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; http://www.nasi.org/learn/medicare/where-money-comes-from
and Medpage Today's KevinMD.com; http://www.kevinmd.com/blog/2010/01/history-medicare.
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