Page 28 - Management Theory 2023-2024 Edition

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22. Medicare and Pharmacy Benefit Management (PBM)

Medicare is the Title XVIII of the Social Security Act. It was first proposed in 1965. It provides medical coverage
to people over 65 years of age. It is funded by the Health Care Financing Administration (HCFA). It provides
services through two programs:

1. Medicare for physicians and hospital care
2. Patients under age 65 who have long-term disabilities or end-stage renal disease may also receive
reimbursement from Medicare.

Benefits covered by Medicare:

Medicare benefits are divided into two major categories:

1. Hospital Insurance (Part A)
2. Supplemental Medical Insurance (Part B)
3. Medicare Advantage or Medicare + Choice (Part C)
4. Prescription Drug Benefit Programs (Part D)

1. Hospital Insurance or Part A: Individuals over age 65 who are eligible for Social Security benefits are
automatically covered under this Part A benefit. The cost for Part-A Medicare is paid out from the Social
Security fund. Part A covers the following health related services:

1. Inpatient hospital services
2. Nursing homes and home healthcare services
3. Hospice care services

2. Part B or Supplemented Medicare Insurance: It normally covers:

1. Physician services
2. Outpatient hospital services
3. Home health services which are not covered in part A
4. Services related to Durable Medical Equipment (DME)
5. An ambulance transportation fee

However, in order to receive benefits listed in Part B, the member needs to pay the small monthly fee,
currently about $45. This premium covers the 25% cost of the total program cost, and rest is paid by the
federal government.

Both Part A and Part B Medicare plans require deductibles and copayments from patients in addition to
monthly premiums. Under the Medicare Part A, the patient must pay the first $800 out of his own
pocket for the given year. Once the patient pays $800 deductible, the rest of the costs are shared by
Medicare and the patient, depending on the plan agreement. Part B deductibles are $100 per year. Once
patients pay this requirement, the rest of the costs are shared by Medicare and patients depending on
the plan agreement. Currently, the coinsurance (once patients pay the $100 deductible) level is set for
20 to 50 percent depending on different plans provided by Medicare.

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