HCA 701: Paying for Health Care Private Insurance, Medicare, Medicaid & Managed Care

RESOURCES NEEDED TO MAINTAIN A HEALTH CARE DELIVERY SYSTEM Financing Healthcare Professionals Technology & Supplies Health Care Delivery System Facilities Source: Williams and Torrens, Introduction to Health Services, 2002

Payment sources and where the money goes Hospital care 33% Physician care 23% Nursing home care 9% Prescription drugs 9% Other spending 26%

Health Insurance vs. Other Insurance Other Insurance Loss is to be avoided Losses are intended to be independent events Loss should be something for which we can’t adequately budget Health Insurance Ill health can’t be avoided Many illnesses imply a great degree of dependency among the insured losses First dollar base / major medical health plans violate this tenet.

Taxonomies of Health Insurance Basic employee coverage The second taxonomy includes the type of insurance provided Commercial carriers Blue Cross/Blue Shield Self funded plans Cost shifting to private plans Cost shifting to uninsured Funding mechanism

Increases in Health Insurance Premiums compared to other Indicators

% of Firms Offering Health Benefits, by Firm Size

Health Maintenance Organizations Began in 1929 HMO Act of 1973 Growth has slowed somewhat due to more enrollment in PPOs Guarantee provision of specific services

Medicare Title XVIII of the Social Security Act, "Health Insurance for the Aged and Disabled" is commonly known as Medicare began in Elderly aged 65 and over Disabled individuals entitled to Social Security benefits End stage renal disease.

Medicare Part A Coverage (Hospital Insurance) 90 days of inpatient care in a benefit period No limit to number of benefit periods Use of “Medigap” (about 75% of beneficiaries) Lifetime reserve of 60 days of care once 90 days are exhausted 100 days of post-hospitalization in skilled nursing facility (or rehab) Home health agency benefits

Part B – Supplementary Medicare 95% beneficiaries enrolled in Part B Coverage optional Requires beneficiary to meet set deductibles (Medicaid programs pay premiums for qualified Medicaid enrollees who qualify for Medicare)

Medicare Provider Reimbursement Hospitals Physicians Beneficiaries can join Medicare HMOs Catalyst system for new prescription drug benefit of Medicare Private insurance participate in supplemental policies (most include managed care plans)

Medicare Regulatory Initiatives Tax Equity and Fiscal Responsibility Act (TEFRA) Prospective Payment System creates DRGs Resource based relative value scale (RBRVS)

Medicare Prospective Payment System Standardized payment amount DRG weights Outliers Quality Indicators Churning – multiple admissions for same patient with same diagnosis Skimming – taking more profitable less severely ill Reducing length of stay, procedures, etc which may affect morbidity and mortality. Financial performance

Medicare Prescription Drug, Improvement and Modernization Act of 2003 Allows elderly and disable beneficiaries to enroll in private plans that contract with Medicare for drug benefit. Two types of plans: Prescription Drug Plan (PDP) Medicare Advantage (MA) Plan is an enticement to get more enrollees in Medicare Managed Care Beneficiaries must pay monthly premium and deductible

Medicare Rx Drug Benefit HHS expects 29.3 million to enroll in Medicare drug plans 10.9 million beneficiaries will receive low-income subsidies 9.8 million will have drug benefits through their employers

Drug Benefit Cost Sharing Average monthly premium $32.20$48.49$64.26 Annual deductible$250$331$437 Coverage gap$2,8503,774$4,984

Medicare Rx Drug Benefit

Source: Managed Care. The Future of Medicaid. What Should Medicaid Look Like in 2010? August, 2004 U.S. Medicaid Enrollment (A Federal Perspective) The largest health insurance program in the United States. Provides coverage for more than 50 million poor and disabled Americans. Spending is in excess of $300 billion a year. Accounts for 20 percent of national health care spending. Without it, the ranks of America’s uninsured would swell to more than 90 million, 1 of every 3 citizens.

Medicaid Enacted with Medicare as Title 19 of the Social Security Act in 1965 Joint program financed between the Federal and State Governments through use of matching funds for: Categories of individuals that could be covered Categories of benefits that could be covered Today, 35 million people in low-income families, predominately children and pregnant women.

Medicaid Dual-Eligibles: Supplements Medicare providing prescription drugs and long-term care services for over 6 million low-income Medicare beneficiaries Guaranteed entitlement to states and to individuals. States entitled to Federal financing when they cover the populations eligible for coverage services they expend state dollars for on behalf of that population, Entitlement to individuals through automatic income eligibility No enrollment caps or limits on the coverage. Medicaid accounts for 43-44% of all Federal dollars that go to states in the form of grants and aid.

Differences in Eligibility by State Eligibility for services differ State by State in amount, duration, or scope of services State legislatures may change Medicaid eligibility, services, and/or reimbursement during the year. Medicaid consists of 56 distinct state- level programs with federal guidelines, but administered state agencies

Minimum Eligibility Requirements Must meet aid to Families with Dependent Children (AFDC) or--at State option--more liberal criteria. Children under age 6 whose family income is at or below 133 percent of the Federal poverty level (FPL). Pregnant women whose family income is below 133 percent of the FPL (services to these women are limited to those related to pregnancy, complications of pregnancy, delivery, and postpartum care). Supplemental Security Income (SSI) recipients in most States Recipients of adoption or foster care assistance under Title IV Special protected groups All children born after September 30, 1983 who are under age 19, in families with incomes at or below the FPL. Certain Medicare beneficiaries

Medicaid Funding Match Federal government matches state Medicaid spending for medical assistance state per capita income formula. Federal contribution ranged from 50 – 77 cents of every state dollar spent on medical assistance in fiscal year 2004, including: Medicaid administrative costs (50% federal match) Skilled professional medical personnel engaged in program integrity activities (as much as 75%)

Nevada Medicaid Enrollment (A State Perspective) Adults with children Children make up the largest portion of the population The elderly and disabled recipients Account for 75% of total expenditures. Biggest increase in expenditures, but smallest increase in enrollment

Nevada Medicaid Enrollment

Recent Federal Actions Federal GAO placed the Medicaid Program on the 2003 list of programs at high risk for fraud, waste, abuse and mismanagement. The GAO specifically recommended Congress curb state financing schemes, such as Intergovernmental Transfers (IGTs).

Medicaid & The Impact on Business There is a growing impact on the General Fund. The impact is significant because it means far fewer resources available for other state funded programs that are essential for commerce and economic growth. Medicaid siphons dollars from education and transportation Economic multiplier effect.

Medicaid’s Impact Health Insurance National trends propose eligibility limits and/or reducing providers rate of payment. Both approaches increase the amount of uncompensated care and costs are allocated to private health insurance premiums through cost shifting. The affordability of providing health care benefits to employees in the private sector creates a burden on business.

The Balanced Budget Act of 1997 Subtitle H – Medicaid The law contains a dramatic expansion in state authority with respect to the use of managed care. It enables states to require most Medicaid beneficiaries to enroll in managed care organizations (MCOs) without obtaining a waiver.

Waivers & Managed Care Growth Managed care programs seek to enhance access to quality care in a cost- effective manner. Waivers may provide the States with greater flexibility in the design and implementation of their Medicaid managed care programs. Waiver authority under sections 1915(b) and 1115 of the Social Security Act is an important part of the Medicaid program. Section 1915(b) waivers allow States to develop innovative health care delivery or reimbursement systems. Section 1115 waivers allow Statewide health care reform experimental demonstrations to cover uninsured populations and to test new delivery systems without increasing costs. Finally, the BBA provided States a new option to use managed care. The number of Medicaid beneficiaries enrolled in some form of managed care program is growing rapidly, from 14 percent of enrollees in 1993 to 58 percent in 2002.

Medicaid Managed Care Program Successes Managed care is the prevalent delivery system in Medicaid, with 59 percent of beneficiaries receiving some or all care through managed care instead of fee- for-service. Forty-eight states, the District of Columbia and Puerto Rico operate Medicaid managed care programs, with about 23.1 million beneficiaries enrolled in 2002, an increase of over two million since Enhancing access to providers and emphasizing preventive and routine care, health plans have successfully improved the quality of care received by enrollees in the Medicaid managed care program.