thumb |upright=2.0 |Medicare plans include the government plan and the privately run [[Medicare Advantage plan. Medicare Advantage bundles certain features from the government plan.
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Medicare is a federal health insurance program in the United States for people age 65 or older and younger people with disabilities, including those with end stage renal disease and amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease). It started in 1965 under the Social Security Administration and is now administered by the Centers for Medicare and Medicaid Services (CMS).
Medicare is divided into four parts: A, B, C, and D. Part A covers hospital, skilled nursing, and hospice services. Part B covers outpatient services. Part C is an alternative that allows patients to choose private plans with different benefit structures that provide the same services as Parts A and B, usually with additional benefits. Part D is for self-administered prescription drugs.
In 2022, Medicare provided health insurance for 65.0 million individuals—more than 57 million people aged 65 and older and about 8 million younger people. According to annual Medicare Trustees reports and research by Congress' MedPAC group, Medicare covers about half of healthcare expenses of those enrolled. Enrollees cover most of the remaining costs by taking additional private insurance (medi-gap insurance), by enrolling in a Medicare Part D prescription drug plan, or by joining a private Medicare Part C (Medicare Advantage) plan. In 2022, spending by the Medicare Trustees topped $900 billion per the Trustees report Table II.B.1, of which $423 billion came from the U.S. Treasury and the rest primarily from the Part A Trust Fund (which is funded by payroll taxes) and premiums paid by beneficiaries. Households that retired in 2013 paid only 13 to 41 percent of the benefit dollars they are expected to receive.
Beneficiaries typically have other healthcare-related costs, including Medicare Part A, B, and D deductibles and Part B and C co-pays; the costs of long-term custodial care (which are not covered by Medicare); and the costs resulting from Medicare's lifetime and per-incident limits.
History
thumb|upright=1.15|right|[[Lyndon B. Johnson signing the Medicare amendment (July 30, 1965). Former president Harry S. Truman (seated) and his wife, Bess, are on the far right.]]
Originally, the name "Medicare" in the United States referred to a program providing medical care for families of people serving in the military as part of the Dependents' Medical Care Act, which was passed in 1956. President Dwight D. Eisenhower held the first White House Conference on Aging in January 1961, in which creating a health care program for social security beneficiaries was proposed.
Various attempts were made in Congress to pass a bill providing for healthcare for the elderly, all without success. In 1963, however, a bill providing for both Medicare and an increase in Social Security benefits passed the Senate by 68–20 votes. As noted by one study, this was the first time that either chamber "had passed a bill embodying the principle of federal financial responsibility for health coverage, however limited it may have been." There was uncertainty over whether this bill would pass the House, however, as White House aide Henry Wilson's tally of House members’ votes on a conference bill that included Medicare “disclosed 180 “reasonably certain votes for Medicare, 29 “probable/possible,” 222 “against,” and 4 seats vacant.” Following the 1964 elections however, pro-Medicare forces obtained 44 votes in the House and 4 in the Senate. In July 1965, under the leadership of President Lyndon Johnson, Congress enacted 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. Johnson signed the Social Security Amendments of 1965 into law on July 30, 1965, at the Harry S. Truman Presidential Library in Independence, Missouri. Former president Harry S. Truman and his wife, former first lady Bess Truman, became the first recipients of the program.
Before Medicare was created, approximately 60% of people over the age of 65 had health insurance (as opposed to about 70% of the population younger than that), with coverage often unavailable or unaffordable to many others, because older adults paid more than three times as much for health insurance as younger people. Many of this group (about 20% of the total in 2022, 75% of whom were eligible for all Medicaid benefits) became "dual eligible" for both Medicare and Medicaid (which was created by the same 1965 law). In 1966, Medicare spurred the racial integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation.
Medicare has undergone several major changes since 1965; provisions have expanded to include benefits for speech, physical, and chiropractic therapy in 1972. In the 1970s the option of payments to health maintenance organizations (HMOs) was added
Administration
The Centers for Medicare and Medicaid Services (CMS), a component of the U.S. Department of Health and Human Services (HHS), administers Medicare, Medicaid, the Children's Health Insurance Program (CHIP), the Clinical Laboratory Improvement Amendments (CLIA), and parts of the Affordable Care Act (ACA) ("Obamacare"). Along with the U.S. Departments of Labor and Treasury, the CMS also implements the insurance reform provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and most aspects of the Patient Protection and Affordable Care Act of 2010 as amended. The Social Security Administration is responsible for determining Medicare eligibility, eligibility for and payment of Extra Help/Low Income Subsidy payments related to Parts C and D of Medicare, and collecting most premium payments for the Medicare program.
The Chief Actuary of the CMS must provide accounting information and cost-projections to the Medicare Board of Trustees to assist them in assessing the program's financial health. The Trustees are required by law to issue annual reports on the financial status of the Medicare Trust Funds, and those reports are required to contain a statement of actuarial opinion by the Chief Actuary.
The Specialty Society Relative Value Scale Update Committee (or Relative Value Update Committee; RUC), composed of physicians associated with the American Medical Association, advises the government about pay standards for Medicare patient procedures performed by doctors and other professionals under Medicare Part B. A similar but different CMS process determines the rates paid for acute care and other hospitals—including skilled nursing facilities—under Medicare Part A. The rates paid for both Part A and Part B type services under Part C are whatever is agreed upon between the sponsor and the provider. The amounts paid for mostly self-administered drugs under Part D are whatever is agreed upon between the sponsor (almost always through a pharmacy benefit manager also used in commercial insurance) and pharmaceutical distributors and/or manufacturers.
Financing
Medicare has several sources of financing.
Part A's inpatient admitted hospital and skilled nursing coverage is largely funded by revenue from a 2.9% payroll tax levied on employers and workers (each pays 1.45%). Until December 31, 1993, the law provided a maximum amount of compensation on which the Medicare tax could be imposed annually, in the same way that the Social Security payroll tax operates. Beginning on January 1, 1994, the compensation limit was removed. Self-employed individuals must calculate the entire 2.9% tax on self-employed net earnings (because they are both employee and employer), but they may deduct half of the tax from the income in calculating income tax. Beginning in 2013, the rate of Part A tax on earned income exceeding $200,000 for individuals ($250,000 for married couples filing jointly) rose to 3.8%, in order to pay part of the cost of the subsidies to people not on Medicare mandated by the Affordable Care Act.
In 2011, Medicare spending was over $900 billion, near 4% of U.S. gross domestic product according to the Trustees Figure 1.1 and over 15% of total US federal spending. Because of the two Trust funds and their differing revenue sources (one dedicated and one not), the Trustees analyze Medicare spending as a percent of GDP rather than versus the Federal budget.
The aging of the Baby Boom generation into Medicare is projected by 2030 (when the last of the baby boom turns 65) to increase enrollment to more than 80 million. In addition, the fact that the number of payroll tax payors per enrollee will decline over time and that overall health care costs in the nation are rising pose substantial financial challenges to the program. Medicare spending is projected to increase from near 4% of GDP in 2022 to almost 6% in 2046.
Cost reduction is influenced by factors including reduction in inappropriate and unnecessary care by evaluating evidence-based practices as well as reducing the amount of unnecessary, duplicative, and inappropriate care. Cost reduction may also be effected by reducing medical errors, investment in healthcare information technology, improving transparency of cost and quality data, increasing administrative efficiency, and by developing both clinical/non-clinical guidelines and quality standards. Of course all of these factors relate to the entire United States health care delivery system and not just to Medicare.
Eligibility
U.S. citizens or permanent residents who have lived in the U.S. for at least five continuous years and who qualify for Social Security payments or Railroad Retirement Board payment and over 65 years old are eligible. There are some instances where U.S. citizens might be able to enroll in Medicare earlier than age 65. For example, people with long term disabilities that prevent them from working (such as end-stage renal disease or amyotrophic lateral sclerosis) may be eligible at an earlier age. Individuals receiving Social Security Disability Insurance (SSDI) benefits for 24 months are automatically enrolled in Medicare Parts A and B in the 25th month. Individuals with permanent kidney failure requiring dialysis or a transplant may qualify for Medicare, regardless of age. Individuals diagnosed with ALS are automatically enrolled in Medicare Parts A and B the month their disability benefits begin. Those who are 65 and older who choose to enroll in Part A Medicare must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid the qualifying Medicare payroll taxes.