Insurance Modalities: Managed Care, Medicare, Medicaid


Section 1: Managed Care


            In a recent study of the number of people covered by some form of health insurance, private health insurance was estimated to cover approximately 61 percent of the American population, where as federal government health insurance programs such as Medicaid covered 10 percent and Medicare covered 13 percent (See Chart 1).  Although it represents 61 percent of the American population, the private health insurance sector covers 32 percent of the national health expenditure.[1]  Additionally, the study found that currently, 42.6 million American people remain uninsured.[2]  This chapter will discuss the history of private health insurance/managed care, pertinent legislation, the problems with this type of health insurance, and the current health care crisis of the United States: the fact that spending is on the increase, coverage is on the decrease, and the problems are only getting worse.  While the topic of health insurance coverage is a very broad one, this chapter will provide a broad overview of many of the issues.  For more specific information about these issues, many URLs are provided at the end of this chapter in the references section.  Additionally, the following site provides links to numerous links on topics related to health insurance:


Chart 1: Health Insurance Coverage, 1999

Source: U.S. Census Bureau, March 2000 Current Population Survey















Chart 2.  Breakdown of National Health Expenditure

Source: U.S. Department of Health and Human Services, Health Care Financing Administration, March 2001[3]



A.  Employment-based private insurance
Employment-based private insurance began in the early 1930s as a result of the Great Depression.   At this time, Blue Cross was formed because very few people had the money to pay for their hospital bills after they were discharged.  Thus, to ensure that hospitals survived, hospital insurance was created so as to guarantee that funds continued to flow into hospitals.  These insurance rates were "community rated," which meant that all of the community had to pay equally for the costs of care.  Because the wages in World War II were controlled, however, employers decided to offer private health insurance as fringe benefits used to attract workers to their place of employment as opposed to any other.  These private insurance companies, which became the dominate source of funding during the 1950s, took business away from Blue Cross by offering lower rates for companies that had younger and healthier workers who were less likely to need coverage.

            Currently, there are two major problems with employer-based private insurance.  The first is that during times of unemployment, many Americans do not have needed health insurance coverage.  In fact, according to a study done by the Commonwealth Fund, 37 percent of workers who lose their job also lose their health coverage.[4]  The second problem with employer-based private insurance is that health coverage and the number of health benefits are some of the first cuts that employers make during an economic slowdown.              Similarly, workers have to pay more of the health insurance premiums during such periods.  In fact, according to a recent study by the Kaiser Family Foundation and Health Research and Education Trust, 44 percent of employers report that they are "very likely" or "somewhat likely" to increase what employees pay out of pocket for health premiums in the next year.[5] This is especially true as the technology of health care continues to advance and become more expensive, providing less incentive to employers to insure their workers.  Thus, this decline in employer-based private insurance has become the greatest source of the growth of the uninsured in the United States.

            The problems of employer-based insurance may become more widespread in the current economic climate.  This is because the number of employees who have access to health insurance is likely to fall as the recession continues and unemployment rises, according to a new RAND study that was published in the February issue of International Journal of Health Care Finance and Economics.

            The study, which was written by RAND economists M.  Susan Marquis and Stephen H.  Long, found that employers are more likely to offer insurance, and to contribute a larger share of its cost, in communities where labor markets are tight.  That is, where local unemployment rates are higher, employer health insurance offer rates are lower.  In fact, a two percentage point increase in the unemployment rate is associated with a two percentage point decline in the number of small employers offering insurance, said the report.   "I wouldn't go so far as to say that the employment-based health insurance system will unravel as a result of the recession," Marquis said.  "But these findings indicate that we ought to be concerned."[6]  Some of the key findings of the report include:
· An employer's decision about a compensation package is likely to be influenced by what other employers in the market offer.
· When there is a greater concentration of purchasers of labor, there is a lower quantity of health insurance benefits.  In fact, offer rates are about 2 percent to 3 percent lower in areas with greater concentration, and employer contribution rates are about 3 percent to 6 percent lower.
·  In 1993, offer rates were about 3 percent higher and employer contributions were about 6 percent to 7 percent higher in areas with a greater share of employment in large businesses.
·  In 1997, offer rates and contributions were higher in areas with a greater share of large businesses.
·  A positive correlation was found between unionization and employer health insurance benefits, with offer rates being about 2 percent to 5 percent higher in areas with a greater share of union workers.
· Offer rates in both 1993 and 1997 were 2 percent to 3 percent higher in areas in which the workforce is, on average, older.
·  Offer rates were about 5 percent higher in areas with a more educated workforce in 1997.[7]


B.  Health Maintenance Organization

            The term “health maintenance organization” was coined by Paul Ellwood in 1970.    According to Health Services Administration of the Department of Health, Education, and Welfare or Rockville, Maryland, a health maintenance organization has four characteristics:

            A) an organized system of health care that is in a geographical area

            B) a specified set of basic and supplemental health maintenance and             treatment services

            C) a voluntarily enrolled group of persons

D) a fixed and predetermined payment that is made by or for the person covered by the HMO and which is regardless of the amount of actual services that that person is provided with.[8]


C.  The Health Maintenance Organization Act of 1973

            This act was established in 1973 to spur the growth of the prepaid group practice by stimulating interest in investing in HMOs.  To do so, it provides grants, loans and demonstration projects, and prevented local medical societies from trying to enact state legislation against such prepaid group practices, given the amount of initial backlash that such plans brought about.  From 1974 to 1980, the federal government granted $190 million in grants and loans to HMOs and private investment had reached $784 million by 1974.  In fact, by 1975, almost six million people were enrolled in the approximately one hundred and seventy-five HMOs that existed in the United States.

            Additionally, the act also required that employers who had more than twenty-five employees to whom they provided health insurance benefits must offer federally qualified HMO coverage if it was available in that area.  Federal qualification of HMOs included a set of requirements: certain mandatory benefits were required, community rating, a restriction was placed on how much patients could be charged for out-of-pocket expenses, a thirty-day open enrollment period each year had to be offered, quality assurance programs had to be offered, and there had to be a provision for consumer participation and health education opportunities.  Amendments to the act in 1976 made these requirements even less stringent, increasing the number of plans that federally qualified from fourty-two in 1977 to seventy-nine in 1978.  From 1978 through the early 1980s, enrollment in HMOs increased with some stunted growth in 1982, which is most likely due to a high national unemployment level of greater than 8.5 percent.  By 1987, however, enrollment growth slowed and the number of HMOs began to decrease.   Reasons sited for this include increased competition from other health care products, employers’ increasing dissatisfaction with the inability of HMOs to use experience-based premiums, and the employers increasing frustrations with the inability of HMOs to provide group-specific data on costs, use, and quality.


D.  1988 Amendments to HMO Act

            The HMO Act amendments that took place in 1988 addressed many of the concerns that employers had.  Because of the amendments, federally qualified HMOs were now required to provide experienced-based, prospective rate setting, which looked at the actual health of the employees to determine what ratings would be set.  This was unlike the traditional method of charging a set rate for a total population, regardless of healthier employers that worked for a certain employer.  These amendments also created more flexibility in determining what amount of money employers had to contribute to HMOs for their employees, as previously, they resisted because they were suspicious of HMOs attracting their healthier employees, and believed that their employees were healthier than the average person who was attracted to HMOs.  Thus, they felt that they were unjustly bearing the costs of others’ health care using the prior community ratings, and were not as flexible as they were prior to this amendment.


E.  Additional Applicable Law for Private Health Insurance

            States have traditionally been the regulators of private health insurance within their borders.  As seen with the passage of the McCarran-Ferguson Act of 1945, Congress intended for the states to regulate private health insurance without any government interference.[9]  Specifically, the McCarran-Ferguson Act, among other things, gave the states the authority to support existing and future state systems for regulating and taxing the business of insurance.[10]

            Regulations within states attempt to guarantee the solvency of health insurers by prescribing capital and financial reserve requirements.[11]  The protection of consumers is attempted by requiring disclosure of contract information, standardized printing of terms of coverage, and insurance company bonding and auditing.[12]  A few states evaluate and approve the rates charged by some insurers to some insureds.[13]  Commercial insurer’s premiums are taxed in all states and more than half also tax Blue Cross and Blue Shield premiums.[14]  Lastly, to make insurance available to persons who are otherwise uninsurable, about a third of the sates now tax insurance plans to finance these risk pools.[15]

            Although the regulation of the business of insurance and the delivery of health care has traditionally been within the purview of the states,[16] the federal government[17] began to reassert its influence with the passage of the Employee Retirement Income Security Act of 1974 (“ERISA”).[18]   Congress originally enacted ERISA as a protective measure for American workers, safeguarding benefit plans offered by employers from corporate and union misappropriation.[19]  Intending to establish uniform standards for the regulation of benefit plans and federally protecting the plans from inappropriate remedies, Congress also included a broad preemption clause so that ERISA would supersede conflicting or inconsistent state regulations.[20]

            Courts have scrutinized over the language of ERISA’s preemption clause for more than two decades.[21]  Key to the issue of preemption is whether or not a state law “relates to” an employee benefit plan.[22]  The language of the statute specifically states that ERISA will “supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan …”[23] 

Until 1995, judicial precedent supported the view held by many ERISA experts that the reach of ERISA’s preemption clause was virtually limitless and that state statutes that even indirectly impacted ERISA plans would be invalidated.[24]  Since 1995, however, Supreme Court preemption decisions have signaled a potential change in the Court’s thinking,[25] with most legal experts concluding that ERISA's preemptive language is not as broad as was once thought.[26]

Not absolute, ERISA has an exception to the rule within the statutory language.  Although the legislation was enacted to protect all employee benefit plans from state interference, the “savings” clause[27] of the statute explicitly saves from preemption any state law regulating insurance, banking, or securities.[28]  Furthermore, the “savings” clause also provides statutory exemption for pre-ERISA acts.[29]

In order to frustrate states’ efforts to statutorily circumvent ERISA’s preemption of state laws relating to employee benefit plans, Congress included within the legislation a “deemer” clause.[30]  It is designed to prevent states from regulating employee benefit plans under the guise of regulating insurance.[31]  The provision provides that:

Neither an employee benefit plan … nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust, company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.[32]


In essence, this ERISA provision prohibits a state law from deeming an employee benefit plan to be an insurance company by claming to regulate the business of insurance.[33]

            Another area of federal law that has usurped traditional areas of state law regulation of health insurance is the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).[34]  COBRA amended, among other statutes, ERISA in 1985.[35]  The amendments require an employer, with more than 20 employees,[36] who sponsors a group health plan to give the plan’s “qualified beneficiaries” the opportunity to elect “continuation coverage” under the plan when the beneficiaries might otherwise lose coverage upon the occurrence of certain “qualifying events,” including the death of the covered employee, the termination of the covered employee’s employment (excluding cases of gross misconduct), and divorce or legal separation from the covered employee.[37]  Therefore, a “qualified beneficiary” entitled to make a COBRA election may be someone covered by the employer’s plan because of his own employment, or a covered employee’s spouse or dependent children who were covered by the plan prior to the occurrence of the “qualifying event.”[38]

            Furthermore, the statute states that the continuation coverage offered to qualified beneficiaries are to be equal to what the plan provides to plan beneficiaries who have not suffered a qualifying event.[39]  COBRA requires plans to advise beneficiaries of their rights under the statute at both the commencement of coverage and within 14 days of learning of a qualifying event,[40] after which qualified beneficiaries have 60 days to determine if they will continue coverage.[41]  If a qualified beneficiary makes the election to continue coverage, continuation coverage dates from the qualifying event, and when the event is the result of termination or reduced hours, the maximum period of coverage is generally 18 to 36 months.[42]  Benefits may cease if the qualified beneficiary fails to pay the premiums as required by the statute.[43]  In addition, COBRA coverage may also cease on:

“the date on which the qualified beneficiary first becomes, after the date of the election,

“(i) covered under any other group health plan (as an employee or otherwise), which does not contain any exclusion or limitation with respect to any preexisting condition of such beneficiary, or

            “(ii) entitled to benefits under title XVIII of the Social Security Act.”[44]


            Another piece of legislation that has expressly preempted state laws in regards to health care is the federal Health Maintenance Organization Act of 1973 (“HMO Act”).[45]  This Act was a result of a push within Congress and the Nixon administration to promote alternatives to the ever-increasing expense of Fee For Service health care.[46]  Specifically, the HMO Act provided HMO’s meeting federal standards to demand that area employers of twenty-five or more provide their employees a “dual choice option”[47] in which the HMO could be offered to the employee along with whatever health plan the employer had already arranged.[48]  This statute gave states the power to regulate where state laws had previously blocked the establishment of such corporations providing health care and where federal laws had in the past preempted state regulation of HMOs.[49]

            In addition, the HMO Act provided detailed operational regulations for HMOs to comply with before they could become “federally qualified” and receive federal grants or loans.[50]  To qualify for this federal support, HMOs were required to offer comprehensive benefits and meet onerous requirements, such as consumer representation on governing boards, community rating (all insureds must be charged the same rate regardless of usage), open enrollment, and mandatory inclusion of low-income and elderly patients.[51]  Upon becoming qualified, the HMO would be continuously subject to Secretarial supervision.[52]  Between the years 1973 and 1983, a total of $145 million in grants and $219 million in loans were made available to 115 HMOs because of the program, setting up what health care has become today.[53]

            The last federal impact on private health insurance that will be addressed, and maybe the most significant, is the area of tax laws.[54]  Under the federal income tax laws, employer contribution for the purchase of employee health insurance is exempt from taxation.[55]  This exemption results in a substantial subsidy for the purchase of employment related health insurance.[56]


F.  History of Managed Care
Prepaid Group Practice (PGP) were developed in the 1920s and 1930s.   They included groups of physicians who organized to provide comprehensive health care to patients.   While they were not a serious alternative to solo practice, their emergence began to increase rapidly in other large cities when the Mayo Clinic was established in Rochester, Minnesota in 1883.   Generally, however, the turning point of the modern movement of PGPs is considered to be in 1929, with the establishment of the   Ross-Loos Clinic in Los Angeles, California and the Elk City Cooperative in Elk City, Oklahoma.   

            The Ross-Loos Clinic formed to provide the employees of the Los Angeles water department with a group of physicians who were paid on a prepaid basis for their services.   Similarly, the Elk City Cooperative developed to provide low-cost health care to the rural communities of Oklahoma who needed health care in the time of the depression.   This prepayment plan was met with a lot of opposition from the general public, and between 1924 and 19854, the county and state medical societies made numerous attempts to disband the program: many of the plan’s physicians were removed from the local medical society, hospitals revoked staffing privileges, and some even attempted to revoke medical licenses.   Thus, these prepayment plans replaced the traditional fee-for-service payment method, particularly because of the need for a less uncertain cash flow, given the depression.

             The 1932 American Hospital Association’s prepayment plan marks the definitive transition from fee-for-service payment to prepayment plans.   This plan evolved from a plan used my Baylor Hospital and resulted with the first Blue Cross Plan.   This plan collected fixed premiums for specified hospital benefits and reimbursed providers on the basis of the costs that they incurred.   Hence, if costs increased, the consumers had to bear them as a higher premium, deductible or co-payment.  Similarly, the Group Health Association was initiated by employees of the Homeowners Loan Corporation in 1937 to reduce the number of mortgage defaults that they experienced.  This was because a large majority of the foreclosures were due to catastrophic illnesses.

            One of the largest groups that emerged during World War II  was Kaiser Industries, who merged with Grand Coulee plan (a plan that provided for employees of a dam project) to form the Kaiser-Permanente Foundation.  This plan was opened to the general public after the war was over, and spread along the West Coast quite rapidly.  Similar prepaid plans were also developed, including the Health Insurance Plan of New York in 1944, the Group Health Cooperative of Puget Sound in 1947, and the Community Health Association of Detroit  by the United Auto Workers in 1956.  Also, the Group Health Mutual Insurance Company began offering prepaid health services in 1956.  Thus, as physicians obtained more experience with such plans, these “health maintenance organizations” began to spread more rapidly.


G.  Growth of the Individual Practice Association Model (IPA)

            During the 1980s, the Individual Practice Association (IPA) model became the predominant type of HMOs in existence.    This type of model involves groups of physicians across the United States who contract with insurers or HMOs and collect a fixed fee from insurance carriers from each patient that they enroll.  This fee is allotted to them regardless of how much care the patient eventually needs during the given enrollment period.  The physicians all take a collective responsibility for each patient‘s care and stay within a fixed budget.  These groups can be very large and range from a few hundred physicians to thousands. 

            Nearly 400 IPAs existed in 1989 and had approximately 13.5 million people enrolled in them.    This growth marked a growth of 300 percent for the number of IPA plans increased and an enrollment increase of 700 percent from the years 1980 to 1989.  There were multiple reasons for this tremendous amount of growth, namely the appeal to physicians, who liked the fact that they could join an IPA and still maintain the fee-for-service arrangement that they used in the past.  Additionally, IPAs required lower start-up costs and thus, were more easily finance.    Finally, consumers also seemed to like IPAs more because they were allowed a greater choice in physicians and many could retain the physician that they had before they enrolled in the IPA.  While in the 1970s, most HMOs were nonprofit, most IPAs operate on a for-profit basis, and help to maintain the current trend of HMOs operating on a for-profit basis.


H.  Problems Facing Managed Care
            One problem with health maintenance organizations are that people's choice of hospital and physicians are restricted to those that are listed on the plan.   To address this issue, many HMOs have created what are termed "Preferred Provider Organizations," which provide panel of health providers for the person to choose from or give the option of choosing another health care provider but having to pay an additional co-payment.   (The other type of plan that is typically created by HMOs is a "Point of Service Plan," which allows patients to see anyone that they want who is willing to accept the plan's reimbursement rate.  In this plan, the patient usually covers about 20 percent of the fee). 

A large problem that also has ethical aspects to it is the fact that many managed care organizations provide their physicians with an “illegal kickback arrangement”[57] that provides monetary rewards to physicians who decide against administering costly tests for patients who could benefit from these services.  They do so simply because the managed care organizations have told them that if they keep such costs down, they will receive these monetary rewards for their compliance.  While in the past, doctors could potentially abuse the fee-for-service arrangement by ordering extraneous tests that were not deemed medically necessary, these tests at least safeguarded the patient and was not potentially damaging like the withholding of tests can be.[58]

            Denial of care is another important problem that managed care creates.  Currently, more than 70 percent of health dollars go toward caring for the ill.  Hence, for-profit managed care organizations wish to attract healthy patients and screen out the high-risk groups.  These for-profit organizations also limit the services that attract the sick and disabled so that they can select for healthier patients without being accused of discriminating against sick people.[59]

               Another problem with managed care is their use of report cards.  Health plans are creating such report cards and acquiring information from members of their plans who are typically less sick and thus, have little contact with the system.  Thus, the quality reports of health plans are much higher than they actually are overall, as the administrators of these health plans are manipulating the selection of participants.  According to recent reports from the Medical Outcomes Study as well as the Robert Wood Johnson Foundation, people actually showed “significantly worse access, satisfaction, and outcomes for the poor, sick and elderly in managed care.”[60]     

            The final and perhaps one of the most important problems that managed care creates is the fact that it diverts revenue away from hospitals and clinics (to go toward paying administrative costs and hefty salaries to managed care CEOs’ salaries).  In fact, such administrative burdens also create patient and physician satisfaction because it takes time away from the physician-patient relationship.  Rather than having the time to spend time with their patients explaining procedures or their diagnosis, physicians are dealing with “armies of corporate utilization managers spend[ing] millions of hours chasing approvals, correcting inappropriate denials and dealing with conflicting formularies, all of which leads to skyrocketing administrative costs.”[61]  Thus, this waste exacerbates the problem of accessing health care, and is a burdensome problem for the millions of people who are uninsured and cannot attain access to voluntary care that could be given to such patients instead.  This problem and the current health care crisis of the United States will be discussed in the remainder of this chapter.[62]


I.  Current Health Care Crisis of the United States

            Please note: there are more detailed chapters in this online text that discuss the fact that health care spending is increasing in the United States and the fact that many people lack health care insurance in the United States.  However, for the purposes of this chapter, these topics will be merely touched upon in an effort to provide a framework for the present situation of health care and thus, to show how the proposed solution might address some of these problems better than the current health care insurance systems that are in place both privately and federally.



            Currently, the United States spends more than $1.3 trillion each year on health care.  The current population size of the United States is 281 million[63] and the infant mortality rate is 6.82 per 1,000 live births.[64] Life expectancy is 74.24 years for men and 79.9 years for women[65] and the per capita gross domestic product (GDP) is $33,900[66] with $4,373 per person per year spent on health care (or, 12.9 percent of GDP).[67]  Despite this phenomenal spending trends of the United States, almost 39 million Americans, including 8.4 million children, lack basic health coverage. Currently, the total number of people without health insurance makes up 14 percent of the total population of the United States,[68] but this percentage has historically risen and fallen depending upon the state of the economy.  The ethnic background of the millions of Americans without insurance include:






            1) Ethnic Background of Uninsured Americans

Table I-1


Source: Department of Commerce, Health Insurance Coverage 2000.  (Washington, DC: Department of Commerce, September 28, 2001).



            2) Ramifications of lack of health coverage for all
The average person in the United States spends approximately $1 out of every $6 on health care and pays for the majority of primary care services that he or she receives out of his or her own pocket.[69] In fact, 60 percent of all U.S.  health expenditures come from private sources (i.e., personal income).[70] Patients may pay a portion of health costs as a co-payment supplemented by insurance, or the patient may bear the full cost of care.  This full payment can be necessary because the patient does not have insurance, as approximately 43 million people in the United States do not have.  Occasionally, a patient does actually have insurance but does not have coverage - often unknowingly - for the particular product or service that the patient needs.  According to data from 1996, the average American spends $470 per year on health care out of his or her own pocket.  Furthermore, the sickest 10 percent of Americans spend $1,864 and the sickest 10 percent of Americans who are lacking insurance pay $1,966.[71]

            The ramifications of not being insured are drastic.  Often, many people forgo health care, even when they are in the early stages of a chronic condition, so as to avoid treatment costs.  This results in their needing even more expensive care later on, as well as a deterioration of their conditions that might have otherwise been avoided.  According to the Universal Health Care 2000 Campaign, the uninsured are four times more likely to forego needed medical care, to postpone care due to costs and to not fill a prescription.  They are also hospitalized at least 50 more often than the insured for avoidable hospital conditions such as pneumonia and uncontrolled diabetes.[72]


            3) U.S. Spending on Health Care is on the Increase

            Despite the fact that the United States already spends more on health care than any other industrialized democratic nation but does not achieve comparably better results, health care spending is increasing in the United States.  In fact, by 2011, health care spending in the United States is expected to reach $2.8 trillion - a 115 percent increase from the $1.3 trillion spent on health care in 2000 - according to a new report by the Centers for Medicare and Medicaid Services.


            The report, published in the March/April issue of Health Affairs, projected that national health spending will grow at an average annual rate of 7.3 percent from 2001 to 2011.  By 2011, health care spending is expected to comprise 17 percent of the U.S.  gross domestic product - up from 13.2 percent in 2000 - with the increase largely attributed to legislative-driven increases in public spending and a weaker economic outlook.

            "From 2003 to 2011, real health spending is expected to outpace real economic growth, resulting in a continually growing share of the nation's resources being allocated to health care," wrote the report authors.

            The report contains a number of spending projections including private spending, public health spending, Medicare, Medicaid, out-of-pocket costs, hospitals, government public health, prescription drugs and nursing homes.

Among the report's predictions and findings:
· Government public health spending will increase in 2001 and 2002, reaching 16 percent in 2002, due to funding increases to upgrade the public health system to defend against the threat of bioterrorism.
· Private spending for health care grew 8.9 percent in 2001 and peaked at 9.4 percent for 2002, due to the effect of recent rising household incomes, less restrictive forms of managed care and rising price inflation.
· Private spending growth will decline to 5.9 percent by 2011, due to slower per capita real income growth, the revival of more restrictive forms of managed care, an increase in the number of uninsured people and an increase in consumer cost sharing.
· Public health spending will grow at an average annual rate of 7.3 percent from 2002­2011.
· By 2003, annual Medicare spending growth will fall by 5.5 percentage points and annual Medicaid spending growth will fall by 3.5 percentage points.
·  Out-of-pocket costs will fall to 14.1 percent of total personal health care spending in 2011, down almost 5 percent from 2001.  However, because employers are continuing to shift the costs of health care to their employees and because the number of uninsured people continues to rise, the declines are expected to be slower than in the 1990s.
·  The growth in prescription drug spending will decelerate from 17.3 percent in 2000 to 10.1 percent in 2011, because of weaker disposable income from the slowing economy, a decreased impact of direct-to-consumer advertising and incentives to use lower-cost drugs.
·   Hospital spending increased to 8.3 percent in 2001, due to increased Medicare spending in 2001 and in private spending through 2002.
·   Nursing home spending is expected to grow 5.5 percent per year from 2001­2011.[73]




Chart 3.  Past and Projected U.S. Health Expenditure

Source: U.S. Department of Health and Human Services, Health Care Financing Administration, March 2001.



            4) Why the United States Spends More on Health than other Nations

            Currently, the United States spends more on health care than other industrialized nation.  In fact, this has been the case since World War II.  For example, the United States spent approximately 5.2 percent of its gross domestic product on health care in 1960, compared to the 3.8 percent of GDP that the Organization of Economic Cooperation and Development, made up of 29 industrialized nations, spent on average in 1960.  These numbers jumped from 12.6 percent in the United States in 1990 compared to the 7.2 percent OECD mean, and 13.5 percent in the United States in 1997 compared to the 7.5 percent OECD mean.[74] There are several reasons why the United States spends more on health care than in other countries.

            Among the reasons cited for the difference in health care costs is that the United States uses much more technology in its practice of medicine than do other countries.  An illustration of this statement is the fact that the United States has three times the number of computerized tomography scanners and five times the number of magnetic resonance imaging units per million population than the average of other industrialized nations.  Also, in 1996, the average cost per day for hospital care in the United States was $1,128, compared to $632 in Denmark, $489 in Canada, and less than $350 per day in 20 other industrialized nations.[75]

            Another problem with the United States in terms of costs of health care is that there is a higher price placed on goods and services provided, especially for pharmaceuticals.  In fact, U.S.  consumers pay about 25 percent to 100 percent more than customers who are in other parts of the world, even when the medications are being produced by the same pharmaceutical companies.  One example of this is the fact that coronary artery "stents," which are medical devices that prevent heart attacks, cost $500 more in the United States than they do in Canada.  If a national health system existed that bought all drugs from all the manufacturers, the system would be able to negotiate prices that are far more reasonable than what one person or one insurance company (or even a handful of insurance companies or individuals) can negotiate.  Hence, some Americans are now going to Canada to purchase needed pharmaceuticals."[76]

            The third burden to health care costs in the United States is that of administrative waste, as approximately 25 percent of the cost of health care is spent on non-clinical administration.  These administrative costs include determination of eligibility for insurance, billing procedures, and marketing expenses.  The United States spends double the amount of what other industrialized nations spend on such activities.[77] The U.S.  Medicare program has overhead administrative costs of less than 5 percent, where as private insurance companies have overhead costs in the 20 percent to 25 percent range.[78] The discrepancy lies in the fact that private insurance companies review every procedure that a doctor proposes and usually contests each one, even if it is deemed necessary.  Such practices result in a delay of health care provision and cause doctors to waste both their time and money taking care of paperwork for the justification of procedures and billing for the provision of delivery, rather than being able to spend time on their patients.



J.  Potential Solution to Lack of Health Insurance for Americans
            The Canadian economy has found that the burden of ill health is more costly than the amount to treat it, in that there is time taken off from work or other regular activities by the person who is sick, there is time taken away from work by the person who is treating the sick and that potential productivity and output is lost when someone dies young.  According to a study released by Health Canada in 1997, these type of costs are double the costs of health care, when calculating the direct costs of illness (the amount of money that was spent on treatment, care, and rehabilitation), as well as the indirect costs (productivity that was lost due to premature death and short- or long-term disability).  However, intangible values such as the value of the time that was spent taking care of a loved one, were immeasurable.  The findings of the study for 1993 were that the total cost of illness was about $157 billion, of which more than $85 billion came from indirect costs.  The report also found that the leading sources of costs included heart disease and stroke (about $20 billion), musculoskeletal disease (about $18 billion), injuries (about $14 billion) and cancer (about $13 billion).  These diseases combined accounted for slightly more than 50 percent of the costs that could be classified by type of illness and each were characterized by much higher indirect costs than direct costs.[79]

            Given that being sick is more costly to the Canadian economy than treating health care and having productive members of society, the Canadian government implemented a universal access to health care system in the 20th century.  As a result of this, life expectancy has increased dramatically from 59 ears in the early 1920s to 69 years in the 1950s and 79 years by 1997.  Furthermore, older adults enjoy a better quality of life because of the extension of the number of years that they are living.  In fact, the Canadian life expectancy is one of the longest in the world, second with Iceland and behind Japan.  Health care also costs much less in Canada than it does in the United States.  In fact, the per capita health care cost in 1994 in the United States was $3,510 as opposed to $1,982 in Canada.[80] Similarly, administrative costs as a percentage of the total cost of health care in the United States are 26 percent, whereas it comprises only 9 percent of total costs in Canada.[81]             Another difference is that the cost for a typical family of four with a gross income of $35,000 per year with average coverage in the United States is $5,780.  The total is paid by the individual in premium contributions, out-of-pocket expenses, co-payments and uncovered services and falling wages as employer health care costs rise.  On the other hand, for full coverage in Canada, the cost is only $3,595, which is paid through a public tax system that is shared fairly by all and based on a national budget.[82] Thus, the Canadian health care system is far better than the U.S.  system in that for almost half the price, it achieves far superior results.        

Section 2: MEDICARE

            The Medicare program was first established in 1965 as Title XVIII of the Social Security Act.[83]  In passing this legislation, Congress separated Medicare into one common definitional part, Part C, and two substantive parts, Part A and Part B.[84] The purpose of Medicare was to provide the same type of health care as could be provided by a comprehensive insurance plan by a private entity.[85]  Specifically, Medicare was to provide a coordinated and comprehensive approach to federal health insurance and medical care for the aged and disabled.[86]

            The Medicare program went into effect July 1, 1966.[87]  It entitles persons age 65 and over (and their spouses who are at least age 65) who have paid into the Social Security system or Railroad Retirement benefits to federal health insurance coverage.[88]  In addition to those over the age of 65, the program also covers two categories of person under age 65: those with end-stage renal (kidney) disease and disabled persons who have been receiving Social Security disability benefits for 24 months.[89]  Medicare is an entitlement program and is not a needs-based program like Medicaid,[90] a federal-state program of medical assistance.[91]

            Today, Medicare provides health care coverage for more than 40 million Americans.[92]  Enrollment into Medicare is projected to reach nearly 77 million by 2031 when the Baby Boom generation is projected to be fully enrolled.[93]  Such figures have generated concern with the future viability of the Medicare system.  Faced with this concern, politicians have been calling for reform to ensure Medicare’s survival for future generations (Please see President Bush’s reform strategies below). 

            The administration of the Medicare program is delegated to the Department of Health and Human Services (DHHS), which is a department in the executive branch of the federal government.[94]  The Social Security Administration (SSA), a department within the DHHS, is responsible for Medicare eligibility and enrollment, and the Health Care Financing Administration (HCFA) establishes all the rules, regulations, and health-related policies governing the Medicare program.[95]  The HCFA contracts with private insurance companies throughout the United States to process Medicare claims.[96]  Each state has an intermediary, a private insurance company that processes Part A claims, and a carrier, a private insurance company that processes Part B claims.[97]

Medicare is funded from payroll taxes, general taxes, interest accumulated from the Health Insurance Trust Funds, and monthly premiums paid by Medicare beneficiaries.[98]  Furthermore, beneficiaries are responsible for paying deductibles and coinsurance amounts.[99]

As mentioned above, Medicare is divided into two parts: Part A, hospital insurance (HI); and Part B, medical insurance (also called supplemental medical insurance or SMI).[100]  Medicare does not pay for all of a beneficiary’s health care costs; it only pays a portion of it.[101]  Because of this, many Medicare beneficiaries supplement their coverage with private health insurance.[102]

A. Medicare Part A

When a person enrolls in Medicare, he or she will not have to pay a monthly premium for Part A.[103] There is no monthly premium to pay for Part A because coverage has been earned through a person’s payroll taxes deducted during his or her working years.[104]  Part B, on the other hand, is voluntary and requires a monthly premium, most often deducted from a person’s Social Security check each month.[105]

Medicare Part A covers areas such as inpatient hospital stays, skilled nursing facility stays, home health care, and hospice care.  In regards to inpatient hospital coverage, a person eligible to receive this coverage must first be admitted into a hospital.[106]  A Utilization Review Committee, a Peer Review Organization (PRO), and a Medicare intermediary determine eligibility by determining whether inpatient hospital care is “reasonable and necessary” for a specific disease or illness.[107]

The basic inpatient hospital benefits under Medicare Part A include a semiprivate room; meals, including special diets; regular nursing care; special care units, such as intensive care; laboratory tests; drugs given while in the hospital; radiology services, such as X-rays; medical supplies, such as casts; equipment use, such as wheelchairs; blood transfusions after the first three pints administered; operating room and recovery room costs; rehabilitation services, such as physical therapy; medical social services, such as discharge planning; emergency admission to the nearest hospital without a physician’s orders in life or death situations; 190 lifetime days in a participating psychiatric hospital; and care in participating Christian Science Sanatoriums if operated or listed and certified by the First Church of Christian Science, Boston.[108]

Program beneficiaries are covered for 90 inpatient days each benefit period.[109]  A benefit period begins when the person enters the hospital and ends when the individual is released.[110]  For the first 60 days of inpatient care, Medicare covers all but a specified deductible.[111]  If the individual’s stay goes beyond 60 days in a benefit period, the patient must pay daily coinsurance.[112]  For stays exceeding 60 days, there are an additional 60 lifetime reserve days available, however, these days can only be used once.[113]  Once these reserve days are used up, they are no longer available to the patient if an extended hospital stay is needed.[114]

Another area covered under Medicare Part A is skilled nursing facility care.  This type of care does not refer to the type of long-term care most people associate with nursing homes.  To be eligible, the skilled care must be a level of care that is provided under the direction of a physician or other licensed professional, such as a registered nurse, licensed practical nurse, physical therapist or speech pathologist, and the facility must include treatments for inpatients that have illnesses or injuries that seriously affect their life or health.[115]

To qualify for skilled nursing facility care a physician must certify that the patient needs, actually receives, and will benefit from skilled nursing care and/or skilled rehabilitation services on a daily basis.[116]  The services provided include technical services, observation and assessment of medically unstable patients, patient instruction in the self-care of devices, and physical and occupational therapy.[117]  Finally, the basic skilled nursing facility benefits provided under Medicare Part A are much the same as the benefits provided for inpatient hospital care discussed earlier.

A beneficiary is entitled to a total of 100 days in a Medicare-certified skilled nursing facility.[118]  For the first 20 days of care, there is no patient coinsurance requirement, however, for the remaining 80 days, the patient is responsible for a specified daily coinsurance amount.[119]

Many people who fall ill prefer to remain at home, preferring home health care instead of inpatient care.  Medicare Part A will pay for this type of care only if the care needed is skilled and is required on a part-time or intermittent basis.  This type of care is intended to help people recover or improve from an illness and is not there to provide unskilled services over an extended period of time.[120]

To be eligible for home health care benefits, the person must be homebound and unable to leave their residence without assistance from another person or special equipment; the person must need the type of care provided by a registered or licensed practical nurse or a physical or speech therapist; the care must be diagnosed by a physician as reasonable and medically necessary; and the services must be provided by a “participating” home health care agency.[121]

A beneficiary who requires skilled care at least once every 60 days is eligible for home health services.[122]  In this portion of Part A, there is no patient coinsurance, annual deductible, or number of visit limitations.[123]  In addition, Medicare will pay for the full amount that has been approved for all covered home health visits.[124]

The last area to be discussed under Medicare Part A is the area of hospice care.  This area of care was added to Medicare in 1982 and became effective in 1983.[125]  The purpose of care for hospice patients under Medicare is to provide in-home (non-hospital) care for symptom management, pain relief, and support services to persons certified by a physician to be terminally ill and to have a life expectancy of less than six months.[126]

The type of hospice care provided under Medicare includes physician services; nursing; certain types of drugs; physical, speech, and occupational therapy; home health aides; homemaker services; medical social services; medical supplies and appliances; short-term inpatient care, including respite stays; and counseling.[127]  An individual is entitled to these benefits for 210 lifetime days with a possibility of an extension if a physician recertifies the person as terminally ill.[128]

B. Medicare Part B

Another area of Medicare available to those who are eligible and choose to obtain it is Medicare part B.  This part of Medicare covers outpatient treatments as well as physicians’ services whether inpatient or outpatient.[129]  Unlike Part A, Medicare Part B requires the individual to pay an annual deductible for enrollment.[130]

To be eligible to receive services under Medicare Part B the person must first be enrolled in the program and the care received must be “reasonable and necessary in the diagnosis and treatment of a specific illness or injury.”[131]  A physician and a Medicare carrier determine this standard.[132]

One area covered under Medicare Part B that is not covered under Part A is the services provided by physicians.  The specific areas covered include approved surgical services, including anesthesia; medical services; services provided by physician’s nurses and staff; physician charges for the interpretation of diagnostic tests and procedures such as X-rays; transfusion of blood and blood components; drugs and biologicals that cannot be self-administered; therapies that are planned and reviewed by a physician; medical supplies; second opinions regarding surgery; clinical laboratory diagnostic services; limited mental illness services; limited chiropractic services; limited podiatrist services; limited optometrist services; and limited dental surgeon’s services.[133]

In addition to physician services, certain outpatient procedures are also covered under Part B.  These procedures include diagnostic tests and clinical laboratory tests billed by the hospital; services in the emergency room or an outpatient clinic; X-rays and other radiological services; medical supplies; drugs and biologicals that cannot be self-administered; blood transfusions; outpatient surgical services; and kidney dialysis.[134]

C. Enrollment

Application for the benefits under Medicare Part A and Part B vary.  In applying for benefits under Medicare A, the best time to apply is in the initial enrollment period, which includes the 3 months prior to the person’s 65th birth month, the birth month itself, and the 3 months following the individual’s 65th birth month.[135]  For those who fail to enroll during this period of time, there is a general enrollment period offered each year.[136] 

For Part B enrollment, there is a general enrollment period offered from January 1st through March 31st of each year for those who are eligible.[137]  For those over 65 it is advised that they purchase this form of insurance because there are penalties for late enrollment and also because obtaining health insurance coverage is difficult for individuals of this age.[138]




            Although the Medicare program has been successful through the years, it has not always kept pace with the ever-increasing improvements in health care.[139]  Because of this, Medicare beneficiaries today are lacking many of the choices and benefits available to millions of other Americans in different health plans.[140]  In spite of all the benefits that Medicare provides, it still does not offer an outpatient prescription drug benefit, forcing many seniors to go without the medicines they need.[141]  Furthermore, Medicare does not provide full coverage for important preventive health care, such as diabetes or cancer screenings, and it does not provide protection against uncapped medical costs that can run a senior’s savings dry.[142]

            With health care costs on the rise and the Baby Boom generation nearing retirement age, Medicare is beginning to face serious financial challenges.[143]  President Bush, acknowledging these problems, believes the nation has a moral obligation to fulfill Medicare’s promise of health care security for America’s seniors and people with disabilities.[144]  To meet this obligation and overcome the problems with Medicare, the president believes that the nation must act now to bring Medicare into the 21st Century by providing more choices and better benefits to every senior in the United States.[145]

            In addressing this problem, President Bush, in July of 2001, outlined the following principles for Medicare reform: All seniors should have the option of a subsidized prescription drug benefit as part of modernized Medicare; modernized Medicare should provide better coverage for preventive care and serious illness; beneficiaries should have the option of keeping the traditional plan with no changes; Medicare should provide better health insurance options, like those available to all federal employees; Medicare legislation should strengthen the program’s long-term financial security; the management of the government Medicare plan should be strengthened so that it can provide better care for seniors; Medicare’s regulations and administrative procedures should be updated and streamlined, while the instances of fraud and abuse should be reduced; and Medicare should encourage high-quality health care for seniors.[146]

            Recently the President has proposed a framework to modernize and improve Medicare building upon the principles mentioned above.  The President, in working with Congress to pass legislation to bring more choices and better benefits, has committed up to $400 billion over the next ten years in his FY 2004 budget to pay for modernizing and improving Medicare.[147]  The President’s plan will give all Medicare beneficiaries access to: Prescription drug coverage that enables seniors to get the medicines they need without the government dictating their drug choices; choice of an individual health care plan that best fits their needs, just like members of Congress and other federal employees enjoy today; choice of the doctor, hospital, or place they want for the treatment and care they need; full coverage for disease prevention such as screenings for cancer, diabetes, and osteoporosis; and protection from high out-of-pocket costs that threaten to rob seniors of their savings.[148]


A. Traditional Medicare

The modernized Medicare plan will give seniors the option to decide what type of Medicare program they would like to be enrolled in.  Seniors who are satisfied with their current coverage in traditional Medicare will be given the option to keep this kind of coverage and receive help with the high costs of prescription drugs.[149]  The beneficiaries who decide to stay in the traditional Medicare program will gain access to discounted drugs through a prescription drug discount card, estimated to achieve savings of 10 to 25 percent on the cost of prescription drugs, as well as coverage to protect them against high out-of-pocket drug expenses[150]

B. Enhanced Medicare

            A new form of Medicare that could be available if legislation is passed is Enhanced Medicare.  Enhanced Medicare will give those seniors who choose to enroll into the program the same types of choices that are available to members of Congress and other federal employees.[151]  Those enrolled will have their choice of multiple health plans from which to choose from.[152]  The choice of plans will be available to all seniors regardless of where they live, allowing them to choose any doctor or any hospital for the treatment and care they need.[153] 

The federal government will pay for most of the cost of coverage under Enhanced Medicare, with participants paying a smaller share.[154]  Beneficiaries who choose to enroll in an average priced plan would pay a premium for the medical portion of their coverage equal to the Medicare Part B premium.[155]

            Enhanced Medicare will include many additional benefits that are not available under today’s Medicare program.  For example, under Enhanced Medicare, plans will offer a subsidized prescription drug benefit with a monthly premium, an annual deductible, coverage of prescription drug costs and protections for those who have drug costs that are high.[156]  Low-income individuals will receive this drug coverage for no additional premium and will receive further subsidies to limit their co-payments.[157]

            Full coverage of preventive benefits will also be available to seniors under Enhanced Medicare.[158]  Under the current Medicare system, coverage is only available for certain preventive services after the Medicare Part B deductible is met.[159]  In addition, a number of preventive services under today’s Medicare system require co-insurance.[160]  Enhanced Medicare plans will provide full coverage of preventive services removing the financial barriers for low-income seniors who are less likely to seek preventive treatment, such as prostate cancer screenings and mammographies.[161]

            Currently, today’s Medicare coverage does not protect individuals from high out-of-pocket costs for health care.[162]  Enhanced Medicare will reverse this eliminating the lifetime limit for inpatient hospital care and protect against high medical bills for hospitalizations.[163]  Under the proposed plan, participants with very high out-of-pocket costs will face no additional cost sharing.[164]

            Furthermore, the current Medicare system penalizes its sickest participants by requiring them to pay more when they need to stay longer in a hospital.[165]  At the same time, Medicare requires cost sharing for some specified services while some services are fully covered.[166]  Patients pay 20 percent or more, for example, when they visit their doctor or a hospital outpatient department, but those needing home care pay nothing out-of-pocket.[167]

            If the new legislation is passed, participants will have a single deductible for medical services, just like what is done in most private insurance plans, to provide more adequate protection from high expenses for all types of health care.[168]  This single deductible would replace the separate Medicare Part A and Part B deductibles.[169]  In addition, after a lower deductible, participants would pay nothing for their first two-inpatient hospital admissions in a year and a reasonable co-pay for any subsequent hospital stay.[170]  Such changes will provide better protection for those enrolled in the program that need the most medical care.[171]

C. Medicare Advantage

            In addition to Enhanced Medicare, the President’s plan also calls for the implementation of a program called Medicare Advantage.  Under Medicare Advantage, seniors will have the option of enrolling in low-cost and high-coverage managed care plans, similar to those that are available today under Medicare.[172]  Plans in competitive markets under the newly created Medicare Advantage program will bid to provide participants with Medicare’s enhanced basic benefit package.[173]  Those who select more efficient plans will benefit from savings, and in some circumstances, participants in the most efficient plans could pay no premium at all and potentially qualify for a rebate on their premium.[174] 

Medicare Advantage will be a good choice for participants willing to accept a more selective provider panel in exchange for lower cost sharing and extra benefits.[175]  The creation of a system in which different types of delivery systems compete for business will result in a marketplace where plans in each system will have strong incentives to provide the most efficient and highest quality of care.[176]

D. Time-Frame

The hope of the President’s plan for the reworking of Medicare is to provide more choices and better benefits for all those who are eligible for Medicare today.[177]  If legislation is passed in 2003, then in the beginning of 2004, seniors will have the following benefits: All seniors will receive access to discounted drugs (discounts ranging between 10 to 25 percent off) through Medicare endorsed prescription drug discount cards.[178]  For low-income seniors, in addition to the drug discount card, they will also receive $600 per year to assist in purchasing prescription drugs.[179]

            By the year 2006, if legislation is passed, seniors will have the option of staying in traditional Medicare and receiving a prescription drug discount card, coupled with coverage that will protect them against high out-of-pocket costs for their prescription medicines.[180]  Along with this type of coverage, as described above, seniors will also be able to choose among new Medicare plans including Enhanced Medicare and Medicare Advantage.  As mentioned by President Bush in his state of the union address in January of 2003, the passing of this legislation will reform and strengthen the Medicare program to ensure its survival and effectiveness.[181]


Section 3: Medicaid

The History of Medicaid

            Medicaid is today’s largest source of government funding designed to provide health care for those American’s who are not able to afford it. These include two groups of people such as the poor and the elderly living in nursing homes. Medicaid became law in 1965 and was originally established to provide medical attention to those considered, “needy”, citizens who could not afford coverage. In 1980 the law was further expanded to cover not only medically needy citizens, but low income pregnant mothers and children, and as it will be discussed further, larger numbers of American citizens. The program is a joint venture run by both the United States Federal and State government and the number of persons enrolled in the Medicaid program represents 15% of America’s population.4


How is Medicaid Run?

            As stated previously, Medicaid is a Federal and State government run program. For example, if Ohio can budget themselves and afford to pay 2,000,000 dollars for Medicaid, then the Federal government is required to match that amount if the State follows particular guidelines later discussed in this chapter. In general, States are allowed to run their Medicaid programs by however they feel fit. The Federal government will step in and mandates that each State follow four initial guidelines. Each State must, establish its own standards for those to be considered eligible to receive health care, determine the proper amount of money, time, and amount of services allotted to those receiving Medicaid, set the rate of payments for those health care organizations who treat Medicaid patients, and lastly, administer its own program.1 For most States, each regulation is different based on the amount of persons currently enrolled in the Medicaid program, the size of the state, and how much money is available for the state to provide. Also, when setting up a program a State has two restrictions set by the Federal government under the category of hospital care and number of physicians a patient may visit. First, limits must result in a sufficient level of services to reasonably achieve the purpose of the benefits; and second, limits on benefits may not discriminate among beneficiaries based on medical diagnosis or condition.1 A good example of how a State would run a program is to look at the State of Ohio.

            Currently, Ohio’s Medicaid plan covers 1.7 million people, which includes 1 in 4 children and 1 in 4 seniors over the age of 85.3 To be considered eligible to receive Medicaid in Ohio, families with children must be below 200 percent the Federal Poverty Guideline, pregnant women are to be 150 percent below the guideline, and working parents with families must be below 100 percent the guideline.3  Those who are low-income seniors, and persons with disabilities requiring long-term care may also apply for Medicaid in the state of Ohio. As far as budgeting is concerned, Ohio has been known to place 2.3 billion dollars into nursing facilities, 1.5 billion dollars into hospitals, and 424 million dollars to managed care.3  This is just the state of Ohio, which is not terribly small, but not terribly large as well. Imagine the amount of Medicaid funds needed for those persons living in California? It is also important to remember that based on the differences in each Medicaid program, just because one may be eligible for care in Ohio does not necessarily mean that he may be eligible for Medicaid in California.


Medicaid Eligibility

            The easiest way for one to understand Medicaid is to look at the program as a pyramid. At the top of the pyramid is the Federal government. On the second level are the States, and then underneath on the ground level are the individuals of that state seeking Medicaid. Just like persons seeking eligibility for Medicaid in a particular State, States must also meet eligibility requirements mandated by the Federal government in order to receive Medicaid funds. These requirements are set in stone in the fact that first each State must follow the four guidelines presented above. States also have other obligations in the fact that they are required to provide Medicaid coverage to individuals who receive Federally assisted income payments, and those groups not receiving cash payments from the Federal government.1 So in a way, States must follow five guidelines rather than four in order to receive Medicaid funds. Those lying at the bottom of the pyramid have a more difficult qualifying for Medicaid, because eligibility requirements become more complicated and detailed than State guidelines.

            One of the most important ideals to remember when discussing Medicaid is that it is not simply given to those who are poor or elderly. In many cases, most persons are stuck in search of health care because they are not able to receive health care simply because they can not afford insurance, and at the same time are not poor enough to be considered for Medicaid.  Medicaid is only given to those who are considered needy and these persons must fall into a needy category, such as in Ohio where for example children living in a family that is below 200 percent according to the Federal Poverty Guideline.3 These categories are mandated by the State and are as follows. Persons who wish to be considered for Medicaid must:

·        Meet the needs specified by the program Aid to Families with Dependent Children1


·        Children under the age of six whose family income is below 133 percent the poverty line1


·        Women who are pregnant must fall between below 33 percent below the poverty line1


·        Supplemental Security Income persons1

·        Special protected groups1

·        All children born after September 30, 1983 who are under the age of 19 and whose family incomes fall below the poverty line1


Not only is it important that persons meet these criteria to receive Medicaid, but if the State does not also mandate these categories through out their Medicaid program then they will not receive the matched funds given by the Federal government. Also, there is the problem of again, finding a place for those who are not considered needy to receive health care which can be found in the solution sections of the chapter.

            It was estimated in 2000 that close to 11.3 percent of the population in the United States was considered poor.4 Of this population, only 4.4 percent were impoverished, meaning that these persons had a family income below one-half of the official poverty threshold. 4 Does this mean that if citizens are not considered poor enough then they should not receive health care? Also how poor is poor then as defined by the American society?


Services to the public

            As well as setting up Medicaid programs including guidelines mandated by the Federal government, States must also provide specific services to those receiving Medicaid to receive their reimbursed Federal Funds. There are two specific types of services which can be allocated to the Medicaid public known as basic and special Medicaid program. Special services on the other hand, are those that can be offered by services. Basic services are those services that must be offered by every State Medicaid program. Special services, on the other hand, can be offered by States only if their budget allows for it. Basic services are known to include to the following1:

Inpatient and outpatient health care           

Prenatal care


Physician services

Nursing home facilities for those 21 and over

Rural health clinic services

Home health care


Special services will include1:

Clinic services




ntermediate care for the mentally retarded

Prescribed drugs

Special services are important because many families are in need of transportation services and in today’s medical world, prescription drugs are becoming more expensive every year. Ohio, for example, spends 15.2 percent of its Medicaid budget simply on prescribed drugs and close to 33 percent of its budget on nursing facilities. For those wishing to learn more about the Medicaid program in Ohio, please click on

Looking at both services, it would seem that some special services should be included into that of the basic services. One of President Bush’s main concerns is to allow Medicaid patients to receive prescribed drugs at lower prices. To learn more about his topic, please refer to the section of this chapter explaining the new health plan of President George W. Bush.

            It is also important to note that with today’s technology it is extremely easy to find information regarding each State Medicaid plan. Each state has close to 50 different web pages dedicated to informing the public on every known Medicaid program available. The easiest way to gain information is to simply look at the website           


Who does Medicaid Cover?

            As stated previously, Medicaid covers those considered to be categorically needy ranging from young children to the elderly living in nursing homes. In 1998 it was estimated that Medicaid covered 20.6 million children alone. 1 These children accounted for close to 51 percent of the total population receiving Medicaid today and each was estimated to cost close to 1,150 dollars. 1 This seems reasonably low seeing as children are known to be more accident prone and susceptible to diseases.

            Medicaid is also known to cover close to 8.6 million adults in the United States. This category of recipients makes up 21 percent of the persons receiving Medicaid with each adult costing around 1, 775 dollars.1  It is also important to note that as the age of Medicaid recipients rises, so does the cost of payment for each person. Lastly, and what would seem to be the most important group of individuals, are the elderly.

            Medicaid is known to cover close to 4 million elderly persons, which makes up around 1.1 percent of the total Medicaid population.1 Each elderly person is estimated to cost around 9,900 dollars to cover.1 The change in monetary unit is dramatic from children to the elderly. Today, Medicaid has paid for almost 45 percent of the total cost of care for persons using nursing facilities.1 There are two problems now occurring with the elderly today. First, the population is growing dramatically, meaning larger amounts of funds are needed to provide coverage. Second, are the methods in which some of the elderly must go through to receive Medicaid.

            In the United States, it is not uncommon for the elderly to live in Nursing Home communities for various reasons such as the need of more medical assistance and attention. The problem is that the cost of Nursing home living is rising dramatically. As mentioned before, persons must be considered categorically needy in order to receive any form of Medicaid. In many instances, the number one factor is to lie significantly below the Federal Poverty Guideline. For many elderly to receive Medicaid payments, they are being forced to sell many assets such as their homes and values to qualify for Medicaid, and live in these facilities. Not only is it important to note that Medicaid is important in paying for these facilities, but in a recent study conducted by scientists determining how physician care compares to the amount of Medicaid being received, those persons receiving larger amounts of Medicaid were able to receive better amounts of physician care.2


How does one pay for Medicaid Services?

            Medicaid is operated by what is known as a vendor payment program,1 which means that a health care provider will carry out a service, for example vaccinating a child, and the State will in return pay for that service. In most cases States are allowed to choose from two options by the Federal government to pay for health care services. States can either pay the health care provider directly, as described above, or the states may pay through various arrangements made with health maintenance organizations, (HMO).1 With both State and Federal government programs involved with Medicaid programs, how do both work together in covering medical expenditures?

            The Federal government pays a share of the medical assistant expenditures under each State’s Medicaid program which is known as the Federal Medical Assistance Percentage.1 This percentage is determined by a formula which compares the State’s average per capita income level with the national income average.1 Those State’s having a larger income level are tended to be reimbursed smaller amounts of money compared to those States having smaller amounts of income. At this present time, there is no real limit spent on the amount of money the Federal government is allowed to pay the State for medical assistant. In general, if the State government is able to produce large amounts of money for Medicaid, then the Federal Government is obligated to pay 100 percent of what the State has already produced for the program.


Today’s Medicaid Program

            Medicaid has come a long way from the law established in the year 1965. Not only is there growing populations of persons who can not afford health care, but  insurance companies are changing as well. Toady, those who can afford to pay for health care can do so through private insurance companies, HMO’s, or a program that is literally a combination of both HMO and private insurance companies. State Medicaid programs are working with many of these programs in helping to provide health care to those who can  not afford it by creating  new system different from the regular fee-for-service system of the past.

            Under today’s managed health care system, private insurance companies have agreed to provide a specific set of services to Medicaid enrollees, usually in return for a predetermined periodic payment for enrollee. 1 By Medicaid working with new managed care programs, States are hoping to run a more cost-effective health care program to those in the Medicaid program.


Where does the American Health System go from here?

            One of the biggest questions today is how can America, the largest economic superpower in the world, have so many of its citizens living without health care coverage? The answer is simple in the way that the managed health care system is run.

Currently, the American system is run by private insurance companies and HMOs. So where is the solution to American’s health care problem? After talking with many physicians the answer lies in universal health care.

             According to Dr. Arora, an OBGYN and Lakewood Hospital in Lakewood, Ohio, one of the best reasons for universal health care is so patients are not limited to their choices and in the end are happier customers. For example, a patient belonging to a prominent health care provider has a problem and is told that they have a choice of five different physicians to choose from to seek treatment. The patient tries each physician and decides that he does not prefer any of the competing physicians and decides that he would rather seek a physician that is not involved with his insurance organization. The patient is then either forced to pay for his own treatment or not seek any treatment at all even though he has a well established insurance provider. Is this really ethical and fair to the public? What if the patient does not wish to pay for this treatment and in the end becomes worse off than he began? With universal health care this would have never been an issue. The patient would have been able to choose the physician he had wanted in the first place, be a happier client, and in the end hopefully come back to that provider.

            Another question which would need to be answered is if every person was able to receive health care then wouldn’t the costs of health care rise? The answer is honestly no. When a patient enters an emergency room today they are subjected to more tests than can be imagined, such as a CAT scan or MRI depending on the problem. These tests are actually quite expensive, sometimes unnecessary, and at many times do not provide the answer in which the physician was looking for. With universal health care, patients would not have to undergo this grueling process of a different physician performing a different test, but rather have the attention they deserve. Along with having the choice of  allowing patients to choose their own physician comes the privilege of allowing physicians time to sit and speaking with their patients about their medical problems. Walk into any hospital setting, and one will notice the rushing of physicians in seeing as many patients as possible throughout the day because the more patients a physician sees, the more money is collected from insurance companies, and in the end more money is being made by the health care provider. Universal health care would allow for those physicians to still make the same amount of money without so many vigorous tests, but at the same time spend time with their patients making the patients a much happier client who can return for their next medical need.

            For many physicians, today’s medical system is a harsh one in which to practice medicine, because according to Dr. Arora, “ the largest problem being faced is the number of medical malpractice suits being brought upon doctors”. It is now a common incentive in our system to sue physicians for any problem a patient may encounter. Insurance companies are faced with the problem of not only providing coverage for its patients, but at the same time shelling out millions of dollars each year to defend physicians. With so much money being paid by hospitals to defend themselves in law suits, many hospitals are being forced to shut down important parts of their organizations ward, such as the emergency, because they simply can not afford to keep their organizations running as well as pay the malpractice insurance. Dr. Arora explains, “Hippocratic Oath or not, who honestly wants to work in such a medical environment with the fear of being sued?” Again, universal health care coverage is a way to help lessen the problem. Ask any patient, and the happiest they have been is when they are treated in such a way that all their questions are answered and made to feel that the physician is really listening. An unhappy patient is one who feels they have been rushed and not listened to, which in the end may lead them to sue a physician. Do not misunderstand there are situations where it is appropriate for one to sue due to a horrific medical malpractice mistake. But it has come to place in our society that suing is the norm and should be done whenever possible leaving physicians caught in a battle to provide services they have dedicated their lives to and yet live with the fear that of being sued at any point in time. Again, it comes back to the point of universalizing the health care system. By allowing the patient to come to feel that they have not been rushed through a visit but allowed to have themselves listened to by the physician of their choice the rate of malpractice would lessen significantly.

            This is a time in our society where a change needs to be made to the health care system so that both physicians and patients are equally treated in a fair manner. The only way to get to this place in time is to universalize the health care system.



            For information on uninsured persons who pay for health care out-of-pocket, please see Lloyd Runser’s chapter located within this publication web site. 


            This chapter’s purpose is to introduce the reader to private and federally funded health insurance and the laws and legislation that have shaped these two areas of health coverage into what it is today.  Although these two areas of insurance cover the majority of American citizens, they are by no means the only insurance available.  In addition to the types of insurance covered in this chapter, there are other forms of medical insurance available to special groups within the United States population.  Such special medical insurance programs cover veterans of the U.S. military,[182] those currently in the U.S. military,[183] persons incarcerated in the prison system,[184] and Native Americans.[185]  To learn more of these additional health plans, please view the web sites provided below. 




ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from


Barry R. Furrow, Sandra H. Johnson, Timothy S. Jost, & Robert L. Schwartz, HEALTH LAW: Cases, Materials, and Problems (West Publishing Company) Chapter 6. 


BLACK’S LAW DICTIONARY (6th ed. 1990).


Birnbaum, Roger.   Health Maintenance Organizations.   New York: Spectrum Publications, Inc., 1976.


California Division of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc., 519 U.S. 316 (1997).


Central Intelligence Agency, CIA World Factbook 2001, (Washington, DC: Central Intelligence Agency, 2001, accesses 8 May 2002); available from; Internet.


Consolidated Omnibus Budget Reconciliation Act 29 USCA sections 1161. 


DeBuono v. NYSA-ILA medical and Clinical Serv. Fund, 520 U.S. 806 (1997).


Department of Commerce, Health Insurance Coverage 2000.  (Washington, DC: Department of Commerce, September 28, 2001).


The Employment Retirement Income Security Act 29 USCA section 1144.


Geissal v. Moore Medical Corporation et al., 524 U.S. 74 (1998).


Health Care Financing Administration, National Health Expenditure Projections, (Washington, DC: Health Care Financing Administration, 2002, accessed 8 May 2002); available from; Internet.


Health Maintenance Organization Act 42 USCA section 280.


Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits; 2001 Annual Survey, (September, 2001, accessed 8 May 2002); available from; Internet.


Jack K. Kilcullen, ERISA, HMO Malpractice, and Enterprise Liability, 22, AM. J. L. and MED. 7 (1996).


Lambrew, Jeanne, How the Slowing U.S.  Economy Threatens Employer Based Health Insurance, (The Commonwealth Fund, November 2001, accessed 8 May 2002), available from; Internet.


McCarran-Ferguson Act 15 USCS section 1011.


M.  Susan Marquis and Stephen H.  Long, (RAND, 2002, accessed 8 May 2002), available from; Internet.


Art Myatt, In Every Other Country Comparing Health Care Systems and Results (September 2001, accessed 8 May 2002); available from; Internet.


New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995).


 Organization for Economic Cooperation and Development, Organization for Economic Cooperation and Development (OECD) Health Data 2001 (Organization for Economic Cooperation and Development, 2001, accessed 8 May 2002); available from; Internet.


Patricia Mullen Ochmann, Managed Care Organizations Manage to Escape Liability: Why Issues of Quantity v. Quality Lead to ERISA’s Inequitable Preemption of Claims, 34 Akron L. Rev. 571 (2001).


Phyllis C. Borzi, Distinguishing Between Coverage and Treatment Decision Under ERISA Health Plans: What’s Left of ERISA Preemption? 49 Buffalo L. Rev. 1219



 R.  Moore and others, Economic Burden of Illness in Canada, 1993, (Ottawa: Health Canada, 1997).


Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.


U.S.  Census Bureau 2000, Census, (Washington, DC: U.S.  Census Bureau 2001).


Wojtczak, Andrzej: The Concept, evolution and Present Problems of Managed Care in the United States, Internet Journal of Public Health education 2 (2000), B 70-81.  Accepted: 28.1.2000



[1] Source: U.S. Department of Health and Human Services, Health Care Financing Administration, March 2001



[4]  Lambrew, Jeanne, How the Slowing U.S. Economy Threatens Employer Based Health Insurance, (The Commonwealth Fund, November 2001, accessed 8 May 2002), available from; Internet.

[5]  Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits; 2001 Annual Survey, (September, 2001, accessed 8 May 2002); available from; Internet.

[6]  M.  Susan Marquis and Stephen H.  Long, (RAND, 2002, accessed 8 May 2002), available from; Internet.

[7]  M.  Susan Marquis and Stephen H.  Long, (RAND, 2002, accessed 8 May 2002), available from; Internet.

[8]  Birnbaum, Roger.   Health Maintenance Organizations.   New York: Spectrum Publications, Inc., 1976.

[9] See McCarran-Ferguson Act 15 USCS section 1011.  To view individual state’s mandated health benefits and other laws, see

[10] Id.

[11] Barry R. Furrow, Sandra H. Johnson, Timothy S. Jost, & Robert L. Schwartz, HEALTH LAW: Cases, Materials, and Problems (West Publishing Company) Chapter 6 at page 543.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] State law refers to laws of a state or ordinances of city or town, all as distinguished from Federal law which is the supreme law of the land under Art. VI of the U.S. Constitution.  However, in matters which are not necessarily governed by Federal law, the Federal courts will look to state law and be governed by it.  See BLACK’S LAW DICTIONARY 1408 (6th ed. 1990).

[17] The federal government can implement laws over the states with statutes enacted by Congress, relating to matters within authority delegated to federal government by the U.S. Constitution.  See BLACK’S LAW DICTIONARY 610 (6th ed. 1990). 

[18] See The Employee Retirement Income Security Act 29 USCA section 1144.  To learn more of ERISA, see

[19] Patricia Mullen Ochmann, Managed Care Organizations Manage to Escape Liability: Why Issues of Quantity vs. Quality Lead to ERISA’s Inequitable Preemption of Claims, 34 Akron L. Rev. 571, 581 (2001).

[20] Id.

[21] Id. at 582.

[22] Id.

[23] See 29 USCA 1144(a) (emphasis added).

[24] Phyllis C. Borzi, Distinguishing Between Coverage and Treatment Decisions Under ERISA Health Plans: What’s Left of ERISA Preemption? 49 Buffalo L. Rev. 1219 (2001).

[25] See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995); California Division of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc., 519 U.S. 316 (1997); DeBuono v. NYSA-ILA Medical and Clinical Serv. Fund, 520 U.S. 806 (1997).

[26] Borzi, supra note 16, at 1226.

[27] See 29 USCS section 1144(b)(2)(A).

[28] Ochmann, supra note 11.

[29] Id.

[30] Id.

[31] Borzi, supra note 16, at 1228.

[32] ERISA 514(b)(2)(B), 29 USCS 1144(b)(2)(B).

[33] Ochmann, supra note 11.

[34] See 29 USCA sections 1161-1167.  For more information on COBRA, see

[35] Geissal v. Moore Medical Corporation et al., 524 U.S. 74 (1998). Citing The Consolidated Omnibus Budget Reconciliation Act 29 USCA 1161.

[36] See 29 USCA section 1161(b).

[37] Geissal, supra note 27, 1872-1873, 29 USCA section 1163.

[38] Id. at 1873, 29 USCA section 1167(3).

[39] Id. 29 USCA section 1162(1).

[40] Id.29 USCA section 1166(a).

[41] Id. 29 USCA section 1165(1).

[42] Id. 29 USCA section 1162(2)(A).

[43] Id. 29 usca section 1162(2)(C); See also sections 1162(3) and 1164.

[44] Id. 29 USCA section 1162(2)(D).

[45] See 42 USCA section 280. For more information on the Health Maintenance Organization Act of 1973, see

[46] Jack K. Kilcullen, ERISA, HMO Malpractice, and Enterprise Liability, 22, Am. J. L. and Med. 7 (1996).

[47] The “dual choice option” was subsequently revoked by the 1988 Amendments to this statute.

[48] Kilcullen, supra note 38.

[49] Id.

[50] Id.

[51] Furrow, supra note 3, chapter 7, page 716.

[52] Kilcullen, supra note 38.

[53]  Id., at 26.

[54] Furrow, supra note 3, chapter 6, page 543-544.

[55] Id.

[56] Id.

[57]  ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from

[58] Wojtczak, Andrzej: The Concept, evolution and Present Problems of Managed Care in the United States, Internet Journal of Public Health education 2 (2000), B 70-81.  Accepted: 28.1.2000

[59] ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from

[60] ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from

[61] ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from

[62]  ACP-ASIM, Why for-profit managed care fails you and your patients, (ACP-ASIM, accesses March 29, 2003); available from

[63]  U.S.  Census Bureau 2000, Census, (Washington, DC: U.S.  Census Bureau 2001).

[64]  Central Intelligence Agency, CIA World Factbook 2001, (Washington, DC: Central Intelligence Agency, 2001, accesses 8 May 2002); available from; Internet.

[65]  Central Intelligence Agency, CIA World Factbook 2001, (Washington, DC: Central Intelligence Agency, 2001, accesses 8 May 2002); available from; Internet.

[66]  Central Intelligence Agency, CIA World Factbook 2001, (Washington, DC: Central Intelligence Agency, 2001, accesses 8 May 2002); available from; Internet.

[67]  Organization for Economic Cooperation and Development, Organization for Economic Cooperation and Development (OECD) Health Data 2001 (Organization for Economic Cooperation and Development, 2001, accessed 8 May 2002); available from; Internet.

[68]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[69]  Art Myatt, In Every Other Country Comparing Health Care Systems and Results (September 2001, accessed 8 May 2002); available from; Internet.

[70]  Art Myatt, In Every Other Country Comparing Health Care Systems and Results (September 2001, accessed 8 May 2002); available from; Internet.

[71]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[72]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[73]  Health Care Financing Administration, National Health Expenditure Projections, (Washington, DC: Health Care Financing Administration, 2002, accessed 8 May 2002); available from; Internet.

[74]  Organization for Economic Cooperation and Development, Organization for Economic Cooperation and Development (OECD) Health Data 2001 (Organization for Economic Cooperation and Development, 2001, accessed 8 May 2002); available from; Internet.

[75]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[76]  Art Myatt, In Every Other Country Comparing Health Care Systems and Results (September 2001, accessed 8 May 2002); available from; Internet.

[77]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[78]  Art Myatt, In Every Other Country Comparing Health Care Systems and Results (September 2001, accessed 8 May 2002); available from; Internet.

[79]  R.  Moore and others, Economic Burden of Illness in Canada, 1993, (Ottawa: Health Canada, 1997).

[80]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[81]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[82]  Universal Health Care Access Network, American Health Care at the end of the Twentieth Century: An Overview (Universal Health Care Access Network, accessed 8 May 2002); available from; Internet.

[83] Erik V. Larson & Diana L. Panian, Successfully Discharging Medical Liens in Personal Injury Cases, 32 Cumb. L. Rev. 348, 350 (2001/2002).

[84] Id.

[85] Id.

[86] Id.

[87] Susan Hellman & Leonard H. Hellman, Medicare and Medigaps: A Guide to Retirement Health Insurance, (Sage Publications, Inc. 1991).

[88] Id. at page 1.

[89] Id.

[90] See infra.

[91] Hellman, supra note 5, at 1-2.

[92] Framework to Modernize and Improve Medicare Fact Sheet, (Visited March 16, 2003)    

[93] Id.

[94] Hellman, Supra note 5, at 2.

[95] Id.

[96] Id.

[97] Id.

[98] Id.

[99] Id.

[100] Id.

[101] Id.

[102] Id. Because Medicare will not pay for all of the beneficiary’s health care needs, a common form of supplemental coverage offered is Medigap.  A Medigap plan is a health insurance plan that fills the gaps in Original Medicare plan coverage.  In all states, there are basic standardized Medigap plans.  Each plan has a different set of benefits.  To see what individual states offer and charge, please go to

[103] Id.

[104] People will not have to pay a hospital insurance premium if they or their spouse have 40 or more quarters of Medicare covered employment. Part A premium is $174.00 for those individuals having 30-39 quarters of Medicare covered employment.  Lastly, for individuals who have less than 30 quarters of Medicare covered employment, the premium amounts to $316.00 per month. See  

[105]Hellman, supra note 5, at 2. .

[106] 8.

[107] Id.

[108] Id.

[109] Id.

[110] Id.

[111] Id. As of 1999, a total of $768 for hospital stays of 1-60 days.

[112] Id. As of 1999, a charge of $192 per day for hospital stays of 61-90 days will be charged.

[113] Id.

[114] Id.

[115] 9.

[116] 10.

[117] Id.

[118] 11.

[119] Id. Up to $96 per day for days 21-100 (1999). 

[120] Id.

[121] Id.

[122] 12.

[123] Id.

[124] Id.

[125] 13.

[126] Id.

[127] 14.

[128] Id.

[129] 15.

[130] Id. Medicare Part B requires a premium of $58.70 per month as of 2002.  This amount is not static however.  This amount may change January 1st of 2003.  This amount is deducted from the individual’s Social Security, Railroad Retirement, or Civil Service Retirement check.  If the individual is not eligible to receive any of these checks, Medicare will send the person a bill for the Part B premium every 3 months. 

[131] 16.

[132] Id.

[133] 16-17.

[134] 17.

[135] Id. at 4.

[136] Id.

[137] Id.

[138] Id.The penalties for not enrolling for Part B coverage at the appropriate time vary.  The cost of Part B will go up 10% for each 12-month period that the person could have had Part B but did not sign up for it.  These extra 10% charges will hold for the rest of the person’s life. 

[139] Framework to Modernize and Improve Medicare Fact Sheet, (Visited March 16, 2003)

[140] Id.

[141] Id.

[142] Id.

[143] Id.

[144] Id.

[145] Id.

[146] Id.

[147] Id.

[148] Id.

[149] Id.

[150] Id.

[151] Id.

[152] Id.

[153] Id.

[154] Id.

[155] Id.

[156] Id.

[157] Id.

[158] Id.

[159] Id.

[160] Id.

[161] Id.

[162] Id.

[163] Id.

[164] Id.

[165] Id.

[166] Id.

[167] Id.

[168] Id.

[169] Id.

[170] Id.

[171] Id.

[172] Id.

 [173] Id.

[174] Id.

[175] Id.

[176] Id.

[177] Id.

[178] Id.

[179] Id.

[180] Id.

[181] Id.

[182] See

[183] See

[184] See

[185] See Andrea Arendt, American Indian and Alaska Native Healthcare,