Journal of Gerontological Nursing

MEDICARE AND MEDICAID: Similarities and Differences

Karen Devereaux Melillo, PHD, RN, CS

Abstract

The Standards of Gerontological Nursing Practice (ANA7 1987) serve as a model for professional practice toward which gerontological nurses can strive (p. 1). Standard L: Organization of Gerontological Nursing Services, identifies two process criteria, in particular, which have relevance to this article:

15. Maintains the compliance of the nursing service with local, state, and federal guidelines and regulations, and

16. Supports community services and affiliations for clients and families, including those clients who are to be discharged.

With today's health care reform environment, concrete knowledge and understanding of the nuances of Medicare and Medicaid as they relate to reimbursement of health care services to older adults, is crucial. Additionally, as responsible citizens, gerontological nurses must have a strong foundation in the current health care reimbursement schema to participate in effecting policy change.

Benefits and eligibility criteria for Medicare and Medicaid are often "overlooked, misunderstood, and underutilized by professionals and lay people" alike (Nutrition Screening Initiative, 1992, p. 18), which can ultimately impact on an individual's health status.

OVERVIEW

The older population - persons 65 years or older - numbered 33.2 million in 1994, representing 12.7% of the U.S. population (AARP & AOA, 1996). People 65+ account for over one-third of the country's total personal health care expenditures. Per capita spending for health care for the elderly reached $5,360 in 1987; of this total, the elderly paid more than one-third (37.4%) through direct payments to providers or indirectly through premiums for insurance (U.S. Senate Special Committee on Aging, 1991, p. 133). Public funds are the major source of health care payments for people age 65+, with Medicare accounting for 45% and Medicaid 12% of personal health care expenditures for the elderly by source of payment (U.S Senate Special Committee on Aging, Chart 4-10, 1991, p. 136). Even with the substantial contribution of public funds, the elderly bear a considerable financial burden for health care out of their own pockets.

Medicare's role primarily involves financing of acute care services (Figure 1), with 58% going to hospitals, 24% to physicians, 14% to "other," and only 5% to nursing homes (HCFA, Office of the Actuary, February 1995).

In contrast, most of the Medicaid payments for the elderly are for the small portion of the population that uses long-term care (U.S. Senate Special Committee on Aging, 1991, p. 139). In fact, Medicaid is the principal source of public financing for nursing home care, paying 43% of all nursing home expenditures in 1989 (U.S. Senate Special Committee on Aging, 1991, p. 138). In 1994, 84% of the $6.3 billion in national Medicaid long-term care spending on the elderly went for nursing facility services (Figure 2).

According to the U.S. Department of Health and Human Services, the Medicare and Medicaid programs virtually assure universal coverage for the elderly. For 1992, the Bureau of the Census estimated that less than 1% of the U.S. non-institutional elderly were uninsured (U.S. DHHS, 1995, p. 128). Medicare coverage for the elderly is linked to Social Security coverage. Ninety-six percent of the U.S. elderly were covered by Medicare in 1992. For elderly living in families with incomes below 150% of the federal poverty level, over 97% were covered by Medicare or by both Medicare and Medicaid (U.S. DHHS, 1995). Nonetheless, the out-of-pocket expenses and spenddown policy required for Medicaid eligibility suggest that this "universal coverage" is not without serious limitations.

Medicare's total enrollment of 35.6 million represents 32 million aged and 3.6 million disabled persons; also included in the total are more than 0.2 million persons with end-stage renal disease (U.S. DHHS, 1995). The Medicaid program provided health insurance to 9.1% of…

The Standards of Gerontological Nursing Practice (ANA7 1987) serve as a model for professional practice toward which gerontological nurses can strive (p. 1). Standard L: Organization of Gerontological Nursing Services, identifies two process criteria, in particular, which have relevance to this article:

15. Maintains the compliance of the nursing service with local, state, and federal guidelines and regulations, and

16. Supports community services and affiliations for clients and families, including those clients who are to be discharged.

With today's health care reform environment, concrete knowledge and understanding of the nuances of Medicare and Medicaid as they relate to reimbursement of health care services to older adults, is crucial. Additionally, as responsible citizens, gerontological nurses must have a strong foundation in the current health care reimbursement schema to participate in effecting policy change.

Benefits and eligibility criteria for Medicare and Medicaid are often "overlooked, misunderstood, and underutilized by professionals and lay people" alike (Nutrition Screening Initiative, 1992, p. 18), which can ultimately impact on an individual's health status.

OVERVIEW

The older population - persons 65 years or older - numbered 33.2 million in 1994, representing 12.7% of the U.S. population (AARP & AOA, 1996). People 65+ account for over one-third of the country's total personal health care expenditures. Per capita spending for health care for the elderly reached $5,360 in 1987; of this total, the elderly paid more than one-third (37.4%) through direct payments to providers or indirectly through premiums for insurance (U.S. Senate Special Committee on Aging, 1991, p. 133). Public funds are the major source of health care payments for people age 65+, with Medicare accounting for 45% and Medicaid 12% of personal health care expenditures for the elderly by source of payment (U.S Senate Special Committee on Aging, Chart 4-10, 1991, p. 136). Even with the substantial contribution of public funds, the elderly bear a considerable financial burden for health care out of their own pockets.

Medicare's role primarily involves financing of acute care services (Figure 1), with 58% going to hospitals, 24% to physicians, 14% to "other," and only 5% to nursing homes (HCFA, Office of the Actuary, February 1995).

In contrast, most of the Medicaid payments for the elderly are for the small portion of the population that uses long-term care (U.S. Senate Special Committee on Aging, 1991, p. 139). In fact, Medicaid is the principal source of public financing for nursing home care, paying 43% of all nursing home expenditures in 1989 (U.S. Senate Special Committee on Aging, 1991, p. 138). In 1994, 84% of the $6.3 billion in national Medicaid long-term care spending on the elderly went for nursing facility services (Figure 2).

According to the U.S. Department of Health and Human Services, the Medicare and Medicaid programs virtually assure universal coverage for the elderly. For 1992, the Bureau of the Census estimated that less than 1% of the U.S. non-institutional elderly were uninsured (U.S. DHHS, 1995, p. 128). Medicare coverage for the elderly is linked to Social Security coverage. Ninety-six percent of the U.S. elderly were covered by Medicare in 1992. For elderly living in families with incomes below 150% of the federal poverty level, over 97% were covered by Medicare or by both Medicare and Medicaid (U.S. DHHS, 1995). Nonetheless, the out-of-pocket expenses and spenddown policy required for Medicaid eligibility suggest that this "universal coverage" is not without serious limitations.

Medicare's total enrollment of 35.6 million represents 32 million aged and 3.6 million disabled persons; also included in the total are more than 0.2 million persons with end-stage renal disease (U.S. DHHS, 1995). The Medicaid program provided health insurance to 9.1% of the U.S. civilian, non-institutional population. Another 1.6% of the population was dually enrolled in Medicaid and Medicare. While children account for about half of the Medicaid enrollees, they generate only 16% of Medicaid payments. The smallest groups of Medicaid enrollees, the aged, disabled, and blind, accounted for about a quarter of Medicaid enrollees, but incurred about 70% of Medicaid payments (U.S. DHHS, 1995).

OVERVIEW OF THE MEDICARE PROGRAM

Title XVin of the Social Security Act, "Health Insurance for the Aged and Disabled," is commonly known as Medicare. Medicare legislation (part of the Social Security Amendments of 1965) established a health insurance program to complement the retirement, survivors. and disability insurance benefits provided under other titles of the Social Security Act. When first implemented in 1966, Medicare covered most persons 65 years of age or over. In 1973, legislation extended coverage to other groups: 1) persons entitled to disability benefits for 24 months or more; 2) persons with end-stage renal disease (ESRD) requiring dialysis or kidney transplant; and 3) certain non-covered persons who elect to buy into the programs through the payment of premiums (U.S. DHHS, 1995, p. 4).

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Coverage

Medicare consists of two parts: hospital insurance (HI), also known as Part A; and supplementary medical insurance (SMI) also known as Part B. Part A is usually provided automatically to persons 65 years of age or over and to most persons who are disabled for at least 24 months who are entitled to Social Security or Railroad Retirement benefits. Part A reimburses participating institutional providers for the inpatient hospital, skilled nursing facility (SNF), home health, and hospice services provided to enrolled persons.

Medicare's federal health insurance program helps defray many of the medical expenses of most Americans over 65. Persons eligible for Social Security may also apply for Medicare benefits.

Part A - A major aspect of Part A is the "benefit period," defined as the period that begins when the beneficiary first enters a hospital and ends when the beneficiary has been out of a hospital or other facility, primarily providing skilled nursing or rehabilitation services, for 60 concurrent days (including the day of discharge). There is no limit to the number of benefit periods that a beneficiary may have. If a beneficiary exhausts the 90 days of inpatient hospital care available in a benefit period, he or she can use days from a nonrenewable "lifetime reserve" of up to 60 additional days of care. In addition to the limits on number of days covered for inpatient hospital care and SNF care, Part A requires copayments.

Inpatient hospital care covers: semiprivate room, meals, regular nursing services, operating and recovery room costs, intensive care, drugs, laboratory tests. X-rays, and all other medically necessary services and supplies.

SNF care is covered under Part A only if it follows: within 30 days of a hospitalization of 3 or more days and is certified as medically necessary. Covered services are similar to those provided in an inpatient hospital setting and include rehabilitation services and appliances. Medicare limits covered SNF days to 100 per benefit period, with a copayment required for days 21 to 100. Part A does not cover nursing facility care if the patient does not require inpatient skilled nursing or other skilled rehabilitation services; that is. Medicare does not cover long-term custodial nursing care.

Home health agency (HHA) care, including homemaker aides, may be furnished by an HHA to a homebound beneficiary if intermittent or part-time skilled nursing care, physical therapy, or rehabilitation care is necessary. There must be a plan of treatment and periodic review by a physician. Home health care under Part A has no time or visit limits. The Medicare HHA benefit does not cover full-time nursing care, food, blood, or drugs.

The hospice care benefit was added in 1983. Hospices provide services to terminally ill persons with a life expectancy of 6 months or less who elect to forgo traditional medical treatment for the terminal illness and to receive only limited care. Such care includes pain relief, supportive medical and social services, physical therapy, nursing services, and symptom management. If a hospice patient requires treatment for a condition not related to the terminal illness, Medicare will pay for all necessary covered services. For the hospice program, the Medicare beneficiary pays a small coinsurance for drugs and the cost of respite care, but pays no deductibles. In addition, there is a cap on hospice expenditures per person.

Part B- helps pay for medically necessary doctor's services, outpatient hospital services and some other medical services. Enrollees must pay a monthly premium for Part B. Medicare will pay for many health care services but not all of them. Medicare does not cover custodial care or care that is not determined to be reasonable and necessary for the diagnosis or treatment of an illness or injury. In some instances, Medicare will pay for home infusion and other high-tech therapies as well as certain psychiatric services.

Part B benefits are available to almost all resident citizens 65 years of age or over; to certain aliens 65 years of age or over - even to those who are not entitled to Part A services; and to disabled beneficiaries entitled to Medicare Part A. Almost all persons entitled to Part A enroll in Part B. Part B coverage is optional, and beneficiaries must pay monthly premiums. Part B helps pay for the following medically necessary services (U.S. DHHS, 1995, p. 5):

* covered services provided by a physician in any location

* helps pay for diagnostic tests, radiology and pathology services,

* drugs that cannot be selfadministered,

* transfusions of blood and blood components

* medical supplies

* physical and occupational therapy

* speech pathology services

* outpatient mental health services.

Cost Sharing

Beneficiaries are responsible for Parts A and B charges not covered by the Medicare program and for various cost-sharing requirements for covered services. These liabilities may be paid by:

1) the Medicare beneficiary;

2) another third party, such as Medicaid, or

3) by additional private insurance purchased by the Medicare beneficiary (Medigap insurance).

Medigap insurance is private insurance that, within limits, pays most of the charges for which the beneficiary is responsible, and it must meet certain standards imposed by law. Most notable in the new standards is the creation of 10 uniform benefit packages by the National Association of Insurance Commissioners in which insurance companies which sell Medigap (or Medicare supplement insurance) are required to sell a "core" package and are allowed to sell up to nine other packages with a variety of benefit combinations (AARP, 1994b).

The beneficiary's Part A cost sharing includes an inpatient hospital deductible at the beginning of each benefit period ($736 in 1996), which approximates the cost of one day of hospital care. This covers the beneficiary's share of the costs for the first 60 days of inpatient hospital care during the benefit period. If more man 60 days of inpatient care are required, coinsurance payments equal to one-fourth of the inpatient hospital deductible ($184 per day in 1996) are required through the 90th day of a benefit. After the 90th day, the beneficiary may elect to draw on the 60-day lifetime reserve. For lifetime reserve days, coinsurance payments equal to one-half of the inpatient deductible ($368 in 1996) are required. Lifetime reserve days are not restored once they are used. When the lifetime reserve is exhausted. Medicare inpatient hospital coverage during the benefit period ends after the 90th day.

Under Part A, the first 20 days of SNF care are fully covered by Medicare; for days 21-100, coinsurance equal to one-eighth of the inpatient hospital deductible ($92 per day in 1996) is required. After 100 days of SNF care in a benefit period. Medicare coverage ends. Home health care requires no deductible or coinsurance. In any Part A service, the beneficiary is responsible for non-replacement fees for the first three pints or units of blood per calendar year. The beneficiary has the option of paying the fee or having the blood replaced.

For most people 65 years of age or over, there are no premiums for the Part A portion of Medicare. Eligibility for Part A is generally earned through the work experience of the beneficiary or spouse. However, some persons not otherwise entitled to Medicare may purchase Part A coverage through premium payments if they also buy Part B coverage.

The beneficiary's Part B cost-sharing payments include:

* monthly premiums ($42.50 per month in 1996);

* one annual deductible ($100 in 1996);

* coinsurance payments (usually 20% of allowable charges); and

* a three-pint blood deductible

After beneficiary cost-sharing requirements have been met. Medicare pays 80% of the allowed charges.

Administration

The responsibility for administration of the Medicare program lies primarily with two components of the DHHS:

HCFA (HCFA has primary responsibility for Medicare, including: the formulation of policies and guidelines for the coverage and payment of services, the oversight of fiscal intermediary and carrier operations, the development of conditions of participation and certification of providers, and the maintenance and review of utilization records)

Social Security Administration (SSA is responsible for the initial determination of an individual's entitlement and for maintenance of the master beneficiary record)

Financing and Payments

Medicare expenses for both Part A and Part B benefits and administration are paid from separate trust funds. Part A is financed through mandatory payroll deductions from employees and employers, as well as by self-employed persons who pay into the HI trust fund.

Part B funds come from payment of premiums by or on behalf of individuals, plus matching general revenue contributions from the Federal Government. In addition, most Medicare-covered services require at least some form of beneficiary costsharing.

Under Medicare's prospective payment system (PPS), most hospitals providing inpatient services to Medicare beneficiaries are paid on the basis of the diagnosis-related group to which the patient is assigned. The DRG system is a clinically based, inpatient classification. Each DRG represents a group of patients that is homogeneous with respect to the amount of resources necessary for treatment. The intermediary assigns the appropriate DRG code to each patient bill record and pays the hospitals the predetermined DRG rate for each discharge.

Until the beginning of Medicare's prospective payment system in FY 1984, Medicare providers were paid through a retrospective, cost-based system. HCFA continues to make retrospective, cost-based reimbursements to SNFs and HHAs, although reimbursement limits apply. In addition, four classes of specialty hospitals (children's, psychiatric, rehabilitation, and long-term) and two types of distinct units in general hospitals (psychiatric and rehabilitation) are excluded from PPS. HCFA reimburses these excluded facilities under a system of limits based on reasonable and allowable costs as defined by the Tax Equity and Fiscal Responsibility Act of 1982.

Medicare's Managed Care Programs

In 1992, 2.2 million Medicare beneficiaries (6.4% of all beneficiaries) were enrolled in managed care plans rather than obtaining care through fee-for-service arrangements. (U.S. DHHS, 1995). As of January 1, 1996, 3.7 million were enrolled in such plans (K. Walsh, HCFA Regional Office, Boston, personal communication, February 2, 1996). Managed care plans are generally known as HMOs. Medicare pays these plans a monthly, prospectively set capitation payment to provide covered services to enrolled beneficiaries. The plans provide health care services at that capitated rate regardless of the frequency or extent of utilization by their enrollees.

OVERVIEW OF THE MEDICAID PROGRAM

Title XIX of the Social Security Act, also known as Medicaid, became law in 1965. It is a jointly funded cooperative venture between the Federal and State governments to assist States in providing medical assistance to eligible needy persons (providing medical assistance to low-income persons who are aged, blind, disabled, or members of families with children). Medicaid is the largest source of funds for medical and health-related services to America's poorest people.

Each state designates a single agency that is responsible for Medicaid program operations. The Federal Government provides broad national guidelines to the states under which they:

1) establish their own eligibility standards;

2) determine the type, amount, duration, and scope of services;

3) set the rates of payment for services; and

4) adrninister their own programs.

Thus, Medicaid programs vary considerably from state to state, as well as within each state over time (U.S. DHHS, 1995, p. 112).

All persons receiving assistance under the Aid to Families with Dependent Children (AFDC), persons receiving Supplementary Security Income (SSI), and most persons eligible for refugee assistance are eligible for Medicaid. States may, at their discretion, cover the medically needy. Medically needy are those persons whose income and resources are large enough to cover daily living expenses, according to income levels set by the state, but not large enough to pay for medical care. These state variations mean persons with identical circumstances may be eligible to receive Medicaid in one state, but not in another (Nutrition Screening Initiative, 1992, pp. 23-24).

To control costs and to provide a range of community-based services to the Medicaid eligible population, many states have applied to HCFA for Medicaid Home and CommunityBased Waivers (under COBRA 1981, Section 2176 and Section 1915-C of Social Security Act). In 1981, Congress enacted legislation giving HCFA the authority to waive certain Medicaid requirements to allow the states to broaden coverage to include a range of community-based services for persons who, without such services, would require the level of care provided in a skilled nursing faculty or intermediate care facility. Services that may be covered under Homeand Community-Based Waivers include meals, case management, homemaker, home health aide, personal care, adult day care, rehabilitation, respite and others. While this new waiver option has been enthusiastically received by the states, there is concern about the administration's support for the home- and community-based program (Nutrition Screening Initiative, 1992, pp. 23-24). To apply or inquire about Medicaid, contact is made with the local county welfare office (Nutrition Screening Initiative, 1992, pp. 23-24).

Mandatory Services

To receive Federal matching funds, the following basic services must be offered to the mandatory and optional eligibility groups:

* inpatient hospital services

* outpatient hospital services

* rural health clinic services and any other ambulatory services offered by a rural health clinic and otherwise covered under the State plan

* Federally qualified health center (FQHC) services and any other ambulatory services offered by a FQHC and otherwise covered under the State plan

* Laboratory and X-ray services

* Nursing facility services for individuals 21 years of age or older

* Early and periodic screening, diagnosis, and treatment (EPSDT) services for individuals under 21 years of age

* Family planning services and supplies

* Physician services

* Medical and surgical services furnished by a dentist

* Home health services for individuals entitled to nursing services

* Nurse-midwife services

* Certified pediatric nurse practitioner and certified family nurse practitioner services.

Optional Services

In addition to the medical services mat must be provided, states may provide the following services to the mandatory and optional eligibility groups:

* Medical or remedial care recognized by state law and furnished by licensed practitioners within the scope of their practice as defined by the State. Examples of frequently covered practitioners include: podiatrists, optometrists, chiropractors, and psychologists

* Private duty nursing services

* Clinic services

* Dental services

* Physical therapy, occupational therapy, and services for persons with speech, hearing, and language disorders

* Prescribed drugs

* Dentures, prosthetic devices, and eyeglasses

* Diagnostic, screening, preventive, and rehabilitative services

* Inpatient hospital and nursing facility services for individuals 65 years of age or over in an institution for mental diseases.

* Services in an ICF /MR.

* Inpatient psychiatric facility services for individuals under 21 years of age

* Hospice care

* Case-management services

* Tuberculosis-related services

* Respiratory care services

* Home and community care for functionally disabled elderly individuals

* Community-supported living arrangement services (limited to no more than eight States)

* Personal care services

* Any other medical care or remedial care recognized under State law as specified by the Secretary of DHHS

Transportation of Medicaid-eligible individuals to and from providers of medical care is required under Title XIX.

If a state's Medicaid program covers the medically needy (special group), it must at least provide home health services for any individual entitled to nursing facility services.

Medicaid Financing and Payment

The costs of the Medicaid program are financed jointly by the Federal Government and the states. The portion of the Medicaid program that is paid by the Federal Government for provider services, known as the Federal Medical Assistance Percentage (FMAP)x is determined annually for each state by a formula that compares the state's average per capita income level to the national average. By law, the FMAP cannot be lower than 50% nor greater than 83% of total state Medicaid program costs; wealthier states have a smaller share of their costs reimbursed. An exception to the FMAP rules requires a 100% Federal share of state expenditures for services provided through Indian Health Service Facilities (and a 90% FMAP for family planning services) (U.S. DHHS, 1995).

Relationship Between Medicare and Medicaid

Medicaid (Title XIX of the Social Security Act) is a joint Federal and state program to provide medical care for qualified poor persons. The states administer the program under Federal guidelines, which provide latitude to the states in the design of their Medicaid programs. As a result, states differ with respect to eligibility criteria, service coverage, and payment arrangements. Certain Medicare beneficiaries are enrolled in Medicaid under two specific conditions:

* Medicaid covers Medicare beneficiaries who meet the limited income and assets standards set by each state's Medicaid program. These beneficiaries are known as dual eligibles. For these persons, state Medicaid programs usually pay the Medicare premiums and cost-sharing requirements. Some states elect to provide coverage for additional health care services not covered by Medicare (i.e., long-term nursing home care, eyeglasses, dentures).

* Federal law also requires that state Medicaid programs pay Medicare costs for certain elderly and disabled persons with low incomes and limited resources. The Qualified Medicare beneficiary (QMB) program helps Medicare beneficiaries whose assets and income are below the Federal poverty level but above that required for regular Medicaid eligibility. For these beneficiaries, the Medicaid program in each state pays the Medicare premiums and cost-sharing amounts. Medicaid coverage for QMB residents is not mandated.

In addition, a new program began in 1993 for low-income Medicare beneficiaries whose income is above the level to qualify as a QMB, but below 110% of die FPL. If a person qualifies as a specified low-income Medicare beneficiary (SLMB), Medicaid pays only the Medicare Part B monthly premium (U.S. DHHS, 1995).

SUMMARY

Gerontological nurses should be aware that the House and Senate are both proposing major Medicare /Medicaid reductions in the rate of growth which, if approved, would have a profound impact on health care services for the nation's growing elderly population. While debate continues as to how reductions would be achieved, gerontological nurses need to have current information regarding Medicare and Medicaid eligibility and benefits to assist older adults and their families in accessing health care.

REFERENCES

  • American Association of Retired Persons. (1994a). Medicare: What it covers. What is doesn't. Washington, DC: Author.
  • American Association of Retired Persons. (1994b). Medigap: Medicare supplement insurance. Washington, DC: Author.
  • American Association of Retired Persons and the Administration on Aging, U.S. Department of Health and Human Services. (1996). A profile of older Americans: 1995. Washington, DC: Authors.
  • American Nurses Association. (1987). Standards and scope of gerontological nursing practice. Kansas City, MO: Author.
  • Gale, B.J. & Steffi, B.M. (1992). The longterm care dilemma: What nurses need to know about Medicare. Nursing & Health Care, 13(1), 34-41.
  • National Association of Insurance Commissioners and the Health Care Financing Administration of the U.S. Department of Health and Human Services. (1994). 2994 Guide to health insurance for people with Medicare. Washington, DC: Authors.
  • Nutrition Screening Initiative. (1992). Nutrition interventions manual for professionals caring for older Americans. Washington, DC: Author.
  • U.S. Department of Health and Human Services. (1995). The Medicare 1995 handbook. Baltimore, MD: Author.
  • U.S. Department of Health and Human Services, Health Care Financing Administration, Office of Research and Demonstrations (1995). Health Care Financing Review: Statistical supplement. Baltimore, MD: Author. (HCFA Pub. No. 03348, 1A9 Oak Meadows Building, 6325 Security Boulevard, Baltimore, MD 21207)
  • U.S. Senate Special Committee on Aging, the American Association of Retired Persons, the Federal Council on the Aging, and die U.S. Administration on Aging (1991). Aging America: Trends and projections. (1991 ed.). Washington, DC: Authors.

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