Elderly Medicare Program (Medicare Part A, Part B, Part C, and Part D)
Medicare generally provides health insurance coverage to those over age 65. The Medicare Trustees (2006) reported that Medicare covered 42.5 million individuals in 2005, 35.8 million of whom were over age 65. The elderly Medicare program has four “parts.” Medicare Part A essentially covers hospital, skilled nursing facility, and home health services, which are paid for by the payroll taxes earmarked for the Medicare program. Medicare Part B essentially covers physician services and durable medical equipment. Three-quarters of its cost is paid from general tax revenues of the federal government. The other quarter is paid by a monthly beneficiary premium. In 2007, this premium was $93.50 for most people.
Some seniors prefer to enroll in a Medicare managed care plan. Approximately 15 percent of Medicare beneficiaries are in such plans. The Medicare managed care program is officially called “Medicare Advantage” or Medicare Part C. Seniors enroll with an approved plan and receive all of their Medicare Part A and Medicare Part B services and often additional benefits, including annual physicals and prescription drugs. They sometimes have to pay an additional monthly premium in a Medicare Advantage plan, however.
Medicare Part D became available in 2006. This voluntary program, enacted in late 2003, provides prescription drug coverage in exchange for a monthly additional premium in the $25 range. The coverage is purchased through one of many approved private insurers in the community. The coverage itself is unusual. Beneficiaries in 2006 had a $250 deductible; then Medicare covered 75 percent of the next $2,000 in expenses. No coverage is available for the next $2,850, but after that, Medicare will pay 95 percent of drug expenses above $5,100.
Of particular importance for our current purposes is the knowledge that most Medicare beneficiaries have some form of additional coverage. All but 7 percent of Medicare beneficiaries had some form of supplemental coverage in 2003. Over one-third (39 percent) had coverage through an employer. These are people with employer-sponsored retiree coverage. Also included in this group are those over age 65 who are still employees and have active worker coverage through their employer.
Another 27 percent of Medicare beneficiaries have what are called “Medigap” plans. Traditional Medicare requires a $992 (in 2007) deductible for each spell of illness and copays of $248 for each hospital day in excess of 60 for each spell of illness. Among other cost-sharing arrangements, there are annual deductibles for Part B services, and the beneficiary is expected to pay 20 percent of the physician’s allowable charge. Many seniors purchase a Medigap policy that is designed to cover some or all of these out-of-pocket expenses. Occasionally, Medigap plans will also cover benefits not handled by Medicare. Prior to 2006, prescription drug benefits were the most common additional benefits that Medigap plans might offer, but their ability to pro- vide drug coverage was eliminated with the launch of Medicare Part D.