About Medicare

Published 01/29/2018

Medicare Basics
Medicare is a federal health insurance program that provides medical coverage for people 65 or older, for certain disabled people and for some people with end-stage renal disease (ESRD). Congress, through Title XVIII of the Federal Social Security Act, enacted this program in 1965. Coverage began in 1966. Medicare is managed by the Centers for Medicare and Medicaid Services (CMS). CMS awards contracts to organizations called contractors to process claims for Medicare and perform related administrative functions (e.g., claims processing). CMS provides operational direction and policy guidance for administration of the program on a regional and national basis.

Medicare Part A
Part A of the Medicare program is hospital insurance. This part of the program is financed by:

  • Taxes paid by employers and employees through the Federal Insurance Contributions Act (FICA)
  • Self-employed individual contributions through the Self-employment Contributions Act
  • Railroad workers, their employers and representatives through the Railroad Retirement Act

Organizations that administer Medicare Part A process claims for:

  • Inpatient hospital care
  • Outpatient hospital and emergency room charges
  • Inpatient care in a skilled nursing facility following a covered hospital stay
  • Home health care
  • Hospice care

Medicare Part B
Part B of the Medicare program is medical insurance. Financing for this part of the program is obtained from:

  • Premium payments by enrollees
  • Occasional contributions from general revenues by the federal government
  • Interest earned on the Part B trust fund

Companies that administer Medicare Part B are called 'contractors.' Part B coverage helps to pay for, but is not limited to:

  • Medically necessary doctor services provided in a variety of medical settings including, but not limited to, the physician’s office, an inpatient/outpatient hospital setting, rural health clinics and ambulatory surgical centers
  • Charges from limited licensed practitioners such as: independently practicing physical/occupational therapists, licensed clinical social workers and clinical psychologists, certified registered nurse anesthetists (CRNA), certified nurse midwives, nurse practitioners (NPs), physician’s assistants (PAs) and audiologists
  • Clinical laboratory and diagnostic services
  • Surgical supplies and durable medical equipment
  • Ambulance services

Medicare Advantage Plans
Medicare Advantage plans are health plan options that are part of the Medicare program. If a patient joins one of these plans, they generally get all your Medicare-covered health care through that plan. This coverage can include prescription drug coverage. Medicare Advantage Plans include:

  • Medicare Health Maintenance Organization (HMOs)
  • Preferred Provider Organizations (PPO)
  • Private fee-for-service plans
  • Medicare special needs plans

With a Medicare Advantage plan, a health insurance card is issued to the patient from the plan. In most of these plans, generally there are extra benefits and lower co-payments than in the Original Medicare plan. However, the patients may have to see doctors and use hospitals that are in the plan’s network.

Medicare Part D
The Medicare Modernization Act of 2003 provided seniors and people with disabilities with the first comprehensive prescription drug benefit ever offered under the Medicare program. Medicare prescription drug coverage is insurance that covers both brand-name and generic prescription drugs at participating pharmacies. Everyone with Medicare is eligible for this coverage.

Medicare Administrative Contractors
In December 2003, Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003.  Under section 911 of the MMA, Congress requires that CMS replace the current fiscal intermediary (FI) and carrier contracts with competitively procured contracts that conform to the Federal Acquisition Regulation (FAR).

Under the new Medicare Administrative Contractor (MAC) contracting authority, CMS has six years — between 2005 and 2011 — to complete the transition to Medicare Fee-for-Service (FFS) claims processing activities from the FIs and carriers to the MACs. The provisions contained under Section 911 are collectively referred to as Medicare Contracting Reform.

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