Medicare, Medicaid, and CHIP December 5, 2017

Entitlement programs The largest social safety net programs (Medicare, Medicaid, and Social Security) are entitlement programs, government programs providing benefits to all persons qualified to receive them under law.

Entitlement Growth What demographic factors are primarily responsible for the growth in entitlement spending? The baby-boomers have begun retiring and people are living longer.

Medicare Medicare is a federal health insurance program for people 65 and older, people with end-stage kidney disease or ALS (Lou Gehrig’s Disease), and younger people on SSDI. In 2017, 51 million older Americans and 8 million disabled people participated in the Medicare program at a cost of $597 billion, including premiums and deductibles paid by program participants, and general revenue expenditures.

Medicare Part A Part A of Medicare is compulsory hospitalization insurance that covers the cost of inpatient care after beneficiaries pay a deductible. It is financed from premiums deducted from the Social Security checks of retirees and by a 2.9 percent payroll tax.

Medicare Part B Medicare Part B is a voluntary medical insurance plan that covers certain physician fees and non-hospital services after beneficiaries pay a deductible. It is funded by premiums deducted from the Social Security checks of retired persons who choose to participate. In 2016, the premium was $121.80 a month for most recipients. Medicare recipients earning more than $85,000 in adjusted annual income had to pay a surcharge.

Medicare Part D Medicare Part D is a prescription drug benefit offered and managed by private insurers under contract with the government. Medicare recipients who choose to participate pay a monthly premium, which averaged under $50 in 2016, along with various deductibles and co-pays.

Medicare Cost Drivers Aging of the baby boomers Inflation in the healthcare industry Addition of prescription drug benefit to the program

Medicaid

Medicaid A federal health insurance program for low-income persons, people with disabilities, and elderly people who are impoverished.

Medicaid Overview In 2016, Medicaid served 73 million clients at a combined federal and state cost of $509 billion.

Undocumented persons are not eligible. Medicaid Coverage Medicaid beneficiaries include low‐income individuals of all ages, including newborns, children and parents, pregnant women, individuals with diverse physical, developmental, and intellectual disabilities and mental illnesses, and poor elderly and disabled Medicare beneficiaries, including many with long‐term care needs. Undocumented persons are not eligible.

Means-Testing Medicaid is a means-tested program, which is a government program that provides benefits to recipients based on their financial need. Does Warren Buffett qualify for Medicare? How about Medicaid? Yes for Medicare. No for Medicaid.

Scope of Medicaid Medicaid covers. . . Healthcare for one in three children Two thirds of nursing home care

Rising costs Medicaid costs are rising for the same reasons Medicare costs are increasing: Inflation in the healthcare industry, Aging of the baby-boom generation The federal government and states split Medicaid costs. In Texas, the breakdown is 60-40 with the federal government picking up the larger share.

Children’s Health Insurance Program (CHIP)

CHIP The Children’s Health Insurance Program (CHIP) is a federal program designed to provide health insurance to children from low-income families whose parents are not poor enough to qualify for Medicaid.

Coverage Medicaid and CHIP provide health coverage for children so that they can get routine check-ups, immunizations and dental care to keep them healthy. They can also get doctor visits, prescription medications and hospital care when they’re sick.

Federal Matching Funds The federal government provides 72 percent of the cost of CHIP, matching state funds nearly three for one.

What You Have Learned What are the Medicare, Medicaid, and CHIP programs? Are they entitlements? Means-tested? Who benefits from the programs? How does each of the programs work? What financial challenges do the programs face?