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OHA Federal Advocacy
Primer on Medicare
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What is Medicare? Medicare is a federal health insurance program for senior citizens and people with permanent disabilities. Medicare serves all eligible individuals regardless of income or previous medical history, and has become a major component of health care in America.
How is Medicare Administered? Medicare currently is made up of two major parts, administered by the federal Centers for Medicare and Medicaid Services (CMS):
"Hospital Insurance" (also called Medicare Part A) covers inpatient hospital services, nursing home care, and hospice. Part A coverage is automatic for beneficiaries and is financed by a payroll tax on both employers and their employees.
"Supplementary Medical Insurance" (also called Part B) covers many outpatient services, laboratory tests, physician services, and medical devices. Part B is optional coverage and is generally paid through beneficiaries' monthly premiums.
Medicare also has a separate provision, sometimes called "Medicare+Choice" or Part C, under which eligible enrollees can elect to receive Part A and B benefits through managed care plans.
Who is Covered? Established in 1965 under the Social Security Act, Medicare covers 40 million Americans -- almost one seventh of the population.
Most beneficiaries (87%) are aged 65 and above and automatically qualify for Medicare. Disabled persons who receive Social Security payments usually become eligible after a 2-year waiting period. 40% of Medicare beneficiaries have incomes at or below twice the poverty level.
What is Covered? Most basic physician and hospital services are covered or partially covered under the program, but prescription drugs and long-term care are not. Beneficiaries sometimes choose to obtain supplemental insurance plans for services and items not covered by Medicare. These plans are called Medigap policies.
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What Does Medicare Mean to Hospitals? With about 40% of all hospitals' inpatient services being provided to Medicare patients, hospitals depend on adequate reimbursement rates under the insurance program. But these rates have been inadequate in recent years to fully cover the costs of providing services to our patients. Any proposed changes to Medicare by Congress can be expected to have significant and long-term effects on hospitals' ability to provide care.
What Challenges Does Medicare Face? First, as currently structured, the Medicare program is financially unsustainable. Medicare costs are projected to outgrow revenues from payroll taxes and premiums before 2025.
Second, Medicare fails to adequately cover the costs borne by hospitals and other health care providers for many services. While physicians can choose whether or not to accept Medicare patients, hospitals must, under federal law, provide care to all -- whether or not government reimbursements are adequate.
Third, many argue Medicare coverage is out of date and insufficient for the needs of today's beneficiaries. Despite the looming insolvency of the program, there is significant public pressure to add new benefits, such as coverage for prescription drugs and long-term care.
Medicare will continue to play an important role in America's health care policy debate, and in hospitals' advocacy agenda.
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