In 1965, President Lyndon B. Johnson signed into law the first major public health care program funded by the United States of America for its citizens. President Johnson signed the Social Security Act of 1965 nearly 45 years ago as an amendment to the Social Security program in order to provide health insurance for citizens over 65 years old. Nearly a half century later, the program is still running strong and providing valuable health care to senior citizens along with people under the age of 65 who have certain disabilities and special needs.
Several government agencies must work together to both administer the Medicare program and oversee the tax process that funds the program. The Centers for Medicare and Medicaid Services (CMS), operating within the Department of Health and Human Services directly administers the Medicare program for the government. The responsibility of determining eligibility for Medicare and processing premium payments falls to the Social Security Administration. Other governmental agencies like the Department of Labor and Department of the Treasury administer the insurance reform provisions provided in the 1996 Health Insurance Portability and Accountability Act.
The Medicare system is funded by every employed American in the country. The Federal Insurance Contributions Act and Self-Employment Contributions Act of 1954 provided the guidelines for taxing the income of American citizens to pay for Medicare. A total of 2.9% of wages, salaries, and other compensations to employees are paid in taxes to fund the program. Of that, 1.45% is taken out of the employees wage and the employer makes a matching contribution of 1.45%. Self-employed individuals must pay the full 2.9% tax themselves out of their net income.
Generally speaking, eligibility for Medicare applies to any individual 65 years of age or more who has been a legal U.S. resident for at least 5 years. Not everyone over the age of 65 is eligible for Medicare coverage however; individuals who have not paid Medicare taxes for a minimum of 10 years must pay a monthly premium to be enrolled in the program. Medicare premiums are waived under the following circumstances:
• Individual is 65 years or older and a U.S. resident and has paid Medicare taxes for at least 10 years
• Individual is 65 years or older and a legal permanent resident of the U.S. for at least 5 years and has paid Medicare taxes for at least 10 years
• Individual is under 65 years old, disabled, and receiving Social Security benefits or Railroad Retirement Board benefits for 24 months
• Individual is receiving continuing dialysis for end stage renal disease (ESRD) or requires a kidney transplant
• Individual is eligible for Social Security Disability Insurance and is suffering from amyotrophic lateral sclerosis (otherwise known as Lou Gehrig’s Disease or ALS).
The Medicare system is divided into four parts that provide different coverage services for its beneficiaries. The program is broken down into Medicare Part A, Part B, Part C, and Part D. When first developed, Medicare provided only Part A and Part B. Medicare Part C were added to the program after the Balanced Budget Act of 1997 was passed. Medicare Part D is the most recent portion of the program and took effect on January 1, 2006. The basics behind each part of the Medicare program are described below.
Medicare Part A provides beneficiaries with the following hospital related coverage:
• Inpatient hospital stays, overnight care, semiprivate rooms, food, tests, and doctor’s fees.
• Coverage for costs associated with brief stays in skilled nursing facilities for convalescence and hospice.
Medicare Part A does not completely remove expense from beneficiaries. For instance, individuals in need of care in a skilled nursing facility are covered for 100 days per ailment. Medicare Part A fully covers the first 20 days but the individual must provide a co-payment for the remaining 80 days. Subsequent stays in a nursing facility are only covered under the 100 day limit if the patient goes 60 days between visits.
Medicare Part B provides beneficiaries with medical insurance coverage for procedures not covered by Part A, especially on an outpatient basis. Part B coverage includes but is not limited to the following:
• Doctors’ services and home health care
• Physician and nursing services
• X-rays, laboratory, and other diagnostic tests
• Influenza and pneumonia vaccinations
• Outpatient hospital procedures
Part B also provides senior citizens with medical equipment such as canes, walkers, wheelchairs, and mobility scooters. Other items such as prosthetic limbs and oxygen for home use are also covered under Part B. Medicare Part B coverage is optional and may be deferred by those who are still actively working. There is a 10% per year penalty charged to those who are not actively working and do not enroll in Part B.
Medicare Part C was developed to provide eligible individuals with an alternate means of receiving their Part A, B, and D coverage. “Medicare + Choice”, or Part C, allows Medicare beneficiaries the option of receiving their coverage through a private health insurance plan instead of through Part A, B, and D. Individuals who use Part C must have a private plan that meets or exceeds the standards of Medicare’s coverage.
Medicare Part D is the most recent addition to the Medicare program and provides for prescription drug coverage. This coverage used to be provided by Part A and Part B, where any individual that is eligible for Part A and Part B is eligible for Part D. Individuals must enroll in a Prescription Drug Plan or Medicare Advantage plan with prescription drug coverage. While these plans are regulated by Medicare, private health care providers develop and administer these programs. Part D does not remove all costs for users, but does help eliminate high costs for individuals.
Medicare has changed immensely since President Johnson enrolled the first two recipients in 1965, former President Harry S. Truman and his wife Bess; and the program now faces great challenges as it seeks to keep America’s senior citizens covered by reliable health insurance. Medicare’s income base is becoming increasingly unable to cover the costs of a growing user base. The nation’s baby boomer generation is reaching retirement age and while 45 million Americans are covered as of 2009, it is expected that nearly 73 million more will be covered by the year 2030. With Medicare spending outpacing its income as of 2008, Medicare faces challenges as it seeks to continue providing coverage to senior citizens.