While typically a topic that pertained only to seniors and those approaching retirement age, recent legislation has caused Medicare to gain widespread attention. However, not many people who are below retirement age have any significant experience with this important social insurance program.
History of Medicare
During 1965, Medicare was created as Title XVIII of the Social Security Act. The aim of the program was to provide health insurance for all residents aged 65 and older. In 1972, these basic services were expanded to include speech therapy, physical therapy, and chiropractic services. Also that year, Social Security Disability Insurance and payments for those who have end-stage renal disease were added. Since then, hospice services, treatment for Lou Gehrig’s Disease and additional improvements have been made to keep with the country's ever changing demographics and health care needs.
Concept of Medicare
Medicare insurance is divided into four parts:
Medicare Part A: This part of Medicare covers inpatient hospital services, up to a maximum of 90 days. The first 60 days of the hospital stay are entirely covered. After that, days 61-90 require a co-payment. Also, hospitals that readmit patients too frequently are subject to severe financial penalties for the practice.
Medicare Part B: This is the health insurance component of Medicare. It helps pay for hospital outpatient services that are not covered by part A, and is very similar to a private health insurance plan. The deductible is met by the patient, and then coverage is given on an 80%/20% basis.
Medicare Part C: This is when Medicare provides a flat fee to a private insurance company, called a Medicare Advantage Organization. Often, patients are able to receive additional benefits, such as prescription drug coverage and gym memberships. However, these plans tend to limit services to participating providers.
Medicare Part D: Added in 2006, this is a prescription drug plan. If an eligible person decides to enroll in a stand-alone prescription drug plan, Medicare will help fund it. However, the plans offered for Medicare D often choose which drugs to cover, and are free to choose not to cover some prescriptions at all.
How is Medicare funded?
Medicare Part A is largely funded through the payroll tax levied on employees and employers at a rate of 2.9%. Medicare Part B, C, and D are funded through general fund revenues and the premiums paid by members for auxiliary benefits.
Who is Eligible?
Anybody who has been a resident of the United States for at least 5 years, and who is 65 years or older, is eligible for Medicare coverage. People who have experienced a disability and are under the age of 65 may also be eligible for Social Security Disability Insurance payments. There are also specific medical conditions that allow for Medicare eligibility, regardless of age.
Since many elderly people require expensive care at a time in their life when incomes are typically low, the only feasible solution that legislators saw was to fund this care through a lifetime of contributions. However, this leads many to view Medicare as an unearned entitlement since it is not directly dependent on a person's level of contribution. Also, since payments from Medicare are fixed and not always representative of modern price increases, critics believe that this will lead to a service quality decline.