foundation for understanding and using Medicare data by learning the basics of the administration of the Medicare program. We define Medicare, discuss enrollment, eligibility, and coverage, and provide a very simple sketch of how Medicare pays for services. We also briefly discuss how this information about Medicare influences the content of the data files we will use throughout the remainder of this book. Looking forward, we will build on the information presented in this chapter by discussing more specifics of Medicare data files, as well as how to request, obtain, and use these files. We will use the data in these files to address the research questions posed by our example project described in Chapter 1.
It is very important to note that Medicare coverage is extremely complex and subject to change over time. We do not attempt to cover every detail of the Medicare program in this text. You will encounter many questions throughout the course of your career using Medicare data that will require you to dig deeply through reference material. To that end, the intent of this chapter is to provide a foundation for understanding the Medicare program for your future work. My hope is that the reader finishes this chapter with a basic understanding of the Medicare program, including history, types of coverage, and administration. When confronted with more advanced research questions, the reader can then leverage this understanding in conjunction with available reference materials. Some of the most commonly used sources of information are CMS’s Research Data Assistance Center (ResDAC), CMS, and the Kaiser Family Foundation.1 In fact, these sources were heavily relied upon in the writing of this chapter!
An Introduction to the Medicare Program
What is Medicare?
Medicare is a health insurance program for people age 65 or older, those under age 65 with certain disabilities, and those of any age with permanent kidney failure. The Medicare program protects beneficiaries from financial risk by covering costs for potentially large and unaffordable medical expenses incurred by seeking medical care. Generally, in order to be eligible for Medicare, beneficiaries must have entered the United States legally, paid Federal Insurance Contributions Act (FICA) taxes for 40 or more quarters (or be the spouse of someone who has), and lived in the United States for 5 years.2 Medicare is a social insurance program operated by the Centers for Medicare & Medicaid Services (CMS), a federal government agency that is part of the Department of Health and Human Services. Medicare provides participants (called beneficiaries) with an array of health insurance coverage, regardless of income or medical history. Medicare provides four types of coverage (Part A, Part B, Part C, and Part D) that are described in detail below.
Started in 1965 (did you know that President Harry Truman was the first person to enroll in Medicare?), the Medicare program we know today (and will describe below), had its genesis in President Lyndon Johnson’s War on Poverty. Because Medicare is a social insurance program, enrollment criteria and benefits are defined by legal statute. This means that Medicare coverage can differ from commercial health insurance in some fundamental ways. It also means that Medicare has changed over the years in response to changes in statute, often to expand or improve coverage or to attempt to control costs. Here are just some examples of how legislation has influenced the administration of the Medicare program: 3
• In 1972, the Medicare program was expanded to include coverage for individuals with end-stage renal disease (ESRD) and some individuals under age 65 with long-term disabilities.
• In the same year, coverage was also expanded to include speech, chiropractic, and physical therapy services.
• In 1982, Medicare coverage was expanded to include hospice services for terminally ill individuals.
• In 1997, the Balanced Budget Act attempted to control Medicare spending through the creation of prospective payment systems (PPS) for certain types of services (though inpatient prospective payment was first implemented in 1983), and established the Medicare+Choice program.
• In 2001, Medicare initiated coverage for individuals with Lou Gehrig’s disease (ALS).
• In 2003, The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) established an outpatient prescription drug benefit that would take effect in 2006.
• In 2005, coverage was expanded to include a physical and preventive screening to new Medicare beneficiaries.
• In 2010, the Affordable Care Act (more commonly known as “health reform legislation”) initiated sweeping measures to control costs, most of which will take effect by 2014. For example, the law provides increased funding to combat waste, fraud, and abuse, takes measures to attempt to improve the quality of care provided to beneficiaries, and establishes free annual wellness visits for Medicare beneficiaries.
Medicare Enrollment and Eligibility
At the time of this writing, Medicare provided health insurance to about 47 million Americans.4 Most people think of Medicare as insuring the elderly, and that is certainly true; the majority of Medicare beneficiaries (about 39 million of them) are eligible for Medicare insurance because they are aged 65 and over. However, Medicare also insures about 8 million beneficiaries who are permanently disabled (receiving Social Security Disability Insurance, or SSDI), have end stage renal disease (ESRD, a condition that requires dialysis), or ALS, regardless of their age. You may hear experts refer to beneficiaries aged 65 and older in general terms as “aged,” and those under age 65 as “disabled.”5
What Is Covered by Medicare?
Medicare benefits are divided and defined in four parts (Part A, Part B, Part C, and Part D). Each Part covers a different type of care or set of services. As we will see in subsequent chapters, not only are these Parts a way of describing coverage, but also a way of organizing the administrative data files we will use throughout this book. Understanding Medicare coverage (and limitations to that coverage) is essential to the proper utilization of Medicare claims data. For example, let’s say you were asked to study claims for blood received in a transfusion. Medicare Part A covers the blood received by a beneficiary in an inpatient hospital setting, but Medicare Part B covers the blood the same beneficiary may have received in a hospital outpatient setting. This means that the programmer may need to query more than one dataset to locate blood-related information in the claims data. As we will see, querying more than one type of claims data set is important in the identification of emergency department visits.
The specifics of Medicare coverage are subject to, and often do, change. As such, it is very helpful to be able to tap into reference materials that summarize Medicare benefits. As mentioned above, Medicare is a social insurance program and the final source of information on Medicare coverage is legal statute. However, many experts simply refer to summaries of the Medicare schedule of benefits that CMS provides to beneficiaries, including online publications such as Your Medicare Benefits6 and Medicare and You7. These publications were used as the foundation for some of the information presented below.
• Medicare Part A, also known as Hospital Insurance (HI), pays for care provided to beneficiaries in hospitals (including most inpatient care, inpatient rehabilitation facilities, and long-term care hospitals), coverage for short-term stays in skilled nursing facilities (SNFs), most post-acute care provided in home health agencies (HHAs), and hospice care services.
• Medicare Part B is also known as Supplemental Medical Insurance (SMI) because it provides coverage that is additional
