Medicare Milestones

On July 30, 1965, President Lyndon B. Johnson signed Medicare, a health insurance program for elderly Americans, into law.  At the bill-signing ceremony, which took place at the Truman Library in Independence, Missouri, former President Harry S. Truman was enrolled as Medicare's first beneficiary and received the first Medicare card.  Johnson wanted to recognize Truman, who, in 1945, had become the first president to propose national health insurance, an initiative that was opposed at the time by Congress.

In 1963, when President John Kennedy signed the Senior Citizens Act (later renamed the Older Americans Act by President Carter), there were 17.5 million Americans over age 65.  Thirty-three percent of those older Americans lived under the federal income poverty limit.  At the 2010 census, only 9% of the approximately 39 million Americans over age 65 lived under the poverty limit.  A major reason for the great improvement in the standard of living of older adults was the implementation of Medicare to cover health care costs.

Nineteen million Americans enrolled in Medicare when it first went into effect in 1966, and in 1972 eligibility for the program was extended to Americans under 65 with certain disabilities and people of all ages with permanent kidney disease requiring dialysis or transplant.  In December 2003, President George W. Bush signed into law the Medicare Modernization Act (MMA), which added the Part D outpatient prescription drug benefits to Medicare.

Medicare is a medical insurance-type program developed to pay medical costs for retired or disabled persons who have paid into the Social Security system.  Medicare is also available to disabled adult children whose parent becomes eligible (or dies after becoming eligible) for a payment from Social Security Retirement or Disability.  Medicare Part A pays for hospitalization costs and Part B pays for doctor visits, outpatient therapies, medical equipment, home health care, etc. Any recipient of Social Security Retirement or railroad retirement benefits is eligible for Medicare Part A coverage beginning at age 65.  The beneficiary should apply for Medicare and will elect either original Medicare or Part C (Medicare Advantage).  Medicare Part C allows eligible individuals to elect coverage from approved Medicare Advantage plans through private companies (HMOs, PPOs, etc.) as an alternative to traditional fee-for-service Medicare.

A person who continues working past age 65 is still eligible for Medicare benefits provided a Medicare application has been filed.  A person who does not apply for Social Security or Medicare Part A benefits until after age 65 is entitled to Part A (hospital) benefits retroactive for 6 months prior to the month of application.  Medicare coverage is not dependent upon the income or assets of the recipient.

Medicare Part B is a voluntary program for individuals who are eligible for Part A and who enroll in the program and pay the monthly premiums.  Enrollment occurs either by written application or automatically by establishing entitlement to Social Security benefits or Part A coverage.  Notice of automatic enrollment is sent to eligible individuals and may be declined by sending a signed statement to the local SSA office stating that they do not wish such insurance.  A person may voluntarily enroll during the “initial enrollment period”, which begins three months prior to the month when all the eligibility requirements are first met (typically the 65th birthday) and extends seven months thereafter.  Since the beginning date of coverage depends on the date of application, it is important to file early to avoid the gap in insurance coverage that could occur when private medical insurance expires at age 65 without immediate continuing coverage under Medicare.  Those who fail to enroll during the initial enrollment period may do so only during a “general enrollment period”, which is the first quarter of each calendar year.  Failure to enroll for Part B when first eligible will result in a higher monthly premium for the rest of the recipient’s life.

Also, persons under age 65 who are receiving or are entitled to receive Social Security disability or railroad retirement disability benefits for not less than 24 months become eligible for Medicare Part A benefits in the 25th month of disability.

Contrary to popular belief, Medicare only pays part of the first 100 days of nursing home care for qualified nursing home residents, and only the first 20 days in full.  Such Medicare coverage requires that the individual be admitted to a nursing home within thirty (30) days after a hospital stay of at least three (3) days.

There are premiums, deductibles and co-payments for Medicare coverage.  These premiums, deductibles and co-payments may be paid by Medicaid for individuals whose income and assets are below certain poverty level limits (known as “Qualified Medicare Beneficiaries” or “QMBs”), or by private “Medigap” insurance policies.

Medicare’s Future Uncertain

The growing elder population has created some financial problems for Medicare, and it has become a target of various proposals to address “entitlement program reform.”   On July 25, House of Representatives lawmakers released a budget blueprint that includes deep cuts to social programs – including Medicare.  Despite the promises President Donald Trump made during his campaign not to touch Medicare, the House budget text says: “Doing nothing would result in programs like Medicare falling off a cliff.”  The 2018 plan, authored by Rep. Diane Black (R-TN), includes more than $200 billion in cuts to entitlement programs.  Current federal spending rates for Medicare, Medicaid, and Social Security are referred to as “unsustainable” in Black’s budget.  Calls for cutting projected Medicare costs, the second largest entitlement program after Social Security, involve turning the program into an “optional premium support” system where future beneficiaries would receive a fixed amount of money to buy health insurance on the open market.  The document says traditional plans would remain available, but a new arrangement, similar to the structure of Medicare Advantage, would be put in place aimed at driving down costs by increasing competition among insurers.  According to the annual trustee’s report, if nothing is done, Medicare faces insolvency by 2028, while Social Security funds will run dry in the mid-2030s.

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