Medicare and Medicaid

Medicare covers costs after age 65, Medicaid insures the needy.

The following are very brief summaries of complex subjects. They should be used only as overviews and general guides to the Medicare and Medicaid programs. The views expressed herein are those of the author, and do not necessarily reflect the policies or legal positions of the Health Care Financing Administration or DHHS. These are not legal documents, nor are they intended to fully explain all of the provisions or exclusions of the relevant laws, regulations and rulings of the Medicare and Medicaid programs, nor of the relationship between these programs. These summaries do not render any legal, accounting or other professional advice, and should not be relied on in making specific decisions. Only original sources should be utilized.

BACKGROUND

Since early in this century, health care issues have continued to escalate in importance for our Nation. Beginning in 1915, various efforts to establish government health insurance programs have been initiated every few years. From the 1930s on, there was agreement on the real need for some form of health insurance to alleviate the unpredictable and uneven incidence of medical costs. The main health care issue at that time was whether health insurance should be privately or publicly financed.

Private health insurance coverage expanded rapidly during World War II, when fringe benefits were increased to compensate for government limits on direct wage increases. This trend continued after the war, in part due to the favorable tax treatment of providing compensation in the form of fringe benefits. Private health insurance (mostly group insurance financed through the employment relationship) was especially needed and wanted by middle-income people. Yet not everyone could obtain or afford private health insurance. Government involvement was sought. Various national health insurance plans, financed by payroll taxes, were proposed in Congress starting in the 1940s; however, none was ever brought to a vote.

In 1950, Congress acted to improve access to medical care for needy persons who were receiving public assistance. This permitted, for the first time, Federal participation in the financing of State payments to the providers of medical care for costs incurred by public assistance recipients. In 1960, the Kerr-Mills bill provided medical assistance for aged persons who were not so poor, yet still needed assistance with medical expenses. But a more comprehensive improvement in the provision of medical care, especially for the elderly, became a major congressional priority.

After consideration of various approaches, and after lengthy national debate, Congress passed legislation in 1965 establishing the Medicare and the Medicaid programs as Title XVIII and Title XIX of the Social Security Act. Medicare was established in response to the specific medical care needs of the elderly (and in 1973, the severely disabled and certain persons with kidney disease). Medicaid was established in response to the widely perceived inadequacy of "welfare medical care" under public assistance. In 1977, the Health Care Financing Administration (HCFA) was established under the Department of Health and Human Services to administer the Medicare and Medicaid programs.

NATIONAL HEALTH CARE OVERVIEW

As a share of the gross domestic product (GDP), health care spending stabilized in 1993-96 at 13.6 percent. The GDP is the total value of goods and services produced in the United States. And although 1996 showed the slowest growth in more than 37 years of measuring health care spending, our nation's total spending for health care broke the $1.0 trillion mark in 1996.

For the 275 million persons residing in the United States, the average expenditure for health care in 1996 was $3,759 per person.

Health care is funded through a variety of private payers and public programs. Private funds include individuals' out-of-pocket expenditures, private health insurance, philanthropy and non-patient revenues (e.g., gift shops, parking lots, etc.), as well as health services that are provided in industrial settings. For the years 1974 through 1991, these private funds paid for 58 to 60 percent of all health care expenditures. But by 1996, the private share of health expenditures had dropped to 53.3 percent of our Nation's total health care expenditures, while the share of health care provided by public spending increased correspondingly over this period.

Public spending represents expenditures by Federal, State, and local governments. Of the publicly funded health care expenditures for our Nation, each of the following account for a small percentage of the total:

• the Department of Defense health care programs for military personnel;

• the Department of Veterans Affairs health programs;

• non-commercial medical research;

• payments for health care under Workers Compensation programs;

• health programs under State-only general assistance programs;

• and the construction of public medical facilities.

Other activities which are also publicly funded include: maternal and child health services; school health programs; public health clinics; Indian health care services; migrant health care services; substance abuse and mental health activities; and medically-related vocational rehabilitation services.

The largest shares of public health expenditures, however, are for the Medicare and Medicaid programs. Together, Medicare and Medicaid financed $351 billion in health care services in 1996 -- more than one-third of the nation's total health care bill and almost three-quarters of all public spending on health care.

Since their enactment, both Medicare and Medicaid have been subject to numerous legislative and administrative changes designed to make improvements, with financial considerations, in the provision of health care services to our nation's aged, disabled and poor persons. Historical information was extracted from the Social Security Bulletin, Volume 56, Number 4, Winter, 1993. National health expenditures data and estimates are from the Office of National Health Statistics in the Office of the Actuary (OACT) in HCFA. Medicare data are from the national claims history data base in the Office of Information Systems (OIS) also in HCFA, with estimates by OACT. Medicaid data are taken from the reports sent by the States to OIS, with estimates by OACT. (For more information, data details, and an explanation of the various aspects of health care spending, see the Office of National Health Statistics, OACT/HCFA, report entitled "National Health Expenditures, 1996", by Katharine Levit, et. al., in Health Care Financing Review, Fall 1997; and in "National Health Spending Trends In 1996", by K. Levit, et. al, in Health Affairs, January/February, 1998, Vol. 17, No. 1, pages 35-51.) For detailed statistical data: on National Health Expenditures, phone 410-786-7933; on Medicare, phone 410-786-3689; on Medicaid, phone 410-786-0165; or visit: www.hcfa.gov/stats and data

MEDICARE: A BRIEF SUMMARY

NOTE: The following is a very brief summary of a complex subject. It should be used only as an overview and general guide to the Medicare program . The views expressed herein are those of the author, and do not necessarily reflect the policies or legal positions of the Health Care Financing Administration or DHHS. This is not a legal document, nor is it intended to fully explain all of the provisions or exclusions of the relevant laws, regulations and rulings of the Medicare program. This summary does not render any legal, accounting or other professional advice; original sources of authority should be researched and utilized.

OVERVIEW

Title XVIII of the Social Security Act, entitled "Health Insurance for the Aged and Disabled," is commonly known as "Medicare." As part of the Social Security Amendments of 1965, the Medicare legislation established a health insurance program for aged persons to complement the retirement, survivors and disability insurance benefits under Title II of the Social Security Act.

When first implemented in 1966, Medicare covered only most persons age 65 and over. By the end of 1966, 3.7 million persons had received at least some health care services covered by Medicare.

In 1973, other groups became eligible for Medicare benefits: persons who are entitled to Social Security or Railroad Retirement disability benefits for at least 24 months; persons with end-stage renal disease (ESRD) requiring continuing dialysis or kidney transplant; and certain otherwise non-covered aged persons who elect to buy into Medicare.

Medicare consists of two primary parts: Hospital Insurance (HI), also known as "Part A," and Supplementary Medical insurance (SMI), also known as "Part B. When Medicare began on July 1, 1966, there were 19.1 million persons enrolled in the program. A third part of Medicare, sometimes known as "Part C", is the Medicare+Choice program-- which was established by the Balanced Budget Act of 1997 (Public Law. 105-33) and began to provide services on January 1, 1998. Beneficiaries must, however, have Medicare Part A and Part B in order to enroll in a Part C plan. In 1997, about 38 million persons were enrolled in one or both of parts A and B of the Medicare program. About 87 percent of all Medicare "enrollees" used some HI and/or SMI service in 1997.

MEDICARE COVERAGE

Hospital Insurance (HI) is generally provided automatically to persons age 65 and over who are entitled to Social Security or Railroad Retirement Board benefits. Similarly, individuals who have received such benefits based on their disability, for a period of at least 24 months, are also entitled to HI benefits. In 1997, the HI program provided protection against the costs of hospital and specific other medical care to about 38 million people (33 million aged and five million disabled enrollees). Approximately 22 percent of these individuals received services covered by HI during the year. The HI benefits totaled $137.8 billion in 1997, -- an increase of 7.1 percent over the prior year, with an average expenditure per HI enrollee of $3,600, -- an increase of 6 percent over 1996.

The following lists the health care services covered under Medicare's Hospital Insurance:

Inpatient hospital care coverage includes costs of a semi-private room, meals, regular nursing services, operating and recovery room, intensive care, inpatient prescription drugs, laboratory tests, X-rays, psychiatric hospital, inpatient rehabilitation, and long-term care hospitalization when medically necessary, as well as all other medically necessary services and supplies provided in the hospital. An initial deductible payment is required, plus co-payments for all hospital days following day 60 within a benefit period.

Skilled nursing facility (SNF) care is covered by HI only if it follows within 30 days (generally) of a hospitalization of three or more days, and is certified as medically necessary. Covered services are similar to those for inpatient hospital, but also include rehabilitation services and appliances. The number of SNF days provided under Medicare is limited to 100 days per benefit period (defined below), with a co-payment required for days 21 through 100. Medicare HI does not cover nursing facility care at all if the patient does not require skilled nursing or skilled rehabilitation services.

Home Health Agency (HHA) care, including care provided by a home health aide, may be furnished part-time by a home health agency in the residence of a home-bound beneficiary if intermittent or part-time skilled nursing and/or certain other therapy or rehabilitation care is necessary. Certain medical supplies and durable medical equipment may also be provided. There must be a plan of treatment and periodical review by a physician. Home health care under HI has no duration limitations, no co-payment, and no deductible. For durable medical equipment, beneficiaries must pay a 20 percent coinsurance, as required under SMI of Medicare. Full-time nursing care, food, blood, and drugs are not provided as HHA services.

Hospice care, is a service provided to those terminally ill persons with a life expectancy of six months or less who elect to forgo the standard Medicare benefits for treatment of a traditional medical treatment, and receive only hospice care. Such care includes pain relief, supportive medical and social services, physical therapy, nursing services and symptom management for a terminal illness. However, if a hospice patient requires treatment for a condition that is not related to the terminal illness, Medicare will pay for all covered services necessary for that condition. For the hospice program, the Medicare beneficiary pays no deductibles, but does pay a very small coinsurance amount for drugs and the cost of inpatient respite care.

An important coverage limitation of HI is the "benefit period" which starts when the beneficiary firstenters a hospital and ends when there has been a break of at least 60 consecutive days since inpatient hospital or skilled nursing care was provided. There is no limit to the number of benefit periods covered by HI during a beneficiary's lifetime; however, inpatient hospital care is normally limited to 90 days during a benefit period, and co-payment requirements (detailed later) apply for days 61 through 90. If a beneficiary exhausts the 90 days of inpatient hospital care available in a benefit period, he or she can elect to use days of Medicare coverage from a nonrenewable "lifetime reserve" of up to 60 (total) additional days of inpatient hospital care.

Supplementary Medical Insurance (SMI) benefits are available to: almost all resident citizens age 65 and over; certain aliens age 65 or over -- even to those who are not entitled (based on eligibility for Social Security or Railroad Retirement benefits) to HI Medicare services; and disabled beneficiaries who are entitled to Medicare's HI. SMI coverage is optional and requires payment of a monthly premium. Almost all persons entitled to HI also choose to enroll in SMI. In 1997, the SMI program provided protection against the costs of physician and other medical services to about 36 million people. Approximately 87 percent of these individuals received medical services covered by SMI during 1997, with SMI benefits of $72.8 billion paid on their behalf. Part B (SMI) is often thought of primarily as coverage for physician services (in both hospital and non-hospital settings). However, SMI also covers certain other non-physician services, including: clinical laboratory tests, durable medical equipment, most supplies, diagnostic tests, ambulance services, flu vaccinations, prescription drugs which cannot be self-administered, certain self-administered anticancer drugs, some other therapy services, certain other health services, and blood which was not supplied by HI. The expenditures for institutional services in hospital outpatient departments, ambulatory surgical centers and certain other centers are also covered. Home Health Agency services are also covered. To be covered, all services must either be medically necessary or be one of the prescribed preventives benefits. Certain medical services and related care are subject to special payment rules, including: deductibles (for blood); maximum approved amounts (for independently practicing, Medicare-approved physical or occupational therapists); or higher cost-sharing requirements (such as that for outpatient treatments for mental illness). Medicare+Choice (Part C) is another option provided by the Balanced Budget Act of 1997 (BBA). Under the BBA, Medicare beneficiaries who have both Part A and Part B can choose to get their benefits through a variety of risk-based plans known as Part C of Medicare. To participate in this Part C, the beneficiaries must be entitled to HI and be enrolled in SMI (except for ESRD patients, who must be enrolled in Part C before they get ESRD; they cannot switch to Part C after they are diagnosed with ESRD). As is the case for risk plans, organizations that are seeking to contract as Medicare+Choice plans will have to meet specific organizational, financial, and other requirements. The primary Medicare+Choice plans are:

Coordinated care plans, which includes Health Maintenance Organizations, Provider-Sponsored Organizations and Preferred Provider Organizations, and other certified public or private coordinated care plans and entities that meet the approved required standards as set forth in the law.

The private, unrestricted fee-for-service plans, which allows beneficiaries to select certain private providers. For those providers who agree to accept the plan's payment terms and conditions, this option does not place the providers at risk, nor vary payment rates based upon utilization.

The Medical Savings Account (MSA) plan allows beneficiaries (only a limited number for the first five years) to enroll in a plan with a high-deductible (maximum for 1999 = $6,000). The Federal government pays a prescribed portion of the capitation amount into an insurance fund for each enrollee. The difference between the Medicare capitation rate and the plan premium is deposited into the MSA account. Deposits for the entire year are made at the start of the year. After the deductible is paid, the MSA plan pays providers the lesser of 100% of specified expenses or 100% of amounts that would have been payable under the original fee-for-service Medicare program. If extra money remains in the MSA, it can be used to pay for future medical needs (including some not covered by Medicare -- e.g., dentures). Or, subject to certain requirements, the extra money can be used for non-medical purchases.

Except for MSA-plans, all Medicare+Choice plans are required to provide the current Medicare benefit package, excluding hospice services, and any additional health services required under the adjusted community rate process. There are some restrictions as to who may elect an MSA-plan, even when enrollment is no longer limited in number of participants.

OTHER MEDICARE CONSIDERATIONS

The Balanced Budget Act of 1997 included another provision for eligible persons known as PACE (Programs of All-inclusive Care for the Elderly). PACE provides an alternative to institutional care for persons aged 55 and over who require a nursing facility level of care and who meet the eligibility requirements for the program within each State. PACE functions within the Medicaid program as well as under Medicare, and is described more extensively on page 17 (in the Medicaid section below.) The individuals enrolled in PACE receive benefits solely through the PACE program. In addition to the new options and changes that were provided through the Balanced Budget Act of 1997, the BBA also enhanced Medicare prevention initiatives and rural health initiatives. It should be noted that some health care services are not provided under any part of Title XVIII. Non-covered services under Medicare include long term nursing care or custodial care, and certain other health care needs -- such as dentures and dental care, eyeglasses, hearing aids, most prescription drugs, etc. These are not a part of the Medicare program unless they are a part of a managed care plan, or--after January 1, 1999--are selected as a part of the Medicare+Choice program.

MANAGED CARE PLANS

Prepaid health care plans known as managed care plans, such as competitive medical plans (CMPs) and health maintenance organizations (HMOs), are options for Medicare beneficiaries. Managed care plans function on a basis different from regular fee-for-service covered under Medicare. Under managed care plans, the Medicare beneficiary selects a specific HMO, CMP, or other approved plans within a service area for comprehensive health care services. It is central to the managed care conceptthat this selected plan coordinate all of the health care services for that person. Managed care plans function on a financial basis that is different from the traditional fee-for-service reimbursements to health care providers. Managed care plans receive a per-person payment from Medicare that is predetermined, based on a formula that is established by law and the demographic characteristics of the Medicare beneficiaries enrolled in their plan.

In addition to the regular services covered under Medicare, the managed care plans often cover services such as preventive care, prescription drugs, eyeglasses, dental care, or hearing aids. Electing to participate in a managed care plan may also serve as an alternative to purchasing "medigap insurance" (described later) which is often wanted if the beneficiary has traditional fee-for-service coverage. Although there are certain restrictions, limitations and differences from the fee-for-service plans, the managed care plan's fixed monthly premiums and cost-sharing structure helps to provide more predictability for out-of-pocket costs for the beneficiaries who do not have medigap insurance.

PROGRAM FINANCING, BENEFICIARY LIABILITIES, & VENDOR PAYMENTS

All financial operations for Medicare are handled through two trust funds, one for the Hospital Insurance and one for Supplementary Medical Insurance. These trust funds--which are special accounts in the U. S. Treasury-- are credited with all income receipts and charged with all Medicare expenditures for benefits and administration costs. Assets not needed for the payment of costs are invested in special Treasury Securities. The following sections describe Medicare's financing provisions, beneficiary cost-sharing requirements, and the basis for determining Medicare reimbursements to health care providers.

Program financing:

The Medicare Part A program (HI) financing is primarily through a mandatory payroll deduction ("FICA tax"). Almost all employees and self-employed workers in the U.S. work in employment covered by the Medicare HI program and pay taxes to support the cost of benefits for aged and disabled beneficiaries. The FICA tax is 1.45 percent of earnings (paid by each employee and by the employer for each), as well as 2.90 percent for self-employed persons. For 1994 and later, this tax is paid on all covered wages and self-employment income without limit. (Prior to 1994, the tax applied only up to a specified maximum amount of earnings.) The trust fund for the HI program also receives income from: (i) a portion of the income taxes levied on Social Security benefits paid to high-income beneficiaries, (ii) premiums from certain persons who are not otherwise eligible and choose to enroll voluntary, (iii) general funds reimbursements for the cost of certain other uninsured individuals, and (iv) interest earnings on the invested assets of the trust fund. The taxes paid each year are used mainly to pay benefits for current beneficiaries. Income not needed to pay current benefits and related expense is invested in U. S. Treasury securities. The hospital insurance trust fund money is used only for the HI program, and the SMI trust funds cannot be transferred for HI use.

The Medicare Part B program (SMI) is financed through: (1) premium payments ($43.80 per month in 1998) which are usually deducted from the monthly Social Security benefit checks of those who are enrolled in the SMI program, and (ii) through contributions from general revenue of the U.S. Treasury. SMI benefits may also be "bought" for persons by a third party directly paying the monthly premium on behalf of the enrollee. Beneficiary premiums are currently set at a level that covers 25 percent of the average expenditures for aged beneficiaries. Except for a small amount of interest income, general revenues provide the balance of the financing for SMI.

The Medicare Part C program (Medicare+Choice) has rather complex financing, depending upon which plan is chosen. Basically, the funding for the Medicare+Choice program comes from the HI and SMI trust funds in proportion to the relative weights of HI and SMI benefits to the total benefits paid by the Medicare program.

Beneficiary payment liabilities:

For Parts A and B, beneficiaries are responsible for charges not covered by the Medicare program, and for various cost-sharing aspects of both HI and SMI. These liabilities may be paid: (1) by the Medicare beneficiary, (2) by a third party such as private "medigap" insurance purchased by the Medicare beneficiary, or (3) by Medicaid, if the person is eligible. The term "medigap" is used to mean private health insurance which, within limits, pays most of the health care service charges not covered by Parts A or B of Medicare. These policies-- which must meet Federally-imposed standards-- are offered by Blue Cross and Blue Shield, and various commercial health insurance companies.

For hospital care covered under HI, the beneficiary's payment share includes a one-time deductible amount at the beginning of each benefit period ($764 in 1998). This covers the beneficiary's part of the first 60 days of each spell of inpatient hospital care. If continued inpatient care is needed beyond the 60 days, additional coinsurance payments ($191 per day in 1998) are required through the 90th day of a benefit period. Medicare pays nothing after day 90, unless the beneficiary elects to use "lifetime reserve" days, for which a co-payment ($382 per day in 1998) is required from the beneficiary.

For skilled nursing care covered under HI, the first 20 days of SNF care are fully covered by Medicare. But for days 21 through 100, a co-payment ($95.50 per day in 1998) is required from the beneficiary. After 100 days of SNF care per benefit period, Medicare pays nothing for SNF care. Home health care has no deductible or co-insurance payment by the beneficiary. In any HI service, the beneficiary is responsible for fees to cover the first three pints or units of non-replaced blood per calendar year. The beneficiary has the option of paying the fee or of having the blood replaced.

There are no premiums for the HI portion of Medicare for most people aged 65 and over. Eligibility for HI is generally earned through the work experience of the beneficiary or that of a spouse. However, some persons who are otherwise unqualified for Medicare may purchase HI coverage if they also buy the SMI coverage. The cost is determined by a formula: if they have 30 to 39 quarters of coverage as defined by the Social Security Administration, the 1998 cost of HI is reduced to $170 per month; if not, the HI cost is $309 per month.

For SMI , the beneficiary's payment share includes: one annual deductible (currently $100); the monthly premiums; the co-insurance payments for SMI services (usually 20 percent of the medically-allowed charges); a deductible for blood; and payment for any services which are not covered by Medicare. These "cost-sharing" contributions are required of the beneficiaries for SMI services. For ESRD patients, Medicare SMI covers kidney dialysis and physician charges incurred by the patient and donor during the transplant and follow-up care. Regular SMI cost-sharing also applies for ESRD services.

For Part C, the beneficiary's payment share is based upon the cost-sharing structure of the specific Medicare+Choice plan selected by the beneficiary (see descriptions on page 6 & 7), as each plan has its own requirements.

Vendor payments:

For HI , prior to 1983, payment to vendors was made on a "reasonable cost" basis. Medicare payments for most inpatient hospital care are now paid under a plan known as the Prospective Payment System (PPS). Under the PPS, a hospital is paid a predetermined amount, based upon the patient's diagnosis within a "diagnosis related group" (DRG), for providing whatever medical care is required during that person's inpatient hospital stay. In some cases the payment received is less than the hospital's actual costs; in other cases it is more. The hospital absorbs the loss or makes a profit. Certain payment adjustments exist for extraordinarily costly cases. The BBA made some reductions in the amounts paid to hospitals, and to other payments for traditional fee-for-service programs. Payments for inpatient rehabilitation, psychiatric, home health, hospice and for skilled nursing care coverage continue to be paid under the reasonable cost methodology, with each service having some restrictions and limitations -- although payment methods will be restructured as required by the BBA .

For SMI , prior to 1992, physicians were paid on the basis of "reasonable charge." This was initially defined as the lowest of (1) the physician's actual charge, (2) the physician's customary charge, or (3) the prevailing charge for similar services in that locality. Starting January, 1992, allowed charges were defined as the lesser of: the submitted charges, or a fee schedule based on a relative value scale (RVS). Payments for durable medical equipment and clinical laboratory services are also based on a fee schedule. Hospital outpatient services and HHAs are currently reimbursed on a reasonable cost basis. The BBA provided for implementation of a Prospective Payment System for these services in the future. If a doctor or supplier agrees to accept the approved rate as payment in full ("takes assignment"), then payments provided must be considered as payments in full for that service. No added payments (beyond the initial annual deductible and co-insurance) may be sought from the beneficiary or insurer. If the provider does not take assignment, the beneficiary will be charged for the excess (which may be paid by medigap insurance). Limits now exist on the excess which doctors or suppliers can charge. Physicians are "participating" physicians if they agree before the beginning of the year to accept assignment for all Medicare services they furnish during the year. Since Medicare beneficiaries may select their doctors, they have the option to choose those who do participate.

For Part C, payments to the Medicare+Choice plans are based on a blend of local and national capitated rates, generally determined by the capitation payment methodology described in Section 1853 of the Social Security Act. Actual payments to plans vary based on characteristics of the enrolled population. New risk adjusters are scheduled to be implemented in January 2000.

MEDICARE CLAIMS PROCESSING

The BBA included provisions for anti-fraud and for countering abuse, as well as improvements in protecting the Medicare programs' integrity. Other aspects of the BBA provisions are quite extensive and have significant impacts on both the HI and SMI part of Medicare. However, since this is only an overview and brief summary of the total Medicare program, additional details will not be included herein.

Medicare claims are processed by non-government organizations or agencies that contract to serve as the fiscal agent between providers and the Federal government to locally process Medicare's HI and SMI claims. These claims processors are known as "intermediaries" and "carriers." They apply the Medicare coverage rules to determine the appropriateness of claims.

Medicare "intermediaries" process HI claims for institutional services, including inpatient hospital claims, skilled nursing facilities, home health agencies, and hospice services. They also process hospital outpatient claims for SMI. Examples of intermediaries are the Blue Cross and Blue Shield Association (which utilize their plans in various States), and other commercial insurance companies.

Intermediaries' responsibilities include:

• determining costs and reimbursement amounts;

• maintaining records;

• establishing controls;

• safeguarding against fraud and abuse or excess use;

• conducting reviews and audits;

• making the payments to providers for services; and

• assisting both providers and beneficiaries as needed.

Medicare "carriers" handle SMI claims for services by physicians and medical suppliers. Examples of carriers are the Blue Shield plans in a State, and various commercial insurance companies.

Carriers' responsibilities include:

• determining charges allowed by Medicare;

• maintaining quality of performance records;

• assisting in fraud and abuse investigations;

• assisting both suppliers and beneficiaries as needed; and

• making payments to physicians and suppliers for services which are covered under SMI.

Peer Review Organizations (PROs) are groups of practicing health care professionals who are paid by the Federal government to do the general overview of the care provided to Medicare beneficiaries in each State, and improve quality of services. PROs act to educate and assist in the promotion of effective, efficient and economical delivery of health care services to the Medicare population they serve.

ADMINISTRATION of MEDICARE

The Department of Health and Human Services (DHHS) has the overall responsibility for administration of the Medicare program, with the assistance of the Social Security Administration (SSA). The Health Care Financing Administration (HCFA) is a component of DHHS. HCFA has primary responsibility for Medicare, including: formulation of policy and guidelines; contract over-sight and operation; maintenance and review of utilization records; and general financing of Medicare. SSA is responsible for the initial determination of an individual's Medicare entitlement, and has the overall responsibility for maintaining the Medicare master beneficiary record.

A Board of Trustees, which is composed of two appointed members of the public and four ex-officio members, oversees the financial operations for the trust funds for both HI and SMI. The Secretary of the Department of Treasury is the managing trustee. The Board of Trustees reports the status and operation of the Medicare trust funds to Congress on or about the first day of April each year.

State agencies (usually State Health Departments under agreements with HCFA) assist by helping DHHS to identify, survey, and inspect provider and supplier facilities or institutions wishing to participate in the Medicare program. In consultation with HCFA, they then certify those that arequalified. The State agency also assists providers as a consultant, and coordinates the various State programs to assure effective and economical endeavors.

MEDICARE DATA SUMMARY

The Medicare program covers 95 percent of our Nation's aged population, plus many of those eligible persons who are on Social Security because of disability. In CY 1997, HI covered about 38 million enrollees at a cost of $137.8 billion, and SMI covered 36 million enrollees at a cost of $72.8 billion in 1997. Administrative costs were 1.2 percent of HI and 1.8 percent of SMI disbursements for 1997. Of those persons who were entitled to Medicare in 1997, about 87 percent used Supplementary Medical Insurance services, while only 22 percent used the Hospital Insurance services. The combined HI and SMI benefit payments for all Medicare services in CY 1997 averaged about $6,300 per enrollee. Total disbursements for Medicare for 1997 was $213.575 billion.

Since certain Medicare beneficiaries also receive some assistance from the Medicaid program, please note the brief Medicare and Medicaid Relationship summary that is described on pages 21 and 22 herein, after the following Medicaid Summary.

MEDICAID: A BRIEF SUMMARY

NOTE: The following is a very brief summary of a complex subject. It should be used only as an overview and general guide to the Medicaid program . The views expressed herein are those of the author, and do not necessarily reflect the policies or legal positions of the Health Care Financing Administration or DHHS. This summary does not render any legal, accounting or other professional advice; nor is it intended to fully explain all of the provisions or exclusions of the relevant laws, regulations and rulings of the Medicaid program. Original sources of authority should be researched and utilized.

OVERVIEW of MEDICAID

Title XIX of the Social Security Act is a Federal-State matching entitlement program that pays for medical assistance for certain vulnerable and needy individuals and families with low incomes and resources. This program, known as Medicaid, became law in 1965 as a jointly funded cooperative venture between the Federal and State governments ("State" used herein includes the Territories and the District of Columbia) to assist States furnishing medical assistance to eligible needy persons. Medicaid is the largest source of funding for medical and health-related services for America's poorest people. In 1996, it provided health care assistance to more than 36 million persons, at a cost of $160 billion dollars.

Within broad national guidelines established by Federal statutes, regulations and policies, each State:

1. establishes its own eligibility standards;

2. determines the type, amount, duration, and scope of services;

3. sets the rate of payment for services; and

4. administers its own program.

Medicaid policies for eligibility, services, and payment are complex, and vary considerably even among similar-sized and/or adjacent States. Thus, a person who is eligible for Medicaid in one State might not be eligible in another State; and the services provided by one State may differ considerably in amount, duration, or scope from services provided in a similar or neighboring State. In addition, Medicaid eligibility and/or services within a State can change during the year.

BASIS of ELIGIBILITY and MAINTENANCE ASSISTANCE STATUS

Medicaid does not provide medical assistance for all poor persons. Even under the broadest provisions of the Federal statute, Medicaid does not provide health care services even for very poor persons unless they are in one of the groups designated below. And low income is only one test for Medicaid eligibilityfor those within these groups; their resources also are tested against threshold levels (as determined by each State within Federal guidelines).

States generally have broad discretion in determining which groups their Medicaid programs will cover and the financial criteria for Medicaid eligibility. To be eligible for Federal funds, however, States are required to provide Medicaid coverage for certain individuals who receive Federally assisted income-maintenance payments, as well as for related groups not receiving cash payments. In addition to the Medicaid program, most States have additional "State-only" programs to provide medical assistance for specified poor persons who do not qualify for Medicaid. Federal funds are not provided for State-only programs. The following displays the mandatory Medicaid "categorically needy" eligibility groups for which Federal matching funds are provided:

• Individuals are generally eligible for Medicaid if they meet the requirements for the AFDC program that were in effect in their State on July 16, 1996, or-- at State option -- more liberal criteria;

• Children under age six whose family income is at or below 133% of the Federal poverty level (FPL);

• Pregnant women whose family income is below 133% of the FPL (services to women are limited to: those related to pregnancy, complications of pregnancy,delivery and postpartum care);

• SSI recipients in most States (some States use more restrictive Medicaid eligibility requirements that pre-date SSI);

• Recipients of adoption or foster care assistance under Title IV of the Social Security Act;

• Special protected groups (typically individuals who lose their cash assistance due to earnings from work or from increased Social Security benefits, but who may keep Medicaid for a period of time);

• All children born after September 30, 1983 who are under age 19, in families with incomes at or below the FPL. (This phases in coverage, so that by the year 2002, all such poor children under age 19 will be covered); and

• Certain Medicare beneficiaries (described later).

States also have the option of providing Medicaid coverage for other "categorically related" groups. These optional groups share the characteristics of the mandatory groups (that is, they fall within defined categories), but the eligibility criteria are somewhat more liberally defined. The broadest optional groups for which States will receive Federal matching funds for coverage under the Medicaid program include:

• Infants up to age one and pregnant women not covered under the mandatory whose family income is no more than 185% of the FPL (the percentage amount is set by each State);

• Children under age 21 who meet what were the AFDC income and resources requirements in effect in their State on July 16, 1996, (even though they do not meet the mandatory eligibility requirements);

• Institutionalized individuals eligible under a "special income level" (the is set by each State --up to 300% of the SSI Federal benefits rate);

• Individuals who would be eligible if institutionalized, but who are receiving care under home and community-based services waivers;

• Certain aged, blind or disabled adults who have incomes above those requiring mandatory coverage, but below the FPL;

• Recipients of State supplementary income payments;

• Certain working and disabled persons with family income less than 250% of FPL who would qualify for SSI if they did not work;

• TB-infected persons who would be financially eligible for Medicaid at the SSI income level if they were within a Medicaid-covered category (however, coverage is limited to TB-related ambulatory services and TB drugs);

• "Optional targeted low-income children" included within the Children's Health Insurance Program (CHIP) established by the Balanced Budget Act of 1997 (BBA); and

• "Medically needy" persons (described below).

The Medically Needy (MN) program allows States the option to extend Medicaid eligibility to additional qualified persons. These persons would be eligible for Medicaid under one of the mandatory or optional groups, except that their income and/or resources are above the eligibility level set by their State. Persons may qualify immediately, or may "spend-down" by incurring medical expenses that reduce their income to or below their State's MN income level.

The medically needy Medicaid program does not have to be as extensive as the categorically needy program, and may be quite restrictive in rules as to who is covered and/or as to what services are offered. Federal matching funds are available for MN programs. However, if a State elects to have any MN program, there are Federal requirements that certain groups and certain services must be included. Children under age 19 and pregnant women who are medically needy must be covered; and prenatal and delivery care for pregnant women, and ambulatory care for children must be provided. A State may elect to provide MN eligibility to certain additional groups, and may elect to provide certain additional services within its MN program. In 1996, forty-two States elected to have a MN program, and provided at least some MN services for at least some MN recipients. All remaining States utilize the "special income level" option (above) to extend Medicaid to the "near poor" in medical institutional settings.

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ( Public Law 104-193) --known as the "welfare reform" bill -- made restrictive changes regarding eligibility for Supplemental Security Income (SSI) coverage that will have an impact on the Medicaid program. The new law may be significant for certain aliens' Medicaid coverage. For most legal resident aliens and other qualified aliens who entered the United States on or after August 22, 1996, Medicaid is barred for five years. Medicaid for most aliens entering before that date is a State option, as is coverage after the five year ban, except for emergency services. For aliens who lose SSI benefits because of new restrictions regarding SSI coverage, Medicaid can continue, except for emergency care, only if these persons can be covered for Medicaid under some other eligibility status. Although a number of disabled children lost SSI as a result of changes to the P. L. 104-193, their continued eligibility for Medicaid was assured by Public Law 105-33: the Balanced Budget Act of 1997 (the BBA).

In addition, welfare reform repealed the open-ended Federal entitlement program known as Aid to Families with Dependent Children (AFDC), and replaced it with Temporary Assistance for Needy Families (TANF), which will provide grants to States to be spent on time-limited cash assistance. TANF limits a family's lifetime cash welfare benefits to a maximum of five years, and permits States to impose a wide range of other restrictions as well --in particular, requirements related to employment. However, the impact on Medicaid eligibility is not expected to be significant. Under welfare reform, persons who would have been eligible for AFDC under the AFDC requirements in effect on July 16, 1996, generally will still be eligible for Medicaid. Although most persons covered by TANF will receive Medicaid, the law does not so require.

Title XXI of the Social Security Act, known as the Children's Health Insurance Program (CHIP), is a new program initiated by the BBA. In addition to allowing States to craft or expand an existing State insurance program, CHIP will provide more Federal funds for States to expand Medicaid eligibility to include more children who are currently uninsured. With certain exceptions, these are low-income children who would not qualify for Medicaid based on the plan that was in effect on April 15, 1997. Funds from the CHIP also may be used for providing medical assistance to children during a presumptive eligibility period for Medicaid. This is one of several options for States to select for providing health care coverage for more children, as prescribed within the BBA's Title XXI program.

Medicaid coverage may begin as early as the third month prior to application-- if the person would have been eligible for Medicaid had he applied during that time. Medicaid coverage generally stops at the end of the month in which a person no longer meets the criteria of any Medicaid eligibility group. The BBA allows States to provide 12 months of continuous Medicaid coverage (without reevaluation) for eligible children under the age of 19.

SCOPE of MEDICAID SERVICES

Title XIX of the Social Security Act ( the Medicaid program) allows considerable flexibility within the States' Medicaid plans. However, some Federal requirements are mandatory if Federal matching funds are to be received. A State's Medicaid program must offer medical assistance for certain basic services to most categorically needy populations. These services generally include:

• inpatient hospital services;

• outpatient hospital services;

• prenatal care;

• vaccines for children;

• physician services;

• nursing facility services for persons aged 21 or older;

• family planning services and supplies;

• rural health clinic services;

• home health care for persons eligible for skilled-nursing services;

• laboratory and x-ray services;

• pediatric and family nurse practitioner services;

• nurse-midwife services;

• Federally-qualified health-center (FQHC) services, and ambulatory services of an FQHC that would be available in other settings; and

• early and periodic screening, diagnostic, and treatment (EPSDT) services for children under age 21.

States also may receive Federal matching funds for providing certain optional services. The most common of the 34 currently-approved optional Medicaid services include:

• diagnostic services;

• clinic services;

• intermediate care facilities for the mentally retarded (ICFs/MR);

• prescribed drugs and prosthetic devices;

• optometrist services and eyeglasses;

• nursing facility services for children under age 21;

• transportation services;

• rehabilitation and physical therapy services; and

• home and community-based care to certain persons with chronic impairments.

The Balanced Budget Act included another provision for eligible persons as a State option known as PACE (Programs of All-inclusive Care for the Elderly). PACE provides an alternative to institutional care for persons aged 55 and over who require a nursing facility level of care. The PACE team offers and manages all health, medical and social services, and mobilizes other services as needed to provide preventative, rehabilitative, curative and supportive services. This care is provided in day health centers, homes, hospitals and nursing homes -- while helping the person maintain independence, dignity and quality of life. PACE functions within the Medicare program as well as under Medicaid. Regardless of source of payment, PACE providers receive payment only through the PACE agreement, and must make available all items and services covered under both Titles XVIII and XIX without amount, duration or scope limitations, and without application of any deductibles, copayments or other cost sharing. The individuals enrolled in PACE receive benefits solely through the PACE program.

AMOUNT and DURATION of MEDICAID SERVICES

Within broad Federal guidelines and certain limitations, States determine the amount and duration of services offered under their Medicaid programs. States may limit, for example, the number of days of hospital care or the number of physician visits covered. Two restrictions apply: (1) limits must result in a sufficient level of services to reasonably achieve the purpose of the benefits; and (2) limits on benefits may not discriminate among beneficiaries based on medical diagnosis or condition.

In general, States are required to provide Medicaid coverage for comparable amounts, duration and scope of services to all categorically-needy and categorically-related eligible persons. There are two important exceptions: 1) Medically necessary health care services identified under the EPSDT program for eligible children which are within the scope of mandatory or optional services under Federal law, must be covered even if those services are not included as part of the covered services in that State's Plan (i.e., only these specific children might receive that specific service); and 2) States may request "waivers" to pay for otherwise-uncovered home and community-based services (HCBS) for Medicaid-eligible persons who might otherwise be institutionalized (i.e., only persons so designated might receive HCBS). States have few limitations on the services which may be covered under such waivers as long as the services are cost effective (except that, other than as a part of respite care, they may not provide room and board for such recipients). With certain exceptions, a State's Medicaid Plan must allow recipients to have some informed choices among participating providers of health care, and to receive quality care that is appropriate and timely.

PAYMENT for MEDICAID SERVICES

Medicaid operates as a vendor payment program. States may pay providers directly, or States may pay for Medicaid services through various prepayment arrangements, such as health maintenance organizations (HMOs). Within Federally-imposed upper limits and specific restrictions, each State generally has broad discretion in determining the payment methodology and payment rate for services. Generally, payment rates must be sufficient to enlist enough providers so that covered services areavailable at least to the extent that comparable care and services are available to the general population within that geographic area. Providers participating in Medicaid must accept Medicaid payment rates as payment in full. States must make additional payments to qualified hospitals that provide inpatient services to a disproportionate number of Medicaid recipients and/or to other low-income or uninsured persons under what is known as the "disproportionate share hospital" (DSH) adjustment. Excessive use of the DSH adjustment resulted in rapidly increasing Federal expenditures for Medicaid. However, under legislation passed in 1991, 1993, and again within the Balanced Budget Act of 1997, the State allotments for payments to DSH hospitals have become increasingly limited.

States may impose nominal deductibles, coinsurance or co-payments on some Medicaid recipients for certain services. Certain Medicaid recipients, however, must be excluded from cost sharing: pregnant women, children under age 18, hospital or nursing home patients who are expected to contribute most of their income to the cost of institutional care. In addition, all Medicaid recipients must be exempt from co-payments for emergency services and family planning services.

The Federal government pays a share of the medical assistance expenditures under each State's Medicaid program. That share, known as the Federal Medical Assistance Percentage (FMAP) is determined annually by a formula that compares the State's average per capita income level with the national income average. States with a higher per capita income level are reimbursed a smaller share of their costs. By law, the FMAP cannot be lower than 50 percent nor higher than 83 percent. In 1997, the FMAPs varied from 50 percent (to 13 States and the District of Columbia) to 77.2 percent (to Mississippi), with the average Federal share among all States being 57.0 percent. However, the BBA permanently raised the FMAP for D.C. from 50% to 70%, and raised the FMAP for Alaska from 50% to 59.8% for three years. For the children added to Medicaid through the CHIP program, the FMAP average is higher -- about 70% , compared to the Medicaid average of 57%.

The Federal government also reimburses States for 100% of the cost of services provided through facilities of the Indian Health Service; provides financial help to the 12 States that provide the highest number of emergency services to undocumented aliens; and shares in each State's expenditures for the administration of the Medicaid program. Most administrative costs are matched at 50 percent for all States, with higher rates for certain activities such as development of mechanized claims processing systems. The Medicaid statute does provide, however, higher matching rates for certain functions and activities.

Except for the CHIP program and the QI program (described later), Federal payments to States for medical assistance have no set limit (cap); rather, the Federal government matches (at FMAP rates) State expenditures for the mandatory services plus the optional services that the individual State decides to cover for eligible recipients, and matches (at the appropriate administrative rate) all necessary and proper administrative costs.

MEDICAID SUMMARY and TRENDS

Medicaid was initially formulated as a medical care extension of Federally-funded programs proving cash income assistance for the poor, with an emphasis on dependent children and their mothers, the disabled, and the elderly. Over the years, however, Medicaid eligibility has been incrementally expanded beyond its original ties with eligibility for cash programs. Legislation in the late 1980s assured Medicaid coverage to an expanded number of low-income pregnant women, poor children andto some Medicare beneficiaries who are not eligible for any cash assistance program. Legislative changes also focused on increased access, better quality of care, specific benefits, enhanced outreach programs, and fewer limits on services.

Since its inception, Medicaid has had very rapid growth in expenditures. Although the rate of increase has subsided recently, acceleration over the years has been noteworthy. This rapid growth in Medicaid expenditures has been due to several factors. The primary ones include:

• expanded coverage and utilization of services, and the increase in the size ofthe Medicaid-covered populations (a result of Federal mandates, of population growth, and of the earlier economic recession);

• the disproportionate share hospital (DSH) payment program, coupled with provider tax and donations programs;

• the increase in the numbers of very old and disabled persons requiring extensive acute and/or long term health care and various related services;

• the results of technological advances to keep more very low birth-weight babies and other critically ill or severely injured persons alive and in need of continued extensive and very expensive care; and

• increased payment rates to providers of health care services, when compared to general inflation.

As with all health insurance programs, most Medicaid recipients require relatively small average expenditures per person each year. Providing health care coverage for almost 17 million children, who otherwise would usually receive little or no medical care, is and has always been a primary concern of the Medicaid program. Yet the data for 1996 indicate that Medicaid payments for services for these children (who constitute over 46 percent of all Medicaid recipients) averaged only a little over $1,000 per child. There are, however, certain other specific groups for whom Medicaid is at least as essential: those comprising far fewer persons, but ones who have much larger per-person expenditures. Regardless of their initial financial situation, their medical needs are so great and/or continuous that most of these patients must eventually depend upon Medicaid. When expenditures for these high and lower cost recipients are combined, the 1996 payments to health care vendors for over 36 million Medicaid recipients average $3,400 per person.

Long term care is an important and increasingly utilized provision of Medicaid--especially as our nation's population ages. Almost 45% of the total cost of care for persons using nursing facility or home health services in the U.S. in recent years is paid for by the Medicaid program. A much larger percentage is paid for by Medicaid, however, for those persons who use more than four months of such long-term care. As Medicaid has continued to provide extensive nursing facility care over the years, the focus has become the struggle to rely more on community-based long term care alternatives. The data for 1996 show that Medicaid payments for nursing facility (excluding ICF/MRs) and home health care totaled $40.5 billion for more than 3.6 million recipients of these services -- an average 1996 expenditure of more than $12,300 per long-term care recipient. With the percentage of our population who are elderly and/or disabled increasing faster than the younger groups, the need for long term care is expected to increase.

Another significant development in Medicaid is the growth in managed care as an alternative service delivery concept different from the traditional fee-for-service system. Under managed care systems, health maintenance organizations (HMOs), prepaid health plans (PHPs) or comparable entities agreeto provide a specific set of services to Medicaid enrollees, usually in return for a predetermined periodic payments per enrollee. Managed care programs seek to enhance access to quality care in a cost-effective manner. Waivers may provide the States with greater flexibility in the design and implementation of their Medicaid programs. Two major waivers (known as "1915(b)" and "1115") are an important part of the Medicaid program. Section 1915(b) of the law allows States to develop innovative health care delivery or reimbursement systems. By January 1997, forty two States had a total of 100 approved 1915(b) waivers. Section 1115 of the law allows Statewide health care reform demonstrations for testing various methods of covering uninsured populations, and testing new delivery systems, without increasing costs. Fifteen States now have 1115 projects approved, and ten more States have 1115 projects under review. Finally, the Balanced Budget Act of 1997 provided States a new option to use managed care. Medicaid managed care programs are growing rapidly. The number of Medicaid beneficiaries who are now enrolled in some managed care program continues to increase, and may soon approach 50 percent of all Medicaid enrollees. Several States have converted their entire Medicaid programs into managed care.

Medicaid data as reported by the States indicate that more than 36 million persons received health care service through the Medicaid program in 1996. These data show that, in addition to administrative costs, the total outlays for the Medicaid program in 1996 included: direct payment to providers of $122 billion; payments for various premiums (for HMOs, Medicare, etc.) of more than $16 billion; and payments to the disproportionate share hospitals of $15 billion.

The total expenditure for the nation's Medicaid program was $160 billion ($ 91 billion in Federal and $69 billion in State funds) in 1996. With anticipated impacts from the Balanced Budget Act of 1997, projections now are that total Medicaid outlays may be $250 billion in fiscal year 2003, with an additional $5.8 billion expected to be spent for the new Children's Health Insurance Program.

THE MEDICAID -- MEDICARE RELATIONSHIP

The views expressed herein are those of the author, and do not necessarily reflect the policy or legal position of any aspect of government. This is not a legal document. It is not intended to offer legal, accounting or other professional advice, nor to fully explain all of the provisions or exclusions of the relevant laws, regulations and rulings of the Medicare and Medicaid programs, or of their relationship. The following very brief summary should be used only as a brief overview and brief general guide to the relationship between Medicare and Medicaid.

Medicare beneficiaries who have low incomes and limited resources may also receive help from the Medicaid program. For persons who are eligible for full Medicaid coverage, the Medicare health care coverage is supplemented by services that are available under their State's Medicaid program, according to eligibility category. These additional services may include--for example--nursing facility care beyond the 100 day limit covered by Medicare, prescription drugs, eyeglasses, and hearing aids. For persons enrolled in both programs, any services that are covered by Medicare are paid for by the Medicare program before any payments are made by the Medicaid program, since Medicaid is always "payor of last resort."

Certain other Medicare beneficiaries may receive help through their State Medicaid program. Qualified Medicare Beneficiaries (QMBs) and Specified Low-Income Medicare Beneficiaries (SLMBs) are the best known and the largest in numbers. QMBs are those Medicare beneficiaries who have resources at or belowtwice the standard allowed under the SSI program, and incomes at or below 100% of the FPL. This also includes persons who are eligible for full Medicaid coverage. For QMBs, the State pays the HI and SMI premiums and the Medicare coinsurance and deductibles, subject to limits that States may impose on payment rates. SLMBs are Medicare beneficiaries with resources like the QMBs, yet with incomes that are higher--but still less than 120% of the FPL. For SLMBs, the Medicaid program only pays the SMI premiums. The Medicare law states that disabled and working individuals who previously qualified for Medicare because of disability, but who lost entitlement because of their return to work (despite the disability), are allowed to purchase Medicare HI and SMI coverage. If these persons have incomes below 200% of the FPL, but do not meet any other Medicaid assistance category, they may qualify to have Medicaid pay their HI premiums as Qualified Disabled and Working Individuals (QDWIs).

According to HCFA estimates, Medicaid provided some level of supplemental health coverage for 5.9 million persons who were Medicare beneficiaries in the above three categories for FY 1995. Although they represent only 17% of the total Medicare enrollees, they accounted for 35% of the total Medicaid expenditures ($53 billion in FY 1995)--including $10 billion for Medicare cost-sharing, $5 billion for other acute care services and prescription drugs, and $38 billion and for long-term care.

The Balanced Budget Act of 1997 establishes a capped allocation to States, for each of five years beginning January 1998, for payment of all or some of the Medicare SMI premiums for additional Medicare beneficiaries: those with incomes that are above 120% and less than 175% of the FPL. This exceeds the income levels established for QMBs and SLMBs. These beneficiaries are known as Qualifying Individuals (QIs). Unlike QMBs and SLMBs, who may be eligible for Medicaid benefits in addition to their QMB/SLMB benefits, the QIs cannot be otherwise eligible for medical assistance under a State plan. The payment of this QI benefit is 100% Federally funded, up to the State's allocation. This QI program provides financial assistance to additional persons needing help in acquiring adequate health care coverage. CONCLUSION

The Department of Health and Human Services, the individual States, and the United States Congress continually seek to make improvements in the Medicare and Medicaid programs' quality, effectiveness, and extent of health care services. However, these programs must function within the various Federal and State constraints of serious economic, social and political factors. As a result, Federal and State regulations and laws continue to be reviewed for these very expensive, yet vitally important, Medicare and Medicaid programs.