Understanding Health Care Programs in the US: Medicare, Medicaid, and SCHIP

Background. The United States offers a range of health care programs designed to ensure access to medical services for various segments of the population. Among these, Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP) stand out as significant pillars of the nation’s health care safety net. These programs, each with its unique history and purpose, collectively address the health care needs of millions of Americans, from the elderly and disabled to low-income families and children. Understanding the intricacies of these programs is crucial for navigating the complex landscape of Health Care Programs In The Us.

Medicare: Health Insurance for Seniors and the Disabled

Medicare, a federal health insurance program, was established in 1965 under Title XVIII of the Social Security Act. Administered by the Centers for Medicare and Medicaid Services, Medicare initially aimed to provide health coverage for the elderly. Over time, its scope broadened to include individuals with disabilities and those with end-stage renal disease (ESRD). The program is structured into different parts, primarily Part A for hospital care and Part B for medical services, forming a comprehensive system designed to address a wide spectrum of health needs. Notably, the End-Stage Renal Disease program, operational since 1973, highlights Medicare’s commitment to specific vulnerable populations, covering over 90% of individuals suffering from this condition. Further expansions, such as those enacted under the Balanced Budget Act of 1997, incorporated preventive services like annual mammograms and cancer screenings, underscoring Medicare’s evolving role in proactive health management.

Medicare Eligibility Criteria

To be eligible for Medicare, individuals or their spouses must have contributed to the Social Security system for a minimum of 10 years. Meeting this contribution criterion, individuals can qualify for Medicare under the following conditions:

• Age 65 and older: This remains the foundational eligibility criterion, ensuring health coverage for senior citizens.
• Disability and Social Security Eligibility: Individuals receiving Social Security benefits due to disability or those diagnosed with ESRD (permanent kidney failure requiring dialysis or transplant) also qualify, regardless of age.

Enrollment Process for Medicare

Medicare’s reach is extensive, covering approximately 34 million Americans aged 65 and older, alongside 5 million younger adults with permanent disabilities, and around 250,000 individuals with permanent kidney failure. The vast majority of Part A beneficiaries also enroll in Part B, with estimates reaching 37 million enrollees in 1999. While most beneficiaries fall within the 65 to 84 age range (76%), the disabled population under 65 (13%) and those 85 and older (11%) are experiencing faster growth rates. Socioeconomic factors also play a significant role, with a considerable portion of beneficiaries (78%) having incomes below $25,000, and about 25% living with incomes under $10,000. Disabled beneficiaries, in particular, often face financial vulnerability, with over half reporting incomes below $10,000.

Key Features of Medicare: Part A and Part B

The Medicare program comprises two main components, each addressing different aspects of health care programs in the US:

1. Part A (Hospital Insurance):

   • Enrollment is typically automatic upon reaching age 65, and for most, it comes without premium charges, reflecting contributions made through Medicare taxes during employment. Individuals who haven’t paid these taxes can still access Part A by paying premiums.
   • Coverage encompasses inpatient hospital care, services in critical access hospitals, skilled nursing facilities, hospice care, and certain forms of home health care.
   • Re-enrollment is not periodically required, providing continuous coverage.

2. Part B (Medical Insurance):

   • Available to Part A beneficiaries, enrollment is optional and can be initiated during a seven-month period starting three months before an individual’s 65th birthday.
   • In 2002, enrollees paid a monthly premium of $54.
   • Part B covers a broad spectrum of outpatient and physician services, including physical and occupational therapy, and some home health care services.

Medicare Funding and Spending

Medicare Part A is primarily funded through a 1.45% payroll tax, shared equally by employers and employees. Part B’s financing model is more diverse, drawing from beneficiary premiums, deductibles, and general federal revenues. Premiums are structured to cover approximately a quarter of Part B’s total expenditures. In terms of program spending, Part A constitutes about 45% of Medicare expenditures, while Part B accounts for 33%. Medicare+Choice plans, which contract with Medicare to offer integrated Part A and B services, represent around 18% of Medicare spending. The ESRD program, despite serving a smaller beneficiary population (about 0.5%), consumes approximately 5% of the Medicare budget, reflecting the high cost of care for this condition.

In 2001, Medicare benefit payments reached a total of $237 billion, representing 12% of the federal budget and 19% of the nation’s total spending on personal health services. Medicare’s financial footprint is substantial within the health care system, financing 31% of hospital services and 20% of physician services in 1999. However, it covered a smaller portion (2%) of outpatient prescription drug costs, highlighting areas where coverage may be less comprehensive.

Medicaid: Healthcare Access for Low-Income Populations

Background. Medicaid, another cornerstone of health care programs in the US, was also established in 1965 as Title XIX of the Social Security Act. Unlike Medicare, Medicaid operates as a federal-state partnership, aiming to provide public health care funding for low-income adults and children. Initially conceived as an extension of federal programs for the poor, Medicaid prioritized the aged, disabled, and families with dependent children. Legislative expansions in 1987 and 2000 broadened coverage to include low-income pregnant women, more children in poverty, and certain Medicare beneficiaries previously ineligible for Medicaid. Notably, child coverage has seen significant growth, with census data from 2000 indicating that one in five children nationally, and a quarter of children under 6, were enrolled in Medicaid. Child enrollment surged from under 10 million in 1980 to over 21 million by 1999, demonstrating Medicaid’s increasing role in children’s health care.

Medicaid Eligibility Requirements

Medicaid eligibility is structured around mandatory and optional categories, reflecting the federal-state partnership nature of health care programs in the US. Mandatory eligibility groups include:

• Children under 6 and pregnant women: Families with incomes below 133% of the federal poverty level (FPL) are mandatorily covered.
• Children ages 6-18: Coverage extends to children in this age group with family incomes at or below 100% FPL.
• SSI Recipients: Individuals receiving Supplementary Security Income (SSI) or those aged, blind, or disabled who meet state-specific restrictive criteria are eligible.
• Adoption Assistance and Foster Care Recipients: Individuals under Title IV-E of the Social Security Act qualify.
• Special Protected Groups: This includes individuals who lose SSI cash assistance due to earnings or increased Social Security benefits but retain Medicaid for a period.
• Qualified Medicare Beneficiaries: Includes specified low-income Medicare beneficiaries and disabled-and-working individuals who previously qualified for Medicare but lost coverage due to returning to work.

States have the option to expand Medicaid coverage beyond these federal minimums to “categorically needy” groups. Many states have expanded their programs to cover a larger proportion of low-income residents than federally mandated. By 2002, most states had expanded child eligibility beyond federal minimums. Common optional expansions include:

• Infants up to age 1 and pregnant women with incomes up to 185% FPL not covered under mandatory rules.
• Recipients of state supplementary income payments.
• Certain aged, blind, or disabled adults with incomes above mandatory levels but below FPL.
• Individuals receiving home and community-based care waivers.
• Individuals with tuberculosis (TB) needing TB-related ambulatory services and drugs.
• Institutionalized individuals with incomes and resources below specified limits.
• Medically needy individuals who “spend down” excess income on medical expenses to meet eligibility.
• Legal resident aliens and qualified aliens entering the US after August 22, 1996, after a five-year waiting period due to the 1996 welfare reform law.

Medicaid Enrollment Trends

Medicaid stands as the largest program providing medical and health-related services to America’s low-income population. In 2001, it provided coverage to approximately 44 million Americans. Enrollment expansions and simplification efforts have contributed to increased health coverage for low-income individuals. However, Medicaid enrollment experienced fluctuations in the late 1990s, with a decline in nonelderly adults and children after 1995, following a period of growth. This decline is partly attributed to the 1996 welfare reforms, which “delinked” Medicaid eligibility from cash assistance, leading to unintended coverage losses. Despite these declines, enrollment moderation and state efforts to re-enroll eligible individuals have occurred. Economic downturns also tend to increase Medicaid enrollment as more people meet eligibility criteria due to income changes.

How Medicaid is Financed

Medicaid’s funding structure is a shared responsibility between federal and state governments. The Federal Medical Assistance Percentage (FMAP), determined annually based on a state’s per capita income relative to the national average, dictates the federal share of funding. FMAP ranges from 50% to 83%, with wealthier states receiving a lower federal match. In 2001, FMAP averaged 57% nationally, varying from 50% in ten states to 76.8% in Mississippi. States can also receive federal matching funds for optional eligibility expansions and services, which account for a significant portion (65%) of total Medicaid spending. Annual spending on Medicaid exceeded $200 billion in federal and state funds by 2001. Medicaid spending growth accelerated between 1999 and 2000, reaching 8.6% in 2000, compared to a 3.6% average annual growth from 1995 to 1998. Economic recessions further intensify spending pressures due to declining state tax revenues and increased demand for public programs.

Medicaid Program Services

In exchange for federal funding, states must cover certain population groups and provide a minimum set of services under health care programs in the US guidelines. States retain flexibility in structuring eligibility, benefits, service delivery, and payment rates within federal guidelines. Enrollment caps and waiting lists are prohibited, ensuring access for all eligible applicants. However, states can adjust optional eligibility and benefits, and set limits on service scope and duration. Mandatory Medicaid services include:

• Inpatient and outpatient hospital services.
• Physician services.
• Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services for individuals under 21.
• Nursing facility services for individuals 21 and older.
• Home health care for nursing home eligible individuals.
• Family planning services and supplies.
• Rural and federally qualified health clinic services.
• Laboratory and X-ray services.
• Pediatric and family nurse practitioner services.
• Nurse midwife services.

The EPSDT program, established in 1967, provides a comprehensive benefit package for children, including periodic health and developmental evaluations, vision, hearing, and dental screenings.

Medicaid Revenue and Expenditures

Medicaid generally prohibits premiums, except in limited cases. Cost-sharing measures like copayments and deductibles are restricted, particularly for children, pregnancy-related services, emergency care, and family planning. Minimal cost sharing is permitted in most other cases, with limits on deductibles, copayments, and co-insurance. Program costs vary by beneficiary type. Average Medicaid payments for children are around $1,150 per enrolled child. For nonelderly adults, the average is about $1,775 per person. Elderly and disabled beneficiaries, while representing smaller proportions of recipients, have significantly higher per-person expenditures, averaging $9,700 and $8,600 respectively. Overall, average expenditures across all beneficiary types were approximately $3,500 per person in 1998.

State Children’s Health Insurance Program (SCHIP): Expanding Coverage for Children

Background. The State Children’s Health Insurance Program (SCHIP), created by the Balanced Budget Act of 1997, represents a significant expansion of health care programs in the US, specifically targeting uninsured children. SCHIP allocated nearly $40 billion in federal matching funds from 1998 to 2008, enabling states to offer health coverage to children in families with incomes up to 200% of the FPL who do not qualify for Medicaid. This program marked the largest single expansion of children’s health insurance coverage in over three decades. Under Title XXI of the Social Security Act, states were given flexibility to establish separate child health programs, expand Medicaid coverage, or implement a combination approach.

SCHIP Enrollment and Coverage Growth

By 2001, SCHIP had enrolled 4.6 million children. Of these, 18% were in separate child health programs (S-SCHIP), 13% in Medicaid expansion programs (M-SCHIP), and 69% in combination programs. SCHIP enrollment experienced steady national growth throughout 2001, with fourteen states at least doubling their enrollment between 1999 and 2001. The majority of enrolled children (over 75%) were between 6 and 18 years old, with significant numbers in the 6-12 and 13-18 age groups. Despite this growth, administrative barriers to enrollment persist. Studies indicate that complicated enrollment procedures remain a significant obstacle, with a substantial percentage of low-income families citing administrative hurdles as a reason for not applying. Complex documentation requirements, not federally mandated, contribute to these difficulties.

SCHIP Program Design and Benefits

SCHIP offers states flexibility in program design and benefits. States with Medicaid expansion SCHIP must provide the same benefits as Medicaid. However, stand-alone SCHIP programs have more discretion in designing benefit packages, often mirroring state Medicaid benefits. Stand-alone SCHIP programs must cover basic services such as physician services, hospital care, and lab and X-ray services. States can offer optional benefits like prescription drugs, mental health, dental, and vision services, potentially with limitations. Patient out-of-pocket costs are permitted but capped. Total out-of-pocket costs in separate SCHIP programs cannot exceed 5% of family income. For families below 150% FPL, premiums and cost-sharing are further limited to nominal amounts.

SCHIP Eligibility Guidelines

SCHIP eligibility criteria allow states to cover children in families with incomes above Medicaid thresholds but generally up to 200% FPL, or even higher. Most states provide SCHIP coverage up to or above 200% of the poverty level. However, some states set lower income or age standards, resulting in a portion of lower-income children remaining uninsured.

Expanding SCHIP Coverage

SCHIP’s scope has expanded beyond children in some states. By 2001, several states had received waivers to enroll parents and pregnant women in SCHIP programs. Initiatives like the Health Insurance Flexibility and Accountability (HIFA) initiative further facilitated coverage expansions to uninsured populations. Arizona and California, for example, received approval for plans to enroll parents and childless adults. Premium assistance programs, also under SCHIP, allow states to subsidize employer-sponsored health coverage for low-income residents. These programs screen for employer-sponsored coverage access and provide subsidies to cover costs, potentially extending coverage to entire families through family coverage waivers.

Conclusion

Medicare, Medicaid, and SCHIP represent critical components of health care programs in the US. Medicare provides essential health insurance for the elderly and disabled, ensuring access to hospital and medical services. Medicaid serves as a vital safety net for low-income individuals and families, offering comprehensive health coverage with shared federal-state funding. SCHIP expands coverage to uninsured children, filling a crucial gap in health care access for this vulnerable population. Together, these programs strive to address diverse health care needs across the nation, reflecting ongoing efforts to improve health care access and equity within the United States.