Sunday, March 10, 2013

A Bit of History about Medicare

Medicare is a federal social insurance program covering over 40 million people over the age of 65 and 8 million people with permanent disabilities. 

Medicare has four basic programs, Parts A through D.  Part A covers hospital insurance including inpatient hospital stays, skilled nursing facility stays, hospice care and home health visits.  Part A is primarily financed by a 1.45% payroll tax on all wage and salary income for the worker and the employer.  Self-employed persons pay the full 2.9% of earnings.

Example:  You make $50,000 a year.  You pay $725 a year and your employer pays $725.00 a year.  If you’re self-employed, you pay $1,450 a year.

While Social Security taxes are capped at $110,100, there is no maximum wage base for Medicare taxes.  An individual making $1,000,000 a year would pay a Medicare payroll tax of $14,500, and his employer would pay an equal amount. 

Medicare Part B is a voluntary program that helps pay for doctor bills and other outpatient health care. Medicare beneficiaries pay a premium of $99.90 (goes up every year, and it’s more than this) a month for their part B coverage.  Part B is usually deducted from the beneficiary’s monthly Social Security check.  The premium is set annually to cover about 25 percent of Part B spending, while the other 75 percent is paid from general revenues.

Medicare Part C is known as Medicare Advantage (MA), and gives seniors the option of receiving their benefits through private health plan. 

Medicare Part D provides prescription drug benefits through private plans that contract with Medicare and Medicare Advantage prescription drug plans.  The average monthly premium for Part D is $31.

Income-Related Part B Premium—Beneficiaries with incomes above $85,000 a year ($170,000 for couples) are responsible for paying a higher share of the cost of Part B.  Medicaid pays Part B premiums for low-income beneficiaries who are currently enrolled in Medicaid; beneficiaries with higher incomes pay an income-related Part B premium that ranges from $139.90 to $319.70 per month.  Medicare provides low-income subsidies to those who qualify.

Medicare under went its first major overhaul when “diagnosis related groups”  -DRGS- entered the medical lexicon in 1983.  By 1984 hospital payments were determined on the basis of a patient’s diagnosis rather than on daily charges.

Medicare officials hoped to cut program costs by creating a new payment system that would encourage hospitals not over utilize medical resources.  Instead of paying for each medical service and what it costs the hospital, Medicare began paying for what it deemed the average cost to treat a patient with a particular diagnosis.  If you were paying for bundled diagnoses, then that would give the hospitals some good reason to be attentive to the cost of taking care of diagnosis.  There was a lot of hope this would be the panacea, but instead some hospitals cleverly unpacked the diagnoses to make the most bang for each patient treated at a hospital. 

DRGS had a noticeable effect by decreasing hospital stays, but the doctors (who make the call to admit a patient to the hospital) weren't seeing a financial incentive to have the patient admitted to the hospital.  This kept hospital costs down for insurance companies. 

In 1992, Medicare adopted the resource-based relative value scale (RBRVS) on which to base physician payments.  This method of payment attempted to pay based on work effort and practice expenditures, rather than on historic charges.  They were primarily concerned with medical inflation.  Another reason for moving to RBRVS was to help primary care physicians get paid more, but it only helped a little.

This is just a small portion of the problem with Medicare.  The day may come when Medicare will only be available for the poor and the rest will just have to have supplemental insurance to cover medical expenses. 

My sources are National Academy of Social Insurance; and Medpage Today's;   You can find a lot more information on these sites and others.  

Have a great week, and I'll be back next Sunday. 

Best always,
Sandra K. Marshall


Melissa Keir said...

Thank you for the information. I'm not at that age yet for Medicare but I do know that many retirement programs stop providing medical benefits when a person reaches the age when Medicare benefits kick in. I worry about how any changes will impact my husband who is getting close to his retirement age. I saw how things changed for my dad when his retirement benefits were cut and he was without insurance for a bit until Medicare kicked in.

Historical Writer/Editor said...

Interesting post.

Linda LaRoque said...

Interesting post, Sandy. We are fortunate to have secondary insurance with our Medicare. I guess all those years of work paid off, however I do know of some individuals lost all of their insurance when they turned 65.
I know it's hard for young people looking for a job today--they just want a job period. I know twenty years ago, I was teaching students to always find out about their benefits--health insurance, retirement plans, etc. too and count that into their salary. It all adds up.

Sandy said...

Thank you, Melissa. I think we all worry about Social Security and Medicare being around.

Sandy said...

Thank you for coming by Historical Writer.

Linda, you're so right that we need to learn all we can about our benefits. My hubby and I pay for additional supplemental insurance along with Medicare. Kids, especially, need to know how much the companies they work for pay for insurance. It's a huge benefit because out of pocket expenses would be horrendous.