Tricia Neuman, Sc'D'

1
Medicare 101 The Basics
Tricia Neuman, Sc.D. Director, Medicare Policy
Project Vice President, Kaiser Family
Foundation For KaiserEDU June 2009
2
Medicare Overview
Exhibit 2

• 1965 Signed into law by President Johnson to
  provide health and economic security to seniors
• 1972 expanded to cover younger adults with
  permanent disabilities
• 2009 covers 45 million people, including 7
  million under-65 disabled
• Covers individuals without regard to income or
  medical history
• Helps pay for range of medical services,
  including inpatient hospital, physician, home
  health, diagnostic tests and prescription drugs

3
Medicare Covers a Population with Diverse Needs
and Circumstances
Exhibit 3
Percent of total Medicare population
Income lt200 FPL (20,800 in 2008)
3 Chronic Conditions
Cognitive/Mental Impairment
Fair/Poor Health
2ADL Limitations
Under-65 Disabled
Age 85
Long-term Care Facility Resident
NOTE ADL is activity of daily living. SOURCE
Income data for 2007 from U.S. Census Bureau,
Current Population Survey, 2008 Annual Social and
Economic Supplement. All other data from Kaiser
Family Foundation analysis of the Centers for
Medicare Medicaid Services Medicare Current
Beneficiary Survey, Access to Care file, 2006.
4
Exhibit 4
Medicare Parts A and B

• Medicare Part A Hospital Insurance Program
• Inpatient hospital, skilled nursing facility,
  home health, hospice
• 1,068 deductible for hospital inpatient in 2009
• Individuals (and spouses) entitled to Part A
  after paying payroll taxes for 10 years
• Mainly funded by payroll tax contributions (1.45
  percent from employers/employees)
• Medicare Part B Supplementary Medical Insurance
• Physician visits, outpatient, preventive
  services, home health
• 96.40 monthly premium in 2009 higher for
  beneficiaries with higher incomes
• 135 deductible 20 coinsurance for physician
  visits and outpatient hospital services

5
Exhibit 5
Medicare Advantage (Part C)
Medicare Advantage Enrollment (in millions)

• Beneficiaries can enroll in regular
  fee-for-service program OR in a Medicare
  Advantage (MA) plan
• MA include HMOs, PPOs and other private health
  plans
• Some plans offer extra benefits and have lower
  cost-sharing requirements than traditional
  Medicare
• Access to doctors and other health care providers
  is typically limited to those in the plans
  network
• Plans are paid a fixed amount per enrollee
• On average, 14 percent more than it would pay
  under traditional Medicare
• This extra payment will increase overall costs to
  Medicare by about150 b over 10 years

25 of beneficiaries are enrolled in Medicare
Advantage plans in 2009
6
Medicare Prescription Drug Benefit (Part D)
Exhibit 6
Prescription Drug Coverage, 2009

• Administered exclusively through private plans
  not under fee-for-service program
• Stand-alone prescription drug plans (PDPs)
• Medicare Advantage prescription drug plans (MA
  PDs)
• Premiums and cost-sharing vary most plans have a
  gap in coverage (doughnut hole)
• Additional premium and cost-sharing subsidies for
  low-income
• Funded by general revenues, enrollee premiums and
  payments from states

No Drug Coverage
Part D Stand-Alone Prescription Drug Plan
4.5million10
Other Drug Coverage
6.2million14
17.5million39
7.9 million18
9.2 million20
Retiree Drug Coverage
Part D Medicare Advantage Prescription Drug Plan
45.2 Million Medicare Beneficiaries
7
Medicare Benefit Payments, by Type of Service,
2009
Exhibit 7
Part A Part B Part D
Part A and B
4
6
4
5
28
19
5
23
4
Total Benefit Payments 484 billion
Notes Total does not include 2.5 billion in
administrative expenses such as spending for
implementation of the Medicare drug benefit and
the Medicare Advantage program. Total is net of
9.4 billion in recoveries for 2009. Source
Congressional Budget Office, Medicare Baseline,
March 2009.
8
Sources of Medicare Revenue in 2010
Exhibit 8
PART A 237 Billion
PART D 66 Billion
PART B 196 Billion
TOTAL 499 Billion
Source 2009 Annual Report of the Boards of
Trustees of the Federal Hospital Insurance and
Federal Supplementary Medical Insurance Trust
Funds.
9
Medicare offers important coverage, but with
high cost-sharing and benefit gaps
Exhibit 9

• Does not cover all medical benefits
• Very limited long-term care coverage
• No dental, hearing aids or eyeglasses
• Has relatively high cost-sharing requirements
• Deductibles for Part A, Part B, and Part D
• Coinsurance/copayments
• Part D coverage gap (doughnut hole)
• No limit on out-of-pocket spending
• Unlike typical plans offered by large employer
• Pays about half of beneficiaries total health
  and long-term care spending

10
Supplemental Coverage Among Medicare
Beneficiaries, by Income, 2006
Exhibit 10
8
20
42
52
52
59
19
3
1
20
1
21
9
1
21
20
1
lt1
16
lt1
14
11
lt1
7
5
10,000 or less
10,001-20,000
20,001-30,000
30,001-40,000
40,001or more
SOURCE Kaiser Family Foundation analysis of the
CMS Medicare Current Beneficiary Survey Access to
Care File, 2006.
11
Median out-of-pocket health spending as a
percent of income for Medicare beneficiaries is
on the rise especially for those with modest
incomes
Exhibit 11
NOTES In 2005, federal poverty level
9,570/individual and 12,830/couple. SOURCE
Kaiser Family Foundation. Skin-in-the-Game,
November 2008.
12
Exhibit 12
Medicare Premiums and Cost Sharing Projected to
Increase
Annual Costs
Source 2009 Annual Report of the Boards of
Trustees of the Federal Hospital Insurance and
Federal Supplementary Medical Insurance Trust
Funds.
13
Medicare Spending and Financing
14
Medicare accounts for 13 of federal spending and
22 of national health spending
Exhibit 14
21
23
13
16
7
13
9
Total Federal Spending, 2009 3.1 trillion
15
A small share of beneficiaries account for most
of Medicare spending
Exhibit 15
Average per capita 44,220
Average per capita 2,934
Total FFS Beneficiaries, 2005 37.5 million
Total Medicare FFS Spending, 2005 265 billion
NOTE Excludes Medicare Advantage
enrollees Average Medicare FFS Spending
only SOURCE Kaiser Family Foundation analysis of
the CMS Medicare Current Beneficiary Survey Cost
Use file, 2005.
16
Medicare Financial Challenges
Exhibit 16

• Part A Trust Fund - The hospital insurance trust
  fund is projected to be insolvent by 2017 with
  insufficient funds to pay for all promised
  benefits
• Worker to retiree ratio The number of workers
  per beneficiary is projected to decline as the
  Medicare population grows in the future
• GDP Medicare spending is projected to double
  from 3.5 of GDP in 2010 to 6.4 of GDP by 2030.
  
• The Congressional Budget Office indicates most of
  the growth is due to rising health costs, rather
  than the aging of the Baby Boom generation.

17
Looking to the Future
Exhibit 17

• Medicare remains critical source of health
  coverage and economic security for many
• Addressing fiscal pressures without shifting more
  costs to beneficiaries
• Setting fair payment rates to providers and plans
• Monitoring and improving Part D drug benefit
• Assessing role of Medicare Advantage plans
• Improving care to meet needs of those with
  coverage and chronic illnesses and disabilities
• Ensuring affordability for lower-income
  beneficiaries
• Strengthening coverage for long-term care services

18
Exhibit 18
Additional Resources

• Kaiser Family Foundations Medicare Policy
  Project
• kff.org/medicare/index.cfm
• Official Medicare site
• medicare.gov/
• Centers for Medicare Medicaid Services (CMS)
• cms.hhs.gov
• Congressional Budget Office (CBO)
• cbo.gov
• Medicare Payment Advisory Commission (MedPAC)
• medpac.gov