Medicare
Content
Medicare (United States)
Medicare is a national social insurance program, administered by the U.S. federal government that guarantees access to health insurance for Americans ages 65 and older and younger people with disabilities as well as people with end stage renal disease. As a social insurance program, Medicare spreads the financial risk associated with illness across society to protect everyone, and thus has a somewhat different social role from private insurers, which must manage their risk portfolio to guarantee their own solvency. Medicare offers all enrollees a defined benefit. Hospital care is covered under Part A and outpatient medical services are covered under Part B. To cover the Part A and Part B benefit Medicare offers a choice between an open-network single-payer plan (traditional Medicare)and a network plan (Medicare Advantage, or Medicare Part C), where the federal government pays for private health coverage. A majority of Medicare enrollees have traditional Medicare (76 percent) over a Medicare Advantage plan (24 percent). Medicare Part D covers outpatient prescription drugs exclusively through private plans, either standalone prescription drug plans or through Medicare Advantage plans that offer prescription drugs A Medicare card, with several areas of the card obscured to protect privacy. There are separate lines for Part A and Part B, each with its own date. There are no lines for Part C or D, as a separate card is issued for those benefits by the private insurance company.
Program History
In 1965, Congress created Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. Before Medicare's creation, only half of older adults had health insurance, with coverage either unavailable or unaffordable to the other half. Older adults had half as much income as younger people and paid nearly three times as much for health insurance. Medicare also spurred the integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation. In 1972, Congress expanded Medicare eligibility to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments and those who have end-stage renal
disease (ESRD or Chronic kidney disease). Congress further expanded Medicare in 2001 to cover younger people with amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease). Initially Medicare consisted exclusively of Part A, which covers hospital and other inpatient services, and Part B, which covers outpatient care, physician visits, and other “medically necessary services.” Congress then added Medicare Part C (originally called Medicare plus Choice, then later changed to Medicare Advantage), which allows enrollees to receive their Medicare benefits through a private plan, under the Balanced Budget Act of 1997, while Medicare Part D was created under the Medicare Modernization Act of 2003. Regardless of a person's age, after receiving SSDI benefits for 24 months, they are eligible for Medicare, including Part A (hospital benefits), Part B (medical benefits), and Part D (drug benefits). The date of Medicare eligibility is measured from the date of eligibility for SSDI (generally 6 months after the start of disability), not the date when the first SSDI payment was received.
Administration
The Centers for Medicare and Medicaid Services (CMS), a component of the Department of Health and Human Services (HHS), administers Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), and the Clinical Laboratory Improvement Amendments (CLIA). Along with the Departments of Labor and Treasury, CMS also implements the insurance reform provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Social Security Administration is responsible for determining Medicare eligibility and processing premium payments for the Medicare program.
Eligibility
In general, all persons 65 years of age or older who have been legal residents of the United States for at least 5 years are eligible for Medicare. People with disabilities under 65 may also be eligible if they receive Social Security Disability Insurance (SSDI) benefits. Specific medical conditions may also help people become eligible to enroll in Medicare. People qualify for Medicare coverage, and Medicare Part A premiums are entirely waived, if the following circumstances apply: 1. They are 65 years or older and U.S. citizens or have been permanent legal residents for 5 continuous years, and they or their spouse has paid Medicare taxes for at least 10 years. Or 2. They are under 65, disabled, and have been receiving either Social Security SSDI benefits or Railroad Retirement Board disability benefits; they must receive one of these benefits for at least 24 months from date of entitlement (first disability payment) before becoming eligible to enroll in Medicare. Or 3. They get continuing dialysis for end stage renal disease or need a kidney transplant. Or 4. They are eligible for Social Security Disability Insurance and have amyotrophic lateral sclerosis (known as ALS or Lou Gehrig's disease). Those who are 65 and older must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid Medicare taxes over the course of 10 years while working. People with disabilities who receive SSDI are eligible for Medicare while they continue to receive SSDI payments; they lose eligibility for Medicare based on disability if they stop receiving SSDI. The 24 month exclusion means that people who become disabled must wait 2 years before receiving government medical insurance, unless they have one of the listed diseases . Some beneficiaries are dual-eligible. This means they qualify for both Medicare and Medicaid. In some states for those making below a certain income, Medicaid will pay the beneficiaries' Part B premium for them (most beneficiaries have worked long enough and have no Part A premium), as well as some of their out of pocket medical and hospital expenses.
Benefits
Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers prescription drugs. Medicare Advantage plans, also known as Medicare Part C, are another way for beneficiaries to receive their Part A, B and D benefits. All Medicare benefits are subject to medical necessity. The original program included Parts A and B. Part D was introduced January 1st, 2006; before that, Parts A and B covered prescription drugs in a few special cases.
Part A: Hospital Insurance
Part A covers inpatient hospital stays (at least overnight), including semiprivate room, food, and tests. It covers brief stays for convalescence in a skilled nursing facility if certain criteria are met: 1. A preceding hospital stay must be at least three days, three midnights, not counting the discharge date. 2. The nursing home stay must be for something diagnosed during the hospital stay or for the main cause of hospital stay. 3. If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing supervision then the nursing home stay would be covered. 4. The care being rendered by the nursing home must be skilled. Medicare part A does not pay for custodial, non-skilled, or long-term care activities, including activities of daily living (ADL) such as personal hygiene, cooking, cleaning, etc. The maximum length of stay that Medicare Part A will cover in a skilled nursing facility per ailment is 100 days. The first 20 days would be paid for in full by Medicare with the remaining 80 days requiring a copayment (as of 2012, $144.50 per day). Many insurance companies have a provision for skilled nursing care in the policies they sell. 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 100-day clock is reset and the person qualifies for a new 100-day benefit period.
Part B: Medical Insurance
Part B medical insurance helps pay for some services and products not covered by Part A, generally on an outpatient basis. Part B is optional and may be deferred if the beneficiary or his/her spouse is still working and has group health coverage through that employer. There is a lifetime penalty (10% per year) imposed for not enrolling in Part B unless actively working and receiving group health coverage from that employer. Part B coverage begins once a patient meets his or her deductible ($140 in 2012), then typically Medicare covers 80% of approved services, while the remaining 20% is paid by the patient. Part B coverage includes physician and nursing services, x-rays, laboratory and diagnostic tests, influenza and pneumonia vaccinations, blood transfusions, renal dialysis, outpatient hospital procedures, limited ambulance transportation, immunosuppressive drugs for organ transplant recipients, chemotherapy, hormonal treatments such as Lupron, and other outpatient medical treatments administered in a doctor's office. Medication administration is covered under Part B if it is administered by the physician during an office visit. Part B also helps with durable medical equipment (DME), including canes, walkers, wheelchairs, and mobility scooters for those with mobility impairments. Prosthetic devices such as artificial limbs and breast prosthesis following mastectomy, as well as one pair of eyeglasses following cataract surgery, and oxygen for home use are also covered. Complex rules are used to manage the benefit, and advisories are periodically issued which describe coverage criteria. On the national level these advisories are issued by CMS, and are known as National Coverage Determinations (NCD). Local Coverage Determinations (LCD) applies within the multi-state area managed by a specific regional Medicare Part B contractor, and Local Medical Review Policies
(LMRP) was superseded by LCDs in 2003. Coverage information is also located in the CMS Internet-Only Manuals (IOM), the Code of Federal Regulations (CFR), the Social Security Act, and the Federal Register.
Part C: Medicare Advantage plans
Medicare has a standard benefit package that covers all reasonable and necessary health care services that older adults and people with disabilities can receive. For people who choose to enroll in a Medicare Advantage plan, Medicare pays the private health plan a set amount every month for each member. Members may have to pay a monthly premium in addition to the Medicare Part B premium, but many companies offering Medicare Advantage plans make them available for a $0 monthly premium in addition to the Medicare Part B premium, which the member pays directly to Medicare. Medicare Advantage subscribers generally pay a fixed amount (a copayment of $20, for example) every time they see a doctor as opposed to meeting a deductible and paying a coinsurance (typically 20%) under Original Medicare. The copayment can be higher to see a specialist with a Medicare Advantage plan. Under Original Medicare the coinsurance remains 20%, but the actual amount out of pocket can be higher since specialists generally charge more for services. The private plans are required to offer a benefit “package” that is at least as good as Medicare’s and cover everything Medicare covers, but they do not have to cover every benefit in the same way. Plans that require higher out-of-pocket costs than Medicare for some benefits, like skilled nursing facility care, can balance their benefits package by offering lower copayments for doctor visits. A private plan may use some of the excess payments they receive from the government for each enrollee to offer supplemental benefits.
Part D: Prescription drug plans
Medicare Part D is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Modernization Act of 2003 (MMA) and went into effect on January 1, 2006.
Social insurance
Social insurance is any government-sponsored program with the following four characteristics: 1. The benefits, eligibility requirements and other aspects of the program are defined by statute; 2. explicit provision is made to account for the income and expenses (often through a trust fund); 3. it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and 4. the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most eligible individuals choose to participate. Social insurance has also been defined as a program where risks are transferred to and pooled by an organization, often governmental, that is legally required to provide certain benefits.
Supplemental Security Income
Supplemental Security Income (or SSI) is a United States government program that provides stipends to low-income people who are either aged (65 or older), blind, or disabled. Although administered by the Social Security Administration, SSI is funded from the U.S. Treasury general funds, not the Social Security trust fund. SSI was created in 1974 to replace federal-state adult assistance programs that served the same purpose. The restructuring of these programs was intended to standardize the eligibility requirements and level of benefits. The new federal program was incorporated into Title XVI (Title 16) of the Social Security Act. In order to be eligible to receive SSI benefits, individuals must prove the following: 1. They are 65+ years of age or blind or disabled. 2. They legally reside in one of the 50 states, the District of Columbia, Northern Mariana Islands, or are the child of military parent(s) assigned to permanent duty outside of the US, or are a student (certain restrictions apply) temporarily abroad. 3. They have income and resources within certain limits (see subsections). 4. They have applied for the benefits.
Social Security Disability Insurance
Social Security Disability Insurance (SSD or SSDI) is a payroll tax-funded, federal insurance program of the United States government. It is managed by the Social Security Administration and is designed to provide income supplements to people who are physically restricted in their ability to be employed because of a notable disability, usually a physical disability. SSD can be supplied on either a temporary or permanent basis, usually directly correlated to whether the person's disability is temporary or permanent. Unlike Supplemental Security Income (SSI), SSD does not depend on the income of the disabled individual receiving it. A "legitimately" (i.e. according to the Americans with Disabilities Act, and via other similar legal and medical backing) disabled person of any income level can theoretically receive SSD. Most SSI recipients are below an administratively-mandated income threshold, and indeed these individuals must in fact stay below that threshold to continue receiving SSI; but this is not the case with SSD. According to the Social Security Administration (SSA), a person qualifies for SSDI if: 1. They have a physical or mental condition that prevents them from engaging in any "substantial gainful activity" ("SGA"), and 2. the condition is expected to last at least 12 months or result in death, and 3. they are under the age of 65, and 4. Generally, they have accumulated 20 social security credits in the last 10 years prior to the onset of disability (normally four credits per full or partial year); one additional credit is required for every year by which the worker's age exceeds 42. The decision is based on a sequential evaluation of medical evidence. The sequence for adults is: 1. Is the claimant performing a Substantial Gainful Activity? If yes, deny. If no, continue to next sequence. 2. Is the claimant's impairment severe? If no, deny. If yes, continue to next sequence. 3. Does the impairment meet or equal the severity of impairments in the Listing of Impairments? If yes, allow the claim. If no, continue to next sequence. 4. Is the claimant able to perform past work? If yes, deny. If no, continue to next sequence. 5. Is the claimant able to perform any work in the economy? If yes, deny. If no, allow the claim.
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
The Consolidated Omnibus Budget Reconciliation Act of 1985 (or COBRA) is a law passed by the U.S. Congress on a reconciliation basis and signed by President Ronald Reagan that, among other things, mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). The law deals with a great variety of subjects, such as tobacco price supports, railroads, private pension plans, emergency room treatment, disability insurance, and the postal service, but it is perhaps best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers (generally those with 20 or more full time equivalent employees) for contributions to a group health plan unless such plan meets certain continuing coverage requirements. The violation for failing to meet those criteria was subsequently changed to an excise tax. According to the U.S. Department of Labor: ...the coverage you are given must be identical to the coverage that is currently available under the plan to similarly situated active employees and their families (generally, this is the same coverage that you had immediately before the qualifying event). You will also be entitled, while receiving continuation coverage, to the same benefits, choices, and services that a similarly situated participant or beneficiary is currently receiving under the plan, such as the right during an open enrollment season to choose among available coverage options. You will also be subject to the same rules and limits that would apply to a similarly situated participant or beneficiary, such as co-payment requirements, deductibles, and coverage limits.
Coordination of coverage
An individual covered under COBRA may also be covered by another group health plan or Medicare as long as one of two conditions is met: 1. The other coverage was in force as of or prior to the coverage under COBRA, or, 2. The other coverage is subject to pre-existing conditions exclusions or limitations.
Family and Medical Leave Act of 1993
The Family and Medical Leave Act of 1993 (FMLA) is a United States federal law requiring covered employers to provide employees job-protected and unpaid leave for qualified medical and family reasons. Qualified medical and family reasons include; personal or family illness, military service, family military leave, pregnancy, adoption, or the foster care placement of a child. The FMLA is administered by the Wage and Hour Division of the United States Department of Labor.
Medigap
Medigap (also Medicare supplement insurance or Medicare supplemental insurance) refers to various private supplemental health insurance plans sold to Medicare beneficiaries in the United States that provide coverage for medical expenses not or only partially covered by Medicare. Medigap's name is derived from the notion that it exists to cover the difference or "gap" between the expenses reimbursed by Medicare and the total amount charged. A person must be enrolled in part A and B of Medicare before they can enroll in a Medigap plan. During the open enrollment period which begins within 6 months of turning 65 or enrolling in Medicare Part B at 65 or older, a person may obtain a Medigap plan on a guaranteed issue basis (i.e. no medical screening required). Outside of open enrollment, the issuing insurance company may require medical screening and may obtain an attending physician's statement if necessary. Medigap insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan. Recipients of Social Security Disability Insurance (SSDI) benefits or patients with end-stage renal disease (ESRD) are entitled to Medicare coverage regardless of age, but are not automatically entitled to purchase Medigap policies unless they are at least 65. Under federal law, insurers are not required to sell Medigap policies to people under 65, and even if they do, they may use medical screening. However, a slight majority of states require insurers to offer at least one kind of Medigap policy to at least some Medicare recipients in that age group. Of these states, 25 require that Medigap policies be offered to all Medicare recipients. In California, Massachusetts, and Vermont, Medigap policies are not available to ESRD patients; in Delaware, Medigap policies are available only to ESRD patients. Medigap offerings have been standardized by the Centers for Medicare and Medicaid Services (CMS) into ten different plans, labeled A through N, sold and administered by private companies. Each Medigap plan offers a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medigap plans (these 'older' plans are no longer marketed) offering minimal benefits will cost more than current plans offering full benefits. The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group. Since Medigap is private insurance and not government sponsored, the rules governing the sale and offerings of a Medigap insurance policy can vary from state to state. Some states such as Massachusetts, Minnesota, and Wisconsin require Medigap insurance to provide additional coverage than what is defined in the standardized Medigap plans. Some Medigap policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medigap policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.
Under the new law, there is no government alternative to the private system--this was a potential provision that was dropped during the congressional tussle--but the number of people who qualify for the existing federal-state Medicaid program for the poor will be expanded. States (or the federal government) will run "exchanges" -- essentially marketplaces -- in which private insurers will sell insurance to individuals and small businesses, but this should mean more people will get private insurance, not fewer. Tax credits will also be offered to people who have trouble buying private insurance. Certainly, the law bolsters government regulation of the health care system, such as forcing insurance companies to no longer deny coverage to people who have existing medical conditions. People who currently do not have health insurance will be required to buy it. But the core of the health system in the United States will remain the existing private insurance market. The Patient Protection and Affordable Care Act (PPACA) informally referred to as Obamacare, is a United States federal statute signed into law by President Barack Obama on March 23, 2010. PPACA requires individuals not covered by employer- or government-sponsored insurance plans to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship, a provision commonly referred to as the "individual mandate". PPACA includes numerous provisions to take effect over several years beginning in 2010. Guaranteed issue and partial community rating will require insurers to offer the same premium to all applicants of the same age and geographical location without regard to most pre-existing conditions (excluding tobacco use). A shared responsibility requirement, commonly called an individual mandate, requires that all persons not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs, purchase and comply with an approved private insurance policy or pay a penalty, unless the applicable individual is a member of a recognized religious sect exempted by the Internal Revenue Service, or waived in cases of financial hardship. Medicaid eligibility is expanded to include all individuals and families with incomes up to 133% of the poverty level along with a simplified CHIP enrollment process. Health insurance exchanges (HIE) will commence operation in each state, offering a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance (with a government subsidy if eligible). Low income persons and families above the Medicaid level and up to 400% of the federal poverty level will receive federal subsidies on a sliding scale if they choose to purchase insurance via an exchange (persons at 150% of the poverty level would be subsidized such that their premium cost would be of 2% of income or $50 a month for a family of 4). Minimum standards for health insurance policies are to be established and annual and lifetime coverage caps will be banned. Firms employing 50 or more people but not offering health insurance will also pay a shared responsibility requirement if the government has had to subsidize an employee's health care.
Very small businesses will be able to get subsidies if they purchase insurance through an exchange. Co-payments, co-insurance, and deductibles are to be eliminated for select health care insurance benefits considered to be part of an "essential benefits package" for Level A or Level B preventive care. Changes are enacted that allow a restructuring of Medicare reimbursement from "fee-for-service" to "bundled payments”. Additional support is provided for medical research and the National Institutes of Health.
Summary of funding
The Act's provisions are intended to be funded by a variety of taxes and offsets. Major sources of new revenue include a much-broadened Medicare tax on incomes over $200,000 and $250,000, for individual and joint filers respectively, an annual fee on insurance providers, and a 40% tax on "Cadillac" insurance policies. There are also taxes on pharmaceuticals, high-cost diagnostic equipment, and a 10% federal sales tax on indoor tanning services. Offsets are from intended cost savings such as improved fairness in the Medicare Advantage program relative to traditional Medicare. Summary of tax increases: Broaden Medicare tax base for high-income taxpayers: $210.2 billion Annual fee on health insurance providers: $60 billion 40% excise tax on health coverage in excess of $10,200/$27,500: $32 billion Impose annual fee on manufacturers and importers of branded drugs: $27 billion Impose 2.3% excise tax on manufacturers and importers of certain medical devices: $20 billion Raise 7.5% Adjusted Gross Income floor on medical expenses deduction to 10%: $15.2 billion Limit contributions to flexible spending arrangements in cafeteria plans to $2,500: $13 billion All other revenue sources: $14.9 billion
Provisions
Effective at enactment
The Food and Drug Administration is now authorized to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed. The Medicaid drug rebate for brand name drugs is increased to 23.1% (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1%), and the rebate is extended to Medicaid managed care plans; the Medicaid rebate for non-innovator, multiple source drugs is increased to 13% of average manufacturer price.
Effective June 21, 2010
Adults with existing conditions became eligible to join a temporary high-risk pool, which will be superseded by the health care exchange in 2014. To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months. There is no age requirement. The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allows premiums to vary by age (4:1), geographic area, and family
composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.
Effective July 1, 2010
A 10% tax on indoor tanning took effect.
Effective September 23, 2010
Insurers are prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays, in new policies issued. Dependents (children) will be permitted to remain on their parents' insurance plan until their 26th birthday, and regulations implemented under the Act include dependents that no longer live with their parents, are not a dependent on a parent's tax return, are no longer a student, or are married. Insurers are prohibited from excluding pre-existing medical conditions (except in grandfathered individual health insurance plans) for children under the age of 19. Insurers are prohibited from charging co-payments, co-insurance, or deductibles for Level A or Level B preventive care and medical screenings on all new insurance plans. Individuals affected by the Medicare Part D coverage gap will receive a $250 rebate, and 50% of the gap will be eliminated in 2011. The gap will be eliminated by 2020. Insurers' abilities to enforce annual spending caps will be restricted, and completely prohibited by 2014. Insurers are prohibited from dropping policyholders when they get sick. Insurers are required to reveal details about administrative and executive expenditures. Insurers are required to implement an appeals process for coverage determination and claims on all new plans. Enhanced methods of fraud detection are implemented. Medicare is expanded to small, rural hospitals and facilities. Medicare patients with chronic illnesses must be monitored / evaluated on a 3 month basis for coverage of the medications for treatment of such illnesses. Companies which provide early retiree benefits for individuals aged 55–64 are eligible to participate in a temporary program which reduces premium costs. A new website installed by the Secretary of Health and Human Services will provide consumer insurance information for individuals and small businesses in all states. A temporary credit program is established to encourage private investment in new therapies for disease treatment and prevention.
Effective January 1, 2011
Insurers must spend a certain percent of premium dollars on eligible expenses, subject to various waivers and exemptions; if an insurer fails to meet this requirement, there is no penalty, but a rebate must be issued to the policy holder. Flexible spending accounts, Health reimbursement accounts and health savings accounts cannot be used to pay for over-the-counter drugs, purchased without a prescription, except insulin.
Effective January 1, 2012
Employers must disclose the value of the benefits they provided beginning in 2012 for each employee's health insurance coverage on the employees' annual Form W-2's.
Effective by August 1, 2012
All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. Women's Preventive Services – including well-woman visits, support for breastfeeding equipment, contraception and domestic violence screening – will be covered without cost sharing.
Effective by January 1, 2013
Income from self-employment and wages of single individuals in excess of $200,000 annually will be subject to an additional tax of 0.9%. The threshold amount is $250,000 for a married couple filing jointly (threshold applies to joint compensation of the two spouses), or $125,000 for a married person filing separately. In addition, an additional tax of 3.8% will apply to the lesser of net investment income or the amount by which adjusted gross income exceeds $200,000 ($250,000 for a married couple filing jointly; $125,000 for a married person filing separately.)
Effective by January 1, 2014
Insurers are prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions. Impose an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance; this will rise to $695, or 2.5% of income, by 2016. This is an individual limit; families have a limit of $2,085. Exemptions to the fine in cases of financial hardship or religious beliefs are permitted. Insurers are prohibited from establishing annual spending caps. Expand Medicaid eligibility; all individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children. Two years of tax credits will be offered to qualified small businesses. In order to receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full time equivalent ("FTE") employee, excluding the owner of the business, of less than $25,000 and have fewer than 11 FTEs. The subsidy is reduced by 6.7% per additional employee and 4% per additional $1,000 of average compensation. As an example, a 16 FTE firm with a $35,000 average salary would be entitled to a 10% premium subsidy. Impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill). Set a maximum of $2,000 annual deductible for a plan covering a single individual or $4,000 annual deductible for any other plan. These limits can be increased under rules set in section 1302. Pay for new spending, in part, through spending and coverage cuts in Medicare Advantage, slowing the growth of Medicare provider payments (in part through the creation of a new Independent Payment Advisory Board), reducing Medicare and Medicaid drug reimbursement rate, cutting other Medicare and Medicaid spending.
Revenue increases from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs. Establish health insurance exchanges, and subsidization of insurance premiums for individuals in households with income up to 400% of the poverty line. To qualify for the subsidy, the beneficiaries cannot be eligible for other acceptable coverage. Members of Congress and their staff will only be offered health care plans through the exchange or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use). A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue. Most medical devices become subject to a 2.3% excise tax collected at the time of purchase. (Reduced by the reconciliation act to 2.3% from 2.6%) Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue. The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5% to 10% of earned income
Effective by January 1, 2015
Physicians' payment will be modified to be based on the quality of care, not the volume.
Effective by January 1, 2017
A state may apply to the Secretary of Health & Human Services for a "waiver for state innovation" provided that the state passes legislation implementing an alternative health care plan meeting certain criteria. The decision of whether to grant the waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period. A state receiving the waiver would be exempt from some of the central requirements of the ACA, including the individual mandate, the creation by the state of an insurance exchange, and the penalty for certain employers not providing coverage. The state would also receive compensation equal to the aggregate amount of any federal subsidies and tax credits for which its residents and employers would have been eligible under the ACA plan, but which cannot be paid out due to the structure of the state plan. In order to qualify for the waiver, the state plan must provide insurance at least as comprehensive and as affordable as that required by the ACA, must cover at least as many residents as the ACA plan would, and cannot increase the federal deficit. The coverage must continue to meet the consumer protection requirements of the ACA, such as the prohibition on increasing premiums because of pre-existing conditions.
Effective by 2018
All existing health insurance plans must cover approved preventive care and checkups without co-payment. A new 40% excise tax on high cost ("Cadillac") insurance plans is introduced. The tax (as amended by the reconciliation bill) is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their
employees may value their coverage using the age and gender demographics of a national risk pool.
Effective by 2020
The Medicare Part D coverage gap (aka "donut hole") would be completely phased out and hence closed.
According to the Centers for Medicare and Medicaid Services, by 2019 the Act will increase expenditures on Medicaid and individual subsidies by $165 billion annually while reducing Medicare expenditures by $125 billion annually.
Impact on child-only policies
In September 2010, some insurance companies announced that in response to the law, they would end the issuance of new child-only policies. Kentucky Insurance Commissioner Sharon Clark said the decision by insurers to stop offering such policies was a violation of state law and ordered insurers to offer an open enrollment period in January 2011 for Kentuckians under 19. An August 2011 Congressional report found that passage of the health care law prompted health insurance carriers to stop selling new child-only health plans in many states. Of the 50 states, 17 reported that there were currently no carriers selling child only health plans to new enrollees. Thirty-nine states indicated at least one insurance carrier exited the child-only market following enactment of the health care laws.
Medicare is a national social insurance program, administered by the U.S. federal government that guarantees access to health insurance for Americans ages 65 and older and younger people with disabilities as well as people with end stage renal disease. As a social insurance program, Medicare spreads the financial risk associated with illness across society to protect everyone, and thus has a somewhat different social role from private insurers, which must manage their risk portfolio to guarantee their own solvency. Medicare offers all enrollees a defined benefit. Hospital care is covered under Part A and outpatient medical services are covered under Part B. To cover the Part A and Part B benefit Medicare offers a choice between an open-network single-payer plan (traditional Medicare)and a network plan (Medicare Advantage, or Medicare Part C), where the federal government pays for private health coverage. A majority of Medicare enrollees have traditional Medicare (76 percent) over a Medicare Advantage plan (24 percent). Medicare Part D covers outpatient prescription drugs exclusively through private plans, either standalone prescription drug plans or through Medicare Advantage plans that offer prescription drugs A Medicare card, with several areas of the card obscured to protect privacy. There are separate lines for Part A and Part B, each with its own date. There are no lines for Part C or D, as a separate card is issued for those benefits by the private insurance company.
Program History
In 1965, Congress created Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. Before Medicare's creation, only half of older adults had health insurance, with coverage either unavailable or unaffordable to the other half. Older adults had half as much income as younger people and paid nearly three times as much for health insurance. Medicare also spurred the integration of thousands of waiting rooms, hospital floors, and physician practices by making payments to health care providers conditional on desegregation. In 1972, Congress expanded Medicare eligibility to younger people who have permanent disabilities and receive Social Security Disability Insurance (SSDI) payments and those who have end-stage renal
disease (ESRD or Chronic kidney disease). Congress further expanded Medicare in 2001 to cover younger people with amyotrophic lateral sclerosis (ALS, or Lou Gehrig’s disease). Initially Medicare consisted exclusively of Part A, which covers hospital and other inpatient services, and Part B, which covers outpatient care, physician visits, and other “medically necessary services.” Congress then added Medicare Part C (originally called Medicare plus Choice, then later changed to Medicare Advantage), which allows enrollees to receive their Medicare benefits through a private plan, under the Balanced Budget Act of 1997, while Medicare Part D was created under the Medicare Modernization Act of 2003. Regardless of a person's age, after receiving SSDI benefits for 24 months, they are eligible for Medicare, including Part A (hospital benefits), Part B (medical benefits), and Part D (drug benefits). The date of Medicare eligibility is measured from the date of eligibility for SSDI (generally 6 months after the start of disability), not the date when the first SSDI payment was received.
Administration
The Centers for Medicare and Medicaid Services (CMS), a component of the Department of Health and Human Services (HHS), administers Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), and the Clinical Laboratory Improvement Amendments (CLIA). Along with the Departments of Labor and Treasury, CMS also implements the insurance reform provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The Social Security Administration is responsible for determining Medicare eligibility and processing premium payments for the Medicare program.
Eligibility
In general, all persons 65 years of age or older who have been legal residents of the United States for at least 5 years are eligible for Medicare. People with disabilities under 65 may also be eligible if they receive Social Security Disability Insurance (SSDI) benefits. Specific medical conditions may also help people become eligible to enroll in Medicare. People qualify for Medicare coverage, and Medicare Part A premiums are entirely waived, if the following circumstances apply: 1. They are 65 years or older and U.S. citizens or have been permanent legal residents for 5 continuous years, and they or their spouse has paid Medicare taxes for at least 10 years. Or 2. They are under 65, disabled, and have been receiving either Social Security SSDI benefits or Railroad Retirement Board disability benefits; they must receive one of these benefits for at least 24 months from date of entitlement (first disability payment) before becoming eligible to enroll in Medicare. Or 3. They get continuing dialysis for end stage renal disease or need a kidney transplant. Or 4. They are eligible for Social Security Disability Insurance and have amyotrophic lateral sclerosis (known as ALS or Lou Gehrig's disease). Those who are 65 and older must pay a monthly premium to remain enrolled in Medicare Part A if they or their spouse have not paid Medicare taxes over the course of 10 years while working. People with disabilities who receive SSDI are eligible for Medicare while they continue to receive SSDI payments; they lose eligibility for Medicare based on disability if they stop receiving SSDI. The 24 month exclusion means that people who become disabled must wait 2 years before receiving government medical insurance, unless they have one of the listed diseases . Some beneficiaries are dual-eligible. This means they qualify for both Medicare and Medicaid. In some states for those making below a certain income, Medicaid will pay the beneficiaries' Part B premium for them (most beneficiaries have worked long enough and have no Part A premium), as well as some of their out of pocket medical and hospital expenses.
Benefits
Medicare has four parts: Part A is Hospital Insurance. Part B is Medical Insurance. Medicare Part D covers prescription drugs. Medicare Advantage plans, also known as Medicare Part C, are another way for beneficiaries to receive their Part A, B and D benefits. All Medicare benefits are subject to medical necessity. The original program included Parts A and B. Part D was introduced January 1st, 2006; before that, Parts A and B covered prescription drugs in a few special cases.
Part A: Hospital Insurance
Part A covers inpatient hospital stays (at least overnight), including semiprivate room, food, and tests. It covers brief stays for convalescence in a skilled nursing facility if certain criteria are met: 1. A preceding hospital stay must be at least three days, three midnights, not counting the discharge date. 2. The nursing home stay must be for something diagnosed during the hospital stay or for the main cause of hospital stay. 3. If the patient is not receiving rehabilitation but has some other ailment that requires skilled nursing supervision then the nursing home stay would be covered. 4. The care being rendered by the nursing home must be skilled. Medicare part A does not pay for custodial, non-skilled, or long-term care activities, including activities of daily living (ADL) such as personal hygiene, cooking, cleaning, etc. The maximum length of stay that Medicare Part A will cover in a skilled nursing facility per ailment is 100 days. The first 20 days would be paid for in full by Medicare with the remaining 80 days requiring a copayment (as of 2012, $144.50 per day). Many insurance companies have a provision for skilled nursing care in the policies they sell. 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 100-day clock is reset and the person qualifies for a new 100-day benefit period.
Part B: Medical Insurance
Part B medical insurance helps pay for some services and products not covered by Part A, generally on an outpatient basis. Part B is optional and may be deferred if the beneficiary or his/her spouse is still working and has group health coverage through that employer. There is a lifetime penalty (10% per year) imposed for not enrolling in Part B unless actively working and receiving group health coverage from that employer. Part B coverage begins once a patient meets his or her deductible ($140 in 2012), then typically Medicare covers 80% of approved services, while the remaining 20% is paid by the patient. Part B coverage includes physician and nursing services, x-rays, laboratory and diagnostic tests, influenza and pneumonia vaccinations, blood transfusions, renal dialysis, outpatient hospital procedures, limited ambulance transportation, immunosuppressive drugs for organ transplant recipients, chemotherapy, hormonal treatments such as Lupron, and other outpatient medical treatments administered in a doctor's office. Medication administration is covered under Part B if it is administered by the physician during an office visit. Part B also helps with durable medical equipment (DME), including canes, walkers, wheelchairs, and mobility scooters for those with mobility impairments. Prosthetic devices such as artificial limbs and breast prosthesis following mastectomy, as well as one pair of eyeglasses following cataract surgery, and oxygen for home use are also covered. Complex rules are used to manage the benefit, and advisories are periodically issued which describe coverage criteria. On the national level these advisories are issued by CMS, and are known as National Coverage Determinations (NCD). Local Coverage Determinations (LCD) applies within the multi-state area managed by a specific regional Medicare Part B contractor, and Local Medical Review Policies
(LMRP) was superseded by LCDs in 2003. Coverage information is also located in the CMS Internet-Only Manuals (IOM), the Code of Federal Regulations (CFR), the Social Security Act, and the Federal Register.
Part C: Medicare Advantage plans
Medicare has a standard benefit package that covers all reasonable and necessary health care services that older adults and people with disabilities can receive. For people who choose to enroll in a Medicare Advantage plan, Medicare pays the private health plan a set amount every month for each member. Members may have to pay a monthly premium in addition to the Medicare Part B premium, but many companies offering Medicare Advantage plans make them available for a $0 monthly premium in addition to the Medicare Part B premium, which the member pays directly to Medicare. Medicare Advantage subscribers generally pay a fixed amount (a copayment of $20, for example) every time they see a doctor as opposed to meeting a deductible and paying a coinsurance (typically 20%) under Original Medicare. The copayment can be higher to see a specialist with a Medicare Advantage plan. Under Original Medicare the coinsurance remains 20%, but the actual amount out of pocket can be higher since specialists generally charge more for services. The private plans are required to offer a benefit “package” that is at least as good as Medicare’s and cover everything Medicare covers, but they do not have to cover every benefit in the same way. Plans that require higher out-of-pocket costs than Medicare for some benefits, like skilled nursing facility care, can balance their benefits package by offering lower copayments for doctor visits. A private plan may use some of the excess payments they receive from the government for each enrollee to offer supplemental benefits.
Part D: Prescription drug plans
Medicare Part D is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Modernization Act of 2003 (MMA) and went into effect on January 1, 2006.
Social insurance
Social insurance is any government-sponsored program with the following four characteristics: 1. The benefits, eligibility requirements and other aspects of the program are defined by statute; 2. explicit provision is made to account for the income and expenses (often through a trust fund); 3. it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and 4. the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most eligible individuals choose to participate. Social insurance has also been defined as a program where risks are transferred to and pooled by an organization, often governmental, that is legally required to provide certain benefits.
Supplemental Security Income
Supplemental Security Income (or SSI) is a United States government program that provides stipends to low-income people who are either aged (65 or older), blind, or disabled. Although administered by the Social Security Administration, SSI is funded from the U.S. Treasury general funds, not the Social Security trust fund. SSI was created in 1974 to replace federal-state adult assistance programs that served the same purpose. The restructuring of these programs was intended to standardize the eligibility requirements and level of benefits. The new federal program was incorporated into Title XVI (Title 16) of the Social Security Act. In order to be eligible to receive SSI benefits, individuals must prove the following: 1. They are 65+ years of age or blind or disabled. 2. They legally reside in one of the 50 states, the District of Columbia, Northern Mariana Islands, or are the child of military parent(s) assigned to permanent duty outside of the US, or are a student (certain restrictions apply) temporarily abroad. 3. They have income and resources within certain limits (see subsections). 4. They have applied for the benefits.
Social Security Disability Insurance
Social Security Disability Insurance (SSD or SSDI) is a payroll tax-funded, federal insurance program of the United States government. It is managed by the Social Security Administration and is designed to provide income supplements to people who are physically restricted in their ability to be employed because of a notable disability, usually a physical disability. SSD can be supplied on either a temporary or permanent basis, usually directly correlated to whether the person's disability is temporary or permanent. Unlike Supplemental Security Income (SSI), SSD does not depend on the income of the disabled individual receiving it. A "legitimately" (i.e. according to the Americans with Disabilities Act, and via other similar legal and medical backing) disabled person of any income level can theoretically receive SSD. Most SSI recipients are below an administratively-mandated income threshold, and indeed these individuals must in fact stay below that threshold to continue receiving SSI; but this is not the case with SSD. According to the Social Security Administration (SSA), a person qualifies for SSDI if: 1. They have a physical or mental condition that prevents them from engaging in any "substantial gainful activity" ("SGA"), and 2. the condition is expected to last at least 12 months or result in death, and 3. they are under the age of 65, and 4. Generally, they have accumulated 20 social security credits in the last 10 years prior to the onset of disability (normally four credits per full or partial year); one additional credit is required for every year by which the worker's age exceeds 42. The decision is based on a sequential evaluation of medical evidence. The sequence for adults is: 1. Is the claimant performing a Substantial Gainful Activity? If yes, deny. If no, continue to next sequence. 2. Is the claimant's impairment severe? If no, deny. If yes, continue to next sequence. 3. Does the impairment meet or equal the severity of impairments in the Listing of Impairments? If yes, allow the claim. If no, continue to next sequence. 4. Is the claimant able to perform past work? If yes, deny. If no, continue to next sequence. 5. Is the claimant able to perform any work in the economy? If yes, deny. If no, allow the claim.
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
The Consolidated Omnibus Budget Reconciliation Act of 1985 (or COBRA) is a law passed by the U.S. Congress on a reconciliation basis and signed by President Ronald Reagan that, among other things, mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving employment. COBRA includes amendments to the Employee Retirement Income Security Act of 1974 (ERISA). The law deals with a great variety of subjects, such as tobacco price supports, railroads, private pension plans, emergency room treatment, disability insurance, and the postal service, but it is perhaps best known for Title X, which amends the Internal Revenue Code and the Public Health Service Act to deny income tax deductions to employers (generally those with 20 or more full time equivalent employees) for contributions to a group health plan unless such plan meets certain continuing coverage requirements. The violation for failing to meet those criteria was subsequently changed to an excise tax. According to the U.S. Department of Labor: ...the coverage you are given must be identical to the coverage that is currently available under the plan to similarly situated active employees and their families (generally, this is the same coverage that you had immediately before the qualifying event). You will also be entitled, while receiving continuation coverage, to the same benefits, choices, and services that a similarly situated participant or beneficiary is currently receiving under the plan, such as the right during an open enrollment season to choose among available coverage options. You will also be subject to the same rules and limits that would apply to a similarly situated participant or beneficiary, such as co-payment requirements, deductibles, and coverage limits.
Coordination of coverage
An individual covered under COBRA may also be covered by another group health plan or Medicare as long as one of two conditions is met: 1. The other coverage was in force as of or prior to the coverage under COBRA, or, 2. The other coverage is subject to pre-existing conditions exclusions or limitations.
Family and Medical Leave Act of 1993
The Family and Medical Leave Act of 1993 (FMLA) is a United States federal law requiring covered employers to provide employees job-protected and unpaid leave for qualified medical and family reasons. Qualified medical and family reasons include; personal or family illness, military service, family military leave, pregnancy, adoption, or the foster care placement of a child. The FMLA is administered by the Wage and Hour Division of the United States Department of Labor.
Medigap
Medigap (also Medicare supplement insurance or Medicare supplemental insurance) refers to various private supplemental health insurance plans sold to Medicare beneficiaries in the United States that provide coverage for medical expenses not or only partially covered by Medicare. Medigap's name is derived from the notion that it exists to cover the difference or "gap" between the expenses reimbursed by Medicare and the total amount charged. A person must be enrolled in part A and B of Medicare before they can enroll in a Medigap plan. During the open enrollment period which begins within 6 months of turning 65 or enrolling in Medicare Part B at 65 or older, a person may obtain a Medigap plan on a guaranteed issue basis (i.e. no medical screening required). Outside of open enrollment, the issuing insurance company may require medical screening and may obtain an attending physician's statement if necessary. Medigap insurance is not compatible with other forms of private Medicare coverage, such as a Medicare Advantage plan. Recipients of Social Security Disability Insurance (SSDI) benefits or patients with end-stage renal disease (ESRD) are entitled to Medicare coverage regardless of age, but are not automatically entitled to purchase Medigap policies unless they are at least 65. Under federal law, insurers are not required to sell Medigap policies to people under 65, and even if they do, they may use medical screening. However, a slight majority of states require insurers to offer at least one kind of Medigap policy to at least some Medicare recipients in that age group. Of these states, 25 require that Medigap policies be offered to all Medicare recipients. In California, Massachusetts, and Vermont, Medigap policies are not available to ESRD patients; in Delaware, Medigap policies are available only to ESRD patients. Medigap offerings have been standardized by the Centers for Medicare and Medicaid Services (CMS) into ten different plans, labeled A through N, sold and administered by private companies. Each Medigap plan offers a different combination of benefits. The coverage provided is roughly proportional to the premium paid. However, many older Medigap plans (these 'older' plans are no longer marketed) offering minimal benefits will cost more than current plans offering full benefits. The reason behind this is that older plans have an older average age per person enrolled in the plan, causing more claims within the group and raising the premium for all members within the group. Since Medigap is private insurance and not government sponsored, the rules governing the sale and offerings of a Medigap insurance policy can vary from state to state. Some states such as Massachusetts, Minnesota, and Wisconsin require Medigap insurance to provide additional coverage than what is defined in the standardized Medigap plans. Some Medigap policies sold before January 1, 2006 may include prescription drug coverage, but after that date no new Medigap policies could be sold with drug coverage. This time frame coincides with the introduction of the Medicare Part D benefit.
Under the new law, there is no government alternative to the private system--this was a potential provision that was dropped during the congressional tussle--but the number of people who qualify for the existing federal-state Medicaid program for the poor will be expanded. States (or the federal government) will run "exchanges" -- essentially marketplaces -- in which private insurers will sell insurance to individuals and small businesses, but this should mean more people will get private insurance, not fewer. Tax credits will also be offered to people who have trouble buying private insurance. Certainly, the law bolsters government regulation of the health care system, such as forcing insurance companies to no longer deny coverage to people who have existing medical conditions. People who currently do not have health insurance will be required to buy it. But the core of the health system in the United States will remain the existing private insurance market. The Patient Protection and Affordable Care Act (PPACA) informally referred to as Obamacare, is a United States federal statute signed into law by President Barack Obama on March 23, 2010. PPACA requires individuals not covered by employer- or government-sponsored insurance plans to maintain minimal essential health insurance coverage or pay a penalty unless exempted for religious beliefs or financial hardship, a provision commonly referred to as the "individual mandate". PPACA includes numerous provisions to take effect over several years beginning in 2010. Guaranteed issue and partial community rating will require insurers to offer the same premium to all applicants of the same age and geographical location without regard to most pre-existing conditions (excluding tobacco use). A shared responsibility requirement, commonly called an individual mandate, requires that all persons not covered by an employer sponsored health plan, Medicaid, Medicare or other public insurance programs, purchase and comply with an approved private insurance policy or pay a penalty, unless the applicable individual is a member of a recognized religious sect exempted by the Internal Revenue Service, or waived in cases of financial hardship. Medicaid eligibility is expanded to include all individuals and families with incomes up to 133% of the poverty level along with a simplified CHIP enrollment process. Health insurance exchanges (HIE) will commence operation in each state, offering a marketplace where individuals and small businesses can compare policies and premiums, and buy insurance (with a government subsidy if eligible). Low income persons and families above the Medicaid level and up to 400% of the federal poverty level will receive federal subsidies on a sliding scale if they choose to purchase insurance via an exchange (persons at 150% of the poverty level would be subsidized such that their premium cost would be of 2% of income or $50 a month for a family of 4). Minimum standards for health insurance policies are to be established and annual and lifetime coverage caps will be banned. Firms employing 50 or more people but not offering health insurance will also pay a shared responsibility requirement if the government has had to subsidize an employee's health care.
Very small businesses will be able to get subsidies if they purchase insurance through an exchange. Co-payments, co-insurance, and deductibles are to be eliminated for select health care insurance benefits considered to be part of an "essential benefits package" for Level A or Level B preventive care. Changes are enacted that allow a restructuring of Medicare reimbursement from "fee-for-service" to "bundled payments”. Additional support is provided for medical research and the National Institutes of Health.
Summary of funding
The Act's provisions are intended to be funded by a variety of taxes and offsets. Major sources of new revenue include a much-broadened Medicare tax on incomes over $200,000 and $250,000, for individual and joint filers respectively, an annual fee on insurance providers, and a 40% tax on "Cadillac" insurance policies. There are also taxes on pharmaceuticals, high-cost diagnostic equipment, and a 10% federal sales tax on indoor tanning services. Offsets are from intended cost savings such as improved fairness in the Medicare Advantage program relative to traditional Medicare. Summary of tax increases: Broaden Medicare tax base for high-income taxpayers: $210.2 billion Annual fee on health insurance providers: $60 billion 40% excise tax on health coverage in excess of $10,200/$27,500: $32 billion Impose annual fee on manufacturers and importers of branded drugs: $27 billion Impose 2.3% excise tax on manufacturers and importers of certain medical devices: $20 billion Raise 7.5% Adjusted Gross Income floor on medical expenses deduction to 10%: $15.2 billion Limit contributions to flexible spending arrangements in cafeteria plans to $2,500: $13 billion All other revenue sources: $14.9 billion
Provisions
Effective at enactment
The Food and Drug Administration is now authorized to approve generic versions of biologic drugs and grant biologics manufacturers 12 years of exclusive use before generics can be developed. The Medicaid drug rebate for brand name drugs is increased to 23.1% (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1%), and the rebate is extended to Medicaid managed care plans; the Medicaid rebate for non-innovator, multiple source drugs is increased to 13% of average manufacturer price.
Effective June 21, 2010
Adults with existing conditions became eligible to join a temporary high-risk pool, which will be superseded by the health care exchange in 2014. To qualify for coverage, applicants must have a pre-existing health condition and have been uninsured for at least the past six months. There is no age requirement. The new program sets premiums as if for a standard population and not for a population with a higher health risk. Allows premiums to vary by age (4:1), geographic area, and family
composition. Limit out-of-pocket spending to $5,950 for individuals and $11,900 for families, excluding premiums.
Effective July 1, 2010
A 10% tax on indoor tanning took effect.
Effective September 23, 2010
Insurers are prohibited from imposing lifetime dollar limits on essential benefits, like hospital stays, in new policies issued. Dependents (children) will be permitted to remain on their parents' insurance plan until their 26th birthday, and regulations implemented under the Act include dependents that no longer live with their parents, are not a dependent on a parent's tax return, are no longer a student, or are married. Insurers are prohibited from excluding pre-existing medical conditions (except in grandfathered individual health insurance plans) for children under the age of 19. Insurers are prohibited from charging co-payments, co-insurance, or deductibles for Level A or Level B preventive care and medical screenings on all new insurance plans. Individuals affected by the Medicare Part D coverage gap will receive a $250 rebate, and 50% of the gap will be eliminated in 2011. The gap will be eliminated by 2020. Insurers' abilities to enforce annual spending caps will be restricted, and completely prohibited by 2014. Insurers are prohibited from dropping policyholders when they get sick. Insurers are required to reveal details about administrative and executive expenditures. Insurers are required to implement an appeals process for coverage determination and claims on all new plans. Enhanced methods of fraud detection are implemented. Medicare is expanded to small, rural hospitals and facilities. Medicare patients with chronic illnesses must be monitored / evaluated on a 3 month basis for coverage of the medications for treatment of such illnesses. Companies which provide early retiree benefits for individuals aged 55–64 are eligible to participate in a temporary program which reduces premium costs. A new website installed by the Secretary of Health and Human Services will provide consumer insurance information for individuals and small businesses in all states. A temporary credit program is established to encourage private investment in new therapies for disease treatment and prevention.
Effective January 1, 2011
Insurers must spend a certain percent of premium dollars on eligible expenses, subject to various waivers and exemptions; if an insurer fails to meet this requirement, there is no penalty, but a rebate must be issued to the policy holder. Flexible spending accounts, Health reimbursement accounts and health savings accounts cannot be used to pay for over-the-counter drugs, purchased without a prescription, except insulin.
Effective January 1, 2012
Employers must disclose the value of the benefits they provided beginning in 2012 for each employee's health insurance coverage on the employees' annual Form W-2's.
Effective by August 1, 2012
All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance. Women's Preventive Services – including well-woman visits, support for breastfeeding equipment, contraception and domestic violence screening – will be covered without cost sharing.
Effective by January 1, 2013
Income from self-employment and wages of single individuals in excess of $200,000 annually will be subject to an additional tax of 0.9%. The threshold amount is $250,000 for a married couple filing jointly (threshold applies to joint compensation of the two spouses), or $125,000 for a married person filing separately. In addition, an additional tax of 3.8% will apply to the lesser of net investment income or the amount by which adjusted gross income exceeds $200,000 ($250,000 for a married couple filing jointly; $125,000 for a married person filing separately.)
Effective by January 1, 2014
Insurers are prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions. Impose an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance; this will rise to $695, or 2.5% of income, by 2016. This is an individual limit; families have a limit of $2,085. Exemptions to the fine in cases of financial hardship or religious beliefs are permitted. Insurers are prohibited from establishing annual spending caps. Expand Medicaid eligibility; all individuals with income up to 133% of the poverty line qualify for coverage, including adults without dependent children. Two years of tax credits will be offered to qualified small businesses. In order to receive the full benefit of a 50% premium subsidy, the small business must have an average payroll per full time equivalent ("FTE") employee, excluding the owner of the business, of less than $25,000 and have fewer than 11 FTEs. The subsidy is reduced by 6.7% per additional employee and 4% per additional $1,000 of average compensation. As an example, a 16 FTE firm with a $35,000 average salary would be entitled to a 10% premium subsidy. Impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers (as amended by the reconciliation bill). Set a maximum of $2,000 annual deductible for a plan covering a single individual or $4,000 annual deductible for any other plan. These limits can be increased under rules set in section 1302. Pay for new spending, in part, through spending and coverage cuts in Medicare Advantage, slowing the growth of Medicare provider payments (in part through the creation of a new Independent Payment Advisory Board), reducing Medicare and Medicaid drug reimbursement rate, cutting other Medicare and Medicaid spending.
Revenue increases from a new $2,500 limit on tax-free contributions to flexible spending accounts (FSAs), which allow for payment of health costs. Establish health insurance exchanges, and subsidization of insurance premiums for individuals in households with income up to 400% of the poverty line. To qualify for the subsidy, the beneficiaries cannot be eligible for other acceptable coverage. Members of Congress and their staff will only be offered health care plans through the exchange or plans otherwise established by the bill (instead of the Federal Employees Health Benefits Program that they currently use). A new excise tax goes into effect that is applicable to pharmaceutical companies and is based on the market share of the company; it is expected to create $2.5 billion in annual revenue. Most medical devices become subject to a 2.3% excise tax collected at the time of purchase. (Reduced by the reconciliation act to 2.3% from 2.6%) Health insurance companies become subject to a new excise tax based on their market share; the rate gradually raises between 2014 and 2018 and thereafter increases at the rate of inflation. The tax is expected to yield up to $14.3 billion in annual revenue. The qualifying medical expenses deduction for Schedule A tax filings increases from 7.5% to 10% of earned income
Effective by January 1, 2015
Physicians' payment will be modified to be based on the quality of care, not the volume.
Effective by January 1, 2017
A state may apply to the Secretary of Health & Human Services for a "waiver for state innovation" provided that the state passes legislation implementing an alternative health care plan meeting certain criteria. The decision of whether to grant the waiver is up to the Secretary (who must annually report to Congress on the waiver process) after a public comment period. A state receiving the waiver would be exempt from some of the central requirements of the ACA, including the individual mandate, the creation by the state of an insurance exchange, and the penalty for certain employers not providing coverage. The state would also receive compensation equal to the aggregate amount of any federal subsidies and tax credits for which its residents and employers would have been eligible under the ACA plan, but which cannot be paid out due to the structure of the state plan. In order to qualify for the waiver, the state plan must provide insurance at least as comprehensive and as affordable as that required by the ACA, must cover at least as many residents as the ACA plan would, and cannot increase the federal deficit. The coverage must continue to meet the consumer protection requirements of the ACA, such as the prohibition on increasing premiums because of pre-existing conditions.
Effective by 2018
All existing health insurance plans must cover approved preventive care and checkups without co-payment. A new 40% excise tax on high cost ("Cadillac") insurance plans is introduced. The tax (as amended by the reconciliation bill) is on the cost of coverage in excess of $27,500 (family coverage) and $10,200 (individual coverage), and it is increased to $30,950 (family) and $11,850 (individual) for retirees and employees in high risk professions. The dollar thresholds are indexed with inflation; employers with higher costs on account of the age or gender demographics of their
employees may value their coverage using the age and gender demographics of a national risk pool.
Effective by 2020
The Medicare Part D coverage gap (aka "donut hole") would be completely phased out and hence closed.
According to the Centers for Medicare and Medicaid Services, by 2019 the Act will increase expenditures on Medicaid and individual subsidies by $165 billion annually while reducing Medicare expenditures by $125 billion annually.
Impact on child-only policies
In September 2010, some insurance companies announced that in response to the law, they would end the issuance of new child-only policies. Kentucky Insurance Commissioner Sharon Clark said the decision by insurers to stop offering such policies was a violation of state law and ordered insurers to offer an open enrollment period in January 2011 for Kentuckians under 19. An August 2011 Congressional report found that passage of the health care law prompted health insurance carriers to stop selling new child-only health plans in many states. Of the 50 states, 17 reported that there were currently no carriers selling child only health plans to new enrollees. Thirty-nine states indicated at least one insurance carrier exited the child-only market following enactment of the health care laws.
