Since the history presented in August for Original Medicare Part A also covers how Original Medicare Part B (“Part B”) came into existence, we’ll take a shortcut here. The year was 1965 and it was LBJ, in the Truman Library, with the ink pen.
Part B is administered by the Centers for Medicare and Medicaid Services.
CMS utilizes a network of Medicare Administrative Contractors to process and pay claims for FFS beneficiaries. The Part B functions were previously handled by Part B carriers but the Medicare Prescription Drug Improvement, and Modernization Act of 2003 had CMS replace them with MACs.
There are currently 12 A/B MACs that handle FFS Part B claims for a specified geographic jurisdiction and 4 that process Medicare Durable Medical Equipment, Orthotics, and Prosthetics claims.
In 2022 alone, MACs processed approximately 957 million Part B claims, which equates to over 16 claims per Part B beneficiary.
Eligibility
Part B is available to individuals that are aged 65 or older, disabled, have ALS, or have end-stage renal disease.
Individuals are not required to enroll in Part B, but if they elect to enroll, a monthly premium is required (there are some exceptions where individuals receive premium-free Part B).
Additionally, individuals that do not enroll in Part B when first eligible will have to pay a penalty for as long as they remain enrolled (extra 10% for each year they were eligible to sign up for Part B and did not).
The standard 2023 Medicare Part B monthly premium is $164.90.
Note: On average the Part B premium has increased 4.6% per year over the last 10 years.
Individuals that meet certain income thresholds are considered high-income beneficiaries and pay a higher monthly premium (5 additional brackets that cap out as high as $560.50 in 2023).
If you recall from the Part A deep-dive, Former President Truman and his wife Bess were the first recipients of Medicare cards. Their monthly Part B premium? $3 a month.
Coverage
Part B provides coverage related to:
- Outpatient services
- Doctor visits
- Home Health services
- Preventative services
- Medical supplies
The coverage of a service or supply by Medicare is dictated by law (federal and state), national coverage decision made by Medicare, and local coverage decisions by companies that process Medicare claims in their area.
The primary Part B benefit pays 80% of the Medicare-approved amount after the beneficiary satisfies the annual Medicare Part B deductible.
The 2023 deductible is $226 ($50 when Medicare was introduced in 1966).
Note: On average, the Part B deductible has increased 4.4% per year over the last 10 years.
After the beneficiary satisfies the annual deductible, there are certain covered services that Medicare pays for completely such as clinical laboratory services, home health care, and an annual depression screening.
Some items and services that Original Medicare does not cover include long-term care, most dental, eye exams, cosmetic surgery, and concierge care.
Statistics
Within its first year of existence, Medicare provided coverage to over 19 million individuals. By the year 2005, Part B was providing coverage to nearly 40 million beneficiaries. As of year-end 2022, Part B has increased to covering nearly 59.5 million individuals.
According to the 2023 Medicare Trustees report, the Part B program will experience an average growth rate of 2.0% over the next decade bringing the total number of beneficiaries to just under 73 million.
Funding
Part B is funded by the Supplementary Medical Insurance (SMI) Trust Fund, which consists of two parts for Part B and Medicare Drug Coverage (Part D). Each Part has its own account within the fund. The SMI Trust Fund receives its funding from the following sources:
- Congress authorized funds
- Premiums from Part B and Part D enrollees
- Investment income from trust fund assets
(Note: In addition to Original Medicare and Part D, Medicare Advantage (Part C) is also partially funded by the the SMI Trust Fund)
Per the annual Medicare Trustees report, the financial status of each account within the SMI Trust Fund must be evaluated independently as there is not a regulatory provision allowing for asset transfer between the Part B and Part D accounts.
However, each account is automatically in financial balance since the current law establishes a method for the premiums and general fund transfers and ensures the fund for each Part is adequate to cover the next year’s estimated expenditures.
According to the 2023 Medicare Trustees report, it is currently estimated that both parts of the SMI Trust Fund will experience increases in fund balance from 2025-2032.