Medicare and Medicaid

Government as a Source of Payment
=Individual programs of reimbursement
=Direct payments to vendors
=Matching funds
Vendor-purchase relationship
-Contracting with service providers
-Purchases hospital, home health, nursing home, physician, and other medical services
Title 18 of the Social Security Act of 1965
-Worker’s compensation was first mandated health insurance program
-One-half of the elderly had any insurance that covered hospital costs
-Now covers 50 million people
-Cost 15% of the federal budget
Medicare Today
In 2010, 46 million people enrolled
-Primary (83%)
=65 years or older
=US citizen
=Worked for Medicare-covered employer for at least 10 years
-Secondary (17%)
=Persons receiving Social Security disability
=Persons with end-stage renal disease
Medicare Qualifications
Some people do not pay a premium
-On Social Security
-Had government employment
Premiums range from $254-461/month
Medicare Finance
The Hospital Trust Fund
-Financed through payroll taxes paid by employees and employers- current contribution is 1.45%; self-employed persons pay 2.9%

Social Security administers hospital payments through an intermediary
-90% choose Blue Cross

Joint Commission on Accreditation of Hospitals
Accredits hospitals

Medicare Part A
-Benefits for hospital care, skilled nursing, short-term home health care post-hospitalization, hospice care
-Requires annual deductible be met
-Patients cover 20% of hospitalization costs
-Lifetime pool of compensated days
-“Medi-gap” policies
=Private, supplemental insurance
=Also covers gaps in Part D benefit
Medicare Part A Coverage
Hospital or skilled nursing for 90 days per “benefit period”
-Admission starts benefit period
-Benefit period ends 60 days after discharge from hospital or skilled nursing facility
-Beneficiary may have multiple benefit periods in one year
Beneficiaries also have 60 days lifetime reserve
-May be used if hospitalization within benefit period exceeds 90 days
Only 190 lifetime days of inpatient psychiatric care
-Does not count toward hospitalization benefit
Medicare Part A Deductible
-1-60 days of benefit period- amount varies by year- $1,100 in 2010
-61-90 days- 25% of inpatient hospital deductible per day
-90+ lifetime- $550 per day
Medicare Part B
-Supplemental medical insurance
-Voluntary program covering physician services
-Services linked to, but external to physician services
=Outpatient diagnostic tests, medical equipment and supplies, and home health services
-Fee for service
=Rate increases led to the resource based relative value scale
->Same payments for generalists and specialists
->Reducing numbers of expensive procedures
->Reducing incentive for physicians to specialize
Medicare Part B Deductible
-$155 in 2010
-Then 20% of the approved charge
-Contingent on whether provider “accepts assignment”
=Meaning accepting Medicare-approved fee
=If not, patient may have to pay 20% of approved charge PLUS the difference between the billed and Medicare-approved amount
=Provider fee cannot be more than 115% of the Medicare-approved fee
=Participating physicians receive 5% higher fee than non
Medicare Part C (Medicare+Choice)
-Balanced Budget Act of 1997
-Voluntary enrollment
=22% of Medicare beneficiaries enrolled by 2009
-2003 revised administration
Medicare Part C
-Provide equivalent benefits to traditional Medicare
-Plan cost savings are passed onto beneficiaries or given back to Medicare
-Overview (2010):
=90% had no cost sharing for preventative services
=80% limited out-of-pocket spending
=90% provided unlimited days of hospital care
Medicare Part D
-Medicare Prescription Drug, Improvement, and Modernization Act of 2006
-Voluntary enrollment through:
=Enrollment in a freestanding drug plan while getting other Medicare benefits
=Enrollment in Medicare advantage plan
Medicare Part D Deductible
-About $30/month
-Covers ~25% of the cost of the standard drug benefit
-$310 deductible25% of the next $2,520 of medication costs (paid $940 of first $2,830, or 33%)100% of next $3,610$4,550 catastrophic limit5% co-insurance or minimal co-payments
Medicare Part D
-Numerous issues with eligibility verification in early implementation
-27 million enrollees in 2009
-14 from retiree health plans, VA, or HIS
-90% of Medicare beneficiaries have coverage
Medicare Part D
-Alternative benefit plans
=Must be actuarially equivalent
=Only 36% charged the deductible
=40% charged no deductible at all
=Only 11% used 25% co-insurance
-ACA impact
=$250 rebate to cover “doughnut hole” in 2010
=Additional subsidies for generics in 2011
=Phasing out 100% gap to 25% by 2020
Medicare Cost Containment
-First ten years
=25% of increases attributed to general inflation
=2/3 to growth in hospital payroll and non-payroll expenses
-1974 resources planning
=State approval before starting capital project
=Certificate of need
=Quantified population-based needs
Medicare Cost Containment
-Switch to case payment system
-Diagnosis-related groups (DRGs)
=Hospital payments are fees based on specific diagnoses
=International Classification of Disease codes >10,000; 500 patient categories
-Direct cost reimbursement
=Medical education expenses for teaching hospitals
=Hospital outpatient expenses
=Capital expenditures
-Improved outcomes
=Resulted in 24% reduction in average length of hospital stay
=Improvement in mortality rates
Medicare Cost Containment
Balanced Budget Act (BBA) of 1997
-Reduce spending through regulatory and payment changes to hospitals, physicians, post-acute-care services and health plans
-Increased premiums for Part B
-Required prospective payments for long term care and skilled nursing
=Reduced spending two years by 1.7%, resulting $68 billion savings
-1965 enacted as Title 19 of the Social Security Act
-Covers 60 million people and costs 25% of state budgets
16% of overall health care spending and 41% of nursing home care
-Third largest source of health insurance after employer-based and Medicare
-Program requirements are stipulated by state governments
3 categories of insured
-Mandated categorically needy
-Optionally categorically needy
-Medically needy
Medicaid Mandated Categorically Needy
-Low income families with children
-Children under the age of 6 and pregnant women whose family income is below 133% of the FPL ($31,321)
-Children under age 19 in families with incomes below the FPL
-Disabled persons
-Persons receiving Supplemental Social Security
Medicaid Optionally Categorically Needy
-Infants through 1 year of age
-Pregnant women and families with 185% of FPL income
Medicaid Medically Needy
-Qualify under “Optional” or “Mandated” but have higher income
-Medical expenses drastically reduce net income
-34 states have program for medically needy
Medicare ACA
-Expands coverage to all non-Medicare eligible persons under age 65 with incomes up to 133% of the FPL effective Jan 2014
=100% Federal, then decline to 90% by 2020
-Direct provider reimbursement
=Rate setting is determining by each state
Medicaid Cost Containment
-BBA allowed managed care mandate
-More than 70% enrolled in managed care plans
-Recession has accelerated enrollment, spending and growth
Medicaid Children’s Programs
-Children’s Health Insurance Program (CHIP) provides health coverage to nearly 8 million children in families with incomes too high to qualify for Medicaid, but can’t afford private coverage
-Signed into law in 1997, CHIP provides federal matching funds to states to provide this coverage (at higher rate than Medicaid
-States can design their CHIP program in one of 3 ways:
=Medicaid expansion (7 states, DC and 5 territories)
=Separate Child Health Insurance Program (17 states)
=Combination of the two approaches (26 states)
Medicaid Children’s Programs
Balanced Budget Act (BBA) of 1997
-Created State Children’s Health Insurance Program (SCHIP)
=Reauthorized in 2009
=Dismissed 2007 directive limiting coverage