The basics & questions for reporters | The politics & questions for reporters | Resources
A thumbnail sketch:
- Covered 48 million people in fiscal 2011
- Expenditures of $563 billion in fiscal 2011
- Projected 64.6 million members in fiscal 2021
- Projected expenditures of $970 billion in fiscal 2021
THE BASICS
Medicare is a federal health program offered for:
- Those 65 and older
- Those with severe disabilities under the age of 65
- Those with end-stage renal (kidney) disease
Medicare has four parts:
- Part A. Pays for inpatient care in hospitals. Also helps pay for nursing home care, hospice and home health care.
- Part B. Pays for doctors’ services, outpatient services in hospitals, home health and some preventive services.
- Part C. This is a private insurance option, known as Medicare Advantage. Members who sign up get services covered under Parts A and B and, often, Part D. Medicare Advantage plans can place restrictions on members’ ability to see medical providers, unlike traditional Medicare.
- Part D. Under this option, members can sign up with private insurance plans for prescription drug coverage.
Costs to consumers
Each of these parts involves different costs to consumers:
- Part A. People who paid Medicare taxes through work (at least 40 quarters) don’t pay a premium for Part A. The same holds true for their spouses.
Those who didn’t pay sufficient Medicare taxes through work can purchase coverage. Part A premiums for this group can be as high as $450 a month. There are late fees for those who delay signing up for Part A coverage.
- Part B. Medicare members pay a monthly premium to obtain Part B coverage. In 2012, the standard premium is $99.90 for new members. People with higher incomes may pay more (up to $219.80 in 2012) and there are late fees for those who delay purchasing Part B coverage.
In 2011, the standard Medicare premiums was $115.40 but the vast majority of existing Medicare members ended up paying lower standard Part B premiums in 2011 – $96.40 a month – because of rules that prohibit Social Security payments from declining year to year. With no cost of living adjustment for Social Security in 2009 and 2010, Part B premiums were restricted from rising. (Part B premiums are deducted from most Medicare members’ Social Security checks.)
- Part C. Medicare Advantage plans charge monthly premiums to members. These must cover the full range of medical services available through traditional Medicare Part A and B and many include Part D drug coverage as well.
Average Medicare Advantage premiums for 2011 were $39 a month, according to the Kaiser Family Foundation. The government recently announced premiums will be about 4 percent lower in 2012.
Medicare Advantage plans also may charge members deductibles (the amount a consumer pays before coverage begins) and co-payments (an amount due when a service is rendered, after the deductible is met). These vary by plan.
- Part D. Prescription drug coverage offered by private insurance plans became available through Medicare in January 2006. More than 1,000 plans currently offer coverage.
Average monthly premiums for Part D plans will stay flat in 2012, at $30 a month, the government announced recently. But premiums can vary widely, and plans differ in which drugs they cover and co-payments charged, among other factors.
Other out-of-pocket costs
In addition to these costs, there are deductibles (the amount a consumer pays before coverage begins) and co-payments (the amount a consumer pays when a service is rendered, after the deductible is met) for services covered through traditional Medicare:
- Part A deductible: $1,156 in 2012 (was $1,132 in 2011)
- Part B deductible: $140 in 2012 (was $162 in 2011)
- Co-payment for hospital stay days 61-90: $289/day in 2012 (was $283 in 2011)
- Co-payment for hospital stay days 91 and beyond: $578/day in 2012 (was $566 in 2011)
- Skilled nursing facility (nursing home) co-payment, days 21-100: $144.50/day in 2012 (was $141.50 in 2011)
Medicare supplemental coverage
To help cover extra costs associated with traditional Medicare, some people choose to buy Medicare supplemental policies offered by private insurance companies, also known as Medigap policies.
The government requires that Medicare supplemental plans offer standardized benefits to consumers. Ten different types of Medigap plans are available.
An insurer cannot deny supplemental coverage if someone signs up for a plan within six months of enrolling for the first time in Medicare. After this period, however, insurers are free to reject applicants or impose extra fees related to their health status.
Enrollment
The first Baby Boomers began enrolling in Medicare in January 2011.
Most people need to contact the Social Security Administration in the three months before they turn 65 to arrange for Medicare coverage. (Signing up later means coverage will be delayed.) But some people are automatically enrolled in Medicare Part A and B – notably, people already receiving Social Security payments before they reach the age of 65.
Open enrollment
Every year, Medicare members have option of staying in traditional Medicare or joining a Medicare Advantage plan during a period known as “open enrollment”. Also, each year, there is an open enrollment period during which Medicare members can change their Part D prescription drug plans.
Dual eligibles
Some seniors have so few resources that they qualify for both Medicare and Medicaid, a joint federal/state program for the poor. About 9 million people fall in this category. This group tends to be sicker and incur higher costs than people on traditional Medicare. Medicaid covers premiums and cost sharing for dual eligibles; Medicare covers the cost of most medical services other than long-term care.
What Medicare doesn’t cover
Medicare doesn’t cover all medical services. Notably excluded are long-term personal care services delivered in the home or long-term nursing home care.
Questions reporters should be asking:
- How many people have Medicare coverage in your state?
- How many people are signed up with Medicare Advantage plans in your state?
- Which Medicare Advantage plans operate in your state? Have these plans changed the terms of their offerings? Are they lifting or lowering premiums charged to members? Are they eliminating or adding optional benefits such as eyeglasses, dental coverage or fitness programs?
- Does your state offer aid to poor seniors on Medicare paying for prescription drug coverage? Has this aid been affected by the economic downturn?
- Which programs in your state help people understand how to navigate Medicare and deal with potential problems, including possible fraud?
- Which local advocacy groups follow senior health issues in your state?
- Are there notable trends surrounding premiums for Medicare supplemental plans in your state? Is there substantial variation among costs charged by companies offering these plans?
Proposed reforms
There is growing agreement that something has to be done about Medicare for the sake of the nation’s fiscal health. But there is little agreement about how to proceed and political battles over Medicare are sure to be fierce for years to come.
Some experts favor radical transformations that would dismantle Medicare as we know it and ask seniors to find coverage in the private insurance market instead.
Other experts want to keep Medicare intact but introduce changes that will make the program less costly, more effective, and more sustainable over the long haul.
Radical transformation
The big idea here is to “privatize” Medicare – to convert it from a government run program to one run by private insurance companies. Advocates claim that competition between insurers will bring Medicare costs under control and improve choices for consumers. Opponents claim that costs will rise because of insurers’ overhead expenses and that profit-maximizing practices will hurt consumers.
Rep. Paul Ryan unveiled a version of this kind of plan in April 2011. Under his proposal, seniors would get a certain amount of money – essentially, a voucher – to purchase private insurance instead of Medicare, starting in 2022. After a Congressional Budget Office analysis found that seniors would spend more for insurance coverage under Ryan’s plan, the proposal didn’t make it very far.
Another proposal along these lines was released in September 2011 by the Healthcare Leadership Council. It calls for creating a new “Medicare exchange” where private insurance plans would compete for Medicare members “on the basis of cost, quality and value.” This plan differs from Ryan’s in that seniors would retain the option of enrolling in traditional Medicare. The Healthcare Leadership Council represents insurers, drug companies, medical device companies, and important industry trade associations.
At the end of 2011, Rep. Ryan introduced a modified Medicare reform plan with Sen. Ron Wyden that struck a compromise of sorts: it would allow seniors to use vouchers to buy traditional Medicare or private insurance policies through a newly established Medicare insurance exchange. Under this new plan, government spending on Medicare would be capped and subsidies for vouchers would track the insurance policies’ actual costs.
Medicare Advantage plans are yet another variation on this “privatize Medicare” theme, operating within the current structure of the Medicare program. These plans, run by private insurance companies, agree to provide a full range of medical services for a set fee per patient from Medicare, plus premiums and other payments from consumers. The same is true of Medicare Part D prescription drug plans, which provide medications to Medicare members and which also are operated by private insurers.
Watch for other variations on this theme in the years ahead. Among the questions to ask:
- Does competition have a track record of reducing costs in health care? What does the evidence show?
- Is private industry more effective than the government in providing health care efficiently? What does the record show?
- Would consumers pay more or less down the road for care under the proposal being floated?
- What safeguards would be in place to protect consumers from the rough and tumble of the free market?
- Would there be requirements that insurers spend a certain amount on medical care and limits on how much they could spend on overhead?
Changes from within
An alternative is retaining Medicare’s fundamental structure while introducing changes that can help improve care, cut costs, and produce better health outcomes for seniors and people with serious disabilities. Generally, this is the approach envisioned under the Accountable Care Act.
But it’s not easy changing a program of Medicare’s size and scope, especially when so many entrenched interests have so much at stake financially.
Many proposals are on the table, too many to cover in any single place. A few highlights:
Raising Eligibility Age. Hospitals are among those advancing a proposal to raise the eligibility age for Medicare from 65 to 67. The proposal was part of a Medicare reform plan unveiled by Oklahoma Sen. Tom Coburn (Rep.) and Connecticut Sen. Joe Lieberman (Independent) earlier this year.
Medical centers like the eligibility change because it could reduce program expenses and help forestall cuts to provider payments. Opponents say the move would shift costs to seniors and the private sector and potentially cost more than the current setup. Also, hundreds of thousands of older adults could find themselves without insurance coverage if the eligibility age is lifted and Health Policy is forestalled, critics note.
Improving Care. Dr. Donald Berwick, who recently stepped down as administrator of the Centers for Medicare & Medicaid services, announced early on that his top priority was improving the care received by beneficiaries. “For too long, health care in the United States has been fragmented – failing to meet patients’ basic needs,” he said in November 2010, in a statement announcing the creation of a new, first-of-its-kind innovation center within CMS.
In practice, innovation means launching efforts to prevent seniors from being readmitted to hospitals, coordinate care provided at various locations ( such as doctors’ offices, hospitals, and rehabilitation facilities), advance team-work between providers (doctors, nurses, pharmacists, and others), eliminate medical errors, enhance patient safety, reduce the incidence of hospital-acquired infections, and better address the needs of patients with long-term, chronic illnesses.
Past efforts to alter Medicare practices have not been particularly successful and resistance from groups with entrenched interest in the status quo has been fierce.
- Read about Medicare’s effort to stop preventable injuries and harm to hospital patients.
- Check out the CMS Innovations Center.
- See a recent Los Angeles Times article on Berwick’s emphasis on improving care.
- Read Berwick’s impassioned talk on this topic soon after he left office in December 2011.
Changing Reimbursement. Medicare is driven by dysfunctional financial incentives that need to change, many experts argue. The current system reimburses doctors for performing procedures and the more procedures doctors do, the more they get paid. This provides an incentive to deliver more services and contributes to the widespread overuse of some types of care.
Missing in the current system are incentives for physicians and other providers to take responsibility for outcomes – whether recommended care is delivered in the right place at the right time, whether practices that protect patient safety are observed, and whether patients live or die. Also missing are incentives for doctors to work together in teams to coordinate care for patients, along with other providers.
Medicare has taken several steps to address these problems: for instance, the program has said it won’t pay for outright errors like leaving a foreign object in a patient after surgery and it will reduce payments to hospitals with higher-than-average readmissions rates. Over time, Medicare plans to tie providers’ reimbursement much more closely to how they perform on various quality measures, and it’s encouraging providers to form networks called “accountable care organizations” that would take responsibility for outcomes while sharing financial risk.
Critics argue this approach takes control away from doctors and puts too much power over medical care in the hands of government.
Some worry that medical providers without a lot of resources could end up being penalized, worsening existing health care disparities.
See this article on Medicare’s controversial “pay for performance” program for physician due to start in 2015.
Funding Cuts. The size of Medicare’s budget makes it a big target for funding cuts as lawmakers in Washington, D.C. pursue ways to reduce federal debt, rein in the growth of the federal budget, and, hopefully, give a boost to the economy.
With strategic cuts, some think that Medicare can be preserved from a radical overhaul. But others argue this strategy won’t do much to control costs in the program, long-term, and is likely to be insufficient.
A key area for proposed cuts are payments to medical providers, notably physicians and hospitals. The hospital industry and medical groups are fiercely resisting these proposals, as are other providers who would lose funding under various proposals being floated.
This is a very volatile topic. Good resources can be found on the Kaiser Family Foundation website, under the “Medicare” section. One looks at five different debt reduction packages being discussed by legislators and their many, complicated provisions.
Enhancing Prevention. With Health Policy, Medicare began fully covering a new set of preventive services for the first time as of January 2011. (Coverage is 100 percent and beneficiaries don’t make co-payments.) Here is a list of preventive services covered by Medicare.
Here’s a write-up on these new preventive benefits from Families USA.
Many seniors are still not aware of these benefits and their use still remains relatively limited. Challenges associated with informing seniors of this change are discussed in this article.
The overarching goal of this initiative is to shift Medicare from a program that pays for illness and injury to one that helps beneficiaries remain healthy as long as possible and intervenes early and effectively when medical problems begin to emerge.
Altering Benefits. Medicare’s benefits are out of date and out of touch with many of its beneficiaries’ most pressing medical needs, some experts argue.
Jane Gross recently made this case vividly in the opinion pages of The New York Times while calling attention to a notable lack of long-term care benefits available under Medicare.
Deciding what services should or should not be covered by Medicare and under what circumstances is a controversial enterprise. When limits are proposed, charges of rationing care are often raised. However, without some type of controls the financial outlook for the program becomes very bleak indeed.
Some experts have proposed that Medicare use results of “comparative effectiveness research” – research that examines scientific evidence concerning the outcomes of various medical services – to modify what services are covered or how they are reimbursed. See a discussion of this concept.
Means Testing. This entails asking people with higher incomes to pay more for benefits. Already, this is happening: wealthier seniors are charged higher Part B Medicare premiums and will end up spending more for Part C and Part D coverage under provisions contained in the Accountable Care Act.
If wealthier beneficiaries pay more, additional funds could flow to Medicare and financial obligations might become more manageable reduced, advocates argue. But opponents advance an egalitarian argument: they say all seniors who have contributed to Medicare during their working lives are entitled to equal benefits, regardless of their financial status.
Mark Miller, a Reuters columnist, took a look at means testing Medicare recently.
Questions reporters should be asking about these and other changes:
- Are these changes significantly restructuring the way healthcare services are organized and delivered? Or are they relatively minor and at the margins?
- Do ordinary people understand what is happening with Medicare or not?
- Who benefits from changes being made to Medicare? Who stands to lose money or market power? How does that influence the policy debate and implementation?
- What unintended consequences, if any, are spawned by these new policies?
- As the government rolls out various initiatives, what evidence is there of their effectiveness?
RESOURCES
The Essentials:
Projections for growth in Medicare from Congressional Budget Office
Medicare Payment Advisory Commission, June 2011 data book
How Medicare Works with Employer-Based Insurance
Out of Pocket Spending by Medicare Members:
Health spending by Medicare households
Advocacy Groups:
National Committee to Preserve Social Security and Medicare
Medicare Supplemental Policies (Medigap):
Choosing Medicare supplemental coverage
Trends in Medigap coverage and enrollment
Recent changes to Medigap plans
Medicare Advantage Plans:
Medicare Advantage premiums for 2012
Medicare Advantage enrollment, an updated analysis
Dual Eligibles:
Some seniors have so few resources that they qualify for both Medicare and Medicaid, a joint federal/state program for the poor. An overview of dual eligibles
