It called for paying a hospital's usual costs and for designating an intermediary, usually Blue Cross, to process claims, thus insulating the hospital system from direct government control. Medicare backers anticipated that these structural compromises and the system of dual financing would be smoothed out as the U.S. moved in the direction of federally sponsored universal health insurance. Neither Part A nor Part B covers long-term nursing care, prescription drugs, or routine vision, dental, hearing, and foot care. For the first time, however, the Balanced Budget Act extended Medicare coverage to include mammograms, Pap smears, prostate and colorectal cancer screenings, diabetes management, and osteoporosis diagnosis. Thirteen percent had no supplemental coverage.
Some employers also sponsor plans that cover retired workers and their spouses.
These are increasingly limited to large companies. In 1998, over 44 percent of companies with over 2500 employees offered medical coverage to retirees over the age of 65, while under 14 percent of companies with fewer than 250 employees did the same. Up until 1998, a steadily growing proportion of Medicare beneficiaries elected to be covered by these health plans and by other Medicare managed care plans. The plans bear the risk that individual patients may require medical services that far exceed this sum, while anticipating that their aggregate payments will exceed costs. This payment arrangement creates a distinct set of incentives and strategies.