Medicare & Medicaid Health Insurance Programs Explained
I’ve never had the need or the opportunity the learn about Medicare or Medicaid, two government programs that garner a lot of attention every two years, and that have recently been in the news because of President Obama’s attempts to bring about health care reform. Like many people, I didn’t understand how either program worked so I decided to do some research and put together this Foundation post.
The biggest difference between the two is eligibility based on financial need. Medicaid is designed to help low-income, financially needy individuals and is administered differently in each state. Medicare is not based on need and is entitlement based, through your payments into the program through your taxes. Medicare is administered nationally and the rules are the same everywhere.
If you’re curious to learn more, read on plucky adventurer because it starts getting a little more complicated.
Medicaid is an means-based assistance program managed by each state, with funds coming from both the state and federal budgets. For a state to receive funds, the state’s Medicaid program needs to conform to the guidelines set by the federal government. Medicaid was created in the Social Security Act of 1965, run by the Department of Health and Human Services, and administered at the state level. Participation is voluntary, but each state participates.
How Medicaid is funded: As a joint federal and state program, funds to operate the program come from both the federal and state governments.
Determining Medicaid eligibility: There are a number of requirements for Medicaid eligibility, with income being one of the primary requirements. From the Medicaid eligibility website:
Since Medicaid is a state run program, the scope of the coverage will vary from state to state, keeping in line with federal regulations. For specific information, I recommend you research your state’s program. Usually a google search of “[Your State] Medicaid” will get you on the right track.
Medicare is a federally administered program, run by the Department of Health and Human Services, funded by payroll deductions (payments made from your paycheck). It’s a single-payer health care system, which is a buzz-word you have probably heard a lot lately.
It was created by the Social Security Act of 1965, signed into law by President Lyndon Johnson. Back in 1965, the Medicare Part B premium cost $3 a month, in 2008 the premium was $45.50 per month.
The program has four parts:
Part A: Hospital Insurance
Covers inpatient overnight hospital stays, up to 100 days, with the cost being split between the Medicare program and the patient according to a schedule. It also includes coverage in a skilled nursing facility if you meed certain criteria.
Part B: Medical Insurance
Covers outpatient services and products not covered by Part A, such as x-rays, lab tests, vaccinations, etc. You can decline this optional coverage.
Part C: Medicare Advantage
Sometimes called the HMO plan, this lets you receive your Medicare benefits through private health insurance rather than through Medicare Part A and Part B, as long as they exceed the standards set by Part A and B.
Part A: Prescription Drug
This is the most recent addition to Medicare, added in 2006, and anyone eligible for Part A or B is eligible for Part D. Individuals with Medicare have to enroll in a Prescription Drug Plan (PDP) or a Medicare Advantage (Part C) that includes a prescription drug coverage. The PDPs are administered by private insurance companies and they choose which drugs they wish to cover, as long as they follow Medicare rules.
How Medicare is funded
If you ever look at a pay-stub, you might notice that a small part, 1.45% (2009), is taken out for Medicare. Your employer also pays 1.45%, on your behalf. If you’re self-employed, you pay both sides, for a total of 2.90% of your earnings.
Determining Medicare eligibility
It covers almost everyone 65 and older, some individuals who qualify for Social Security disability coverage, and some individuals with permanent kidney failure. There are more clearly defined rules for eligibility at the HHS.gov website.
For more information about Medicare, you can download or request free publications at HHS.gov. Here is the latest Medicare & You 2009 handbook, it’s a whopping 128 page booklet.
Hopefully this article has shed some light on these two programs and give you the basis for continuing your research.
Is there something I missed in this article that I should include? If so, let me know in the comments or by email and I will expand it as needed.