The Medicare Essentials

The Medicare program was enacted by President Johnson in 1965 under Title XVIII of the Social Security Act to provide those over the age of 65 with health care, regardless of income or medical history. It is a single-payer program funded by the federal government through payroll taxes, premiums paid by beneficiaries, and general revenue.In 2016, the federal government spent $675 billion [or 15% of total federal spending] on Medicare coverage. 

Medicare currently provides health coverage to nearly 57 million individuals in three categories: who are over 65, those under 65 who receive social security disability insurance, and those under 65 with end-stage renal disease. In 2013, over one-third of Medicare beneficiaries had a cognitive/mental impairment (34%), functional impairment (36%), or more than five chronic conditions (30%). In addition, half of Medicare beneficiaries had an income below $26,200. 

Medicare benefits are categorized into Parts A-D, as detailed below.

  • Part A covers inpatient hospital stays, skilled nursing facility stays, some home health care, and hospice care.
  • Part B covers outpatient hospital services; physician visits; preventative services; some home health care; and other services including but not limited to x-rays, laboratory/diagnostic tests, some vaccinations, blood transfusions, renal dialysis, immunosuppressive drugs for organ transplant recipients, and chemotherapy.
  • Part C refers to the Medicare Advantage (MA) program that was enacted in 1997 to give Medicare beneficiaries the option of receiving their Parts A, B, and D benefits through private health insurance plans, such a health maintenance organization (HMO) or preferred provider organization (PPO). MA plans are required to offer coverage that meets or exceeds Medicare standards.
  • Part D was enacted in 2003 and went into effect in 2006. It offers prescription drug coverage for anyone with Part A or B and covers outpatient prescription drugs through private plans with a deductible, monthly premiums and cost sharing for prescriptions. Unlike Parts A and B, Part D plans (while approved and regulated by Medicare) are not standardized and can choose which drugs to cover within reason–plans must cover at least two drugs in 148 categories and cover nearly all (if not all) drugs in these protected classes: anti-cancer, anti-convulsant, anti-depressants, immuno-suppressant, and HIV/AIDS drugs.
  • Beneficiaries can also select a Medigap plan to help pay costs that Medicare does not cover, such as copayments, coinsurance, and deductibles.

Medicare faces many challenges in the coming years–namely how to provide affordable, quality healthcare to an aging population and secure financing for the future (you know, so the current generation of medical students can use Medicare!). The Affordable Care Act (ACA) introduced changes to improve Medicare benefits, slow spending growth, and improve quality of care. Stay tuned for more on these changes and an overview of how Medicare is financed.


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