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Medicare: The Essentials Juliette Cubanski, Ph.D. Principal Policy Analyst Kaiser Family Foundation for Alliance for Health Reform Washington, D.C. March.

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Presentation on theme: "Medicare: The Essentials Juliette Cubanski, Ph.D. Principal Policy Analyst Kaiser Family Foundation for Alliance for Health Reform Washington, D.C. March."— Presentation transcript:

1 Medicare: The Essentials Juliette Cubanski, Ph.D. Principal Policy Analyst Kaiser Family Foundation for Alliance for Health Reform Washington, D.C. March 16, 2009

2 Medicare Past and Present Enacted in 1965 to provide health and economic security to seniors age 65 and older Enacted in 1965 to provide health and economic security to seniors age 65 and older Expanded in 1972 to cover younger beneficiaries with permanent disabilities Expanded in 1972 to cover younger beneficiaries with permanent disabilities Now covers 45 million people, including about 7 million under- 65 disabled Now covers 45 million people, including about 7 million under- 65 disabled Covers individuals and spouses without regard to income or medical history Covers individuals and spouses without regard to income or medical history Benefits include hospital visits and physician services, and prescription drugs through private plans Benefits include hospital visits and physician services, and prescription drugs through private plans Private plans have been playing an increasingly larger role in the delivery of Medicare benefits Private plans have been playing an increasingly larger role in the delivery of Medicare benefits Exhibit 1

3 Percent of total Medicare population: NOTE: ADL is activity of daily living. SOURCE: Income data for 2007 from U.S. Census Bureau, Current Population Survey, 2008 Annual Social and Economic Supplement. All other data from Kaiser Family Foundation analysis of the Centers for Medicare & Medicaid Services Medicare Current Beneficiary Survey, Access to Care file, Income <200% FPL ($20,800 in 2008) Cognitive/Mental Impairment Long-term Care Facility Resident 3+ Chronic Conditions Under-65 Disabled Medicare covers a population with diverse needs and significant vulnerabilities Age ADL Limitations Exhibit 2

4 Medicare Part A – Hospital Insurance Program Medicare Part A – Hospital Insurance Program Inpatient hospital, skilled nursing facility, home health, and hospice care Inpatient hospital, skilled nursing facility, home health, and hospice care Cost-sharing requirements: Cost-sharing requirements: $1,068 deductible for hospital stays, plus daily copayments after 60 days $1,068 deductible for hospital stays, plus daily copayments after 60 days Daily copayments for skilled nursing facility stays Daily copayments for skilled nursing facility stays Entitlement to Part A after 10+ years of payroll taxes Entitlement to Part A after 10+ years of payroll taxes Medicare Part B – Supplementary Medical Insurance Medicare Part B – Supplementary Medical Insurance Physician visits, outpatient hospital, preventive services, home health Physician visits, outpatient hospital, preventive services, home health Cost-sharing requirements: Cost-sharing requirements: $96.40 monthly premium (income-related) $96.40 monthly premium (income-related) $135 deductible $135 deductible 20% coinsurance for physician visits, outpatient hospital services, and some preventive services 20% coinsurance for physician visits, outpatient hospital services, and some preventive services 50% coinsurance for mental health services (phasing down to 20% in 2014) 50% coinsurance for mental health services (phasing down to 20% in 2014) Enrollment in Part B is voluntary, with automatic enrollment at age 65 for Social Security recipients (but can opt out) Enrollment in Part B is voluntary, with automatic enrollment at age 65 for Social Security recipients (but can opt out) Exhibit 3 Benefits Covered by Original Fee-for-Service Medicare

5 An alternative to Original Medicare; beneficiaries can enroll in a private plan to receive all Medicare-covered benefits and (often) extra benefits An alternative to Original Medicare; beneficiaries can enroll in a private plan to receive all Medicare-covered benefits and (often) extra benefits Includes HMOs, PPOs, and private- fee-for-service (PFFS) plans Includes HMOs, PPOs, and private- fee-for-service (PFFS) plans The government pays private insurers a fixed amount per enrollee The government pays private insurers a fixed amount per enrollee Medicare pays private health plans on average 14 percent more than traditional Medicare costs Medicare pays private health plans on average 14 percent more than traditional Medicare costs Medicare Advantage enrollees: Medicare Advantage enrollees: generally pay the Part B premium generally pay the Part B premium sometimes pay a supplemental premium for additional benefits (e.g., vision, dental) sometimes pay a supplemental premium for additional benefits (e.g., vision, dental) typically receive drug coverage (Part D) typically receive drug coverage (Part D) Exhibit 4 Medicare Advantage (Part C) Medicare Advantage Enrollment (in millions) Nearly a quarter of all Medicare beneficiaries are enrolled in Medicare Advantage plans in 2009

6 Medicare Part D – Prescription Drug Benefit Part D is a voluntary benefit offered through private plans Part D is a voluntary benefit offered through private plans Stand-alone prescription drug plans to supplement Original Medicare Stand-alone prescription drug plans to supplement Original Medicare Medicare-Advantage prescription drug plans Medicare-Advantage prescription drug plans Beneficiaries in each state have a choice of at least 45 stand-alone drug plans and multiple Medicare Advantage drug plans Beneficiaries in each state have a choice of at least 45 stand-alone drug plans and multiple Medicare Advantage drug plans The government defined a standard benefit, but allows plans to vary benefit design, covered drugs, and cost sharing The government defined a standard benefit, but allows plans to vary benefit design, covered drugs, and cost sharing $30.36 average monthly premium (range $10.30-$136.80) $30.36 average monthly premium (range $10.30-$136.80) $295 deductible; 25% coinsurance; $3,454 coverage gap; catastrophic coverage $295 deductible; 25% coinsurance; $3,454 coverage gap; catastrophic coverage Additional subsidies for people with low incomes and modest assets Additional subsidies for people with low incomes and modest assets 9.6 million receiving low-income subsidies in 2009, while 2.6 million low-income beneficiaries are estimated to be eligible but not receiving extra subsidies 9.6 million receiving low-income subsidies in 2009, while 2.6 million low-income beneficiaries are estimated to be eligible but not receiving extra subsidies 90% of beneficiaries now have drug coverage, up from 66% in % of beneficiaries now have drug coverage, up from 66% in million out of 45.2 million beneficiaries are enrolled in a Part D plan (two-thirds in stand-alone drug plans) 26.7 million out of 45.2 million beneficiaries are enrolled in a Part D plan (two-thirds in stand-alone drug plans) 7.9 million with employer coverage and 6.2 million with other sources of coverage 7.9 million with employer coverage and 6.2 million with other sources of coverage 4.5 million (10%) lack drug coverage 4.5 million (10%) lack drug coverage Exhibit 5

7 Total Benefit Payments = $477 billion NOTE: Does not include administrative expenses such as spending to administer Part C and Part D. SOURCE: CBO Medicare Baseline, March Medicare Benefit Payments, by Type of Service, in 2009 Part A Part B Part A and B Part D 17% 4% 24% 5% 29% 11% 8% Exhibit 6

8 Medicares Funding Sources in FY2009 SOURCE: 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. PART A $244 Billion PART D $61 Billion PART B $202 Billion TOTAL $507 Billion Exhibit 7

9 Medicare offers important benefits, but there are gaps in coverage Medicare pays less than half (45%) of beneficiaries total health and long-term care spending Medicare pays less than half (45%) of beneficiaries total health and long-term care spending Medicare does not cover all medical benefits Medicare does not cover all medical benefits No coverage for hearing aids, eyeglasses, or dental care No coverage for hearing aids, eyeglasses, or dental care Generally does not pay for long-term care Generally does not pay for long-term care Medicare has high cost-sharing requirements Medicare has high cost-sharing requirements Monthly premiums for Part B, Part C, and Part D Monthly premiums for Part B, Part C, and Part D Deductibles for Part A, Part B, and Part D Deductibles for Part A, Part B, and Part D Part D coverage gap (doughnut hole) Part D coverage gap (doughnut hole) No limit on out-of-pocket spending for benefits No limit on out-of-pocket spending for benefits Median out-of-pocket spending as a share of income rose from 11.9% in 1997 to 16.1% in 2005 Median out-of-pocket spending as a share of income rose from 11.9% in 1997 to 16.1% in 2005 Exhibit 8

10 Most Medicare beneficiaries have supplemental coverage (as of 2006) Medicare Advantage Employer- sponsored Medicaid Medigap NONE Original Medicare only Other SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care file, Exhibit 9


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