What is Medicare?
Part IV: Yes, Now is the Perfect Time to Talk Healthcare in America
Note: This post is one part of my series, Yes, Now is the Perfect Time to Talk Healthcare in America, which provides an in-depth look at the current healthcare system so that it can be reformed. Click the link or scroll to the bottom to check out the other posts in the series.
The United States does not have a universal health insurance program. Instead, it’s largest nationalized program, Medicare, specifically targets a few high risk segments of the population. According to the Department of Health and Human Services, “Medicare is available for people age 65 or older, younger people with disabilities and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant)”.
As of February 2020, the Centers for Medicare & Medicaid Services reports that about 61 million Americans are enrolled in either a Medicare Part A or Medicare Part B plan. Looking at the last few years, enrollment grows at about 2.5% each year.
Meanwhile, America’s overall population, according to the Census Bureau, grows at a decelerating rate of .5%. To explain the plateauing curve, the Bureau cites a decreasing net international migration rate, a slowing birth rate, and an increasing birth to death ratio. The latter case especially impacts Medicare. With better technologies, medicine, and treatment, more Americans tend to hit the 65 year threshold and therefore become enrollment eligible.
Structured Health Insurance Payments
Before diving into Medicare’s components, it might be best to understand the different type of health insurance payments. For reference, this cost structure is not specific to Medicare; rather, it spans across the entire health insurance industry and exists in public and private plans alike.
Premium: a monthly payment required by the patient (whether or not a medical service is utilized)
Deductible: the annual allotment that the patient pays out-of-pocket before the insurance company starts to pay (hospital stays, lab tests, scans, surgeries, medical devices, leftover costs)
Copay: a set charge for each visit (doctor’s office, urgent care, emergency room, and sometimes prescription drugs)
Coinsurance: an expense where the patient bears a percentage of the responsibility of the medical service (usually, but not always, after the amount covered by the deductible has been depleted for a given year)
A patient’s liability differs across plans and policies. To reduce greater financial exposure down the road, some individuals will choose to pay more up-front. Typically, this includes older Americans and those with underlying health conditions.
Conversely, if betting on continued good health, younger Americans are more likely to pay less up-front and more out-of-pocket. Primarily, they often speculate that they likely won’t incur many healthcare costs. It’s important to note, many low-income Americans, who are ineligible for government programs, will also pay less up-front because they cannot afford a higher deductible and premiums. Therefore, they can be greatly impacted by unforeseen medical situations. Of course, any individual’s risk tolerance will inherently play an essential role too.
Medicare contains a few different components, and for those who become eligible, they can enroll how they wish:
Part A: Inpatient and Hospital Coverage
Part B: Outpatient and Physician Care
Part C: Inpatient and Outpatient Care
Part D: Outpatient Prescription Drug Coverage
For those who enroll in Medicare, there are a few options at play. Each option has some benefits and drawbacks, which highlights a personal-choice type system:
- Enroll in Medicare Parts A and B: This coverage is funded by the federal government and allows flexibility to seek treatment across state lines. However, it is a fee-for-service system where after a certain threshold, the patient is liable for uncapped, out-of-pocket expenses. When first enrolling in Parts A and B, the individual has the option to then shop for Part D which is privately purchased but federally subsidized. Subsequently, enrollment or changes can only be made during the annual election period.
- Enroll in Medicare Part C, Medicare Advantage: This coverage is funded by private insurance companies and replaces Medicare Parts A and B. The healthcare is confined to specific networks such as Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO) and tends to be localized. This will also come with a bundled and assigned Part D plan. However, the patient’s individual financial exposure is capped and paid for by the insurer.
- Enroll in Medicare Parts A and B with a supplement, Medigap: This coverage enhances Parts A and B and offers additional coverage for an additional premium that is paid along with Part B’s premium. It allows access anywhere Medicare is accepted in the country. Medigap does not cover Part D and therefore enrollment acts similarly to option 1.
For reference, the Centers for Medicare & Medicaid Services, details the cost structure for each Medicare part below:
If an individual decides to enroll in Medicare Parts A, B, and D, they will still have to pay quite a bit in a given year. At a minimum, they will pay about $2K per year. Thus, even though these programs receive sizable government subsidizing, they still cost the patient a fair amount; it’s hardly free.
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