Medicare remains a vital means of paying for health care for many Americans. An estimated 15 percent of Americans were enrolled in Medicare programs in 2015. That's about 46 million seniors, of which roughly 13 percent are 85 or older, in addition to about 9 million receiving Social Security disability benefits [sources: Center for Medicare Advocacy, KFF]. Despite being a vital program for older Americans' health and financial security, funding for Medicare has always been a sensitive political issue in the U.S.
Medicare is funded through a few different revenue streams, primarily general revenues (most of which comes from federal income tax payments), payroll taxes and beneficiary sources.
Payroll taxes paid by American employees and employers finance Part A, for example. Under PPACA in 2013, the Additional Medicare Tax, generally withheld from high-wage earners, was introduced.
Part B is mostly financed by general revenues and beneficiary premiums.
Part D is also financed by general revenues and beneficiary premiums, in addition to state funding for individuals eligible for both Medicare and Medicaid (called dual eligibles).
Part C, the Medicare Advantage program, is its own creature but isn't much different. Advantage programs are composed of Medicare Part A, Part B and sometimes Part D, and they're financed in the same ways as Part A, Part B and Part D. The money comes from general revenues, payroll taxes and monthly premiums. The difference is that individuals enrolled in these plans are also responsible for additional costs for the supplementary benefits available in Advantage plans.
Medicare has and continues to undergo changes under the PPACA health care reform laws of 2010, including new policy options such as Medicare Advantage, and coverage such as free preventive care services — but beneficiaries have seen and will see changes in out-of-pocket expenses, such as deductibles and payroll taxes.
Under the Budget Control Act of 2011, $1.2 trillion in federal spending cuts were approved, including a 2 percent cut to Medicare provider payments, as well as to claims for durable medical equipment, prosthetics, orthotics and supplies beginning in April 2013. In 2013 the U.S. spent roughly $586 billion on Medicare, which is 20 percent of America's health care spending. That year nearly 4,000 health care providers were paid about $1 million — each. And a handful of doctors saw as much as $10 million in Medicare reimbursements. Medicare payments of $62 billion went to hospitals and outpatient facilities [source: Tracer]. The Congressional Budget Office (CBO) predicts that reductions between 2013 and 2021 will total $123 billion, adding up to roughly $31 billion in savings [source: Medicare NewsGroup].
In October 2014, President Barack Obama signed the Improving Medicare Post-acute Care Transformation Act of 2014 (known as the IMPACT Act). The goal of the act is to standardize patient-care assessment data for quality, payment and resource management (such as discharge planning) in Medicare's post-acute care settings, which include home health agencies, inpatient rehabilitation facilities, long-term care facilities, hospitals, and skilled nursing facilities [source: CMS].
Among these changes is also the Medicare Access and CHIP Reauthorization Act (MACRA), enacted in April 2015 as an update to the Balanced Budget Act of 1997. MACRA improves the way physicians are reimbursed under Medicare and reduces vulnerabilities in the payment model, making it more difficult to commit Medicare fraud.
Author's Note: How Medicare Works
Health care fraud is big business, and Medicare beneficiaries are popular targets — for predatory strangers, family, and even physicians and health care facilities. It's estimated that in 2012, fraud added nearly $100 billion, or roughly 10 percent, to Medicare and Medicaid spending that year. You can help prevent Medicare fraud by following a few simple tips:
- Safeguard your Medicare number; it contains your social security number.
- Don't give in to hard-sell or scare tactics.
- Be suspicious of "free" tests or doctors who waive your co-pay.
- Watch for providers who bill for procedures that they never performed.
- Report Medicare fraud to the Office of Inspector General by calling 1-800-HHS-TIPS (1-800-447-8477) or file a fraud report online.
More Great Links
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- Blum, Jonathan. "What is the donut hole?" The Medicare Blog. April 9, 2010. (June 5, 2015) http://blog.medicare.gov/2010/08/09/what-is-the-donut%C2%A0hole/
- Burgess, Michael C. "H.R.2 - Medicare Access and CHIP Reauthorization Act of 2015." Congress.gov. April 16, 2015. (June 5, 2015) https://www.congress.gov/bill/114th-congress/house-bill/2/text
- Bash, Dana. "Bush: New Medicare price tag means 'tough choices.'" CNN. Jan. 30, 2004. http://www.cnn.com/2004/ALLPOLITICS/01/30/white.house.medicare
- Centers for Medicare & Medicaid Services - Medicare.gov. "Costs in the coverage gap." (June 5, 2015) http://www.medicare.gov/part-d/costs/coverage-gap/part-d-coverage-gap.html
- Centers for Medicare & Medicaid Services - Medicare.gov. "Different types of Medicare Advantage Plans." 2015. (June 5, 2015) http://www.medicare.gov/sign-up-change-plans/medicare-health-plans/medicare-advantage-plans/types-of-medicare-advantage-plans.html
- Centers for Medicare & Medicaid Services - Medicare.gov. "Get help paying costs" 2015. (June 5, 2015) http://www.medicare.gov/your-medicare-costs/help-paying-costs/get-help-paying-costs.html
- Centers for Medicare & Medicaid Services. "History: Key Milestones in CMS Programs." (June 5, 2015) https://www.cms.gov/About-CMS/Agency-Information/History/downloads/CMSProgramKeyMilestones.pdf
- Centers for Medicare & Medicaid Services. "IMPACT Act of 2014 & Cross Setting Measures." April 17, 2015. (June 5, 2015) http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html
- Centers for Medicare & Medicaid Services - Medicare.gov. "Medicare Medical Savings Account (MSA) Plans?" 2015. (June 5, 2015) http://www.medicare.gov/sign-up-change-plans/medicare-health-plans/medicare-savings-accounts/medical-savings-account-plans.html
- Centers for Medicare & Medicaid Services - Medicare.gov. "Understanding Medicare Part C & D Enrollment Periods." August 2014. (June 5, 2015) https://www.medicare.gov/Pubs/pdf/11219.pdf
- Centers for Medicare & Medicaid Services - Medicare.gov. "What's not covered by Part A & Part B?" 2015. (June 5, 2015) http://www.medicare.gov/what-medicare-covers/not-covered/item-and-services-not-covered-by-part-a-and-b.html
- Center for Medicare Advocacy. "50 Insights for Medicare's 50th Anniversary." 2015. (June 5, 2015) http://www.medicareadvocacy.org/50-insights-for-medicares-50th-anniversary/
- Center for Medicare Advocacy. "Medicare's 50th Anniversary." 2015. (June 5, 2015) http://www.medicareadvocacy.org/medicares-50th-anniversary/
- Crane, Thomas S. and Samantha P. Kingsbury. "Medicare Access and CHIP Reauthorization Act of 2015: Program Integrity and Fraud and Abuse Provisions." The National Law Review. April 23, 2015. (June 5, 2015) http://www.natlawreview.com/article/medicare-access-and-chip-reauthorization-act-2015-program-integrity-and-fraud-and-ab
- Internal Revenue Service. "Questions and Answers for the Additional Medicare Tax." March 5, 2015. (June 5, 2015) http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax
- Internal Revenue Service. "Topic 751 - Social Security and Medicare Withholding Rates." May 27, 2015. (June 5, 2015) http://www.irs.gov/taxtopics/tc751.html
- Jacobson, Gretchen et al. "Medigap Enrollment Among New Medicare Beneficiaries: How Many 65-Year Olds Enroll In Plans With First-Dollar Coverage?" Kaiser Family Foundation. April 13, 2015. (June 5, 2015) http://kff.org/medicare/issue-brief/medigap-enrollment-among-new-medicare-beneficiaries/
- Kaiser Family Foundation. "Medicare at a Glance." Sept. 2, 2014. (June 5, 2015) http://kff.org/medicare/fact-sheet/medicare-at-a-glance-fact-sheet/
- Medicare Health Plans (MHP). "Changes to Medicare 2015. Feb. 27, 2014. (June 5, 2015) http://medicarehealthplans.com/2014/02/changes-to-medicare-2015/
- Morales, Tatiana. "Medicare discount cards from hell?" CBS News Online, May 25, 2004. http://www.cbsnews.com/stories/2004/05/25/earlyshow/contributors/raymartin/main619500.shtml
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- National Academy of Social Insurance. "What is the history of Medicare?" (June 5, 2015) https://www.nasi.org/learn/medicare/history
- Noridian Healthcare Solutions. "Mandatory Payment Reductions in the Medicare Fee-for-service Program." May 27, 2015. (June 5, 2015) https://med.noridianmedicare.com/web/jeb/fees-news/fee-schedules/mpfs/sequestration
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- Scandlen, Greg. "Medicare's Biggest Little Secret: Seniors Can Have A Medical Savings Account." Forbes. Feb. 12, 2015. (June 5, 2015) http://www.forbes.com/sites/realspin/2015/02/12/medicares-biggest-little-secret-seniors-can-have-a-medical-savings-account/
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- The Economist. "The $272 Billion Swindle." May 21, 2014. (June 5, 2015) http://www.economist.com/news/united-states/21603078-why-thieves-love-americas-health-care-system-272-billion-swindle
- The Medicare NewsGroup. "What Does Sequestration Mean to Medicare?" (June 5, 2015) http://www.medicarenewsgroup.com/news/medicare-faqs/individual-faq?faqId=2ec7b6bb-c68b-433e-830e-035b9d930e4d
- Tracer, Zachary and Caroline Chen. "At Least 3,900 Medicare Millionaires Revealed in U.S. Data." Bloomberg. June 3, 2015. (June 5, 2015) http://www.bloomberg.com/news/articles/2015-06-01/at-least-3-900-medicare-millionaires-revealed-in-u-s-pay-data
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- Updegrove, Mark K. "Making Harry Truman's Dream Come True." LBJ Presidential Library. March 13, 2012. (June 5, 2015) http://www.lbjlibrary.org/press/making-harry-trumans-dream-come-true
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- Zamosky, Lisa. "Medicare Advantage: Private Health Insurance Through Medicare." WebMD. Nov. 20, 2014. (June 5, 2015) http://www.webmd.com/health-insurance/insurance-basics/medicare-advantage-private-health-insurance-through-medicare