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Medicare is a social insurance program administered by the United States
government, providing health insurance coverage to people who are aged 65 and
over, or who meet other special criteria. It was originally signed into law on
July 30, 1965, by President Lyndon B. Johnson as amendments to Social Security
legislation. At the bill-signing ceremony President Johnson enrolled former
President Harry S. Truman as the first Medicare beneficiary and presented him
with the first Medicare card.
Administration
The Centers for Medicare and Medicaid Services (CMS), a component of the
Department of Health and Human Services (HHS), administers Medicare, Medicaid,
the State Children's Health Insurance Program (SCHIP), and the Clinical
Laboratory Improvement Amendments (CLIA). Along with the Departments of Labor
and Treasury, CMS also implements the insurance reform provisions of the Health
Insurance Portability and Accountability Act of 1996 (HIPAA). The Social
Security Administration is responsible for determining Medicare eligibility and
processing premium payments for the Medicare program.
The Chief Actuary of CMS is responsible for providing accounting information and
cost-projections to the Medicare Board of Trustees in order to assist them in
assessing the financial health of the program. The Board is required by law to
issue annual reports on the financial status of the Medicare Trust Funds, and
those reports are required to contain a statement of actuarial opinion by the
Chief Actuary.
Since the beginning of the Medicare program, CMS has contracted with private
companies to assist with administration. These contractors are commonly already
in the insurance or health care area. Contracted processes include claims and
payment processing, call center services, clinician enrollment, and fraud
investigation.
Taxes imposed to finance Medicare
==============================================
The term medicare (in lowercase) (French: assurance maladie) is the unofficial
name for Canada's universal publicly funded health insurance system. The formal
terminology for the insurance system is provided by the Canada Health Act and
the health insurance legislation of the individual provinces and territories.
Under the terms of the Canada Health Act, all "insured persons" (basically,
legal residents of Canada, including permanent residents) are entitled to
receive "insured services" without co-pays. Such services are defined as
medically necessary services if provided in hospital, or by 'practitioners'
(usually physicians). . Approximately 70% of Canadian health expenditures come
from public sources, with the rest paid privately (both through private
insurance, and through out-of-pocket payments). The extent of public financing
varies considerably across services. For example, approximately 99% of physician
services, and 90% of hospital care, are paid by publicly funded sources, whereas
almost all dental care is paid for privately.
Funding
Funding for the insurance plans comes from the general revenues of the Canadian
provinces/territories, assisted by transfer payments from the federal government
through the Canada Health Transfer. Some provinces charge health care premiums,
but these are in effect taxes (since they are not tied to service use, nor to
provincial health expenditures). The system is accordingly classified by the
OECD as a tax-supported system, as opposed to the social insurance approaches
used in many European countries.
Delivery
Canada uses a mix of public and private organizations to deliver health care; in
turn, these organizations bill the provincial health authorities, with few
exceptions. Hospitals are largely non-profit organizations, historically often
linked to religious or charitable organizations. In some provinces, individual
hospital boards have been eliminated and combined into quasi-private regional
health authorities, subject to varying degrees of provincial control. Laboratory
services are often delivered by for-profit investor-owned corporations.
With rare exceptions, medical doctors are small for-profit independent
businesses. Historically, they have practiced in small solo or group practices
and billed the medicare system on a fee for service basis. Unlike the practice
in some other countries, hospital-based physicians were rarely hospital
employees, and also billed the provincial insurance plans on a fee-for-service
basis. Since 2000, physicians have been allowed to incorporate for tax reasons
(dates of authorization vary province to province). However, efforts to achieve
primary health care reform have increasingly encouraged physicians to work in
multidisciplinary teams, and be paid through blended funding models, including
elements of capitation and other 'alternative funding formulas'. Similarly, some
hospitals (particularly teaching hospitals and rural/remote hospitals) have also
experimented with alternatives to fee-for-service.
In summary, the system is known as a "public system" due to its public
financing, but is not a nationalized system such as the UK's NHS; most medicare
services are provided privately.
An additional complexity is that, because health care is deemed to be under
provincial jurisdiction, there is not a "Canadian health care system". As noted,
most providers are private, and may or may not coordinate their care.
Publicly-funded insurance is organized at the level of the province/territory;
each manages its own insurance system, including issuing its own healthcare
identification cards (a list of the provincial medical care insurance programs
is given at the end of this entry). Once care moves beyond the services required
by the Canada Health Act - for which universal comprehensive coverage applies -
there is inconsistency from province to province in the extent of
publicly-funded coverage, particularly for such items as outpatient drug
coverage and rehabilitation, as well as vision care, mental health, and
long-term care, with a substantial portion of such services being paid for
privately, either through private insurance, or out-of-pocket. Eligibility for
these additional programs may be based on various combinations of such factors
as age (e.g., children, seniors), income, enrollment in a home care program, or
diagnosis (e.g., HIV/AIDS, cancer, cystic fibrosis).
The Canada Health Act requires coverage for all medically necessary care
provided in hospitals or by physicians; this explicitly includes diagnostic,
treatment and preventive services. Coverage is universal for qualifying Canadian
residents, regardless of income level. Services of non-physicians working within
hospitals are covered; but provinces can, but are not forced to, cover services
by non-physicians if provided outside hospitals. Changing the site of treatment
may thus change coverage. For example, pharmaceuticals, nursing care, and
physical therapy must be covered for inpatients, but there is considerable
variation from province to province in the extent to which they are covered for
patients discharged to the community (e.g., after day surgery). The need to
modernize coverage was pointed out in 2002 by both the Romanow Commission and by
the Kirby committee of the Canadian Senate (see External links below).
Similarly, the extent to which non-physician providers of primary care are
funded varies; Quebec offers primary health care teams through its CLSC system).
Drug coverage
Each province may also provide its own prescription drug benefit plan, although
the Canada Health Act requires only coverage for pharmaceuticals delivered to
hospital inpatients. Provincial prescription drug benefit plans differ across
provinces. Some provinces cover only those in particular age groups (usually,
seniors) and/or those on social assistance. Others are more universal. Quebec
achieves universal coverage through a combination of private and public plans.
Co-payments also vary. Provinces maintain their own provincial formularies,
although efforts are underway to institute a Common Drug Review. Note that there
is ongoing controversy in Canada, as in other countries, about inclusion of
expensive drugs and discrepancies in their availability, as well as in what if
any provisions are made for allowing medications not yet approved to be
administered under "exceptional drug" provisions. Drug costs are contentious.
Their prices are controlled by the Patented Medicine Prices Review Board,
otherwise called the PMPRB. The PMPRB's pricing formula ensures that Canada pays
prices based on the average of those charged to selected countries; they are
neither the highest, nor the lowest.
Dental care, eye care and other services
Dental care is not required to be covered by the government insurance plans.
Canadians rely on their employers, individual private insurance, pay cash
themselves for dental treatments, or receive no care. In some jurisdictions,
public health units have been involved in providing targeted programs to address
the need of the young, the elderly or those who are on welfare. The Canadian
Association of Public Health Dentistry tracks programs, and has been advocating
for extending coverage to those currently unable to receive dental care.
The range of services for vision care coverage also varies widely among the
provinces. Generally, "medically required" vision care is covered if provided by
physicians (cataract surgery, diabetic vision care, some laser eye surgeries
required as a result of disease, but not if the purpose is to replace the need
for eyeglasses). Similarly, the standard vision test may or may not be covered.
Some provinces allow a limited number of tests (e.g., no more than once within a
two-year period). Others, including Ontario, Alberta and Saskatchewan, do not,
although different provisions may apply to particular sub-groups (e.g.,
diabetics, children).
Naturopathic services are covered in some cases, but homeopathic services are
generally not covered. Chiropractic is partially covered in some provinces.
Cosmetic procedures are not typically covered. Psychiatric services (provided by
physicians) are covered, fee-for-service psychology services outside of
hospitals or community based mental health clinics are usually not. Physical
therapy, occupational therapy, speech therapy, nursing, and chiropractic
services are often not covered unless within hospitals. Some provinces,
including Ontario include some rehabilitation services for those in the home
care program, those recently discharged from hospitals (e.g., after a hip
replacement), or those in particular age categories. Again, considerable
variation exists, and provinces can (and do) alter their coverage decisions.
Opinions on Medicare
This section needs additional citations for verification.
Please help improve this article by adding reliable references. Unsourced
material may be challenged and removed. (July 2007)
Polling data in the last few years have consistently cited medicare as among the
most important political issues in the minds of Canadian voters. Along with
peacekeeping, the CBC ran a poll that found medicare to be one of the most
defining characteristics of Canada.
It has increasingly become a source of controversy in Canadian politics. As a
recent report from the Health Council of Canada has noted "Herein lies one of
the puzzles of Canadian health care: Canadians increasingly view the health care
system as unsustainable and under threat, even as their own experiences with the
system are mostly positive."
As analysts have noted, the root of the concern may be traced to successful cost
control efforts in the mid 1990s, where public health expenditure per capita, in
inflation-adjusted dollars, actually fell. These efforts arose from efforts by
the federal government to deal with its deficit, which led to cuts in their
transfers to the provinces, and in turn to squeezing hospital budgets and
physician reimbursements. The number of physicians being trained was reduced.
The result was seen in increased wait times, particularly for elective
procedures. More recently, government has been reinvesting in health care, but
public confidence has been slow to recover.
A number of studies have compared Canada with other countries, and concluded
that each system has its own strengths and weaknesses. One widely-cited
statistic which has been used to argue that Canada was under-performing came
from the World Health Organization, which ranked Canada as 30th in 2000.
However, the basis for these rankings has been highly contentious. As Deber
noted, "The measure of "overall healthsystem performance" derives from adjusting
"goal attainment" for educational attainment. Although goal attainment is in
theory based on five measures (level and distribution of health, level and
distribution of "responsiveness" and "fairness of financial contribution"), the
actual values assigned to most countries, including Canada, were never directly
measured. The scores do not incorporate any information about the actual
workings of the system, other than as reflected in life expectancy. The primary
reason for Canada's relatively low standing rests on the relatively high
educational level of its population, particularly as compared to France, rather
than on any features of its health system." Other countries had similar
complaints, and the WHO has not repeated this ranking.
The 2003 Accord
In 2003, the prime minister and the provincial premiers agreed upon priority
areas for reinvestment. The 2003 First Ministers’ Accord on Health Care Renewal
reaffirmed their commitment to the principles of the Canada Health Act. They
indicated the following principles:
"Drawing from this foundation, First Ministers view this Accord as a covenant
which will help to ensure that:
* all Canadians have timely access to health services on the basis of need, not
ability to pay, regardless of where they live or move in Canada;
* the health care services available to Canadians are of high quality,
effective, patient-centred and safe; and
* our health care system is sustainable and affordable and will be here for
Canadians and their children in the future."
The accord set the following priority areas: primary health care, home care,
catastrophic drug coverage, access to diagnostic/medical equipment and
information technology and an electronic health record. The extent of progress
in meeting reform goals has varied across these areas.
Evaluating Claims about the System
Evaluating the accuracy of claims about the system is hampered by several
factors. The highly decentralized nature of health care delivery means that good
data is not always available. It is often difficult to distinguish compelling
but atypical anecdotes from systemic problems. Considerable effort is being made
to develop and implement comparable indicators to allow better assessment of
progress. However, the Health Council of Canada - with a mandate to monitor and
report on health reform - complained in 2007 that progress has stalled
The debate about health care has also become heavily ideological. The Fraser
Institute, a think tank supporting "competitive market solutions for public
policy problems" is a frequent critic of medicare. It publishes yearly reports
about wait times which are then used to argue that the system is both failing
and unsustainable. Others criticize their methodology, which is based on
physician perceptions rather than actual waits. Other complaints come from the
political left, who object to 'privatization' (by which they usually mean a
heavier involvement of for-profit providers). (See, for example, the Canadian
Health Coalition web page. There are frequent debates in the media and on line
between advocates and opponents of Canadian healthcare.
Wait Times and Access
Common complaints relate to access, usually to elective surgery (especially hip
and knee replacement and cataract surgery) and diagnostic imaging. These have
been the primary targets of health care reinvestment, and it appears that
considerable progress has been made for certain services, although the
implications for procedures not on the target list are unclear. Canadian
physicians have been heavily involved, particularly in developing
appropriateness criteria to ensure timely access for necessary care. It cost
Canada's economy $14.8 billion in 2007 to have patients waiting longer than
needed for medical procedures.
Health Human Resources
A related issue is the volume, and distribution, of health human resources.
There are ongoing issues about the distribution of physicians, with the pendulum
swinging from arguing that there were too many, to arguing that there were too
few. As Ben Chan found, the major factor driving the drop in physician numbers
was changes in training programs. Combined with such factors as changes in the
hours worked by each physician , and a decrease in the proportion of doctors
choosing to go into family practice, there were shortages in some areas,
particularly for general practitioners (GP) / family doctors. One response has
been to encourage 'primary care reform', including greater use of
multidisciplinary health care teams. There are also ongoing issues regarding
nurses. (See Nursing Health Services Research Unit, which links to some reports.
CIHI also gives data about nursing.)
The Parallel Private Debate
Some politicians and think tanks have proposed removing barriers to the
existence of a parallel private healthcare system. Others note that such systems
act to erode cost control and impede equity. Though polling suggests support for
such reforms has been increasing, it has yet to be adopted as official policy by
any of the main federal political parties.
There are no barriers under the Canada Health Act to private clinics, although
provincial governments may or may not permit them. Individual physicians can and
do operate private clinics, but there are disputes as to whether surgical
procedures can be performed. Two related issues have obstructed the growth of
such clinics. One is regulatory - hospital-based quality assurance often failed
to encompass them. This gap has been filled in most provinces, but sometimes
only after celebrated incidents in which patients died in unregulated clinics,
including one physician who performed cosmetic surgery in an Ontario hotel room.
The second is economic - there may be no way for physicians to recoup the
additional costs of running a surgical facility from their fees. Here, provinces
can choose to offer 'facility fees' to these clinics, but doing so has often
been contentious, particularly if hospitals felt that these costs would be
better devoted to allowing them to increase their operating room time.
Note that uninsured persons can pay for care (including medical tourism), and
that insured persons can still pay for uninsured services. These are both niche
markets.
American opinion on Canadian medicare tends to be non-neutral, either supportive
as in the preceding paragraph and therefore desirable within the USA, or
negative and not desirable. Opinions not supportive of medicare put forth issues
such as wait times and budget cuts having severely impaired the Canadian
healthcare system, to the point where Canadian mothers have to go to the U.S. to
deliver because of lack of room and nurses in Canadian hospitals.
Governments in Canada spend a smaller amount per capita on healthcare than
governments in the United States, while almost every Canadian citizen is fully
covered. In the United States a high percentage of the population is uncovered
or only marginally covered, despite higher proportional spending along with
large private investment. Even more people are just a job loss away from not
having coverage (although in most cases the employer must maintain health care
with copayment of the patient for a period of time after employment in the
United States has gone down not up).
The lack of competition has given healthcare unions a monopoly on essential
services, thus ensuring a very strong bargaining position. Nova Scotia is
currently debating healthcare legislation aimed at removing the threat of
striking healthcare workers and replacing it with binding arbitration.
Proposed reforms
One proposed solution for improving the Canadian healthcare system is to
increase funding. Proponents of this approach point to the rise of
neo-conservative economic policies in Canada and the associated reduction in
welfare state expenditure (particularly in the provinces) from the 1980s onwards
as the cause of degradation in the system. In fact, there is evidence that the
percentage of total government expenditures spent on healthcare has been
increasing, in part due to a higher percentage of older Canadians.
Other critics of healthcare state that increased funding will not solve
systematic problems in the healthcare system including a rising cost of medical
technology, infrastructure, and wages. These critics say that Canada's proximity
to the United States causes a "brain drain" or migration of Canadian-trained
doctors and nurses (as well as other professionals) to the United States, where
private hospitals can pay much higher wages and income tax rates are lower. Some
of these critics argue that increased privatization of healthcare would improve
Canada's health infrastructure.
Critics of the systematic reform approach state that healthcare should be kept
public, (public in funding only, as most services are provided by the private
sector including doctors who in most cases are private corporations) in part
because it separates Canadians from Americans by mandating equality and fairness
in health care. Truth is that the system is not a true public system, as in
Italy, where doctors are on a per capita salary. The Canadian Health care system
is merely publicly funded, which most Canadians appreciate and desire. Making
the system a true public system is an alternative to the current half public,
half private system.
Ontario's reform experiments
Since the early 1990s, Ontario has implemented several systematic reforms to
reduce health care costs. Similar reforms have been implemented in other
provinces.
User premiums
Currently in Ontario, people who earn salaries above $20,000 must pay an annual
health care premium ranging from $300-$900. Funding for medicare in Ontario also
comes in part from a dedicated Employer Health Tax (EHT) that ranges from
0.98%-1.95% of employer payroll. Eligible employers are exempted from EHT on the
first $400,000 of payroll. British Columbia, Quebec, and Alberta charge similar
premiums. Alberta charges $44 a month or $88 per family, though as Alberta
approaches debt-free status, there has been talk of removing them.
Medical clinics
Ontario has increased the number of 24-hour drop-in medical clinic networks to
reduce costs associated with treating off-hours emergencies in hospital
emergency rooms.
Many family doctor practices have created their own clinics, offering 24-hour
service for their patients if needed. Each doctor in the practice takes a turn
at being "on call" on a rotating basis. Patients who have family doctors
belonging to these practices are able to have a doctor come to their home in
extreme situations. There is no additional charge for these services as they are
billed to the Province, the same as an office visit.
Hospitals in some major Canadian cities, such as London, Ontario, have
restructured their emergency services to share emergency treatment among several
hospitals. One hospital may provide full emergency room care, while another sees
patients who have broken limbs, minor injuries and yet another sees patients
suffering cold, flu, etc.
Recently, the first nurse practitioner-led office to relieve waiting times
caused by a shortage of primary practitioners was opened in Sudbury, Ontario.
Alternatives to fee-for-service
Ontario has also attempted to move the system away from bill for service and
toward preventive and community-based approaches to healthcare. The Ontario
government in the early 1990s helped develop many community health care centres,
often in low-income areas, which provide both medical and social support which
combines health care with programs such as collective kitchens, Internet access,
anti-poverty groups and groups to help people quit smoking.
While funding has decreased for these centres, and they have had to cut back ,
they have had a lower cost than the traditional fee-for-service approach . Many
of these centres are filled to capacity in terms of general doctors, and there
are often fairly long waiting lists and the centres also utilize nurse
practitioners, who reduce the workload on the doctors and increase efficiency.
Midwives and hospital birthing reforms
Ontario and Quebec have recently licensed midwives, providing another option for
childbirth which can reduce costs for uncomplicated births. Midwives remain
close to hospital facilities in case the need for emergency care emerges. These
births often cost much less than the traditional hospital delivery . Hospitals
have also reformed their approach to birthing by adding private birthing areas,
often with a hot tub (which is good for relieving pain without medication).
Privatization
Currently, privately owned and operated hospitals that allow patients to pay
out-of-pocket for services cannot obtain public funding in Canada, as they
contravene the "equal accessibility" tenets of the Canada Health Act. Some
politicians and medical professionals have proposed allowing public funding for
these hospitals. Workers' Compensation Boards, the Canadian Military, the RCMP,
federally incarcerated prisoners, and medical care for which an insurance
company has liability (e.g., motor vehicle accidents) all pay for health care
outside of the public systems in all provinces.
In Quebec, a recent legal change has allowed this reform to occur. In June 2005,
the Supreme Court of Canada overturned a Quebec law preventing people from
buying private health insurance to pay for medical services available through
the publicly funded system and this ruling does not apply outside the province.
See: Chaoulli v. Quebec (Attorney General) .
In November 2005, the Quebec government announced that it would allow residents
to purchase private medical insurance to comply with this ruling.
Private insurance from companies such as Blue Cross, Green Shield and Manulife
have been available for many years to cover services not covered by Medicare,
such as dental care and eye care. Private insurance is provided by many
employers as a benefit.
The Canadian Medical Association (CMA) released a report in July 2007 endorsing
private healthcare as a means to improve an ailing healthcare system. The
current president of the CMA, Dr. Brian Day, is the owner of the largest private
healthcare hospital in Canada and a proponent of mixed public and private
healthcare in Canada.
Canadian Health Practitioner standards
It is generally accepted that physicians arriving in Canada from other countries
must meet Canadian Health Practitioner standards. So there is concern that
doctors from other countries are not trained or educated to meet Canadian
standards. Consequently, doctors who want to practice in Canada must meet the
same educational and medical qualifications as Canadian-trained practitioners,
others suggest that the current regulatory bodies, the Canadian Medical
Association, the Doctors Union, and the College of Physicians and Surgeons has
created too much red tape to allow qualified doctors to practise in Canada. It
should be noted that Canada's Health system is ranked 30th in the world,
suggesting the logic of the doctor shortage defies the statistics. In fact
according to a report by Keith Leslie of the Canadian Press in the Chronicle
Journal, Nov 21, 2005, over 10,000 trained doctors are working in the United
States, a country ranked 37th in the world. It would suggest money or the
perception of better working conditions, or both, are resulting in an exodus of
Canadian doctors (and nurses) to the USA.
It is important to recognize that many consider the doctor shortage in Canada to
be a very severe problem affecting all sectors of health care. It may relate in
part to the details of how doctors are paid; a detail often misunderstood. In
Canada, almost all doctors receive a fee per-visit, not per-service. It has been
suggested that this type of "fee-for-visit" payment system can encourage
complexity, volume visits, repeat visits, referrals, and testing.
One consequence of the shortage in Canada is that a great many patients are left
without family doctors, and trained specialists, making early intervention very
difficult. As the article in the Toronto Star specially isolates, it is not so
much a problem of a doctor shortage but of a shortage of 'licensed doctors'.
Michael Urbanski states that Canada already has a hidden reserve of
foreign-trained MDs eager to begin medical practice. "However, what's crucial to
understanding the issue of doctor shortage in Ontario is that while the Liberal
government is planning to go "poaching" for other countries' doctors, there are
an estimated 4,000 internationally trained doctors right here in Ontario working
at low-wage jobs."
A CBC report (August 21, 2006) on the health care system reports the following:
Dr. Albert Schumacher, former president of the Canadian Medical Association
estimates that 75 per cent of health-care services are delivered privately, but
funded publicly. "Frontline practitioners whether they're GPs or specialists by
and large are not salaried. They're small hardware stores. Same thing with labs
and radiology clinics …The situation we are seeing now are more services around
not being funded publicly but people having to pay for them, or their insurance
companies. We have sort of a passive privatization.
In a report by Keith Leslie of the Canadian Press in the Chronicle Journal, Nov
21, 2005, commenting on an Ontario Medical Association Report, prepared by the
human resources committee states "The year 2005 finds the province in the midst
of a deepening physician resources crisis". The report continues to report, "the
government should make it easier for doctors from other provinces to work in
Ontario and .... ". Here we have signs of inter-provincial competition affecting
the doctor shortage in one province over another. . Essentially, privatized
healthcare is not a choice of interest for lower income Canadians, it is most
likely to be unaffordable and unfair to those who suffer on a social standard.
Provincial insurance plans
Though the Canada Health Act provides national guidelines for healthcare, the
provinces have exclusive jurisdiction over health under the constitution and are
free to ignore these guidelines, although if they ignore the guidelines, the
federal government may deny federal funding for healthcare. All provinces
currently abide by the Canada Health Act in order to receive this funding;
however the Alberta legislature has considered proposals to ignore the Act to
allow them to implement reforms not allowed under the Act.
The federal government has no direct role in the delivery of medicine in the
provinces and territories so each province and territory has its own independent
public health insurance program. Under the Canada Health Act, each province and
territory must provide services to members of plans in other provinces and
territories.
List of provincial programs
Province Name of plan
Alberta Alberta Health Care Insurance Plan
British Columbia Medical Services Plan
Manitoba Manitoba Health
New Brunswick Medicare
Newfoundland and Labrador Newfoundland and Labrador Medical Care Plan
Northwest Territories NWT Health Care Insurance Plan
Nova Scotia Medical Service Insurance
Nunavut Nunavut Health Care Plan
Ontario Ontario Health Insurance Plan
Prince Edward Island Medicare
Quebec Assurance maladie (RAMQ Medicare)
Saskatchewan Saskatchewan Medical Care Insurance Plan
Yukon Yukon Health Care Insurance Plan
Medicare is partially financed by payroll taxes imposed by the Federal Insurance
Contributions Act (FICA) and the Self-Employment Contributions Act of 1954. In
the case of employees, the tax is equal to 2.9% (1.45% withheld from the worker
and a matching 1.45% paid by the employer) of the wages, salaries and other
compensation in connection with employment. Until December 31, 1993, the law
provided a maximum amount of wages, etc., on which the Medicare tax could be
imposed each year. Beginning January 1, 1994, the compensation limit was
removed. In the case of self-employed individuals, the tax is 2.9% of net
earnings from self-employment, and the entire amount is paid by the
self-employed individual.
Eligibility
In general, individuals are eligible for Medicare if they are a U.S. citizen or
have been a permanent legal resident for 5 continuous years, and they are 65
years or older, or they are under 65, disabled and have been receiving either
Social Security or the Railroad Retirement Board disability benefits for at
least 24 months, or they get continuing dialysis for permanent kidney failure or
need a kidney transplant, or they are eligible for Social Security Disability
Insurance and have Amyotrophic Lateral Sclerosis (ALS-Lou Gehrig's disease).
Many beneficiaries are dual-eligible. This means they qualify for both Medicare
and Medicaid. In some states for those making below a certain income, Medicaid
will pay the beneficiaries' Part B premium for them (most beneficiaries have
worked long enough and have no Part A premium), and also pay any drugs that are
not covered by Part D.
In 2007, Medicare provided health care coverage for 43 million Americans.
Enrollment is expected to reach 77 million by 2031, when the baby boom
generation is fully enrolled.
Benefits
A Medicare card, with several areas of the card obscured to protect privacy.
There are separate lines with for Part A and Part B, each with its own date.
There is no lines for Part C or D, as a separate card is issued for those
benefits by the private insurance company.
A Medicare card, with several areas of the card obscured to protect privacy.
There are separate lines with for Part A and Part B, each with its own date.
There is no lines for Part C or D, as a separate card is issued for those
benefits by the private insurance company.
The original Medicare program has two parts: Part A (Hospital Insurance), and
Part B (Medical Insurance). Only a few special cases exist where prescription
drugs are covered by original Medicare, but as of January 2006, Medicare Part D
provides more comprehensive drug coverage. Medicare Advantage plans are another
way for beneficiaries to receive their Part A, B and D benefits. All Medicare
benefits are subject to medical necessity.
Part A: Hospital Insurance
Part A covers hospital stays (including stays in a skilled nursing facility) if
certain criteria are met:
1. The hospital stay must be at least three days, three midnights, not counting
the discharge date.
2. The nursing home stay must be for something diagnosed during the hospital
stay or for the main cause of hospital stay. For instance, a hospital stay for a
broken hip and then a nursing home stay for physical therapy would be covered.
3. If the patient is not receiving rehabilitation but has some other ailment
that requires skilled nursing supervision then the nursing home stay would be
covered.
4. The care being rendered by the nursing home must be skilled. Medicare part A
does not pay for custodial, non-skilled, or long-term care activities, including
activities of daily living (ADLs) such as personal hygiene, cooking, cleaning,
etc.
The maximum length of stay that Medicare Part A will cover in a skilled nursing
facility per ailment is 100 days. The first 20 days would be paid for in full by
Medicare with the remaining 80 days requiring a co-payment (as of 2008, $128.00
per day). Many insurance companies have a provision for skilled nursing care in
the policies they sell.
If a beneficiary uses some portion of their Part A benefit and then goes at
least 60 days without receiving facility-based skilled services, the 100-day
clock is reset and the person qualifies for a new 100-day benefit period.
Part B: Medical Insurance
Part B medical insurance helps pay for some services and products not covered by
Part A, generally on an outpatient basis. Part B is optional and may be deferred
if the beneficiary or their spouse is still actively working. There is a
lifetime penalty (10% per year) imposed for not taking Part B if not actively
working.
Part B coverage includes physician and nursing services, x-rays, laboratory and
diagnostic tests, influenza and pneumonia vaccinations, blood transfusions,
renal dialysis, outpatient hospital procedures, limited ambulance
transportation, Immunosuppressive drugs for organ transplant recipients,
chemotherapy, hormonal treatments such as lupron, and other outpatient medical
treatments administered in a doctor's office. Medication administration is
covered under Part B only if it is administered by the physician during an
office visit.
Part B also helps with durable medical equipment (DME), including canes,
walkers, wheelchairs, and mobility scooters for those with mobility impairments.
Prosthetic devices such as artificial limbs and breast prosthesis following
mastectomy, as well as one pair of eyeglasses following cataract surgery, and
oxygen for home use is also covered.
Complex rules are used to manage the benefit, and advisories are periodically
issued which describe coverage criteria. On the national level these advisories
are issued by CMS, and are known as National Coverage Determinations (NCD).
Local Coverage Determinations (LCD) only apply within the multi-state area
managed by a specific regional Medicare Part B contractor, and Local Medical
Review Policies (LMRP) were superseded by LCDs in 2003. Coverage information is
also located in the CMS Internet-Only Manuals (IOM), the Code of Federal
Regulations (CFR), the Social Security Act, and the Federal Register.
Part C: Medicare Advantage plans
With the passage of the Balanced Budget Act of 1997, Medicare beneficiaries were
given the option to receive their Medicare benefits through private health
insurance plans, instead of through the original Medicare plan (Parts A and B).
These programs were known as "Medicare+Choice" or "Part C" plans. Pursuant to
the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the
compensation and business practices changed for insurers that offer these plans,
and "Medicare+Choice" plans became known as "Medicare Advantage" (MA) plans.
Medicare has a standard benefit package that covers medically necessary care
members can receive from nearly any hospital or doctor in the country. For
people who choose to enroll in a Medicare private health plan, Medicare pays the
private health plan a set amount every month for each member. Members may have
to pay a monthly premium in addition to the Medicare Part B premium and
generally pay a fixed amount (a copayment of $20, for example) every time they
see a doctor. The copayment can be higher to see a specialist.
The private plans are required to offer a benefit “package” that is at least as
good as Medicare’s and cover everything Medicare covers, but they do not have to
cover every benefit in the same way. Plans that pay less than Medicare for some
benefits, like skilled nursing facility care, can balance their benefits package
by offering lower copayments for doctor visits. Private plans use some of the
excess payments they receive from the government for each enrollee to offer
supplemental benefits. Some plans put a limit on their members’ annual
out-of-pocket spending on medical care, providing some insurance against
catastrophic costs over $5,000, for example. But many plans use the excess
subsidies to offer dental coverage and other services not covered by Medicare
and can leave members exposed to high medical bills if they fall seriously ill.
Private plan members can end up with unexpectedly high out-of-pocket costs.
In 2006 enrollees in Medicare Advantage Private Fee-for-Service plans were
offered a net extra benefit value (the value of the additional benefits minus
any additional premium) of $55.92 a month more than the traditional Medicare
benefit package; enrollees in other Medicare Advantage plans were offered a net
extra benefit value of $71.22 a month more.
Medicare Advantage Plans that also include Part D prescription drug benefits are
known as a Medicare Advantage Prescription Drug plan or a MAPD.
Enrollment in Medicare Advantage plans grew from 5.4 million in 2005 to 8.2
million in 2007. Enrollment grew by an additional 800,000 during the first four
months of 2008. This represents 19% of Medicare beneficiaries. A third of
beneficiaries with Part D coverage are enrolled in a Medicare Advantage plan.
Medicare Advantage enrollment is higher in urban areas; the enrollment rate in
urban counties is twice that in rural counties (22% vs. 10%). Almost all
Medicare beneficiaries have access to at least two Medicare Advantage plans;
most have access to three or more. The number of organizations offering
Fee-for-Service plans has increased dramatically, from 11 in 2006 to almost 50
in 2008. Eight out of ten beneficiaries (82%) now have access to six or more
Private Fee-for-Service plans.
Part D: Prescription Drug plans
Medicare Part D
Medicare Part D went into effect on January 1, 2006. Anyone with Part A or B is
eligible for Part D. It was made possible by the passage of the Medicare
Prescription Drug, Improvement, and Modernization Act. In order to receive this
benefit, a person with Medicare must enroll in a stand-alone Prescription Drug
Plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD).
These plans are approved and regulated by the Medicare program, but are actually
designed and administered by private health insurance companies. Unlike Original
Medicare (Part A and B), Part D coverage is not standardized. Plans choose which
drugs (or even classes of drugs) they wish to cover, at what level (or tier)
they wish to cover it, and are free to choose not to cover some drugs at all.
The exception to this is drugs that Medicare specifically excludes from
coverage, including but not limited to benzodiazepines, cough suppressant and
barbiturates. Plans that cover excluded drugs are not allowed to pass those
costs on to Medicare, and plans are required to repay CMS if they are found to
have billed Medicare in these cases.
It should be noted again for beneficiaries who are dual-eligible (Medicare and
Medicaid eligible) Medicaid will pay for drugs not covered by part D of
Medicare, such as benzodiazepines, and other restricted controlled substances.
Out-of-pocket costs
Neither Part A nor Part B pays for all of a covered person's medical costs. The
program contains premiums, deductibles and coinsurance, which the covered
individual must pay out-of-pocket. Some people may qualify to have other
governmental programs (such as Medicaid) pay premiums and some or all of the
costs associated with Medicare.
Premiums
Most Medicare enrollees do not pay a monthly Part A premium, because they (or a
spouse) have had 40 or more quarters in which they paid Federal Insurance
Contributions Act taxes. Medicare-eligible persons who do not have 40 or more
quarters of Medicare-covered employment may purchase Part A for a monthly
premium of:
* $233.00 per month (2008) for those with 30-39 quarters of Medicare-covered
employment, or
* $423.00 per month (in 2008) for those with less than 30 quarters of
Medicare-covered employment and who are not otherwise eligible for premium-free
Part A coverage.
All Medicare Part B enrollees pay an insurance premium for this coverage; the
standard Part B premium for 2008 is $96.40 per month. A new income-based premium
schema has been in effect for 2007, wherein Part B premiums are higher for
beneficiaries with incomes exceeding $80,000 for individuals or $160,000 for
married couples. Depending on the extent to which beneficiary earnings exceed
the base income, these higher Part B premiums are $122.20, $160.90, $199.70, or
$238.40 for 2008, with the highest premium paid by individuals earning more than
$205,000, or married couples earning more than $410,000.
Medicare Part B premiums are commonly deducted automatically from beneficiaries'
monthly Social Security checks.
Part C and D plans may or may not charge premiums, at the programs' discretion.
Part C plans may also choose to rebate a portion of the Part B premium to the
member.
Deductible and coinsurance
Part A — For each benefit period, a beneficiary will pay:
* A Part A deductible of $1,024 (in 2008) for a hospital stay of 1-60 days.
* A $256 per day co-pay (in 2008) for days 61-90 of a hospital stay.
* A $512 per day co-pay (in 2008) for days 91-150 of a hospital stay, as part of
their limited Lifetime Reserve Days.
* All costs for each day beyond 150 days
* Coinsurance for a Skilled Nursing Facility is $128.00 per day (in 2008) for
days 21 through 100 for each benefit period.
* A blood deductible of the first 3 pints of blood needed in a calendar year,
unless replaced. There is a 3 pint blood deductible for both Part A and Part B,
and these separate deductibles do not overlap.
Part B — After a beneficiary meets the yearly deductible of $135.00 (in 2008),
they will be required to pay a co-insurance of 20% of the Medicare-approved
amount for all services covered by Part B. They are also required to pay an
excess charge of 15% for services rendered by non-participating Medicare
providers.
The deductibles and coinsurance charges for Part C and D plans vary from plan to
plan.
Medicare supplement (Medigap) policies
Medigap
Some people elect to purchase a type of supplemental coverage, called a Medigap
plan, to help fill in the holes in Original Medicare (Part A and B). These
Medigap insurance policies are standardized by CMS, but are sold and
administered by private companies. Some Medigap policies sold before 2006 may
include coverage for prescription drugs. Medigap policies sold after the
introduction of Medicare Part D on January 1, 2006 are prohibited from covering
drugs.
Some have suggested that by reducing the cost-sharing requirements in the
Medicare program, Medigap policies increase the use of health care by Medicare
beneficiaries and thus increase Medicare spending. One recent study suggests
that this concern may have been overstated due to methodological problems in
prior research.
Payment for services
Medicare contracts with regional insurance companies who process over one
billion fee-for-service claims per year. In 2003, Medicare accounted for almost
13% of the entire federal budget. Based on the CMS projections, 33 cents of
every dollar spent on health care in the U.S. is paid by Medicare and Medicaid
(including State funding). Looked at from three different perspectives, 61 cents
of every dollar spent on nursing homes, 47 cents of every dollar received by
U.S. hospitals, and 27 cents of every dollar spent on physician services is
funded by Medicare or Medicaid.
Reimbursement for Part A services
For institutional care such as hospital and nursing home care, Medicare uses
prospective payment systems. A prospective payment system is one in which the
health care institution receives a set amount of money for each episode of care
provided to a patient, regardless of the actual amount of care used. The actual
allotment of funds is based on a list of diagnosis-related groups (DRG). The
actual amount depends on the kind of diagnosis made at the hospital. There are
some issues surrounding Medicare's use of DRGs because if the patient uses less
care, the hospital gets to keep the remainder. This, in theory, should balance
the costs for the hospital. However, if the patient uses more care, then the
hospital has to cover its own losses. This results in the issue of "upcoding,"
when a physician makes a more severe diagnosis to hedge against accidental
costs.
Reimbursement for Part B services
Payment for physician services under Medicare has evolved since the program was
created in 1965. Initially, Medicare compensated physicians based on the
physician's charges, and allowed physicians to bill Medicare beneficiaries the
amount in excess of Medicare's reimbursement. In 1975, annual increases in
physician fees were limited by the Medicare Economic Index (MEI). The MEI was
designed to measure changes in costs of physician's time and operating expenses,
adjusted for changes in physician productivity. From 1984 to 1991, the yearly
change in fees was determined by legislation. This was done because physician
fees were rising faster than projected.
The Omnibus Budget Reconciliation Act of 1989 made several changes to physician
payments under Medicare. Firstly, it introduced the Medicare Fee Schedule, which
took effect in 1992. Secondly, it limited the amount Medicare non-providers
could balance bill Medicare beneficiaries. Thirdly, it introduced the Medicare
Volume Performance Standards (MVPS) as a way to control costs.
On January 1, 1992, Medicare introduced the Medicare Fee Schedule (MFS). The MFS
assigned Relative Value Units (RVUs) for each procedure from the Resource-Based
Relative Value Scale (RBRVS). The Medicare reimbursement for a physician was the
product of the RVU for the procedure, a Geographic Adjustment Factor (GAF) for
geographic variations in payments, and a global Conversion Factor (CF) which
converts RBRVS units to dollars.
From 1992 to 1997, adjustments to physician payments were adjusted using the MEI
and the MVPS, which essentially tried to compensate for the increasing volume of
services provided by physicians by decreasing their reimbursement per service.
In 1998, Congress replaced the VPS with the Sustainable Growth Rate (SGR). This
was done because of highly variable payment rates under the MVPS. The SGR
attempts to control spending by setting yearly and cumulative spending targets.
If actual spending for a given year exceeds the spending target for that year,
reimbursement rates are adjusted downward by decreasing the Conversion Factor
(CF) for RBRVS RVUs.
Since 2002, actual Medicare Part B expenditures have exceeded projections.
In 2002, payment rates were cut by 4.8%. In 2003, payment rates were scheduled
to be reduced by 4.4%. However, Congress boosted the cumulative SGR target in
the Consolidated Appropriation Resolution of 2003 (P.L. 108-7), allowing
payments for physician services to rise 1.6%. In 2004 and 2005, payment rates
were again scheduled to be reduced. The Medicare Modernization Act (P.L.
108-173) increased payments 1.5% for those two years.
In 2006, the SGR mechanism was scheduled to decrease physician payments by 4.4%.
(This number results from a 7% decrease in physician payments times a 2.8%
inflation adjustment increase.) Congress overrode this decrease in the Deficit
Reduction Act (P.L. 109-362), and held physician payments in 2006 at their 2005
levels. Similary, another congressional act held 2007 payments at their 2006
levels, and HR 6331 held 2008 physician payments to their 2007 levels, and
provided for a 1.1% increase in physician payments in 2009. Without further
continuing congressional intervention, the SGR is expected to decrease physician
payments from 25% to 35% over the next several years.
MFS has been criticized for not paying doctors enough because of the low
conversion factor. By adjustments to the MFS conversion factor, it is possible
to make global adjustments in payments to all doctors.
Office medication reimbursement
Chemotherapy and other medications dispensed in a physician's office are
reimbursed according to the Average Sales Price, a number computed by taking the
total dollar sales of a drug as the numerator and the number of units sold
nationwide as the denominator. The current reimbursement formula is known as
"ASP+6" since it reimburses physicians at 106% of the ASP of drugs.
Pharmaceutical company discounts and rebates are included in the calculation of
ASP, and tend to reduce it. ASP+6 superseded Average Wholesale Price in 2005,
after a 2004 front-page New York Times article drew attention to the
inaccuracies of Average Wholesale Price calculations. Average Wholesale Price
(AWP) reimbursement tended to be more favorable for physicians, since it was an
arbitrary number provided by the pharmaceutical company to CMS. Since the
change, some outpatient chemotherapy drugs are "underwater," since the wholesale
price from drug distributors may be higher than ASP+6 for some drugs.
Stakeholders are involved in active discussions with the United States Congress
to address this issue.
Costs and funding challenges
According to the 2004 "Green Book" of the House Ways and Means Committee,
Medicare expenditures from the American government were $256.8 billion in fiscal
year 2002. Beneficiary premiums are highly subsidized, and net outlays for the
program, accounting for the premiums paid by subscribers, were $230.9 billion.
Medicare spending is growing steadily in both absolute terms and as a percentage
of the federal budget. Total Medicare spending reached $440 billion for fiscal
year 2007, or 16 percent of all federal spending. The only larger categories of
federal spending are Social Security and defense. Given the current pattern of
spending growth, maintaining Medicare's financing over the long-term may well
require significant changes.
According to the 2008 report by the board of trustees for Medicare and Social
Security, Medicare will spend more than it brings in from taxes this year
(2008). The Medicare hospital insurance trust fund will become insolvent by
2019. Shortly after the release of the report, the Chief Actuary testified that
the insolvency of the system could be pushed back by 18 months if Medicare
Advantage plans were paid at the same rate as the traditional fee-for-service
program. He also testified that the 10-year cost of Medicare drug benefit is 37%
lower than originally projected in 2003, and 17% percent lower than last year's
projections.
Spending on Medicare and Medicaid is projected to grow dramatically in coming
decades. While the same demographic trends that affect Social Security also
affect Medicare, rapidly rising medical prices appear a more important cause of
projected spending increases. The Congressional Budget Office (CBO) has
indicated that: "Future growth in spending per beneficiary for Medicare and
Medicaid—the federal government’s major health care programs—will be the most
important determinant of long-term trends in federal spending. Changing those
programs in ways that reduce the growth of costs—which will be difficult, in
part because of the complexity of health policy choices—is ultimately the
nation’s central long-term challenge in setting federal fiscal policy." Further,
the CBO also projects that "total federal Medicare and Medicaid outlays will
rise from 4 percent of GDP in 2007 to 12 percent in 2050 and 19 percent in
2082—which, as a share of the economy, is roughly equivalent to the total amount
that the federal government spends today. The bulk of that projected increase in
health care spending reflects higher costs per beneficiary rather than an
increase in the number of beneficiaries associated with an aging population."
Financial viability
Richard W. Fisher, President of the Federal Reserve Bank of Dallas has remarked
that in order to "cover the unfunded liability" for the Medicare program today,
"you would be stuck with an $85.6 trillion bill" which is "more than six times
the annual output of the entire U.S. economy."
Aging of the population
The fundamental problem is that the ratio of workers paying Medicare taxes to
retirees drawing benefits is shrinking at the same time that the price of health
care services per person is increasing. Currently there are 3.9 workers paying
taxes into Medicare for every older American receiving services. By 2030, as the
baby boom generation retires, that is projected to drop to 2.4 workers for each
beneficiary. Medicare spending is expected to grow by about 7 percent per year
for the next 10 years. As a result, the financing of the program is out of
actuarial balance, presenting serious challenges in both the short-term and
long-term.
Fraud and waste
Part of the cost of Medicare is attributable to fraud, which government auditors
estimate costs Medicare billions of dollars a year. The Government
Accountability Office lists Medicare as a "high-risk" government program in need
of reform, in part because of its vulnerability to fraud and partly because of
its long-term financial problems. A Washington Post story from June of 2008
reported that Medicare fraud is a growing problem. Limited resources mean that
fewer than 5% of Medicare claims are audited. The annual cost to taxpayers of
Medicare fraud is estimated to be over $60 billion.
Criticism
Medicare faces continuing financial issues. In its 2006 annual report to
Congress, the Medicare Board of Trustees reported that the program's hospital
insurance trust fund could run out of money by 2018. The trustees have made such
projections in the past, but this one was bleaker than the outlook reported in
2005.
Popular opinion surveys show that the public views Medicare’s problems as
serious, but not as urgent as other concerns. In January 2006, the Pew Research
Center found 62 percent of the public said addressing Medicare’s financial
problems should be a high priority for the government, but that still put it
behind other priorities. Surveys suggest that there’s no public consensus behind
any specific strategy to keep the program solvent.
Quality of beneficiary services
A study by the Government Accountability Office evaluated the quality of
responses given by Medicare contractor customer service representatives to
provider (physician) questions. The evaluators assembled a list of questions,
which they asked during a random sampling of calls to Medicare contractors. The
rate of complete, accurate information provided by Medicare customer service
representatives was 15%.
Hospital accreditation
In most states the Joint Commission, a private, non-profit organization for
accrediting hospitals, possesses a monopoly over whether or not a hospital is
able to participate in Medicare, as currently there are no competitor
organizations recognized by CMS. An attempt by TüV Healthcare Specialists to
provide a hospital accreditation option was denied in 2006. Rebecca Wise, CEO of
TüVHS, has said "Choice and competition are the hallmarks of a free market....
Can you think of an industry with a more profound impact on our lives than
healthcare? Yet there is a much higher chance of you getting the wrong dosage of
medicine in a hospital than there is of a manufacturer putting the wrong chip on
a circuit board. It’s a failure of the system not the people."
Beyond hospitals and hospital accreditation, there are now a number of
alternative American organizations possessing healthcare-related deeming power
for Medicare. These include the Community Health Accreditation Program, the
Accreditation Commission for Health Care, the Compliance Team and the Healthcare
Quality Association on Accreditation.
Physician residency
Medicare funds the vast majority of residency training in the US. This tax-based
financing covers resident salaries and benefits through payments called Direct
Medical Education payments. Medicare also uses taxes for Indirect Medical
Education, a subsidy paid to teaching hospitals in exchange for training
resident physicians. Overall funding levels, however, have remained frozen over
the last ten years, creating a bottleneck in the training of new physicians in
the US. Meanwhile, the US population continues to grow, leading to greater
demand for physicians. At the same time the cost of medical services continue
rising rapidly and many geographic areas face physician shortages, both trends
suggesting the supply of physicians remains too low. Medicare finds itself in
the odd position of having assumed control of graduate medical education,
currently facing major budget constraints, and as a result, freezing funding for
graduate medical education, as well as for physician reimbursement rates. This
halt in funding in turn exacerbates the exact problem Medicare sought to solve
in the first place: improving the availability of medical care. In response,
teaching hospitals have resorted to alternative approaches to funding resident
training, leading to the modest 4% total growth in residency slots from
1998-2004, despite Medicare funding having been frozen since 1996.
Legislation and reform
* 1960 — PL 86-778 Social Security Amendments of 1960 (Kerr-Mill aid)
* 1965 — PL 89-97 Social Security Amendments of 1965, Establishing Medicare
Benefits
* 1988 — PL 100-360 Medicare Catastrophic Coverage Act of 1988
* 1997 — PL 105-33 Balanced Budget Act of 1997
* 2003 — PL 108-173 Medicare Prescription Drug, Improvement, and Modernization
Act
President Bill Clinton attempted an overhaul of Medicare through his health care
reform plan in 1993-1994 but was unable to get the legislation passed by
Congress.
In 2003 Congress passed the Medicare Prescription Drug, Improvement, and
Modernization Act, which President George W. Bush signed into law on December 8,
2003. Part of this legislation included filling gaps in prescription-drug
coverage left by the Medicare Secondary Payer Act that was enacted in 1980. The
2003 bill strengthened the Workers' Compensation Medicare Set-Aside Program
(WCMSA) that is monitored and administered by CMS.
On August 1, 2007, the U.S. House United States Congress voted to reduce
payments to Medicare Advantage providers in order to pay for expanded coverage
of children's health under the SCHIPS program. As of 2008, Medicare Advantage
plans cost, on average, 13 percent more per person insured than direct payment
plans. Many health economists have concluded that payments to Medicare Advantage
providers have been excessive. The Senate, after heavy lobbying from the
insurance industry, declined to agree to the cuts in Medicare Advantage proposed
by the House. President Bush subsequently vetoed the SCHIPS extension.
Legislative oversight
Cameral body Committee Leader
Joint House/Senate Joint Economic Committee Charles Schumer
House House Committee on Ways and Means Charles Rangel
House House Committee on Ways and Means Subcommittee on Health Pete Stark
House House Committee on Energy and Commerce John Dingell
House House Committee on Energy and Commerce Subcommittee on Health Frank
Pallone
House House Committee on Energy and Commerce Subcommittee on Oversight and
Investigations Bart Stupak
House House Committee on Appropriations David Obey
House House Committee on Appropriations Subcommittee on Labor, Health and Human
Services, Education, and Related Agencies David Obey
House House Small Business Committee Nydia Velazquez
House House Budget Committee John Spratt
Senate Senate Committee on Finance Max Baucus
Senate Senate Special Committee on Aging Herb Kohl
Senate Senate Committee on Appropriations Robert Byrd
Senate Senate Committee on Appropriations Subcommittee on Labor, Health and
Human Services, Education, and Related Agencies Tom Harkin
Senate Senate Committee on Homeland Security and Governmental Affairs Joe
Lieberman
Senate Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Oversight of Government Management, the Federal Workforce, and
the District of Columbia Daniel Akaka
Senate Senate Committee on Health, Education, Labor and Pensions Ted Kennedy
Senate Senate Committee on Health, Education, Labor and Pensions Subcommittee on
Retirement Security and Aging Barbara Mikulski
Senate Senate Budget Committee Kent Conrad
Senate Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Federal Financial Management, Government Information, and
International Security
=====================================
Medicare is Australia's publicly-funded universal health care system, operated
by the government authority Medicare Australia. Medicare is intended to provide
affordable treatment by doctors and in public hospitals for all resident
citizens and permanent residents except for those on Norfolk Island. Residents
with a Medicare card can receive subsidised treatment from medical practitioners
who have been issued a Medicare provider number, and fully subsidised treatment
in public hospitals. Visitors from countries which have reciprocal arrangements
with Australia have limited access to Medicare.
Since 1999, the public health scheme has been supplemented by a Private Health
Insurance Rebate, where the government funds at least 30% of any private health
insurance premium covering people eligible for Medicare. Including these
rebates, Medicare is the major component of the total Commonwealth health
budget, taking up about 43% of the total. The program is estimated to cost $18.3
billion in 2007-08. This figure is projected to rise by almost 4% annually in
real terms over the next few years.
History
Medibank
Medicare, originally called Medibank, was introduced by the Whitlam Labor
Government on 1 July 1975, at the commencement of the Health Insurance Act 1973.
The introduction of Medicare was fraught: the Senate rejected the changes
multiple times and they were passed only at a joint sitting following the 1974
double dissolution election.
Despite this hostile response to its introduction, Medibank/Medicare was
supported by subsequent governments and has become a key feature of Australia’s
public policy landscape. The exact structure of Medicare, in terms of the size
of the rebate to doctors and hospitals and the way it has administered, has
varied over the years. Although considerable changes were enacted after the
Whitlam government lost power, the Fraser Government reviewed Medibank and
decided to retain it despite the Liberal Party’s previous opposition. In October
1976 the parliament introduced a ‘Medicare levy’ to help fund the program, a
measure the Liberal party had previously refused to support under the Whitlam
government.
1 October 1976 also saw the introduction of Medibank Private, a complementary
government-owned private health insurance fund that provides cover for health
treatment not covered by the universal scheme (which was then referred to as
'Medibank Public'). Medibank Private competes with all other private health
funds on a commercial basis. In 2006 the then Coalition government announced
that Medibank Private would be privatised after the 2007 election, claiming a
conflict of interest in being both the regulator of the whole private health
insurance industry and the owner of its largest single competitor. However the
incoming Australian Labor Party government pledged that it would remain in
government ownership.
Current program
The title ‘Medicare’ was introduced in 1984 by the Hawke Government. The Hawke
Government reversed many of the Fraser Government’s changes, and this change in
title also reflects the introduction of what can be considered the current
Medicare system.
Funding and legal framework
Program funding
The original Medibank program proposed a 1.35% levy (with low income exemptions)
but these bills were rejected by the Senate, and so Medibank was originally
funded from general revenue. In October 1976, the Fraser Government introduced a
2.5% levy.
The program is now nominally funded by an income tax surcharge known as the
Medicare levy, which is currently set at 1.5%. An exemption applies to low
income earners. In practice the levy raises only a fraction of the money
required to pay for the scheme. If the levy was to fully pay for the services
provided under the medicare banner then it would need to be set at about 8%.
There is an additional levy of 1.0%, known as the Medicare Levy Surcharge, for
those on high annual incomes ($50,000+, expected to be increased to $100,000+ in
the 2008 federal budget) who do not have adequate levels of private hospital
coverage. This was part of an effort by the former Howard Coalition Federal
Government to encourage people towards private health insurance.
Constitutional framework
Section 51 (xxiiiA) of the Commonwealth Constitution was inserted following the
successful referendum of 1946. It gave the Federal Parliament power, subject to
the Constitution, to make laws with respect to: The provision of maternity
allowances, widows’ pensions, child endowment, unemployment, pharmaceutical,
sickness and hospital benefits, medical and dental services (but not so as to
authorize any form of civil conscription), benefits to students and family
allowances.
This power supports the Commonwealth operating the Medicare program, but not the
entire Australian health system. The authority to operate public hospitals
remains the province of the State and Territory governments. In practice, the
state governments, as well as private doctors, act as pseudo-contractors. This
is done by a provider number system controlled by the Commonwealth.
Privately run hospitals are also part of the Medicare system. Medicare benefits
are payable for medical treatment provided to admitted patients of private
hospitals as well as public hospitals. However, a patient in a private hospital
(by definition, a private patient) would need private insurance coverage to help
him or her meet any of the hospital charges such as accommodation costs, as well
as some or all of the remainder of the doctor's charges above the 75% Medicare
benefit.
Components
Medicare Benefits Scheme
Medicare funds (or reimburses) expenses related to services provided by medical
practitioners. Eye examinations by optometrists are also covered. Dental
treatment is excluded except for certain surgical procedures that can only be
performed in hospital by specially trained maxillo-facial surgeons.
Medicare benefits are available on a restricted basis for allied health services
(such as physiotherapy or speech therapy) under the Enhanced Primary Care
program, however most allied health and alternative medicine services are
excluded from Medicare. Recently acupuncture provided by a medical practitioner
has been included .
Each Medicare procedure has an MBS Fee (Medicare Benefits Schedule fee).
* For in-hospital treatment, i.e. medical treatment provided to an admitted
patient of a hospital (which usually excludes treatment provided in an
outpatient or accident/emergency department of a hospital), Medicare pays 75% of
the MBS Fee. If the patient has private patient hospital insurance, that must
cover them for the remaining 25% of the MBS Fee (subject to rules such as
waiting periods). If the doctor charges above the MBS Fee, some or all of the
remaining charge may be covered by the private health insurance depending on the
fund's gap-cover arrangements.
* For out-of-hospital treatment, i.e. treatment provided to a person who is not
an admitted patient of a hospital, Medicare pays 100% of the MBS fee for general
practitioner consultations and 85% of the MBS fee for specialist consultations.
A practitioner may choose bulk billing, and charge only the relevant percentage
of the MBS fee and thus making the service free to the patient. Doctors are not
forced to bulk-bill and have discretion in charging their patients. The law
prevents private health insurance funds from providing any coverage for the
remainder of the charge after the Medicare benefit has been paid.
Treatment in a public hospital as a public patient is fully subsidised by
Medicare. Regardless of means, every Australian is entitled to attend a public
hospital and receive medical treatment free of charge. However, there may be a
considerable waiting list for elective surgery. Treatment and hospital
accommodation is free to the patient. This is funded through the
Commonwealth-State Health Care Agreements.
For private patients in public or private hospitals, Medicare will cover 75 per
cent of the Medicare Schedule fee for medical procedures. Private patients still
need private hospital coverage to help with accommodation costs and other
hospital charges.
The major issues with this part of Medicare are:
* to medical professionals – the rate at which the scheduled fees are set and
how accurately they reflect running costs/support profit margins
* to patients – the availability of a bulk-billing doctor (free doctor),
particularly in rural and regional areas.
The 'bulk-billing rate' is the percentage of doctors providing a free service.
The Department of Health and Ageing (Australia) monitors bulk billing rates (see
external sources). The number of bulk-billing doctors has decreased. Some
doctors may not bulk-bill at all; may bulk-bill only existing patients; or may
bulk-bill only patients who can not afford to pay medical fees out-of-pocket.
Whilst the majority of general practitioner services are bulk billed, the rate
is lower in more affluent areas and in rural, regional and remote areas of
Australia where there is a greater shortage of doctors and health care services,
and there has been a trend of declining bulk-billing rates, particularly in
rural areas. This decline can be linked to the low level of the scheduled fees
and doctor’s desire to maintain their profitability. However, increasing
scheduled fees would increase the cost of the program.
Medicare Safety Net
Due to low rates of bulk-billing, the Howard Government, after the 2004
election, introduced the “Medicare Plus Safety Net”. This system reimburses 80%
of out-patient expenses. For health card holders or Family Tax Benefit
recipients, the threshold (for the year 2007) is $519.50. For other individuals
or registered families, the threshold (for the year 2007) is $1039.00. These
figures are revised annually.
Medicare and private health insurance
Debates regarding Medicare focus on the two-tier system and the role of private
health insurance. Controversial issues include:
* Whether people with means should take up private health insurance
* Whether rebates/incentives should be given in terms of private health
insurance
* People with health insurance still accessing the tax-payer funded public
system rather than relying on their insurance.
* People with private health insurance are still required to pay a 1.5% levy on
their taxes regardless of their income and usage of the system.
People who take up private health insurance are currently rewarded in a number
of ways. They receive a Private Health Insurance Rebate that subsidises 30% of
their insurance premiums, increasing to 35% or 40% for people over 65. Critics
say that the rebate is an unfair subsidy to those who can afford health
insurance, claiming the money would be better spent on public hospitals where it
would benefit everyone. Supporters say people must be encouraged into the
private health care system, claiming the public system is not universally
sustainable for the future. Similarly, even after the introduction of the
rebate, most private health insurance organisations have raised their premiums
most years , somewhat negating the benefit of the rebate.
Approximately 43% of Australians also retain private health insurance, even
though they are already entitled to free treatment in public hospitals. The
major reasons for taking up health insurance despite the free public system are:
* Shorter waiting lists in private hospitals (especially for procedures such as
joint reconstructions or heart bypass surgery, for which there are often long
waiting times in public hospitals).
* Choice of hospital/physician in the private system;
* Improved accommodation facilities such as private rooms (although medical
facilities are usually more extensive in the public system).
Some people choose to have private coverage for ancillary treatment, or
"extras", (e.g. chiropractic, dental, optical, ambulance, etc - for which
Medicare has limited or no cover) but use the Medicare system for hospital
treatment.
The proportion of Australians with private health insurance was declining, but
has increased again with the introduction of Lifetime Health Cover (where people
who take out private hospital insurance later in life pay higher premiums than
those who have held coverage since they were younger) and tax incentives to take
out private cover (such as the Medicare Levy Surcharge).
Other health care programs
Pharmaceutical Benefits Scheme
Pharmaceutical Benefits Scheme
The Pharmaceutical Benefits Scheme (PBS) subsidises certain prescribed
pharmaceuticals. The PBS pre-dates Medicare, being established in 1948. It is
generally considered a separate health policy to 'Medicare'. However, the PBS is
now administered by Medicare Australia (formerly the Health Insurance
Commission) under the Health Insurance Act 1973, with input from a range of
other bodies such as the Pharmaceutical Benefits Pricing Authority.
State/territory programs
State and Territory Governments also sometimes administer peripheral health
programmes, such as free dentistry for school students and community sexual
health programmes
Contact Information
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