Essay on Health Insurance and Medicare

1159 Words Aug 27th, 2010 5 Pages
Medicare

Medicare was established in 1965 to guarantee elderly Americans access to quality health care regardless of their financial circumstances. Medicare spends more than $200 billion a year and it will increase, partly because greater numbers of Americans will become eligible for coverage when the baby boomers begin to turn sixty-five after 2010. According to the article The Political Economy of Medicare by Bruce C. Vladeck, to understand the political economy of Medicare it is necessary to view it from three perspectives. The first one is Medicare as redistributive politics, second is Medicare as special-interest politics, and third is Medicare as distributive politics. In the next few paragraphs I will focus on economic analysis
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An individual pays a monthly premium which is usually deducted from the monthly Social Security check. Participation in Part B is voluntary, however it pays for physician’s services and outpatient hospital services (emergency room services, diagnostic testing, laboratory services, outpatient physical therapy, speech-pathology services, and durable medical equipment; Health Economics & Policy, James W. Henderson, pg. 347). As Vladeck stated in his article, Medicare accounts for as much as 40 percent of the income of the average U.S. hospital. The reason for this is that Medicare makes payments to providers of services, not directly to beneficiaries. Physicians who provide care to Medicare patients have to decide whether or not to accept the Medicare allowable fee as payment in full for the services provided. To get the bills paid for the services provided, physicians often use balance billing. Using balance billing, physicians bill a patient for the difference between the physician’s usual charge for a service and the maximum charge allowed by the patient’s health plan. However, physicians complain that the Medicare allowable fee is below their average cost of providing medical services, so a common practice is cost shifting to private patients. A part of the income for the hospitals, especially teaching hospitals, is the prospective payment system (PPS). This kind of payment is determined prior to the provision of services. It is a