Justin P. Swearingen

1. Justin P. Swearingen Federal Payers (Medicare, VA, and more)

2. Medicare History • 1965- Lyndon B. Johnson adds Medicare and Medicaid to the Social Security Act (Medicaid will be covered in Part 2) • At the time, ½ of all seniors lacked health insurance • Unlike other program, it grants access without regard to income or medical history to those who qualify (true universal coverage) • Today it is considered by many to have been a tremendous success. • Has withstood tremendous opposition from physician groups and many hospitals, particularly those in the South who were being forced to desegregate because of the law.

3. Medicare Overview • Medicare  is the federal program that provides health coverage to almost 50 million Americans • Virtually everyone age 65 and older • The disabled (receiving Social Security Disability payments) • Those with End Stage Renal (Kidney) Disease or ALS (Lou Gehrig’s) • People pay into Medicare throughout their working lives through taxes • Medicare covers most health care services, but does not cover services such as vision, dentures, hearing aids • Questions about design, payment systems, and insolvency • Central to ACA as 1/3 the $938B price tag will be paid from Medicare savings, which will also extend the solvency of the program

4. Medicare Enrollment

5. CMS • The Centers for Medicare and Medicaid Services (CMS) administers Medicare (and Medicaid) • A component of the Department of Health and Human Services (DHHS) • The Social Security Administration is responsible for determining Medicare eligibility and processing premium payments for the Medicare program

6. Total Spending Total spending is over $500 billion per year (15% of Federal budget)

7. Medicare Part A Medicare Part A – Hospital Insurance Program • Covers inpatient hospital care (90 days per episode), Skilled nursing (100 days), Home Health Care, and Hospice (end of life) Care • Financed by mandatory payroll taxes (1.45% Employee/ 1.45% Employer) • Free (no premium/automatic enrollment) for those who worked for 10+ years ($450/months otherwise) • $1,132 deductible and some copays for longer hospital/nursing home stays

8. Medicare Part B Part B – Supplementary Medical Insurance • Covers doctor visits and other outpatient services (Emergency Room, Outpatient Surgery, and more) • Financed by premiums (25%) and general taxes (75%) • Standard Premium is $115/month (more with higher income) • $162 deductible • 20% coinsurance (Traditional Medicare only pays 80%!) • Optional, but nearly everyone enrolls in this program

9. Medicare Part C Part C – Medicare Advantage (25% of people) • Government pays private Managed Care insurance companies a fixed amount per enrollee • HMO/PPO plans that provide extra benefits and less copays (usually cover the 20% coinsurance) for less choice • Average premium is extra $65/month (in addition to $115 Part B premium) • Various deductibles (some have none) • Usually no coinsurance and low copays • Was previously subsidized by the government (ACA changed this) • On average, 17% more than “traditional enrollees”

10. Traditional vs. Advantage (MCO)

11. Medigap • Private supplemental health insurance plans sold to Medicare beneficiaries • Provides coverage for medical expenses not or only partially covered by Medicare • Average premium is extra $130/month (in addition to $115 Part B premium) • No restriction of choice (no network/ out-of-network) • Often cover ALL costs (no copay or coinsurance) • 20% of Medicare enrollees

12. Medicare Part D Part D – Medicare Prescription Drug Benefit • Managed through private insurance companies only • Financed by premiums (10%), general federal taxes (75%), and states (15%) • Paid by premiums (average is $40/month) on top of other (Part B) premiums • Can be stand alone for “traditional enrollees” or part of a HMO/PPO Managed Care package • Various plans and deductibles (standard is $320)

13. Phasing out of “doughnut hole” by 2020

14. Trends, Problems, and Issues • Escalating expenses: Spending is projected to increase from $523 billion in 2010 to $932 billion by 2020. • Aging population: From 2010 to 2030, Medicare enrollment is projected to increase from 47 million to 79 million • Shrinking Tax Base: The ratio of workers paying taxes to enrollees is expected to decrease from 3.7 to 2.3 • Medical cost inflation • Hospital (Part A) Trust Fund: Expected to become insolvent by 2017

15. Part A Insolvency Part A is not paid for by general taxes. It relies on current worker funding through a payroll tax. (Illegal workers generally do not pay income taxes) Less workers + baby boom + increased expense of services = Insolvency

16. Effect of Baby Boom

17. Medicare is Expensive

18. Medicare and the ACA • New Revenue • Medicare Part A income tax will increase from 1.45% each (employee/employer) to 2.35% each in 2013 • High income individuals will pay higher premiums for Parts B and D (remember, Part A is “free”) • Targeted anti-fraud activities • Extends the solvency of Medicare and reduces cost growth • Improved Access • No cost sharing for most preventive services and annual wellness visit • More affordable prescription drugs (cost savings in Part D coverage) • Encourage more primary care with 10% bonus payment to doctors • Financial Changes to Medicare Advantage • See next slide

19. Ending Overpayments to Medicare Advantage (Part C) Plans • Originally, Medicare wanted to save money by paying private insurance companies the average amount per enrollee per month • Manage them well and make money. Manage them poorly, lose money • MCO’s “cherry pick” (free gym memberships, 2ndflr meetings, commercials) • However, as their pool of recipients aged, they began to use more services. • Insurances lobbied hard • Now paid $1,000 (17%) more per person than Traditional Medicare. • Unfair subsidy to those not in Medicare Advantage plans! • ACA levels the playing field by gradually eliminating Medicare Advantage overpayments to insurance companies. • Upwards of $300 billion used to fund the ACA (largest way the ACA is being funded)

20. Independent Payment Advisory Board (IPAB) • An independent body of 15 health experts appointed by the President and confirmed by Congress • Charged with recommending savings should Medicare exceed certain defined growth rates • Recommendations are mandatory, unless both houses of Congress (house and senate) override with a 2/3 majority • Pro: Supersedes power of lobbyists and special interests. Estimated to reduce costs by $15.5B (2015 – 2019) • Con: Might only look at cost-cutting. Might be too much power for one committee. • Some are opposed to IPAB and are pressing to block its implementation

21. Result: Extending the Life of Medicare

22. Other Ways to Control Cost Previously done and/or underway: • Reduce payments to providers • Increase Part A tax • Increase Part B and D premiums • Make Part B and D income related More controversial methods: • Increase eligibility age to 67 • Convert to a voucher system to be used in the private market • Convert to a Medicare individual retirement account

23. Other Federal Payers • Veterans Administration (VA ) provides free care are to veterans, their families, and survivors at over 150 hospitals and 800 clinics • Over 8 million enrolled, 23 million qualify • Indian Health Service provides free health care at 33 hospitals and 59 health centers • Almost 2 million American Indians and Alaska Natives who belong to 564 federally recognized tribes in 35 states • TRICARE provides health insurance (can be used in most places) for military personnel, military retirees, and their dependents • Almost 10 Million people

24. To Recap: What is Medicare? http://www.staysmartstayhealthy.com/medicare

25. Questions?