Financing Health Care for Older Adults: A Focus on Medicare

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Financing Health Care for Older Adults A Focus
on Medicare

• Dale K. Hursh, MD
• January 23, 2008

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Learning Objectives

• Appreciate how Medicare fits in the overall
  system of health care financing for older adults
• Learn how Medicare developed and changed over
  time
• Learn details of coverage and costs of Medicares
  different parts
• Understand how the federal government monitors
  and protects the Medicare Trust Fund

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National Health Expenditures 2006

• Total 2.1 trillion
• 7,026 per person
• 16 of nations GDP
• A 6.7 increase from 2005

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Health Care Spending 2006

• Hospital
• 7 growth in 2006 to 648.2 billion
• Deceleration in growth from 8.2 in 2002
• Physician Services
• 5.9 growth in 2006 to 447.6 billion
• Slowest rate of growth since 1999
• Home Health
• 9.9 growth in 2006 to 52.7 billion
• Deceleration in growth from 12.3 in 2005
• Fastest growing component of personal health care
  spending

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Health Care Spending 2006, contd

• Nursing Homes
• 3.5 growth in 2006 to 124.9 billion
• Deceleration in growth from 4.9 in 2005
• Slowest rate of growth since 1999
• Prescription Drugs
• 8.5 growth in 2006 to 216.7 billion
• Growth accelerated for first time in 6 years from
  low of 5.8 in 2005
• DME
• 2.3 growth in 2006 to 23.7 billion
• Growth accelerated in 2006

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2006 Health Spending by Major Sources of Funds

• Medicare
• 18.7 total spending growth to 401.3 billion
• Acceleration in growth from 9.3 in 2005
• Medicaid
• Spending fell by 0.9 to 308.6 billion
• First time total Medicaid spending declined since
  inception of the program

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2006 Health Spending by Major Sources of Funds,
contd

• Private Health Insurance
• 5.5 growth in private health insurance premiums
  in 2006 to 723.4 billion (slowest rate of growth
  since 1997)
• 6.0 growth in benefit payments in 2006 to 634.6
  billion (decline in growth from 2005)
• Out-of-Pocket
• 3.8 growth in spending to 256.5 billion
• Deceleration in growth from 2005
• Accounted for 12 of national health spending in
  2006

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Medicare in 2006

• 43.2 million people covered by Medicare
• 36.3 million aged 65 and older
• 7.0 million disabled
• Total benefits paid were 402 billion

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Major Sources of Health Care Funding for Elderly
in the U.S.

• Medicare (Federal Government)
• Medicaid (Federal and State Government)
• Other Federal Programs
• Veterans Health Administration
• Older Americans Act
• Title XX of the Social Security Act
• Military Retiree Benefits (TRICARE)
• PACE program
• Private Insurance
• Medigap (Medicare Supplement Insurance) Policies
• Long-Term Care Insurance
• Out-of-Pocket

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History of Social Security and the Origins of
Medicare

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Development of Social Security

• The foundation of economic security for much of
  human history was people living and working on
  farms in extended families
• Industrial Revolution brought change
• More people became wage-earners working for
  others
• Less reliance on family and farming
• Relocation from rural communities to cities

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Development of Social Security, contd

• The idea of having a program of economic security
  in a modern, industrialized world developed in
  Europe in late 19th century
• U.S. 1930s economic upheaval brought on by the
  Great Depression played a role in the development
  of the Social Security program in this country

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Social Security Act

• Signed into law by FDR on August 14, 1935
• Created a social insurance program designed to
  pay retired workers age 65 or older a continuing
  income after retirement
• Establishment of the Social Security Board

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Franklin D. Roosevelt

• We can never insure one-hundred percent of the
  population against one-hundred percent of the
  hazards and vicissitudes of life. But we have
  tried to frame a law which will give some measure
  of protection to the average citizen and to his
  family against the loss of a job and against
  poverty-ridden old age. This law, too, represents
  a cornerstone in a structure which is being
  built, but is by no means complete. It isa law
  that will take care of human needs and at the
  same time provide for the United States an
  economic structure of vastly greater soundness.
• August 14, 1935

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1939 Amendments

• Two new benefit categories added
• Dependents benefits (spouse and minor children of
  the worker)
• Survivors benefits (paid to family in event of
  premature death of worker)
• Transformed Social Security from a retirement
  program for individuals into a family-based
  economic security program

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Additions and Changes to the Social Security
Program

• 1950 Amendments
• Raised benefits
• Legislated Cost-of-Living Adjustments (COLAS)
• The Social Security Amendments of 1954
• Initiated a disability insurance program
• Amendments of 1961
• Age at which men first eligible for retirement
  benefits was lowered to 62
• Social Security Amendments of 1965
• Passage of Medicare and Medicaid

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Medicare Established

• This legislation provided for health coverage to
  be extended to Social Security beneficiaries aged
  65 or older (eventually extended to those
  receiving disability benefits as well)
• Signed into law on July 30, 1965 by LBJ
• Social Security maintained responsibility for
  Medicare until a 1977 reorganization created
  HCFA in 2001, HCFA renamed CMS

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Medicare Bill Signed 1965
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Medicare

• A health insurance program for
• People 65 years of age or older
• People under age 65 with certain disabilities
• People of all ages with ESRD

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The Parts of Medicare

• Part A is hospital insurance
• Part B is medical insurance
• Part C is Medicare Advantage (formerly Medicare
  Choice)
• Part D is the prescription drug plan

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Organizations That Impact Medicare

• Social Security Administration
• OIG
• Quality Improvement Organizations
• State Health Insurance Assistance Programs

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Recent Laws That Impact Medicare

• Medicare Prescription Drug, Improvement, and
  Modernization Act of 2003
• Health Insurance Portability and Accountability
  Act of 1996

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Medicare Part A Hospital Insurance

• Helps cover inpatient care
• Hospitals
• Semiprivate room, private room only if medically
  necessary, meals, general nursing, other hospital
  services and supplies
• Does not include private duty nursing or TV or
  phone in room
• Inpatient mental health care in a psychiatric
  hospital is limited to 190 days in a lifetime

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Medicare Part A, contd

• SNF (not custodial or LTC)
• After a qualifying three-day hospital stay must
  enter SNF within 30 days of leaving hospital
• Coverage up to 100 days in a benefit period
• Benefit period ends with occurrence of break of
  at least 60 consecutive days since inpatient
  hospital or SNF care was provided
• No limit to number of benefit periods
• Semiprivate room, meals, skilled nursing and
  rehab services, medications, and other supplies

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Medicare Part A, contd

• Hospice care
• People with terminal illness with 6 months or
  less life expectancy if the disease runs its
  normal course
• Coverage includes drugs, medical and support
  services, grief counseling
• Coverage of some short-term inpatient stays (pain
  and symptom management) and for respite care

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Medicare Part A, contd

• Some home health care
• Limited to part-time, medically necessary skilled
  care (nursing, physical therapy, occupational
  therapy, and speech-language therapy) ordered by
  a physician
• May also include medical social services, home
  health aide, DME
• Patients are required to be "homebound" as a
  condition of eligibility for these services.

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Medicare Part A Costs to Patients in Original
Medicare Plan2008

• Monthly premium is not paid for those (or their
  spouse) who paid Medicare taxes while working
• For those not eligible for premium-free Part A,
  cost of monthly premium is up to 423

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Medicare Part A Costs to Patients in Original
Medicare Plan2008

• Hospital
• 1,024 deductible and no coinsurance for days of
  160 each benefit period
• 256 per day for days 61 90 each benefit period
• 512 per lifetime reserve day after day 90 each
  benefit period (up to 60 days over lifetime)
• Most individuals do not pay a monthly premium for
  part A because they or a spouse paid Medicare
  taxes while working
• Blood
• Patient pays for the first three pints of blood,
  then 20 of Medicare-approved amount for
  additional pints used (unless the patient or
  someone else donates blood to replace what is
  used)

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Medicare Part A Costs to Patients in Original
Medicare Plan2008

• SNF Care
• Patient pays 0 for first 20 days each benefit
  period
• For days 21 100, patient pays 128 per day
• Patient pays all costs beyond the 100th day in
  the benefit period
• Home Health Care
• Costs patient 0 for Medicare-approved services
• Patient pays 20 of Medicare-approved amount for
  DME

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Medicare Part A Costs to Patients in Original
Medicare Plan2008

• Hospice Care
• Co-payment of up to 5.00 per Rx for outpatient
  prescription drugs
• 5 of Medicare-approved amount for inpatient
  respite care
• Generally, room and board not covered (e.g., not
  covered in nursing facility)

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Medicare Part B Medical Insurance

• Helps to cover
• Medically necessary doctors services, outpatient
  care, and other medical services not covered by
  Part A
• Some preventive services

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Medicare Part B Covered Services(not
all-inclusive list)

• Ambulance services
• Ambulatory surgery center fees
• Blood (outpatient)
• Chiropractor services (limited)
• Diabetes supplies
• Diagnostic tests
• DME
• Doctor services
• ER services
• Eye exams (limited)

• Hearing and balance exams
• Home health services
• Kidney dialysis services and supplies
• Outpatient mental health care
• Outpatient PT, OT, ST
• Medically necessary clinical lab services
• Outpatient hospital services
• Prosthetic/orthotic items

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Medicare Preventive ServicesPart B(not
all-inclusive list)

• AAA screening
• One-time Welcome to Medicare physical exam
• Cardiovascular screening
• Breast cancer screening
• Cardiovascular screenings
• Cervical and vaginal cancer screening
• Colorectal cancer screenings
• Diabetes screenings
• Diabetes self-management training

• Prostate cancer screening
• Immunizations (flu vaccine, pneumonia vaccine,
  hepatitis B)
• Bone mass measurements
• Diabetes screening, supplies, and self-management
  training
• Glaucoma tests
• Medical nutrition therapy services
• Smoking cessation

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Medicare Part B Costs to Patients in Original
Medicare Plan2008

• Annual deductible of 135
• Monthly premium of 96.40
• Premium may be higher depending on income and
  whether or not individual signed up for Part B
  when first eligible
• Pay coinsurance (generally 20 of the
  Medicare-approved amount) when required

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Medicare Part B Services Requiring 20
Coinsurance (not all-inclusive list)

• Ambulance services
• Ambulatory surgery center fees
• Blood (starting with 4th unit1st 3 patient pays)
• Chiropractor services
• Diabetes supplies
• Doctor services
• DME
• ER services

• Eye exams
• Hearing and balance exams
• Kidney dialysis services and supplies
• OT, PT, ST
• Outpatient hospital services
• Prosthetic/orthotic devices

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Medicare and Assignment

• Agreement between Medicare beneficiaries, their
  doctors and suppliers, and Medicare
• Individual with Medicare agrees to allow the
  doctor to request direct payment from Medicare
  for covered Part B services
• Doctors agreeing to accept assignment from
  Medicare cannot try to collect more than the
  proper Medicare deductibles and co-insurance
  amounts from the person with Medicare, or their
  other insurance

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Medicare Part B Costs to Patients in Original
Medicare Plan2008

• 50 of most outpatient mental health services
• Patient pays 0 for Medicare-approved clinical
  lab services
• Patient pays 0 for Medicare-approved home health
  services
• 20 of Medicare-approved amount for DME
• Blood
• Patient pays for first three pints, then 20 of
  the Medicare-approved amount for additional pints
  unless someone else donates to replace

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What Is Not Paid For by Medicare Part A or Part B
in the Original Medicare Plan

• Acupuncture
• Deductibles, coinsurance, co-payments
• Dental care and dentures
• Cosmetic surgery
• Health care when traveling out of the U.S.
• Hearing exams unless ordered by physician
• Hearing aids and hearing exams for the purpose of
  fitting a hearing aid
• Custodial care, long-term care in nursing home
• Orthopedic shoes (with only a few exceptions)
• Routine foot care (with only a few exceptions)
• Routine eye care and most eyeglasses
• Routine or yearly physical exams

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Medicare Part C

• Medicare Advantage plans
• Health plan options approved by Medicare and run
  by private companies
• Available in most areas of U.S.
• Must be eligible for Medicare A and B to join
• Plans include
• PPO plans
• HMO plans
• PFFS plans
• Medical Savings Account (MSA) plans
• Special Needs Plans (SNP)

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Medicare Advantage Plans

• Provide all of a patients Part A and Part B
  benefits
• Must cover at least all of the medically-necessary
  services that the Original Medicare Plan
  provides
• May offer extra benefits such as vision, hearing,
  dental, and health and wellness programs
• Most offer prescription drug coverage

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Medicare Advantage Plans Costs to Patients in
2008

• Depends on the type of plan and the specific
  company
• Monthly part B premium monthly premium charged
  by company for the plan (which generally
  includes Part A and Part B benefits, Medicare
  prescription drug coverage if offered and extra
  benefits if offered)

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Medicare Part D

• Prescription drug benefit plans
• Medicare contracts with private companies to
  offer coverage
• Anyone with Medicare Part A and/or B can join

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Medicare D Costs to Patients2008

• Exact costs differ among plans, but include
  monthly premium, yearly deductible, co-payments
  and coinsurance, coverage gap
• CMS estimate of average monthly premium for
  standard Part D coverage is 25

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Medicare D Costs to Patients2008, contd

• Base premium of 27.93
• Initial deductible of 275
• Coinsurance of 25 of remaining costs, up to an
  initial coverage limit of 2,510
• Beneficiary then pays for all costs until an
  out-of-pocket threshold of 4,050 is reached

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2,510
4,050
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Medicare Part D Coverage Gap

• Patients continue to pay monthly premiums while
  in the coverage gap
• Each state offers at least one plan with gap
  coverage, but these plans generally charge a
  higher monthly premium
• Once patient reaches limit of coverage gap set by
  plan, they receive catastrophic coverage

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Medicare D Catastrophic Coverage

• Provides for special prescription drug coverage
  once patient spends 4,050 in 2008
• Limit may vary depending on the plan
• After reaching limit, patient pays the greater of
  5 coinsurance or a small defined co-payment
  amount per prescription

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Medigap Policies (Medicare Supplement Insurance)

• Health insurance policies sold by private
  insurance companies to fill gaps in Original
  Medicare Plan coverage
• Must follow federal and state laws
• Not needed and cannot be used if patient is in a
  Medicare Advantage Plan
• Generally must have Medicare Part A and Part B
• Medigap insurance premium paid in addition to
  monthly Part B premium

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Payment of Bills in The Original Medicare Plan

• Part A services (and some Part B services)
• Provider of service such as a hospital or home
  health agency must send a claim to the fiscal
  intermediary, a private company that contracts
  with Medicare to pay the bills (in PA, Highmark
  Medicare Services)
• Part B services and supplies
• Provider of covered service or supply must send a
  claim to the Medicare carrier, a private company
  that contracts with Medicare to pay Part B claims
  (in PA, Highmark Medicare Services)
• DME MAC in Pennsylvania is National Heritage
  Insurance

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Protecting the Medicare Trust Fund

• Medicare Integrity Program (MIP)
• Medical Review process
• Review claims
• Target problem areas
• Validate claim errors
• Classify severity of problems, collect
  overpayments, develop corrective action plan

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Medicare Coverage Determinations

• Two types of coverage determinations assist
  providers and suppliers in correctly coding and
  billing Medicare only for covered items and
  services
• National Coverage Determinations (NCDs)
• Local Coverage Determinations (LCDs)

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Medicare Coverage Determinations, contd

• National Coverage Determinations (NCDs)
• Specify the extent to which Medicare will cover
  specific services, procedures, or technologies on
  a national basis
• Medicare contractors are required to follow NCDs
• http//www.cms.hhs.gov/coverage/
• Local Coverage Determinations (LCD)
• Made in the absence of a specific NCD by local
  Medicare Contractors
• Outline coverage criteria, define medical
  necessity, provide codes that describe what is
  and is not covered

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Protecting the Medicare Trust Fund

• Fraud and Abuse
• Potential legal actions
• Investigations, civil monetary penalties, suspend
  payment, exclude from participation
• OIG

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References

• National Health Expenditure Accounts 2006
  Highlights. CMS Website. Available at
  http//www.cms.hhs.gov/NationalHealthExpendData/02
  _NationalHealthAccountsHistorical.asp. Accessed
  January 18, 2008
• The Nations Health Dollar, Calendar Year 2006.
  CMS Website. Available at http//www.cms.hhs.gov/
  NationalHealthExpendData/downloads/PieChartSources
  Expenditures2006.pdf. Accessed January 18, 2008.
• Pompei P, Murphy JB, eds. Geriatrics Review
  Syllabus A Core Curriculum in Geriatric
  Medicine. 6th ed. New York American Geriatrics
  Society 2006.
• Social Security A Brief History. Social Security
  Website. Available at http//www.socialsecurity.g
  ov/history. Accessed January 18,2008.
• Medicare Physician Guide A Resource for
  Residents, Practicing Physicians, and Other
  Health Care Professionals. CMS 2006.

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References, contd

• Brief Summaries of Medicare and Medicaid. CMS
  Website. Available at http//www.cms.hhs.gov/Medi
  careProgramRatesStats/downloads/MedicareMedicaidSu
  mmaries2007.pdf. Accessed January 18, 2008.
• Medicare You 2008. CMS Website. Available at
  http//www.medicare.gov/Publications/Pubs/pdf/1005
  0.pdf. Accessed January 3, 2008.