Government funded health care: Medicare and Medicaid

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Government funded health careMedicare and
Medicaid
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Medicare and Medicaid

• Similarities
• Both are federally supported programs enacted in
  1965 to provide health care coverage to
  vulnerable populations
• Services provided under each program are mandated
  by the federal government, i.e. feds decide what
  gets covered under each program and state or
  local governments have no input

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Differences in MCare MCaid

• Population covered
• Medicare provides services to elderly (over 65)
  and disabled
• Medicaid provides services to poor
• Funding mechanism
• Medicare is funded totally by federal government
• Medicaid cost is shared between federal
  government and individual states

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Other differences

• Drug coverage
• Until recent law, Medicare did not contribute to
  cost of prescribed drugs
• Medicaid covered prescribed drugs

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Medicare
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How does Medicare work

• Who is eligible?
• Everyone in the U.S. over the age of 65 who has
  paid threshold amount (40 quarters) into social
  security
• People who are under age 65 and disabled based on
  criteria set up by Medicare
• Anyone with End Stage Renal Failure requiring
  dialysis

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Two parts to Medicare Part A

• Part A hospital coverage
• Covered if patient or spouse has worked 40 or
  more quarters and paid SS taxes
• Premium of 189/mo if worked 31-39 quarters
• Premium of 343/mo if worked less than 31
  quarters

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Part B

• Part B outpatient coverage
• Optional
• Recipient must contribute a premium each month to
  maintain coverage (93.53/month) plus 131
  deductible
• Starting 2007, premium will be needs based
  those earning more than 80,000 a year (160,000
  for a couple) will pay more

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Part C

• Covers up to 30 days of long-term care
• Who pays after that?
• The patient (or no one if the patient cant
  afford it)
• Nursing homes at are risk for not getting paid
  after the 30 days of Part C run out
• Thats why its so hard to get Medicare patients
  into nursing homes!

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Part D

• Medication coverage
• Started January 1, 2006
• Does not offer single drug plan instead lets
  marketplace develop drug plans with stated
  formularies and co-pays
• Legislation specifically forbids federal
  government from using purchasing power to
  negotiate for reduced costs of drugs

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Part D

• Patients must go to Web site and select
  individual plan
• Patients directed to sign on by specified period
  to participate in plan
• If patient did not sign on by deadline, there is
  a financial penalty to participate in future
• Benefits consist of payment for drugs up to
  1,500 then catastrophic coverage (gt3,000)

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Medicare growth 1970-97(enrollees in millions
costs in billions)
Cost 5,631/ person
Cost 381/ person
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Life expectancy at age 65
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Where does Medicare money go?

• Acute care hospitals 48
• Physicians 20
• Home health 9
• Outpatient services 8
• Skilled nursing home care 6
• Hospice care 1

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Where does Medicare money go?

• Acute care hospitals 48
• Physicians 20
• Home health 9
• Outpatient services 8
• Skilled nursing home care 6
• Hospice care 1
• Administrative overhead 0.7
• Profit 0

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What do you get?

• Hospital care
• Medicare pays 80 of the Medicare allowable
  costs for medically necessary services
• Patient has a 876 annual deductible before
  Medicare pays anything (for stays lt60 days)
• Ambulatory care
• Only covered if recipient elects to pay for Part
  B
• Covers 80 of medically necessary services after
  100 annual deductible

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What do you get?

• Long term care
• Medicare only covers up to 30 days in a nursing
  home
• Pharmaceuticals
• Medicare only pays part of pharmacy costs if
  patient enrolls in Part D
• Part D supported by additional premium from
  patient plus co-pay on medications

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Medicare payments

• Who pays the other 20 that Medicare doesnt
  cover
• The patient or
• Private insurance either paid for by the patient
  (Medigap insurance) or by pension plan
• What is the Medicare allowable cost?
• Whatever Medicare says it will pay for that
  service Hint its usually a lot lower than you
  charge!

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Who decides what is medically necessary?

• Medicare does
• Some services are never covered
• Others are covered on scheduled timeline only
• Pap smear covered every year but must be more
  than 365 days!
• Mammogram covered every 2 years

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What does Medicare pay?

• Depends on who you are
• Original Medicare fee schedule based on usual and
  customary fee (UCF) in 1965
• As new services were established, fee schedule
  based on providers recommendation
• Resulted in discrepancy between cognitive
  services (pre-1965) and most procedural services
  (post-1965)

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What if your fee is more than the Medicare
allowable

• You can choose to participate in Medicare or be
  a non-participating provider
• Participating providers agree to accept the
  Medicare allowable as their full compensation
  can only bill patient the other 20
• Non-participating providers can bill the entire
  difference to the patient

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Medicare reimbursement

• Reimbursement has been revised periodically over
  last 40 years
• Payments to hospitals generally very good
• Payments to physicians generally bad
• Reimbursement to MUSC/UMA doctors from Medicare
  around 25 of charges
• Other insurers often base their payments on
  Medicare fee schedule

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Medicare reimbursement reform

• In 1990, Medicare recognized disparity in
  reimbursement
• Commissioned a study to look at the relative
  worth of each service covered by Medicare
• Worth took into account amount of training needed
  for the service, time required, risk inherent in
  the service, and other factors (study done at
  Harvard and headed by Bill Hsaio)

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RBRVS

• What was developed was the Resource based
  Relative Value System
• Each service assigned an RVU (relative value
  unit)
• Rationale behind RVU something that either
  requires twice as much training, time or risk
  should be paid twice as much

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Payment reform

• Idea was to gradually shift Medicare payment from
  arbitrary amounts to some multiple of RVU.
• Each year Medicare raising rates for underpaid
  services and reducing payment for overvalued
  services

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Examples of RVUs

• RVUs for new patient visits
• 99202 New patient, brief 1.67
• 99203 New patient, limited 2.39
• 99204 New patient, extended 3.47
• 99205 New patient, comprehensive 4.38

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Other RVUs

• 99212 Est patient, brief 0.94
• 99213 Est patient, limited 1.32
• 99214 Est patient, extended 2.06
• 99215 Est patient, comprehen 3.06
• 99221 Brief hospital admission 1.87
• 99222 Moderate hospital admit 3.07
• 99223 Complex hospital admit 4.20

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So how does this work?

• You submit your bill with the appropriate CPT
  code (eg. 99214)
• Medicare then multiplies the RVUs by a conversion
  factor (2006 37.8975/RVU) and thats what is
  reasonable cost
• But what determines if a visit is a 99212 or a
  99214? Medicare has rules for that!

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Upcoming changes in RVUs

• CMS updates RVUs periodically
• For 2007, CMS changed for RVUs for several
  services (called CPT codes).
• RVUs of several procedure codes decreased and
  RVUs for routine EM codes increased
• Projected impact of these on payments vary
• Nuclear med - 6.34 Diag Rad - 0.07
• Dermatology 2.80 Opthalmol 5.08
• Hem/Onc 20.91 Fam Med 25.27

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Hospital payment Prospective payment (DRG) system

• In 1983, Medicare changed way it reimbursed
  hospitals for care
• Prior to 1983, Medicare paid fee-for-service
  based on charges
• Medicare paid more for long stays or excessive
  use of diagnostic services
• In 1983, Medicare started paying based on
  Diagnostic Related Groups
• Shifted risk of cost to hospitals

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What is a DRG?

• DRGs are the 500 most common reasons why people
  are hospitalized
• Eg. Myocardial infarction without complication
  is assigned a DRG code
• Every time a Medicare recipient is hospitalized
  with this diagnosis, the hospital gets a set fee
  (2,400)
• If the hospitals cost is less than 2,400 then
  they make a profit if it exceeds 2,400 then
  these lose money

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Example DRGS

• DRG Dx Reimbursement LOS
• 391 Normal newborn 622 2.3
• 127 Heart failure/shock 4,154 5.5
• 143 Chest pain 2,158
  2.3
• 88 COPD 3,907
  5.4
• 88 Simple pneumonia 4,444 6.3
• (based on 2001 data)

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How are DRG costs set?

• Based on average cost of caring for patient with
  that clinical condition
• Adjusted for local differences in costs
• Adjusted for teaching hospital status
• Adjusted for disproportionate share of caring for
  poorer patients
• Not applied for outliers, defined as people
  whose episode of care is very long or extremely
  expensive

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Might get reports like this
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Shift in Medicare concerns

• Prior to 1983, Medicare hired utilization
  reviewers to make sure patients were not staying
  too long or getting too many tests
• After 1983, Medicare shifted emphasis to assure
  that patients were not being discharged too
  quickly by hospitals
• Unintended consequence of DRG was the birth and
  flourishing of home health care

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Other feature of Medicare GME

• Govt provides an add-on to teaching hospitals to
  pay for GME (residency) training
• Hospitals get a premium (25-40) increase in
  every DRG depending on the number and types of
  residents in their hospital
• Direct training expenses salaries, call rooms,
  etc.
• Indirect training expenses added cost of care to
  patient because residents are caring for them

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Future of Medicare

• Payment will be linked to quality of service
• Hospitals that provide good care will get
  raises
• Hospitals that provide poor care will get
  reimbursement decreased
• Results of quality measures will be made public
• Next initiative to look at physician quality (P4P
  pay for performance)
• Currently, standards for good care being
  developed

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Report cards

• Medicare has started public web sites so that
  consumers can compare hospital performance for
  several diseases
• We can look today at www.HospitalCompare.hhs.gov
  and compare hospitals in the same city
• In the near future, patients will be able to do
  the same and compare doctors

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Medicaid
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Medicaid

• Federal-state partnership
• Federal govt matches money put up by state
• Match depends on program and wealth of state
• Ranges from a 2/1 match (2 fed/1 state) to a
  4/1 match

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Program available for Mcaid

• AFDC (Aid to Families with Dependent Children)
• SCHIP (state childrens health insurance program)
• Family planning services
• HIV care coverage
• Disability coverage

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Medicaid Payments (1997)

• Nursing homes 25
• Inpatient general hospital 19
• Mentally retarded intermed
• care facilities 8
• Prescribed drugs 10
• Home health 10
• Other care 9
• Physicians 6

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Medicaid funding

• Total amount of funding for state depends on how
  wealthy they are (for match) and how much they
  put up
• Poorer states that can afford to put up less
  money for Medicaid then have less to spend for
  services
• So how do they provide care for Medicaid
  recipients if they have less money?

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Dealing with lack of MCaid funds

• Because services covered by Medicaid are mandated
  by federal government, cannot cut back on what is
  available to patients
• Only ways to deal with less money
• Cover fewer people
• Pay less for service

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Eligibility requirements

• Usually set at different levels for different
  services
• AFDC usually most restrictive
• Pregnancy covered up to 185 of FPL
• sCHIP covered up to 200 of FPL
• HIV care covered regardless of income

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Medicaid payments

• Usually very little compared to private payers
• Often less than even Medicare payments for same
  services
• Results in fewer doctors wanting to care for
  Medicaid patients (less access to care)

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How do states stack up

• http//www2.citizen.org/hrg/medicaid/

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Oregon Health Plan

• In mid-1990s, Oregon proposed a new way of
  offering Medicaid (and health coverage in
  general)
• Instead of restricting eligibility, they proposed
  to make everyone eligible but limit what they
  paid for
• And what they would cover, they would pay for
  well so that patients would have access

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The Oregon Plan

• Put together their plan based on the threat to
  health and evidence of benefit of treatment and
  ranked all common health care services
• Provide coverage to everyone under the federal
  poverty level for all approved services
• Decide how far down on the list the state could
  go based on the funding provided

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Example of the list

• Pneumococcal Pneumonia
• Acute Appendicitis
• 81. Otitis media age gt 6 month
• 82. Acne vulgaris
• 83. Ingrown toenails
• 84. Plantar fasciitis
• 85. Tinea capitus

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Legislature provides 200 million

• Pneumococcal Pneumonia
• Acute Appendicitis
• 81. Otitis media age gt 6 month
• 82. Acne vulgaris
• 83. Ingrown toenails
• 84. Plantar fasciitis
• 85. Tinea capitus

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Legislature provides 210 million

• Pneumococcal Pneumonia
• Acute Appendicitis
• 81. Otitis media age gt 6 month
• 82. Acne vulgaris
• 83. Ingrown toenails
• 84. Plantar fasciitis
• 85. Tinea capitus

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Other key component of plan

• Plan required all Oregon employers to offer
  either insurance that covered the same service of
  Medicaid
• Or employers could pay state equivalent of
  Medicaid cost and employees would be covered by
  Medicaid

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Future of Medicaid

• States struggling to fund Medicaid costs
• Most have moved to restrictive drug access such
  as formularies or pre-authorization
• Many states have mandated managed care for
  Medicaid or offered patients incentives to
  participate in managed care programs
• Access continuing to be an issue because of poor
  payment