HCA 701: Paying for Health Care

Private Insurance, Medicare, Medicaid & Managed Care

RESOURCES NEEDED TO MAINTAIN A HEALTH CARE DELIVERY SYSTEM

Financing

Healthcare Professionals

Technology & Supplies

Health Care Delivery System

FacilitiesSource: Williams and Torrens, Introduction to Health Services, 2002

Payment sources and where the money goes

Other Govt. Pgms. 12%Medicaid

16%

Medicare18%

Out-of-Pocket

21%

Private Insur. 33%

Hospital care 33% Physician care 23% Nursing home care

9% Prescription drugs

9% Other spending 26%

Health Insurance vs. Other Insurance

Other Insurance Loss is to be avoided Losses are intended to

be independent events Loss should be

something for which we can’t adequately budget

Health Insurance Ill health can’t be

avoided Many illnesses imply a

great degree of dependency among the insured losses

First dollar base / major medical health plans violate this tenet.

Taxonomies of Health Insurance

Basic employee coverageThe second taxonomy includes the type of

insurance provided Commercial carriers Blue Cross/Blue Shield Self funded plans Cost shifting to private plans Cost shifting to uninsured

Funding mechanism

Increases in Health Insurance Premiums compared to other Indicators

0

2

4

6

8

10

12

14

16

18

20

1988 1990 1996 2000 2002 2005

Health InsurancePremiums

Overall Inflation

Workers' Earnings

% of Firms Offering Health Benefits, by Firm Size

53

56

57

58

52

47

78

74

80

70

74

72

90

86

91

86

87

87

9397

97

95

92

93

59

656866

63

59

99999998

9998

0

10

20

30

40

50

60

70

80

90

100

3-9Workers

10-24Workers

25-49workers

50-199Workers

All SmallFirms

All LargeFirms

1996

1999

2000

2002

2004

2005

Health Maintenance Organizations

Began in 1929 HMO Act of 1973 Growth has slowed

somewhat due to more enrollment in PPOs

Guarantee provision of specific services

0

50

100

1970 1995 2000

Americans enrolled in HMOs in millions

Medicare

Title XVIII of the Social Security Act, "Health Insurance for the Aged and Disabled" is commonly known as Medicare began in 1966.Elderly aged 65 and overDisabled individuals entitled to Social

Security benefitsEnd stage renal disease.

Medicare Part A Coverage (Hospital Insurance)

90 days of inpatient care in a benefit period No limit to number of benefit periods Use of “Medigap” (about 75% of beneficiaries)

Lifetime reserve of 60 days of care once 90 days are exhausted

100 days of post-hospitalization in skilled nursing facility (or rehab)

Home health agency benefits

Part B – Supplementary Medicare

95% beneficiaries enrolled in Part BCoverage optionalRequires beneficiary to meet set

deductibles (Medicaid programs pay premiums for qualified Medicaid enrollees who qualify for Medicare)

Medicare Provider Reimbursement

HospitalsPhysiciansBeneficiaries can join Medicare HMOs

Catalyst system for new prescription drug benefit of Medicare

Private insurance participate in supplemental policies (most include managed care plans)

Medicare Regulatory Initiatives

Tax Equity and Fiscal Responsibility Act (TEFRA)

Prospective Payment System creates DRGs

Resource based relative value scale (RBRVS)

Medicare Prospective Payment System

Standardized payment amount DRG weights Outliers Quality Indicators

Churning – multiple admissions for same patient with same diagnosis

Skimming – taking more profitable less severely ill Reducing length of stay, procedures, etc which may

affect morbidity and mortality. Financial performance

Medicare Prescription Drug, Improvement and Modernization Act of 2003

Allows elderly and disable beneficiaries to enroll in private plans that contract with Medicare for drug benefit.

Two types of plans: Prescription Drug Plan (PDP) Medicare Advantage (MA)

Plan is an enticement to get more enrollees in Medicare Managed Care

Beneficiaries must pay monthly premium and deductible

Medicare Rx Drug Benefit

HHS expects 29.3 million to enroll in Medicare drug plans

10.9 million beneficiaries will receive low-income subsidies

9.8 million will have drug benefits through their employers

Drug Benefit Cost Sharing

2006 2010 2014

Average monthly premium

$32.20 $48.49 $64.26

Annual deductible $250 $331 $437

Coverage gap $2,850 3,774 $4,984

Medicare Rx Drug Benefit

0

20

40

60

80

100

120

2006 2008 2010 2012 2014

Cost in billions

Source: Managed Care. The Future of Medicaid. What Should Medicaid Look Like in 2010? August, 2004

U.S. Medicaid Enrollment (A Federal Perspective)

The largest health insurance program in the United States.

Provides coverage for more than 50 million poor and disabled Americans.

Spending is in excess of $300 billion a year. Accounts for 20 percent of national health care

spending. Without it, the ranks of America’s uninsured

would swell to more than 90 million, 1 of every 3 citizens.

Medicaid

Enacted with Medicare as Title 19 of the Social Security Act in 1965

Joint program financed between the Federal and State Governments through use of matching funds for: Categories of individuals that could be covered Categories of benefits that could be covered

Today, 35 million people in low-income families, predominately children and pregnant women.

Medicaid Dual-Eligibles: Supplements Medicare providing

prescription drugs and long-term care services for over 6 million low-income Medicare beneficiaries

Guaranteed entitlement to states and to individuals. States entitled to Federal financing when they cover

the populations eligible for coverage services they expend state dollars for on behalf of that population,

Entitlement to individuals through automatic income eligibility

No enrollment caps or limits on the coverage. Medicaid accounts for 43-44% of all Federal dollars

that go to states in the form of grants and aid.

Differences in Eligibility by State

Eligibility for services differ State by State in amount, duration, or scope of services

State legislatures may change Medicaid eligibility, services, and/or reimbursement during the year.

Medicaid consists of 56 distinct state-level programs with federal guidelines, but administered state agencies

Minimum Eligibility Requirements Must meet aid to Families with Dependent Children (AFDC) or--at

State option--more liberal criteria. Children under age 6 whose family income is at or below

133 percent of the Federal poverty level (FPL). Pregnant women whose family income is below 133 percent of the

FPL (services to these women are limited to those related to pregnancy, complications of pregnancy, delivery, and postpartum care).

Supplemental Security Income (SSI) recipients in most States Recipients of adoption or foster care assistance under Title IV Special protected groups All children born after September 30, 1983 who are under age 19, in

families with incomes at or below the FPL. Certain Medicare beneficiaries

Medicaid Funding Match

Federal government matches state Medicaid spending for medical assistance state per capita income formula.

Federal contribution ranged from 50 – 77 cents of every state dollar spent on medical assistance in fiscal year 2004, including:Medicaid administrative costs (50% federal

match)Skilled professional medical personnel

engaged in program integrity activities (as much as 75%)

Nevada Medicaid Enrollment (A State Perspective)

Adults with childrenChildren make up the largest portion of

the populationThe elderly and disabled recipients

Account for 75% of total expenditures. Biggest increase in expenditures, but

smallest increase in enrollment

Nevada Medicaid Enrollment

Recent Federal Actions

Federal GAO placed the Medicaid Program on the 2003 list of programs at high risk for fraud, waste, abuse and mismanagement.

The GAO specifically recommended Congress curb state financing schemes, such as Intergovernmental Transfers (IGTs).

Medicaid & The Impact on Business

There is a growing impact on the General Fund.

The impact is significant because it means far fewer resources available for other state funded programs that are essential for commerce and economic growth.

Medicaid siphons dollars from education and transportation

Economic multiplier effect.

Medicaid’s Impact Health Insurance

National trends propose eligibility limits and/or reducing providers rate of payment.

Both approaches increase the amount of uncompensated care and costs are allocated to private health insurance premiums through cost shifting.

The affordability of providing health care benefits to employees in the private sector creates a burden on business.

The Balanced Budget Act of 1997

Subtitle H – MedicaidThe law contains a dramatic expansion

in state authority with respect to the use of managed care.

It enables states to require most Medicaid beneficiaries to enroll in managed care organizations (MCOs) without obtaining a waiver.

Waivers & Managed Care Growth Managed care programs seek to enhance access to quality care in a cost-

effective manner. Waivers may provide the States with greater flexibility in the design and

implementation of their Medicaid managed care programs. Waiver authority under sections 1915(b) and 1115 of the Social Security Act

is an important part of the Medicaid program. Section 1915(b) waivers allow States to develop innovative health care

delivery or reimbursement systems. Section 1115 waivers allow Statewide health care reform experimental

demonstrations to cover uninsured populations and to test new delivery systems without increasing costs.

Finally, the BBA provided States a new option to use managed care. The number of Medicaid beneficiaries enrolled in some form of managed

care program is growing rapidly, from 14 percent of enrollees in 1993 to 58 percent in 2002.

Medicaid Managed Care Program Successes

Managed care is the prevalent delivery system in Medicaid, with 59 percent of beneficiaries receiving some or all care through managed care instead of fee-for-service.

Forty-eight states, the District of Columbia and Puerto Rico operate Medicaid managed care programs, with about 23.1 million beneficiaries enrolled in 2002, an increase of over two million since 2001.

Enhancing access to providers and emphasizing preventive and routine care, health plans have successfully improved the quality of care received by enrollees in the Medicaid managed care program.