cent of beneficiaries have incomes below $25,000, and about one in four has an income of less than $10,000 (Century Foundation, 2001). More than half of the disabled beneficiaries reported incomes of less than $10,000.

Program Characteristics. The Medicare program has two components:

  1. Part A (Hospital Insurance):

  • Enrollment occurs automatically at age 65 with no premium charges, except for those individuals who did not pay Medicare taxes while employed. They can receive Part A by paying premiums.

  • Part A provides coverage for care in hospitals as an inpatient, critical access hospitals, skilled nursing facilities, hospice care, and some home health care.

  • It does not require periodic re-enrollment.

  1. Part B (Medical Insurance):

  • Part A beneficiaries may enroll and may sign up anytime during a sevenmonth period beginning three months before turning 65.

  • Enrollees pay premiums of $54 a month for calendar year 2002 (CMS, 2002a).

  • Part B covers physician and outpatient services, including the services of physical and occupational therapists, and some home health care.

Revenue and Expenditures. Part A is financed by a 1.45 percent payroll tax paid equally by employees and their employers (Kaiser Family Foundation, 2001). Part B is financed with premiums and deductibles paid by beneficiaries and from general revenues. Premiums are designed to cover about a quarter of total Part B spending. Medicare Part A accounts for 45 percent of program expenditures and Part B accounts for 33 percent (Kaiser Family Foundation, 2001). Medicare+Choice plans contract with Medicare to provide both Part A and B services to enrolled beneficiaries and account for an estimated 18 percent of Medicare spending (Kaiser Family Foundation, 2001). About 5 percent of the Medicare budget goes to the ESRD program, although only about 0.5 percent of Medicare beneficiaries are ESRD patients (Century Foundation, 2001).

Medicare benefit payments totaled $237 billion in 2001, accounting for 12 percent of the federal budget and 19 percent of total national spending for personal health services (Century Foundation, 2001). In 1999, Medicare financed 31 percent of the nation’s hospital services and 20 percent of physician services, but only 2 percent of outpatient prescription drugs (Kaiser Family Foundation, 2001).


Background. The Medicaid program was created in 1965 as Title XIX of the Social Security Act. It was designed as a federal–state partnership to provide public funding of health care for low-income children and adults. Initially, Medicaid was

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