What Is Medicare?

• Medicare is the nation’s health insurance program for the elderly and disabled. Medicaid is the nation’s health insurance program for people with low incomes.
• Medicare provides coverage to 39 million people (1 in 7 Americans): 35 million senior citizens (65 and older) and 4 million disabled citizens
• Before Medicare, about half of all elderly American had health insurance
• It is expected to cover over 72 million beneficiaries by 2027

Number of Medicare Beneficiaries
Fiscal Years 1967-2027

Elderly and Disabled. Includes beneficiaries whose eligibility is based solely on end-stage renal disease (96,000 in 1997). SOURCE: Health Care Financing Administration, Office of the Actuary, April 1998

Characteristics of Medicare

Beneficiaries

• Age
  • 10% Age 85 or older
  • 78% Age 65 to 84
  • 12% Under age 65 and disables
• Poverty
  • 43% of Medicare beneficiaries have annual incomes less than 200% of poverty (less than $20,000 per couple in 1995)
• Health
  • 29% report fair or poor health status
  • 23% have problems with mental functioning
• Medicare
  • 17% admitted to hospital care each year
  • 77% use prescription drugs regularly

Benefits Covered

• Medicate “Part A” covers about 56% of total benefits.
  • Coverage Includes:
    • Inpatient Hospital Services
    • Limited Skilled Nursing Care
    • Home Health Benefits following hospital or nursing home stay
    • Hospice Care
  • Beneficiaries pay:
    • $764 deductible for each episode of hospital inpatient care
    • Daily coinsurance after a 60-day hospital stay
    • Daily coinsurance days 21-100 in a skilled nursing facility
• Medicare “Part B” accounts for 29% of benefit spending.
  • Coverage Includes:
    • Physician Services
    • Outpatient Hospital Services
    • Home Health Visits not covered under Part A
    • Lab Procedures and Medical Equipment
  • Beneficiaries pay:
    • Monthly Part B premium ($43.80 in 1998)
    • $100 annual deductible
    • 20% coinsurance for most services
• The Balanced Budget Act of 1997 added annual mammography and other cancer screening benefits
• Medicare does not cover outpatient prescriptions and long-term care

How Is Medicare Paid For?

• Medicare consists of:
  • Hospital Insurance (Part A
    • Funded mainly by a 1.45% Payroll Tax on both workers and their employers. The revenue from this tax is deposited in the Hospital Insurance Trust Fund
  • Supplementary Medical Insurance (Part B)
    • Funded through Beneficiary Premiums ($43.80 per month in 1998) and general revenues paid by taxpayers
    • Premiums cover about 25% of Part B costs

Where Does the Money Go?

TOTAL EXPENDITURES=$217 BILLION
Excludes Administrative Expenses

SOURCE: CBO, The Economic and Budget Outlook, Fiscal Years 1999-2008, January 1998

Medicare Facts

• Covers about HALF of the elderly’s medical expenses
• In general, less generous than health plans offered by large employers
• Relatively high deductibles for inpatient hospital care ($764 in 1998)
• No cap on out-of-pocket expenditures
• No outpatient prescription drug coverage
• In 1996, beneficiaries spent an average $2,605 of their own money (over 20% of their average household income) for health services, premiums, deductibles and cost-sharing
• Two thirds of all beneficiaries buy supplemental health insurance coverage. This is either in the form of individual health insurance policies known as “Medigap” or employer-sponsored plans or retiree insurance to fill in the gaps in Medicare coverage
• More than 15% of beneficiaries receive supplemental coverage from Medicaid