100 things to know about Medicare and Medicaid

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


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. PPACA standardized Medicaid eligibility and enrollment processes across states and allowed states to expand coverage. Under 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. CMS is an $820 billion industry, providing healthcare for more than 100 million Americans today. The organization employs more than 4,000 people in 10 regional offices.

17. Marilyn Tavenner is the current administrator of the Centers for Medicare and Medicaid Services. Appointed in May 2013, her nomination passed in the Senate 91-7, making her the first nominee to get through the Senate in a decade, according to Politico. She was previously the principal deputy administrator of CMS under Administrator Donald Berwick, MD. Ms. Tavenner has a background in nursing and hospital administration. She became the CEO of Johnston-Willis Hospital in Richmond, Va., where she got her start as a nurse. After eight years as the CEO of the hospital, which was part of the Hospital Corporation of America, she served as the president of HCA's Central Atlantic Division, overseeing 20 hospitals. Before making the move to CMS, Ms. Tavenner also served as HCA's Group President of Outpatient Services.

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.

19. There are four parts to Medicare today: A, B, C and D. Both parts A and B are managed directly by the government, while parts C and D are managed by private health insurance companies.

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.

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 includes separate Medicaid insurance plans administered by private health insurance companies. In 2014, roughly one third of Medicare enrollees used 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.

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. 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 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 ten states are amongst those with the highest number of beneficiaries and they are also the biggest Medicare spenders (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 have the smallest amount of Medicare spending (in millions): 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 covers 66 million Americans today. That means one in five Americans received Medicaid benefits in the past year. Medicaid covers even more children. The program covers more than one in three children and 40 percent of births.

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. Medicaid finances 16 percent of the total personal health spending in the U.S. In the 2010 fiscal year, it totaled more than $414 billion.

36. Roughly 40 percent of Medicaid spending is from dual-eligible beneficiaries, enrolled in both Medicare and Medicaid.

37. 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.

Medicaid expansion

38. PPACA extended Medicaid coverage to non-elderly adults with incomes at or below 138 percent of the federal poverty level, which was about $16,105 per individual in 2014.

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

40. The expansion is optional. As of June 2014, 26 states and Washington D.C. opted to implement the expansion and three states were still debating the option. The other 21 states decided not to expand Medicaid at this time.

41. Across states opting out of the expansion, almost 5 million uninsured Americans fall into 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. Adults eligible for the new Medicaid expansion group 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.

43. 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.

44. 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.

45. 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.

46. 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.

47. 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.

48. 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.

49. Using federal funds, 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.

50. Under PPACA, six options are provided to improve the access and delivery of Medicaid long-term services and supports. Most states (47 and Washington D.C.) have adopted at least one of the six options.

51. 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. PPACA increased federal funding and expanded eligibility for the MFP demonstration.

52. The MFP option is the most popular with 37 participating states and eight more in the process of implementing the option in 2013.

53. The second option is a new state demonstration for dual-eligible beneficiaries. PPACA created the Center for Medicare and Medicaid Innovation to test new payment and service delivery models that integrate care for dual-eligible patients. In 2012, 26 states had submitted proposals for models to the CMS Medicare-Medicaid Integration Office.

54. In early 2013, five states had approved demonstration proposals for the above option, including California, Illinois, Ohio, Massachusetts and Washington. Proposals from 20 states pended approval and two states, New Mexico and Tennessee, withdrew proposals.

55. The third option is a new health home option. Services include care coordination and case management for enrollees with chronic conditions and a temporary 90 percent enhanced federal medical assistance percentage.

56. Health home state plan amendments were approved in eight states in 2013, including Iowa, Idaho, Missouri, North Carolina, New York, Ohio, Oregon and Rhode Island. Amendments from four other states and draft proposals from three more states were pending review in 2013. CMS approved funding for 16 states and Washington D.C. to develop their own health home state plan amendments.

57. The fourth option is the new Balancing Incentive Program. Through this program, states receive incentives to increase access to community-based LTSS instead of institutional care. Under PPACA, $3 billion of federal matching funds are available through September 2015.

58. Ten states have CMS-approved BIP applications and five more planned to establish BIP in 2013.

59. The fifth option expands home- and community-based service plans. Previously, HCBS options were only available to states with a waiver or demonstration project. 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.

60. In early 2013, nine states had HCBS plans in place and four more planned to implement them in 2013 and 2014.

61. 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.  

62. California was the only state in early 2013 with an approved CFC plan. Arizona and Louisiana's plans were pending review. Six additional states planned to implement CFC in the near future.


63. Under CMS' Inpatient Prospective Payment System, participating hospitals receive pre-determined payments on a per-case basis for Medicare inpatient stays. To determine payments, cases are organized by diagnosis, then sorted by 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 their overall performance on a set of quality measures, such as clinical processes of care and patient satisfaction from 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 keep 1.5 percent of Medicare reimbursements, resulting in about $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 test the power of bundled payments to influence care coordination between physicians and settings.

70. The BPCI initiative provides opportunities for healthcare providers to reduce costs, improve quality, provides a platform to engage physicians and helps hospitals fully understand the total cost of care. More than 6,000 providers are currently engaged in the initiative.

71. The BPCI initiative also eliminates the three-day rule. This rule mandates a minimum three-day hospital stay before a patient can receive nursing home care coverage. Medicare gives participating providers a set fee for 48 selected clinical procedures.

72. The BPCI initiative uses four payment models, each based on the healthcare providers, the types of services and time frame for the services covered in the bundle.

73. The first model focuses on acute-care inpatient hospitalization. Participants in this model provide a standard discount to Medicare from the Part A payments for inpatient stays.

74. The second model includes the acute-care inpatient stay and the related services from the admission. These are limited to the 30 days before and 90 days after discharge.

75. The third model revolves around episodes of care beginning at the initiation of post-acute care services with a nursing facility, inpatient rehabilitation center, long-term care hospital or home health company. An acute-care hospital stay triggers these episodes of care.

76. In the fourth model, participating hospitals receive single, bundled payments from CMS for all services during the inpatient stay. Related admissions within 30 days are included in the bundle.

77. CMS plans to implement BPCI models 2, 3 and 4 in phases. In the first phase, CMS and participating hospitals prepare to assume the financial risk. The second phase is the risk-bearing phase.

78. In July 2014, 2,412 providers were already participating with BPCI and another 4,122 providers entered the first phase .

79. Medicare 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 Medicare Shared Savings Program, the Advance Payment ACO Model and the Pioneer ACO Model.

80. In December 2011, CMS named 32 original Pioneer ACOs, which improved quality and patient satisfaction. However, when first year performance data was released in July 2013, nine ACOs left the program. Only 13 ACOs saved enough to share in savings with Medicare. Together, those 13 ACOs produced $76 million in shared savings.

81. Of the nine ACOs that left the Pioneer program, seven adopted the MSSP, which doesn't include downside risk.

82. The MSSP is for ACOs that can commit to providing care for at least 5,000 Medicare patients for a minimum of three years. More than 360 Medicare ACOs have been established since the enactment of the Patient Protection and Affordable Care Act.

83. CMS wants to raise the bar for MSSP assessments. As part of the 2015 Physician Fee Schedule, CMS retired eight quality measures and included new scored measures. New measures include the Stewardship of Patient Resources measure for open communication about prescription costs, a 30-day all-cause skilled nursing facility measure, depression readmission after 12 months, a foot and eye exam to measure diabetes, a coronary artery disease test and electronic documentation of current prescriptions.


84. The 2013 release of Medicare hospital charge data for the 100 most common inpatient services and 30 most common outpatient services was unprecedented transparency. The release was caused in part by a 36-page investigative report written by Steve Brill. The piece, published in TIME, highlighted healthcare costs and the hospital health insurance market.

85. This April, CMS released Medicare physician payment data from 2012, making information on more than 880,000 healthcare professionals available to the public. The data revealed $77 billion in total Medicare Part B fee-for-service payments. The data allows the comparison of 6,000 different services, procedures and payments received by individual providers.

86. Price transparency advocates say the data represents the starting point for reduced rate negotiations. Some other comments have criticized the databases for not being consumer friendly or providing the proper context to interpret the data.

87. The data release particularly concerns groups like the American Medical Association. AMA felt releasing public data may come with consequences, especially since the lack of context may lead to inaccurate interpretations of the data set.

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, for instance. Proposals to lessen or eliminate the gap have been unpopular with hospitals.

89. Congress enacts a short-term legislative patch to put off sustainable growth rate cuts every year. The SGR formula is meant to keep Medicare spending growth in check. The patches foster anger and uncertainty in physicians and anxiety in Medicare patients, according to the Medicare Payment Advisory Commission. The 2013 patch delayed a required 24 percent Medicare pay cut and provided a 0.5 percent payment update for physicians.

90. Congress wants to find a permanent solution to the SGR conundrum. A proposal was issued in early 2013 to repeal the physicians pay formula and replace it with a value-based payment system. By December 2013, both the House and the Senate passed bills to repeal and replace SGR. The House proposed a 0.5 percent annual payment update through 2017 and the Senate suggested freezing payment levels until 2023.

91. Repealing the SGR would cost $153.2 billion from 2014 to 2023.

Fraud Prevention

92. The Health Care Fraud Prevention and Enforcement Action Team (HEAT) was created in 2009 by HHS and DOJ. The HEAT Task Force's mission is to save money by reducing Medicare and Medicaid fraud.

93. HHS Secretary Sylvia Mathews Burwell and Attorney General Eric Holder lead HEAT.

94. The HEAT Medicare Fraud Strike Force has recovered $4.8 billion in fraudulent claims since 2007. The multi-agency team uses data analysis and community policing to detect and prevent fraud.

95. The Medicare Fraud Strike Force is present in nine U.S. cities: Baton Rouge, La., Brooklyn, NY, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami and Tampa Bay, Fla.

96. In 2011, HEAT managed the largest federal healthcare fraud bust in history, recovering $530 million in false billing. The Strike Force charged 115 healthcare providers in nine cities across the U.S. for $240 million in fraudulent Medicare billing. The force also charged an additional 91 providers in eight different cities for $290 million in false billings in a correlated case.

97. Two years ago, CMS implemented a Fraud Prevention System, which 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 more than $210 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. CMS is planning an expansion of a program that sniffs out waste, fraud and abuse for early intervention by Medicare Administrative Contractors. CMS' RAC program started in 2009 and involves independent contractors who ensure all Medicare and Medicaid payments are proper. 

More articles on Medicare and Medicaid:

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Top 10 Medicare, Medicaid plans

Average Medicaid acceptance rates in 15 major cities

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