View source for Medicare (United States)

{{Short description|US government health insurance program}}
{{about|the United States government program|other uses|Medicare (disambiguation)}}
{{distinguish|Medicaid|Centers for Medicare & Medicaid Services}}
<noinclude>{{Requested move notice|1=Medicare|2=Talk:Medicare#Requested move 19 January 2025}}
</noinclude>{{Use mdy dates|date=January 2019}}
{{Lead too long|date=January 2025}}
{{Infobox government agency
| name            = Medicare
| logo            = Medicarelogo.png
| logo_size       = 255px
| formed          = {{Start date and age|1965|07|30}}
| chief1_name     = [[Chiquita Brooks-LaSure]]
| chief1_position = Administrator
| headquarters    = 7500 Security Boulevard, [[Baltimore]], Maryland 21244, U.S.
| parent_department = [[Centers for Medicare and Medicaid Services]]
| website         = {{URL|https://www.medicare.gov/|medicare.gov}}
}}

'''Medicare''' is a federal [[health insurance]] program in the United States for people age 65 or older and younger people with disabilities, including those with [[End Stage Renal Disease Program|end stage renal disease]] and [[amyotrophic lateral sclerosis]] (ALS or Lou Gehrig's disease). It started in 1965 under the [[Social Security Administration]] and is now administered by the [[Centers for Medicare and Medicaid Services]] (CMS).

Medicare is divided into four parts: A, B, C and D. Part A covers hospital, skilled nursing, and hospice services. Part B covers outpatient services. Part D covers self-administered prescription drugs. Part C is an alternative that allows patients to choose private plans with different benefit structures that provide the same services as Parts A and B, usually with additional benefits.

* [[#Part A: Hospital/hospice insurance|Part A]] covers hospital (inpatient, formally admitted only), skilled nursing (only after being formally admitted to a hospital for three days and not for custodial care), home health care, and hospice services. 
* [[#Part B: Medical insurance|Part B]] covers outpatient services, including some providers' services while inpatient at a hospital, outpatient hospital charges, most provider office visits, durable medical equipment, and most professionally administered prescription drugs. 
* [[#Part C: Medicare Advantage plans|Part C]] is an alternative often called Managed Medicare by the Trustees (and almost all of which are deemed Medicare Advantage plans), which allows patients to choose health plans with at least the same service coverage as Parts A and B (and most often more), often the benefits of Part D; Part C's key differences with Parts A and B are that Part C plans include an annual out-of-pocket expense limit in an amount between $1500 and $8000{{update inline|date=August 2024}} and do not have lifetime coverage limits.<ref name="official">{{cite web |title=About Medicare |url=https://www.medicare.gov/about-us/about-medicare.html |website=Medicare.gov|publisher=U.S. Centers for Medicare & Medicaid Services, Baltimore |access-date=October 25, 2017}}</ref>
* [[#Part D: Prescription drug plans|Part D]] covers self-administered prescription drugs.

In 2022, Medicare provided health insurance for 65.0 million individuals—more than 57 million people aged 65 and older and about 8 million younger people.<ref>[https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2023.pdf 2023 Annual Report of the Medicare Trustees]{{Dead link|date=July 2023 |bot=InternetArchiveBot |fix-attempted=yes }} (for the year 2022), March 31, 2023</ref> According to annual Medicare Trustees reports and research by Congress' MedPAC group, Medicare covers about half of healthcare expenses of those enrolled.<ref>{{Cite web |title=Beneficiary Income and Out-of-Pocket Costs {{!}} CMS |url=https://www.cms.gov/data-research/statistics-trends-and-reports/trustees-report-trust-funds/beneficiary-income-and-out-pocket-costs?utm_source=chatgpt.com |access-date=2024-11-26 |website=www.cms.gov}}</ref> Enrollees cover most of the remaining costs by taking additional private insurance (medi-gap insurance), by enrolling in a Medicare Part D prescription drug plan, or by joining a private Medicare Part C (Medicare Advantage) plan. In 2022, spending by the Medicare Trustees topped $900 billion per the Trustees report Table II.B.1, of which $423 billion came from the U.S. Treasury and the rest primarily from the Part A Trust Fund (which is funded by payroll taxes) and premiums paid by beneficiaries. Households that retired in 2013 paid only 13 to 41 percent of the benefit dollars they are expected to receive.{{ r | PF_2014-09 | Urban_2013 }}

Beneficiaries typically have other healthcare-related costs, including Medicare Part A, B and D deductibles and Part B and C co-pays; the costs of long-term custodial care (which are not covered by Medicare); and the costs resulting from Medicare's lifetime and per-incident limits.<ref>{{Cite web |title=Long Term Care Coverage |url=https://www.medicare.gov/coverage/long-term-care?utm_source=chatgpt.com |access-date=2024-11-26 |website=www.medicare.gov |language=en}}</ref>

==History==
[[File: Lyndon Johnson signing Medicare bill, with Harry Truman, July 30, 1965.jpg|thumb|right|[[Lyndon B. Johnson]] signing the Medicare amendment (July 30, 1965). Former president Harry S. Truman (seated) and his wife, [[Bess Truman|Bess]], are on the far right.]]

Originally, the name "Medicare" in the United States referred to a program providing medical care for families of people serving in the military as part of the Dependents' Medical Care Act, which was passed in 1956.<ref>Robinson, P. I. (1957). Medicare: Uniformed Services Program for Dependents. Social Security Bulletin, 20(7), pp. 9–16.</ref> President [[Dwight D. Eisenhower]] held the first White House Conference on Aging in January 1961, in which creating a health care program for social security beneficiaries was proposed.<ref>Tibbits C. "The 1961 White House Conference on Aging: it's rationale, objectives, and procedures". J Am Geriatr Soc. 1960 May. 8:373–77</ref><ref>Mcnamara PAT, Dirksen EM, Church F, Muskie ES. The 1961 White House Conference on Aging: basic policy statements and recommendations / prepared for the Special Committee on Aging, United States Senate 87th Congress, 1st Session, Committee Print, May 15, 1961.</ref>

Various attempts were made in Congress to pass a bill providing for healthcare for the elderly, all without success. In 1963, however, a bill providing for both Medicare and an increase in Social Security benefits passed the Senate by 68-20 votes. As noted by one study, this was the first time that either chamber “had passed a bill embodying the principle of federal financial responsibility for health coverage, however limited it may have been.” There was uncertainty over whether this bill would pass the House, however, as White House aide Henry Wilson's tally of House members’ votes on a conference bill that included Medicare “disclosed 180 “reasonably certain votes for Medicare, 29 “probable/possible,” 222 “against,” and 4 seats vacant.”<ref>[https://books.google.com/books?id=LPXaAAAAMAAJ&dq=This+marked+the+first+time+that+a+chamber+had+passed+a+bill+embodying+the+principle+of+federal+financial+responsibility+for+health+coverage,&pg=PA133 Chronic Politics Health Care Security from FDR to George W. Bush, By Philip J. Funigiello, 2005, p. 133].</ref> Following the 1964 elections however, pro-Medicare forces obtained 44 votes in the House and 4 in the Senate.<ref>[https://books.google.com/books?id=YEYNpBFHqxMC&dq=The+turning+point+for+Medicare+came+on+November+3,+1964&pg=PA186 Crisis in Health Care, an Overview Hearing Before the Subcommittee on Health and Long-Term Care of the Select Committee on Aging, House of Representatives, Ninety-eighth Congress, First Session, May 5, 1983, Volume 4, By United States. Congress. House. Select Committee on Aging. Subcommittee on Health and Long-Term Care, 1983, p.186].</ref> In July 1965,<ref>{{cite news |title=Medicare Bill Signed By Johnson: 33 Congressmen Attend Ceremony In Truman Library |first=Edward T. |last=Folliard |author-link=Edward T. Folliard |newspaper=The Washington Post |date= July 31, 1965 |page=A1 |url=https://www.proquest.com/docview/142611149/ }}</ref> under the leadership of President [[Lyndon B. Johnson|Lyndon Johnson]], Congress enacted Medicare under Title XVIII of the [[Social Security Act of 1965|Social Security Act]] to provide health insurance to people age 65 and older, regardless of income or medical history.<ref>{{cite news |title= What Medicare Means to Taxpayers: How to Get Voluntary Insurance |first= Drew |last=Pearson |author-link=Drew Pearson (journalist) |newspaper=The Washington Post |date=July 29, 1965 |page=C13 |url=https://www.proquest.com/docview/142602859/ }}</ref><ref>See Health Insurance for the Aged Act, Title I of the Social Security Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286 (July 30, 1965), generally effective beginning with the month of July 1966. Section 321 of the Act amended section 1401 of the [[Internal Revenue Code]] to impose the Medicare tax.</ref> Johnson signed the [[Social Security Amendments of 1965]] into law on July 30, 1965, at the [[Harry S. Truman Presidential Library and Museum|Harry S. Truman Presidential Library]] in [[Independence, Missouri]]. Former [[President of the United States|president]] Harry S. Truman and his wife, former [[First Lady of the United States|First Lady]] [[Bess Truman]] became the first recipients of the program.<ref>{{cite web |title=Truman Library – July 30, 1965: President Lyndon B. Johnson Signs Medicare Bill |url=https://www.trumanlibrary.org/anniversaries/medicarebill.htm |url-status=dead |archive-url=https://web.archive.org/web/20190527201512/https://www.trumanlibrary.org/anniversaries/medicarebill.htm |archive-date=May 27, 2019 |access-date=April 2, 2017 |website=Trumanlibrary.org}}</ref>

Before Medicare was created, approximately 60% of people over the age of 65 had health insurance (as opposed to about 70% of the population younger than that), with coverage often unavailable or unaffordable to many others, because older adults paid more than three times as much for health insurance as younger people. Many of this group (about 20% of the total in 2022, 75% of whom were eligible for all Medicaid benefits) became "dual eligible" for both Medicare and Medicaid (which was created by the same 1965 law). In 1966, Medicare spurred the [[racial integration]] of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on [[Desegregation in the United States|desegregation]].<ref>{{citation |author=Study Panel on Medicare and Disparities |title=Strengthening Medicare's Role in Reducing Racial and Ethnic Health Disparities |date=October 2006 |work=National Academy of Social Insurance |editor-last=Vladeck |editor-first=Bruce C. |url=http://www.nasi.org/sites/default/files/research/Strenthening%20Medicare's%20Role%20In%20Reducing.pdf |access-date=July 17, 2013 |archive-url=https://web.archive.org/web/20201029203622/https://www.nasi.org/sites/default/files/research/Strenthening%20Medicare%27s%20Role%20In%20Reducing.pdf |archive-date=October 29, 2020 |url-status=dead |isbn=978-1-884902-47-5 |editor2-last=Van de Water |editor2-first=Paul N. |editor3-last=Eichner |editor3-first=June}}, p. 17.</ref>

Medicare has been operating for almost 60 years and, during that time, has undergone several major changes. Since 1965, the program's provisions have expanded to include benefits for speech, physical, and chiropractic therapy in 1972.<ref name="medicare.gov, 2012">medicare.gov, 2012.</ref> Medicare added the option of payments to [[health maintenance organizations]] (HMOs)<ref name="medicare.gov, 2012" /> in the 1970s. The government added [[hospice]] benefits to aid elderly people on a temporary basis in 1982,<ref name="medicare.gov, 2012" /> and made this permanent in 1984.

Congress further expanded Medicare in 2001 to cover younger people with [[amyotrophic lateral sclerosis]] (ALS, or Lou Gehrig's disease). As the years progressed, Congress expanded Medicare eligibility to younger people with permanent disabilities who receive [[Social Security Disability Insurance]] (SSDI) payments and to those with [[end-stage renal disease]] (ESRD).

The association with HMOs that began in the 1970s was formalized and expanded under President [[Bill Clinton]] in 1997 as Medicare Part C (although not all Part C health plans sponsors have to be HMOs, about 75% are). In 2003, under President [[George W. Bush]], a [[Medicare Prescription Drug, Improvement, and Modernization Act|Medicare program for covering almost all self-administered prescription drugs]] was passed (and went into effect in 2006) as Medicare Part D.<ref>{{cite web |title=Medicare Modernization Act |url=https://www.ssa.gov/privacy/pia/Medicare%20Modernization%20Act%20(MMA)%20FY07.htm |website=Social Security |access-date=15 May 2020}}</ref>

==Administration==
{{hus}}
The [[Centers for Medicare and Medicaid Services]] (CMS), a component of the [[United States Department of Health and Human Services|U.S. Department of Health and Human Services]] (HHS), administers Medicare, [[Medicaid]], the [[Children's Health Insurance Program]] (CHIP), the [[Clinical Laboratory Improvement Amendments]] (CLIA), and parts of the [[Patient Protection and Affordable Care Act|Affordable Care Act]] (ACA) ("Obamacare").<ref>{{cite web|title=About CMS|url=http://www.cms.gov/About-CMS/About-CMS.html|website=CMS.gov|access-date=July 27, 2015}}</ref> Along with the [[United States Department of Labor|Departments of Labor]] and [[United States Department of the Treasury|Treasury]], the CMS also implements the insurance reform provisions of the [[Health Insurance Portability and Accountability Act]] of 1996 (HIPAA) and most aspects of the Patient Protection and Affordable Care Act of 2010 as amended. The [[Social Security Administration]] is responsible for determining Medicare eligibility, eligibility for and payment of Extra Help/Low Income Subsidy payments related to Parts C and D of Medicare, and collecting most premium payments for the Medicare program.

The Chief Actuary of the CMS must provide accounting information and cost-projections to the Medicare Board of Trustees to assist them in assessing the program's financial health. The Trustees are 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.<ref>[http://www.actuary.org/pdf/medicare/medicare_actuary_jan02.pdf "What Is the Role of the Federal Medicare Actuary?"], [[American Academy of Actuaries]], January 2002.</ref><ref>[http://www.actuarialstandardsboard.org/pdf/asops/asop032_062.pdf "Social Insurance"], Actuarial Standard of Practice No. 32, Actuarial Standards Board, January 1998</ref>

The [[Specialty Society Relative Value Scale Update Committee]] (or Relative Value Update Committee; RUC), composed of [[physician]]s associated with the [[American Medical Association]], advises the government about pay standards for Medicare patient procedures performed by doctors and other professionals under Medicare Part B.<ref name="NYT-20150531">{{cite news |last=Pear |first=Robert |author-link=Robert Pear |title=Federal Investigators Fault Medicare's Reliance on Doctors for Pay Standards |url=https://www.nytimes.com/2015/06/01/us/federal-investigators-fault-medicares-reliance-on-doctors-for-pay-standards.html |date=May 31, 2015 |work=[[The New York Times]] |access-date=June 1, 2015 }}</ref> A similar but different CMS process determines the rates paid for acute care and other hospitals—including skilled nursing facilities—under Medicare Part A. The rates paid for both Part A and Part B type services under Part C are whatever is agreed upon between the sponsor and the provider. The amounts paid for mostly self-administered drugs under Part D are whatever is agreed upon between the sponsor (almost always through a pharmacy benefit manager also used in commercial insurance) and pharmaceutical distributors and/or manufacturers.

==Financing==
Medicare has several sources of financing.

Part A's [[Inpatient care|inpatient]] admitted hospital and skilled nursing coverage is largely funded by revenue from a 2.9% [[payroll tax]] levied on employers and workers (each pay 1.45%). Until December 31, 1993, the law provided a maximum amount of compensation on which the Medicare tax could be imposed annually, in the same way that the Social Security payroll tax operates.<ref>Title 26, Subtitle C, Chapter 21 of the [[United States Code]].</ref> Beginning on January 1, 1994, the compensation limit was removed. Self-employed individuals must calculate the entire 2.9% tax on self-employed net earnings (because they are both employee and employer), but they may deduct half of the tax from the income in calculating income tax.<ref>{{cite web|work=IRS|url=https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-%28Social-Security-and-Medicare-Taxes%29|title=Self-Employment Tax (Social Security and Medicare Taxes)|access-date=December 28, 2021|archive-date=September 26, 2015|archive-url=https://web.archive.org/web/20150926183100/http://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Self-Employment-Tax-%28Social-Security-and-Medicare-Taxes%29|url-status=dead}}</ref> Beginning in 2013, the rate of Part A tax on earned income exceeding $200,000 for individuals ($250,000 for married couples filing jointly) rose to 3.8%, in order to pay part of the cost of the subsidies to people not on Medicare mandated by the Affordable Care Act.<ref>{{cite web|url=https://www.ssa.gov/OACT/ProgData/taxRates.html|title=FICA & SECA Tax Rates|first=Sue|last=Kunkel|website=Ssa.gov|access-date=June 15, 2019}}</ref>

In 2022, Medicare spending was over $900 billion, near 4% of U.S. gross domestic product according to the Trustees Figure 1.1 and over 15% of total US federal spending.<ref name="kff.org">{{Cite web|date=2011-01-31|title=A Primer on Medicare Financing|url=https://www.kff.org/health-reform/issue-brief/a-primer-on-medicare-financing/|access-date=2023-01-06|website=KFF|language=en-US}}</ref> Because of the two Trust funds and their differing revenue sources (one dedicated and one not), the Trustees analyze Medicare spending as a percent of GDP rather than versus the Federal budget.

The aging of the [[Post–World War II baby boom|Baby Boom]] generation into Medicare is projected by 2030 (when the last of the baby boom turns 65) to increase enrollment to more than 80 million. In addition, the fact that the number of payroll tax payors per enrollee will decline over time and that overall [[health care prices in the United States|health care costs in the nation]] are rising pose substantial financial challenges to the program. Medicare spending is projected to increase from near 4% of GDP in 2022 to almost 6% in 2046.<ref name="kff.org"/> Baby-boomers are projected to have longer life spans, which will add to the future Medicare spending. In response to these financial challenges, Congress made substantial cuts to future payouts to providers (primarily acute care hospitals and skilled nursing facilities) as part of PPACA in 2010 and the [[Medicare Access and CHIP Reauthorization Act of 2015]] (MACRA) and individual Congresspeople have offered many additional competing proposals to stabilize Medicare spending further. Many other factors have complicated the forecasting of Medicare Trust Fund health and spending trends including but not limited to the Covid pandemic, the overwhelming preference of people joining Medicare this century for Part C, and the increasing number of dual eligible (Medicaid and Medicare eligibility) beneficiaries.

In 2013 the [[Urban Institute]] published a report which analyzed the amounts that various households (single male, single female, married single-earner, married dual-earner, low income, average income, high income) contributed to the Medicare program over their lifetimes, and how much someone living to the statistically expected age would expect to receive in benefits.{{ r | PF_2014-09 | Urban_2013 }} They found differing amounts for the different scenarios, but even the group with the "worst" return on their Medicare taxes would have concluded their working years with $158,000 in Medicare contributions and growth (assuming annual growth equal to inflation plus 2%) but would receive $385,000 in Medicare benefits (both numbers are in 2013 inflation adjusted dollars).{{ r | PF_2014-09 | Urban_2013 }} Overall, the groups paid into the system 13 to 41 percent of what they were expected to receive.<ref name=PF_2014-09 >{{ cite web | url=https://www.politifact.com/factchecks/2014/sep/09/national-republican-senatorial-committee/how-much-have-medicare-beneficiaries-paid-system/ | title=How much have Medicare beneficiaries 'paid in' to the system? | last=Jocobson | first=Louis | newspaper=[[PolitiFact]] | date=2014-09-09 | quote=To make the final amounts comparable to what might have been done with the tax money had it been invested privately, the institute adjusted all dollar figures at 2 percentage points above the rate of inflation. (The authors note that different assumptions for long-term returns on investment would change the results.) ... We found that, for Medicare recipients, the "worst" deal for any of these demographic groups is still quite generous. A two-earner couple, with one high earner and one average earner, who both turned 65 in 2010 would have paid $158,000 in Medicare taxes over their lifetimes, but can be expected to be the recipient of $385,000 in Medicare spending. That’s a ratio of $2.40 in benefits for every dollar paid in taxes -- and that’s the least generous ratio we found. ...  For today’s typical Medicare beneficiary, what they paid into the system represents just 13 percent to 41 percent of what they can expect to get out of it. The rest is funded by younger Americans’ payroll taxes. }}</ref><ref name=Urban_2013 >{{cite web |url=https://www.urban.org/UploadedPDF/412945-Social-Security-and-Medicare-Taxes-and-Benefits-over-a-Lifetime.pdf |title=Social Security and Medicare Taxes and Benefits over a Lifetime |last1=Steuerle |first1=C. Eugene |author-link=C. Eugene Steuerle |last2=Quakenbush |first2=Caleb |work=[[Urban Institute]] |date=2013-11-01 |access-date= |archive-url=https://web.archive.org/web/20140701195505/https://www.urban.org/UploadedPDF/412945-Social-Security-and-Medicare-Taxes-and-Benefits-over-a-Lifetime.pdf |archive-date=2014-07-01 |url-status=dead }}</ref>

Cost reduction is influenced by factors including reduction in inappropriate and unnecessary care by [[Managed care|evaluating evidence-based practices]] as well as reducing the amount of unnecessary, duplicative, and inappropriate care. Cost reduction may also be effected by reducing medical errors, investment in [[healthcare information technology]], improving transparency of cost and quality data, increasing administrative efficiency, and by developing both clinical/non-clinical guidelines and quality standards.<ref>{{cite web|url=https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf|title=CMS Quality Strategy, 2016|website=Cms.gov|access-date=September 16, 2016|archive-date=March 28, 2021|archive-url=https://web.archive.org/web/20210328184650/https://www.cms.gov/medicare/quality-initiatives-patient-assessment-instruments/qualityinitiativesgeninfo/downloads/cms-quality-strategy.pdf|url-status=dead}}</ref> Of course all of these factors relate to the entire United States health care delivery system and not just to Medicare.

==Eligibility==
U.S. citizens or permanent residents who have lived in the U.S. for at least five continuous years are eligible. Those who are 65 and older who choose to enroll in Part A Medicare must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid the qualifying Medicare payroll taxes.<ref>[http://questions.medicare.gov/app/answers/detail/a_id/10]{{dead link|date=May 2017|bot=InternetArchiveBot|fix-attempted=yes}}</ref> There are some instances where U.S. citizens might be able to enroll in Medicare earlier than age 65. For example, if you have a long term disability that would prevent you from working, End-Stage Renal Disease, or Amyotrophic lateral sclerosis then you may be eligible for Medicare at an earlier age.<ref>{{Cite web |date=December 8, 2022 |title=Who is eligible for Medicare? |url=https://www.hhs.gov/answers/medicare-and-medicaid/who-is-eligible-for-medicare/index.html?utm_source=chatgpt.com |website=U.S. Department of Health and Human Services}}</ref> Individuals receiving Social Security Disability Insurance (SSDI) benefits for 24 months are automatically enrolled in Medicare Parts A and B in the 25th month. Individuals with permanent kidney failure requiring dialysis or a transplant may qualify for Medicare, regardless of age. Individuals diagnosed with ALS are automatically enrolled in Medicare Parts A and B the month their disability benefits begin.<ref>{{Cite web |title=Original Medicare (Part A and B) Eligibility and Enrollment {{!}} CMS |url=https://www.cms.gov/medicare/enrollment-renewal/original-part-a-b?utm_source=chatgpt.com |access-date=2024-11-26 |website=www.cms.gov}}</ref>

==Benefits and parts==
{{multiple image
| align = right| direction = vertical| header = Medicare cards
| image1 = Medical Care Card USA Sample.JPG
| caption1 = A sample of the Medicare card format used through 2018. The ID number is the subscriber's [[Social Security number]], followed by a suffix indicating the holder's relationship to the subscriber (generally "A" for self).<ref name="numbers">{{cite web |title=Medicare Numbers Suffixes and Prefixes |url=https://www.novitas-solutions.com/webcenter/portal/MedicareJL/pagebyid?centerWidth=100%25&contentId=00101347&leftWidth=0%25&rightWidth=0%25&showFooter=false&showHeader=false&_adf.ctrl-state=mshv04j9_4&_afrLoop=681522025461411#! |website=Novitas-solutions.com |access-date=December 5, 2018}}</ref>{{paragraph}} There are separate lines for basic Part A and Part B's supplementary medical coverage, each with its own start date.
| image2 = New US Medicare Card Sample 2018.jpg
| caption2 = A sample of the new Medicare cards mailed out in 2018 and 2019 depending on state of residence on a Social Security database. The new ID number is randomly generated and not tied to any personally identifying information.<ref name="numbers"/>{{paragraph}} Beneficiaries on Medicare Part C health plans are issued with a separate card and ID number, in addition to their Original Medicare card.
| total_width =
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}}
Medicare has four parts: Part A, B, C, & D. Coverage under the first two (Parts A and B), as opposed to Part C plans, is referred to as '''Original Medicare'''.<ref>{{Cite web |title=Your Medicare Coverage Choices |url=https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices |access-date=2024-05-17 |website=Medicare.gov |language=en}}</ref>

In April 2018, CMS began mailing out new Medicare cards with new ID numbers to all beneficiaries.<ref>{{cite web |title=New Medicare Card Mailing Strategy |url=https://www.cms.gov/Medicare/New-Medicare-Card/NMC-Mailing-Strategy.pdf |website=Cms.gov |publisher=[[Centers for Medicare and Medicaid Services]] |access-date=December 5, 2018}}</ref> Previous cards had ID numbers containing beneficiaries' [[Social Security number]]s; the new ID numbers are randomly generated and not tied to any other [[personally identifying information]].<ref>{{cite report |publisher=Center for Medicare and Medicaid Services |title=New Medicare Card Project Frequently Asked Questions (FAQs) |date=May 2, 2018 |url=https://www.cms.gov/Medicare/New-Medicare-Card/NMC-FAQs-5-18.pdf }}</ref><ref>{{cite web|url=http://www.aarp.org/health/medicare-insurance/info-2018/new-medicare-card-not-received.html|title=Still Haven't Received a New Medicare Card? Call the Hotline|last=Bunis|first=Dena|date=June 27, 2018|publisher=[[AARP]]|language=en|access-date=December 5, 2018}}</ref>

{{anchor|PartA|Part A}}

===Part A: Hospital/hospice insurance===
Part A covers [[Inpatient care|inpatient]] [[hospital]] stays. The maximum length of stay that Medicare Part A covers in a hospital admitted inpatient stay or series of stays is typically 90 days. The first 60 days would be paid by Medicare in full, except one copay (also and more commonly referred to as a "deductible") at the beginning of the 60 days of $1632 as of 2024.<ref name=":1">{{Cite web |title=2024 Medicare Parts A & B Premiums and Deductibles {{!}} CMS |url=https://www.cms.gov/newsroom/fact-sheets/2024-medicare-parts-b-premiums-and-deductibles |access-date=2024-08-15 |website=www.cms.gov}}</ref> Days 61–90 require a co-payment of $408 per day as of 2024.<ref name=":1" /> The beneficiary is also allocated "lifetime reserve days" that can be used after 90 days. These lifetime reserve days require a copayment of $816 per day as of 2024, and the beneficiary can use a total of only 60 of these days throughout their lifetime.<ref name="medicare-costs-2023-2024">{{cite web |title=Costs Medicare |url=https://www.medicare.gov/basics/costs/medicare-costs |website=www.medicare.gov |publisher=Medicare |access-date=16 December 2023}}</ref> A new pool of 90 hospital days, with new copays of $1632 in 2024 and $408 per day for days 61–90, starts only after the beneficiary has 60 days continuously with no payment from Medicare for hospital or Skilled Nursing Facility confinement.<ref>{{cite web|url=http://www.medicare.gov/glossary/b.html|title=Benefit period|publisher=Medicare|access-date=April 26, 2018|archive-date=March 10, 2021|archive-url=https://web.archive.org/web/20210310222928/https://www.medicare.gov/glossary/b.html|url-status=dead}}</ref>

Some "hospital services" are provided as inpatient services, which would be reimbursed under Part A; or as outpatient services, which would be reimbursed, not under Part A, but under Part B instead. The "Two-Midnight Rule" decides which is which. In August 2013, the [[Centers for Medicare and Medicaid Services]] announced a final rule concerning eligibility for hospital inpatient services effective October 1, 2013. Under the new rule, if a physician admits a Medicare beneficiary as an inpatient with an expectation that the patient will require hospital care that "crosses two midnights", Medicare Part A payment is "generally appropriate". However, if it is anticipated that the patient will require hospital care for less than two midnights, Medicare Part A payment is generally not appropriate; payment such as is approved will be paid under Part B.<ref>{{cite journal |last=Hord|first=Emily M.|publisher=McBrayer, McGinnis, Leslie & Kirkland|title=Clarifying the 'Two-Midnight Rule' and Part A Payments Re: Inpatient Care|journal=The National Law Review|volume=III|issue=253|date=September 10, 2013|url=http://www.natlawreview.com/article/clarifying-two-midnight-rule-and-part-payments-re-inpatient-care|access-date=June 29, 2022}}</ref> The time a patient spends in the hospital before an inpatient admission is formally ordered is considered outpatient time. But, hospitals and physicians can take into consideration the pre-inpatient admission time when determining if a patient's care will reasonably be expected to cross two midnights to be covered under Part A.<ref>{{cite journal|last=Hord|first=Emily M.|title=Clarifying the "Two-Midnight Rule" and Part A Payments, cont.|journal=The National Law Review|date=September 12, 2013|url=http://www.natlawreview.com/article/clarifying-two-midnight-rule-and-part-payments-cont}}</ref> In addition to deciding which trust fund is used to pay for these various outpatient versus inpatient charges, the number of days for which a person is formally considered an admitted patient affects eligibility for Part A skilled nursing services.

Medicare penalizes hospitals for [[Hospital Readmission|readmissions]]. After making initial payments for hospital stays, Medicare will take back from the hospital these payments, plus a penalty of 4 to 18 times the initial payment, if an above-average number of patients from the hospital are readmitted within 30 days. These readmission penalties apply after some of the most common treatments: [[pneumonia]], [[heart failure]], [[heart attack]], [[COPD]], [[knee replacement]], and [[hip replacement]].<ref>{{cite web|url=http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Readmissions-Reduction-Program.html |title=Readmissions Reduction Program, seen June 25, 2013 |website=Cms.gov |access-date=August 30, 2013}}</ref><ref>{{cite web|url=http://www.kaiserhealthnews.org/stories/2013/march/14/revised-readmissions-statistics-hospitals-medicare.aspx |title=Kaiser health News, Medicare Revises Readmissions Penalties – Again |website=Kaiserhealthnews.org |date=March 14, 2013 |access-date=August 30, 2013}}</ref> A study of 18 states conducted by the [[Agency for Healthcare Research and Quality]] (AHRQ) found that 1.8 million Medicare patients aged 65 and older were readmitted within 30 days of an initial hospital stay in 2011; the conditions with the highest readmission rates were congestive heart failure, [[sepsis]], pneumonia, and COPD and [[bronchiectasis]].<ref>{{cite journal | vauthors = Hines AL, Barrett ML, Jiang HJ, Steiner CA | title = Conditions With the Largest Number of Adult Hospital Readmissions by Payer, 2011. | journal =HCUP Statistical Brief |issue=172 | publisher = Agency for Healthcare Research and Quality | location = Rockville, MD | date = April 2014 | pmid = 24901179 | url = http://hcup-us.ahrq.gov/reports/statbriefs/sb172-Conditions-Readmissions-Payer.jsp | access-date = May 21, 2014 | archive-date = March 4, 2016 | archive-url = https://web.archive.org/web/20160304052719/http://hcup-us.ahrq.gov/reports/statbriefs/sb172-Conditions-Readmissions-Payer.jsp | url-status = dead }}</ref>

The highest penalties on hospitals are charged after knee or hip replacements, $265,000 per excess readmission.<ref>{{cite web|url=http://ehrintelligence.com/2013/08/15/knee-and-hip-replacement-readmissions-may-cost-265000/|title=Knee and hip replacement readmissions may cost $265,000 |publisher=EHR Intelligence |access-date=August 24, 2013|date=August 15, 2013 }}</ref> The goals are to encourage better post-hospital care and more referrals to hospice and end-of-life care in lieu of treatment,<ref>{{cite web|url=http://www.medpac.gov/documents/Mar12_EntireReport.pdf |title=Report to Congress, Medicare Payment Policy. March 2012, pp. 195–96 |publisher=MedPAC |access-date=August 24, 2013 |url-status=dead |archive-url=https://web.archive.org/web/20131019105819/http://www.medpac.gov/documents/Mar12_EntireReport.pdf |archive-date=October 19, 2013 }}</ref><ref>{{cite web|url=http://www.fha.org/showDocument.aspx?f=FHA5YearsOnlineversion.pdf|title=Five Years of Quality, p. 8|publisher=Florida Hospital Association|access-date=August 24, 2013|archive-date=February 27, 2021|archive-url=https://web.archive.org/web/20210227015108/http://www.fha.org/showDocument.aspx?f=FHA5YearsOnlineversion.pdf|url-status=dead}}</ref> while the effect is also to reduce coverage in hospitals that treat poor and frail patients.<ref>{{Cite journal | doi=10.1056/NEJMp1201598 | title=Thirty-Day Readmissions – Truth and Consequences | year=2012 | last1=Joynt | first1=Karen E. | last2=Jha | first2=Ashish K. | journal=New England Journal of Medicine | volume=366 | issue=15 | pages=1366–69 | pmid=22455752}}</ref><ref>{{cite journal|title=Thirty-day readmissions—truth and consequences|pmid=22455752|year=2012|last1=Joynt|first1=KE|last2=Jha|first2=AK|volume=366|issue=15|pages=1366–9|doi=10.1056/NEJMp1201598|journal=The New England Journal of Medicine}}</ref> The total penalties for above-average readmissions in 2013 are $280 million,<ref>{{cite web|url=https://www.federalregister.gov/articles/2012/08/31/2012-19079/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the#h-22 |title=Summary of Costs and Benefits |website=Federalregister.gov |date=August 31, 2012 |access-date=August 30, 2013}}</ref> for 7,000 excess readmissions, or $40,000 for each readmission above the US average rate.<ref>{{cite web |url=http://globe1234.com |archive-url=https://archive.today/20130624212152/http://globe1234.com/ |url-status=dead |archive-date=June 24, 2013 |title=Math Underlying the Penalties |website=Globe1234.com |date=July 18, 2013 |access-date=August 30, 2013 }}</ref>

Part A fully covers brief stays for rehabilitation or convalescence in a [[skilled nursing facility]] and up to 100 days per medical necessity with a co-pay if certain criteria are met:<ref name="medicare-costs-2023-2024"/><ref name="Kodjak">{{cite news |last1=Kodjak |first1=Alison |author-link1=Alison Kodjak |title=How Medicare's Conflicting Hospitalization Rules Cost Me Thousands Of Dollars |url=https://www.npr.org/sections/health-shots/2018/04/20/583338114/how-medicares-conflicting-hospitalization-rules-cost-me-thousands-of-dollars |access-date=2019-01-01 |publisher=NPR |date=2018-04-20}}</ref>

# A preceding hospital stay must be at least three days as an inpatient, three midnights, not counting the discharge date.
# The skilled nursing facility stay must be for something diagnosed during the hospital stay or for the main cause of hospital stay.
# If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing supervision (e.g., wound management) then the nursing home stay would be covered.
# The care being rendered by the nursing home must be skilled. Medicare part A does not pay for stays that ''only'' provide custodial, non-skilled, or [[long-term care]] activities, including [[activities of daily living]] (ADL) such as personal hygiene, cooking, cleaning, etc.
# The care must be medically necessary and progress against some set plan must be made on some schedule determined by a doctor.

The first 20 days would be paid for in full by Medicare with the remaining 80 days requiring a co-payment of $204 per day as of 2024.<ref name="medicare-costs-2023-2024" /> Many [[insurance]] group retiree, Medigap and Part C insurance plans have a provision for additional coverage of skilled nursing care in the indemnity insurance policies they sell or health plans they sponsor. 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 90-day hospital clock and 100-day nursing home clock are reset and the person qualifies for new benefit periods.

[[Hospice]] benefits are also provided under Part A of Medicare for terminally ill persons with less than six months to live, as determined by the patient's physician. The terminally ill person must sign a statement that hospice care has been chosen over other Medicare-covered benefits, (e.g. [[assisted living]] or hospital care).<ref>[http://www.medicare.com/assisted-living/hospice-care.html Medicare Guide to Covered Products, Services and Information] {{webarchive|url=https://web.archive.org/web/20140209113031/http://medicare.com/assisted-living/hospice-care.html |date=February 9, 2014 }}. Medicare.com. Retrieved on July 17, 2013.</ref> Treatment provided includes pharmaceutical products for symptom control and pain relief as well as other services not otherwise covered by Medicare such as [[grief counseling]]. Hospice is covered 100% with no co-pay or deductible by Medicare Part A except that patients are responsible for a copay for outpatient drugs and respite care, if needed.<ref name="medicare">{{cite web|url=http://www.medicare.gov/publications/pubs/pdf/hosplg.pdf |title=Medicare Hospice Benefits |publisher=Medicare, the Official U.S. Government Site for People with Medicare |date=March 2000 |access-date=February 1, 2009 |url-status=dead |archive-url=https://web.archive.org/web/20090306191044/http://www.medicare.gov/publications/pubs/pdf/hosplg.pdf |archive-date=March 6, 2009 }}</ref>

{{anchor|PartB|Part B}}

===Part B: Medical insurance===
The Monthly Premium for Part B for 2024 is $174.70 per month.<ref name="medicare-costs-2023-2024"/>

Part B coverage begins once a patient meets his or her deductible ($240 for 2024), then typically Medicare covers 80% of the RUC-set rate for approved services, while the remaining 20% is the responsibility of the patient,<ref name="medicare-costs-2023-2024"/><ref>{{cite journal|first=Julie|last=Allen|title=Dewonkify – Medicare Part B|journal=The National Law Review|volume=III|issue=309|date=November 5, 2013|url=http://www.natlawreview.com/article/dewonkify-medicare-part-b|publisher=Faegre Drinker Biddle & Reath|access-date=June 29, 2022}}</ref> either directly or indirectly by private group retiree or [[Medigap]] insurance. Part B coverage covers 100% for preventive services such as yearly mammogram screenings, osteoporosis screening, and many other preventive screenings.

Part B also helps with [[durable medical equipment]] (DME), including but not limited to [[cane (medical device)|canes]], [[walker (mobility)|walkers]], [[lift chair]]s, [[wheelchair]]s, and [[mobility scooter]]s for those with [[mobility impairment]]s. [[Prosthesis|Prosthetic devices]] such as [[artificial limb]]s and [[breast prosthesis]] following [[mastectomy]], as well as one pair of [[eyeglasses]] following [[cataract surgery]], and [[oxygen therapy|oxygen]] for home use are also covered.<ref>[https://web.archive.org/web/20050830095452/http://www.uihealthcare.com/topics/aging/agin3390.html Medicare: Part A & B], [[University of Iowa Hospitals and Clinics]], 2005.</ref>

[[Medical necessity|Medically necessary]] emergency ambulance transport is covered by Part B if transport by any other method is dangerous to health.<ref name="t237">{{cite web | title=Ambulance services | website=Medicare | url=https://www.medicare.gov/coverage/ambulance-services | access-date=2025-01-14}}</ref> Non-emergency ambulance transport, or transport when not suffering from a medical emergency, may be covered if a physician orders that ambulance transport is medically necessary. Transport by an [[Air ambulance|air ambulance]], either [[Fixed-wing aircraft|fixed-wing]] or [[Helicopter|helicopter]], may also be covered if specialized services are required that are unable to be provided by ground services.<ref name="l832">{{cite web | last=Lankford | first=Kimberly | title=Does Medicare Cover the Cost of Ambulance Services? | website=AARP | date=2022-11-23 | url=https://www.aarp.org/health/medicare-qa-tool/does-medicare-cover-ambulances.html | access-date=2025-01-14}}</ref>

Anyone on Social Security (SS) in 2019 is "held harmless" from the 2019 amount if the increase in their SS monthly benefit does not cover the increase in their Part B premium from 2019 to 2020. This hold harmless provision is significant in years when SS does not increase but that is not the case for 2020. There are additional income-weighted surtaxes for those with incomes more than $85,000 per annum.

{{anchor|PartC|Part C}}

===Part C: Medicare Advantage plans===
{{main|Medicare Advantage}}
{{More citations needed|section|date=September 2019}}

Public Part C Medicare Advantage and other Part C health plans are required to offer coverage that meets or exceeds the standards set by Original Medicare but they do not have to cover every benefit in the same way (the plan must be actuarially equivalent to Original Medicare benefits). After approval by the Centers for Medicare and Medicaid Services, if a Part C plan chooses to cover less than Original Medicare for some benefits, such as Skilled Nursing Facility care, the savings may be passed along to consumers by offering even lower co-payments for doctor visits (or any other plus or minus aggregation approved by CMS).<ref>{{cite web |title=What is Medicare Part C? |url=https://www.hhs.gov/answers/medicare-and-medicaid/what-is-medicare-part-c/index.html |website=hhs.gov|date=June 7, 2015 }}</ref>

Public Part C Medicare Advantage health plan members typically also pay a monthly premium in addition to the Medicare Part B premium to cover items not covered by Original Medicare (Parts A & B), such as the OOP limit, self-administered prescription drugs, dental care, vision care, annual physicals, coverage outside the United States, and even gym or health club memberships as well as—and probably most importantly—reduce the 20% co-pays and high deductibles associated with Original Medicare.<ref>{{cite journal |last1=Pope |first1=Christopher |year=2016 |title=Supplemental Benefits Under Medicare Advantage |url=https://www.healthaffairs.org/do/10.1377/forefront.20160121.052787 |journal=Health Affairs |doi=10.1377/forefront.20160121.052787 |access-date=January 25, 2016}}</ref> But in some situations the benefits are more limited (but they can never be more limited than Original Medicare and must always include an OOP limit) and there is no premium. The OOP limit can be as low as $1500 and as high as but no higher than $9350 (as with all insurance, the lower the limit, the higher the premium). In some cases, the sponsor even rebates part or all of the Part B premium, though these types of Part C plans are becoming rare.

{{anchor|PartD|Part D}}

===Part D: Prescription drug plans===
{{Main|Medicare Part D|Medicare Part D coverage gap}}

[[Medicare Part D]] went into effect on January 1, 2006. Anyone with Part A or B is eligible for Part D, which covers mostly self-administered drugs. It was made possible by the passage of the [[Medicare Modernization Act]] of 2003. To receive this benefit, a person with Medicare must enroll in a stand-alone Prescription Drug Plan (PDP) or public Part C health plan with integrated prescription drug coverage (MA-PD). These plans are approved and regulated by the Medicare program, but are actually designed and administered by various sponsors including charities, integrated health delivery systems, unions and health insurance companies; almost all these sponsors in turn use pharmacy benefit managers in the same way as they are used by sponsors of health insurance for those not on Medicare. Unlike Original Medicare (Part A and B), Part D coverage is not standardized (though it is highly regulated by the Centers for Medicare and Medicaid Services). Plans choose which drugs they wish to cover (but must cover at least two drugs in 148 different categories and cover all or "substantially all" drugs in the following protected classes of drugs: anti-cancer; anti-psychotic; anti-convulsant, anti-depressants, immuno-suppressant, and HIV and AIDS drugs). The plans can also specify, with CMS approval, at what level (or tier) they wish to cover it, and are encouraged to use [[step therapy]]. Some drugs are excluded from coverage altogether and Part D 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.<ref>{{cite web |url=http://oig.hhs.gov/oas/reports/region6/60600022.pdf |title=Report on the Medicare Drug Discount Card Program Sponsor McKesson Health Solutions, A-06-06-00022 |access-date=February 19, 2011 |archive-url=https://web.archive.org/web/20110717232756/http://oig.hhs.gov/oas/reports/region6/60600022.pdf |archive-date=July 17, 2011 |url-status=dead }}</ref>

==Out-of-pocket costs==
No part of Medicare pays for all of a beneficiary's covered medical costs and many costs and services are not covered at all. The program contains [[insurance premium|premiums]], [[deductible]]s and coinsurance, which the covered individual must [[out-of-pocket expenses|pay out-of-pocket]]. A study published by the [[Kaiser Family Foundation]] in 2008 found the Fee-for-Service Medicare benefit package was less generous than either the typical large employer [[preferred provider organization]] plan or the [[Federal Employees Health Benefits Program]] Standard Option.<ref>{{cite book|first1=Dale|last1=Yamamoto|first2=Tricia|last2=Neuman|first3=Michelle Kitchman|last3=Strollo|title=How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?|publisher=[[Kaiser Family Foundation]]|date=September 2008|url=http://www.kff.org/medicare/upload/7768.pdf}}</ref> 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 3-month quarters in which they paid [[Federal Insurance Contributions Act]] taxes. The benefit is the same no matter how much or how little the beneficiary paid as long as the minimum number of quarters is reached. Medicare-eligible persons who do not have 40 or more quarters of Medicare-covered employment may buy into Part A for an annual adjusted monthly premium of:

* $248.00 per month (as of 2012)<ref name="healthharbor1">{{cite web |title=Medicare: Big Changes for 2011 |url=http://www.healthharbor.com/medicare/2011-medicare-changes |url-status=dead |archive-url=https://web.archive.org/web/20110523085102/http://www.healthharbor.com/medicare/2011-medicare-changes |archive-date=May 23, 2011 |access-date=January 27, 2011}}</ref> for those with 30–39 quarters of Medicare-covered employment, or
* $451.00 per month (as of 2012)<ref name="healthharbor1"/> for those with fewer than 30 quarters of Medicare-covered employment and who are not otherwise eligible for premium-free Part A coverage.<ref>[http://questions.medicare.gov/app/answers/detail/a_id/2305 Medicare premiums and coinsurance rates for 2011], {{webarchive|url=https://web.archive.org/web/20111015004424/http://questions.medicare.gov/app/answers/detail/a_id/2305|date=October 15, 2011}}, FAQ, Medicare.gov (11/05/2010).</ref>

Most Medicare Part B enrollees pay an [[insurance premium]] for this coverage; the standard Part B premium for 2019 is $135.50 a month. A new income-based premium surtax [[Model (abstract)|schema]] has been in effect since 2007, wherein Part B premiums are higher for beneficiaries with incomes exceeding $85,000 for individuals or $170,000 for married couples. Depending on the extent to which beneficiary earnings exceed the base income, these higher Part B premiums are from 30% to 70% higher with the highest premium paid by individuals earning more than $214,000, or married couples earning more than $428,000.<ref name="2012 Medicare & You">2012 Medicare & You handbook, Centers for Medicare & Medicaid Services.</ref> This extra amount is called the Income Related Monthly Adjustment Amount (IRMAA).

===Deductible and coinsurance===
'''Part A'''—For each [[benefit period]], a beneficiary pays an annually adjusted:

* A Part A deductible of '''$1,632''' in '''2024''' for a hospital stay of 1–60 days.<ref name=":1" />
* A '''$408''' per day co-pay in '''2024''' for days 61–90 of a hospital stay.<ref name=":1" />
* A '''$816''' per day co-pay in '''2024 f'''or days 91–150 of a hospital stay, as part of their limited [[Lifetime Reserve Days]].<ref name=":1" />
* All costs for each day beyond 150 days<ref name="Medicare.gov">{{cite web |date=2017 |title=Medicare 2017 costs at a glance |url=https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html |url-status=dead |archive-url=https://web.archive.org/web/20180910124746/https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html |archive-date=September 10, 2018 |access-date=March 12, 2017 |publisher=Medicare, U.S. Centers for Medicare & Medicaid Services, Baltimore}}</ref>
* Coinsurance for a Skilled Nursing Facility is '''$204''' per day in 2024 for days 21100 for each benefit period (no co-pay for the first 20 days).<ref name=":1" />
* 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 beneficiaries meet the yearly deductible of '''$240''' for 2024, they will be required to pay a co-insurance of 20% of the Medicare-approved amount for all services covered by Part B<ref name=":1" /> with the exception of most lab services, which are covered at 100%. Previously, outpatient mental health services was covered at 50%, but under the [[Medicare Improvements for Patients and Providers Act of 2008]], it gradually decreased over several years and now matches the 20% required for other services.<ref>{{Cite web|url=https://www.medicareadvocacy.org/medical-coverage-of-mental-health-services/|title=Medicare Coverage of Mental Health Services &#124;&#124; Center for Medicare Advocacy|date=2019}}</ref> They are also required to pay an excess charge of 15% for services rendered by physicians who do not accept assignment.

The deductibles, co-pays, and coinsurance charges for Part C and D plans vary from plan to plan. All Part C plans include an annual out-of-pocket (OOP) upper spend limit. Original Medicare does not include an OOP limit.

===Medicare supplement (Medigap) policies===
{{Main|Medigap}}{{More citations needed|date=May 2020}}

All insurance companies that sell Medigap policies are required to make Plan A available, and if they offer any other policies, they must also make either Plan C available as well. Plan F is no longer offered as of 2020, but anyone who has a Plan F may keep it.<ref>{{cite web |title=How to compare Medigap policies|url=https://www.medicare.gov/supplements-other-insurance/how-to-compare-medigap-policies |website=Medicare.gov |access-date=13 March 2020}}</ref> Many of the insurance companies that offer Medigap insurance policies also sponsor Part C health plans but most Part C health plans are sponsored by integrated health delivery systems and their spin-offs, charities, and unions as opposed to insurance companies.

==Payment for services==
Medicare contracts with regional insurance companies to process over one billion fee-for-service claims per year. In 2008, Medicare accounted for 13% ($386 billion) of the [[United States federal budget|federal budget]]. In 2016 it was projected to account for close to 15% ($683 billion) of the total expenditures. For the decade 2010–2019 Medicare was projected to cost 6.4 trillion dollars.<ref>[http://www.gpoaccess.gov/USbudget/fy10/pdf/summary.pdf "Budget of the United States Government: Fiscal Year 2010 – Updated Summary Tables"], {{webarchive|url=https://web.archive.org/web/20111010084418/http://www.gpoaccess.gov/USbudget/fy10/pdf/summary.pdf|date=October 10, 2011}}.</ref>

===Reimbursement for Part A services===
For institutional care, such as hospital and nursing home care, Medicare uses [[prospective payment system]]s. In a prospective payment system, 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. The actual allotment of funds is based on a list of [[diagnosis-related group]]s (DRG). The actual amount depends on the primary diagnosis that is actually 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.<ref>{{cite journal | author = Silverman E, Skinner J | year = 2004 | title = Medicare upcoding and hospital ownership | journal = Journal of Health Economics | volume = 23 | issue = 2| pages = 369–89 | doi=10.1016/j.jhealeco.2003.09.007| pmid = 15019762 }}</ref>

===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.<ref>Lauren A. McCormick, Russel T. Burge. [https://archive.today/20120630033016/http://findarticles.com/p/articles/mi_m0795/is_n2_v16/ai_16863013 Diffusion of Medicare's RBRVS and related physician payment policies – resource-based relative value scale – Medicare Payment Systems: Moving Toward the Future] ''Health Care Financing Review''. Winter 1994.</ref>

On January 1, 1992, Medicare introduced the Medicare Fee Schedule (MFS), a list of about 7,000 services that can be billed for. Each service is priced within the [[Resource-Based Relative Value Scale]] (RBRVS) with three [[Relative Value Units]] (RVUs) values largely determining the price. The three RVUs for a procedure are each geographically weighted and the weighted RVU value is multiplied by a global Conversion Factor (CF), yielding a price in dollars. The RVUs themselves are largely decided by a private group of 29 (mostly [[Medical specialist|specialist]]) physicians—the [[American Medical Association]]'s [[Specialty Society Relative Value Scale Update Committee]] (RUC).<ref>{{cite news |title=The Little-Known Decision-Makers for Medicare Physicians Fees |first=Uwe |last=Reinhardt |newspaper=[[The New York Times]] |date=December 10, 2010 |url=https://economix.blogs.nytimes.com/2010/12/10/the-little-known-decision-makers-for-medicare-physicans-fees/ |access-date=July 6, 2011|author-link=Uwe Reinhardt }}</ref>

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 [[Medicare Sustainable Growth Rate|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.

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 by 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. Similarly, 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.<ref>[https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/07-25-sgr.pdf Medicare's Physician Payment Rates and the Sustainable Growth Rate]. (PDF) ''CBO TESTIMONY Statement of [[Donald B. Marron Jr.]], Acting Director''. July 25, 2006.</ref>

The SGR was the subject of possible reform legislation again in 2014. On March 14, 2014, the [[United States House of Representatives]] passed the [[SGR Repeal and Medicare Provider Payment Modernization Act of 2014 (H.R. 4015; 113th Congress)]], a bill that would have replaced the (SGR) formula with new systems for establishing those payment rates.<ref name=cbo4015>{{cite web|title=H.R. 4015 |date=February 27, 2014|url=http://www.cbo.gov/publication/45149|publisher=Congressional Budget Office|access-date=March 11, 2014}}</ref> However, the bill would pay for these changes by delaying the [[Affordable Care Act]]'s individual mandate requirement, a proposal that was very unpopular with Democrats.<ref name=ViebeckHill>{{cite news|last=Viebeck|first=Elise|title=Obama threatens to veto GOP 'doc fix' bill|url=https://thehill.com/blogs/healthwatch/medicare/200620-obama-threatens-to-veto-gop-healthcare-bill/|access-date=March 13, 2014|newspaper=The Hill|date=March 12, 2014}}</ref> The SGR was expected to cause Medicare reimbursement cuts of 24 percent on April 1, 2014, if a solution to reform or delay the SGR was not found.<ref name=GOPreadies26>{{cite news|last=Kasperowicz|first=Pete|title=House GOP readies year-long 'doc fix'|url=https://thehill.com/blogs/floor-action/healthcare/201770-gop-tees-up-year-long-doc-fix-patch/|access-date=March 27, 2014|newspaper=The Hill|date=March 26, 2014}}</ref> This led to another bill, the [[Protecting Access to Medicare Act of 2014 (H.R. 4302; 113th Congress)]], which would delay those cuts until March 2015.<ref name="GOPreadies26"/> This bill was also controversial. The [[American Medical Association]] and other medical groups opposed it, asking Congress to provide a permanent solution instead of just another delay.<ref name=HouseApproves27>{{cite news|last=Kasperowicz|first=Pete|title=House approves 'doc fix' in voice vote|url=https://thehill.com/blogs/floor-action/votes/201932-house-approves-doc-fix-in-voice-vote/|access-date=March 27, 2014|newspaper=The Hill|date=March 27, 2014}}</ref>

The SGR process was replaced by new rules as of the passage of MACRA in 2015.

====Provider participation====
There are two ways for providers to be reimbursed in Medicare. "Participating" providers accept "assignment", which means that they accept Medicare's approved rate for their services as payment (typically 80% from Medicare and 20% from the beneficiary). Some non-participating doctors do not take assignment, but they also treat Medicare enrollees and are authorized to balance bills no more than a small fixed amount above Medicare's approved rate. A minority of doctors are "private contractors" from a Medicare perspective, which means they opt out of Medicare and refuse to accept Medicare payments altogether. These doctors are required to inform patients that they will be liable for the full cost of their services out-of-pocket, often in advance of treatment.<ref>American Medical Association, [http://www.ama-assn.org/ama1/pub/upload/mm/399/medicarepayment08.pdf Medicare Payment Options for Physicians] {{Webarchive|url=https://web.archive.org/web/20150630235834/http://www.ama-assn.org/ama1/pub/upload/mm/399/medicarepayment08.pdf |date=June 30, 2015 }}</ref>

While the majority of providers accept Medicare assignments, (97 percent for some specialties),<ref>Kaiser Family Foundation 2010 Chartbook, [http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742 "Figure 2.15"], {{Webarchive|url=https://web.archive.org/web/20130405060011/http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742|date=April 5, 2013}}.</ref> and most physicians still accept at least some new Medicare patients, that number is in decline.<ref>Kaiser Family Foundation 2010 Chartbook, [http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742 "Figure 2.16], {{Webarchive|url=https://web.archive.org/web/20130405060011/http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742|date=April 5, 2013}}.</ref> While 80% of physicians in the Texas Medical Association accepted new Medicare patients in 2000, only 60% were doing so by 2012.<ref>{{cite web|url=https://www.forbes.com/sites/nextavenue/2013/06/11/what-to-do-if-your-doctor-wont-take-medicare/|title=What To Do If Your Doctor Won't Take Medicare|first=Caroline|last=Mayer|website=forbes.com}}</ref> A study published in 2012 concluded that the Centers for Medicare and Medicaid Services (CMS) relies on the recommendations of an American Medical Association advisory panel. The study led by Miriam J. Laugesen, of [[Columbia Mailman School of Public Health]], and colleagues at UCLA and the University of Illinois, shows that for services provided between 1994 and 2010, CMS agreed with 87.4% of the recommendations of the committee, known as RUC or the Relative Value Update Committee.<ref>{{cite news |title=Study Finds that the AMA Committee Recommendations on Doctor Fees Are Followed Nine Times out of Ten |author=Laugesen, Miriam |newspaper=The [[National Law Review]] |date=May 10, 2012 |url=http://www.natlawreview.com/article/study-finds-ama-committee-recommendations-doctor-fees-are-followed-nine-times-out-te/ |access-date=June 6, 2012}}</ref>

====Office medication reimbursement====
[[Chemotherapy]] and other medications dispensed in a physician's office are reimbursed according to the Average Sales Price (ASP),<ref>{{Cite web |url=http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=3303 |title=Archived copy |access-date=April 11, 2015 |archive-url=http://webarchive.loc.gov/all/20150411130719/http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=3303 |archive-date=April 11, 2015 |url-status=dead }}</ref> 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.<ref>{{Cite web |url=http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=4758 |title=Archived copy |access-date=April 11, 2015 |archive-url=http://webarchive.loc.gov/all/20150411130725/http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=4758 |archive-date=April 11, 2015 |url-status=dead }}</ref> 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. In addition, Medicare pays 80% of ASP+6, which is the equivalent of 84.8% of the actual average cost of the drug. Some patients have supplemental insurance or can afford the co-pay. Large numbers do not. This leaves the payment to physicians for most of the drugs in an "underwater" state. ASP+6 superseded Average Wholesale Price in 2005,<ref>{{Cite news|last=Pollack|first=Andrew|date=2005-07-19|title=Law Impedes Flow of Immunity in a Vial|language=en-US|work=The New York Times|url=https://www.nytimes.com/2005/07/19/health/policy/law-impedes-flow-of-immunity-in-a-vial.html|access-date=2023-01-06|issn=0362-4331}}</ref> after a 2003 front-page ''[[New York Times]]'' article drew attention to the inaccuracies of Average Wholesale Price calculations.<ref>{{Cite news |last=Pear |first=Robert |author-link=Robert P ear|date=2003-08-06 |title=Cancer Drugs Face Funds Cut In a Bush Plan |language=en-US |work=The New York Times |url=https://www.nytimes.com/2003/08/06/us/cancer-drugs-face-funds-cut-in-a-bush-plan.html |access-date=2023-01-06 |issn=0362-4331}}</ref>

This procedure is scheduled to change dramatically in 2017 under a CMS proposal that will likely be finalized in October 2016.

====Medicare 10 percent incentive payments====
"Physicians in geographic Health Professional Shortage Areas (HPSAs) and Physician Scarcity Areas (PSAs) can receive incentive payments from Medicare. Payments are made on a quarterly basis, rather than claim-by-claim, and are handled by each area's Medicare carrier."<ref>{{cite web|url=https://www.ruralhealthinfo.org/funding/214 |title=Medicare Incentive Payments in Health Professional Shortage Areas|website=Ruralhealthinfo.org |access-date=February 15, 2018}}</ref><ref>{{cite web|url=http://www.cms.gov/HPSAPSAPhysicianBonuses/ |title=Overview HPSA/PSA (Physician Bonuses) |website=Cms.gov |access-date=February 19, 2011}}</ref>

==Enrollment==
{{more citations needed section|date=February 2019}}
Generally, if an individual already receives Social Security payments, at age 65 the individual becomes automatically enrolled in Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). If the individual chooses not to enroll in Part B (typically because the individual is still working and receiving employer insurance), then the individual must proactively opt out of it when receiving the automatic enrollment package. Delay in enrollment in Part B carries no penalty if the individual has other insurance (e.g., the employment situation noted above), but may be penalized under other circumstances. An individual who does not receive Social Security benefits upon turning 65 must sign up for Medicare if they want it. Penalties may apply if the individual chooses not to enroll at age 65 and does not have other insurance.

===Parts A & B===
==== Part A Late Enrollment Penalty ====
If an individual is not eligible for premium-free Part A, and they do not buy a premium-based Part A when they are first eligible, the monthly premium may go up 10%.<ref>{{cite web |title=Part A late enrollment penalty |url=https://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-late-enrollment-penalty |website=medicare.gov |access-date=23 April 2020 |archive-date=March 18, 2021 |archive-url=https://web.archive.org/web/20210318014907/https://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-late-enrollment-penalty |url-status=dead }}</ref> The individual must pay the higher premium for twice the number of years that they could have had Part A, but did not sign up. For example, if they were eligible for Part A for two years but did not sign up, they must pay the higher premium for four years. Usually, individuals do not have to pay a penalty if they meet certain conditions that allow them to sign up for Part A during a Special Enrollment Period.

==== Part B Late Enrollment Penalty ====
If an individual does not sign up for Part B when they are first eligible, they may have to pay a late enrollment penalty for as long as they have Medicare. Their monthly premium for Part B may go up 10% for each full 12-month period that they could have had Part B, but did not sign up for it. Usually, they do not pay a late enrollment penalty if they meet certain conditions that allow them to sign up for Part B during a special enrollment period.<ref>{{cite web |url=http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf |title=Medicare & You 2020 |access-date=November 2, 2019 |archive-date=April 6, 2006 |archive-url=https://web.archive.org/web/20060406005133/https://www.medicare.gov/publications/pubs/pdf/10050.pdf |url-status=dead }}</ref>

==Comparison with private insurance==
Medicare differs from private insurance available to working Americans in that it is a [[social insurance]] program. Social insurance programs provide statutorily guaranteed benefits to the entire population (under certain circumstances, such as old age or unemployment). These benefits are financed in significant part through universal taxes. In effect, Medicare is a mechanism by which the state takes a portion of its citizens' resources to provide health and financial security to its citizens in old age or in case of disability, helping them cope with the cost of health care. In its universality, Medicare differs substantially from private insurers, which decide whom to cover and what benefits to offer to manage their risk pools and ensure that their costs do not exceed premiums.{{citation needed|date=October 2014}}

Because the federal government is legally obligated to provide Medicare benefits to older and some disabled Americans, it cannot cut costs by restricting eligibility or benefits, except by going through a difficult legislative process, or by revising its interpretation of [[medical necessity]]. By statute, Medicare may only pay for items and services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member", unless there is another statutory authorization for payment.<ref>''See'' 42 U.S.C. § [http://www.ssa.gov/OP_Home/ssact/title18/1862.htm 1395y(a)(1)(A)].</ref> Cutting costs by cutting benefits is difficult, but the program can also achieve substantial economies of scale in the prices it pays for health care and administrative expenses—and, as a result, private insurers' costs have grown almost 60% more than Medicare's since 1970.{{citation needed|date=October 2014}}<ref>{{Cite web |last=Rosso |first=Ryan J. |date=March 20, 2024 |title=U.S. Health Care Coverage and Spending |url=https://crsreports.congress.gov/product/pdf/IF/IF10830 |access-date=June 4, 2024 |website=Congressional Research Service}}</ref>{{Original research inline|date=April 2020}}<ref>Center or Medicare and Medicaid Services, [https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads//tables.pdf "NHE Web Tables for Selected Calendar Years 1960–2010"] {{webarchive|url=https://web.archive.org/web/20120411171845/https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/tables.pdf |date=April 11, 2012 }}, Table 16.</ref> Medicare's cost growth is now the same as GDP growth and expected to stay well below private insurance's for the next decade.<ref>Center for Medicare and Medicaid Services, [https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads//proj2010.pdf "National Health Expenditure Projections 2010–2020"] {{webarchive|url=https://web.archive.org/web/20120501105801/http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2010.pdf |date=May 1, 2012 }}, Table 17.</ref>

Because Medicare offers statutorily determined benefits, its coverage policies and payment rates are publicly known, and all enrollees are entitled to the same coverage. In the private insurance market, plans can be tailored to offer different benefits to different customers, enabling individuals to reduce coverage costs while assuming risks for care that is not covered. Insurers, however, have far fewer disclosure requirements than Medicare, and studies show that customers in the private sector can find it difficult to know what their policy covers,<ref>Karen Pollitz, et al. [http://www.naic.org/documents/committees_b_consumer_information_coverage_facts_paper.pdf "Coverage When It Counts: What Does Health Insurance In Massachusetts Cover and How Can Consumers Know?"] The Robert Wood Johnson Foundation and Georgetown University. May 2009. {{Webarchive|url=https://web.archive.org/web/20210307204620/http://www.naic.org/documents/committees_b_consumer_information_coverage_facts_paper.pdf|date=March 7, 2021}}.</ref> and at what cost.<ref>GAO, [http://www.gao.gov/new.items/d11791.pdf "Health Care Price Transparency: Meaningful price information is difficult for consumers to obtain prior to obtaining care"] {{Webarchive|url=https://web.archive.org/web/20120105160249/http://www.gao.gov/new.items/d11791.pdf|date=January 5, 2012}}. September 2011.</ref> Moreover, since Medicare collects data about utilization and costs for its enrollees—data that private insurers treat as trade secrets—it gives researchers key information about health care system performance.

Medicare also has an important role in driving changes in the entire health care system. Because Medicare pays for a huge share of health care in every region of the country, it has a great deal of power to set delivery and payment policies. For example, Medicare promoted the adaptation of prospective payments based on DRG's, which prevents unscrupulous providers from setting their own exorbitant prices.<ref>{{Cite web|last=Reinhardt|first=Uwe E.|date=2010-12-03|title=How Medicare Pays Physicians|url=https://archive.nytimes.com/economix.blogs.nytimes.com/2010/12/03/how-medicare-pays-physicians/|access-date=2023-01-06|website=Economix Blog|language=en}}</ref> Meanwhile, the [[Patient Protection and Affordable Care Act]] has given Medicare the mandate to promote cost-containment throughout the health care system, for example, by promoting the creation of accountable care organizations or by replacing fee-for-service payments with bundled payments.<ref name="ReferenceA">{{Cite web|date=2013-04-25|title=Summary of the Affordable Care Act|url=https://www.kff.org/health-reform/fact-sheet/summary-of-the-affordable-care-act/|access-date=2023-01-06|website=KFF|language=en-US}}</ref>

==Costs and funding challenges==
[[Image:Effects of Population Aging and Excess Health Care Costs on Entitlement Programs (2013).png|thumb|upright=1.8|Medicare and Medicaid Spending as % GDP (2013)]]
[[File:Medicare Parts A B C D.png|upright=2.8|thumb|Medicare spending as a percent of GDP]]
[[File:Medicare Revenue-Expenses.png|upright=2.4|thumb|Medicare expenses and revenue]]

Over the long-term, Medicare faces significant financial challenges because of rising overall health care costs, increasing enrollment as the population ages, and a decreasing ratio of workers to enrollees. Total Medicare spending was projected to increase from $523 billion in 2010 to around $900 billion by 2020. From 2010 to 2030, Medicare enrollment is projected to increase, from 47 million to 79 million, and the ratio of workers to enrollees is expected to decrease from 3.7 to 2.4.<ref>{{cite web|url=https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf |title=Trust funds |date=2010 |website=Cms.gov |access-date=2019-06-14}}</ref> However, the ratio of workers to retirees has declined steadily for decades, and social insurance systems have remained sustainable due to rising worker productivity. There is some evidence that [[productivity]] gains will continue to offset demographic trends in the near future.<ref>{{cite web|title=Medicare Chartbook, 2010|url=http://kff.org/medicare/report/medicare-chartbook-2010/|work=[[Kaiser Family Foundation]]|access-date=October 20, 2013|archive-url=https://web.archive.org/web/20131005115529/http://kff.org/medicare/report/medicare-chartbook-2010/|archive-date=October 5, 2013|date=October 30, 2010|url-status=bot: unknown}}</ref>

The [[Congressional Budget Office]] (CBO) wrote in 2008 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."<ref>[http://www.cbo.gov/ftpdocs/93xx/doc9385/06-17-LTBO_Testimony.pdf CBO | The Long-Term Budget Outlook and Options for Slowing the Growth of Health Care Costs] {{Webarchive|url=https://web.archive.org/web/20111203123408/http://www.cbo.gov/ftpdocs/93xx/doc9385/06-17-LTBO_Testimony.pdf |date=December 3, 2011 }}. Cbo.gov (June 17, 2008). Retrieved on July 17, 2013.</ref>

Overall health care costs were projected in 2011 to increase by 5.8 percent annually from 2010 to 2020, in part because of increased use of medical services, higher prices for services, and new technologies.<ref>{{Cite journal|last=Fleming|first=Chris|title=U.S. Health Spending Projected To Grow 5.8 Percent Annually|url=https://www.healthaffairs.org/do/10.1377/forefront.20110728.012690/full/|journal=Health Affairs Forefront|year=2011 |language=en|doi=10.1377/forefront.20110728.012690}}</ref> Health care costs are rising faster than inflation across the board, but the cost of insurance has risen dramatically for families and employers as well as the federal government. Since 1970, the per-capita cost of private insurance coverage has grown roughly one percentage point faster each year than the per-capita cost of Medicare. Since the late 1990s, Medicare has performed especially well relative to private insurers.<ref>{{cite web|url=https://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf |title=National Health Expenditures (tables) |access-date=February 16, 2012 |url-status=dead |archive-url=https://web.archive.org/web/20120127170317/http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf |archive-date=January 27, 2012 }}</ref> Over the next decade, Medicare's per capita spending is projected to grow at a rate of 2.5 percent each year, compared to private insurance's 4.8 percent.<ref name="cms.gov">{{cite web|url=https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf |title=National Health Expenditure Projections 2010–2020 |access-date=February 16, 2012 |url-status=dead |archive-url=https://web.archive.org/web/20120309123319/https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf |archive-date=March 9, 2012 }}</ref> Nonetheless, most experts and policymakers agree containing health care costs is essential to the nation's fiscal outlook. Much of the debate over the future of Medicare revolves around whether per capita costs should be reduced by limiting payments to providers or by shifting more costs to Medicare enrollees.

===Indicators===
Several measures serve as indicators of the long-term financial status of Medicare. These include total Medicare spending as a share of [[gross domestic product]] (GDP), the solvency of the Medicare HI trust fund, Medicare per-capita spending growth relative to [[inflation]] and per-capita GDP growth; general fund revenue as a share of total Medicare spending; and actuarial estimates of unfunded liability over the 75-year timeframe and the infinite horizon (netting expected premium/tax revenue against expected costs). The major issue these indicators is comparing any future projections against current law vs. what actuaries expect to happen. For example, current law specifies that Part A payments to hospitals and skilled nursing facilities will be cut substantially after 2028 and that doctors will get no raises after 2025. Actuaries expect that the law will change to keep these events from happening.

===Total Medicare spending as a share of GDP===
[[File:Medicare Cost and Non-Interest Income by Source as a Percentage of GDP.png|thumb|upright=1.8|Medicare cost and non-interest income by source as a percentage of GDP]]
This measure, which examines Medicare spending in the context of the US economy as a whole, is projected to increase from 3.7 percent in 2017 to 6.2 percent by 2092<ref name="cms.gov"/> under current law and over 9 percent under what actuaries really expect will happen (called an "illustrative example" in recent-year Trustees Reports).

===The solvency of the Medicare HI trust fund===
This measure involves only Medicare Part A. The trust fund is considered insolvent when available revenue plus any existing balances will not cover 100 percent of annual projected costs. According to the 2018 estimate by the Medicare trustees, the trust fund was expected to become insolvent in 8 years (2026), at which time available revenue will cover around 85 percent of annual projected costs for Part A services.<ref name="ReferenceB">
{{cite web|url=https://www.cms.gov/ReportsTrustFunds/downloads/tr2016.pdf |title=Trust funds |date=2016 |website=Cms.gov |access-date=2019-06-14}}</ref> Since Medicare began, this solvency projection has ranged from two to 28 years, with an average of 11.3 years.<ref>{{cite web|url=https://fas.org/sgp/crs/misc/RS20946.pdf |title=Graph on Page 4 |access-date=August 30, 2013}}</ref> This and other projections in Medicare Trustees reports are based on what its actuaries call the intermediate scenario but the reports also include worst-case and best-case projections that are quite different (other scenarios presume Congress will change present law).

===Medicare per-capita spending growth relative to inflation and per-capita GDP growth===
Per capita spending relative to inflation per-capita GDP growth was to be an important factor used by the PPACA-specified [[Independent Payment Advisory Board]] (IPAB), as a measure to determine whether it must recommend to Congress proposals to reduce Medicare costs. However, the IPAB never formed and was formally repealed by the Balanced Budget Act of 2018.

===General fund revenue as a share of total Medicare spending===
This measure, established under the [[Medicare Modernization Act]] (MMA), examines Medicare spending in the context of the federal budget. Each year, MMA requires the Medicare trustees to make a determination about whether general fund revenue is projected to exceed 45 percent of total program spending within a seven-year period. If the Medicare trustees make this determination in two consecutive years, a "funding warning" is issued. In response, the president must submit cost-saving legislation to Congress, which must consider this legislation on an expedited basis. This threshold was reached and a warning issued every year between 2006 and 2013 but it has not been reached since that time and was not expected to be reached in the 2016–2022 "window". This is a reflection of the reduced spending growth mandated by the ACA according to the Trustees.

===Unfunded obligation===
Medicare's unfunded obligation is the total amount of money that would have to be set aside today such that the principal and interest would cover the gap between projected revenues (mostly Part B premiums and Part A payroll taxes to be paid over the timeframe under current law) and spending over a given timeframe. By law the timeframe used is 75 years though the Medicare actuaries also give an infinite-horizon estimate because life expectancy consistently increases and other economic factors underlying the estimates change.

As of January 1, 2016, Medicare's unfunded obligation over the 75-year time frame is $3.8 trillion for the Part A Trust Fund and $28.6 trillion for Part B. Over an infinite timeframe, the combined unfunded liability for both programs combined is over $50 trillion, with the difference primarily in the Part B estimate.<ref name="ReferenceB"/><ref>{{cite web|url=https://www.cms.gov/ReportsTrustFunds/downloads/tr2016.pdf|title=2016 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS<!-- Bot generated title -->|website=cms.gov}}</ref> These estimates assume that CMS will pay full benefits as currently specified over those periods though that would be contrary to current United States law. In addition, as discussed throughout each annual Trustees' report, "the Medicare projections shown could be substantially understated as a result of other potentially unsustainable elements of current law." For example, current law effectively provides no raises for doctors after 2025; that is unlikely to happen. It is impossible for actuaries to estimate unfunded liability other than assuming current law is followed (except relative to benefits as noted), the Trustees state "that actual long-range present values for (Part A) expenditures and (Part B/D) expenditures and revenues could exceed the amounts estimated by a substantial margin."

===Public opinion===
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.<ref>{{cite web |url=http://www.publicagenda.org/citizen/issueguides/medicare/publicview/people-concerns |title=Medicare: People's Chief Concerns |publisher=[[Public agenda|Public Agenda]] |access-date=July 25, 2008 |archive-url=https://web.archive.org/web/20080919171331/http://www.publicagenda.org/citizen/issueguides/medicare/publicview/people-concerns |archive-date=September 19, 2008 |url-status=dead }}</ref> Surveys suggest that there is no public consensus behind any specific strategy to keep the program solvent.<ref>{{cite web |url=http://www.publicagenda.org/blogs/paying-for-quality-over-quantity-in-health-care-why-the-public-ought-to-be-engaged |title=Paying for Quality over Quantity in Health Care |publisher=[[Public agenda|Public Agenda]] |access-date=December 1, 2015 |archive-url=https://web.archive.org/web/20151208123334/http://www.publicagenda.org/blogs/paying-for-quality-over-quantity-in-health-care-why-the-public-ought-to-be-engaged |archive-date=December 8, 2015 |url-status=dead }}</ref>

===Fraud and waste===
{{Main|Medicare fraud}}
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.<ref>{{cite web|url=http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf|title="High-Risk Series: An Update" U.S. Government Accountability Office, January 2003 (PDF) | access-date=July 21, 2006}}</ref><ref>{{Cite journal |url=http://www.gao.gov/docdblite/summary.php?rptno=GAO-05-656&accno=A37738 |title=U.S. GAO – Report Abstract |issue=GAO-05-656 |website=Gao.gov |access-date=February 19, 2011 |date=October 12, 2005 |archive-url=https://web.archive.org/web/20080623073055/http://www.gao.gov/docdblite/summary.php?rptno=GAO-05-656&accno=A37738 |archive-date=June 23, 2008 |url-status=dead }}</ref><ref>[http://www.gao.gov/new.items/d02546.pdf Medicare Fraud and Abuse: DOJ Continues to Promote Compliance with False Claims Act Guidance] {{Webarchive|url=https://web.archive.org/web/20060824201401/http://www.gao.gov/new.items/d02546.pdf |date=August 24, 2006 }}, GAO Report to Congressional Committees, April 2002</ref> Fewer than 5% of Medicare claims are audited.<ref name="washingtonpost.com">{{Cite news|last=Johnson|first=Carrie|date=2008-06-13|title=Medical Fraud a Growing Problem|newspaper=[[The Washington Post]] |language=en-US|url=http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203915.html|access-date=2023-01-06|issn=0190-8286}}</ref>

==Criticism==
Robert M. Ball, a former commissioner of Social Security under President Kennedy in 1961 (and later under Johnson, and Nixon) defined the major obstacle to financing health insurance for the elderly: the high cost of care for the aged combined with the generally low incomes of retired people. Because retired older people use much more medical care than younger employed people, an insurance premium related to the risk for older people needed to be high, but if the high premium had to be paid after retirement, when incomes are low, it was an almost impossible burden for the average person. The only feasible approach, he said, was to finance health insurance in the same way as cash benefits for retirement, by contributions paid while at work, when the payments are least burdensome, with the protection furnished in retirement without further payment.<ref name="BALL">{{Cite web |author=Ball |first=Robert M. |title=The role of Social Insurance in preventing economic dependency |url=https://www.ssa.gov/history/churches.html |access-date=2023-01-06 |website=www.ssa.gov}}</ref> In the early 1960s relatively few of the elderly had health insurance, and what they had was usually inadequate. Insurers such as [[Blue Cross Blue Shield Association|Blue Cross]], which had originally applied the principle of [[community rating]], faced competition from other commercial insurers that did not community rate, and so were forced to raise their rates for the elderly.<ref>{{cite journal |title=Perspectives On Medicare: What Medicare's Architects Had In Mind |first=Robert M. |last=Ball |journal=[[Health Affairs]] |date=Winter 1995 |volume=14 |issue=4 |pages=62–72 |doi=10.1377/hlthaff.14.4.62|pmid=8690364 }}</ref>

Medicare is not generally an unearned entitlement. Entitlement is most commonly based on a record of contributions to the Medicare fund.<!-- Unearned entitlement may occur for those that qualify without paying into the system, such as for those receiving SSI for more than one year, or with ESRD --> As such it is a form of [[social insurance]] making it feasible for people to pay for insurance for sickness in old age when they are young and able to work and be assured of getting back benefits when they are older and no longer working. Some people will pay in more than they receive back and others will receive more benefits than they paid in. Unlike private insurance where some amount must be paid to attain coverage, all eligible persons can receive coverage regardless of how much or if they had ever paid in.

===Politicized payment===
Bruce Vladeck, director of the [[Centers for Medicare and Medicaid Services|Health Care Financing Administration]] in the [[Bill Clinton|Clinton]] administration, has argued that lobbyists have changed the Medicare program "from one that provides a legal entitlement to beneficiaries to one that provides a de facto political entitlement to providers."<ref>{{cite web|last1=Pope|first1=Chris|title=Medicare's Single-Payer Experience|url=http://www.nationalaffairs.com/publications/detail/medicares-single-payer-experience|website=National Affairs|access-date=January 20, 2016}}</ref>

===Quality of beneficiary services===
A 2001 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%.<ref>[http://www.gao.gov/new.items/d011141t.pdf Improvements Needed in Provider Communications and Contracting Procedures] {{Webarchive|url=https://web.archive.org/web/20070710073514/http://www.gao.gov/new.items/d011141t.pdf |date=July 10, 2007 }}, Testimony Before the Subcommittee on Health, Committee on Ways and Means, House of Representatives, September 25, 2001.</ref> Since then, steps have been taken to improve the quality of customer service given by Medicare contractors, specifically the [https://archive.today/20131115022646/http://cms.hhs.gov/Outreach-and-Education/Training/1800medicare/index.html 1-800-MEDICARE] contractor. As a result, [https://archive.today/20131115022646/http://cms.hhs.gov/Outreach-and-Education/Training/1800medicare/index.html 1-800-MEDICARE] customer service representatives (CSR) have seen an increase in training, quality assurance monitoring has significantly increased, and a customer satisfaction survey is offered to random callers.

===Hospital accreditation===
In most states the [[Joint Commission]], a private, [[non-profit organization]] for accrediting hospitals, decides whether or not a hospital is able to participate in Medicare, as currently there are no competitor organizations recognized by CMS.

Other organizations can also accredit hospitals for Medicare.{{citation needed|date=October 2014}} These include the [[Community Health Accreditation Program]], the [[Accreditation Commission for Health Care]], [[the Compliance Team]] and the [[Healthcare Quality Association on Accreditation]].

Accreditation is voluntary and an organization may choose to be evaluated by their State Survey Agency or by CMS directly.<ref>[http://www.vdh.state.va.us/OLC/Laws/documents/HomeCare/Accreditation%20Option%20for%20Medicare%20payments.pdf The Accreditation Option for Deemed Medicare Status], {{Webarchive|url=https://web.archive.org/web/20090716120632/http://www.vdh.state.va.us/OLC/Laws/documents/HomeCare/Accreditation%20Option%20for%20Medicare%20payments.pdf|date=July 16, 2009}}, Office of Licensure and Certification, Virginia Department of Health.</ref>

===Graduate medical education===
Medicare funds the vast majority of [[Residency (medicine)|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 hospital]]s in exchange for training resident physicians.<ref>{{cite journal |last=Gottlieb |first=Scott |date=November 1997 |title=Medicare funding for medical education: a waste of money? |journal=[[USA Today (magazine)|USA Today]]}} [http://findarticles.com/p/articles/mi_m1272/is_n2630_v126/ai_20004039 Reprint] by [[BNET]]. {{Webarchive|url=https://web.archive.org/web/20080927212732/http://findarticles.com/p/articles/mi_m1272/is_n2630_v126/ai_20004039|date=September 27, 2008}}.</ref> For the 2008 fiscal year these payments were $2.7 billion and $5.7 billion, respectively.<ref>{{cite journal |url=http://www.aamc.org/newsroom/reporter/feb09/payments.htm |title=Overview: Medicare Direct Graduate and Indirect Medical Education Payments |last=Fuchs |first=Elissa |date=February 2009 |journal=AAMC Reporter |issn=1544-0540 |access-date=November 12, 2009 |archive-url=https://web.archive.org/web/20100613150629/http://aamc.org/newsroom/reporter/feb09/payments.htm |archive-date=June 13, 2010 |url-status=dead }}</ref> Overall funding levels have remained at the same level since 1996, so that the same number or fewer residents have been trained under this program.<ref name="amednews2006-01-30">{{cite news |url=http://www.ama-assn.org/amednews/2006/01/30/prl20130.htm |title=Innovative funding opens new residency slots |last=Croasdale |first=Myrle |date=January 30, 2006 |newspaper=American Medical News |publisher=[[American Medical Association]] }}</ref> Meanwhile, the US population continues to grow both older and larger, which has led to greater demand for physicians, in part due to higher rates of illness and disease among the elderly compared to younger individuals. 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.<ref>{{cite journal |title=Shortages of Medical Personnel at Community Health Centers |journal=Journal of the American Medical Association |date=March 1, 2006 |volume=295 |issue=9 |first1=Roger A. |last1=Rosenblatt |first2=C. Holly A. |last2=Andrilla |first3=Thomas |last3=Curtin |first4=L. Gary |last4=Hart |pages=1042–49 |pmid=16507805 |doi=10.1001/jama.295.9.1042 |doi-access=free }}</ref>

Medicare thus finds itself in the odd position of having assumed control of the single largest funding source for 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 has forced hospitals to look for alternative sources of funding for residency slots.<ref name=amednews2006-01-30/> This halt in funding in turn exacerbates the exact problem Medicare sought to solve in the first place: improving the availability of medical care. However, some healthcare administration experts believe that the shortage of physicians may be an opportunity for providers to reorganize their delivery systems to become less costly and more efficient. Physician assistants and Advanced Registered Nurse Practitioners may begin assuming more responsibilities that traditionally fell to doctors, but do not necessarily require the advanced training and skill of a physician.<ref>{{cite journal |last=Rovner |first=Julie |date=August 2012 |title=Prognosis Worsens For Shortages In Primary Care |journal=[[Talk of the Nation]]}}. [https://www.npr.org/2012/08/07/158370069/the-prognosis-for-the-shortage-in-primary-care] by [[NPR]].</ref>

==Legislation and reform==
{{expand section| separate, more detailed descriptions of legislation and reforms|date=January 2012}}

* 1960: PL 86-778 [[Social Security Amendments of 1965#Previous administrations|Social Security Amendments of 1960]] (Kerr-Mills aid)
* 1965: PL 89-97 [[Social Security Act of 1965]], Establishing Medicare Benefits<ref name="test">{{cite web|url=http://www.americanheritage.com/people/articles/web/20100719-Johnson-Medicare-Congress-Democratic-Party-Wilbur-Mills-Harry-Byrd.shtml|first=Robert|last=Dallek|work=americanheritage.com|publisher=American Heritage|title=Medicare's Complicated Birth|date=Summer 2010|page=28|url-status=dead|archive-url=https://web.archive.org/web/20100822235458/http://www.americanheritage.com/people/articles/web/20100719-Johnson-Medicare-Congress-Democratic-Party-Wilbur-Mills-Harry-Byrd.shtml|archive-date=August 22, 2010}}</ref>
* 1980: Medicare Secondary Payer Act of 1980, prescription drugs coverage added
* 1988: PL 100-360 Medicare Catastrophic Coverage Act of 1988<ref name="Health Affairs-Rice-1990"/><ref name="NYT-Hulse-2013-11-18"/>
* 1989: Medicare Catastrophic Coverage Repeal Act of 1989<ref name="Health Affairs-Rice-1990">{{cite journal | title = The Medicare Catastrophic Coverage Act: a Post-mortem | first1 = Thomas | last1 = Rice | first2 = Katherine | last2 = Desmond | first3= Jon | last3 = Gabel | volume = 9| issue = 3 | date = Fall 1990 | pages = 75–87 | journal = Health Affairs | doi = 10.1377/hlthaff.9.3.75 | pmid = 2227787 | doi-access = free }}</ref><ref name="NYT-Hulse-2013-11-18">{{cite news | title = Lesson Is Seen in Failure of Law on Medicare in 1989 | url = https://www.nytimes.com/2013/11/18/us/politics/lesson-is-seen-in-failure-of-1989-law-on-medicare.html | date = November 17, 2013 | last = Hulse | first = Carl | work = The New York Times }}</ref>
* 1997: PL 105-33 [[Balanced Budget Act of 1997]]
* 2003: PL 108-173 [[Medicare Prescription Drug, Improvement, and Modernization Act]]
* 2010: [[Patient Protection and Affordable Care Act]] and [[Health Care and Education Reconciliation Act of 2010]]
* 2013: Sequestration effects on Medicare due to [[Budget Control Act of 2011]]
* 2015: Extensive changes to Medicare, primarily to the SGR provisions of the [[Balanced Budget Act of 1997]] as part of the [[Medicare Access and CHIP Reauthorization Act of 2015|Medicare Access and CHIP Reauthorization Act]] (MACRA)
* 2016: Changes to the Social Security "hold harmless" laws as they affect Part B premiums based on the Bipartisan Budget Act of 2015
* 2022: [[Inflation Reduction Act of 2022|Inflation Reduction Act]] included Medicare negotiation provisions, allowing negotiation of prescription drug prices beginning in 2026

In 1977, the [[Health Care Financing Administration]] (HCFA) was established as a federal agency responsible for the administration of Medicare and Medicaid. This would be renamed to [[Centers for Medicare & Medicaid Services]] (CMS) in 2001.<ref>{{Cite web |title=Agencies – Health Care Finance Administration |url=https://www.federalregister.gov/agencies/health-care-finance-administration |access-date=2019-12-18 |website=Federal Register}}</ref> By 1983, the [[diagnosis-related group]] (DRG) replaced pay for service reimbursements to hospitals for Medicare patients.<ref>{{Cite journal|last1=Cacace|first1=Mirella|last2=Schmid|first2=Achim|date=2009-11-05|title=The role of diagnosis related groups (DRGs) in healthcare system convergence|journal=BMC Health Services Research|volume=9|issue=Suppl 1|pages=A5|doi=10.1186/1472-6963-9-S1-A5|issn=1472-6963|pmc=2773580 |doi-access=free }}</ref>

President [[Bill Clinton]] attempted an overhaul of Medicare through his [[1993 Clinton health care plan|health care reform plan]] in 1993–1994 but was unable to get the legislation passed by Congress.<ref>{{Cite news|url=https://www.nytimes.com/1993/10/28/us/clinton-s-health-plan-overview-congress-given-clinton-proposal-for-health-care.html|title=Clinton's Health Plan: The Overview – Congress Is Given Clinton Proposal for Health Care|last=Pear|first=Robert|date=1993-10-28|work=The New York Times|access-date=2019-12-18|language=en-US|issn=0362-4331}}</ref>

In 2003, [[United States Congress|Congress]] passed the [[Medicare Prescription Drug, Improvement, and Modernization Act]], which President [[George W. Bush]] signed into law on December 8, 2003.<ref>{{Cite web |last=Hastert |first=J. Dennis |date=2003-12-08 |title=H.R.1 – 108th Congress (2003–2004): Medicare Prescription Drug, Improvement, and Modernization Act of 2003 |url=https://www.congress.gov/bill/108th-congress/house-bill/1 |access-date=2019-12-18 |website=congress.gov}}</ref> 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 US House of Representatives voted to reduce payments to Medicare Advantage providers in order to pay for expanded coverage of children's health under the [[State Children's Health Insurance Program|SCHIP]] program. As of 2008, Medicare Advantage plans cost, on average, 13 percent more per person insured for like beneficiaries than direct payment plans.<ref>{{cite news |first=Aliza |last=Marcus |url=https://www.bloomberg.com/apps/news?pid=20601070&sid=a8.4kZl7x03E&refer=home |title=Senate Vote on Doctor Fees Carries Risks for McCain |newspaper=Bloomberg News |date=July 9, 2008 }}</ref> Many health economists have concluded that payments to Medicare Advantage providers have been excessive.<ref>{{Cite web|url=https://homehealthcarenews.com/2019/12/medpac-pushes-for-7-medicare-payment-cut-for-home-health-agencies/|title=MedPAC Pushes for 7% Medicare Payment Cut for Home Health Agencies|last=Holly|first=Robert|date=2019-12-16|website=Home Health Care News|language=en-US|access-date=2019-12-18}}</ref><ref>{{Cite news|url=https://www.nytimes.com/2018/10/13/us/politics/medicare-claims-private-plans.html|title=Medicare Advantage Plans Found to Improperly Deny Many Claims|last=Pear|first=Robert|date=2018-10-13|work=The New York Times|access-date=2019-12-18|language=en-US|issn=0362-4331}}</ref> 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 SCHIP extension.<ref>{{cite news |url=https://www.nytimes.com/2007/08/02/health/policy/02health.html |title=House Passes Children's Health Plan 225–204 |newspaper=The New York Times |date=August 2, 2007 |last=Pear |first=Robert}}</ref>

===Effects of the Patient Protection and Affordable Care Act===
The Patient Protection and [[Affordable Care Act]] (PPACA) of 2010 made a number of changes to the Medicare program. Several provisions of the law were designed to reduce the cost of Medicare. The most substantial provisions slowed the growth rate of payments to hospitals and skilled nursing facilities under Part A of Medicare, through a variety of methods (e.g., percentage cuts, penalties for readmissions).

Congress also attempted to reduce payments to public Part C Medicare health plans by aligning the rules that establish Part C plans' capitated fees more closely with the FFS paid for comparable care to "similar beneficiaries" under Parts A and B of Medicare. Primarily these reductions involved much discretion on the part of CMS. Examples of what CMS did included effectively ending a Part C program Congress had previously initiated to increase the use of Part C in rural areas (the so-called Part C PFFS plan) and reducing over time a program that encouraged employers and unions to create their own Part C plans not available to the general Medicare beneficiary base (so-called Part C EGWP plans) by providing higher reimbursement. These two types of Part C plans had been identified by MedPAC as the programs that most negatively affected parity between the cost of Medicare beneficiaries on Parts A/B/C and the costs of beneficiaries not on Parts A/B/C. These efforts to reach parity have been more than successful. As of 2015, all beneficiaries on A/B/C cost 4% less per person than all beneficiaries not on A/B/C. But whether that is because the cost of the former decreased or the cost of the latter increased is not known.

PPACA also slightly reduced annual increases in payments to physicians and to hospitals that serve a disproportionate share of low-income patients. Along with other minor adjustments, these changes reduced Medicare's projected cost over the next decade by $455 billion.<ref>{{cite report |title=Selected CBO Publications Related to Health Care Legislation, 2009–2010 |publisher=[[Congressional Budget Office]] of the [[United States|United States of America]] |date=December 2010 |url=http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/120xx/doc12033/12-23-selectedhealthcarepublications.pdf |page=20}}</ref>

Additionally, the PPACA created the [[Independent Payment Advisory Board]] (IPAB), which was empowered to submit legislative proposals to reduce the cost of Medicare if the program's per-capita spending grows faster than per-capita GDP plus one percent. The IPAB was never formed and was formally repealed by the Balanced Budget Act of 2018.

The PPACA also made some changes to Medicare enrollees' benefits. By 2020, it "closed" the so-called "donut hole" between Part D plans' initial spend phase coverage limits and the catastrophic cap on out-of-pocket spending, reducing a Part D enrollee's' exposure to the cost of prescription drugs by an average of $2,000 a year.<ref>{{cite web|url=http://www.ratehospitals.com/blog/how-will-the-affordable-care-act-change-medicare/|title=How will the Affordable Care Act Change Medicare?|website=Ratehospitals.com|access-date=January 30, 2014|archive-url=https://web.archive.org/web/20140202095800/http://www.ratehospitals.com/blog/how-will-the-affordable-care-act-change-medicare/|archive-date=February 2, 2014|url-status=dead}}</ref> That is, the template co-pay in the gap (which legally still exists) will be the same as the template co-pay in the initial spend phase, 25%. This lowered costs for about 5% of the people on Medicare. Limits were also placed on out-of-pocket costs for in-network care for public Part C health plan enrollees.<ref>{{cite web|url=http://www.healthcare.gov/news/factsheets/2011/02/medicare02102011a.html|title=Shining a Light on Health Insurance Rate Increases&nbsp;– Centers for Medicare & Medicaid Services|work=Healthcare.gov|access-date=July 17, 2013}}</ref> Most of these plans had such a limit but ACA formalized the annual out of pocket spend limit. Beneficiaries on traditional Medicare do not get such a limit but can effectively arrange for one through private insurance.

Meanwhile, Medicare Part B and D premiums were restructured in ways that reduced costs for most people while raising contributions from the wealthiest people with Medicare.<ref>{{cite web|url=http://www.kff.org/medicare/upload/8126.pdf|title=Income-Relating Medicare Part B and Part D Premiums: How Many Medicare Beneficiaries Will Be Affected? | publisher=The Henry J. Kaiser Family Foundation|work=Kff.org|date=November 30, 2010|access-date=July 17, 2013}}</ref> The law also expanded coverage of or eliminated co-pays for some preventive services.<ref>{{cite web|url=http://www.healthcare.gov/law/features/rights/preventive-care/index.html |title=Health care law rights and protections; 10 benefits for you |work=HealthCare.gov |date=March 23, 2010 |access-date=July 17, 2013 |url-status=dead |archive-url=https://web.archive.org/web/20130619173358/http://www.healthcare.gov/law/features/rights/preventive-care/index.html |archive-date=June 19, 2013 }}</ref>

The PPACA instituted a number of measures to control Medicare fraud and abuse, such as longer oversight periods, provider screenings, stronger standards for certain providers, the creation of databases to share data between federal and state agencies, and stiffer penalties for violators. The law also created mechanisms, such as the [[Center for Medicare and Medicaid Innovation]] to fund experiments to identify new payment and delivery models that could conceivably be expanded to reduce the cost of health care while improving quality.<ref name="ReferenceA"/>

===Proposals for reforming Medicare===
As legislators continue to seek new ways to control the cost of Medicare, a number of new proposals to reform Medicare have been introduced in recent years.

==== Premium support ====
Since the mid-1990s, there have been a number of proposals to change Medicare from a publicly run social insurance program with a defined benefit, for which there is no limit to the government's expenses, into a publicly run health plan program that offers "premium support" for enrollees.<ref name="Aaron">Henry Aaron and Robert Reischauer, "The Medicare reform debate: what is the next step?", Health Affairs 1995; 14: 8–30.</ref><ref name="AaronFrakt">{{cite journal |last1=Aaron |first1=Henry |last2=Frakt |first2=Austin |year=2012 |title=Why Now Is Not the Time for Premium Support |journal=The New England Journal of Medicine |volume=366|issue=10|pages=877–79|doi=10.1056/NEJMp1200448 |pmid=22276779|doi-access=free }}</ref> The basic concept behind the proposals is that the government would make a defined contribution, that is a premium support, to the health plan of a Medicare enrollee's choice. Sponsors would compete to provide Medicare benefits and this competition would set the level of fixed contribution. Additionally, enrollees would be able to purchase greater coverage by paying more in addition to the fixed government contribution. Conversely, enrollees could choose lower cost coverage and keep the difference between their coverage costs and the fixed government contribution.<ref name="Moffit">{{cite web |url=http://www.heritage.org/research/lecture/2012/08/premium-support-medicares-future-and-its-critics#_ftn8 |title=Premium Support: Medicare's Future and its Critics |last=Moffit |first=Robert |date=August 7, 2012 |work=heritage.org |publisher=The Heritage Foundation |access-date=September 7, 2012}}</ref><ref name="Moon">{{cite web |url=http://www.urban.org/uploadedpdf/309232_medicare_comp.pdf |title=Can Competition Improve Medicare? A Look at Premium Support |last=Moon |first=Marilyn |date=September 1999 |work=urban.org |publisher=Urban Institute |access-date=September 10, 2012 |archive-date=October 18, 2012 |archive-url=https://web.archive.org/web/20121018133026/http://www.urban.org/uploadedpdf/309232_medicare_comp.pdf |url-status=dead }}</ref> The goal of premium Medicare plans is for greater cost-effectiveness; if such a proposal worked as planned, the financial incentive would be greatest for Medicare plans that offer the best care at the lowest cost.<ref name=Aaron/><ref name=Moon/>

This concept is basically how public Medicare Part C already works (but with a much more complicated competitive bidding process that drives up costs for the Trustees, but is advantageous to the beneficiaries). Given that only about 1% of people on Medicare got premium support when Aaron and Reischauer first wrote their proposal in 1995 and the percentage is now 35%, on the way to 50% by 2040 according to the Trustees, perhaps no further reform is needed.

There have been a number of criticisms of the premium support model. Some have raised concern about risk selection, where insurers find ways to avoid covering people expected to have high health care costs.<ref>{{cite web|last=Frakt|first=Austin|title=Premium support proposal and critique: Objection 1, risk selection|url=http://theincidentaleconomist.com/wordpress/premium-support-proposal-and-critique-objection-1-risk-selection/|work=[[The Incidental Economist]]|access-date=October 20, 2013|date=December 13, 2011|quote=[...] The concern is that these public health plans will find ways to attract relatively healthier and cheaper-to-cover beneficiaries (the 'good' risks), leaving the sicker and more costly ones (the 'bad' risks) in fee for service Medicare. Attracting good risks is known as 'favorable selection' and attracting 'bad' ones is 'adverse selection'. [...]}}</ref> Premium support proposals, such as the 2011 plan proposed by Senator [[Ron Wyden]] and Rep. [[Paul Ryan]] (R–[[Wis.]]), have aimed to avoid risk selection by including protection language mandating that plans participating in such coverage must provide insurance to all beneficiaries and are not able to avoid covering higher risk beneficiaries.<ref name="PolitiFact">{{cite news |title=Debbie Wasserman Schultz says Ryan Medicare plan would allow insurers to use pre-existing conditions as barrier to coverage |url=http://www.politifact.com/truth-o-meter/statements/2011/jun/01/debbie-wasserman-schultz/debbie-wasserman-schultz-says-ryan-medicare-plan-w/ |work=PolitiFact |date=June 1, 2011 |access-date=September 10, 2012}}</ref> Some critics are concerned that the Medicare population, which has particularly high rates of cognitive impairment and dementia, would have a hard time choosing between competing health plans.<ref>{{cite web|last=Frakt|first=Austin|title=Premium support proposal and critique: Objection 4, complexity|url=http://theincidentaleconomist.com/wordpress/premium-support-proposal-and-critique-objection-4-complexity/|work=[[The Incidental Economist]]|access-date=October 20, 2013|date=December 16, 2011|quote=[...] Medicare is already very complex, some say too complex. There is research that suggests beneficiaries have difficulty making good choices among the myriad of available plans. [...]}}</ref> Robert Moffit, a senior fellow of [[The Heritage Foundation]] responded to this concern, stating that while there may be research indicating that individuals have difficulty making the correct choice of health care plan, there is no evidence to show that government officials can make better choices.<ref name=Moffit/> Henry Aaron, one of the original proponents of premium supports, has since argued that the idea should not be implemented, given that [[Medicare Advantage]] plans have not successfully contained costs more effectively than traditional Medicare and because the political climate is hostile to the kinds of regulations that would be needed to make the idea workable.<ref name=AaronFrakt/>

Currently, public Part C Medicare health plans avoid this issue with an indexed risk formula that provides lower per capita payments to sponsors for relatively (remember all these people are over 65 years old) healthy plan members and higher per capita payments for less healthy members.

==== Changing the age of eligibility ====
A number of different plans have been introduced that would raise the age of Medicare eligibility.<ref name="budget.house.gov">{{cite web |url=http://budget.house.gov/UploadedFiles/PathToProsperityFY2012.pdf |title=The Path to Prosperity: Fiscal Year 2012 Budget Resolution |access-date=January 14, 2019 |archive-url=https://web.archive.org/web/20110413020014/http://budget.house.gov/UploadedFiles/PathToProsperityFY2012.pdf |archive-date=April 13, 2011 |url-status=dead }}</ref><ref>{{cite news| url=http://blogs-images.forbes.com/aroy/files/2012/02/Seniors-Choice-Act-Summary.pdf |archive-url=https://web.archive.org/web/20120713023317/http://blogs-images.forbes.com/aroy/files/2012/02/Seniors-Choice-Act-Summary.pdf|title=Seniors Choice Act Summary|date=February 2012|archive-date=July 13, 2012}}</ref><ref>{{cite web |url=http://paulryan.house.gov/UploadedFiles/rivlinryan.pdf |title=A Long-Term Plan for Medicare and Medicaid |access-date=January 14, 2019 |archive-url=https://web.archive.org/web/20181107124033/https://paulryan.house.gov/uploadedfiles/rivlinryan.pdf |archive-date=November 7, 2018 |url-status=dead }}</ref><ref>{{cite web |title=Co-chairs' Proposal |url=http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf |url-status=dead |archive-url=https://web.archive.org/web/20101111182901/http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/CoChair_Draft.pdf |archive-date=11 November 2010 |access-date=13 January 2022 |website=www.fiscalcommission.gov}}</ref> Some have argued that, as the population ages and the ratio of workers to retirees increases, programs for the elderly need to be reduced. Since the age at which Americans can retire with full Social Security benefits has risen from 65 to 67, it is argued that the age of eligibility for Medicare should rise with it (though people can begin receiving reduced Social Security benefits as early as age 62).

The CBO projected that raising the age of Medicare eligibility would save $113 billion over 10 years after accounting for the necessary expansion of Medicaid and state health insurance exchange subsidies under health care reform, which are needed to help those who could not afford insurance purchase it.<ref>{{cite web|url=http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-10-2012-Medicare_SS_EligibilityAgesBrief.pdf |title=Medicare eligibility |date=2012 |website=Cbo.gov |access-date=2019-06-14}}</ref> The [[Kaiser Family Foundation]] found that raising the age of eligibility would save the federal government $5.7 billion a year, while raising costs for other payers. According to Kaiser, raising the age would cost $3.7 billion to 65- and 66-year-olds, $2.8 billion to other consumers whose premiums would rise as insurance pools absorbed more risk, $4.5 billion to employers offering insurance, and $0.7 billion to states expanding their Medicaid rolls. Ultimately Kaiser found that the plan would raise total social costs by more than twice the savings to the federal government.<ref>{{Cite web|date=2011-07-18|title=Raising the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform|url=https://www.kff.org/medicare/report/raising-the-age-of-medicare-eligibility/|access-date=2023-01-06|website=KFF|language=en-US}}</ref>

During the 2020 presidential campaign, Joe Biden proposed lowering the age of Medicare eligibility to 60 years old.<ref>{{Cite web|date=2021-05-21|title=Coverage Implications of Policies to Lower the Age of Medicare Eligibility|url=https://www.kff.org/health-reform/issue-brief/coverage-implications-of-policies-to-lower-the-age-of-medicare-eligibility/|access-date=2021-06-28|website=KFF|language=en-US}}</ref> A Kaiser Family Foundation study found that lowering the age to 60 could reduce costs for employer health plans by up to 15% if all eligible employees shifted to Medicare.<ref>{{Cite web|title=How Lowering the Medicare Eligibility Age Might Affect Employer-Sponsored Insurance Costs|url=https://www.healthsystemtracker.org/brief/how-lowering-the-medicare-eligibility-age-might-affect-employer-sponsored-insurance-costs/|access-date=2021-06-28|website=Peterson-KFF Health System Tracker|language=en-US}}</ref>

==== Negotiating the prices of prescription drugs ====
Currently, people with Medicare can get prescription drug coverage through a public Medicare Part C plan or through the standalone Part D prescription drug plans (PDPs) program. Each plan sponsor establishes its own coverage policies and could, if desired, independently negotiate the prices it pays to drug manufacturers. But because each plan has a much smaller coverage pool than the entire Medicare program, many argue that this system of paying for prescription drugs undermines the government's bargaining power and artificially raises the cost of drug coverage. Conversely, negotiating for the sponsors is almost always done by one of three or four companies typically tied to pharmacy retailers each of whom alone has much more buying power than the entire Medicare program. That pharmacy-centric versus government-centric approach appears to have worked given that Part D has cost 50% or more under original projected spending and has held average annual drug spending by seniors in absolute dollars fairly constant for over 10 years.

Many look to the [[Veterans Health Administration]] (VHA) as a model of lower cost prescription drug coverage. Since the VHA provides healthcare directly, it maintains its own formulary and negotiates prices with manufacturers. Studies show that the VHA pays substantially less for drugs than the PDP plans Medicare Part D subsidizes.<ref>Families USA, No Bargain: Medicare Drug Plans Deliver High Prices (Washington, DC: January 2007).</ref><ref name="law.umaryland.edu">{{cite web|url=http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RS2205902182005.pdf|title=The Pros and Cons of Allowing the Federal Government to Negotiate Prescription Drug Prices|work=law.umaryland.edu|access-date=March 6, 2012|archive-date=June 5, 2008|archive-url=https://swap.stanford.edu/20080605213812/http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RS2205902182005.pdf|url-status=dead}}</ref> One analysis found that adopting a formulary similar to the VHA's would save Medicare $14 billion a year.<ref>Austin B. Frakt, Steven D. Pizer, and Roger Feldman. "Should Medicare Adopt the Veterans Health Administration Formulary?" Health Economics (April 19, 2011).</ref>

There are other proposals for savings on prescription drugs that do not require such fundamental changes to Medicare Part D's payment and coverage policies. Manufacturers who supply drugs to Medicaid are required to offer a 15 percent rebate on the average manufacturer's price. Low-income elderly individuals who qualify for both Medicare and Medicaid receive drug coverage through Medicare Part D, and no reimbursement is paid for the drugs the government purchases for them. Reinstating that rebate would yield savings of $112 billion, according to a recent CBO estimate.<ref>{{cite web|url=http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/120xx/doc12085/03-10-reducingthedeficit.pdf |title=Reducing the deficit |website=Cbo.gov |access-date=2019-06-14}}</ref> Some have questioned the ability of the federal government to achieve greater savings than the largest PDPs, since some of the larger plans have coverage pools comparable to Medicare's, though the evidence from the VHA is promising. Some also worry that controlling the prices of prescription drugs would reduce incentives for manufacturers to invest in research and development, though the same could be said of anything that would reduce costs.<ref name="law.umaryland.edu"/> However, the comparisons with the VHA point out that the VHA covers about half the drugs as Part D.

==== Reforming care for the "dual-eligibles" ====
Roughly nine million Americans—mostly older adults with low incomes—are [[Medicare dual eligible|eligible for both Medicare and Medicaid]]. These men and women tend to have particularly poor health—more than half are being treated for five or more chronic conditions<ref name="ahipcoverage.com">{{cite web|last=Thorpe|first=Kenneth E.|title=Estimated Federal Savings Associated with Care Coordination Models for Medicare-Medicaid Dual Eligibles|url=http://www.ahipcoverage.com/wp-content/uploads/2011/09/Dual-Eligible-Study-September-2011.pdf|archive-url=https://web.archive.org/web/20111013072459/http://www.ahipcoverage.com/wp-content/uploads/2011/09/Dual-Eligible-Study-September-2011.pdf|url-status=dead|archive-date=October 13, 2011|date=October 13, 2011|access-date=June 15, 2019}}</ref>—and high costs. Average annual per-capita spending for "dual-eligibles" is $20,000,<ref>{{cite web|title=Dual Eligible: Medicaid's Role for Low-Income Beneficiaries|publisher=Kaiser Family Foundation, Fact Sheet #4091-07|date=December 2010|url=http://www.kff.org/medicaid/upload/4091-07.pdf}}</ref> compared to $10,900 for the Medicare population as a whole.<ref>CMS, National Health Expenditure Web Tables, Table 16. {{cite web|url=https://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf |title=Archived copy |access-date=February 16, 2012 |url-status=dead |archive-url=https://web.archive.org/web/20120127170317/http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf |archive-date=January 27, 2012 }}</ref>

The dual-eligible population comprises roughly 20 percent of Medicare's enrollees but accounts for 36 percent of its costs.<ref>Medicare Chartbook, Kaiser Family Foundation, November 2010, p. 55.</ref> There is substantial evidence that these individuals receive highly inefficient care because responsibility for their care is split between the Medicare and Medicaid programs<ref>{{cite web|first1=John|last1=Holahan|first2=Linda J.|last2=Blumberg|first3=Stacey|last3=McMorrow|first4=Stephen|last4=Zuckerman|first5=Timothy|last5=Waidmann|first6=Karen|last6=Stockley|title=Containing the Growth of Spending in the U.S. Health System|publisher=The Urban Institute|date=October 2011|url=http://www.urban.org/uploadedpdf/412419-Containing-the-Growth-of-Spending-in-the-US-Health-System.pdf|access-date=March 13, 2012|archive-date=June 14, 2013|archive-url=https://web.archive.org/web/20130614084117/http://urban.org/UploadedPDF/412419-Containing-the-Growth-of-Spending-in-the-US-Health-System.pdf|url-status=dead}}</ref>—most see a number of different providers without any kind of mechanism to coordinate their care, and they face high rates of potentially preventable hospitalizations.<ref>Jiang HJ, Wier LM, Potter DEB, Burgess J. Hospitalizations for Potentially Preventable Conditions among Medicare-Medicaid Dual Eligibles, 2008. Statistical Brief #96. Rockville, MD: Agency for Healthcare Research and Quality, Healthcare Cost and Utilization Project, September 2010.</ref> Because Medicaid and Medicare cover different aspects of health care, both have a financial incentive to shunt patients into care the other program pays for.

Many experts have suggested that establishing mechanisms to coordinate care for the dual-eligibles could yield substantial savings in the Medicare program, mostly by reducing hospitalizations. Such programs would connect patients with primary care, create an individualized health plan, assist enrollees in receiving social and human services as well as medical care, reconcile medications prescribed by different doctors to ensure they do not undermine one another, and oversee behavior to improve health.<ref>Medicare Payment Advisory Commission, MedPAC 2011 Databook, Chapter 5. {{cite web |title=Archived copy |url=http://www.medpac.gov/chapters/Jun11_Ch05.pdf |url-status=dead |archive-url=https://web.archive.org/web/20111113143043/http://www.medpac.gov/chapters/Jun11_Ch05.pdf |archive-date=November 13, 2011 |access-date=March 13, 2012}}</ref> The general ethos of these proposals is to "treat the patient, not the condition,"<ref name="ahipcoverage.com"/> and maintain health while avoiding costly treatments.

There is some controversy over who exactly should take responsibility for coordinating the care of the dual-eligibles. There have been some proposals to transfer dual-eligibles into existing Medicaid managed care plans, which are controlled by individual states.<ref>The National Commission on Fiscal Responsibility and Reform, "The Moment of Truth". December 2010. PDF.</ref> But many states facing severe budget shortfalls might have some incentive to stint on necessary care or otherwise shift costs to enrollees and their families to capture some Medicaid savings. Medicare has more experience managing the care of older adults, and is already expanding coordinated care programs under the ACA,<ref>{{cite web|first1=Judy|last1=Feder|first2=Lisa|last2=Clemans-Cope|first3=Teresa|last3=Coughlin|first4=John|last4=Holahan|first5=Timothy|last5=Waidmann|title=Refocusing Responsibility For Dual Eligibles: Why Medicare Should Take The Lead.|publisher=Robert Wood Johnson Foundation|date=October 2011|url=http://www.rwjf.org/files/research/72868qs68dualeligiblesfull20110930.pdf|access-date=March 13, 2012|archive-url=https://web.archive.org/web/20120813045358/http://www.rwjf.org/files/research/72868qs68dualeligiblesfull20110930.pdf|archive-date=August 13, 2012|url-status=dead}}</ref> though there are some questions about private Medicare plans' capacity to manage care and achieve meaningful cost savings.<ref>Families USA, "A Guide for Advocates: State Demonstrations to Integrate Medicare and Medicaid". April 2011. {{cite web |title=Report to the Congress: Medicare and the Health Care Delivery System |url=http://familiesusa2.org/assets/pdfs/health-reform/State-Integration-of-Medicare-and-Medicaid.pdf |url-status=dead |archive-url=https://web.archive.org/web/20120324164822/http://familiesusa2.org/assets/pdfs/health-reform/State-Integration-of-Medicare-and-Medicaid.pdf |archive-date=March 24, 2012 |access-date=March 13, 2012}}</ref>

Estimated savings from more effective coordinated care for the dual eligibles range from $125 billion<ref name="ahipcoverage.com"/> to over $200 billion,<ref>Robert A. Berenson and John Holahan, Preserving Medicare: A Practical Approach to Controlling Spending (Washington, DC: Urban Institute, Sept. 2011).</ref> mostly by eliminating unnecessary, expensive hospital admissions.

==== Income-relating Medicare premiums ====
Both House Republicans and President Obama proposed increasing the additional premiums paid by the wealthiest people with Medicare, compounding several reforms in the ACA that would increase the number of wealthier individuals paying higher, income-related Part B and Part D premiums. Such proposals were projected to save $20 billion over the course of a decade,<ref>The National Commission on Fiscal Responsibility and Reform, "The Moment of Truth". December 2010. {{cite web |url=https://obamawhitehouse.archives.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf |title=Archived copy |access-date=March 14, 2012 |url-status=live |archive-url=https://web.archive.org/web/20170122170017/https://obamawhitehouse.archives.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf |via=[[NARA|National Archives]] |work=[[Office of Management and Budget]] |archive-date=January 22, 2017 }}</ref> and would ultimately result in more than a quarter of Medicare enrollees paying between 35 and 90 percent of their Part B costs by 2035, rather than the typical 25 percent. If the brackets mandated for 2035 were implemented today,{{When|date=December 2013}} it would mean that anyone earning more than $47,000 (as an individual) or $94,000 (as a couple) would be affected. Under the Republican proposals, affected individuals would pay 40 percent of the total Part B and Part D premiums, which would be equivalent of $2,500.<ref>{{cite web|publisher=Kaiser Family Foundation |title=Income-Relating Medicare Part B and Part D Premiums Under Current Law and Recent Proposals: What are the Implications for Beneficiaries?|date=February 2012|url=http://www.kff.org/medicare/upload/8276.pdf}}</ref>

More limited income-relation of premiums only raises limited revenue. Currently, 5 percent of Medicare enrollees pay an income-related premium, and most pay 35 percent of their total costs (on average), compared to the 25 percent most people pay. Only a negligible number of enrollees fall into the higher income brackets required to bear a more substantial share of their costs—roughly half a percent of individuals and less than three percent of married couples currently pay more than 35 percent of their total Part B costs.<ref>Social Security Administration, Income of the Population, 55 and Older.</ref>

There is some concern that tying premiums to income would weaken Medicare politically over the long run, since people tend to be more supportive of universal social programs than of [[means test|means-tested]] ones.<ref>Theda Skocpol and Vanessa Williams. ''The Tea Party and the Remaking of Republican Conservatism''. Oxford University Press, 2012.</ref>

==== Medigap restrictions ====
Some Medicare supplemental insurance (or "Medigap") plans cover all of an enrollee's cost-sharing, insulating them from any out-of-pocket costs and guaranteeing financial security to individuals with significant health care needs. Many policymakers believe that such plans raise the cost of Medicare by creating a [[perverse incentive]] that leads patients to seek unnecessary, costly treatments. Many argue that unnecessary treatments are a major cause of rising costs and propose that people with Medicare should feel more of the cost of their care to create incentives to seek the most efficient alternatives. Various restrictions and surcharges on Medigap coverage have appeared in some deficit reduction proposals.<ref>National Commission on Fiscal Responsibility and Reform, "The Moment of Truth", December 2010.</ref><ref>Office of Management and Budget, "Living Within Our Means and Investing in the Future: The President's Plan for Economic Growth and Deficit Reduction". September 2011.</ref><ref>Sen. Tom Coburn and Sen. Richard Burr, "The Seniors' Choice Act", February 2012.</ref> One of the furthest-reaching reforms proposed, which would prevent Medigap from covering any of the first $500 of coinsurance charges and limit it to covering 50 percent of all costs beyond that, could save $50 billion over 10 years.<ref>CBO, "Reducing the Deficit: Revenue and Spending Options", May 2012. Option 21.</ref> But it would also increase health care costs substantially for people with costly health care needs.

There is some evidence that claims of Medigap's tendency to cause over-treatment may be exaggerated and that potential savings from restricting it might be smaller than expected.<ref>Jeff Lemieux, Teresa Chovan, and Karen Heath, "Medigap Coverage And Medicare Spending: A Second Look", Health Affairs, Volume 27, Number 2, March/April 2008.</ref> Meanwhile, there are some concerns about the potential effects on enrollees. Individuals who face high charges with every episode of care have been shown to delay or forgo needed care, jeopardizing their health and possibly increasing their health care costs over time.<ref>Beeuwkes Buntin M, Haviland AM, McDevitt R, and Sood N, "Healthcare Spending and Preventive Care in High-Deductible and Consumer-Directed Health Plans", ''American Journal of Managed Care'', Vol. 17, No. 3, March 2011, pp. 222–230.</ref> Given their lack of medical training, most patients tend to have difficulty distinguishing between necessary and unnecessary treatments. The problem could be exaggerated among the Medicare population, which has low levels of health literacy.{{full citation needed|date=November 2012}}

==== Vision Coverage ====
The [[Build Back Better Act|Build Back Better]] legislation was passed in Congress in November 2021, and adds hearing services subject to Medicare Part B deductible and 20% coinsurance beginning in 2023. The initial proposal of this bill also aimed to address gaps in Medicare such as dental and vision coverage, however both services were removed following objections in the Senate. A study performed by Urban Institute showed that Medicare enrollees spend more on routine vision services ($8.4 billion) than routine hearing services ($5.7 billion), of which $5.4 billion and $4.7 billion were spent out of pocket respectively.<ref name=":0">{{Cite web |last1=Gangopadhyaya |first1=Anuj |last2=Shartzer |first2=Adele |last3=Garrett |first3=Bowen |last4=John |first4=Holahan |date=November 2021 |title=Are Vision and Hearing Benefits Needed in Medicare? |url=https://www.urban.org/sites/default/files/publication/105115/are-vision-and-hearing-benefits-needed-in-medicare_1.pdf |website=Health Policy Center at the Urban Institute}}</ref> In addition, nearly 1 in 3 Medicare beneficiaries used vision services annually, and averages a spending of $411 per person;<ref name=":0" /> as such, the impact of expanding Medicare to include vision services would benefit many people. There is an income gradient seen in those who use vision services and a severe unmet needs for these services in those with lower incomes. Enrollees below the federal poverty level spent $190, whereas those 400% above the level spent $465;<ref name=":0" /> and a likely trend that far fewer non-Hispanic Black and Hispanic beneficiaries use and spend on vision services—which is in keeping with the trend seen with hearing aids.<ref>{{Cite journal |last1=Arnold |first1=Michelle L. |last2=Hyer |first2=Kathryn |last3=Small |first3=Brent J. |last4=Chisolm |first4=Theresa |last5=Saunders |first5=Gabrielle H. |last6=McEvoy |first6=Cathy L. |last7=Lee |first7=David J. |last8=Dhar |first8=Sumitrajit |last9=Bainbridge |first9=Kathleen E. |date=2019-06-01 |title=Hearing Aid Prevalence and Factors Related to Use Among Older Adults From the Hispanic Community Health Study/Study of Latinos |url=https://doi.org/10.1001/jamaoto.2019.0433 |journal=JAMA Otolaryngology–Head & Neck Surgery |volume=145 |issue=6 |pages=501–508 |doi=10.1001/jamaoto.2019.0433 |pmid=30998816 |pmc=6583684 |issn=2168-6181}}</ref><ref>{{Cite journal |last1=Reed |first1=Nicholas S. |last2=Garcia-Morales |first2=Emmanuel |last3=Willink |first3=Amber |date=2021-03-01 |title=Trends in Hearing Aid Ownership Among Older Adults in the United States From 2011 to 2018 |url=https://doi.org/10.1001/jamainternmed.2020.5682 |journal=JAMA Internal Medicine |volume=181 |issue=3 |pages=383–385 |doi=10.1001/jamainternmed.2020.5682 |pmid=33284312 |pmc=7921897 |issn=2168-6106}}</ref>

==Legislative oversight==
The following [[congressional committee]]s provide [[congressional oversight|oversight]] for Medicare programs:<ref>{{cite web |url=http://www.cms.hhs.gov/OfficeofLegislation/COI/list.asp |title=Congressional Committees of Interest |publisher=Center for Medicare Services |access-date=February 15, 2007 |archive-url = https://web.archive.org/web/20070203202622/http://www.cms.hhs.gov/OfficeofLegislation/COI/list.asp |archive-date = February 3, 2007}}</ref>

; Senate
* [[United States Senate Committee on Appropriations|Senate Committee on Appropriations]]
** [[United States Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies|Subcommittee on Labor, Health and Human Services, Education, and Related Agencies]]
* [[United States Senate Committee on the Budget|Senate Budget Committee]]
* [[United States Senate Committee on Finance|Senate Committee on Finance]]
* [[United States Senate Committee on Homeland Security and Governmental Affairs|Senate Committee on Homeland Security and Governmental Affairs]]
** [[United States Senate Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia|Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia]]
* [[United States Senate Committee on Health, Education, Labor and Pensions|Senate Committee on Health, Education, Labor and Pensions]]
** [[United States Senate Homeland Security Subcommittee on Financial and Contracting Oversight|Subcommittee on Federal Financial Management, Government Information, and International Security]]
** [[United States Senate Health Subcommittee on Primary Health and Retirement Security|Subcommittee on Primary Health and Aging]]
* [[United States Senate Special Committee on Aging|Senate Special Committee on Aging]]

; House
* [[United States House Committee on Appropriations|House Committee on Appropriations]]
** [[United States House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies|Subcommittee on Labor, Health and Human Services, Education, and Related Agencies]]
* [[United States House Committee on the Budget|House Budget Committee]]
* [[United States House Committee on Energy and Commerce|House Committee on Energy and Commerce]]
** [[United States House Energy Subcommittee on Health|Subcommittee on Health]]
** [[United States House Energy Subcommittee on Oversight and Investigations|Subcommittee on Oversight and Investigations]]
* [[United States House Committee on Small Business|House Small Business Committee]]
* [[United States House Committee on Ways and Means|House Committee on Ways and Means]]
** [[United States House Ways and Means Subcommittee on Health|Subcommittee on Health]]

; Joint
* [[United States Congress Joint Economic Committee|Joint Economic Committee]]

==See also==
{{div col|colwidth=20em}}
* [[Administration on Aging]]
* [[Federal Insurance Contributions Act]]
* [[Health care in the United States]]
* [[Health care politics]]
* [[Health care reform in the United States]]
* [[Health insurance in the United States]]
* [[Maurice Mazel]]
* [[Medicaid]]
* [[Medicare (Australia)]]
* [[Medicare (Canada)]]
* [[Medicare Access and CHIP Reauthorization Act of 2015]]
* [[Medicare for All Act]]
* [[Medicare Physician Group Practice Demonstration]]
* [[Medicare Prompt Pay Correction Act]]
* [[Medicare Quality Cancer Care Demonstration Act]]
* [[Medicare Rights Center]]
* [[National Health Service]] ([[United Kingdom]])
* [[National Quality Cancer Care Demonstration Project Act of 2009]]
* [[Patient Protection and Affordable Care Act]] (Obamacare)
* [[Philosophy of healthcare]]
* [[Single-payer health care]]
* [[Stark Law]]
{{div col end}}

==References==
{{Reflist}}

==External links==
{{Commons category}}

===Governmental links—current===
* [https://www.cms.gov/Medicare/Medicare Medicare] at cms.gov
* [https://www.medicare.gov/ Medicare.gov]—the official U.S. government site for Medicare
* [https://fas.org/sgp/crs/misc/R40425.pdf Medicare Primer] [[Congressional Research Service]]
* [https://fas.org/sgp/crs/misc/R44735.pdf Finding Medicare Enrollment Statistics] [[Congressional Research Service]]

===Governmental links—current law===
* [https://www.govinfo.gov/content/pkg/COMPS-8768/uslm/COMPS-8768.xml Social Security Act – Title XVIII Health Insurance for The Aged and Disabled] ([https://www.govinfo.gov/content/pkg/COMPS-8768/pdf/COMPS-8768.pdf PDF]/[https://www.govinfo.gov/app/details/COMPS-8768/ details]) as amended in the [[United States Government Publishing Office|GPO]] [https://www.govinfo.gov/help/comps Statute Compilations collection]

===Governmental links—historical===
* [http://www.ssa.gov/history/lbjsm.html Medicare Is Signed Into Law] page from ssa.gov—material about the bill-signing ceremony
* [http://www.ssa.gov/history/briefhistory3.html Historical Background and Development of Social Security] from ssa.gov—includes information about Medicare
* [http://www.ssa.gov/history/chrono.html Detailed Chronology of SSA] from ssa.gov—includes information about Medicare
* [https://web.archive.org/web/20060925174340/http://www.ssa.gov/history/near65s.html Early Medicare poster] from ssa.gov

===Non-governmental links===
* [http://www.consumerreports.org/cro/2012/09/managing-medicare/index.htm Consumer Reports] Managing Medicare
* [http://www.kff.org/medicare/ Kaiser Family Foundation]—Substantial research and analysis related to the Medicare program and the population of seniors and people with disabilities it covers.
** [http://kff.org/state-category/medicare/ State-level data] on Medicare beneficiaries, such as enrollment, demographics (such as age, gender, race/ethnicity), spending, other sources of health coverage, managed care participation, and use of services.
** [http://kff.org/medicare/timeline/medicare-timeline/ History of Medicare] in an interactive timeline of key developments.
* [https://www.nytimes.com/interactive/2021/08/22/upshot/hospital-prices.html Medical Prices may be much higher with health insurance than without?] ([[The New York Times]], August 22, 2021).

{{ssusa|state=expanded}}


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[[Category:Healthcare reform in the United States]]
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[[Category:Presidency of Lyndon B. Johnson]]