Medicare, Medicaid, and Health Care Reform

Todd Gilmer, PhDProfessor of Health Policy and Economics

Department of Family and Preventive Medicine

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Medicare

• Social insurance program for the elderly and disabled;

federally financed and administered– Eligibility: 65 and over (or disabled or ESRD) and worked for 10

years (or dependent of a worker)

• Pays for hospital and physician services, limited skilled

nursing services and home health, and prescription drugs

• Enacted in 1965, benefits package mirrors 1965 Blue Cross

package; few changes since then, until the addition of Part

D on January 1, 2006

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Medicaid

• Joint state - federal social welfare program

• Feds set basic rules on eligibility and benefits; some mandatory requirements, many state options

• States administer the program, making many choices on eligibility, covered services, and payment levels

• Feds pay a percentage of total Medicaid spending: 50% in CA; 85% in poor states; averages 57%

Medicaid Eligibility

• To be eligible for Medicaid, a beneficiary must belong to a ‘Category’ that is eligible, and meet strict financial tests

• Categories of eligibility

– Poor children, and their parents

– Disabled

– Elderly

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Health Care Reform

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Health Reform and Coverage Provisions

• Individual Mandate

• Health Benefit Exchanges

• Changes to Private Insurance

• Employer Requirements

• Expansion of public programs: Medicaid /SCHIP

Individual Mandate

• Individual required to purchase insurance starting 2014

• Financial penalty greater of $695 per person (up to $2085 per family) to 2.5% of household income

• Exceptions

– Financial hardship, religious objections, American Indians

– People who have been uninsured less than 3 months

– People for whom insurance costs exceed 8% income

– Those with incomes below tax filing threshold ($9,350 individual)

Health Benefit Exchanges

• Individuals (US citizens and legal immigrants) and small employers (up to 100 employees) can purchase insurance

• New marketplace will provide consumers with information to help them chose among plans

• Premium and cost-sharing subsidies available to make coverage more affordable (100-400% FPL)

• Two FEHBP based multi-state plans available

Changes to Private Insurance

• Cannot deny coverage or adjust premiums based on health status or gender

• Plans must provide comprehensive coverage that meets a standard minimum, caps annual out-of-pocket spending, does not impose cost-sharing for preventive services, does not impose lifetime limits on coverage

• Premiums allowed to vary based on age (by 3:1), geographic area, tobacco use (1.5:1), and number of family members

• Young adults allowed to remain on insurance until age 26

Employer Requirements

• No employer mandate

• Employers (50+) must pay fees if they do not offer coverage or if their employees receive a premium credit through the exchange

• Employs that offer coverage must auto enrollee employees unless they opt-out

Medicare and Health Reform

• Phases in coverage of Part D coverage gap, also known as the “doughnut hole”

• Improves coverage of prevention benefits

• Reduces Medicare Advantage payments and provides bonus payments to plans receiving high ratings for quality

• Establishes a new Independent Payment Advisory Board to recommend ways to reduce spending

Medicare Payment Reforms

• Provisions related to provider payment

– Increased payments to providers in underserved and rural areas

• Pilot programs to bundle payments for post-acute care, value-based purchasing for providers, establishment of accountable care organizations

• A new Center for Medicare and Medicaid Innovation will test payment and service delivery models aimed to improve quality and efficiency

Medicare Financing Reforms

• Modifies and expands the use of income-related premiums

– Freezes thresholds for Part B related premium at 2010 levels ($85,000 per individual / $170,000 per couple)

– Adds income related premium for Part D

• Increases the Medicare Hospital Insurance (Part A) payroll tax for high earners

– Increases 0.9% from 1.45% to 2.35% for high earners ($200,000 per individual / $250,000 per couple)

Medicaid and Health Reform

• Expands Medicaid to a national floor of 133% FPL

• Includes adults without children

• Income is modified AGI without asset or resource tests

• States receive full federal match for new eligibles

• Subsidies for individuals between 133% and 400% FPL through the State Health Exchanges

Medicaid and Health Reform

• Benchmark benefit package

• Increases Medicaid payment rates in FFS and managed care for primary care services provided by primary care doctors to 100% Medicare payment rates

• A new Center for Medicare and Medicaid Innovation will test payment and service delivery models aimed to improve quality and efficiency

• Funding for pilot programs for medical homes and accountable care organizations

Health Reform and Medicaid LTC

• Establishes the Community First Choice Option to allow states to provide community-based services and supports to individuals with incomes up to 150% FPL who require an institutional level of care

• A new Federal Coordinated Health Care Office will improve the integration of care for dual eligibles

Congressional Budget Office Estimates

• Increase coverage by 32 million

– 24 million in SHE

– 16 million Medicaid / CHIP

• Net cost of $938 billion from 2010 to 2019

• Financed through a combination of savings on Medicare and Medicaid and taxes and fees, includingan excise tax on high-cost insurance