Medicare is a federally funded program initially designed to provide health insurance coverage for citizens 65 and over and for retirees [[1]. The Medicare program was implemented through the Social Security Amendments Act of 1965 and signed into law on July 30, 1965, by President Lyndon B. Johnson. The Social Security Amendment of 1972 expanded Medicare eligibility to include persons under 65 with disabilities and all persons with end-stage renal disease (ESRD) [[2]. Today more than 63 million, almost 20% of the United States population, have Medicare [3]. Medicare is administered by the Centers for Medicare & Medicaid Services (CMS) and covers inpatient hospital or nursing facility care (Part A), medical & outpatient care (Part B), offers Medicare Advantage Plans (Part C), and has a prescription drug program (Part D).
Medicare Advantage Plans were introduced in 1986 to save costs by allowing Medicare to contract with the private sector and offer managed health care plans approved by Medicare [4]. Until recently, these plans were not made available to Medicare recipients under 65. As of January 2021, Medicare recipients with ESRD can enroll in a Medicare Advantage Plan. Once enrolled in a Medicare Advantage plan, Medicare pays the recipient’s monthly premium, and the recipient is responsible for their out-of-pocket costs. Medicare recipients benefit from these managed care plans by including Part A, B, and D benefits in a consolidated health insurance plan offering additional benefits such as vision, dental, and hearing coverage, not offered in the traditional Medicare program.
A Medicare recipient can also enroll in a Medical Supplemental plan known as a Medigap plan. This supplemental insurance covers out-of-pocket expenses (copay, deductible, and co-insurance) not covered through traditional Medicare. The most comprehensive Medigap plan is the high deductible Medicare Supplement Plan F that covers all out-of-pocket expenses not covered by traditional Medicare. However, as of January 2020, new Medicare recipients will not qualify for Medicare Supplement Plan F because of reforms to the Medicare program. New Medicare recipients will qualify for Medicare Supplement Plan G. This plan is just as comprehensive as Plan F but excludes out-of-pocket expenses for Part B. To qualify for a Medigap health insurance plan, you can only have traditional Medicare Part A & Part B, not a Medicare Advantage Plan. A recipient would have to purchase a separate prescription drug plan for prescription drug coverage.
The Medicare Access and CHIP Reauthorization Act of 2015 was implemented to reduce Medicare spending and signed into law by President Obama. The Act alters the payment model for doctors who treat Medicare recipients. The new payment system is a value-based incentive model that pays providers based upon quality standard metrics such as health outcomes and clinical practices. Value-based payment models have emerged as a promising way to offer quality health care with value defined as the health outcomes achieved per dollar spent. Providers are encouraged to coordinate care among the hospitals and other health care providers with the hope of limiting unnecessary spending [5]. The Act allows the use of Affordable Care Organizations (ACOs) within the Medicare program to deliver such value-based health care. An ACO is a network of doctors and hospitals that provide coordinated, high-quality health care through a shared savings program to their Medicare beneficiaries fueled by provider incentives.
The prescription drug program (Part D) was implemented through the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and signed into law by President George W. Bush. Through this prescription drug program, Medicare recipients receive affordable prescription drug benefits by receiving discounts on their prescriptions. The Biden Administration has proposed reforms to the prescription drug program through the Build Back Better Act passed by the House of Representatives (H.R. 5376), currently in the Senate. If the bill passes, it will allow the Federal government to negotiate drug prices and set an out-of-pocket maximum of $2000 for prescription drugs.
For over 50 years, the Medicare program has been implemented and reformed, with great success through bipartisan support, for the specific purpose of providing basic health insurance needs to those who are no longer able to attain health insurance through their employer because of either age, retirement, or disability. Further reforms to Medicare should be carefully considered in addition to other Federal health insurance programs such as the Affordable Care Act or Medicaid to avoid any redundancy of programs or overlapping payments of Federal subsidies.
[1] Pub. Law No: 89-97
[2] Pub. Law No: 92-603
[4] McGuire Thomas G, Newhouse Joseph P, Sinaiko Anna D. An Economic History of Medicare Part C. Milbank Quarterly. 2011; 89 (2): 289-332.
[5] Pub L. 114-10
