Medicare and Medicaid

Medicare

• A U.S. gov’t health insurance program intended for:

  • People > 65 years old, regardless of income

  • *With some peculiar exceptions

Medicaid

• A U.S. gov’t health insurance program intended for:

  • People of any age, based on having very low income or assets

  • *With some peculiar exceptions

  • Every state runs their own Medicaid program (within limits)

Medicare Part A

• Hospital insurance

• Pays for care provided to patients in hospitals, hospices, and home healthcare programs

• Very limited skilled nursing facility care for rehabilitation only (100 days only)

Medicare Part B

• Supplementary medical insurance

• Provides coverage for physicians’ services, outpatient hospital care, and many other medical services not covered under Part A

• Typically “ambulatory care” services

Medicare Part C

• Medicare Advantage

• Added in 1997

• Expanded ability to participate in a wide variety of private health plans, including health maintenance organizations (HMOs) and preferred provider organizations (PPOs)

Medicare Part D

• Prescription drug benefit

• Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new prescription drug benefit

Medicare Part A: eligibility

• 65 years old

• No premium if:

  • A U.S. citizen or permanent resident and person or spouse worked >10 years in Medicare-covered employment

  • Receiving or eligible to receive benefits from Social Security (SS) or Railroad Retirement Board

  • Had Medicare-covered government employment

  • Most beneficiaries don’t pay premiums for this part

• Or beneficiaries may pay a monthly premium

• Received disability benefits from Social Security or Railroad Retirement Board for at least 24 months

• No waiting period for amyotrophic lateral sclerosis [ALS (“Lou Gehrig's Disease”)]

• End-stage renal disease (ESRD) requiring dialysis or transplant

Medicare Part B: eligibility

• Eligible for Part A and pay a premium

• Not required but ~93% have Parts A and B

• SS recipients have premium deducted from checks

Medicare Part C: eligibility

• Eligible for Part A

• Choose from approved MCO

• May need to pay additional premium

Medicare Part D: eligibility

• Started 2006

• Eligible for Part A

• Pay a premium

• “Not required” – but there’s a penalty if you don’t join!

"traditional” Medicare

Part A, B, and D

Medicare: funding

• general revenue

• payroll taxes

• premiums

• taxation of Social Security benefits

• transfers from states

• interest

• other revenue

Medicare: administration

• Responsibility of the U.S. Dept. HHS

• Eligibility and enrollment is through SSA

  • Administration through the Centers for Medicare and Medicaid Services (CMS)

  • U.S. Treasury manages the HI and SMI trust funds

• Providers must comply with conditions of participation

• Agencies of state governments certify compliance

• Providers get paid after filing claims to designated administrators contracted by CMS (an in-state insurer)

• CMS Administrators determine reasonable charges for covered services to reimburse providers

Medicare Part A: services

• Covers all emergency care, but not hospitalizations while in other countries

• Blood deductible

  • Patient must replace first 3 pints of blood used each year

• Covers 90 days of medically-necessary inpatient care per benefit period

• Each patient has lifetime reserve of 60 days used if hospitalization exceeds 90 days in one benefit period

• Emergency services

• Lifetime limit of 190 days of inpatient psychiatric hospitalization not provided in a general hospital

Medicare Part A: skilled nursing facility care

• Limited → 100 days of SNF care per benefit period

• Must be preceded by at least a 3-day hospitalization and within 30 days of discharge

• Requires that daily skilled care or rehabilitation can only be provided in an SNF

Medicare Part B: services

• Physician services provided in most settings (e.g., office, hospital, nursing facilities, at home)

• Outpatient hospital services (e.g., X-rays, labs, PT, OT, dialysis, ambulance transport, etc.)

• Preventive services (e.g., vaccines, injectables, cancer and osteoporosis screenings, diabetes monitoring)

• Limited care by chiropractors, optometrists, podiatrists, dental surgeons

• Not covered:

  • Hearing tests and hearing aids

  • Routine dental care

Medicare Part B: cost sharing

• Monthly premium

• Nominal annual deductible

• Co-insurance of 20%

• All of non-covered services or charges

• Assignment

  • Medicare participating physicians agree to accept only what Medicare pays (= 99% of physicians)

  • If physician does not accept assignment, patient can be billed for the difference (= balance billing)

    • However, by law, they can only be charged a maximum of 115% (less in some states) of the approved charge, which is 5% less than Medicare-participating physicians

Medicare Part C: services

• Increased options for Medicare beneficiaries similar to those of non-Medicare private plans (e.g., HMO, PPO, etc.)

• Plan must provide minimum of a traditional Medicare benefit, excluding hospice care, without imposing any other out-of-pocket costs

• Even with better coverage, Advantage beneficiaries save ~$100/month on average

Medicare Part D: services

• “Voluntary” enrollment in prescription drug benefit; beneficiaries pay an additional premium

• Coverage by two different methods

• Enrolling in free-standing prescription drug plan (PDP) while in traditional Medicare or joining a Medicare Advantage plan (Part C) that includes a PDP (MA-PD)

Medicare Part D: cost sharing

• Annual Deductible

  • Annual deductible (increasing to $545 in 2024)

• Initial Coverage Phase

  • Co-insurance of 25% on next $4,485 [ 5,030 – 545 ]

• Coverage Gap Phase

  • Donut hole: – closed! Used to be NO COVERAGE; but this has changed...

  • Co-insurance 25% on brands and generics

  • Maximum out-of-pocket = $8,000

• Catastrophic Coverage

  • After $8,000 of OOP, beneficiaries pay NOTHING !

Medicare Part D: cost sharing

• Subsidies available for low- and limited-income beneficiaries:

  • Premium and deductible waivers

  • Copayments are nominal, with generics < brands

• Covers most FDA-approved prescription drugs; (not including those covered by Medicare Parts A or B)

• Provider plans allowed to have formularies & tiered cost sharing if not too restrictive

• Original law prevented Medicare from negotiating discounts directly with manufacturers. This has changed!

• About 90% of beneficiaries now have an Rx drug benefit

Medicare Part C and D: star ratings

• Plans get 1 (worse) to 5 (best) stars

• Based on:

  • Good patient outcomes

  • Patient surveys of satisfaction

  • Ease of access to health care

  • Markers of quality processes

• 2024 criteria = 213-page document

• Reimbursements to plans are tied to star ratings !

• Ratings are PUBLISHED and available to review – public pressure to perform!!!

Medicare: expenditures

• From inception, beneficiaries have increased 19 to 55+ million

• Expenditures grown from $6B in 1968 to $500+B in 2014

• Payments for MDs & and hospital services account for about 35% of Medicare

• Payments for outpatient Rx drugs = 11% of expenditures

• Within Medicare, a relatively small group of patients with serious medical problems accounts for a disproportionate amount of expenditures/beneficiary

Medicare: additional coverage

• Medicare pays for less than half of the average beneficiary’s health care bills

• ~75% of beneficiaries have coverage in addition to traditional Medicare:

  • Other retiree benefit from own or spouse’s employer

  • Medicaid

  • “Medigap” – private plan that covers many of the charges not covered by Medicare, also referred to as “Medicare Supplemental Policy”

    • **** Traditional Medicare only **** Not Part C holders *****

Medigap

• Most states have regulations for seniors to compare Medigap plans:

  • Many types of policies allowed (Plans A-N)

  • Plans B-N offer a variety of additional or enhanced benefits

  • Standardized formats, language, and definitions

  • All states must allow Plan A (basic), which all Medigap insurers must offer, but they do not have to offer any other plans

Medigap: services

• Most basic Medigap policy (Plan A) covers:

  • Co-pays for days 61-90 of inpatient hospitalization

  • Co-pay for lifetime hospital inpatient reserve

  • 100% of Medicare-eligible hospital costs after all Medicare benefits are exhausted

  • 3-pint blood deductible

  • Medicare Part B co-insurance

Title XIX

• Grants to the States for Medical Assistance Programs - i.e., Medicaid

  • SSA was passed in 1965 to provide medical assistance to eligible needy citizens

• This was a “last minute” addition to the 1965 bill with no real estimate of future costs

• It was expected to be a “stopgap” or temporary measure until universal health insurance passed after a larger Democratic majority with another Democratic presidential win in 1968

• However, Richard Nixon, a Republican, won in 1968; and the universal health insurance movement stalled

• Medicaid is now the largest source of funding for health-related services to low-income Americans

welfare reform

• Personal Responsibility and Work Opportunities Act of 1996 removed automatic eligibility for individuals who received cash welfare through Aid to Families with Dependent Children (AFDC).

• Successfully cut link between Medicaid and cash welfare, replacing AFDC with Temporary Assistance for Needy Families (TANF) program

• TANF provides block grants to states for time-limited cash assistance

• Allows families to receive cash welfare for no more than 5 years and allows states to impose other requirements related to employment and education

Medicaid: eligibility

• Since Medicaid is a joint state-federal program, states have flexibility to determine criteria within federal guidelines

• Medicaid eligibility is complex, state-specific, and changes frequently

• 3 broad groups may be covered by Medicaid:

  • Mandated categorically needy

  • Optionally categorically needy

  • Medically needy

mandated categorically needy

• Families below a state-determined maximum limit on income and resources

• A child living with a parent or other relative that is deprived of parental support or care due to death, absence, incapacity, or unemployment

• Individuals receiving cash assistance through the Social Security Income (SSI) program below income and asset limits

• Pregnant women and children under the age of 6 below certain income limits

• All children <19 in families below the federal poverty level

• Qualified Medicare Beneficiaries (QMBs) below certain income and asset limits

optionally categorically needy

• Determined by states

• Do not meet mandated requirements, but share certain characteristics with the mandated categorically needy

• Must receive same benefits as the mandated group

medically needy

• Optional category; determined individually by states

• May be eligible in other two groups, except exceed the income or asset limits

• Medical expenses reduce “net” income to below thresholds (i.e., “spend-down”)

• Used mostly to grant eligibility to institutionalized persons who incur extremely large medical expenses (e.g., nursing facility patients)

• If available, must also cover certain minors and pregnant women that would be eligible, except they exceed the income or asset limits

Medicaid: state flexibility

• States must operate Medicaid programs within broad guidelines, and adhere to three general requirements:

  • Statewideness – in effect throughout state without variation

  • Freedom of choice – obtain covered services from any qualifying provider

  • Comparability of services – services equal for all beneficiaries

Medicaid: waivers

• Under the SSA, CMS can grant two types of waivers:

  • Section 1115

    • 5-year demonstration waiver for innovative ideas

    • Must be “budget-neutral” – does not increase costs, but increases eligibility or provides new benefits

    • Mostly have been managed care demonstrations

  • Section 1915B

    • Targets only current beneficiaries (will not expand eligibility)

    • To implement managed care principles

• 60%+ of Medicaid beneficiaries are enrolled in managed care plans

Medicaid: administration

• Medicaid is actually an optional program; it is not required of the states by the federal government

• Federal and state governments share financing and administration – CMS and a single agency in each state, which actually administers the program

• States determine eligibility (other than those mandated), scope of services, and provider payment rates

• The federal portion of Medicaid program costs – Federal Medical Assistance Percentage (FMAP) – is determined by comparing a state’s mean per capita income to the national average; max. 83%, min. 50%

• Administrative costs are split evenly

• Providers must accept amount Medicaid reimburses as payment in full

Medicaid: cost sharing

• Many states have Medicaid recipients contribute to the cost of their health care by deductibles, co-pays, or co-insurance

• Cost sharing cannot be a barrier to needed services

• Over 80% of states have copayments for prescription drugs, most $0.50-$3.00

• Nursing home patients expected to contribute most of their income to pay for care

• Cost sharing (copayments) not allowed for emergency care, family planning services, pregnancy-related services, and services provided to those ≤ age 18

Medicaid: required services

• Inpatient hospital services

• Outpatient hospitals services

• Physician services

• Rural health clinic services

• Federally-qualified health center services

• Labs and X-rays

• Nursing facility services for individuals >21 years old

• Early and periodic screening, diagnosis, and treatment (EPSDT) for individuals <21 years old

• Family planning services and supplies

• Home health services for persons eligible for skilled nursing services

• Nurse-midwife services

• Certified pediatric and family nurse practitioner services

• Prenatal care

Medicaid: optional services

• Outpatient prescription drugs

• Prosthetic devices

• Physical therapy

• Rehabilitation therapy

• Optometrist services and eyeglasses

• Services in an intermediate care facility for the mentally disabled

• Transportation services

• Home- and community-based care for certain persons with chronic impairments

Medicaid: expenditures

• managed care organizations

• home, health, and personal care

• other acute

• nursing facilities

• inpatient services

• outpatient services

Patient Protection and Affordable Care Act (PPACA)

• Expand access to healthcare services

  • Individual mandate

  • Tax penalty for those who don’t enroll in a health insurance plan

    • (Currently repealed)

• Creates State-based or Federal health insurance exchanges

• Medicaid expansion—under age 65 and income up to 138% of federal poverty level

  • (Optional for states to opt into this)

  • Enhanced federal assistance to states who did this....

• Dependent coverage for adult children to age 26