What Are The 4 Major Government-Sponsored Health Care Programs?

Understanding the landscape of healthcare in the United States requires familiarity with the major government-sponsored programs designed to provide access to medical services for various segments of the population. These programs act as crucial safety nets, ensuring that vulnerable individuals and families can receive necessary medical attention. This article delves into four key government initiatives, outlining their background, eligibility criteria, enrollment processes, program characteristics, and funding mechanisms.

Medicare: Healthcare for Seniors and the Disabled

Medicare stands as the federal health insurance program specifically designed for elderly and disabled individuals. Administered by the Centers for Medicare and Medicaid Services (CMS), Medicare is divided into different parts, each covering distinct aspects of healthcare. Its origins trace back to 1965 with the enactment of Title XVIII of the Social Security Act. Over time, Medicare has expanded its coverage, notably with the inclusion of the End-Stage Renal Disease (ESRD) program in 1973, ensuring comprehensive care for individuals suffering from permanent kidney failure. Further expansions, such as those introduced by the Balanced Budget Act of 1997, broadened preventative care coverage to include mammograms, Pap smears, cancer screenings, diabetes management, and osteoporosis diagnosis.

Medicare Eligibility

To be eligible for Medicare, individuals or their spouses must have contributed to the Social Security system for a minimum of 10 years. Qualifying individuals fall into the following categories:

• Age 65 and older: This is the most common eligibility pathway, ensuring healthcare access for senior citizens.
• Disabled Individuals: Those receiving Social Security benefits due to disability or diagnosed with ESRD (requiring dialysis or a kidney transplant) also qualify, regardless of age.

Medicare Enrollment

Medicare provides coverage to a significant portion of the American population. It encompasses approximately 34 million individuals aged 65 and older, alongside 5 million younger adults with permanent disabilities, and around 250,000 Americans with ESRD. A vast majority of Part A beneficiaries also opt for Part B coverage, with estimates suggesting around 37 million enrollees in 1999. While most beneficiaries are within the 65 to 84 age group (76 percent), the disabled (13 percent) and those 85 and older (11 percent) segments are experiencing faster growth. Financially, a considerable portion of beneficiaries have limited incomes, with 78 percent earning below $25,000 annually and about 25 percent earning less than $10,000. This financial vulnerability is even more pronounced among disabled beneficiaries, with over half reporting incomes below $10,000.

Program Components of Medicare

Medicare is structured into two primary parts:

1. Part A (Hospital Insurance):

   • Enrollment is typically automatic upon reaching age 65 and is premium-free for those who have paid Medicare taxes during their employment. Individuals who haven’t paid these taxes can still enroll in Part A by paying premiums.
   • Part A covers inpatient hospital care, services in critical access hospitals, skilled nursing facility care, hospice care, and some forms of home health care.
   • Re-enrollment is not required periodically, offering continuous coverage.

2. Part B (Medical Insurance):

   • Enrollment in Part B is optional for Part A beneficiaries. Individuals can enroll during a seven-month period starting three months before their 65th birthday.
   • Enrollees are required to pay monthly premiums, which were approximately $54 in 2002.
   • Part B covers a wide range of medical services, including physician services, outpatient care, physical and occupational therapy, and some home health care services.

Medicare Financing

Medicare Part A is primarily funded through a 1.45 percent payroll tax, split equally between employees and employers. Part B’s funding comes from a combination of beneficiary premiums and deductibles, along with general federal revenues. Premiums are intended to cover roughly a quarter of Part B’s total expenditures. In terms of overall program spending, Part A constitutes about 45 percent, while Part B accounts for 33 percent. Medicare+Choice plans, which contract with Medicare to provide both Part A and B services, represent around 18 percent of Medicare spending. The ESRD program, despite serving a small percentage of beneficiaries (approximately 0.5 percent), consumes about 5 percent of the total Medicare budget.

In 2001, Medicare benefit payments reached a substantial $237 billion, representing 12 percent of the entire federal budget and 19 percent of the nation’s total spending on personal health services. In 1999, Medicare played a significant role in financing healthcare services, covering 31 percent of hospital services and 20 percent of physician services nationwide. However, it only financed a small fraction (2 percent) of outpatient prescription drugs, highlighting a gap in coverage that has become more prominent over time.

Medicaid: Healthcare for Low-Income Individuals and Families

Medicaid, established in 1965 under Title XIX of the Social Security Act, is a joint federal-state program designed to provide healthcare funding for low-income children and adults. Initially conceived as an extension of existing federal programs for the poor, Medicaid initially focused on the elderly, disabled, and families with dependent children. Legislative expansions in 1987 and 2000 broadened Medicaid eligibility to include low-income pregnant women, more children living in poverty, and certain Medicare beneficiaries who did not qualify for cash assistance programs. Notably, coverage for children has significantly increased, with census data from 2000 indicating that one in five children nationwide and a quarter of children under age 6 were enrolled in Medicaid. Child enrollment surged from under 10 million in 1980 to over 21 million by 1999.

Medicaid Eligibility

Medicaid eligibility is complex and varies by state, but federal guidelines mandate coverage for certain groups. Mandatory enrollment groups include:

• Children under age 6 and pregnant women: Families with incomes below 133 percent of the federal poverty level (FPL) meet the federal minimum requirement for these groups.
• Children ages 6–18: Coverage is mandated for children in this age group with family incomes at or below 100 percent FPL.
• Supplemental Security Income (SSI) recipients: Individuals receiving SSI benefits automatically qualify for Medicaid in most states.
• Recipients of adoption assistance and foster care: As designated under Title IV-E of the Social Security Act.
• Special protected groups: Individuals who lose SSI cash assistance due to earnings or increased Social Security benefits may retain Medicaid coverage for a period.
• Qualified Medicare beneficiaries: Including specified low-income Medicare beneficiaries and disabled-and-working individuals who lost Medicare coverage due to returning to work.

States have the flexibility to expand Medicaid coverage beyond these federal minimums to other “categorically needy” groups. Many states have chosen to expand their programs to cover a larger proportion of their low-income populations. Common state-initiated expansions, often with federal matching funds, include:

• Infants up to age 1 and pregnant women with family incomes up to 185 percent of FPL.
• Recipients of state supplementary income payments.
• Certain aged, blind, or disabled adults with incomes above mandatory levels but below the FPL.
• Individuals receiving care under home and community-based waivers.
• People with tuberculosis (TB) eligible for Medicaid at the SSI income level (for TB-related services and drugs).
• Institutionalized individuals with limited income and resources.
• “Medically needy” individuals who meet categorical requirements but have high healthcare expenses, allowing them to “spend down” to Medicaid eligibility.
• Legal resident aliens and qualified aliens entering the U.S. after August 22, 1996, may face a five-year waiting period due to the 1996 welfare reform law.

Medicaid Enrollment

Medicaid stands as the largest program providing medical and health-related services to America’s poorest populations. In 2001, it provided coverage to approximately 44 million Americans. Enrollment expansions and simplified enrollment processes have contributed to increased coverage among low-income populations. The number of Medicaid enrollees has grown from 42 million in 1999. Economic downturns can exert pressure on the Medicaid program, as enrollment growth and associated costs increase during recessions when state tax revenues decline and demand for public programs rises.

Interestingly, Medicaid enrollment among nonelderly adults and children experienced a decline after 1995, following a decade of consistent growth. This decrease is partly attributed to unintended consequences of the 1996 welfare reforms, which altered eligibility for family cash assistance and “delinked” cash assistance from automatic Medicaid eligibility. Total Medicaid enrollment for adults and children dropped by 1.5 million between 1995 and 1997 as a strong economy and welfare reform efforts reduced participation in cash assistance programs. However, this enrollment decline has moderated as states have taken steps to re-enroll those who remained eligible but lost coverage due to confusion or administrative hurdles. Furthermore, section 1931 provisions have allowed states to extend coverage to parents at higher income levels, and economic downturns have increased the number of people meeting current eligibility standards.

Medicaid Financing

Medicaid is funded through a shared federal-state partnership, with both levels of government contributing to funding and administrative responsibilities. The federal share, known as the Federal Medical Assistance Percentage (FMAP), is calculated annually based on a formula comparing a state’s average per capita income to the national average. States with higher per capita incomes receive a smaller federal share. The FMAP floor is 50 percent, and the ceiling is 83 percent. In 2001, FMAPs ranged from 50 percent in ten states to 76.8 percent in Mississippi, averaging 57 percent nationwide. Federal matching payments also cover optional groups and services, which account for a significant 65 percent of total Medicaid spending. In 2001, total Medicaid spending, encompassing both federal and state funds, exceeded $200 billion annually.

Medicaid spending growth accelerated between 1999 and 2000, following a period of slower growth. Spending increased by 7.1 percent in 1999 and 8.6 percent in 2000, compared to an average annual growth of 3.6 percent from 1995 to 1998. The Congressional Budget Office projected Medicaid spending to grow at an average of 9 percent per year through 2012. Economic recessions further intensify these spending pressures due to decreased state revenues and tighter budgets.

Program Characteristics of Medicaid

In exchange for federal funding, states must agree to cover certain populations and offer a minimum set of services. States have considerable flexibility in structuring eligibility criteria, benefits packages, service delivery models, and payment rates within federal guidelines. States must enroll all eligible applicants and are prohibited from imposing enrollment caps or waiting lists. However, states can reduce or eliminate optional eligibility categories and benefits, and they can set limits on the amount, scope, and duration of benefits. Notably, most elderly individuals receiving nursing home care funded by Medicaid are covered under state options. Federal law generally does not allow states to cover childless adults with federal matching funds unless they fall into other eligible categories (elderly or disabled), except under special waivers. The extent to which states utilize their options to cover low-income populations varies significantly.

States receive federal Medicaid matching payments for a comprehensive range of mandatory and optional services. Mandatory services that must be provided to Medicaid enrollees include:

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

The Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program, established in 1967, provides specific benefits for children, offering periodic health and developmental evaluations, as well as vision, hearing, and dental screening services.

Medicaid Revenue and Expenditures

Federal law generally prohibits premiums in Medicaid, with limited exceptions. Cost-sharing, such as copayments and deductibles, is also restricted. Copayments and deductibles are not permitted for services provided to children, or for pregnancy-related, emergency, and family planning services and supplies. In most other cases, minimal cost-sharing is allowed. Deductibles cannot exceed $2 per month per family, copayments typically range from $0.50 to $3.00 depending on the service cost, and co-insurance cannot exceed 5 percent of the service cost.

Average program costs vary significantly based on beneficiary type. Medicaid payments for services for children average around $1,150 per enrolled child. For nonelderly adults (under 65), who constitute 21 percent of recipients, average service payments are approximately $1,775 per person. Certain groups have much higher per-person expenditures. For the 4 million elderly Medicaid recipients (11 percent of total), average payments are about $9,700 per person. For the 7.2 million disabled beneficiaries (18 percent), average payments are around $8,600 per person. The overall average expenditure across all beneficiary types was approximately $3,500 per person in 1998.

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

The State Children’s Health Insurance Program (SCHIP), created by the Balanced Budget Act of 1997, was established to provide states with additional federal funding to cover uninsured children. Approximately $40 billion in federal matching funds were allocated over fiscal years 1998 to 2008 to enable states to offer health coverage to children in families with incomes up to 200 percent of the FPL who did not qualify for Medicaid. SCHIP represents the most significant expansion of health insurance coverage for children in over three decades. Under Title XXI of the Social Security Act, states were given options to establish separate child health programs, expand Medicaid coverage, or implement a combination of both.

SCHIP Enrollment

By 2001, SCHIP had enrolled 4.6 million children. Of these, 18 percent were enrolled in separate child health programs (S-SCHIP), 13 percent in Medicaid expansion programs (M-SCHIP), and 69 percent in combination programs. SCHIP enrollment demonstrated steady national growth throughout 2001, with decreases observed in only six states. Fourteen states more than doubled their SCHIP enrollment between 1999 and 2001. In 2001, over 75 percent of children ever enrolled in SCHIP were between 6 and 18 years of age.

Despite the program’s success, barriers to SCHIP coverage persist. Studies indicate that complex enrollment procedures remain a significant obstacle in ensuring eligible children gain coverage. A substantial 38 percent of low-income families inquiring about Medicaid and SCHIP cited administrative hurdles as a primary reason for not applying. For instance, many states require extensive documentation to verify application information, even though such verification is not mandated by federal law.

Program Characteristics of SCHIP

While states utilizing SCHIP Medicaid expansions must provide the same benefits as regular Medicaid for children, states with stand-alone SCHIP programs have considerable flexibility in designing their benefit packages. Stand-alone SCHIP programs must cover basic benefits like physician services, inpatient and outpatient hospital care, and laboratory and X-ray services. However, states have discretion regarding optional benefits such as prescription drugs, hearing, mental health, dental, and vision services, which may be offered on a limited basis or not at all.

Patient out-of-pocket costs are permitted in SCHIP but are subject to limitations. Total out-of-pocket costs (premiums, copayments, deductibles, enrollment fees) in separate SCHIP programs cannot exceed 5 percent of family income. Furthermore, for children in families with incomes below 150 percent FPL, premiums and cost-sharing charges cannot exceed nominal amounts set by CMS.

SCHIP Eligibility

SCHIP eligibility allows states to cover children in families with incomes exceeding Medicaid thresholds but below 200 percent of the FPL, or even at higher income levels using state funds. Most states provide SCHIP coverage for children in families at or above 200 percent of the poverty level. However, some states have set lower income or age standards.

SCHIP Program Expansion

States have begun to explore expanding SCHIP to cover uninsured populations beyond children. In 2001, four states (Minnesota, New Jersey, Rhode Island, and Wisconsin) received approval for section 1115 waivers to enroll parents of children in SCHIP. New Jersey and Rhode Island also planned to enroll eligible pregnant women. These four states enrolled over 230,000 adults in 2001 through these expansions.

Further initiatives to expand coverage to uninsured populations emerged through the Health Insurance Flexibility and Accountability (HIFA) initiative in August 2001. Arizona and California received approval for HIFA applications:

1. Arizona: Aimed to enroll 50,000 adults, expanding coverage to parents with children in Arizona’s Medicaid or SCHIP programs (incomes between 100 percent and 200 percent FPL) and childless adults (incomes up to 100 percent FPL).
2. California: Planned to expand coverage to 300,000 uninsured individuals, primarily parents of SCHIP children (incomes at or below 200 percent FPL).

Additionally, several states have implemented premium assistance programs, including Maryland, Massachusetts, Mississippi, New Jersey, Virginia, Wisconsin, and Wyoming. These programs subsidize health coverage for low-income residents whose employers offer health insurance. States may also apply for family coverage waivers, allowing them to purchase family coverage if cost-effective. Maryland, Virginia, and Wisconsin had family coverage waivers approved.

Conclusion

Medicare, Medicaid, and SCHIP represent three pillars of government-sponsored healthcare in the United States, each addressing distinct populations and healthcare needs. Medicare provides essential health insurance for seniors and individuals with disabilities. Medicaid serves as a critical safety net for low-income families and individuals, while SCHIP focuses on expanding coverage to uninsured children. These programs, while distinct in their focus and operation, collectively play a vital role in ensuring access to healthcare for millions of Americans, reflecting the government’s commitment to promoting public health and well-being. Understanding the nuances of each program is crucial for navigating the complex healthcare system and ensuring that those in need can access the care they require.