HCA 701: Paying for Health
Care
Private Insurance, Medicare,
Medicaid & Managed Care
RESOURCES NEEDED TO MAINTAIN A
HEALTH CARE DELIVERY SYSTEM
Financing
Healthcare
Professionals
Health Care
Delivery
System
Facilities
Technology &
Supplies
Source: Williams and Torrens,
Introduction to Health Services, 2002
Payment sources and where the
money goes


Medicaid
16%
Medicare
18%
Other Govt.
Pgms. 12%

Private
Insur. 33%
Out-ofPocket
21%


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
Health Maintenance Organizations
Americans enrolled in HMOs
in millions

Began in 1929
 HMO Act of 1973
 Growth has slowed
somewhat due to
more enrollment in
PPOs
 Guarantee provision
of specific services
100
50
0
1970
1995
2000
Medicare

Title XVIII of the Social Security Act,
"Health Insurance for the Aged and
Disabled" is commonly known as
Medicare began in 1966.
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
Source: Kaiser Family Foundation, 2005
2006
2010
2014
Average monthly
premium
$32.20
$48.49
$64.26
Annual deductible
$250
$331
$437
Coverage gap
$2,850
3,774
$4,984
Medicare Rx Drug Benefit
120
100
80
60
Cost in billions
40
Source: Kaiser Family
Foundation, 2005
20
0
2006
2008
2010
2012
2014
U.S. Medicaid Enrollment
(A Federal Perspective)



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
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.
Source: Managed Care. The Future of
Medicaid. What Should Medicaid Look
Like in 2010? August, 2004
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.


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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 statelevel programs with federal guidelines,
but administered state agencies

Minimum Eligibility Requirements






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
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

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Managed care programs seek to enhance access to quality care in a costeffective 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 feefor-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 2001.
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.