pubpol 2350 prelim 2

ACA exchange gov't subsidy generally _____ with a person's or family's annual income

ACA exchange gov't subsidy generally decreases with a person's or family's annual income

As income increases relative to the poverty level, people are expected to contribute a _____ percentage of their income toward insurance premiums

As income increases relative to the poverty level, people are expected to contribute a larger percentage of their income toward insurance premiums

Why are so many Americans uninsured?

1. Health insurance is ____

1. Health insurance is voluntary: the gov't does not provide us with tax-funded insurance or require us to buy it.

Why are so many Americans uninsured?

2. Some people don't...

2. some people don't earn enough to afford health insurance, or they choose to spend their limited income on other essentials

Why are so many Americans uninsured?

3. Medicaid

3. Medicaid, a gov't-run health insurance program for low-income people, doesn't cover all low-income individuals

Why are so many Americans uninsured?

4. Many small employers do not...

4. Many small employers do not offer health insurance

Why are so many Americans uninsured?

5. People who don't have access to employer-sponsored health insurance...

5. People who don't have access to employer-sponsored health insurance face higher premiums in the individual market.

Why are so many Americans uninsured?

6. Some people who are offered health insurance by their employer...

6. Some people who are offered health insurance by their employer DO NOT purchase it. With community-rated premiums, insurance may not be a good bargain for healthy people.

Why are so many Americans uninsured?

7. Not everybody eligible for a subsidized premium on the ACA...

7. Not everybody eligible for a subsidized premium on the ACA chooses to buy a health plan

When and who signed Medicare Bill?

1965

effective: 1966

President Johnson

When and who signed the Medicare Modernization Act?

2003

effective: 2006

Bush

Who is covered by Medicare?

1. Elderly: 65+: paid payroll taxes for 10+ years

2. Disability: under 65 (after 2 year waiting period)

3. ESRD Patients: End stage renal disease (ESRD)

How many people were covered by Medicare in 2025?

69.0 million

___% of the elderly were uninsured in 1962

48% of the elderly were uninsured in 1962

Lowered uninsured rate reduced...

reduced OOP medical spending and the poverty rate among the elderly

increased male life expectancy by 1 year

Medicare comes in ___ parts

4 parts

Medicare Part A covers:

what it covers: Hospital inpatient, SNF, home care

pt costs: deductibles and coinsurance

Medicare Part B covers:

what it covers: Physician, outpatient facility, infused drugs

premium: $203/month

pt costs: premiums, deductibles, and coinsurance

Medicare Part C covers:

What it is: Medicare Advantage; an alternative way to receive Medicare benefits through a private health insurane plan

Medicare benefits +

Dentures and Dental Care, Eyeglasses, Hearing aids included

trade-off: lower out-of-pocket costs and extra benefits, but usually a NARROWER provider network and more utilization management

Medicare Part D covers:

What it covers: Prescription medication through drug coverage plans

Premium: $35/month

Patient Costs: Premiums, deductibles, and coinsurance

D = DRUGS

What's NOT covered by traditional Medicare

1. Long-lasting care/ nursing home

2. Dentures and dental care

3. Eyeglasses

4. Hearing Aids

2-4 covered by PRIVATE medicare ADVANTAGE plans

Why do medicare leave coverage gaps?

still face significant cost-sharing requirements

(w/ deductibles and copay)

- financial burden: avg. $6,150 (2024) --> 26% of their social security income

What is Supplemental insurance ?

helps fill the gaps in traditional medicare by paying some costs that beneficiaries would otherwise owe.

Type of Supplemental insurance

Medigap

Medicaid

Medicare Advantage

___% of Medicare beneficiaries had some form of supplemental coverage in 2021

94% of Medicare beneficiaries had some form of supplemental coverage in 2021

A simple example

Imagine a patient receives a $1,000 outpatient medical bill under traditional Medicare.

Medicare pays its covered share.

The patient is responsible for the remaining 20% coinsurance, or $200, assuming the deductible has already been met.

If the patient has a Medigap policy that covers this coinsurance, the policy may pay some or all of that $200, depending on its terms.

The purpose is to...

The purpose is to reduce the financial uncertainty of getting sick.

Joining a ____ ____ ______ Health Plan is a common way to (reduce/increase) patient cost sharing and receive additional health benefits

Joining a Private Medicare advantage Health plan is a common way to reduce patient cost sharing and receive additional health benefits

How does Medicare Advantage work?

Federal Gov't (CMS): pays the private insurer for each enrolled beneficiary

>>>

Private medicare advantage insurer: organizes covered healthcare and pays providers under its plan's rules

>>>>

Medicare Beneficiary:

uses the plan's network ad pays applicable premiums and out-of-pocket costs

a. Traditional Medicare v. b. Medicare advantage:

Who administers coverage?

Prover choice?

Extra benefits?

Cost structure?

Prior Authorization barrier?

Who administers coverage:

a: federal gov't

b: private insurance

Prover choice?

a: generally broad

b: narrow network

Extra benefits?

a: requires separate coverage or services (dental and vision)

b: includes the additional benefits

Cost structure?

a: part B, possibly part D, and medigap premiums, cost sharing

b: part B, possibly part C, and medigap premiums, cost sharing

a. Less restrictive

b. uses MORE utilizes management

__ % of Medicare Beneficiaries Choose to Be in a Private Medicare Advantage (Part C) plan

55% of medicare beneficiaries choose to be in a private medicare advantage plan

Why doesn't everyone choose a madicare advantage plan?

Benefits:

1. offered prescription drug coverage, dental care, and vision care

2. only 24% of plans charge a part C premium

3. OOP max is present v. no MAX in traditional

4. Lower patient cost sharing than in traditional Medicare

HOWEVER

1. have a smaller network of providers (i.e. less choice)

2. Implement utilization management more aggressively (e.g. prior-auth)

How is Medicare financed?

(hospital care)

- "Pay-as-you-go" system:

current workers pay for current 65+ year olds

future workers pay for current workers when they are 65+

- Employees and their employers SPLIT a 2.90% medicare payroll tax on wages (+0.90% for HIGH INCOME WORKERS)

- Part A trust fund is expected to RUN OUT in 2033

How is Medicare financed?

(Physician and drugs)

- fed tax revenues cover 76% of part b and part d costs

- elderly pay premiums for the remaining portion of parts B and D

(slightly higher for HIGH INCOME)

PART B and D are SUBSIDIzED

--> PAY AS YOU GO SYS

Medicare spending is steadily increasing or decreasing?

Share % of medical spending in US (1980 v. 2024)

INCREASING

1980: 15% ($37)

2024: 22% ($1,118)

As Baby Boomers Retire, _____ Workers Will be Paying taxes Per Each Medicare Beneficiary, Which ____ theTaxes Required Per Worker

#of workers per medicare beneficiary:

1970:

2029:

As Baby Boomers Retire, Fewer Workers Will be PayingTaxes Per Each Medicare Beneficiary, Which Raises theTaxes Required Per Worker

#of workers per medicare beneficiary:

1970:3.7

2029: 2.5

Older adults receive substantial benefits from Medicare, while much of the program's funding comes from taxes paid by the ____ ______, including _____ workers.

Older adults receive substantial benefits from Medicare, while much of the program's funding comes from taxes paid by the broader population, including current workers.

Older voters turn out at ______ rates than younger ones.

Older voters turn out at higher rates than younger ones.

What will happen if medicare costs continue to grow at historic rates?

- medicare payroll taxes would have to INCREASE (2.9 to 3.4%)

- If we wait until 2030, taxes would have to increase to 11%

- If taxes are NOT raised, Part A spending would need to be cut by 11%

- other taxes (e.g. INCOME tax) will have to rise to cover part B and part D

- fed gov't can CUT other programs

- ged gov't can issue more DEBT

____% of Federal Budget Allocated to Health Care Programs in 2025; IfMedicare Taxes/Premiums Aren't Raised, Non-Health ExpendituresWill Have to be Cut

27% - Medicare and Medicaid

22% - Social Security

Beneficiaries can receive substantially ____ in Medicare _____ than they contributed in Medicare ____ over their lifetimes.

Beneficiaries can receive substantially more in Medicare benefits than they contributed in Medicare taxes over their lifetimes.

what are the 5 proposed policies

Proposed policy

What it means

Who would be affected?

10-year impact in lecture

1. Raise eligibility age from 65 to 67

- People would wait two additional years to qualify based on age.

- Adults approaching retirement who would otherwise qualify at 65.

- 10-yr impact: $100 billion

2. Increase Part B and D premiums

- Beneficiaries would pay premiums covering 35% of Parts B and D costs.

- Medicare beneficiaries, especially those who rely on these benefits.

- $418 billion

3. Raise payroll tax by 1 percentage point

- Increase the Medicare payroll tax rate to bring in more revenue.

- Workers and employers who pay the payroll tax.

- $651 billion

4. Switch to a premium support program

- Give beneficiaries a government contribution toward private coverage, with everyone required to shift into Part C under the proposal.

- Beneficiaries and private insurance plans; effects depend on how the contribution compares with plan costs.

- $275 billion

5. Change cost-sharing rules and restrict Medigap

- Change how much patients pay when they use care and limit supplemental coverage that pays those costs.

- Beneficiaries who use medical services and people with Medigap policies.

- $116 billion

How much of the federal budget is allocated to programs, such as medicaid and medicare?

27%

Restructuring Medicare will be easier if the Elderly acknowledge that Medicare is a _______ program

Restructuring Medicare will be easier if the Elderly acknowledge that Medicare is a transfer program.

What are the (5) possible medicare restructuring policies?

1. Increase eligibility from age from 65 to 67

2. Increase Part B and Part D premiums so they cover 35% of the costs

3. Raise payroll tax by 1% point

4. Turn Medicare into a premium support program; everybody must shift into Part C

5. Change cost sharing rules for Medicare and restrict Medigap

Medicaid, which is financed by state and federal gov't, is really ____ different programs

51 different programs

The federal gov't establishes _________ for the medicaid program (i.e., the "______" - the minimum)

The federal gov't establishes requirements for the medicaid program (i.e. the "floor" - the minimum)

- who must be covered

- what types of medical services must be offered

- very little cost sharing is allowed (e.g. deductibles, co-pays)

Each state decides whether to ______ the floor:

Each state decides whether to exceed the floor

- Decides whether to make certain types of people eligible beyond the minimum required by the federal government

• Determines how to raise its share of the program's cost

• Determines how much to pay physicians, hospitals, and other providers

• Administers its own program

"Legacy" (Before the 2010 Affordable Care Act, ACA) Medicaid Eligibility Rules/Federal Mandates Federally-Mandated Groups Who Must be Covered (all except #3)

1. Children in low-income households

2. Pregnant women

3. Low-income adults under 65 years of age

4. Blind or disabled persons who have little or no income

5. Low-income Medicare beneficiaries

Documented immigrants must wait ____ years after entering US to receive medicaid

5 years

Federal poverty level for a family of _____ is $31,000

Federal poverty level for a family of 4 is $31,000

Southern states have generally _____ to cover ____ pople

Southern states have generally chosen to cover fewer people

ACA _____ states to offer Medicaid to Low-Income people not already eligible, and ____ private health insurnace for middle-income people

ACA ENCOURAGES states to offer Medicaid to Low-Income people not already eligible, and SUBSIDIZES private health insurance for middle-income people

ACA is encouraging "Restrictive" states to become "expansive" states by...

picking up 90% of the costs for newly-eligible people

How many were newly enrolled to Medicaid due to ACA?

19 million new people

How did the ACA shift Medicaid to the public?

1. Income limit increased

2. Gov't funded 100% of costs

3. Medicaid expansion now optional

The federal government mandates coverage for

what groups?

What about states?

1. Children in low-income households

Under age 6: family income at or below approximately 133% of the Federal Poverty Level (FPL).

Ages 6-19: family income at or below 100% of FPL.

2. Pregnant women

Family income at or below approximately 133% of FPL.

3. Blind or disabled people

Those with little or no income who meet the applicable eligibility rules.

4. Low-income Medicare beneficiaries

People who qualify for Medicare and meet the relevant Medicaid eligibility requirements.

States can mandate their own policies

What is the difference between 133% and 138%?

133%: legacy mandated

138%: ACA mandated

How does the difference (Legacy v. ACA) impact Medicaid?

Low-income populations who were not eligible beforehand are now eligible

Legacy Medicaid v. ACA Medicaid expansion

LM: Covers federally mandated eligible groups

ACA: Extends eligibility to additional low-income adults

LM: Federal coverage rules apply in every state

ACA: Expansion is optional for states

LM: States determine eligibility beyond the federal minimum

ACA: Expansion generally covers eligible adults up to 138% FPL

LM: Existing program remains in place

ACA: Federal government covers 90% of expansion costs under the ongoing funding arrangement

How many states opted out of ACA?

what does this mean?

10 states

meaning they will have the legally mandated Medicaid BUT NOT the ACA mandated policies

The _____ ) states not participating in the ACA Medicaid expansion

(most of the Southeast) have a....

The 10 (Republican) states not participating in the ACA Medicaid expansion

(most of the Southeast) have a disproportionate share of the poorest

uninsured residents

Medicaid enrollment has ____ since 1980

How many enrolled in 2026?

tripled

73 million in 2026

What are the mandated benefits of medicaid?

hospital care

outpatient and physician care

Nursing Home care (Long-term)

home care

lab tests and other medical care

What are the Optional benefits of medicaid?

prescription drugs

How has medicaid spending evolve in the US?

1980: 9%

2024: 19%

what is the main groups covered from Medicaid?

Disabled >> elderly >>>> children + adults

What is the overall outcome of a kid who is Medicaid eligible and receives benefits?

Children who became eligible for Medicaid as a child "randomly"...

▪ Are healthier when they are 25-54 years old

▪ Are more likely to complete high school and to attend and complete college

▪ Work more and earn higher wages

▪ Receive fewer government transfer payments (e.g., welfare)

▪ Pay more in lifetime taxes. Government has recouped $2 for every $1 invested in Medicaid!

▪ Medicaid has helped to produce more than 10 million Quality-Adjusted Life Years (QALYs)

How is Pre-ACA, Legacy Medicaid Financed?

1. Costs are shared between federal and state governments.

2. Federal government's share is based on a state's per capita income.

3. In Mississippi, the state with lowest per capita income, federal government pays

77% of total cost. For every $1 Mississippi spends, federal government spends

$3.34.

4. In highest-income states such as NJ, NY, and CT, federal government

pays $1 for each $1 the state spends

Federal Government Pays ________ of the Legacy

Medicaid Program Costs, More in Low-Income State

50% - 77%

State gov't spends more on Medicaid than _____?

By how much?

more than half on Medicaid than HIGHER EDUCATION

18% v. 9%

How would a typical taxpayer react to high spending on Medicaid (state)?

a) demand for shift to Medicaid!

b) Commend their state legislators for being

considerate to those who are less fortunate

c) Pay no attention whatsoever

Medicaid Pays Physicians and Hospitals Much _____ Than

Private Health Insurers Do, On Average

LESS

In most states, private health insurers pay physicians and hospitals the most generous fees.

Medicare pays physicians about 25% less and hospitals about 50% less than private insurers.

Medicaid pays physicians and hospitals about 50% less than private insurers, on average.

In some states (e.g., Alaska, Montana, and New Mexico), Medicaid actually pays fairly high physician fees.

In other states (e.g., NJ, FL, RI, IL, and OH), Medicaid reimbursement to physicians is particularly low.

Due to ____ fees, medicaid providers do not accept ______

Due to low fees, medicaid providers do not accept new patients

Medicaid: 77%

Medicare: 88%

Private Insurance: 96%

____ million people are in the Coverage Gap: too "rich" for Medicaid but too

poor to qualify for an ACA Exchange subsidy/tax credit

2 million people are in the Coverage Gap: too "rich" for Medicaid but too

poor to qualify for an ACA Exchange subsidy/tax credit

Why are 10 states still refusing to expand Medicaid?

1) Turning down federal $

2) Money would improve health

3) Why turn down free money?

The 2025 "One Big Beautiful Bill Act" (OBBBA) Will Reduce

Medicaid Spending by About ________ a year 10% of spending)

$90 billion/yr

OBBBA Estimated to Lead to ____ Million People Becoming

Uninsured, With Main Effect Beginning in 2027

10 million

What causes people to lose medicaid under OBBBA?

work requirement needs to be approved

What are the main differences between medicaid and medicare?

Medicare:

1. covers primarily elderly

2. popular; expected to use down the line

3. financed by the federal gov't

4. "pay-as-you-go" system = wealth transfers from workers to elderly

5. HIGH payment rate

Medicaid:

1. low-income families

2. stigma of welfare

3. financed by state and fed gov't

4. pay as you go

- from general fed and state taxes

5. LOW payment rates ---> many physicians DONT participate

Hospitals pay for _____, _____, _______, and ___________ when a patient is treated in their hospital

Hospitals pay for nurses, technicians, medical equipment, and medical supplies when a pt is treated in their hospitals

Capitation v. Fee-for-service

Capitation: practice receives a fixed amt. of $/enrollee per month

FFS: pre-determined schedule of fees for each service that a physician performs for a pt (more visits, more $)

RBRVS (Resource-Based Relative Value Scale)

- 1992

- main idea: determines how much physicians get paid by medicare

- goals: reduce income difference btwn. specialists and primary care physicians -->FAILED

- goals: slow the growth rate of Medicare Part B (covers physician services)---> SUCCEEDED

-goals: limit OOP payments for elderly --->SUCCEEDED

Overview of Medicare's RBRVS Payment system

1. PTs are categorized into one of the 8,000 CPT codes

2. Each CPT is assigned 3 separate relative value units (RVU)

3. CONGRESS sets payment for each RVU unit

4. (RVUs) (payment/unit) = how much the MD is paid

5. Medicare forbids MDs from "balance billing"; MD must accept Medicare's RBRVS payment amount as final!

6. MDs can decide whether or not to participate in Medicare; ~97% of MDs participate in Medicare

3 components of RBRVS

1.Practice Expense RVU

-e.g. rent, salaries

2.Malpractice Expense RVU

3. Work RVU

-time, mental effort, technical skill

How are costs adjusted based on locations?

Each RVU is adjusted by a "geographic practice cost index" (GPCI) to reflect the relative costs of practice expenses in different areas

How do MD work, Practice expense, and malpractice compare for states: Alaska, Los Angeles, San Francisco, and Long Island

MD is highest in Alaska (1.5)

Practice Expense is highest in San Fran (1.28)

Malpractice is highest in LI (2.15)

*these rates show a difference when comparing the other states

RBRVS system pay who more?

They pay specialists/non-primary care physicians WAY more than primary care physicians

Compare how much Specialists earn/hr v. Primary Care physician

Primary care:$114/hr Specialists: $244/hr

A ______ specialist can earn more in one hr than a _______ does all day

A non-primary care specialists can earn more in 1 hr than a primary care physician does all day

work RVU = wRVU

2.57 (cog. sci) v. 9.42 (screening colonscopy) v. 12.45 (Cataract extraction)

___% of private health insurance companies pay ____,after _____ with them,adjusting the _____ Medicare RBRVS schedule

74% of private health insurance companies pay physicians, after negotiating with them, adjusting the entire Medicare RBRVS schedule

Private health insurers paid physicians ___% (more/less) than the medicare RBRVS amt.

Private health insurers paid physicians _47% MORE than the medicare RBRVS amt.

How much higher are private insurers' physician fees than medicare's and medicaids'?

medicare: 47% higher

medicaid: twice as higher

What is the % of solo practice v. group practices in 2024?

solo: 12%

50+ physicians: 18%

What is the percent of US physicians employed by a hospital /health insurance? What has been the trend for this?

What % were employed by a health insurer in2023?

26% (2012) to 55% (2024)

2023- 4%

Why are physicians choosing to be employed by hospitals rather than running their own practice?

More physicians are choosing hospital employment because running an independent medical practice has become increasingly expensive, complicated, and administratively demanding.

If Hospital B employs Physicians...

When Hospital B employs physicians, it pays them salaries, receives the revenue generated by their medical services, and benefits when those physicians direct more patients to Hospital B.

what were the top reason why physicians sold their practice and agreed to become an employee of a health system?

1. Negotiations for HIGHR payment rates with payers

- remember Hospitals have the ability to negotiate prices with its grand network

2. Access to costly resources

- equipment = EXPENSIVE, better off from working at hospital

3. Admin work

- billing, pre-dets, insurnace, paperwork, etc. TOO MUCH WORK

Private health insurers and Medicare are trying to...

shift physicians and hospitals away from fee-for-service totake more responsibility for population health and costs.

What is an EMR and why do MDS want them?

expensive electronic medical record (EMR)system to improve quality and reduce costs; hospitalscan help pay to install these systems.

Summary Qs

1. Physicians generate revenue in TWO settings:

2. Hospital ownership does NOT determine who pays the physician practice.

3. Two ways physician practices can be paid.

4. Medicare uses RBRVS to determine physician payments.

5. Private insurers usually adjust Medicare's fee schedule.

6. Physicians are increasingly becoming hospital employees.

1.Office visits (outpatient care).

Services provided to hospitalized patients (inpatient care).

2.

3. FFS or Capitation

4, RBRVS = Resource-Based Relative Value Scale.

Medicare considers THREE components:

Physician work: Time, effort, intensity, skill, and stress.

Practice expenses: Staff, equipment, supplies, and office costs.

Malpractice expenses: Professional liability insurance costs.

Remember: Medicare sets the fees. There is no individual negotiation with physicians.

5. Larger physician practices generally have more bargaining power.

Higher-quality or highly valued practices may negotiate higher reimbursement rates.

Private insurers and providers negotiate payment rates.

6. More predictable salaries.

Access to expensive medical equipment.

Administrative and insurance billing support.

Greater bargaining power through larger health systems.

Less responsibility for running an independent business.

Hospitals also benefit because employed physicians may direct more hospital admissions to their employing health system.