100 things to know about Medicare and Medicaid — 2015 update

 An overview of Medicare and Medicaid, including the history, innovation and the politics behind the programs.

History — Medicare and Medicaid's 50th anniversary

1. President Lyndon B. Johnson signed a transformative healthcare bill on July 30, 1965 in Independence Mo., the hometown of President Harry Truman. The bill, H.R. 6675, established Medicare, a federal health insurance program for the elderly, and Medicaid, a state-managed healthcare program for people with low income in the United States.

"In this town, and a thousand other towns like it, there are men and women in pain who will now find ease. There are those, alone in suffering who will now hear the sound of some approaching footsteps coming to help. There are those fearing the terrible darkness of despairing poverty — despite their long years of labor and expectation — who will now look up to see the light of hope and realization," said President Johnson at the signing.

2. In his address, President Johnson credited President Truman for being the first to push for government-led healthcare. President Truman, who was present, then became the first Medicare enrollee.

3. When coverage began in 1966, Medicare was instrumental in the desegregation of hospitals across the United States. Separate-but-equal hospitals had received federal funding since 1946 under the Hill-Burton Act. However, to receive Medicare reimbursement, hospitals were required to desegregate. Although the condition initially met some opposition, more than 1,000 hospitals complied in just four months.   

4. The Social Security Amendments of 1972 marked the first major changes to the programs. President Nixon expanded Medicare coverage to individuals younger than 65 with end-stage renal disease and to those with long-term disabilities who had received Social Security Disability Insurance for at least two years. Medicare was also expanded to include speech, physical and chiropractic therapy.

5. The Social Security Amendments of 1972 also installed the Supplemental Security Income program, which required states to cover the low-income aged, blind or disabled with Medicaid. Section 209(b) gave states the option to create their own more restrictive Medicaid eligibility requirements. Eleven states are "section 209(b) states" today: Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma and Virginia.  

6. In 1982, the Tax Equity and Fiscal Responsibility Act passed, initiating more notable adjustments to Medicare and Medicaid. Hospice became a Medicare benefit. Medicare Part B premiums, which beneficiaries pay to cover physician visits and outpatient costs, increased to cover 25 percent of program costs. Health management organizations began participating in Medicare with a risk-based prospective payment system.

7. TEFRA also expanded states' Medicaid cost-sharing options and coverage for disabled children. SSI income requirements were waived for families with "Katie Beckett" children, who lived at home but required institutional care for disabilities.

8. The Medicare Catastrophic Coverage Act of 1988 added drug benefits, hospital and nursing facility benefits and capped out-of-pocket expenses in a sweeping Medicare reform. The act also required states to cover Medicare premiums for Qualified Medicare Beneficiaries with incomes below 100 percent of the federal poverty level. Pregnant women and infants in families with incomes up to 100 percent of the federal poverty level required coverage under MCCA.

9. MCCA was repealed a year later, in 1989, but the QMB provisions of the law remained.

10. The Omnibus Budget Reconciliation Act of 1990 required states to cover Medicaid premiums for families with incomes between 100 and 120 percent of the federal poverty level, or the Specified Low-Income Medicare Beneficiary group. The law mandated Medicaid coverage of children in families at or below 100 percent of the federal poverty level and required pharmaceutical companies to give state and federal government "best price" rebates on prescriptions.

11. President Clinton's Balanced Budget Act of 1997 provided a formalized structure for Medicare HMOs and private health plans to work with beneficiaries, called the Medicare+Choice program. BBA 97 established a State Children's Health Insurance Program (SCHIP, now called CHIP) for Medicaid to provide coverage of children in families with incomes below 200 percent of the federal poverty line.

12. In 2001, Bush announced the Health Insurance Flexibility and Accountability initiative to expand coverage using available Medicaid and SCHIP resources. The Health Care Financing Administration, which regulated Medicare and Medicaid programs, was renamed the Centers for Medicare and Medicaid, as we know it today.

13. Medicare coverage was extended to people with ALS in 2001.

14. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 proposed outpatient prescription drug benefits that were implemented in 2006. People eligible for both Medicare and Medicaid began to receive drug coverage under Medicare at this time.

15. The Patient Protection and Affordable Care Act, passed in March 2010, required the majority of Americans to sign up for health insurance by 2014. The PPACA standardized Medicaid eligibility and enrollment processes across states and allowed states to expand coverage. Under the PPACA, CMS began testing alternative payment models such as bundled payments and ACOs, though most payments are still fee-for-service.

Medicare and Medicaid today

16. The Centers for Medicare and Medicaid, part of the Department of Human and Health Services, manages Medicare and oversees the state operation of Medicaid. Medicare and Medicaid combined provide healthcare for more than 100 million Americans today. CMS employs more than 4,000 people in 10 regional offices.

17. Andy Slavitt is acting administrator for CMS. He stepped into the role after former administrator Marilyn Tavenner resigned and left her post at the end of February. Mr. Slavitt has more than 20 years of healthcare experience in the private sector, and he most recently served as group executive vice president for United Health Group's Optum unit. He joined CMS in June 2014 in the role of principal deputy administrator, in which he managed day-to-day operations issues across all CMS programs.

18. Medicare insures 54 million people age 65 and over, as well as eligible beneficiaries younger than 65 with disabilities. Medicare spending accounted for 14 percent of the 2013 federal budget, which translates to $492 billion in net federal Medicare expenditures. However, Medicare spending has been slowing down. According to HHS, average annual growth in Medicare spending per enrollee slowed to 0.2 percent in 2013, compared to 1.8 percent average growth in Medicare spending per enrollee between 2009 and 2012, and 5.9 percent average growth between 2000 and 2008.

19. There are four parts to Medicare today: A, B, C and D. Both parts A and B are considered "Original Medicare" and are managed by the federal government. Parts C and D are managed by health insurance companies or other private companies approved by Medicare.

20. Part A is hospital insurance; it covers medically necessary hospital visits, nursing facility visits, home healthcare and hospice. For those who worked and paid Social Security taxes for at least 10 years, Part A is free.

21. To ensure hospitalization is medically necessary to qualify for Part A, CMS established a two-midnight rule as part of the 2014 Inpatient Prospective Payment System. To qualify for Medicare Part A payments, inpatient stays must span a minimum of two midnights. Any inpatient stays shorter than two midnights can be billed as outpatient services in Part B. CMS noted in April it is considering feedback from the Medicare Payment Advisory Commission on the two-midnight policy, and expects to address it in its prospective 2016 hospital outpatient payment system rule, which will be published in summer 2015.

22. Part B covers medically necessary services and preventive services like physician appointments, lab tests, equipment and ambulance services. Beneficiaries must pay a monthly premium to receive this coverage.

23. Medicare Part C is known as Medicare Advantage. Part C is a health plan offered through a private company that contracts with Medicare. It includes Part A and Part B benefits, and most Medicare Advantage plans also offer prescription drug coverage. This year, 31 percent of Medicare enrollees use Medicare Advantage plans.

24. Part D is outpatient drug insurance and is also provided by private health insurance companies. Part D can be combined with either Parts A and B, or Part C benefits. More than 37 million Medicare beneficiaries had Part D coverage in 2014, according to the most up-to-date CMS data.

25. Medicare benefit payments totaled $583 billion in 2013. Just under a quarter of these payments were for hospital inpatient services. Another quarter of the payments were for Medicare Advantage plans. Physician services accounted for 12 percent of the payments and Part D drug benefit payments accounted for 11 percent.

26. Medicare spending per enrollee has grown at a slower rate than private health insurance spending. Between 1969 and 2012, Medicare spending increased at an average annual rate of 7.7 percent per enrollee, compared to 9.2 percent for private health insurance companies.

27. Projected net Medicare expenditures for 2024 are $858 billion, a two-third increase from 2014 net expenditures of $512 billion. This is a 5.3 percent average annual growth rate. However, the portion of the federal budget for net Medicare expenditures is projected to remain static — at 14.5 percent — over the next 10 years.

28. General revenues (41 percent), payroll tax contributions (38 percent) and beneficiary premiums (13 percent) finance Medicare.

29. Approximately 16 percent of the U.S. population is enrolled in Medicare. As of 2012, the top 10 states with the highest Medicare enrollment as a percentage of total population are: West Virginia (21 percent), Maine (21 percent), Arkansas (19 percent), Vermont (19 percent), Florida (19 percent), Pennsylvania (18 percent), Alabama (18 percent), Kentucky (18 percent), Rhode Island (18 percent) and Montana (18 percent).

30. The bottom 10 states, including Washington D.C., for 2012 Medicare enrollment as a percentage of total state population are Wyoming (15 percent), Maryland (14 percent), Nevada (14 percent), Georgia (13 percent), California (13 percent), Washington D.C. (13 percent), Colorado (13 percent), Texas (12 percent), Utah (11 percent) and Alaska (10 percent).

31. Total Medicare spending aligns with the total number of Medicare beneficiaries in each state. The following 10 states are among those with the highest number of beneficiaries and they were also the biggest Medicare spenders in 2009 (in millions): California ($50,604), Florida ($39,119), New York ($34,081), Texas ($33,288), Pennsylvania ($23,771), Ohio ($19,263), Illinois ($19,176), Michigan ($17,638), New Jersey ($15, 526) and North Carolina ($14,105).

32. The following 10 states spent the smallest amount (in millions) on in 2009: Idaho ($1, 749), Hawaii ($1,533), Delaware ($1,512), Montana ($1,247), South Dakota ($1,096), Vermont ($941), North Dakota ($859), Washington D.C. ($856), Wyoming ($639) and Alaska ($553).

33. As the largest health insurance program in the U.S., Medicaid covered about 64.9 million Americans monthly in 2014, which means about one in five Americans received Medicaid benefits in the past year. The largest group covered by Medicaid is children. About 29.5 million children received Medicaid coverage in 2014.

34. Children and their families account for about 75 percent of Medicaid enrollees, but elderly and disabled beneficiaries account for about 65 percent of Medicaid spending.

35. Both federal and state governments fund Medicaid. The federal government matches state Medicaid spending at a rate based on a certain formula. Match rates range to cover 50 percent or more of state Medicaid spending.

36. Medicaid finances 16 percent of the total personal health spending in the U.S. It is the fastest growing major entitlement, according to the Congressional Budget Office. In 2014, it totaled $305 billion in expenditures and it is expected to grow 87 percent by 2024 to $570 billion.

37. About 10.7 million Americans are dual-eligible beneficiaries, enrolled in both Medicare and Medicaid. Roughly 40 percent of Medicaid spending is from dual-eligible beneficiaries. To more effectively integrate benefits and enhance coordination between the two programs, the PPACA created a new office within CMS for dual eligibles, called the Medicare-Medicaid Coordination Office.

Medicaid expansion

38. Before healthcare reform, only the following groups were eligible for Medicaid: children, pregnant women, parents of dependent children, individuals with disabilities and elderly Americans over age 65. The PPACA extended Medicaid coverage to adults under 65 years old with incomes at or below 138 percent of the federal poverty level, or about $16,105 per individual in 2014. It also marks the first time states could provide coverage for low-income adults with no children without a waiver.

39. Federal funding will cover 100 percent of the Medicaid expansion for newly eligible adults through 2016. Funding will slowly decrease to 90 percent by 2020.

40. In National Federation of Independent Business v. Sebelius, the U.S. Supreme Court ruled in 2012 it was unconstitutionally coercive to require states under the PPACA to expand Medicaid. The court said states did not have enough notice to consent to the change and if they didn't comply, all of their federal funds were potentially at risk. This decision made Medicaid expansion under the PPACA optional for states, and those that choose not implement Medicaid expansion can only lose PPACA expansion funds.

41. As of late June 2015, 29 states and Washington D.C. opted to implement the expansion and two states were debating the option. The other 19 states decided not to expand Medicaid at this time. In non-expansion states, millions of uninsured Americans fall in to a coverage gap: Their income exceeds their state's Medicaid cutoff, yet they do not make enough money to qualify for federal subsidies to buy health insurance in the marketplace.

42. The Urban Institute for the Kaiser Family Foundation's Commission on Medicaid and the Uninsured estimated Medicaid enrollment in the 21 states that have not expanded Medicaid would increase 40 percent by 2016 if they opted for expansion, increasing the number of nonelderly Medicaid beneficiaries from 17.4 million to 24.3 million in those states.

43. In June, the White House reported that uncompensated care costs would be $4.5 billion lower in 2016 if Medicaid coverage was expanded in the 21 states that haven't done so, which would nearly double the $4.4 billion reduction expected in states that have already expanded Medicaid.

44. In expansion states, Medicaid enrollment is blowing by initial projections, according to a report from the Foundation for Government Accountability. States with the most surprising enrollment numbers were California (based on Sept. 2014 data), Illinois (March 2015 data), Kentucky (Dec. 2014 data), Nevada (Jan. 2015 data) and Washington (February 2015 data).

45. However, nonprofit hospitals said in June 2015 the expansion did not yet yield the high financial benefits they expected. Nonprofit hospitals in expansion states saw a 13 percent drop in unpaid bills in 2014 compared to 2013, according to Moody's Investors Services. In comparison, nonprofit hospitals in non-expansion states saw bad debt increase through 2014 and drop slightly in the fourth quarter, according to the report. However, nonprofit hospitals in expansion states did not see a notable increase in operating margins compared to those in non-expansion states.

46. Florida Gov. Rick Scott sued the federal government in April, alleging it was withholding funds from Florida to force it to expand Medicaid. Florida had a Medicaid waiver set to expire June 30 that allowed it to receive $1 billion to $2 billion annually to support its Low Income Pool program and the state's safety-net hospitals. CMS told the Florida Agency for Health Care Administration that the state's expansion status was an important consideration in determining the fate of its Medicaid waiver.

47. Kansas and Texas said in May they would file friend-of-the-court briefs supporting Florida's Medicaid expansion lawsuit against the federal government. Both Kansas and Texas have not expanded Medicaid, and Texas has a Medicaid demonstration waiver that will expire in 2016.

Medicaid expansion — In depth

48. Most adults newly eligible for Medicaid will receive Alternative Benefit Plan coverage. ABPs are required to include the same 10 essential health benefits, or EHBs, as the plans in the marketplace include.

49. The 10 EHBs include outpatient care, emergency services, hospitalization, pre- and postnatal care, mental health and addiction services, prescription drugs, rehabilitative services and equipment, lab tests, preventive services and chronic disease treatment and pediatric services, which include dental and vision for children.

50. On top of the 10 EHBs, ABPs are required to provide parity between physical and mental health services, cover federally qualified health center and rural health center services and cover non-emergency medical transportation.

51. Some people are exempt from ABPs. These groups include people with disabilities, those who have dual eligibility and the medically frail. These groups are qualified to receive adult Medicaid benefits under a traditional state plan.

52. CMS established new Medicaid premium and cost-sharing guidelines in July 2013. For people earning less than 100 percent of the federal poverty line, the uniform copayment must be no more than $4 for outpatient services and $75 for inpatient admission.

53. Under the changes, states cannot charge more than $8 copayments for non-preferred prescription drugs and non-emergency use of the ER department for patients with incomes below 100 percent of the federal poverty line.

54. The total cost of a family's Medicaid premiums and cost sharing still must not exceed 5 percent of their income. It is still prohibited to charge premiums to people with incomes at or below 150 percent of the federal poverty line.

55. Using federal funds, the PPACA increased Medicaid payment rates for most primary care physician services to match Medicare fee levels. That meant a 73 percent increase in Medicaid payment rates for the primary care physician services affected.

56. Under the PPACA, six options are provided to improve the access and delivery of Medicaid long-term services and supports. Most states (45 and Washington D.C.) have adopted at least one of the six options. Alaska, New Mexico, North Carolina, Utah and Wyoming are currently not participating in any of the options. To adopt an option, states must have program proposals reviewed and approved by CMS. These proposals, called a state plan amendment, will change the policies in the Medicaid agreement between the state and the federal government.

57. The first option expands the "Money Follows the Person" Rebalancing Demonstration, which aims to reduce institutionalized care and replace it with community-based care opportunities. The PPACA increased federal funding and expanded eligibility for the MFP demonstration. The MFP option is the most popular, with 44 states and the District of Columbia participating.

58. The second option is a new financial alignment demonstration for dual-eligible beneficiaries. Under the PPACA, CMS is testing two new payment and service delivery models that integrate care for dual-eligible patients: the capitated model and the managed fee-for-service model. States had the option to submit proposals for one or both. In 2012, 26 states submitted proposals for models to the CMS Medicare-Medicaid Integration Office. As of February 2015, nine states — California, Illinois, Massachusetts, Michigan, New York, Ohio, South Carolina, Texas and Virginia — are participating in the capitated model, Colorado and Washington are participating in the managed fee-for-service model and Minnesota is participating in an alternative model that builds on its Senior Health Option program.

59. The third option is a new health home option to improve care coordination and case management for enrollees with chronic conditions. Temporary enhanced federal medical assistance (90 percent coverage) is available for the first two years, in addition to planning funds up to $500,000. Health home state plan amendments have been approved in 19 states.

60. The fourth option is the new Balancing Incentive Program. Through this program, states receive incentives to increase access to community-based long-term services and supports instead of institutional care. Under the PPACA, $3 billion of federal matching funds are available through September 2015. Currently, 21 states are approved for the program, but three of those states — Indiana, Louisiana and Nebraska — are no longer participating.

61. The fifth option expands home- and community-based service plans. Previously, HCBS options were only available to states with a waiver or demonstration project. The PPACA expands HCBS financial eligibility, creates a new medical eligibility group for otherwise ineligible patients to access Medicaid benefits and HCBS, allows population-specific services and broadens HCBS services. No enhanced federal funding is available for this option. As of May 2015, 16 states and the District of Columbia had approved state plan amendments.

62. The sixth and final option is a new Community First Choice plan. With this option, states can provide home and community-based service and support to beneficiaries in lieu of institutional care. States receive a six percent increase to the federal medical assistance percentage for implementing CFC services. Federal medical assistance percentages are used to determine the amount of federal matching funds allocated to states for medical and social service programs like Medicaid. Four states — California, Maryland, Montana and Oregon — have approved CFC state plan amendments.


63. Under CMS' Inpatient Prospective Payment System, participating hospitals receive pre-determined payments on a per-case or per-discharge basis for Medicare inpatient stays. Discharges are assigned to diagnosis-related groups, or DRGs, based on clinical condition and procedures administered during the patient's stay.

64. Today, about 3,400 acute-care hospitals and 435 long-term care hospitals nationwide receive payments through IPPS.

65. The PPACA's Hospital Value-Based Purchasing Program modifies IPPS payments based on hospitals' overall performance on a set of quality measures, such as clinical processes of care and patient satisfaction as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems survey. CMS recovered 1.25 percent of hospital Medicare payments through IPPS, totaling $1.1 billion, in the 2014 fiscal year. The money was redistributed to hospitals that rated high on quality measures like patient satisfaction or effective treatment of heart failure. In FY 2014, 778 hospitals lost more than 0.2 percent of their Medicare pay, while 630 hospitals received a bonus of more than 0.2 percent. For 2015, CMS will withhold 1.5 percent of Medicare reimbursements, resulting in a pool of approximately $1.4 billion in value-based incentives.

66. Medicare's Outpatient Prospective Payment System provides payment for outpatient services and partial hospitalization services at hospitals, community mental health centers and ASCs. More than 4,000 hospitals and 5,300 Medicare-certified ASCs receive OPPS payments.

67. Health providers are reimbursed for services for Medicare Part B beneficiaries through a Physician Fee Schedule. The Physician Fee Schedule determines the value of a service based on the amount of work, malpractice expenses and direct and indirect practice expenses for the service, adjusted by geographic location.


68. Congress established the CMS Center for Medicare and Medicaid Innovation as part of the PPACA in an effort to reduce Medicare, Medicaid and CHIP expenditures without compromising the quality of care. The center focuses on developing new payment and healthcare delivery models, testing the models and evaluating the results to improve best practices.

69. One CMS experiment, the Bundled Payments for Care Improvement Initiative, allows providers to enter into arrangements that group payments for multiple services received during an episode of care, rather than by each individual service. It aims to improve quality, reduce costs and engage providers in understanding the costs of care.

70. CMS announced the first BPCI participants January 2013. It also welcomed another group of participants in July 2014. More than 6,000 providers are currently engaged in the initiative and CMS hinted at potentially expanding the BPCI initiative in its proposed rule for the Medicare Inpatient Prospective Payment System for fiscal year 2016.

71. The BPCI initiative uses four payment models, each based on the types of services provided, time frame for the services covered in the bundle and prospective vs. retrospective payment schedules.

72. The first model defines an episode of care by acute-care inpatient hospital stays. Medicare pays participants retrospectively a standard discount based on the payment rates established under the IPPS. Physicians are still paid separately for their services under the Medicare Physician Fee Schedule.

73. The second model includes the acute-care inpatient stay, physician services and the related post-acute services and related readmissions in the episode of care, which ends either 30, 60 or 90 days after hospital discharge. Participants are paid retrospectively.

74. In the third model, participants retrospectively receive payments for an episode of care that is triggered by an acute-care hospital stay, but does start not until the initiation of post-acute care services with a skilled nursing facility, inpatient rehabilitation center, long-term care hospital or home health company. Related readmissions are also included in the bundle. To be considered part of an episode of care under this model, services must begin within 30 days of discharge.

75. In the fourth model, participating hospitals receive single, prospectively determined bundled payments from CMS for all inpatient hospital services and physician services. Related readmissions within 30 days are included in the bundle.

76. CMS implemented BPCI models 2, 3 and 4 in phases. The first phase is an exploratory, non-risk bearing phase. The second phase holds healthcare organizations accountable for financial and quality performance for episodes of care.

77. In July 2014, 2,412 providers were participating with BPCI, and 243 of those providers were in phase 2. At this time another 4,122 providers joined the program in phase 1.

78. Medicare also offers a variety of accountable care organization programs to help networks of health care providers transition to value-based care through a performance-based reimbursement model. These programs include the Pioneer ACO Model, the Medicare Shared Savings Program, the Advance Payment ACO Model, and the Next Generation ACO pilot, which was unveiled in March.

79. In December 2011, CMS named 32 original Pioneer ACOs. By the time first year performance data was released in July 2013, nine ACOs had left the program. Together, Pioneer ACOs have generated more than $384 million in savings in the first two years, according to HHS. In May 2015, CMS certified the program as the first of its pilot programs to meet the criteria for expansion.

80. MSSP ACOs commit to providing care for at least 5,000 Medicare patients for a minimum of three years. In January, 89 more ACOs were approved for the MSSP program, for a total of 432 participating ACOs. This number has recently dwindled to 405, however, primarily due to mergers between ACOs. Six ACOs dropped the program, but only one dissolved entirely. The other five are considering other options.

81. In June, CMS released its final rule for the MSSP. It created a two-sided risk track with higher risks and higher rewards, finalized benchmark policies, eliminated the requirement that ACOs must move to two-sided risk after three years and required that ACOs maintain a dedicated webpage, among other actions.

82. The Advance Payment ACO Model provides upfront, monthly payments to 35 MSSP ACOs. This model is designed for smaller ACOs with less capital, especially physician-led and rural-based ACOs. The upfront payments are meant to support investments in infrastructure and staff for the program.

83. CMS unveiled the latest ACO pilot, the Next Generation ACO, in March to see if a higher-risk, higher-reward model would be effective in improving health outcomes and reducing costs for Medicare fee-for-service beneficiaries. It is part of a greater effort launched by HHS in 2015 to shift 50 percent of Medicare provider payments to alternative models by 2018.


84. CMS' 2013 release of 2011 Medicare hospital charge data for the 100 most common inpatient services and 30 most common outpatient services was unprecedented. The transparency was motivated in part by a 36-page investigative report written by Steven Brill. The piece, entitled "Bitter Pill," was published in TIME and highlighted healthcare pricing practices. This year, Mr. Brill released a full book called "America's Bitter Pill," that provides a detailed look at the PPACA and its effect on the healthcare industry.

85. Last April, CMS released Medicare physician payment data from 2012, making information on more than 880,000 healthcare professionals available to the public. It was the first time in more than three decades this information was released. The data dump occurred after Dow Jones & Co., publisher of the Wall Street Journal, challenged a 1980 policy decision to not provide Medicare physician payment data through Freedom of Information Act requests. Despite concerns of possible inaccurate interpretations of the complex data, the government decided this year to release Medicare physician payments annually.

86. Data released in June 2015 includes information on the amounts 3,000 hospitals billed Medicare for services in 2013, revealing information on $90 billion in Medicare payments to more than 950,000 healthcare providers. Physicians received an average of $74,000 in reimbursements. Five physicians received more than $10 million, according to Bloomberg.

87. Following the trend, CMS released in April Medicare Part D spending data for the first time. The data showed Medicare Part D spending in 2013 totaled $103.7 billion. Spending was highest in California, New York, Florida and Texas. The heartburn drug Nexium cost $2.5 billion alone in 2013. CMS defined total drug cost as the ingredient cost of the medication, dispensing fees, sales tax and applicable administration fees. The numbers total the amounts paid by Part D, the beneficiary, other government subsidies and third-party payers.

88. Site-neutral payments are a contentious Medicare issue. Medicare pays hugely different rates for the same services, depending on the setting in which they are delivered. The program paid hospital outpatient departments 78 percent more on average than ASCs for the same procedures in 2013, for instance. Proposals to lessen or eliminate the gap have been unpopular with hospitals.

89. When Congress enacted the Balanced Budget Act of 1997, it created the Sustainable Growth Rate, a formula meant to keep Medicare spending growth in check. Every year since 2003, and sometimes multiple times a year, Congress has enacted a short-term legislative patch to put off sustainable growth rate cuts. It has passed "doc fix" bills 17 times.The patches foster anger and uncertainty in physicians and anxiety in Medicare patients, according to the Medicare Payment Advisory Commission. The 2014 patch delayed a required 24 percent Medicare pay cut and provided a 0.5 percent payment update for physicians, which would remain in place until March 31, 2015.

90. In March, the U.S. House voted to repeal the SGR and implement a permanent "doc fix." The bipartisan bill was passed by the Senate in April, just before physicians would have had to take a 21 percent cut in Medicare payments.

91. Many major healthcare associations strongly supported the law, which also extends funding for CHIP for two more years. The legislation is expected to cost more than $210 billion over 10 years. About $73 billion of those costs are expected to be offset with spending cuts and new revenue.

Fraud Prevention

92. The government recovered $19.2 billion in taxpayer dollars from healthcare fraud from 2009 through 2013. Since the Department of Justice and HHS launched the Health Care Fraud and Abuse Control Program in 1997, more than $25.9 billion has been recovered, according to HHS.

93. As part of the HCFAC Program, HHS and the DOJ created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in 2009. The HEAT Task Force's mission is to save money by reducing Medicare and Medicaid fraud. HEAT builds on the efforts of Medicare Fraud Strike Force teams previously launched in individual regions like South Florida (2007) and Los Angeles (2008).

94. HHS Secretary Sylvia Mathews Burwell and Attorney General Loretta Lynch lead HEAT.

95. As of March 2015, the Medicare Fraud Strike Force, which is part of HEAT, charged more than 2,100 individuals involved in more than $6.5 billion in fraud. The force has a 95 percent conviction rate since 2007.

96. This June, the Medicare Fraud Strike Force broke its own record for the largest federal healthcare fraud bust in history, recovering $712 million in false billing. The Strike Force charged 243 individuals, including 46 physcians, nurses and other licensed medical professionals, for alleged participation in fraud schemes. Before this bust, the largest occurred in 2011, when the Strike Force recovered $530 million in two coordinated takedowns.

97. CMS implemented a Fraud Prevention System in June 2011 that uses predictive analytics to analyze billing patterns against Medicare fee-for-service claims. The system recovered $19.2 billion in the last five years.

98. The system identified twice as much fraud as last year, topping out at $210.7 million recovered from improper Medicare fee-for-service payments.

99. The Fraud Prevention System can now automatically stop the payment of improper claims entirely digitally. The system sends a denial message to the claims payment system.

100. In January, CMS made a number of changes to its Recovery Audit Contractor program, which is designed to identify waste, fraud and abuse for early intervention by Medicare Administrative Contractors. The changes enhanced oversight, reduced burden on providers and increased transparency of the program. Among the changes, auditors must now streamline and standardize their provider portals, broaden review topics to all claim/provider types and limit additional documentation requests based on providers' compliance with Medicare.  

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