Medicare (Title XVIII of the Social Security Act) is America's federal health insurance program for individuals age 65 and older as well as certain younger, disabled former workers. The topic of Medicare is worthy of inclusion in this volume because the elderly and the disabled utilize a variety of human services agencies. Social workers, case managers, and other human services practitioners benefit from resources to better provide services to diverse populations. The aged and disabled constitute two such groups. Knowledge of how the Medicare program operates and an understanding of the challenges facing it are essential for those working with seniors and the disabled. Among these challenges is the uncertain future of this pay-as-you-go intergenerational transfer system that depends on workers paying into its reserve fund. Even if costs to run this very expensive program could be cut, the aging of the U.S. population is a demographic reality to contend with. by 2030, approximately 20 percent of the U.S. population will be elderly. Not only will these individuals stop paying into the system upon retirement, but They will also likely experience costly health problems at a greater rate than their younger counterparts.
Approximately 50 million individuals were covered in 2012 by Medicare. Originally begun in 1965 as a social insurance program for those age 65 and older who had paid a payroll deduction tax into the Social Security system, Medicare expanded in 1972 to include two other groups of beneficiaries (disabled former workers under age 65 receiving Social Security Disability Insurance benefits for more than 24 consecutive months and end-stage renal patients of any age). The Centers for Medicare and Medicaid Services (CMS) has oversight of the program, although initial application to receive benefits is made through the Social Security Administration.
Medicare consists of four parts. Part A covers hospitalization, skilled nursing facilities (posthospital rehabilitative short stays), and hospice care. Everyone who paid into the system is entitled to Part A, but a deductible and coinsurance are involved. Noticeably absent from Medicare's inpatient categories is long-term care (e.g., nursing homes). Medicare does not cover the cost of custodial nursing home care. Part B covers physician office visits, hospital outpatient care and diagnostic services, home health care, and other medical services and supplies. Part B is optional and has an annual premium in addition to a deductible and co-=payment. The premium can be deducted from the individual's monthly Social Security or Railroad Retirement check. Part C is a private plan option called Medicare Advantage (covering Part A and B services), which can be chosen instead of traditional Medicare (also known as original Medicare).
The government pays a fee to the company for enrolling each patient, and no CMS reimbursement claims are filed for services. From mid-October to early December each year, Part C beneficiaries can choose from a variety of commercial companies during this open enrollment period. In addition to private fee-for-service plans, the choices include preferred provider organizations (PPOs) and health maintenance organizations (HMOs), which are known for managed care practices involving cost containment. It can be an overwhelming experience for individuals to read the mailings They receive from competing companies trying to convince them that one company's plan will save them more money than the others. Medicare Advantage originated with the passage of the Balanced Budget Act of 1997 as an attempt to reform a system in trouble. by 2013, about 28 percent of Medicare beneficiaries chose Advantage plans rather than traditional Medicare. Part D (implemented in 2006) covers outpatient prescription medications. It is optional and has a premium, deductible, and copayment. There is a coverage gap (referred to as the donut hole) after expenses reach a certain amount (and benefits stop) and before expenses reach another level (and benefits resume at a more generous rate). Supplemental coverage to Parts A and B combined (Medigap insurance) is available from private companies. These insurance plans have monthly premiums and can cover copayments, coinsurance, and deductibles. About 20 percent of Medicare beneficiaries choose this type of coverage. Others have similar supplemental coverage offered to them through their employers upon retirement.
During one's working years, the individual pays a health insurance payroll tax of 1.45 percent of his or her annual salary, while one's employer pays an additional 1.45 percent. Receipts collected through this mandatory contribution cover approximately 38 percent of the costs to operate the Medicare program (and only apply to Part A). Premiums paid by enrollees in Part B and Part D cover an additional 13 percent of the costs to run the program. Federal income tax revenue covers most of the remaining expenditures of the Medicare program. Under the 2010 Patient Protection and Affordable Care Act (ACA), the wealthy pay an additional tax on earned income as well as on investment income to further finance Medicare. typically, a beneficiary receives substantially more in benefits than his or her lifetime payroll tax contribution (which for the average worker is $60,000).
In 2008, Medicare's annual outlays began to exceed its yearly income. In their may 2013 annual report, Medicare trustees listed 2012's expenditures at more than $574 billion and income at almost $537 billion. They predicted the depletion date for the Part A trust fund (reserves) to occur in the year 2026. Part B's trust fund is not facing the same threat of running out of money as premiums paid by beneficiaries can be reset each year to offset costs. With Medicare expenditures surpassing revenues annually, the government cannot pay its Medicare bills and must borrow money. Because such borrowing adds to the national debt, the topic of Medicare reform has become part of a contentious political debate.
Several factors are contributing to the rising costs to run the Medicare program. These include the growth of the aging population, the inflated cost of health care in the United States, waste in Medicare spending, and fraudulent reimbursement claims.
Seventy-six million baby boomers (Americans born between 1946 and 1964) will become eligible for Medicare during the next two decades, with the last of them turning age 65 in the year 2029. Health care in the United States accounts for 18 percent of the gross domestic product (the total value of goods and services produced). When it comes to health care, we spend more than twice the average of Germany, Britain, Canada, or Japan. In addition to the United States having an expensive health care system, unnecessary procedures are performed on patients, partly due to the fact that for-profit hospitals, hospices, and dialysis treatment centers depend on Medicare reimbursements. With regard to waste, improper Medicare payments (e.g., errors in billing, coding, etc.), mismanagement, and other inefficiencies account for $48 billion per year. Fraud accounts for $60 billion per year (approximately 10 percent of Medicare's annual expenditures). While the ACA has allocated a sizeable amount of resources to improve efforts to combat fraud, organized crime gangs have infiltrated the durable medical equipment industry setting up bogus companies to obtain fraudulent reimbursements from an overworked, massive bureaucracy. Additionally, sophisticated networks of criminals steal Medicare patient identification numbers to file for reimbursement for care never received.
In an effort to save the Medicare trust fund, several changes have been suggested. The possibility of raising the eligibility age to 67 has received bipartisan support in Congress and could result in a savings of $15 billion per year. Reducing payments to providers is a provision of the ACA. Bundling payments to providers is a three-year experiment begun in 2012. In this model (also known as episode-based payment), a reimbursement covers all services surrounding a single hospital stay. Another suggestion to reform Medicare is to eliminate Medicare's financial contribution to graduate medical education. In 2010, this contribution amounted to $9.5 billion given to teaching hospitals involved in the education of approximately 100,000 residents. A major restructuring of Medicare has been suggested that would gradually phase out traditional Medicare. Some are asking for a system where seniors would receive a voucher each year to choose a private health insurance plan. Others favor premium support, with the individual receiving a subsidy to pay the premium of a private plan and then paying the difference between the cost of insurance and this subsidy. Whatever changes occur to Medicare, it is likely that beneficiaries and providers will both have to sacrifice and compromise. It will likely take a combination of strategies to ensure sustainability of the Medicare system for future generations.
See Also: Aging and Adult Services; Elder Care/Geriatric Services; Health Care Delivery, Models of; Health Insurance; Hospice Services; Hospitals; Outpatient Medical Care; Social Security Administration
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