Healthcare and Medicare

Medicare is the federal health insurance program for persons 65 and older and certain disabled persons. Congress established Medicare in 1965 as Title XVIII of the Social Security Act. It is now codified as 42 U.S.C.A sections 1395 et seq. Pub.L. No. 89-97, 79 Stat. 291. Medicare is an entitlement program for qualified beneficiaries and not a need-based program like Medicaid, the federal-state health insurance program for low-income persons. Thus, the rich, the poor, and the middle class all may receive Medicare benefits, so long as they satisfy the eligibility criteria.

Medicare is administered by the Centers for Medicare & Medicaid Services (CMMS), formerly known as the Health Care Financing Administration (HCFA). It oversees issues concerning eligibility requirements, extent of coverage, and termination of benefits. CMMS is a division of the U. S. Department of Health and Human Services. Its main office is located in Baltimore, Maryland, and there are nine regional offices throughout the United States.

The Medicare program is divided into four parts: (1) Medicare Part A covers inpatient hospital services, skilled nursing facility services, home health services, and hospice services; (2) Medicare Part B covers other reasonable and necessary medical services, including outpatient hospital care and physician services; (3) Medicare Part C provides an array of private health insurance plans that are mandated to cover the same items and services offered by Medicare Parts A and B. Depending on the plan, Part C may also contain additional costs and offer additional benefits to those in Parts A and B. (4) The Medicare Prescription Drug Improvement and Modernization Act of 2003 (P.L. 108-173) effectively became Medicare Part D, and covers prescription drug benefits. Its first benefit began in 2004 with the introduction of Medicare-Approved Drug Discount Cards, which phased out when permanent prescription drug benefits went into effect in 2006.

Part A Medicare is largely funded by mandatory payroll taxes paid by employers and employees. Part B is an elective program financed in part through premiums paid by Medicare beneficiaries and in part through government contributions. Part C is essentially a medical savings plan that is also funded partly by beneficiary premiums and partly by government contributions. Each part has its own trust fund. Part A payroll taxes are maintained in the Federal Hospital Insurance Trust Fund, while Part B premiums and contributions are maintained in the Supplementary Medical Insurance Trust Fund. Part C premiums and contributions are maintained by the Medicare+Choice (now called Medicare Advantage) MSA Trust Fund.

Individuals are generally entitled to coverage under any of the three parts if they are 65 years or older and (1) qualify for Social Security or Railroad Retirement benefits; (2) have received Social Security or Railroad Retirement disability benefits for at least 24 months; (3) or suffer from end-stage renal disease. Individuals who elect retirement at age 62 are not eligible for Medicare until they turn 65, even if they qualify for Social Security or Railroad Retirement benefits earlier. Individuals who are eligible for Social Security retirement benefits and postpone retirement to continue working after age 65 can begin receiving Medicare benefits at age 65.

The largest group of Medicare recipients qualify for coverage based on their entitlement to Social Security benefits. Sometimes called Old Age, Survivors, and Disability Insurance (OSADI) benefits, these benefits are paid to workers eligible to retire, survivors of workers eligible to receive these benefits, and disabled workers. Workers are eligible to retire at age 62 (with reduced benefits) if they are “fully insured,” which means that they have worked and paid Social Security taxes for the requisite amount of time specified by statute. Survivors are entitled to Social Security benefits according to their relationship with the deceased worker (i.e., widow, divorced spouse, child, or parent). Workers are “disabled” and entitled to Social Security benefits if they are unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve months. 42 U.S.C.A. section 1382c.

Health care providers may participate in Medicare and receive Medicare payments if they satisfy state and federal licensing requirements and comply with the standards promulgated by CMMS. A health care provider must also enter into an agreement with the Secretary of Health and Human Services. The agreement designates the amounts the provider will charge Medicare patients and the manner in which it will provide medical services. Hospitals, skilled nursing facilities, home health agencies, clinics, rehabilitation agencies, public health agencies, comprehensive outpatient rehabilitation facilities, hospices, critical access hospital, and community mental health centers (CMHCs) may generally seek to participate in Medicare under a provider agreement. However, clinics, rehabilitation agencies, and public health agencies may enter into provider agreements only for services involving outpatient physical therapy and speech pathology. CMHCs may only enter into provider agreements to furnish certain hospitalization services.


Inside Healthcare and Medicare