Social Insurance
Medicaid and Medicare
Introduction
• No longer will older Americans be denied the
healing miracle of modern medicine. No longer
will illness crush and destroy the savings that
they have so carefully put away over a lifetime
so that they might enjoy dignity in their later
years. No longer will young families see their
own incomes, and their own hopes, eaten away
simply because they are carrying out their deep
moral obligations to their parents, and to their
uncles, and their aunts. ~President Lyndon
Johnson
Medicaid
• Social Insurance for the poor
Other Social Insurance Programs
• State Children’s Health Insurance
Program (SCHIP)
• Veterans Administration
Crowding Out
• When private insurance take up falls after
introduction of increases in public benefits.
• Concerns over public option.
HHS Estimates of Low-Income Subsidy Eligibility and
Participation Under the Medicare Drug Benefit, 2008
Eligible but not
receiving subsidy
2.6 million
21%
Eligible but estimated
to have other drug
coverage
.5 million 4%
Applied for and receiving
subsidy
Future anticipated
facilitated enrollment
<0.1 million (0.5%)
6.2 million
49%
1.5 million
12%
Full dual
eligibles
automatically
receiving
subsidy
1.7 million
13%
MSP and SSI recipients
automatically receiving subsidy
Total Eligible for Low-Income Subsidies = 12.5 million
NOTES: MSP is Medicare Savings Program; SSI is Supplemental Security Income.
SOURCE: Kaiser Family Foundation, based on HHS data, January 31, 2008 ( Data as of January 2008).
Medicaid Today
Health Insurance
Coverage
Assistance to
Medicare Beneficiaries
Long-Term Care
Assistance
29 million children & 15
million adults in low-income
families; 14 million elderly
and persons with disabilities
7.5 million aged and disabled
— 19% of Medicare
beneficiaries
1 million nursing home
residents; 41% of long-term
care services
MEDICAID
Support for Health Care
System and Safety-net
State Capacity for Health
Coverage
16% of national spending on health
services and supplies
43% of federal funds to states
Source: Kaiser Commission on Medicaid and the Uninsured, 2008
Medicaid’s Role for Selected Populations
Percent with Medicaid Coverage:
40%
Poor
Near Poor
23%
Families
All Children
27%
51%
Low-Income Children
Low-Income Adults
20%
41%
Births (Pregnant Women)
Aged & Disabled
Medicare Beneficiaries
19%
People with Severe Disabilities
20%
People Living with HIV/AIDS
Nursing Home Residents
44%
65%
Note: “Poor” is defined as living below the federal poverty level, which was $17,600 for a family of 3 in 2008.
SOURCE: Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, and Urban Institute
estimates; Birth data: NGA, MCH Update.
Medicaid Enrollees and Expenditures
by Enrollment Group, 2005
Elderly
10%
Disabled
14%
Adults
26%
Elderly
28%
Disabled
42%
Children
50%
Adults 12%
Children 18%
Enrollees
Expenditures on
benefits
Total = 59 million
Total = $275 billion
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban
Institute estimates based on 2005 MSIS data.
Medicaid Payments Per Enrollee
by Acute and Long-Term Care, 2005
$13,524
$11,839
LongTerm Care
Acute
Care
$1,617
Children
$2,102
Adults
Disabled
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban
Institute estimates based on 2005 MSIS data.
Elderly
Medicaid Enrollment Growth
Average Annual Growth Rates, 2000-2006
Aged/Disabled
Families
11.4%
5.7%
3.3%
2.6% 2.9%
3.2%
2.0%
-0.4%
2000-2002
2002-2004
2004-2005
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates
based on KCMU Medicaid enrollment data collected by Health Management Associates from 44
states inflated proportionally to national totals, 2007.
2005-2006
Overall Average Annual Total Medicaid
Spending Growth, 2000-2006
11.9%
7.2%
6.5%
4.0%
-0.2%
Annual Spending
at End of Period
(billions)
‘00-’02
‘02-’04
‘04-’05
‘05-’06
Adjusted
‘05-’06
$257.3
$295.9
$315.0
$314.5
$310.8
NOTE: Adjusted expenditures exclude all prescription drug spending for dual eligibles to remove
the effect of their transition to Medicare Part D in 2006.
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute, 2007; estimates
based on data from HCFA Financial Management Reports, 2006 (HCFA-64/CMS-64).
Medicaid and SCHIP Enrollment of Children,
1998-2005
Medicaid
Millions of Children
20.9
20.7
.7
1998
2.0
1999
21.8
3.4
2000
23.4
4.6
2001
SCHIP
25.5
5.4
2002
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute
analysis of HCFA-2082, MSIS, and SEDS data, 2007.
27.3
6.0
2003
27.8
6.1
2004
28.3
6.1
2005
Income and Health Status of Medicaid and the
Low-Income Privately Insured, 2002
Percent of Enrolled Adults:
Medicaid
100%
Low-Income and
Privately Insured
75%
61%
50%
25%
49%
48%
27%
15%
16%
0%
Poor
Health
Conditions that
limit work
Fair or Poor Health
SOURCE: Coughlin et. al, “Assessing Access to Care Under Medicaid: Evidence for the National and Thirteen
States,” Health Affairs 24(4):1073-1083. Based on a 2002 NSAF analysis for Kaiser Commission on Medicaid
and the Uninsured.
Concentration of Health Spending in the
Medicaid Population, 2001
<$25,000
in Costs
96%
>$25,000 in Costs
• Children (.2%)
• Adults (.1%)
• Disabled (1.6%)
• Elderly (1.8%)
<$25,000
in Costs
52%
>$25,000
in Costs
Children 3%
Adults 1%
Disabled 25%
Elderly 20%
Enrollees
Total = 46.9
million
Expenditures
Total = $180.0
billion
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute estimates based on MSIS 2001 data.
Medicaid Expenditures by Service, 2006
DSH Payments
Inpatient
5.6%
Home Health and
14.1%
Personal Care
14.8%
Physician/ Lab/ X-ray
3.8%
Mental Health
Long-Term
Care
35.8%
1.0%
ICF/MR
4.3%
Outpatient/Clini
c
6.8%
Drugs
5.5%
Nursing
Facilities
15.7%
Payments to Medicare
3.3%
Other Acute
6.9%
Payments to MCOs
18.0%
Total = $304.0 billion
NOTE: Total may not add to 100% due to rounding. Excludes administrative
spending, adjustments and payments to the territories.
SOURCE: Urban Institute estimates based on data from CMS (Form 64), prepared for
the Kaiser Commission on Medicaid and the Uninsured.
Acute
Care
58.5%
Medicaid in the Health System, 2006
Medicaid as a share of national
health care spending:
16%
Total Health
Services and
Supplies
Total
National
Spending
(billions)
$2,106
17%
43%
13%
9%
Hospital
Care
Professional
Services
Nursing
Home Care
Prescription
Drugs
$648
$660
$125
$217
NOTE: Does not include spending on SCHIP
SOURCE: Kaiser Commission on Medicaid and the Uninsured, based on A Catlin et al, “National Health Spending in
2006: A Year of Change for Prescription Drugs,” Health Affairs 27(1)14-29, January/February 2008. Based on National
Health Care Expenditure Data, CMS, Office of the Actuary.
Medicaid Financing of Safety-Net Providers
Public Hospital Net Revenues
by Payer, 2004
Self Pay
7%
Self Pay/
Other
7%
Medicare
20%
Commerica
l
24%
Health Center Revenues
by Payer, 2006
Medicaid
35%
Other
9%
Private
7%
Medicaid
37%
Medicare
6%
State/Local
Subsidies
14%
Total = $29 billion
Federal
Grants
22%
State/Local
13%
Total = $8.1 billion
SOURCE: Kaiser Commission on Medicaid and the Uninsured, based on America’s Public Hospitals
and Health Systems, 2004, National Association of Public Hospitals and Health Systems, October
2006. KCMU Analysis of 2006 UDS Data from HRSA.
National Spending on Nursing Home and
Home Health Care, 2006
Nursing Home Care
Home Health Care
Other
Private
Insurance 6%
7%
Private
Insurance
11%
Medicaid
43%
Other*
6%
Medicaid
34%
Out-ofPocket
11%
Out-ofPocket
26%
Medicare
17%
Total = $124.9 billion
Medicare
38%
Total = $52.7 billion
Note: Medicaid percentage includes spending through SCHIP. Other includes private and public funds
SOURCE: Kaiser Commission on Medicaid and the Uninsured, based on Health Affairs January/February
2008, CMS, National Health Accounts.
Growth in Medicaid Long-Term Care
Expenditures, 1990-2006
In Billions:
$92
$75
$54
32%
$100
37%
13%
87%
1990
41%
30%
Home and
Community-Based
Institutional Care
20%
$32
$109
70%
68%
63%
2000
2002
2004
59%
80%
1995
2006
Note: Home and community-based care includes home health, personal care services
and home and community-based service waivers.
SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute
analysis of HCFA/CMS-64 data.
Impact of Unemployment Growth on Medicaid
and SCHIP and the Number Uninsured
$3.4
$1.4 State
1.0
1%
1.1
=
Increase in National
Unemployment Rate
&
$2.0 Federal
Increase in Increase in
Medicaid and Uninsured
SCHIP
(million)
Enrollment
(million)
Increase in
Medicaid and
SCHIP Spending
(billion)
Source: Stan Dorn, Bowen Garrett, John Holahan, and Aimee Williams, Medicaid, SCHIP and Economic Downturn: Policy
Challenges and Policy Responses, prepared for the Kaiser Commission on Medicaid and the Uninsured, April 2008
State Authorized Children’s Eligibility for
Medicaid/SCHIP by Income, January 2008
WA
MT
MN
SD
ID
CA
AZ
CO
PA
ILIL
KS
MO
OK
NM
MI
IA
NE
AK
OH
IN
WV
NC
TN
RI
MD
DC
SC
AR
AL
CT
NJ
DE
VA
KY
MS
TX
MA
NY
WI
WY
UT
ME
ND
OR
NV
NH
VT
GA
LA
FL
HI
< 200% FPL (6 states)
200-250% FPL (22 states)
Effective >250% FPL (23 states)
*The Federal Poverty Line (FPL) for a family of three in 2007 is $17,170 per year.
**Effective eligibility higher than 250% FPL accounts for earnings disregards.
***IL uses state funds to cover children above 200% FPL.
SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for the Kaiser
Commission on Medicaid and the Uninsured., 2008.
Authorized Medicaid Eligibility for Working
Parents by Income, January 2008
WA
MT
MN
SD
ID
CA
AZ
CO
MO
OK
AK
OH
IN
VA
NC
TN
MD
DC
SC
AR
AL
RI
DE
WV
KY
MS
TX
CT
NJ
PA
ILIL
KS
NM
MI
IA
NE
MA
NY
WI
WY
UT
ME
ND
OR
NV
NH
VT
GA
LA
FL
HI
US Median Eligibility = 63%
FPL
< 50% FPL (12 states)
50% - 99% FPL (21 states)
100% or higher FPL (18 states including DC)
NOTE: The Federal Poverty Line (FPL) for a family of three in 2008 is $17,600 per year. AR, IN, & UT operate
waivers allowing higher-income parents to enroll, but the coverage has higher cost-sharing and reduced benefits.
SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for the Kaiser
Commission on Medicaid and the Uninsured, 2008.
Nearly Two-Thirds of States Expanded
Access to Medicaid and SCHIP,
July 06 – January 08
Number of States With…
32
26
11
7
Total
Eligibility
Increases
Enrollment
Procedure
Simplifications
SOURCE: Based on a national survey conducted by the Center on Budget and Policy
Priorities for the Kaiser Commission on Medicaid and the Uninsured, 2008.
Reduced
Children's
Premiums
Community Hospital Payment-to-Cost
Ratios, by Source of Revenue, 1980-2006
140%
130%
120%
110%
100%
90%
Private Payers
Medicare
80%
Medicaid
70%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Note: Payment-to-cost ratios show the degree to which payments from each payer cover the costs of treating its patients. They cannot be
used to compare payment levels across payers, however, because the service mix and intensity vary. Data are for community hospitals.
Medicaid includes Medicaid Disproportionate Share payments.
Source: American Hospital Association and Avalere Health, Avalere Health analysis of 2006 American Hospital Association Annual Survey
data, for community hospitals, Trendwatch Chartbook 2008, Trends Affecting Hospitals and Health Systems , April 2008, Table 4.4, p. A-35,
at http://www.aha.org/aha/trendwatch/chartbook/2008/08appendix4.pdf.
Medicaid Managed Care and Traditional
Enrollment, 1990-2004
Enrollment (in millions)
50
45
40
35
30
25
25.3
28.3
20
15
23.0
25.6
30.9
27.3
33.4
28.6
33.6
25.8
33.4
23.6
10
5
0
2.3
2.7
3.6
4.8
1990
1991
1992
1993
7.8
9.8
1994
1995
33.2
19.9
32.1
16.7
30.9
14.3
31.9
14.2
33.7
14.9
36.6
15.8
13.3
15.3
16.6
17.8
18.8
20.8
1996
1997
1998
1999
2000
2001
40.1
17.0
42.7
17.5
44.4
17.4
23.1
25.3
26.9
2002
2003
2004
Number Enrolled in Traditional Medicaid Programs
Number Enrolled in Medicaid Managed Care
Note: Numbers may not produce totals because of rounding. These figures represent point-in-time enrollment as of June 30 of each reporting
year. Total Medicaid enrollment for 1996-2004 was collected by states at the same time the managed care enrollment numbers were collected,
instead of using the CMS 2082 Medicaid data reporting system as in previous years. The unduplicated managed care enrollment data include
enrollees receiving comprehensive benefits and limited benefits. This table also provides unduplicated national figures for the Total Medicaid
population and Other population. The statistics also include individuals enrolled in State health care reform programs that expand eligibility
beyond traditional Medicaid eligibility standards.
Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace, 2002, May 2002, Exhibit 2.8, p.23, at
http://www.kff.org/insurance/3161-index.cfm, using and updated with data from the Centers for Medicare and Medicaid Services, at
http://new.cms.hhs.gov/MedicaidDataSourcesGenInfo/04_MdManCrEnrllRep.asp.
Enrollment in Medicare Managed Care and
Traditional Medicare, 1990-2005
Enrollment (in millions)
45
40
35
34.3
34.9 35.6
37.6
36.3 37.0
38.1 38.5 38.9
39.2 39.7 40.1
40.5 41.2
41.9
42.5
30
25
20
33.0
33.5
34.0
34.5
34.7
34.5
34.0
1.6
1.8
2.3
3.1
4.1
33.3
32.8
32.9
33.4
34.6
35.6
36.6
37.2
37.3
5.2
6.1
6.3
6.3
5.5
4.9
4.6
4.7
5.2
15
10
5
0
1.3
1.4
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Note: Total Medicare enrollment includes beneficiaries with HI and/or
SMI coverage. Medicare managed care enrollment is enrollment in
what Medicare calls CCPs (Coordinated Care Plans), which include
health maintenance organizations (HMOs), provider-sponsored
organizations (PSOs), and preferred provider organizations (PPOs).
Number Enrolled in Traditional Medicare Program
Number Enrolled in Medicare Managed Care
Source: Kaiser Family Foundation calculations using CCP enrollment data from the Centers for Medicare and Medicaid Services' monthly Medicare Managed Care
Contract Reports for December 1 of each year, at http://www.cms.hhs.gov/HealthPlanRepFileData/04_Monthly.asp#TopOfPage (Zipped Monthly Summary
(MMCC) Text Report, CCP plans), and total Medicare enrollment data from the 2006 Annual Report of the Boards of Trustees of the Federal Hospital Insurance
and Federal Supplementary Medical Insurance Trust Funds, May 1, 2006, Table III.A3, p. 34, at
http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf
Per Enrollee Growth in Medicare Spending and
Private Health Insurance Premiums (for Common
Benefits), 1970-2006
25%
Medicare
Private Health Insurance Premiums
20%
15%
10%
5%
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
0%
Notes: Per enrollee includes primary policy-holder plus dependents. Common benefits include hospital services, physician and clinical services, other
professional services, and durable medical products; they exclude, for example, prescription drugs, home health care, non-durable medical products,
and nursing home care.
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, Table 13, at
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf.
Cumulative Change in Family Health Insurance Premiums
and Federal Poverty Level, 1996 - 2004
Family Premium
Federal Poverty Level
120%
102%
100%
80%
60%
40%
20%
20%
0%
1996
1997
1998
1999
2000
2001
2002
2003
Source: Premium data from Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 1996-2004, at
http://www.meps.ahrq.gov/mepsweb/; Federal Poverty Level based on HHS Federal Poverty Guidelines (1996 through 2004) at
http://aspe.hhs.gov/poverty/figures-fed-reg.shtml. Rate of growth based on change for one person (change for 4 person family would be 20.8%
rather than 20.3% over the period).
2004
American Public's Experience with Long-Term Care, 2007
At any time during the past 3 years, was a member of your immediate family or someone you know
well receiving long-term care in a nursing home, at home, or in some other type of facility?
31%
No
68%
Yes
1%
Don’t know/ Refused
Source: KFF Update on the Public’s Views of Nursing Homes and Long-Term Care Services (conducted October 1 – October 10, 2007)
Financial Burden of Health Spending Among
Medicare Beneficiaries, 1997-2003
Median Out-of-Pocket Health
Spending as % of Income
14.9%
11.9%
11.8%
12.0%
1997
1998
1999
12.8%
13.0%
2000
2001
Note: Difference between 1997 and 2003 is statistically significant at .05 level.
Source: Kaiser/UCLA analysis of Medicare Current Beneficiary Survey Cost and Use files, 1997-2003.
2002
15.5%
2003
Percent Change in Medicaid Spending and
Enrollment, FY 2001-2008
Medicaid Spending Growth
Medicaid Enrollment Growth
Projected
12.7%
10.4%
9.5%
8.5%
7.7%
7.9%
6.4%
6.3%
5.6%
4.2%
2.9%
3.2% 1.3%
0.2%
2.2%
-0.5%
2001 2002 2003 2004 2005 2006 2007 2008
Notes: Enrollment percentage changes from June to June of each year.
Spending growth percentage changes in state fiscal year.
Source: KCMU survey of Medicaid Officials in 50 states and DC conducted by Health Management
Associates, October 2007.
Distribution of the Increase in Uninsured
Children, by Income, 2005-2006
150,000
340,000
220,000
400%+ FPL
200-399%
FPL
<200% FPL
21.2%
47.5%
31.3%
710,000 Uninsured Children
Note: 200% to 399% of the federal poverty level (FPL) is roughly $40,000$80,000 in annual income for a family of four in 2006.
Source: KCMU/Urban Institute analysis of the March 2007 CPS.
Percent of Seniors Who Did Not Fill or Delayed Filling
Prescriptions Due to Cost, by Source of Drug Coverage, 2006
(Among Non-Institutionalized Seniors Taking 1 or More Rx)
23%*
20%
12%*
8%*
No Rx
Part D
Employer
VA
NOTES: Did not fill or delayed filling prescriptions due to cost refers to within the past twelve months. VA is
Department of Veterans Affairs. Reference group for statistical significance is Part D coverage (*p<0.05).
SOURCE: Kaiser/Commonwealth/Tufts-New England Medical Center National Survey of Seniors and Prescription
Drugs, 2006.
Distribution of Uninsured Children, 2004
Not Eligible >300% FPL
Not Eligible <300% FPL
Not Eligible on the Basis
of Immigration Status
1.1 Million
1.0 Million
0.6 Million
1.7 Million
Eligible for SCHIP
5.4 Million Uninsured
Children are Eligible
but Unenrolled in
SCHIP or Medicaid
3.7 Million
Eligible for
Medicaid
8 Million Uninsured Children
SOURCE: Urban Institute analysis of the 2005 Annual Social and Economic Supplement to
the CPS for KCMU. Data has been adjusted for the Medicaid undercount.
Medicare
• Social Insurance for the elderly
– Description 1965
– Medicare Part A, B, C,
Characteristics of the Medicare Population, 2006
Percent of total Medicare population:
Income less than 200%
FPL
48%
38%
3+ chronic conditions
Cognitive/mental
impairment
29%
28%
Fair/poor health
Less than high school
education
26%
17%
2+ ADL limitations
16%
Under-65 disabled
12%
Age 85+
Long-term care facility
resident
5%
NOTES: ADL is activity of daily living. The federal poverty (FPL) threshold for people age 65 and over was $9,669/individual
and $12,201/couple in 2006.
SOURCE: Income data from US Census Bureau, Current Population Survey published on statehealthfacts.org; all other data
from Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2006 Access to Care file.
Medicare Enrollment, by Eligibility Status,
2001-2007
Disabled
Elderly
In millions:
45
40
35
43.0
44.0
41.0
41.7
42.5
5.7
6.0
6.0
6.3
6.7
7.0
7.2
34.4
35.1
35.0
35.4
35.8
36.0
36.8
2001
2002
2003
2004
2005
2006
2007
40.1
41.1
30
25
20
15
10
5
0
SOURCE: Kaiser Family Foundation, based on Annual Report of the Boards of Trustees of the Federal Hospital Insurance
and Federal Supplementary Medical Insurance Trust Funds, 2002-2008.
Medicare: Part A
• Medicare Part A is a type of hospital insurance provided
by Medicare. The coverage provided by Part A includes
inpatient care in hospitals, nursing homes, skilled
nursing facilities, and critical access hospitals. Part A
does not include long-term or custodial care. If you meet
specific requirements, then you may also be eligible for
hospice or home health care.
• Fiscal Intermediaries handle the claims for the Medicare
Part A plan. These are private insurance companies that
act as agents for the federal government in processing
and paying Medicare claims.
Medicare Part A (Health Insurance) Trust Fund
Balance, 2001-2019
Under High Cost, Low Cost, and Intermediate Assumptions
Fund balance as % of
annual expenditures:
175%
Actual Projected
Low cost
150%
125%
100%
Intermediate
75%
High cost
50%
25%
0%
2001
2004
2007
2010
2013
2016
2019
NOTE: The Medicare Trustees recommend that the HI Trust Fund assets should be maintained at a level of at least 100%
of annual expenditures.
SOURCE: Kaiser Family Foundation, based on 2008 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplementary Medical Insurance Trust Funds.
Medicare: Part B
• Medicare Part B is a medical insurance
provided by the federal government to
eligible beneficiaries. The coverage
provided by Part B includes medically
necessary doctor's services, outpatient
care, and most other services that Part A
does not cover such as some physical or
occupational therapies and some home
health care services. Part B covers
preventive services as well.
Medicare: Part C
• Medicare Part C combines your Part A and Part B
options and must cover all medically needed services.
The difference is that private insurance companies that
are approved by Medicare provide this type of coverage.
In most cases, Part C is a lower-cost alternative to the
Original Medicare Plan, and providers usually offer extra
benefits and include prescription drug coverage (Part D).
• Part C plans often have networks, and you must use the
doctors or hospitals that belong to the plan. These plans
help you coordinate and manage your overall care. Part
C includes specialized care for people who need a large
amount of health care services. If you find yourself
needing medical attention while traveling out of your plan
coverage area, you will still be covered for emergency or
urgent care services.
Medicare: Part D
• Prescription Drug Coverage
• “Donut hole” $3,600*
• * Changes by year
• Part D is prescription drug coverage insurance that is
provided by private companies approved by Medicare.
You need to enroll when you first become eligible to
keep from paying a penalty cost later. Part D was
designed to help people with Medicare to lower their
prescription drug costs and to protect against future
costs. A prescription drug plan will also enable you to
have greater access to medically necessary drugs.
Donut Hole
TrOOP
Out-of-pocket
cost
Portion
covered by
Medicare
$0–$295
$0–$295
Deductible is
out-of-pocket
No Medicare
coverage of
costs
$295–$2,700
$295–$896.25
25% out-ofpocket
75% covered by
Medicare
$2,700–$6,154
$896.25–
$4,350.25
All costs are
out-of-pocket
No Medicare
coverage of
costs
over $6,154
over $4,350.25
5% out-ofpocket
95% covered by
Medicare
Total drug
spend
Effects of Medicare: Part D
• Shang and Goldman 2007
• Overall, a $1 increase in prescription drug
spending is associated with a $2.06
reduction in Medicare spending.
Furthermore, the substitution effect
decreases as income rises, and thus
provides support for the low-income
assistance program of Medicare Part D.
Prescription Drug Coverage Among
Medicare Beneficiaries, by Income, 2006
23%
28%
Part D - Stand-alone
PDP
24%
Part D - Medicare
Advantage drug plan
46%
12%
16%
67%
19%
Employer-sponsored
20%
Self-purchased only
16%
17%
7%
3%
9%
$10,000
or less
1%
1%
(N=6.4 mil)
53%
47%
37%
Other public/private
1%
2%
1%
2%
13%
13%
11%
$10,001$20,000
$20,001$30,000
$30,001$40,000
(N=9.4 mil)
(N=7.0 mil)
1%
(N=5.7 mil)
2%
9%
<1%
No drug coverage
$40,001
or more
(N=6.7 mil)
NOTES: Percents rounded to the nearest whole number. N=weighted estimate of number of beneficiaries; mil=million.
SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care File, 2006.
HHS Estimates of Prescription Drug Coverage
Among Medicare Beneficiaries, 2008
No Drug
Coverage
4.6
million
Other
4.0 10%
Creditable Drug
million
Coverage1
9%
10.2
million
Retiree Drug 23%
Coverage2
11.2
million
25%
Stand-Alone
PDPs
6.2
million
Dual
14% Eligibles in
8.0
PDPs
million
18%
Total in
Part D
Plans:
25.4 Million
(57%)
Medicare Advantage
Drug Plans3
Total Number of Beneficiaries = 44.2 Million
NOTES: Estimates do not sum to 100% due to rounding. 1Includes Veterans Affairs, Indian Health Service, state pharmacy assistance
programs, employer plans for active workers, Medigap, multiple sources, and other sources. 2Includes Retiree Drug Subsidy (RDS)
coverage; retiree coverage without RDS; and FEHBP and TRICARE retiree coverage. 3Includes 0.4 million enrolled in other Medicare
health plan types. PDP = Prescription Drug Plan.
SOURCE: Kaiser Family Foundation analysis of HHS data, January 31, 2008 (Data as of January 2008).
Standard Medicare Prescription Drug Benefit, 2008
Enrollee Pays
5%
Plan Pays 15%;
Medicare Pays 80%
$5,726 in
Total Drug Costs
($4,050 out of pocket)
Enrollee Pays
100%
$3,216 Coverage Gap
(“Doughnut Hole”)
$2,510 in
Total Drug Costs
Enrollee Pays
25%
Plan Pays 75%
$275 Deductible
$320 Average Annual Premium
NOTE: Annual premium amount based on $26.70 national average monthly beneficiary premium (CBO, March 2008).
Amounts for premium, coverage gap, and catastrophic coverage threshold rounded to nearest dollar.
SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit for 2008 (standard benefit parameter
update from CMS, April 2007).
Medicare Part D Enrollees Who Reached the
Coverage Gap in 2007
Excludes Part D Enrollees Who Receive Low-Income Subsidies and Non-Users
Did not
reach the
coverage
gap
74%
26%
Reached the
coverage
gap
NOTES: Estimates based on analysis of retail pharmacy claims for 1.9 million Part D enrollees in 2007.
SOURCE: Georgetown University/NORC/Kaiser Family Foundation analysis of IMS Health LRx database, 2007.
The Standard Medicare Part D Benefit
Coverage Gap, 2006-2017
Amount of beneficiary outof-pocket costs in the gap
Actual
Projected
$6,058
$6,241
$5,583
$2,850
$3,051 $3,216
$3,439
$3,721
$4,041
$4,358
$4,706
$5,100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
SOURCE: Kaiser Family Foundation, based on 2008 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplementary Medical Insurance Trust Funds.
Financing Medicare
• Part A
– Payroll Taxes
– Medicare FICA is uncapped and 2.9% split
50/50 with the employer
Medicare Cost Containment
• Diagnostic Related Groups (DRGs)
• Move towards risk adjustments
• Reforming Physician Reimursements
– Limits balance billing (115% of Medicare rate)
• Growth Rates Capped
• Medicare Managed Care
• Selection Bias in Medicare HMOs
Medicare Spending as a Share of
Total Federal Outlays, FY2009
Social Security
22%
Defense
Discretionary
20%
Medicare
14%
Nondefense
Discretionary
16%
Net Interest
8%
Other
12%
Medicaid and
SCHIP
7%
FY 2009 Total Outlays = $3.0 trillion
SOURCE: Kaiser Family Foundation, based on OMB, Fiscal Year 2009 Budget, February 2008; Baseline
Category Totals.
Supplemental Coverage Among
Medicare Beneficiaries, by Income, 2006
8%
Employer-sponsored
20%
18%
Medicare Advantage
42%
9%
52%
59%
23%
Self-purchased only
Medicaid
22%
20%
52%
19%
19%
14%
16%
$10,000
or less
$10,001$20,000
(N=6.4 mil)
Other public/private
20%
None - Medicare feefor-service only
21%
1%
1%
15%
(N=9.4 mil)
11%
$20,001$30,000
3%
<1%
(N=7.0 mil)
21%
7%
$30,001$40,000
1%
<1%
(N=5.7 mil)
5%
1%
1%
$40,001
or more
(N=6.7 mil)
NOTES: Percents rounded to the nearest whole number. N=weighted estimate of number of beneficiaries; mil=million.
SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care File, 2006.
Medicare Benefit Payments, by Type of Service,
2007
Low-Income
Subsidy Payments
Payments to
Drug Plans
Other Part B
Benefits
Hospital
Outpatient
Payments to
Union/EmployerSponsored Plans
1%
Hospital
Inpatient
7% 4%
4%
4%
Part A
Part B
30%
Part D
Part A and B
Physicians and
Other Suppliers
20%
5%
11%
Home Health
18%
Skilled Nursing
Facilities
Hospice
2%
Medicare Advantage (Part C)
Total Benefit Payments = $426 billion
NOTE: Does not include administrative expenses such as spending for implementation of the Medicare drug benefit and the
Medicare Advantage program.
SOURCE: Kaiser Family Foundation, based on Congressional Budget Office, Medicare Baseline, March 2008.
Estimated Sources of Medicare Revenue, FY2009
Payroll Taxes
41%
General Revenue
73%
85%
79%
Beneficiary
Premiums
Payments from
States
39%
Taxation of Social
Security Benefits
12%
3%
5%
1%
6%
1%
8%
TOTAL
PART A
$506.8 Billion $243.5 Billion
25%
2%
PART B
$202.4 Billion
9%
12%
Interest and
Other
PART D
$60.9 Billion
SOURCE: 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal
Supplementary Medical Insurance Trust Funds.
Distribution of Total Medicare Beneficiaries and
Spending, 2005
37%
Average per capita
Medicare spending
(FFS only): $7,064
90%
63%
Average per capita
Medicare spending
among top 10%
(FFS only): $44,220
10%
Total Number of FFS Beneficiaries:
37.5 million
Total Medicare Spending:
$265 billion
NOTE: FFS is fee-for-service. Includes noninstitutionalized and institutionalized Medicare fee-for-service
beneficiaries, excluding Medicare managed care enrollees.
SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Cost & Use file, 2005.
Medicare Beneficiaries and The Number of Workers
Per Beneficiary
Millions of beneficiaries
79
Number of workers per
beneficiary
4.0
62
3.7
47
2.9
40
2.4
34
19
20
1966
1970
1990
2000
2010
2020
2030
2000
2010
2020
2030
SOURCE: Kaiser Family Foundation, based on 2001 and 2008 Annual Reports of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.
Median Out-of-Pocket Health Care Spending as a
Percent of Income for Elderly vs. Non-Elderly
Households, 1998-2003
16%
14%
13.7%
13.4%
12.4%
12%
13.4%
14.4%
Elderly
11.8%
10%
8%
6%
4%
2.7%
2.7%
2.6%
2.6%
2.7%
2001
2002
2.7%
Non-Elderly
2%
0%
1998
1999
2000
SOURCE: Kaiser Family Foundation/UCLA analysis of Consumer Expenditure Survey, 1998-2003.
2003
Projected Medicare Outlays, 2008-2018
Total outlays in billions:
$1,000
$800
$600
$454 $486
$514
$567 $568
$636
$681
$729
$814 $850
$887
$400
$200
$0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Share of:
Federal
16%
Budget
Gross
Domestic 3%
Product
16%
16%
17%
17%
18%
18%
19%
20%
20%
20%
3%
3%
3%
3%
3%
4%
4%
4%
4%
4%
NOTE: Numbers have been rounded to nearest whole number.
SOURCE: Kaiser Family Foundation, based on Congressional Budget Office, The Budget and Economic Outlook: An Update,
January 2008.
Medicare Advantage Enrollment, 1999-2008
Total Medicare Advantage
Enrollment
in millions:
Private Fee-for-Service
10.1
9.0
6.9
6.8
7.6
6.1
5.5
5.3
5.5
6.1
0.2 0.9
1.7
2.3
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
NOTE: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts, Demonstrations, HCPP, and PACE
contracts.
SOURCE: Kaiser Family Foundation, based on Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription
Drug Plans Monthly Report” December 1999-2007. CMS Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan
Contract Report, Monthly Summary Report, July 2008.
Average Payments to Medicare Advantage Plans
Relative to Traditional
Fee-for-Service Medicare
119%
117%
115%
113%
112%
Traditional
Fee-forService
Medicare =
100%
All Medicare
Advantage
Plans
Local HMOs
Local PPOs
Private FeeFor-Service
Plans
Special Needs
Plans
Medicare Advantage Plan Types
SOURCE: Kaiser Family Foundation, based on Medicare Payment Advisory Commission, March 2008.
Percentage of Children Without Health
Insurance, By Poverty Level, 1997-2005
Children below
200% of poverty
23%
21%
14%
Children above
200% of poverty
6%
1997
5%
1998
1999
2000
5%
2001
2002
2003
Notes: Survey method change in 2005 affects comparison with earlier years slightly. Children less
than 18 years old.
Source: L. Ku, “Medicaid: Improving Health, Saving Lives,” Center on Budget and Policy Priorities
analysis of National Health Interview Survey data, August 2005.
2004
2005
Medicare Private Fee-for-Service Enrollment as a
Share of the Total Medicare Population, 2007
Traditional
Medicare
81%
3%
Medicare
Advantage
19%
16%
Private
Fee-forService
HMO, PPO,
and other
Total Medicare Beneficiaries = 44 million
SOURCE: Centers for Medicare and Medicaid Services, Medicare Advantage , Cost, PACE, Demo and Prescription Drug Plan Contract Report –
Monthly Summary Report (Data as of May 2007).
Medicare Advantage and Other Sources of Supplemental Coverage
Among Medicare Beneficiaries Below 150% FPL, by Race/Ethnicity
10%
12%
19%
Medicare
Advantage
32%
57%
Medicaid
49%
Private*
40%
None
16%
15%
14%
3%
N=
16%
3%
14%
White
AfricanAmerican
Hispanic
11 million
2.6 million
2 million
Other
3%
Note: Coverage was assigned based on the following hierarchy: Medicare Advantage, Medicaid, Private (employer-sponsored,
Medigap), other public and unknown source, and no coverage.
Source: Kaiser Family Foundation analysis of 2003 Medicare Current Beneficiary Survey Cost and Use File.
Total Medicare Private Health Plan
Enrollment, 1999-2007
In millions:
6.9
1999
6.8
2000
7.6
6.1
2001
5.5
5.3
5.5
2002
2003
2004
8.3
6.1
2005
2006
Note: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts,
Demonstrations, HCPP, and PACE contracts.
Source: Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription Drug Plans
Monthly Report.” December 1999-2006. CMS Monthly Summary Report, February 2007.
2007
Seniors' Views of the Medicare Rx Drug
Benefit, 2006
Percent Agreeing That the Medicare Drug Benefit…
Is too complicated
73%
Helps people on Medicare save on
their prescriptions
68%
Benefits private plans and drug
companies too much
60%
Notes: Percents include those responding "strongly agree" and "somewhat agree"; margin of error +/- 4 points.
Source: KFF/HSPH The Public's Health Care Agenda for the New Congress and Presidential Campaign (conducted
November 9-19, 2006).
Large Employers' Expected Medicare Rx
Coverage Strategy, 2007
Do Not Provide
Rx Coverage
8%
Other
Strategy
14%
Offer Rx
Coverage,
Taking Subsidy
78%
Notes: Virtually all companies not providing drug coverage in 2007 discontinued drug coverage in 2006. "Other Strategy" includes
supplementing Medicare drug coverage, contracting with Medicare drug plans, and becoming a Medicare drug plan. Applies to plan with the
largest number of age 65+ retirees. Based on a non-probability sample of private-sector firms with 1,000 or more employees offering retiree
health benefits.
Source: Kaiser/Hewitt 2006 Survey of Retiree Health Benefits, December 2006.