RESULTS.org > Issues > Medicare

Print

Medicare

The Medicare program was established in 1965 through the Social Security Act. Medicare is a federal entitlement health insurance program for seniors 65 years of age and older, people under age 65 with permanent disabilities and certain diseases, and people of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant).

Medicare is administered by the Centers for Medicare and Medicaid Services (CMS). The main sources of funding are a payroll tax, paid by current workers and their employers (41 percent), and general federal revenues (39 percent). People also pay a premium for Part B, services that do not involve hospitalization (12 percent).

Individuals become eligible for Medicare when they reach 65, if they or their spouse made payroll tax contributions for 10 or more years.

Medicare services fall into four parts (See Medicare General Information for more details):

  • Part A, also known as the Hospital Insurance (HI) program, is hospitalization insurance. Most people do not pay a premium for Part A.
  • Part B, the Supplementary Medical Insurance (SMI) program, is medical insurance that covers services not covered by Part A. Most people pay a monthly premium for Part B ($96.40 per month in 2009, higher for singles earning over $85,000 a year or couples earning over $170,000 a year).
  • Part C is the Medicare Advantage program. It allows beneficiaries to enroll in a private plan, such as a Health Maintenance Organization (HMO), preferred provider organization (PPO), or private fee-for-services (PFFS) plan.
  • Part D is outpatient prescription drug insurance, issued by private insurance companies.

Medicare does not cover most long-term health services, vision or dental care, or hearing aids.

Medicare covers more than 44 million Americans: 35 million seniors and 6 million non-elderly people with disabilities. The program has helped reduce poverty among older adults by nearly two-thirds since 1965, but approximately half of Medicare beneficiaries still have incomes below 200 percent of poverty.

Medicare Advantage Plans

RESULTS and others — including the American Association for Retired Persons (AARP) and Medicare watchdogs — call for the elimination of overpayments to private insurers being made under the Medicare Advantage (MA) Plans as they increase the costs of Medicare, drive up premiums for traditional Medicare beneficiaries, and weaken the financial stability of Medicare.

These plans started as an alternative to traditional Medicare based on insurance companies’ claims they could be more efficient with lower costs. Instead, these plans cost more than traditional Medicare, with a substantial portion of the excess costs benefiting insurers and not beneficiaries. Advantage Plans cover approximately 20% of the 44 million Medicare enrollees. According to the Center for Budget & Policy Priorities, the Medicare Payment Advisory Commission (MedPAC), Congress’ expert advisory body on Medicare payment policy, has estimated that in 2009 Medicare will pay Medicare Advantage plans 14 percent more per beneficiary than it would cost to cover these beneficiaries in traditional Medicare. Further, “By increasing Medicare costs, these overpayments also drive up premiums for beneficiaries in traditional Medicare by $86 per year for a couple, according to the chief actuary at the Centers for Medicare and Medicaid Services. More than 31 million seniors and people with disabilities enrolled in regular Medicare are forced to pay higher premiums each month to subsidize these excess payments.” Continuing down this path with Advantage plans that benefit insurers will bankrupt Medicare. The extra spending — more than $50 billion over the next five years — is unsustainable.

The House and Senate bills being considered would phase out these excess payments to Medicare Advantage plans to both help pay for overall health care reform and to allocate savings to the State Children’s Health Insurance Program, which provides coverage for children in low-income families that earn too much to qualify for Medicaid. The House would also use some of the savings to help pay for changes in the Medicare program, including extra help for low-income seniors.

As Chief of Staff for Representative Jan Schakowsky (D-IL), Cathy Hurwit, told RESULTS partners on the November 14, 2009 conference call, the Affordable Health Care for America Act passed by the House is especially important for low-income people as it increases access and benefits for those on Medicare. Read the Conference Call notes or listen to the call on RESULTS Musings.

This is why AARP, legislative champion for senior citizens, supports the pending health care reform bills in the House and Senate, stating that “health care reform will strengthen the financial status of the Medicare program.” See AARP’s “myths and facts” about health care reform webpage.

Chronic Conditions Take Much of Medicare Spending

According to AARP Vice-President Susan Reinhard (briefing March 2009), close to half the U.S. population has a chronic medical condition. Most of these are working age people with insurance. The number of people with chronic conditions grows with age. About 50 percent of Medicare patients have five or more chronic illnesses! Medicare spends 22 percent of its money on 1 percent of its population.

Congress Blocks Scheduled Premium Increase

Medicare Part B premiums were set to increase in January 2010. However, because inflation has been low, Social Security recipients are not getting a cost of living increase for 2010. Most retirees have the Part B premium deducted from their monthly Social Security payment. In late September 2009, Congress moved to block the scheduled Part B premium increase.

Medicare as the Basis for a National Health Plan

The long-term vision of RESULTS for the United States health care system is a National Health Plan based on expanded and improved Medicare for all. See our National Health Program page.