Medicare: National Health Ins. for Older and Disabled Americans

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Medicare Developments
Medicare in a Nutshell
The Medicare Sequester
Medicare vs. Medicaid
Medicare: Background and Resources

CRS Medicare PrimerLink

Medicare Developments

  • July 13, 2017:  The Medicare Trustees released their annual assessment of the Medicare Trust Funds, finding that the Hospital Insurance Trust Fund, which is funded by payroll taxes, will have insufficient revenues to cover expenses in 2029.  At that time dedicated revenues will be sufficient to pay 88 percent of HI costs. The Trustees project that the share of HI cost that can be financed with HI dedicated revenues will decline slowly to 81 percent in 2041, and will then rise gradually to 88 percent in 2091.  The sooner adjustments are made in revenues or payments to providers, the more slowly they can be phased in.  In addition, actions to slow the broader growth in healthcare costs—such as improving access to primary care and avoiding more expensive acute care—will help to stabilize the Hospital Insurance Trust Fund.
  • Medicare Trustees Report: 2017   
  • 2015:  The Medicare Access and CHIP Reauthorization Act of 2015 (also known as the “Doc Fix” or “SGR Repeal”) changed the method for calculating updates to Medicare payment rates to physicians and altered how physicians and other practitioners will be paid in the future.
  • The Affordable Care Act (ACA) (P.L. 111-148 and P.L. 111- 152) made numerous changes to the Medicare program that modify provider reimbursements, provide incentives to increase the quality and efficiency of care, and enhance certain Medicare benefits.

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Medicare in a Nutshell

  • Medicare is a national health insurance entitlement program for nearly all Americans 65 and older.
  • Medicare was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include workers who have become disabled and people diagnosed with end-stage renal disease or amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease).
  • In FY 2016, the program covered approximately 57 million persons (48 million aged and 9 million disabled).
  • The program is administered by the Centers for Medicare & Medicaid Services (CMS), and by private entities that contract with CMS to provide claims processing, auditing, and quality control services.
  • The Medicare program has two separate trust funds, the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund.
  • HI, otherwise known as Medicare Part A, helps pay for hospital, home health services following hospital stays, skilled nursing facility, and hospice care for the aged and disabled.
  • SMI consists of Medicare Part B and Part D.  Part B helps pay for physician, outpatient hospital, home health, and other services for the aged and disabled who have voluntarily enrolled.  Part D provides subsidized access to drug insurance coverage on a voluntary basis for all beneficiaries, as well as premium and cost-sharing subsidies for low-income enrollees.
  • General revenues finance roughly three-quarters of Parts B and D, and premiums paid by beneficiaries almost all of the remaining quarter.
  • Medicare pays doctors, hospitals, and most other providers using a “prospective payment system” under which predetermined payment amounts are established for specific services, with annual “updates” and limitations on patient cost-sharing (deductibles, coinsurance, and co-payments).
  • Spending under the program (except for a portion of administrative costs) is considered “mandatory” spending, i.e. it is not subject to annual appropriations decisions.
  • Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met; this is what makes Medicare an “entitlement.”

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The Medicare Sequester

  • CRS:  Medicare and Budget Sequestration  Feb 2018
  • Excerpt from CRS Medicare Primer:  
    • The Budget Control Act of 2011 (BCA; P.L. 112-25) provided for increases in the debt limit and established procedures designed to reduce the federal budget deficit, including the creation of a Joint Select Committee on Deficit Reduction. The failure of the Joint Committee to propose deficit reduction legislation by its mandated deadline triggered automatic spending reductions (“sequestration” of mandatory spending and reductions in discretionary spending) in fiscal years 2013 through 2021.
    • The American Taxpayer Relief Act of 2012 delayed the automatic reductions by two months, while the Bipartisan Budget Act of 2013 extended sequestration for mandatory spending for an additional two years—through FY2023.
    • In 2014, the President signed into law P.L. 113-82, which included a provision to extend BCA’s sequester of mandatory spending through FY2024.
    • The Bipartisan Budget Act of 2015 extended the sequestration of mandatory spending another year, through FY2025.
    • The Bipartisan Budget Act of 2018 extended the sequestration of mandatory spending another two years, through FY2027.
    • Section 256(d) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177) contains special rules for the Medicare program in the event of a sequestration. Among other things, it specifies that for Medicare, sequestration is to begin the month after the sequestration order has been issued. Therefore, as the sequestration order was issued March 2013, Medicare sequestration began April 1, 2013, and will continue through March 31, 2026.
    • Under sequestration, Medicare’s benefit structure generally remains unchanged; however, benefit related payments are subject to 2% reductions.
    • In other words, most Medicare payments to health care providers, as well as to Medicare Advantage and Part D (Rx) plans, are being reduced by 2%. 
    • Certain Medicare payments are exempt from sequestration and therefore not reduced. These exemptions include (1) Part D low-income subsidies, (2) the Part D catastrophic subsidy, and (3) Qualified Individual (QI) premiums. Some non-benefit related Medicare expenses, such as administrative and operational spending, are subject to higher reductions, 6.9% in 2017.
  • CMS – Medicare 2 Percent Sequester

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Medicare v. Medicaid

  • Medicare is an entitlement based on age (65 or older) or disability without regard to income;  Medicaid is a means-tested entitlement where eligibility is based on being at or near the Federal poverty level.
  • Medicare is a health insurance program similar to private sector health insurance, with specified coverage and beneficiary cost-sharing;  Medicaid is a health coverage program where States pay healthcare providers for services on behalf of beneficiaries, usually without any cost-sharing.
  • Medicaid assists millions of low-income Medicare enrollees (called “dual eligibles”) by paying Medicare premiums, deductibles and coinsurance.
  • Medicare is funded by federal payroll (HI) taxes, general tax revenues, and premiums; Medicaid is funded jointly by the Federal and State governments.
  • Medicare is national health insurance administered by the Federal Centers for Medicare and Medicaid (CMS); Medicaid is administered by the States.

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Medicare: Background and Resources

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