How Medicare is financed
The finances of Medicare come from numerous sources, including “revenues, payroll tax revenues, and premiums paid by beneficiaries” (Kaiser Family Foundation, 2010). Moreover, other extra sources come from government payments, interests, and taxes imposed on social security benefits. Notably, the finances are program-specific. In essence, there are four “packages that Medicare offers to its beneficiaries, including Part A, B, C, and D” (Kaiser Family Foundation, 2010). In a synopsis, Part A otherwise Hospital Insurance (HI) package is a program that encompasses inpatient services, sanatorium care, home health, and competent nursing facility.
On the other hand, Part B, also known as Supplementary Medical Insurance (SMI) package, is skewed towards ensuring that physicians are paid, an outpatient is taken care of, and offers both preventive and home health services to the beneficiaries. Contrary to the aforementioned (Part A and B) programs, Parts C (Medical Advantage Program) and D (Outpatient Presubscription Drug Program) offer fringe benefits under the private plan wing. While the former presents potential beneficiaries with available private plans on offer, the later, as the name suggests, prescribe drugs to outpatients under the private plan (Zarabozo & Harrison, 2008).
As specified before, the funding is package-specific. To this end, Part A program is funded equally by both the employer and employee. The detail of the package is such that the two contribute 1.45% each, totaling up to 2.9% of the employee’s total earnings. According to a research report in 2010, this package received revenues totaling to $234 billion, with payroll taxes contributing 84% of the total sum (see fig. 1). Notably, following the amendments in the health care sector, this tax is set to increase by 0.9% at the end of 2013 for people earning greater than $200,000 per individual and $250,000 a couple.
Part B program draws its finances from two main “sources, including premiums from subscribers and general revenue” (Thorpe, 2011). These two share the total expenditure at a ratio of 1 to 3, respectively. However, for the high-income earners, an individual contribution ranges between 35% and 80%. A research report of 2010 estimates that this program has generated a total of $212 billion in revenues (Newhouse, 2010).
Part C that acts as an affiliate program to the other programs enjoys funding from the other programs. As such, funding is indirect.
Finally, Part D draws its funding from the “general revenues, beneficiary premiums, and state payments for dual eligibilities (who received drug coverage under state Medicaid programs before 2006)” (Kaiser Family Foundation, 2010). The detail of the package is such that contributions received from the subscribers have to make up at most 25.5% of the total expenditure with the Medicare subsidies offsetting a deficit of 74.5%. Like the other packages, higher-income earners are expected to pay a higher premium as they receive fewer subsidies on the drugs. A report published in the year 2010 sets this contribution at $68 billion in total revenues (see fig. 1).
Eligibility to Medicare
Eligibility to Medicare package is program-specific. Eligibility is a function of the age (over 65 years), citizenship (only the US citizens), and partly the working age of an individual or a spouse (over ten years). Ideally, when an individual meets the requirements mentioned above, he/she is automatically qualified to enroll in Part A program irrespective of the medical history or the income earned. In essence, Part A is the benchmark for qualification to the other programs (B, C, and D). However, Part B exempts individuals who do not fall within the working-age bracket of 10 years. For Part A, however, there are certain groups with the US citizenship that are exempted from meeting the requirements mentioned above. These groups include individuals who are below 65 years of age and have a permanent disability and those with Lou Gehrig’s syndrome. However, the former group’s eligibility is dependent on whether an individual has received SSDI (Social Security Disability Income) for the last two years. On the contrary, the latter group’s eligibility is automatic once one has started receiving SSDI. Also, the US citizens who meet the above age requirement but with less tax contribution initially are eligible for this package once they start remitting premiums every month (Kaiser Family Foundation, 2010).
As mentioned earlier, all the individuals who are entitled to the previous package (Part A) are eligible for Part B. Ideally, 95% of Part A beneficiaries are Part B subscribers. Part A subscribers are automatically enrolled in Part B unless otherwise. As mentioned previously, this package is lenient to the working age. However, those individuals who fail to meet Part A requirements but qualify for Part B and delay to subscribe they attract a penalty on top of their monthly premiums (Kaiser Family Foundation, 2010).
For Part C, “eligibility is dependent on whether an individual has Part A entitlement and has already enrolled in Part B” (Kaiser Family Foundation, 2010). On the other hand, an individual qualifies for Part D if he/she has enrolled in Part A and/or subscribed to Part B.
Benefits of Medicare
The benefits of Medicare are program-specific. As such, different packages draw their unique benefits. For instance, the beneficiaries of Part A program enjoy sanatorium care, exceptional nursing facility, home health, and inpatient care. On the other hand, subscribers to Part B are exempted from physician fees while also enjoying outpatient services, “home health and preventive services” (Kaiser Family Foundation, 2010). With Part C, a beneficiary gets an array of private packages, which offer exceptional services under the ones provided by the other packages. As for Part D, the beneficiaries enjoy the provision of outpatient prescription drugs. This benefit is “delivered through private plans that contract with Medicare: either stand-alone prescription drug plans (PDPs) or Medicare Advantage prescription drug (MAPD) plans” (Kaiser Family Foundation, 2010).
Eligibility of a group below 65 years of age
As mentioned earlier, the eligibility of an individual to Medicare program is very strict on the citizenship, age, and partly the working age. However, one could be eligible for a package before attaining the age of 65 years if he/she has a permanent disability or Lou Gehrig’s syndrome. Nonetheless, unlike those with Lou Gehrig’s syndrome, whose eligibility depends on whether an individual has received SSDI unconditionally, a person with a permanent disability ought to have received SSDI for the past two years to be eligible. To this end, such an individual can enroll in Part A program that is a permit to other programs (Kaiser Family Foundation, 2010).
References
Kaiser Family Foundation. (2010). MEDICARE: A PRIMER. Washington, DC: Barbara Jordan Conference Center.
Newhouse, J. (2010). Assessing Health Reform’s Impact. On Four Key Groups Of Americans, 29(9), 1714-1724.
Thorpe, K. (2011). Estimated Federal Savings Associated with Care Coordination Models for Medicare-Medicaid Dual Eligibles. America’s Health Insurance Plans, 34(2), 56-90.
Zarabozo, C., & Harrison, S. (2008). Payment Policy And The Growth Of Medicare Advantage. Health Affairs, 28(1), 55-67.