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  • Medicare and Medicaid are two of the three largest medical insurance programs in the United States, with each program comprising approximately 60 million enrollees. The largest health insurance programs are employer group insurance programs (commercial), with about 150 million members.

  • Medicare and Medicaid have unique roles and influence in US healthcare financing and delivery. Both are government programs, and thus quite complex, with arcane, changing policies, regulations, and procedures.

  • Medicare and Medicaid are heavily monitored for quality and cost outcomes, and both may impose significant financial penalties if providers or participating private insurers violate required compliance policies.

  • The Centers for Medicare & Medicaid Services1 (CMS) Innovation Center is actively testing novel payment and delivery models and concepts, and other patient access and quality initiatives.

  • The CMS establishes payment standards for medical benefit drugs, bundled-payment models, preventive care, and quality programs that, if successful, are often adopted, or influence, private health insurance programs. Thus, although Medicaid and Medicare programs are each one-half the size of the employer group private insurance market, the state and federal regulatory authority and compliance penalties influence commercial employer group insurance, hospital, and all other healthcare delivery program operations.

  • Although Medicaid is a state-administered program, the CMS has both financial investment and regulatory oversight, and can monitor and promulgate recommendations and requirements on all 54 state and US territory Medicaid programs, thus ensuring standardized and consistent minimum benefit coverage, although states can apply for waivers and benefit coverage.

  • Both Medicaid and Medicare have been significantly altered through the Patient Protection and Affordable Care Act (PPACA) provisions, including benefit changes and expansion, as discussed in the following text. Today, both Medicare and Medicaid include inpatient and outpatient prescription drug benefits, but they are quite different in terms of drugs covered, access rules, and financial structure.



Medicare was established in 1965 under Title XIX in the Amendment to the Social Security Act (SSA). Medicare was originally created to provide healthcare benefits for citizens 65 years of age and above. As with most government programs, it has evolved and expanded over the past 50 years, adding younger enrollees with disabilities, skilled nursing and hospice care, home healthcare, and preventive services to the core inpatient and outpatient medical services. Outpatient prescription drug benefits were added in the 2003 Medicare Modernization Act. Medicare provides services to almost 70 million people, most over 65 years old, and about 10 million dual eligible disabled, who may be younger patients. The CMS Innovation Center has used Medicare to test innovative reimbursement models and benefits that have been adopted, with modification, by private insurance programs. Examples are development of various value-based programs,2 the average sales price (ASP) medical benefit (Part B) specialty drug reimbursement,3 the Oncology Care Model,4 the Quality Payment Program,5 and the Medicare Access and CHIP Reauthorization Act (MACRA).5...

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