 2% of income or $50 a month for a family of 4). Minimum standards for health insurance policies are to be established and annual and lifetime coverage caps will be banned. Firms employing 50 or more people but not offering health insurance will also pay a shared responsibility requirement if the government has had to subsidize an employee's health care.
Very small businesses will be able to get subsidies if they purchase insurance through an exchange. Co-payments, co-insurance, and deductibles are to be eliminated for select health care insurance benefits considered to be part of an "essential benefits package" for Level A or Level B preventive care. Changes are enacted that allow a restructuring of Medicare reimbursement from "fee-for-service" to "bundled payments. Additional support is provided for medical research and the National Institutes of Health.
Summary of funding
The Act's provisions are intended to be funded by a variety of taxes and offsets. Major sources of new revenue include a much-broadened Medicare tax on incomes over $200,000 and $250,000, for individual and joint filers respectively, an annual fee on insurance providers, and a 40% tax on "Cadillac" insurance policies. There are also taxes on pharmaceuticals, high-cost diagnostic equipment, and a 10% federal sales tax on indoor tanning services. Offsets are from intended cost savings such as improved fairness in the Medicare Advantage program relative to traditional Medicare. Summary of tax increases: Broaden Medicare tax base for high-income taxpayers: $210.2 billion Annual fee on health insurance providers: $60 billion 40% excise tax on health coverage in excess of $10,200/$27,500: $32 billion Impose annual fee on manufacturers and importers of branded drugs: $27 billion Impose 2.3% excise tax on manufacturers and importers of certain medical devices: $20 billion Raise 7.5% Adjusted Gross Income floor on medical expenses deduction to 10%: $15.2 billion Limit contributions to flexible spending arrangements in cafeteria plans to $2,500: $13 billion All other revenue sources: $14.9 billion
Provisions
Effective at enactment
The Food and Drug Administration is now authorized to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed. The Medicaid drug rebate for brand name drugs is increased to 23.1% (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1%), and the rebate is extended to Medicaid managed care plans; the Medicaid rebate for non-innovator, multiple source drugs is increased to 13% of average manufacturer price.
composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.
Revenue increases from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs. Establish health insurance exchanges, and subsidization of insurance premiums for individuals in households with income up to 400% of the poverty line. To qualify for the subsidy, the beneficiaries cannot be eligible for other acceptable coverage. Members of Congress and their staff will only be offered health care plans through the exchange or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use). A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue. Most medical devices become subject to a 2.3% excise tax collected at the time of purchase. (Reduced by the reconciliation act to 2.3% from 2.6%) Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue. The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5% to 10% of earned income
Effective by 2018
All existing health insurance plans must cover approved preventive care and checkups without co-payment. A new 40% excise tax on high cost ("Cadillac") insurance plans is introduced. The tax (as amended by the reconciliation bill) is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their
employees may value their coverage using the age and gender demographics of a national risk pool.
Effective by 2020
The Medicare Part D coverage gap (aka "donut hole") would be completely phased out and hence closed.
According to the Centers for Medicare and Medicaid Services, by 2019 the Act will increase expenditures on Medicaid and individual subsidies by $165 billion annually while reducing Medicare expenditures by $125 billion annually.