Harry Truman began the process of establishing a national health plan by asking Congress to enact legislation in 1945. Twenty years later he was the first person to sign up for Medicare under the newly enacted law signed by Lyndon Johnson. The dangers of "socialized medicine" had been debated for two decades, and now the U.S. opened the door to the first recipients of Medicare, a program for seniors over age 65 or disabled and Medicaid, the companion plan for the indigent.
Medicare's design centered around two care levels. Medicare part A covers hospitals, skilled nursing, hospice and home health care. Part A is premium free but most of those who qualify will have paid for it through Medicare taxes during their working years.
Medicare part B includes doctor services, outpatient services, durable medical equipment, home health and other medical services. Part B requires a premium, which in 1965 was $3 per month and today is near $100 per month.
The claims paid by Original Medicare are about 70% of the total submitted by a provider. Todays general rule of thumb is that Medicare will approve 80% of the charges submitted. Of this 80%, Medicare pays a share of another 80%. For the Medicare member this amount totals about 65% of the bill. The responsibility for paying the remaining 35% belongs to the to member. There is NO upper limit cap for what could be owed.
With a potential liability of multi thousands of dollars to a Medicare enrollee the first Medigap or Medicare Supplement policies offered were by Bankers Life in the early 1970's. These plans covered the excess charges for what Medicare A and B would not pay. The Medigap concept became widely accepted by the public and soon hundreds of companies were offering their own versions of Medicare supplement plans.
Abuses in the market place among agents continuously "replacing" their own coverage on the basis of having an improved or better plan or needlessly selling seniors multiple plans for the sake of earning a new commission led to Federal standardization of Medigap policies in 1992. This change made it unlawful to sell multiple policies and standardized all the policies offered. An example would be that if a senior was considering a Plan "F" from company A, it would be exactly the same as a Plan "F" from another company B. With this, the buyer needed only to consider the price and the service they expected, but no longer had to worry about the difference in benefits. The change ended the problem to having thousands of plan choices from which to make.
Cost shifting, those additional charges not covered by Medicare increased the pricing of Medigap plans. As time went on, Medicare cut back on the amount they reimbursed providers, doctors, hospitals, etc. This meant that the Medigap policy had to pay for these new charges resulting in raised premiums to cover these shifting expenses. The effect on seniors as they aged was that their plans became more costly. Many retirees on fixed incomes felt the economic pressure and dropped their coverage. The irony was, at a time in life when they would more likely need insurance, they didn't have it.
As a result of the Balanced Budget Act of 1997 the first alternate to a Medicare Supplement plan became available. Known as Medicare
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