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Medicaid

Medicaid was created as Title XIX in the Social Security Act, as a health care program for low-income parents and children, the elderly and the disabled. Medicaid functions as an entitlement program for those who meet very specific eligibility criteria. The federal government determines mandatory eligibility and states are given flexibility to provide optional benefits, or expand care to larger populations under certain circumstances.

Two years after Medicaid was enacted in 1965, Congress passed the Social Security Amendments of 1967, placing limits on financial standards for the medically needy, and establishing the Early and Periodic Screening, Diagnostic and Treatment (EPSDT) program for children. In addition, program beneficiaries were provided with the flexibility to see physicians of their choice.

In 1980, Congress established a payment system for nursing home care, and within seven years, in the Omnibus Budget Reconciliation Act of 1987 (OBRA-87), enacted a set of national minimum standards of care and rights for people living in nursing facilities.

In the Omnibus Budget Reconciliation Act of 1981 (OBRA-81), freedom of choice and home and community-based waivers were passed into law to provide states with increased flexibility in how they could provide care to elderly and disabled populations and how they could pay for it.

Medicaid coverage was extended to pregnant women (who qualified for Aid to Families with Dependent Children) under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA-85) and the following year coverage to pregnant women and children up to 100 percent of the poverty level was made an optional service. In 1987, optional coverage to this population was raised to 185 percent of poverty. Eventually in the Medicare Catastrophic Coverage Act of 1988, the federal government mandated coverage of pregnant women and children up to 100 percent of poverty, and increased it to 133 percent of poverty in 1989. Under the Omnibus Budget Reconciliation Act of 1990 (OBRA-90), Congress added coverage for children up to 18 to 100 percent of poverty.

In OBRA-81 and then again in OBRA-87, Congress provided the means for states to seek Medicaid reimbursement for payments to hospitals providing a 'disproportionate share' of care to low-income patients. In the Medicaid Voluntary Contribution and Provider Specific Tax Amendments of 1991, the federal government tried restricting how states leveraged the state portion of disproportionate share hospital (DSH) payments, placing limits on provider taxes and donations.

The Balanced Budget Act of 1997 (BBA-97) instituted far-reaching reforms as well as significant cuts to the Medicaid and Medicare programs. Most notably though, the BBA created the State Children's Health Insurance Program (SCHIP), providing a mechanism for states to provide health coverage to children whose family's income is too high to qualify for Medicaid but too low to afford basic health insurance. In 1999, Congress passed the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) to reduce the impact of payment reductions enacted two years earlier. The following year, Congress passed the Benefits Improvement and Protection Act (BIPA) - a move that continued to reduce the impact of some of the provider cutbacks from BBA-97.

Medicare

Medicare is the nation’s health insurance program for Americans age 65 and older, and for younger adults with permanent disabilities.

Established in 1965 under Title XVIII of the Social Security Act, Medicare was initially established to provide health insurance to individuals age 65 and older, regardless of income or medical history. The program was expanded in 1972 to include individuals under age 65 with permanent disabilities and people suffering from end-stage renal disease (ESRD). In 2001, Medicare eligibility expanded further to cover people with Lou Gehrig’s disease.

Medicare consists of four parts, each covering different benefits:

Part A, also known as the Hospital Insurance (HI) program, covers inpatient hospital services, skilled nursing facility, home health, and hospice care.

Part B, the Supplementary Medical Insurance (SMI) program, helps pay for physician, outpatient, home health, and preventive services.

Part C, known as the Medicare Advantage program, allows beneficiaries to enroll in a private plan, such as a health maintenance organization (HMO), preferred provider organization (PPO), or private fee-for-service (PFFS) plan. These plans receive payments from Medicare to provide Medicare-covered benefits, including hospital and physician services, and in most cases, prescription drug benefits.

Part D, the prescription drug benefit, is delivered through private plans that contract with Medicare. This can be as either stand-alone prescription drug plans or Medicare Advantage prescription drug plans. Authorized by the Medicare Modernization Act of 2003 (MMA) Part D plans are required to provide a “standard” benefit and may provide enhanced benefits.