Medicare and Medicaid by Daniel Buhr
The following
paper is a descriptive approach to one part of the
U.S.-American health-system: the Medicare and Medicaid program.
Considering the density of the topic and the following
‘paper’, I hope it won’t impair a fruitful
discussion in the news-group, but provides us with some facts and
figures as a basic fundamental knowledge (of this part) of the
American health-system, and therefore might lead to some
interesting theses and arguments instead.
Since early in this century, health care issues have continued to intensify in importance for the United States of America. After years and decades of national discussion and debate, after consideration of various approaches, U.S. Congress finally passed legislation in 1965, establishing the Medicare and Medicaid programs of the so called Social Security Act. While Medicare was established in response to the specific medical care needs of the elderly (and since 1973 the severely disabled and certain persons with kidney disease as well), Medicaid was installed in response to the widely perceived inadequacy of ‘welfare medical care’ under public assistance. In 1977, the Health Care Financing Administration (HCFA) was established under the Department of Health and Human Services in order to administer those two programs mentioned above.
In 1996 Medicare
and Medicaid together financed $351 billion in health care
services, which is more than one-third of the nation’s total
health care bill and almost three-quarters of all public spending
on health care. Since their enactment, both Medicare and Medicaid
have been subject to numerous legislative and administrative
changes.
Medicare consists of two primary parts: Hospital Insurance,
also known as ‘Part A’, and Supplementary Medical
Insurance (‘Part B’). In 1997 a third part of
Medicare was established by the Balanced Budget Act and began to
provide services on January 1, 1998: the Medicare+Choice
program, sometimes known as ‘Part C’. In 1997,
about 38 million persons were enrolled in one or both of parts A
and B of the Medicare program, from which 87 percent (of all
Medicare ‘enrollees’) used some service. The program
covers approximately 95 percent of U.S.A.’s aged population,
plus many of those eligible persons who are on Social Security
because of disability. Part A covered 38 million enrollees at a
cost of $137.8 billion, and Part B 36 million enrollees at a cost
of $72.8 billion in 1997.
Part A, Hospital Insurance, covers the following health care services:
Part B, Supplementary Medical Insurance benefits, are available to almost all resident citizens age 65 and over, its coverage is optional and requires payment of a monthly premium. While Part B of the Medicare program is primarily thought of as coverage for physician services, it also covers certain other non-physician services as for instance clinical laboratory tests, durable medical equipment, ambulance services and others. As both expenditures like surgical centers or hospital costs and Home Health Agency services are paid by the program, certain medical services and related care, however, are subject to special payment regulations including deductibles (i.e. for blood) or maximum approved amounts (for independently practicing therapists) etc.
Part C, Medicare+Choice, is another option provided by
the Balance Budget Act of 1997. Under this act, Medicare
beneficiaries who have both Part A and B can choose to get their
benefits through a variety of risk-based plans. These primary
Medicare+Choice plans are coordinated care plans, private
unrestricted fee-for-service plans (which allows beneficiaries to
select certain private providers) and the Medical Savings Account
plan (which allows a limited number of beneficiaries to enroll in
a plan with high-deductible).
Prepaid health care plans (i.e. competitive medical plans (CMPs)
and health maintenance organizations (HMOs)) are also options for
Medicare beneficiaries, as they are able to pick a specific HMO,
CMP, or another approved plan within a service area for
comprehensive health care services; however, this selected plan
has to coordinate all of the person’s health care services.
Non-covered services under Medicare include long term nursing
care or custodial care, and certain other health care needs (such
as dental care, eyeglasses, hearing aids, most prescription drugs
etc.).
All financial operations for Medicare are handled through two trust funds, one for the Hospital Insurance (HI) and one for Supplementary Medical Insurance (SMI). The hospital insurance trust fund money is used only for the HI program, and the SMI trust funds cannot be transferred for HI use.
The Medicare Part A program (Hospital Insurance) is primarily paid through mandatory payroll deduction (‘FICA tax’). The FICA tax is 1.45 percent of earnings (paid by each employee and by employer for each) - as well as 2.9 percent for self-employed persons. Nowadays (since 1994) this tax is paid on all covered wages and self-employment income without limit.
Financing of the Medicare Part B program (SMI) looks different: on the one hand it is collected through premium payments ($43.80 per month in 1998) which are usually deducted from the monthly Social Security benefit checks of those who are enrolled in the SMI program, on the other hand through contributions from general revenue of the U.S. Treasury.
Part C (Medicare+Choice) has rather complex financing depending upon what kind of plan (which I mentioned earlier) the beneficiary took.
Over all, beneficiaries are responsible for charges not
covered by the Medicare program, and for various cost-sharing
aspects of both HI and SMI. These liabilities may be paid by the
Medicare beneficiary, by a third party (such as additional
private insurance, so called ‘Medigaps’) or by
Medicaid, if the person is eligible. While for hospital care (HI)
the beneficiary has to pay a one-time deductible amount at the
beginning of each benefit period ($764 in 1998), the
beneficiary’s payment share for SMI includes diverse
deductibles (i.e. annual deductible, deductible for blood etc.).
The Department of Health and Human Services (DHHS) has the
overall responsibility for administration of the Medicare program
- with assistance of the Social Security Administration (SSA).
The Health Care Financing Administration (HCFA) is a component of
DHHS and has the primary responsibility for Medicare, while SSA
is responsible for the initial determination of an
individual’s Medicare entitlement. A Board of Trustees
oversees the financial operations for both trust funds (HI and
SMI); its managing trustee is the Secretary of the Department of
Treasury.
Some estimations project that the Medicare trust fund of Part A (HI), financed by the Medicare portion of the Social Security payroll tax, will only last until the year 2007, while Part B (SMI) of the trust fund can theoretically last forever, because of its largely financing through automatic (unlimited) withdrawals from general revenues.
Not just because of improved medical
technology, people are living longer and therefore face higher
medical costs as they age. For that reason the cost of (Medi)care
grows much faster than general inflation and faster than economy
as a whole. An increased payroll tax could solve the immediate
year 2007 problem, but Republicans are strongly opposed to this
idea and many Democrats aren’t too happy with it either.
Nevertheless, The National Bipartisan Commission on the Future of
Medicare was directed to come up with recommendations by March 1,
1999. Some say, whatever the outcome, the panel’s report
will be the starting point for this ongoing debate once again.
Medicaid is a jointly funded cooperative federal and state program paying medical assistance for certain vulnerable and needy individuals and families with low incomes and resources; it is the largest source of funding for medical and health-related services for America’s poorest people.
Within broad national guidelines established by Federal statutes, regulations and policies each state has to establish its own eligibility standards; furthermore each state determines the type, amount, duration, and scope of services, sets the rate of payment for services while administering its own program. Interesting that Medicaid’s policies for eligibility, services, and payment are not only complex, but vary even among similar-sized or neighboring States. Thus, a person who is eligible for Medicaid in one State might not be eligible in another (neighboring) State. In addition to that, Medicaid eligibility or services can change within a State during the year.
But Medicaid does not provide medical assistance for all poor persons. As low income is only one test for Medicaid eligibility within those groups listed below, their resources are also tested against threshold levels as determined by each state (within Federal guidelines). Categorically eligible groups for Medicaid are:
In addition to that a broad variety of optional eligible
groups (depending on the specific State) exists (i.e.
‘Medically Needy’ program).
The Social Security Act allows much flexibility within the
States’ Medicaid plans. Nevertheless, a State’s
Medicaid program has to offer medical assistance for certain
basic services to the most categorically needy population, for
example: in- and outpatient hospital services, prenatal care,
physician services, nursing facility services, laboratory and
x-ray services etc. Furthermore a lot of States provide optional
services like diagnostic and clinic services, (intermediate)
facilities for mentally retarded people, eyeglasses,
transportation, rehabilitation and physical therapy services and
others. A special State option within the Medicaid (and Medicare)
program of the Balanced Budget Act is PACE (Programs of
All-inclusive Care for Elderly), which provides an alternative to
institutional care for persons aged 55 and over who require
special nursing care. The individuals enrolled in PACE receive
benefits solely through the PACE program.
States are allowed to pay health care providers directly or
through various prepayment arrangements (as HMOs). However,
States may impose deductibles, coinsurance or co-payments on some
Medicaid recipients for certain services. As a cooperative
venture between States and Federal government, a share -known as
the Federal Medical Assistance Percentage (FMAP)- is paid by the
Federal government.
Actually, Medicaid was initially established as a care extension of Federally-funded programs proving cash income assistance for the poor, with a special focus on dependent children and their mothers, the disabled, and, of course, the elderly. But over the years, Medicaid eligibility has been expanded, and therefore its expenditures increased a lot as well. The primary factors of that rapid growth are, first of all, the expanded coverage and utilization of services, and the increase in the size of the Medicaid-covered populations. Certainly, like in Germany, the numbers of very old and disabled persons requiring extensive health care increased, as the results of technological advances did, too.
However, as with all health insurance programs, most Medicaid recipients require relatively small expenditures per person each year; that’s why the average Medicaid recipient in 1996 ‘cost’ $3,400. With the percentage of the U.S. population who are elderly and/or increasing faster than the younger groups, the need for long term care is expected to increase, and so will the average expenditure. Medicaid data as reported by the States show that more than 36 million persons received health care service through Medicaid program in 1996, with a total expenditure of $160 billion of which $91 billion was paid by the Federal government, while $69 billion were funded by the State. Estimations foresee that in fiscal year 2003 Medicaid outlays will be $250 billion.
The ‘crisis’ of the U.S.-American health-system finds its origin in the incapacity of the system to control immanently those developments, that could firstly impair extraordinary the system’s capacity, and then affect the stability of the system. Central problems of this development are on the one hand the phenomena of less- and non-insurance coverage, and on the other hand the ‘explosion’ of (health) costs. In comparison to Germany, France or Canada (all ‘equipped’ with a general (federal) public health-insurance) the United States have to spend a much higher percentage of their Social Budget for ‘health’ (approximately 14%). In 1996 the total spending for health care broke the $1.0 trillion mark - for the 275 million persons residing in the United States, the average expenditure for health care was $3,579 per person. An amount that is funded through a wide range of private payers and public programs. For the last years the private share of health expenditures had dropped to almost 50% of the Nation’s total health care expenditures, while the share of health care provided by public spending increased correspondingly. And so did the largest shares of public health costs: the Medicare and Medicaid programs.
For that reason the American health-system is more and more prevailed by the government, although most of the citizens are still insured (-if they are-) privately. Obviously it is a system of mixture - like the U.S.-American economy.