Medicare overview

SALMAN KHAN: I'm here with Dr. Laurence Baker from Stanford Medical School, and we're going to talk about what? DR. LAURENCE BAKER: How about Medicare? SALMAN KHAN: Medicare. I think we knew that was going to happen, because we had this picture here already. So what is this a picture of? DR. LAURENCE BAKER: I think that's a picture of LBJ signing the Medicare Act in 1965. This is the time that we passed Medicare. SALMAN KHAN: Lyndon Baines Johnson, LBJ. This is Truman right over here. DR. LAURENCE BAKER: I think so. SALMAN KHAN: Maybe he was there because I think he was probably old enough by that point to be a recipient. DR. LAURENCE BAKER: Yeah. 65 and over. SALMAN KHAN: So, I think we all have a general idea of what Medicare is, that it's kind of a health care program, or insurance program for people who are retired. But then, it starts to get fuzzy after that. There are all these details that confuse most of us. DR. LAURENCE BAKER: Yeah, so we talked about Medicare in a bunch of different ways. Medicare is a program. It's a US government program run by the federal government. SALMAN KHAN: So it is run by the federal government? DR. LAURENCE BAKER: Yep. SALMAN KHAN: And sometimes, it's thrown in with Medicaid. How are they different, just at a very high level. DR. LAURENCE BAKER: Oh, so Medicaid is another different insurance program run by the federal government in coordination with state governments. Medicaid is a federal and state program. Medicare is a federal program. Medicare is for folks who are 65 years old and older and people with disabilities. Principally those two groups. Medicaid is a program that's aimed at lower income populations, and so-- SALMAN KHAN: OK. So this older people and disabilities. This is low income, kind of a poverty issue. DR. LAURENCE BAKER: Yes. Mostly. SALMAN KHAN: I'm gonna write that down. Low income. And this is primarily retirees? DR. LAURENCE BAKER: Yeah. The vast majority of people in there are folks who are there because they are over 65. SALMAN KHAN: OK. And we're just going to focus on Medicare. And Medicare is federal government. Medicaid is the federal and the state government are on Medicaid, because they always sound very similar. DR. LAURENCE BAKER: They sound very similar. Yeah, I know. They're easily confused, certainly at the name level. Really different programs. They operate completely separately. In a few cases, there are people who get access to both of them, but they pay differently. They run differently. They're-- SALMAN KHAN: But at federal level, they are still run by the same organization, the Centers for Medicaid and Medicare. Or Medicaid-- DR. LAURENCE BAKER: Yeah. The Department of Health and Human Services has a subpart called the Centers for Medicare and Medicaid Services. SALMAN KHAN: --executive branch. DR. LAURENCE BAKER: Yeah. SALMAN KHAN: The executive branch of our government, obviously. And then you have the Secretary of Health-- DR. LAURENCE BAKER: Health and Human Services. SALMAN KHAN: So, Health and Human Services. And then within that, you have CMS. DR. LAURENCE BAKER: You have CMS. SALMAN KHAN: Which is the Centers for-- and you were saying earlier, it should have two M's in it. DR. LAURENCE BAKER: Yeah. It's the Centers for Medicare and Medicaid Services. So I think it's just shorter to have one M. But really, there's two in there. SALMAN KHAN: [INAUDIBLE] instead of calling it CMMS. OK. They administer at the federal level, both Medicare and Medicaid. But just to reiterate, Medicare is really mainly a federal thing, while Medicaid is both. DR. LAURENCE BAKER: Yeah, Medicare-- SALMAN KHAN: And they're run separately, so you have Medicare here. Medicare. And then you Medicaid here. DR. LAURENCE BAKER: Yeah. SALMAN KHAN: I see. All right. All right. So let's dive deep into Medicare. So I guess, what is it? DR. LAURENCE BAKER: So Medicare is an insurance program. It provides insurance coverage for people who are eligible for it. So if you're age 67 and over, or if you have a permanent disability, a couple other small groups. If you have Lou Gehrig's disease, or end stage renal disease, kidney failure, then you can get access to Medicare too, but those are small populations. So if you're in those groups, you're eligible for Medicare. Medicare will provide you with insurance that will cover hospital bills, doctor bills, some prescription drugs. It'll cover lots of medical care-- SALMAN KHAN: You know, I hear these things-- this is the part that I think gets confusing for everyone. Is that you start hearing Part A, Part B, Part C, Part, D. I don't even if those are all the parts. What are those referring to? And are they exactly insurance, or are they something slightly different? DR. LAURENCE BAKER: OK, so Medicare has these four parts. Part A, Part B, Part C, and Part D. And it can get a little confusing, but we can break it up into some different pieces. So the biggest one, in terms of the number of people who are in it, is what sometimes we call traditional Medicare. And that's what historically is Part A and Part B. And you kind of want to take those two together, because they make a package. And we call that maybe traditional Medicare. Sometimes people call it original Medicare, standard Medicare. But when they passed the program, when they first did it, Part A was meant to cover hospital expenditures, and Part B was aimed at doctor costs, costs for seeing physicians. Of course, those things go so closely together that nowadays, Part A and Part B are kind of a pair. So you really rarely would find someone who only wanted Part A, or only wanted Part B. SALMAN KHAN: Right. Sometimes, you hear the doctor processes it as outpatient. DR. LAURENCE BAKER: It's [INAUDIBLE]. SALMAN KHAN: Hospitals, sometimes you hear the word inpatient, means you're living there while they're treating you. Outpatient, you go visit them for an hour or two and leave. And that's where you hear those. DR. LAURENCE BAKER: Yeah. So that's a way of breaking up the kinds of services that medicine provides. Medicare actually gets a little bit-- it's mix and match. So really, Medicare Part A expenditures when a hospital bills Medicare for use of the hospital, use of a room, use of the services at the hospital. Anytime a doctor bills Medicare, even if they saw the patient in the hospital, they're going to be a Part B expenditure. SALMAN KHAN: I see. I see. So it isn't strictly inpatient, outpatient. It really is much more along the lines of hospital and doctor. DR. LAURENCE BAKER: Yep. SALMAN KHAN: OK. So I'll maybe put this in some type of [INAUDIBLE] way or something. It's not necessarily outpatient, inpatient. That's maybe one way of-- DR. LAURENCE BAKER: Yes, it is useful to think about that, outpatient, inpatient. SALMAN KHAN: And will it cover everything that happens? Including drugs? DR. LAURENCE BAKER: OK. So drugs is one key issue. To the main question, the first thing I guess I'd say is that traditional Medicare is pretty comprehensive. It covers most of the things that people would normally encounter in their needs throughout the year. SALMAN KHAN: Right. Does it cover everything? DR. LAURENCE BAKER: Prescription drugs is one big exception. SALMAN KHAN: It does not cover-- so Parts A and Part B do not cover prescription drugs. So when Lyndon Johnson was signing this, if Truman had to get prescribed some drug, and if he was a Medicare recipient, in 1965, he would have had to pay that out of pocket. DR. LAURENCE BAKER: Yeah. So I guess one caveat I'll note is that if you get prescription drugs that are administered to you while you're in the hospital-- SALMAN KHAN: I see. DR. LAURENCE BAKER: --you're staying in the hospital, they give you drugs, that's going to be generally covered under Part A. It's when you're outpatient, and you're going home, and somebody sends you to pharmacy to pick up a-- SALMAN KHAN: I see. Medicare in its original form would not cover that. DR. LAURENCE BAKER: They would not cover the outpatient prescription drugs. So that became a problem for some folks, and that has generated changes to the Medicare program. SALMAN KHAN: Right. Since then, there is a part now that cover that. DR. LAURENCE BAKER: Yes. So that's the Part D program as a Medicare extension. I don't know how far you want to get-- SALMAN KHAN: We can-- I'll write that right here. Well just, D for drugs. DR. LAURENCE BAKER: Yeah. The whole story of prescription drugs and Medicare has a lot to it. People would buy additional policies if they had A and B. They'd buy themselves a private supplement that might cover drugs sometimes. But now, with the new Part D plan, maybe people would buy that instead. And there's other stuff. SALMAN KHAN: There's probably a C right there. DR. LAURENCE BAKER: There's a C that's coming. SALMAN KHAN: We can get to that in a second. But so, A and B, traditional. A, hospitals. B, doctors. And what percent would-- with my health insurance, there's a copay every time I visit the a doctor. It's $20. How does it work with traditional Medicare, with Parts A and Part B? DR. LAURENCE BAKER: So if you just have Part A and Part B, then on the Part B side, doctors are covered 80% of the Medicare allowable charges. So Medicare has a fee schedule that governs what doctors can be paid for services. And Medicare will cover 80% of that, and the patient pays 20%. SALMAN KHAN: I see. DR. LAURENCE BAKER: For Part A, it gets a little more complicated, but there's a co-payment that you have to make. If you go to the hospital, Medicare is going to have a copayment of a fixed amount, several hundred dollars, coming up. SALMAN KHAN: OK. It's just not as simple as 80-20. DR. LAURENCE BAKER: No. Not as simple as 80-20. You're going to pay a copayment there too. So they're not bad coverage. But there's certainly some costs you can run up. And if you're pretty sick, you might really have a bill that's left [INAUDIBLE]. SALMAN KHAN: And there's extreme flexibility here. You can see any doctor you want, go to any hospital you want. DR. LAURENCE BAKER: Yeah. Medicare Part A and Part B is, to one way of thinking, one of the last bastions of health care as it exists, or health insurance as it existed in America in 1965, '70, '75, when there were really minimal restrictions on what doctors you could see, what hospitals you could use. Doctors get lots of discretion here about the services they're going to provide, and there's not a lot of oversight that you might see in today's HMOs, or other kinds of-- SALMAN KHAN: Right. But there are still-- maybe I'm wrong here-- there still are doctors that won't take Medicare patients? DR. LAURENCE BAKER: So, doctors can elect to be Medicare doctors or not. And some doctors, I think, decide they have enough business or enough patients from other places. And Medicare's a plan that's got its rules, and you have to follow the rules. And some people think that Medicare doesn't pay as well as other options they have. So there are a few. Most of the doctors, the vast majority of doctors in the country, will work with Medicare. SALMAN KHAN: And you're saying, it is kind of the super flexible thing. If you do have an illness, you can go see multiple doctors, get second opinions. You could go to the specialist on the other side the country. So it is pretty good that way. Although you have to pay 20% of at least the doctor's visit, so it's a pretty-- so what happens if I'm a retiree? I don't have a lot of money. I have a major bill. Say I have a surgery that's $50,000. I know that's more of a hospital inpatient thing. Are there other options so that they don't have to pay that out of pocket? DR. LAURENCE BAKER: Yeah. So there's a bunch of things that go into trying to figure out what the cost to getting this are, and how you might get covered for some of these other services. The main thing that would be the answer to the question is, there are supplemental policies. So if you're a retiree, and you've gotten Part A, because you're eligible for that, and you've Medicare tax, and you've got Part B, for which you do have to pay a little bit of money every month-- subsidized, but still a premium you have to pay-- you might decide in addition to that to pay for a supplemental insurance policy, which you'd buy from a private place. The AARP is one place that sells these. There are other folks that sell them. You pay an extra premium for that. That's an additional insurance plan that you have. And that might agree, or you might have a method there to have them cover that 20% co-pay, the additional hospitals. And those plans, there's some different varieties of those that cover more or less generously, and of course, charge a higher or a lower premium for. SALMAN KHAN: I see. That makes complete sense. And do people have to pay any premium to be in Medicare? DR. LAURENCE BAKER: To get A and B both, you have to A, you generally don't. If you pay your Medicare tax for 10 years, you work for 10 years here, and you pay your Medicare tax, you get Part A for free. But Part B charges a premium. So you do have to pay a small monthly-- SALMAN KHAN: And it's what? It's like on the order of like, $100 a month? DR. LAURENCE BAKER: Yeah, generally. It's gone up a little bit over time, or something like that. SALMAN KHAN: So it's not too much. Maybe $100 or a little bit more per month, which is nothing. I mean, if you're 65 or over, and you try to get a private policy, you're probably looking at something like a thousand dollars a month. DR. LAURENCE BAKER: Yes. So I guess two ways of thinking about it. One, this is heavily subsidized. Compared to what a person 75 years old or 80 would pay for an actual private insurance policy would be much, much higher than that. There are people who look at that $100 a month in fixed income and Social Security and things, and you say that's an issue. And so one of the things that's just in the news the last few weeks is the fact that this number, the number went up a bit. Social Security payments went up a little bit. But less, actually, than the Medicare. So people are saying-- SALMAN KHAN: I see. So there's a net decrease. I see. I see. DR. LAURENCE BAKER: --if you're buying both. So there's some people who will still be worried about that, even though it is heavily subsidized, and looks like a great deal. SALMAN KHAN: I see. And then finally, so we have no A, B. And then we have a little bit of D. We know it's all about covering drugs. What does C do? [INAUDIBLE] exist? DR. LAURENCE BAKER: Yes. C exists. C has been around for 20 or 30 years now. C is a separate choice. So when you turn 65, let's say, you can make this choice a little bit differently sometimes too. But when you turn 65, you might decide to take part A and part B, maybe by a traditional supplement. Maybe you add the first Part D drug plan on and make yourself package. Or you can elect Part C, and Part C is an alternative. Under Part C, what happens is the CMS, federal government, has contracted with some HMOs. Kaiser, Blue Cross, other places. Sometimes, they've contracted with a few PPOs. They've tried other kinds of plans too. Mostly it's HMOs. So you have a choice then. You can join Kaiser, and have Kaiser be your Medicare plan. You can join the Blue Cross one. Depending on where you are, you'll have different choices of different private plans that have contracted. And you can do that. The federal government will then pay a bunch of your premium to them. SALMAN KHAN: I see. DR. LAURENCE BAKER: So you'll get covered by the private plan with the federal government covering your costs. They might ask you to pay some additional premium. You're going to have to pay your Part B equivalent already. So you've got to pay that amount. But then, you might have to pay a little bit extra. And then, you'll get access to what services that has. And for some people, that's attractive. Because though the co-payments and deductibles will be lower-- you'll often have more like the $10 copay-- you might have access to some prescription drug coverage automatically built in there. Sometimes those cover some vision and other things, which might be nice. SALMAN KHAN: So this one or plans. I could get this, while it's 80% coverage-- well, I can't make that rule, because hospitals, it could be different. But you get this kind of flexible thing. But you have a pretty significant co-pay, the 20% patient. I could get supplemental insurance for me to cover some of that right over there. Or I can do Part C. Is there a name for Part C? DR. LAURENCE BAKER: Part C these days is called Medicare Advantage. So the plans in Part C are called Medicare Advantage plans. SALMAN KHAN: Which is really just Medicare subsidizing me to get private insurance. DR. LAURENCE BAKER: Right. From some plans that have agreed to work with Medicare patients. SALMAN KHAN: And there's various checking up on them. So they agree to basically cover everything that A and B would cover, so you're not going to get skimped on too much. SALMAN KHAN: And what do most people do? Do they go A and B? The traditional route? Or do they go the C route? DR. LAURENCE BAKER: So historically, the vast majority of people have gone A and B route. It changes. It kind of goes up and down over time, depending on various factors. But over a historical average, it would be something like 80%, 85%, 90% in A, and maybe 20%, 15%, 10% in B and C, depending on which year you're looking at over the last 15 year. SALMAN KHAN: Right. And we could probably do a whole series of videos on it. So when did D come about? It wasn't part of the original-- DR. LAURENCE BAKER: D was not part of the original. D comes about in the early 2000s under George Bush. George W. Bush. SALMAN KHAN: This is what we heard about. I think it was like, 2003. I think I it was-- DR. LAURENCE BAKER: I think that's probably about right. And the issue there was there's a lot of folks who were having trouble getting their outpatient drugs covered. So this is a plan, this is another part of Medicare. You can elect to buy this. You normally would think about this if you got A and B, and you wanted to get outpatient drugs covered, you'd think about a D plan. Part D is run by the federal government, kind of the way that C is. They subsidize, and they pay a premium to the private plans that cover drugs. Or at least they organize the market, and the person then pays also some premium to get-- SALMAN KHAN: I see. So a private-- DR. LAURENCE BAKER: So it's private. SALMAN KHAN: A private entity will handle the actual reimbursements for the drugs, but Medicare will pay them. DR. LAURENCE BAKER: Yeah. So the way to think about it is, just a bunch of private entities with funds flows coming in, partly from the person, partly from Medicare, to buy these. SALMAN KHAN: OK. And who do you pay your money to? You pay it to Medicare? You pay it to these-- DR. LAURENCE BAKER: Uh. SALMAN KHAN: Actually-- it works out the same way one way or the other. This is optional. A retiree or someone over 65 would pay money to essentially get a drug plan subsidized. DR. LAURENCE BAKER: Yes. SALMAN KHAN: OK. Cool. Cool. Well, no, this is super. DR. LAURENCE BAKER: Well, actually, we're trying to think about subsidies. But there's some interesting-- [INTERPOSING VOICES] SALMAN KHAN: Oh, I guess to be able to participate in a drug plan. DR. LAURENCE BAKER: I mean, they are subsidized. And the federal is taking a bunch of money in. But how exactly the economics of these plans works out has been an interesting discussion over the last couple over year. SALMAN KHAN: Right. Right. No, we could make a ton of videos. No, this is super helpful. Because, I think, frankly, I didn't know about the differences right here before about 15 minutes ago. All right. Well, thanks a bunch.