Medicare and Medicaid Preview

1
Medicare and Medicaid Preview

• Lecture 2

2
The Nations Health Dollar 2002
Source CMS
3
Medicare (SS Title XVIII)

• 1965 Passage under LBJ
• 1966 19M initial enrollment elderly, blind,
  low income children w/o parental support, elderly
  with disabilities
• 1972 Medicare extended --
• under-65 with disabilities, End Stage Renal
  Disease (ESRD)
• provision for demonstration projects
• HMO payments authorized
• Supplemental Security Income (SSI)

4
Medicare evolves structurally

• 1983 Prospective payment system (PPS) based on
  diagnosis (DRGs) Greenspan Commission
• 1988 Medicare Catastrophic Coverage/
  prescription benefits (repealed 1989)
• 1992 Physician payments on fee schedule
• 1997 Clinton signs MedicareChoice (Part C)
• 2000 PPS for outpatient / home health
• 2003 Medicare Prescription Drug (Part D),
  including HSA and Competitively-bid drugs

5
Benefits also grow over time

• 1972 Some chiropractic, speech therapy, and
  physical therapy
• 1982 Hospice benefits -- temporary
• 1986 Hospice benefits -- permanent
• 1988 Routine mammography
• 1989 Pap smears
• Incremental with punctuated equilibrium?

6
Total Medicare Spending, 1996-2005( in
billions figures for 2003 and beyond are
projections)
Source CMS
7
Medicare Enrollment U.S. (M)Hospital Insurance
(HI)
2004 HI Aged 34.9M 2004 HI Disabled
6.4M Note 38.6M have both HI and SMI Source
CMS Data Compendium
8
Spending for common benefits Medicare vs. PHI
premiums (1993 2003)
Medicare PHI
Medicare PHI
1998 -0.3 4.4 1999 2.7 2.6 2000
4.0 6.7 2001 9.1 9.4 2002 5.9
9.5 2003 4.7 9.6

• 1993 4.7 7.3
• 1994 8.1 1.8
• 1995 7.2 3.0
• 1996 6.2 1.8
• 1997 4.5 3.8

Source CMS, http//www.cms.hhs.gov/statistics/nhe
/historical/t12.asp
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Medicare PHI1970 2003
9.0 10.11970 1993 10.7
12.01993 1997 6.5 2.61997 1999
1.2 3.51999 2003 5.9
8.8
Avg Annual Growth Rates by Period
Over long haul, rates tend to track closely.
10
Medicare Spending by Service Type (1993 vs. 2003)
()/ (-) as of Total
- Hosp. inpatient Other FFS Managed care
Home health
11
Taking a DipTotal of community hospitals/ beds

12
Medicare profit margins
Source Medicare Payment Advisory Commission
13
Factor Analysis Medicare Increase (1993 2003)

• Total s 148.3 280.9 89
• Per enrollee s 4167 7061 69
• Enrollees (HI) 35.6M 40.7M 14
• General inflation (CPI) factor 1.31
• Medical inflation factor 1.29
• These factors explain 102 of the growth.

14
How Medicare HI is funded

• Individuals and employers each pay 1.45 of
  payroll self-employed pay 2.9
• Other sources
• Transfers from railroad retirement
• Voluntary enrollee premiums (316/ mo 2003)
• General revenue for uninsured and military wage
  credit
• Interest on investments (Where are these?)
• Is there really a trust fund?

15
Source Tax Policy Center (Urban Inst/ Brookings)
80 of people pay more in social insurance tax
than in FIT.
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How Medicare was funded 2004

• HI SMI Total
• Total income 183.9 133.8 317.7
• Payroll taxes 156.7
  156.7
• Interest 15.0 1.5
  16.5
• Tax on benefits 8.6
  8.6
• Premiums 1.9 31.4
  33.4
• General revenue 0.6 100.4
  101.0
• Other 1.2 0.4
  1.6
• Note For comparison, OASDI contrib. 553B

Source Medicare Trustees Report 2005
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Medicare Part B (SMI) funding

• Enrollees may elect to participate basic
  monthly premium 58.70 in 2003.
• Payments may be made by state on behalf of
  qualifying persons dually eligible.
• Government puts in 178.70 (aged) or 223.30
  (disabled) per month.
• SMI trust fund (or not a trust fund)
• Premiums
• General revenue
• Interest on investments

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Medicaid (SS Title XIX)

• State-administered program for medical care for
  the poor each state establishes eligibility
  rules and benefits paid by general revenues.
• Eligibility is combination financial and
  categorical
• 5 Broad categories of eligibility
• Children
• Pregnant women
• Adults in families with dependent children
• Individuals with disabilities
• Individuals 65 or over

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Total Medicaid Spending (B) 1996-2005(includes
SCHIP expansion 2003 are projections)
Source CMS
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Medicaid Managed Care Enrollment

• YEAR MEDICAID MC
  Total (M) (M)
• 2004 44.4 26.9 60.7
• 2002 40.1 23.1 57.6
• 2000 33.7 18.8 55.8
• 1998 30.9 16.6 53.6
• 1996 33.2 13.3 40.1

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1997 SCHIP authorized thru 2007

• Capped grant feds match 65 85 of costs
• States may expand Medicaid, provide separate
  program, or both.
• Texcare has a separate program at 200 FPL also
  includes Childrens Medicaid.
• 2000 SCHIP policy allows waivers to cover parents
  and pregnant women.
• BBA allowed state allotments to run for three
  years after this unspent s redistributed.
• Through 2005 shortfalls have been prevented 2005
  fed s 5.0 5.5B (per CRS)

22
Who Pays for Nursing Home Care?
Source American Health Care Assoc. www.ahca.org
23
The Price of Nursing Home CareNatl avg annual
costs, private pay
Source MetLife Mature Market Survey of Nursing
Home and Home CareCosts.
24
CMS Expenditures then and nowAnnual B
1967
1968 2002 2003 CMS Pgm Outlays
5.1 8.4 505 551
Federal Outlays NA 6.7 396
431 Medicare 3.2
5.1 252 271 HI
2.5 3.7
144 154 SMI
0.7 1.4 108
118 Medicaid 1.9 3.3
248 273 Fed Share
NA 1.6 140
155 SCHIP NA NA
5 7 Fed Share
NA NA 4
5
Source CMS Data Compendium 11/03
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HC and GDP How much of GDP is right?