Medicare Primer

Summary

Medicare is a federal program that pays for covered health care services of qualified beneficiaries. It was established in 1965 under Title XVIII of the Social Security Act to provide health insurance to individuals 65 and older, and has been expanded over the years to include permanently disabled individuals under the age of 65. Medicare, which consists of four parts (A-D), covers hospitalizations, physician services, prescription drugs, skilled nursing facility care, home health visits, and hospice care, among other services. Generally, individuals are eligible for Medicare if they or their spouse worked for at least 40 quarters in Medicare-covered employment, are 65 years old, and are a citizen or permanent resident of the United States. Individuals may also qualify for coverage if they are a younger person who cannot work because they have a medical condition that is expected to last at least one year or result in death, have end-stage renal disease (permanent kidney failure requiring dialysis or transplant), or have amyotrophic lateral sclerosis (ALS, Lou Gehrig's disease). The program is administered by the Centers for Medicare & Medicaid Services (CMS), and by private entities that contract with CMS to provide claims processing, auditing, and quality oversight services.

In FY2016, the program will cover approximately 57 million persons (48 million aged and 9 million disabled) at a total cost of about $678 billion. Spending under the program (except for a portion of administrative costs) is considered mandatory spending and is not subject to the appropriations process. Services provided under Parts A and B (also referred to as "original" or "traditional" Medicare) are generally paid directly by the government on a "fee-for-service" basis, using different prospective payment systems or fee schedules. Under Parts C and D, private insurers are paid a monthly "capitated" amount to provide enrollees with at least a minimum standard benefit. Medicare is required to pay for all covered services provided to eligible persons, so long as specific criteria are met.

Introduction

($652 billion)

IPPS payments may be reduced by certain quality-related programs based on a hospital's quality performance. These quality-related programs include the Hospital Readmissions Reduction Program, the Hospital-Acquired Condition Reduction Program, and the Hospital Value-Based Purchasing Program. Further, hospitals may receive Medicare reimbursement reductions for failing to demonstrate meaningful use of certified electronic health record (EHR) technology.

MACRA changed the methodology for determining the annual updates to the conversion factor, established a merit-based incentive payment system (MIPS) to consolidate and replace several existing incentive programs; and established the development of, and participation in, alternative payment models (APMs). Prior to MACRA, the SGR system, which had been in place since BBA 97, tied annual updates to the Medicare fee schedule to cumulative Part B expenditure targets. Updates were determined according to a formula that incorporated Medicare beneficiary enrollment growth, the Medicare Economic Index (MEI, which measures changes in the price of the inputs required to produce physician services) and were generally positive when actual expenditures were below target levels. However, the SGR methodology required negative updates when actual expenditures exceeded the targets, which first occurred in 2002. Between 2003 and 2015, Congress passed numerous laws that replaced the negative updates required under the SGR system with updates that were positive or zero.³⁵ MACRA repealed the SGR methodology, established annual fee updates in the short term, and put in place a new method for determining updates thereafter.

In addition, MACRA established two pathways for payment reform. The MIPS is a new program that remains based on FFS payments but combines parts of the Physician Quality Reporting System (PQRS), the Value Modifier (VM, or Value-Based Payment Modifier), and the Medicare Electronic Health Record (EHR) Incentive Program into one single program based on quality, resource use, clinical practice improvement, and meaningful use of certified EHR technology. In contrast, qualified APMs are intended to be alternatives to FFS, incorporating new approaches to paying for medical care. Proposed APMs will be evaluated by an ad hoc committee (the Physician-Focused Payment Models Technical Advisory Committee), which will provide comments and recommendations to the Secretary as to whether new payment models meet the criteria of APMs.

As a result of the MACRA changes, the update to physician payments under the MPFS was 0% from January 2015 through June 2015; for the remainder of the year—July 2015 through December 2015—the payments were increased by 0.5%. In each of the next four years, 2016 through 2019, the payments will increase by 0.5% each year. For the next six years, from 2020 through 2025, the payment update will be 0%. Beginning in 2026, there will be two update factors, one for items and services furnished by a participant in a new APM and another for those electing to remain in the modified FFS payment system (MPS) that do not participate in an APM. The update factor for the APM participants will be 0.75%, and the update factor for those not participating in an APM will be 0.25%.³⁶

In addition to the fee schedule reimbursements, physicians who report on selected quality measures for services for which quality measures are established under the PQRS³⁷ received bonus payments for those services, beginning in July 2007. The bonus payments were 1.5% during the second half of 2007 and in 2008, 2.0% in 2009 and 2010, 1.0% in 2011, and 0.5% in 2012. The bonus remained at 0.5% in 2013 and 2014 for those who successfully reported the measures. The bonuses were replaced by a penalty for those providers who failed to successfully report the measures beginning in 2015; a 1.5% penalty was applied in 2015 and a 2% penalty will apply in 2016 and future years.

Medicare covers medically necessary outpatient physical and occupational therapy (PT and OT) and speech-language pathology (SLP) services. The program has limits (therapy caps) on how much it pays for outpatient therapy services in a calendar year. These limits are updated annually. In 2016, the annual therapy cap amounts are (1) $1,960 for outpatient PT and SLP services and (2) $1,960 for outpatient OT services. The limits apply to services provided in the following settings: physical therapists in private practice, physician offices, skilled nursing facilities (when not covered under Part A), comprehensive outpatient rehabilitation facilities (CORFs) and other rehabilitation agencies, critical access hospitals (CAHs), and hospital outpatient departments.³⁸

The DRA required the Secretary to implement an exceptions process to allow continued coverage for medically necessary services after a beneficiary has reached the therapy cap, up to a certain limit.³⁹ A series of legislative acts have extended the exceptions process, increased the limits in subsequent years, and implemented a requirement for manual medical review (MMR) for services over the annual therapy thresholds. The therapy caps exceptions process applies an annual MMR requirement when a beneficiary's incurred expenses reach a threshold of $3,700; one threshold applies for PT and SLP services combined and another threshold for OT services. Until January 1, 2018, Medicare will allow providers and practitioners to request an exception on a beneficiary's behalf when those services are reasonable and necessary; granting the exception allows Medicare to pay for therapy costs above the cap.

The original Medicare statute prohibited payment for covered items and services that are "not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member," which effectively excluded preventive and screening services.⁴¹ In recent years, Congress has added and expanded Medicare coverage for a number of such services through legislation, including MMA, MIPPA, and ACA. Under current law, if a preventive service is recommended for use by the U.S. Preventive Services Task Force (USPSTF, an independent evidence-review panel)⁴² and Medicare covers the service, all cost sharing must be waived. Also, the Secretary may add coverage of a USPSTF-recommended service that is not already covered. Coverage for preventive and screening services currently includes, among other services: (1) a "welcome to Medicare" physical exam during the first year of enrollment in Part B and an annual visit and prevention plan thereafter; (2) flu vaccine (annual), pneumococcal vaccine, and hepatitis B vaccine (for persons at high risk); (3) screening tests for breast, cervical, prostate, and colorectal cancers; (4) screening for other conditions such as depression, alcohol misuse, heart disease, glaucoma, and osteoporosis; and (5) intensive behavioral therapy for heart disease and for obesity.⁴³ Payments for these services are provided under the physician fee schedule and/or the clinical laboratory fee schedule.

Part B covers outpatient clinical laboratory tests, such as certain blood tests, urinalysis, and some screening tests, provided by Medicare-participating laboratories. These services may be furnished by labs located in hospitals and physician offices, as well as by independent labs. Beneficiaries have no co-payments or deductibles for covered clinical lab services.

Since 1984, payments for outpatient clinical laboratory services have been made on the basis of the Medicare clinical laboratory fee schedule (CLFS), which sets payment amounts as the lesser of the amount billed, the local fee for a geographic area, or a national limit. The national limits are set at a percentage (74%) of the median of all local fee schedule amounts for each laboratory test code. In general, annual increases in clinical lab fees have been based on the percentage change in the CPI-U. However, Congress has modified the update in recent years by (1) freezing the fee schedule amounts (2008), (2) reducing the update that would otherwise apply by 0.5 percentage points (2009-2010), and (3) establishing a permanent multifactor productivity adjustment and a 1.75 percentage point reduction (2011 through 2015). As a result of these actions, the annual update to the local clinical laboratory fee schedule for CY2015 decreased payment by 0.25%,⁴⁴ and the annual update for CY2016 is an increase of 0.10%.

PAMA requires CMS to base Medicare CLFS reimbursement on private insurance payment amounts beginning January 1, 2017. CMS issued a proposed rule on October 1, 2015. It estimates that the new policy will reduce Medicare CLFS payments by $360 million in FY2017 and by $5.14 billion over 10 years.⁴⁵

Part B also covers diagnostic non-laboratory x-ray tests and other diagnostic tests, as well as x-ray, radium, and radioisotope therapy. Generally, these services are paid for under the physician fee schedule, with beneficiaries responsible for a 20% coinsurance payment.

Medicare covers a wide variety of equipment and devices under the heading of durable medical equipment (DME), and prosthetics, orthotics (PO) if they are medically necessary and are prescribed by a physician. DME is defined as equipment that (1) can withstand repeated use, (2) has an expected life of at least three years (effective for items classified as DME after January 1, 2012), (3) is used primarily to serve a medical purpose, (4) is not generally useful in the absence of an illness or injury, and (5) is appropriate for use in the home. DME includes such items as hospital beds, wheelchairs, blood glucose monitors, and oxygen and oxygen equipment. It also includes related supplies, such as drugs and biologics that are necessary for the effective use of the product. PO is defined as items that replace all or part of a body organ, such as colostomy bags and pacemakers, as well as leg, arm, back, and neck braces and artificial legs, arms, and eyes. Medicare also covers some items or supplies (S), such as disposable surgical dressings that do not meet the definitions of DME or PO.

Except in competitive bidding areas (described below), Medicare pays for most durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) based on fee schedules. Medicare pays 80% of the lower of the supplier's charge for the item or the fee schedule amount. The beneficiary is responsible for the remaining 20%. In general, fee schedule amounts are updated each year by a (1) measure of price inflation, and (2) a measure of economy-wide productivity, which may result in lower fee schedule amounts from one year to the next. Starting in 2016, the fee schedule rates that apply outside of competitive bidding areas for certain DMEPOS are reduced based on price information from the competitive bidding program.

Numerous studies and investigations have shown that Medicare pays more for certain items of DME and PO than some other health insurers and some retail outlets.⁴⁶ Such overpayments may be due partly to the fee schedule mechanism of payment. MMA required the Secretary to establish a Competitive Acquisition Program for certain DMEPOS in specified areas. Instead of paying for medical equipment based on a fee schedule established by law, payment for items in competitive bidding areas is based on the supplier bids. The program started in 9 metropolitan areas in January 2011 and has since expanded to 100 metropolitan areas.⁴⁷

Certain specified outpatient prescription drugs and biologics are covered under Medicare Part B.⁴⁸ (However, most outpatient prescription drugs are covered under Part D, discussed below.) Covered Part B drugs and biologics include drugs furnished incident to physician services, immunosuppressive drugs following a Medicare-covered organ transplant, erythropoietin for treatment of anemia for individuals with ESRD when not part of the ESRD composite rate, oral anti-cancer drugs (provided they have the same active ingredients and are used for the same indications as chemotherapy drugs that would be covered if furnished incident to physician services), certain vaccines under selected conditions, and drugs administered through DME. Generally, Medicare reimburses physicians and other providers, such as hospital outpatient clinics, for covered Part B drugs and biologics at 106% of a drug manufacturer's average sales price, although some Part B drugs, such as those administered through DME, are reimbursed at 95% of the drug's average wholesale price. Health care providers also are paid separately for administering Medicare Part B drugs. Medicare pays 80% of the amount paid to providers, and beneficiaries are responsible for the remaining 20%.

Hospitals provide two distinct types of services to outpatients: services that are diagnostic in nature, and other services that aid the physician in the treatment of the patient. A hospital outpatient is a person who has not been admitted by the hospital as an inpatient but is registered on the hospital records as an outpatient. Generally, payments under the hospital outpatient prospective payment system (OPPS) cover the operating and capital-related costs that are directly related and integral to performing a procedure or furnishing a service on an outpatient basis. These payments cover services such as the use of an operating suite, treatment, procedure, or recovery room; use of an observation bed as well as anesthesia; certain drugs or pharmaceuticals; incidental services; and other necessary or implantable supplies or services. Payments for services such as those provided by physicians and other professionals as well as therapy and clinical diagnostic laboratory services, among others, are separate.

Under the OPPS, the unit of payment for acute care hospitals is the individual service or procedure as assigned to an ambulatory payment classification (APC). To the extent possible, integral services and items (excluding physician services paid under the physician fee schedule) are bundled within each APC. Specified new technologies are assigned to "new technology APCs" until clinical and cost data are available to permit assignment into a "clinical APC." Medicare's hospital outpatient payment is calculated by multiplying the relative weight associated with an APC by a conversion factor. For most APCs, 60% of the conversion factor is geographically adjusted by the wage index used for the inpatient prospective payment system. Except for new technology APCs, each APC has a relative weight that is based on the median cost of services in that APC. The OPPS also includes pass-through payments for new technologies (specific drugs, biologicals, and devices) and payments for outliers.⁴⁹

The Medicare Payment Advisory Commission (MedPAC) has recommended site-neutral payment policies that base payments on the resources needed to provide high-quality care in the most efficient setting.⁵⁰ Section 603 of the Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74) added new restrictions on Medicare payments for services furnished in provider-based (PDB) off-campus hospital outpatient departments (HOPDs), defined as those locations that are located more than 250 yards from the main campus. New PBD HOPDs⁵¹ would be eligible for payments from either the Ambulatory Surgical Center Prospective Payment System (ASC PPS) or the Medicare Physician Fee Schedule (PFS), whereas existing PDB HOPDs would be grandfathered to receive payments under the OPPS.

An ambulatory surgical center (ASC) is a distinct entity that furnishes outpatient surgical procedures to patients who do not require an overnight stay after the procedure. According to MedPAC, most ASCs are freestanding facilities rather than part of a larger facility, such as a hospital. Medicare covers surgical and medical services performed in an ambulatory surgical center that are (1) commonly performed on an inpatient basis but may be safely performed in an ASC; (2) not of a type that are commonly performed or that may be safely performed in physicians' offices; (3) limited to procedures requiring a dedicated operating room or suite and generally requiring a post-operative recovery room or short term (not overnight) convalescent room; and (4) not otherwise excluded from Medicare coverage.

Beginning in January 2008, Medicare pays for surgery-related facility services provided in ASCs using a prospective payment system (PPS) based on the OPPS. (Associated physician fees are paid for separately under the physician fee schedule.) Each of the approximately 3,700 procedures approved for payment in an ASC is classified into an APC group on the basis of clinical and cost similarity. The ASC system uses the same payment groups as the OPPS. The relative weights for most of the procedures in the ASC payment system are based on the relative weights in the OPPS. These ASC weights are scaled (reduced) to account for the different mix of services in an ASC and to ensure budget neutrality. The ASC system uses a conversion factor based on a percentage of the OPPS conversion factor. The percentage of this average dollar figure is set to ensure budget neutrality, so that total payments under the new ASC payment system should equal total payments under the old ASC payment system. A different payment method is used to set ASC payment for new, office-based procedures, separately payable drugs, and device-intensive procedures.⁵² This policy also applies to separately payable radiology services. Separately payable drugs in an ASC are paid the same amount as if provided in a hospital outpatient department. Different rules apply for device intensive procedures (where a device that is packaged into an APC accounts for more than half of its total payments). Separate payments are made for corneal tissue acquisition, brachytherapy sources, certain radiology services, many drugs, and certain implantable devices.

Medicare Part B covers emergency and non-emergency ambulance services to or from a hospital, critical access hospital, or a skilled nursing facility when other modes of transportation could endanger the Medicare beneficiary's health. In most cases, the program covers 80% of the allowed amount for the service, and the beneficiary is responsible for the remaining 20%. Generally, ambulance services are covered if (1) transportation of the beneficiary occurs; (2) the beneficiary is taken to an appropriate location (generally, the closest appropriate facility); (3) the ambulance service is medically necessary (other forms of transportation are contraindicated); (4) the ambulance provider or supplier meets state licensing requirements; and (5) the transportation is not part of a Medicare Part A covered stay.⁵³ Medicare covers both scheduled and nonscheduled nonemergency transports if the beneficiary is bed-confined or meets other medical necessity criteria. Medicare may also cover emergency ambulance transportation in an airplane or helicopter if the beneficiary's location is not easily reached by ground transportation or if long distance or obstacles, such as heavy traffic, would prevent the individual from obtaining needed care.

Medicare pays for different levels of ambulance services, which reflect the staff training and equipment required to meet the patient's medical condition or health needs. Generally, basic life support is provided by emergency medical technicians (EMTs). Advanced life support is provided by EMTs with advanced training or by paramedics. Medicare pays for ambulance services according to a national fee schedule. The fee schedule establishes seven categories of ground ambulance services and two categories of air ambulance services. Some rural ground and air ambulance services may qualify for increased payments. Ambulance providers that are CAHs, or that are entities that are owned and operated by a CAH, are paid on a reasonable cost basis if they are the only ambulance provider within a 35 mile radius.

Medicare covers Part B services in rural health clinics (RHCs) and federally qualified health centers (FQHCs) provided by (1) physicians and specified non-physician practitioners; (2) visiting nurses for homebound patients in home health shortage areas; (3) registered dieticians or nutritional professionals for diabetes training and medical nutrition therapy; and (4) others, as well as otherwise covered drugs.

RHCs are paid based on an "all-inclusive" rate per beneficiary visit subject to a per visit upper limit, adjusted annually for inflation. Starting for the cost-reporting period on or after October 1, 2014, FQHCs are paid a base payment rate per day under a new prospective payment system. Each FQHC's rate is adjusted based on the location where the service is furnished using the geographic adjustment factors, which are the geographic practice cost indices (GPCI) used in Medicare's physician fee schedule (MPFS). This rate is increased by 34% for new patients (those not seen in the FQHC organization within the past three years). The 34% adjustment also applies when a beneficiary receives a comprehensive initial Medicare visit (an initial preventive physician examination or an initial annual wellness visit) or a subsequent annual wellness visit.

Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person amount to provide all Medicare covered benefits (except hospice) to beneficiaries who enroll in their plan. Medicare beneficiaries who are eligible for Part A, enrolled in Part B, and do not have ESRD are eligible to enroll in an MA plan if one is available in their area. Some MA plans may choose their service area (local MA plans), while others agree to serve one or more regions defined by the Secretary (regional MA plans). In 2016, nearly all Medicare beneficiaries have access to an MA plan and approximately 31% of beneficiaries are enrolled in one. Private plans may use different techniques to influence the medical care used by enrollees. Some plans, such as health maintenance organizations (HMOs), may require enrollees to receive care from a restricted network of medical providers; enrollees may be required to see a primary care physician who will coordinate their care and refer them to specialists as necessary. Other types of private plans, such as private fee-for-service (PFFS) plans, may look more like original Medicare, with fewer restrictions on the providers an enrollee can see and minimal coordination of care.

In general, MA plans offer additional benefits or require smaller co-payments or deductibles than original Medicare. Sometimes beneficiaries pay for these additional benefits through a higher monthly premium, but sometimes they are financed through plan savings. The extent of extra benefits and reduced cost sharing varies by plan type and geography. However, MA plans are seen by some beneficiaries as an attractive alternative to more expensive supplemental insurance policies found in the private market.

By contract with CMS, a plan agrees to provide all required services covered in return for a capitated monthly payment adjusted for the demographics and health history of actually enrolled beneficiaries. The same monthly payment is made regardless of how many or few services a beneficiary actually uses. The plan is at-risk if costs, in the aggregate, exceed program payments; conversely, the plan can retain savings if aggregate costs are less than payments. Payments to MA plans are based on a comparison of each plan's estimated cost of providing Medicare covered services (a bid) relative to the maximum amount the federal government will pay for providing those services in the plan's service area (a benchmark). If a plan's bid is less than the benchmark, its payment equals its bid plus a rebate. The size of the rebate is dependent on plan quality and ranges from 50% to 70% of the difference between the bid and the benchmark. The rebate must be returned to enrollees in the form of additional benefits, reduced cost sharing, reduced Part B or Part D premiums, or some combination of these options. If a plan's bid is equal to or above the benchmark, its payment will be the benchmark amount and each enrollee in that plan will pay an additional premium, equal to the amount by which the bid exceeds the benchmark.

The MA benchmarks are determined through statutorily specified formulas that have changed over time. Since BBA 97, formulas have increased the benchmark amounts, in part, to encourage plan participation in all areas of the country. As a result, however, the benchmark amounts (and plan payments) in some areas are higher than the average cost of original FFS Medicare. The ACA changed the way benchmarks are calculated by tying them closer to (or below) spending in FFS Medicare, and adjusting them based on plan quality. At the time of passage, CBO expected the ACA changes to result in reduced MA enrollment and plan subsidies for extra benefits, though the impact was expected to vary by market. Subsequently, the Secretary announced an MA plan quality demonstration to test whether different structures of bonus payments lead to greater quality improvements. The demonstration increased the size of the quality-adjusted benchmarks above levels authorized in the ACA and expanded the number of plans eligible to receive quality-adjusted benchmarks. The demonstration may have mitigated some of the reductions in enrollment and extra plan benefits that had been expected with the passage of the ACA. The final year of the quality bonus demonstration was 2014.

In 2006, the MA program began to offer MA regional plans. Regional MA plans must agree to serve one or more regions designated by the Secretary. There are 26 MA regions consisting of states or groups of states. Regional plan benchmarks include two components: (1) a statutorily determined amount (comparable to benchmarks described above) and (2) a weighted average of plan bids. Thus, a portion of the benchmark is competitively determined. Similar to local plans, plans with bids below the benchmark are given a rebate, while plans with bids above the benchmark require an additional enrollee premium.

In general, MA eligible individuals may enroll in any MA plan that serves their area. However, some MA plans may restrict their enrollment to beneficiaries who meet additional criteria. For example, employer-sponsored MA plans are generally only available to the retirees of the company sponsoring the plan. In addition, Medicare Special Needs Plans (SNPs) are a type of coordinated care MA plan that exclusively enrolls, or enrolls a disproportionate percentage of, special needs individuals. Special needs individuals are any MA eligible individuals who are either institutionalized as defined by the Secretary, eligible for both Medicare and Medicaid, or have a severe or disabling chronic condition and would benefit from enrollment in a specialized MA plan.

Medicare Part D provides coverage of outpatient prescription drugs to Medicare beneficiaries who choose to enroll in this optional benefit.⁵⁴ (As previously discussed, Part B provides limited coverage of some outpatient prescription drugs.) In 2015, close to 42 million (about 76%) eligible Medicare beneficiaries are enrolled in Part D. Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through Medicare Advantage prescription drug plans (MA-PDs), which offer prescription drug coverage that is integrated with the health care coverage they provide to Medicare beneficiaries under Part C. Plans must meet certain minimum requirements; however, there are significant variations among them in benefit design, including differences in premiums, drugs included on plan formularies, and cost sharing for particular drugs.

CMS administers the Medicare program through contracts with private entities, such as Medicare Administrative Contractors (MACs). MACs help CMS to run Medicare's day-to-day operations by serving as the primary operational contact with the approximately 1.5 million FFS providers and suppliers enrolled in Medicare. MACs process and pay reimbursement claims, enroll providers and suppliers, educate providers and suppliers on billing requirements, support appeal processes, and answer provider and supplier inquiries through call centers, as well as other activities.⁵⁸

In FY2014, Medicare FFS RACs identified approximately $2.57 billion in claim corrections, $2.39 billion of which were overpayments and $173 million were underpayments.⁶⁶ Taking into consideration all FY2014 program costs, including contingency fees paid to RACs, administrative costs, and amounts overturned on appeal, Medicare FFS RACs returned approximately $1.6 billion to the Medicare Trust Funds.⁶⁷

Since 2007, higher-income enrollees pay higher premiums.⁷⁶ In 2016, individuals whose modified adjusted gross income (AGI) exceeds $85,000 and each member of a couple filing jointly whose modified AGI exceeds $170,000 are subject to higher premium amounts. These higher-income premiums range from 35% to 80% of the value of Part B and affect about 6% of Medicare Part B enrollees.⁷⁷ Income thresholds used to determine high-income premiums for 2011 through 2017 are frozen at the 2010 levels.⁷⁸

Payments for spending under the Medicare Advantage program are made in appropriate portions from the HI and SMI trust funds. There is no separate trust fund for Part C.

Medicare Part D is financed through a combination of beneficiary premiums and federal general revenues. In addition, certain transfers are made from the states. These transfers, referred to as "clawback payments," represent a portion of the amounts states could otherwise have been expected to pay for drugs under Medicaid if drug coverage for the dual eligible population had not been transferred to Part D. Part D revenues are credited to a separate Part D account within the SMI trust fund. In CY2016, total spending for Part D is estimated to reach approximately $101 billion, with about $76 billion of that amount paid for by general revenues, $16 billion from beneficiary premiums, and $10 billion from state transfers.⁷⁹

In 2016, the base beneficiary premium is $34.10;⁸⁰ however, beneficiaries pay different premiums depending on the plan they have selected and whether they are entitled to low-income premium subsidies.⁸¹ Additionally, beginning in 2011, higher income Part D enrollees pay higher premiums.⁸² (The income thresholds are the same as for Part B, as described above.) On average, beneficiary premiums are set at 25.5% of expected total Part D costs for basic coverage.

ACA

ACO

Accountable Care Organization

AGI

Adjusted Gross Income

APC

Ambulatory Payment Classification

APM

Alternative Payment Model

ASC

Ambulatory Surgical Center

ATRA

BBA 97

BBA 15

Bipartisan Budget Act of 2015 (P.L. 114-74)

BBRA

BCA

BIPA

CAH

Critical Access Hospital

CBO

Congressional Budget Office

CERT

Comprehensive Error Rate Testing

CHIP

State Children's Health Insurance Program

CMI

Center for Medicare and Medicaid Innovation

CMS

Centers for Medicare & Medicaid Services

CORF

Comprehensive Outpatient Rehabilitation Facility

CPI

Consumer Price Index

CPI-U

Consumer Price Index for Urban Consumers

DGME

Direct Graduate Medical Education

DME

Durable Medical Equipment

DMEPOS

Durable Medical Equipment, Prosthetics, Orthotics, and Other Medical Supplies

DRA

DRG

Diagnosis Related Group

DSH

Disproportionate Share Hospital

ESRD

End-Stage Renal Disease

FFS

Fee-for-Service

FPL

Federal Poverty Level

FQHC

Federally Qualified Health Center

GAO

Government Accountability Office

GDP

Gross Domestic Product

GME

Graduate Medical Education

HCERA

HHA

Home Health Agency

HHRG

Home Health Resource Group

HHS

Department of Health and Human Services

HI

Hospital Insurance (Medicare Part A)

HMO

Health Maintenance Organization

HOPD

Hospital Outpatient Department

IME

Indirect Medical Education

IPAB

Independent Payment Advisory Board

IMPACT

IPF

Inpatient Psychiatric Facility

IPPS

Inpatient Prospective Payment System

IRF

Inpatient Rehabilitation Facility

LIS

Low-Income Subsidy

LTC

Long-Term Care

LTCH

Long-Term Care Hospital

MA

Medicare Advantage

MA-PD

Medicare Advantage – Prescription Drug (Plan)

MAC

Medicare Administrative Contractor

MACRA

Medicare Access and CHIP Reauthorization Act of 2015 (P.L. 114-10)

MCTRJCA

Middle Class Tax Relief and Job Creation Act of 2012

MEDIC

Medicare Drug Integrity Contractor

MedPAC

Medicare Payment Advisory Commission

MEI

Medical Economic Index

MIPPA

MMA

MMSEA

MS-DRG

Medicare Severity Diagnosis Related Groups

MSP

Medicare Savings Program

OIG

Office of Inspector General

OMB

Office of Management and Budget

OPPS

Outpatient Prospective Payment System

OT

Occupational Therapy

PAMA

PBD

Provider-Based Department

PDP

Prescription Drug Plan

PFFS

Private Fee-for-Service

PO

Prosthetics and Orthotics

PPS

Prospective Payment System

PQRS

Physician Quality Reporting System

PT

Physical Therapy

QI

Qualified Individual

QIO

Quality Improvement Organization

QMB

Qualified Medicare Beneficiary

RAC

Recovery Audit Contractor

RBRVS

Resource-Based Relative Value Scale

RHC

Rural Health Clinic

RUG

Resource Utilization Group

SCH

Sole Community Hospital

SGR

Sustainable Growth Rate

SLMB

Specified Low-Income Beneficiaries

SLP

Speech-Language Pathology (services)

SMI

Supplementary Medical Insurance (Medicare Parts B and D)

SNF

Skilled Nursing Facility

SNP

Special Needs Plan

SSA

Social Security Act

SSI

Supplemental Security Income

TRHCA

USPSTF

United States Preventive Services Task Force

ZPIC

Zone Program Integrity Contractor

2016 Premiums, Deductible, and Additional Cost Sharing

Premiums

Yearly income in 2014 (2015 Tax Return)

File Individual Tax Return

File Joint Tax Return

$85,000 or less

$170,000 or less

above $85,000 up to $107,000

above $170,000 up to $214,000

$170.50

above $107,000 up to $160,000

above $214,000 up to $320,000

$243.60

above $160,000 up to $214,000

above $320,000 up to $428,000

$316.70

above $214,000

above $428,000

$389.80

Deductible

Deductible

$166 per year

Additional Cost Sharing

Physician and Non-Physician Practitioner Services

20% co-insurance, plus up to an additional 15% of the amount if the medical provider does not accept assignment

Outpatient Hospital Care

20% coinsurance

Ambulatory Surgical Services

20% coinsurance

Durable Medical Equipment

20% coinsurance

Physical, Occupational, and Speech Therapy

20% coinsurance, certain limits may apply

Clinical Laboratory Services

No coinsurance, deductible does not apply

Home Health

No coinsurance, deductible does not apply

Outpatient Mental Health Services

20% coinsurance

Most Preventive Services

No coinsurance

Premiums

Yearly Income in 2014 (2015 Tax Return)

File Individual Tax Return

File Joint Tax Return

$85,000 or less

$170,000 or less

Plan Premium

above $85,000 up to $107,000

above $170,000 up to $214,000

Plan Premium + $12.70

above $107,000 up to $160,000

above $214,000 up to $320,000

Plan Premium + $32.80

above $160,000 up to $214,000

above $320,000 up to $428,000

Plan Premium + $52.80

above $214,000

above $428,000

Plan Premium + $72.90

Deductible and Additional Cost Sharing

The amounts below apply to the standard Part D benefit; actual benefits and cost-sharing requirements may vary by plan. Beneficiaries receiving low-income subsidies pay reduced cost-sharing amounts.

Deductible

$360

25% coinsurance

Author Contact Information

Footnotes

The U.S. Census Bureau estimates the resident population for the United States, regions, states, and Puerto Rico to be roughly 319 million people as of July 2014. In 2014, 53.5 million beneficiaries were enrolled in the Medicare program. For more information on Medicare enrollment, see Department of Health and Human Services (HHS), Fiscal Year 2016 Budget in Brief: Strengthening Health and Opportunity for All Americans, 2015, p. 64, at http://www.hhs.gov/sites/default/files/budget/fy2016/fy-2016-budget-in-brief.pdf.

HHS, Fiscal Year 2017 Budget in Brief: Strengthening Health and Opportunity for All Americans, 2016, p. 66, at http://www.hhs.gov/sites/default/files/fy2017-budget-in-brief.pdf.

Congressional Budget Office (CBO), "March 2015 Medicare Baseline," March 9, 2015, at https://www.cbo.gov/sites/default/files/51302-2015-03-Medicare.pdf.

This estimate of benefit spending includes expected reductions in benefit payments due to sequestration under the Budget Control Act of 2011 (BCA; P.L. 112-25) but does not include projected amounts paid to providers and later recovered. If recoveries are included, total benefit spending in 2016 is expected to be $669 billion.

Also known as "customary, prevailing and reasonable charges," this method based physician payments on charges commonly used by physicians in a local community. The payment for a service was the lowest of (1) the physician's billed charge for the service, (2) the physician's customary charge for the service, or (3) the prevailing charge for that service in the community.

End-stage renal disease (ESRD) is a stage of kidney impairment that appears to be irreversible and permanent, requiring a regular course of dialysis treatments or a kidney transplantation to maintain life.

For additional information on major legislative changes to Medicare from 1997 through 2014, see Chapter 2 of the House Committee on Ways and Means 2014 Greenbook at http://greenbook.waysandmeans.house.gov/2014-green-book/chapter-2-medicare.

For more information, see archived CRS Report RL31966, Overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

For more information, see CRS Report R40082, Medicare: Part B Premiums, by [author name scrubbed].

For more information, see CRS Report RS22796, Medicare Trigger, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

For more information, see archived CRS Report RL34360, P.L. 110-173: Provisions in the Medicare, Medicaid, and SCHIP Extension Act of 2007.

For more information, see archived CRS Report RL34592, P.L. 110-275: The Medicare Improvements for Patients and Providers Act of 2008.

For more information, see CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline, coordinated by [author name scrubbed].

See CRS Report R41511, The Independent Payment Advisory Board, by [author name scrubbed] and [author name scrubbed].

Groups of providers and suppliers who work together to manage and coordinate care for Medicare fee-for-service beneficiaries. See CRS Report R41474, Accountable Care Organizations and the Medicare Shared Savings Program, by [author name scrubbed].

Post-acute care is the skilled nursing care and therapy typically furnished after an inpatient hospital stay. It is provided in a variety of settings, including skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, and in patients' homes by home health agencies.

See CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10), coordinated by [author name scrubbed] and Kirstin B. Blom.

For more information, see CRS Report RS22195, Social Security Disability Insurance (SSDI) and Medicare: The 24-Month Waiting Period for SSDI Beneficiaries Under Age 65, by [author name scrubbed].

Centers for Medicare & Medicaid Services (CMS), "2016 Medicare Parts A & B Premiums and Deductibles Announced," press release, November 10, 2015, at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-11-10.html.

For more information, see CRS Report R40082, Medicare: Part B Premiums, by [author name scrubbed].

CMS, "2016 Medicare Parts A & B Premiums and Deductibles Announced," press release, November 10, 2015, at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-11-10.html. Due to a 0% Social Security cost-of-living adjustment in 2016, about 70% of Medicare Part B enrollees are protected by a "hold-harmless" provision in the Social Security Act that prevents their Social Security benefits from being reduced as a result of an increase in Medicare Part B premiums. These individuals are continuing to pay the 2015 monthly premium amount of $104.90 through 2016.

Starting in 2011, Medicare Advantage (MA) enrollees are only permitted to drop out of their MA plans and return to original Medicare during the first 45-day period of each calendar year. Though they are no longer allowed to switch to another MA plan as they were able to do previously, MA enrollees who use the 45-day period to disenroll from their MA plan may enroll in a stand-alone Part D prescription drug plan (PDP), or may elect to enroll in other non-Medicare Advantage private plan options, such as a Medicare Cost plan or a demonstration plan. MA enrollees will still be able to switch plans during special enrollment periods, such as when an MA enrollee moves outside his or her plan's service area or if an enrollee's MA plan is terminated.

In addition to the yearly Medicare & You Handbook (http://www.medicare.gov/publications/pubs/pdf/10050.pdf), which is mailed to beneficiaries' homes, beneficiaries can consult http://www.Medicare.gov to find information such as the items and services covered under Medicare, cost sharing requirements, participating medical providers and private health plan, and nursing home quality scores.

If a Medicare beneficiary enrolls in a Private Fee-for-Service (PFFS) plan that does not provide drug coverage, he or she may enroll in a stand-alone Prescription Drug Plan (PDP). However, enrollees in other types of MA plans who want Part D prescription drug coverage must choose a Medicare Advantage Prescription Drug (MA-PD) plan, which is an MA plan that provides all Medicare required parts A, B, and D benefits. If a Medicare beneficiary enrolls in a local HMO or regional PPO that does not offer drug coverage, he or she does not have the option to enroll in a stand-alone PDP plan.

For additional information on enrollment periods see Medicare Publications: "Enrolling in Medicare Part A & Part B," at http://www.medicare.gov/Pubs/pdf/11036.pdf; and "Understanding Medicare Part C & D Enrollment Periods," at http://www.medicare.gov/Publications/Pubs/pdf/11219.pdf.

CMS, "CMS Fast Facts," December 2015 version, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Fast-Facts/. This percentage only includes those enrolled in original fee-for-service (FFS) Medicare and does not include those enrolled in Medicare Advantage.

CMS, "2016 Medicare Parts A & B Premiums and Deductibles Announced," press release, November 10, 2015, at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-11-10.html.

Additionally, other hospitals that are exempt from the inpatient prospective payment system (IPPS) and are reimbursed by Medicare under different methods include hospitals in Maryland, hospitals located in U.S. territories (with the exception of Puerto Rico), and hospitals of the Indian Health Service.

For additional information on Medicare's skilled nursing facility benefit, see CRS Report R42401, Medicare Skilled Nursing Facility Primer: Benefit Basics and Issues, by [author name scrubbed].

CMS, "2016 Medicare Parts A & B Premiums and Deductibles Announced," press release, November 10, 2015, at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-11-10.html.

CMS, "CMS Fast Facts," December 2015 version, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Fast-Facts/. This percentage includes only those enrolled in original FFS Medicare. It does not include those enrolled in Medicare Advantage.

Certain durable medical equipment suppliers in competitive bidding areas are required to accept assignment.

For details, see CRS Report R40907, Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System, by [author name scrubbed].

For more discussion of alternative payment models (APMs) and the new methodology for determining payment updates for services provided by physician and other practitioners, see CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10), coordinated by [author name scrubbed] and Kirstin B. Blom.

For more information, see CMS, "Payment Adjustment Information," at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/PQRS/Payment-Adjustment-Information.html.

The Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96) and American Taxpayer Relief Act of 2012 (P.L. 112-240) applied the cap and threshold to therapy services furnished in hospital outpatient departments and critical access hospitals in 2012 and 2013.

For more information, see CMS, "Therapy Services," at https://www.cms.gov/Medicare/billing/therapyServices/index.html.

This section was written by [author name scrubbed], Specialist in Public Health and Epidemiology at the Congressional Research Service.

Social Security Act §1862(a)(1)(A); 42 U.S.C. 1395y(a)(1)(A).

See CMS Medicare Learning Network Matters publications "Calendar Year (CY) 2015/[2016] Annual Update for Clinical Laboratory Fee Schedule and Laboratory Services Subject to Reasonable Charge Payment," at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9028.pdf and http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/MM9465.pdf.

For details, see the proposed rule at HHS, CMS, "Medicare Program; Medicare Clinical Diagnostic Laboratory Tests Payment System," 80 Federal Register 59386, October 1, 2015, at https://www.gpo.gov/fdsys/pkg/FR-2015-10-01/pdf/2015-24770.pdf.

See General Accounting Office (GAO) report, "Medicare Payments for Oxygen," May 15, 1997, GAO-97-120R; HHS Office of the Inspector General report, "Medicare Home Oxygen Equipment: Cost and Servicing," September 2006, OEI-09-04-00420.

See CMS, "DMEPOS Competitive Bidding Program," at http://www.dmecompetitivebid.com/palmetto/cbic.nsf/DocsCat/Home, and CRS Report R43123, Medicare Durable Medical Equipment: The Competitive Bidding Program, by [author name scrubbed].

Biologics generally are derived from living organisms rather than inorganic chemical compounds.

Additionally, starting in 2006, rural sole community hospitals (SCHs) receive an additional 7.1% in Medicare payments. Special payment protections apply to cancer hospitals, children's hospitals, small rural hospitals (that are not SCHs) with 100 or fewer beds, and SCHs.

MedPAC, Report to the Congress: Medicare Payment Policy, March 2012, at http://www.medpac.gov/documents/reports/march-2012-report-to-the-congress-medicare-payment-policy.pdf.

New provider-based (PDB) off-campus hospital outpatient departments (HOPDs) would be HOPDs that had not billed Medicare under the Outpatient Prospective Payment System prior to the date of enactment of the Bipartisan Budget Act of 2015 (BBA 15, P.L. 114-74) on November 2, 2015.

New office-based procedures are services that are performed in physician offices at least 50% of the time. Payment is set at the lower of the ambulatory surgical center rate or the practice expense portion of the physician fee schedule payment rate.

Under certain circumstances, Part B will cover an non-emergency ambulance service during a Part A covered stay, including transport of a skilled nursing facility (SNF) resident with end-stage renal disease to and from a dialysis facility for dialysis services.

The Part D program was created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (P.L. 108-173), and began in 2006. For additional information, see CRS Report R40611, Medicare Part D Prescription Drug Benefit, by [author name scrubbed] and [author name scrubbed].

CMS, Announcement of Calendar Year (CY) 2016 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter, April 6, 2015, at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2016.pdf. The actual level of total covered Part D spending before reaching the catastrophic threshold will depend on whether the individual qualifies for the low-income subsidy and the portion of brand name and generic drugs purchased during the coverage gap. For enrollees who do not receive the LIS, the amounts paid by the beneficiary and the 50% manufacturer discount count as out-of-pocket costs, while the 5% coverage by Medicare of the cost of brand name drugs and the 35% coverage of the cost of generic drugs do not.

For additional information, see CRS Report R41196, Medicare Provisions in the Patient Protection and Affordable Care Act (PPACA): Summary and Timeline, coordinated by [author name scrubbed].

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) changed how these subsidies are treated for tax purposes. Originally, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (P.L. 108-173) allowed employers to exclude the retiree drug subsidies from their gross income, as well as claim a business deduction for retiree prescription drug expenses. Beginning in 2013, the allowed deduction for retiree prescription drug coverage is reduced by the amount of the federal drug subsidy received. For additional information, see archived CRS Report R41128, Health-Related Revenue Provisions in the Patient Protection and Affordable Care Act (ACA).

Annually, Medicare Administrative Contractors (MACs) process about 1.2 billion Medicare FFS claims.

CMS began the acquisition process in November 2005. The first round of MAC procurements included all procurements completed or in progress of as of September 1, 2010.

For more information, see CMS, "Medicare Contracting Reform," at https://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/VisionofFutureFeeforServiceMedicareEnvironment.html.

CMS to Delay Further Medicare Administrative Contractor (MAC) Jurisdiction Consolidations, March 19, 2014, at http://www.cms.gov/Medicare/Medicare-Contracting/Medicare-Administrative-Contractors/Downloads/RFI-Announcement-AB-MAC-March-2014.pdf.

Most program integrity authority was originally provided in the Health Insurance Portability and Accountability Act of 1996 (HIPAA; P.L. 104-191), although a number of other laws have added fraud and abuse authority and expanded HIPAA funding.

The Medicare Supplemental Medical Review Contractor (SMRC) is StrategicHealthSolutions, LLC. The SMRC performs medical review on Parts A and B, including DME as directed by CMS. The SMRC evaluates medical documentation to verify whether Medicare claims comply with coverage, coding, payment, and billing requirements. See CMS, "Supplemental Medical Review Contractor (SMRC)," at http://cms.hhs.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/SMRC.html.

Recovery Audit Contractors (RACs) identify improper payments, but MACs are responsible for recovering or refunding Parts A and B over- and underpayments.

Medicare's four FFS RACs are Region A: Performant Recovery, Region B: CGI, Inc., Region C: Connolly, Inc., and Region D: HealthDataInsights.

CMS, Recovery Auditing in Medicare for Fiscal Year 2014, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/Downloads/RAC-RTC-FY2014.pdf.

Ibid. For comparison, in FY2013, the Medicare FFS RAC program returned approximately $3.04 billion to the Medicare Trust Funds (see Appendix B at https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program/Downloads/FY-2013-Report-To-Congress.pdf).

For more information on Medicare financing, see CRS Report R43122, Medicare Financial Status: In Brief, by [author name scrubbed].

For additional information, see Internal Revenue Service, Questions and Answers for the Additional Medicare Tax, at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax.

For additional information on Hospital Insurance solvency estimates, see CRS Report RS20946, Medicare: Insolvency Projections, by [author name scrubbed].

2015 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, Table III.C4, p. 86. BBA 15 decreased the premiums payable by those not held harmless in 2016 thus reducing expected income from premiums by about $7 billion and increasing general revenue transfers by that same amount.

For more information, see CRS Report R40082, Medicare: Part B Premiums, by [author name scrubbed].

CMS, "2016 Medicare Parts A & B Premiums and Deductibles Announced," press release, November 10, 2015, at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-11-10.html.

There are four high-income premium tiers; depending on income, beneficiaries can pay 35%, 50%, 65%, or 80% of per capita Parts B (or D) expenditures. For additional information, see Social Security publication, Medicare Premiums: Rules for Higher-Income Beneficiaries, at http://www.socialsecurity.gov/pubs/EN-05-10536.pdf.

§3402 of the ACA froze the thresholds used to determine high-income premiums at the 2010 level. These levels will be maintained through 2017. In 2018 and 2019, §402 of MACRA will maintain the freeze on the income thresholds for the lower two high-income premium tiers but reduce the threshold levels for the two highest income tiers so that more beneficiaries will fall into the higher percentage categories. Beginning in 2020, the income thresholds for all income categories will be adjusted annually for inflation. These changes are applicable to both Medicare Parts B and D high-income premiums. See CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10), coordinated by [author name scrubbed] and Kirstin B. Blom.

CMS, Annual Release of Part D National Average Bid Amount and other Part C and D Bid Information, July 29, 2015.

There is no "hold harmless" provision under Part D similar to that under Part B. Part D premium increases are not affected by Social Security cost-of-living adjustments.

For a comprehensive discussion of the BCA, see CRS Report R41965, The Budget Control Act of 2011, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

For additional information, see CRS Report R42884, The "Fiscal Cliff" and the American Taxpayer Relief Act of 2012, coordinated by [author name scrubbed].

§1205 of the act also changed the sequestration percentages for Medicare in the last year of sequestration. Instead of reducing Medicare benefits by a uniform 2% throughout the year, the sequestration level during the first six months is to be 2.9% and in the last six months, 1.1%.

The Protecting Access to Medicare Act of 2014 (PAMA; P.L. 113-93) adjusted the Medicare sequestration reductions in FY2024 to 4% for the first six months and 0% for the last six months.

BBA 15 §101(c). BBA 15 also modified the FY2024 sequestration adjustments so that reductions will be a uniform 2% through the entire fiscal year (instead of 4% for the first six months and 0% for the last six months, see footnote 86), and adjusted the FY2025 Medicare sequestration reductions to 4% for the first six months and 0% for the last six months.

The first sequestration order was issued March 1, 2013. See Office of Management and Budget (OMB), OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013, March 1, 2013, at http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/fy13ombjcsequestrationreport.pdf.

§256(d) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177) contains special rules for the Medicare program in case of a sequestration. While BBEDCA ordinarily limits reduction of certain Medicare spending to 4% under a sequestration order, the BCA limits the size of this reduction to 2%. See CRS Report R42050, Budget "Sequestration" and Selected Program Exemptions and Special Rules, coordinated by [author name scrubbed].

See CMS accounts in OMB, OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2016, February 2, 2015, at https://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/sequestration/2016_jc_sequestration_report_speaker.pdf.

Starting in 2011, all MA plans are required to include a maximum out-of-pocket (OOP) limit determined by CMS. Prior to 2011, only MA regional plans were required to include a catastrophic cap on OOP spending.

See CRS Report R43357, Medicaid: An Overview, coordinated by [author name scrubbed].

In addition to individuals eligible for full Medicaid benefits, other low-income Medicare beneficiaries are entitled to limited benefits under the Medicare Savings Program (MSP). MSP includes three benefit categories each with different benefit levels: (1) Qualified Medicare Beneficiaries (QMBs), (2) Specified Low-Income Beneficiaries (SLMB), and (3) Qualified Individuals (QIs). For QMBs, state Medicaid programs pay Medicare Part B premiums and Medicare cost sharing (deductibles and co-payments) when beneficiaries' incomes are under 100% of the federal poverty level (FPL). For SLMBs, state Medicaid programs pay Part B premiums when beneficiaries' incomes are between 100% and 120% of the FPL. For QIs, Medicaid pays premiums when beneficiaries' incomes are between 120% and 135% of poverty. To be eligible for MSP, Medicare beneficiaries must also meet Medicaid's other eligibility requirements (e.g., meet citizenship or legal residency requirements).

See CRS Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions, by [author name scrubbed], and CRS Report RL33537, Military Medical Care: Questions and Answers, by [author name scrubbed].

Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Cost and Use File, 2010, in A Primer on Medicare, March 2015, Figure 12, at http://files.kff.org/attachment/report-a-primer-on-medicare-key-facts-about-the-medicare-program-and-the-people-it-covers.