Medicare and medicaid


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Medicare and medicaid

  1. 1. Government funded health care: Medicare and Medicaid
  2. 2. Medicare and Medicaid <ul><li>Similarities: </li></ul><ul><ul><li>Both are federally supported programs enacted in 1965 to provide health care coverage to vulnerable populations </li></ul></ul><ul><ul><li>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 </li></ul></ul>
  3. 3. Differences in MCare & MCaid <ul><li>Population covered </li></ul><ul><ul><li>Medicare provides services to elderly (over 65) and disabled </li></ul></ul><ul><ul><li>Medicaid provides services to poor </li></ul></ul><ul><li>Funding mechanism </li></ul><ul><ul><li>Medicare is funded totally by federal government </li></ul></ul><ul><ul><li>Medicaid cost is shared between federal government and individual states </li></ul></ul>
  4. 4. Other differences <ul><li>Drug coverage </li></ul><ul><ul><li>Until recent law, Medicare did not contribute to cost of prescribed drugs </li></ul></ul><ul><ul><li>Medicaid covered prescribed drugs </li></ul></ul>
  5. 5. Medicare
  6. 6. How does Medicare work <ul><li>Who is eligible? </li></ul><ul><ul><li>Everyone in the U.S. over the age of 65 who has paid threshold amount (40 quarters) into social security </li></ul></ul><ul><ul><li>People who are under age 65 and disabled based on criteria set up by Medicare </li></ul></ul><ul><ul><li>Anyone with End Stage Renal Failure requiring dialysis </li></ul></ul>
  7. 7. Two parts to Medicare: Part A <ul><ul><li>Part A: hospital coverage </li></ul></ul><ul><ul><li>Covered if patient or spouse has worked 40 or more quarters and paid SS taxes </li></ul></ul><ul><ul><li>Premium of $189/mo if worked 31-39 quarters </li></ul></ul><ul><ul><li>Premium of $343/mo if worked less than 31 quarters </li></ul></ul>
  8. 8. Part B <ul><ul><li>Part B: outpatient coverage </li></ul></ul><ul><ul><ul><li>Optional </li></ul></ul></ul><ul><ul><ul><li>Recipient must contribute a premium each month to maintain coverage ($93.53/month) plus $131 deductible </li></ul></ul></ul><ul><ul><ul><li>Starting 2007, premium will be ‘needs based’ – those earning more than $80,000 a year ($160,000 for a couple) will pay more </li></ul></ul></ul>
  9. 9. Part C <ul><li>Covers up to 30 days of long-term care </li></ul><ul><li>Who pays after that? </li></ul><ul><ul><li>The patient (or no one if the patient can’t afford it) </li></ul></ul><ul><ul><li>Nursing homes at are risk for not getting paid after the 30 days of Part C run out </li></ul></ul><ul><ul><li>That’s why it’s so hard to get Medicare patients into nursing homes! </li></ul></ul>
  10. 10. Part D <ul><li>Medication coverage </li></ul><ul><ul><li>Started January 1, 2006 </li></ul></ul><ul><ul><li>Does not offer single drug plan: instead lets marketplace develop drug plans with stated formularies and co-pays </li></ul></ul><ul><ul><li>Legislation specifically forbids federal government from using purchasing power to negotiate for reduced costs of drugs </li></ul></ul>
  11. 11. Part D <ul><li>Patients must go to Web site and select individual plan </li></ul><ul><li>Patients directed to sign on by specified period to participate in plan </li></ul><ul><li>If patient did not sign on by deadline, there is a financial penalty to participate in future </li></ul><ul><li>Benefits consist of payment for drugs up to $1,500 then catastrophic coverage (>$3,000) </li></ul>
  12. 12. Medicare growth: 1970-97 (enrollees in millions; costs in billions) Cost: $381/ person Cost: $5,631/ person
  13. 13. Life expectancy at age 65
  14. 14. Where does Medicare money go? <ul><li>Acute care hospitals: 48% </li></ul><ul><li>Physicians 20% </li></ul><ul><li>Home health 9% </li></ul><ul><li>Outpatient services 8% </li></ul><ul><li>Skilled nursing home care 6% </li></ul><ul><li>Hospice care 1% </li></ul>
  15. 15. Where does Medicare money go? <ul><li>Acute care hospitals: 48% </li></ul><ul><li>Physicians 20% </li></ul><ul><li>Home health 9% </li></ul><ul><li>Outpatient services 8% </li></ul><ul><li>Skilled nursing home care 6% </li></ul><ul><li>Hospice care 1% </li></ul><ul><li>Administrative overhead 0.7% </li></ul><ul><li>Profit 0% </li></ul>
  16. 16. What do you get? <ul><li>Hospital care </li></ul><ul><ul><li>Medicare pays 80% of the Medicare allowable costs for “ medically necessary ” services </li></ul></ul><ul><ul><li>Patient has a $876 annual deductible before Medicare pays anything (for stays <60 days) </li></ul></ul><ul><li>Ambulatory care </li></ul><ul><ul><li>Only covered if recipient elects to pay for Part B </li></ul></ul><ul><ul><li>Covers 80% of medically necessary services after $100 annual deductible </li></ul></ul>
  17. 17. What do you get? <ul><li>Long term care </li></ul><ul><ul><li>Medicare only covers up to 30 days in a nursing home </li></ul></ul><ul><li>Pharmaceuticals </li></ul><ul><ul><li>Medicare only pays part of pharmacy costs if patient enrolls in Part D </li></ul></ul><ul><ul><li>Part D supported by additional premium from patient plus co-pay on medications </li></ul></ul>
  18. 18. Medicare payments <ul><li>Who pays the other 20% that Medicare doesn’t cover </li></ul><ul><ul><li>The patient or </li></ul></ul><ul><ul><li>Private insurance either paid for by the patient (Medigap insurance) or by pension plan </li></ul></ul><ul><li>What is the “Medicare allowable cost”? </li></ul><ul><ul><li>Whatever Medicare says it will pay for that service – Hint: it’s usually a lot lower than you charge! </li></ul></ul>
  19. 19. Who decides what is “medically necessary”? <ul><li>Medicare does </li></ul><ul><li>Some services are never covered </li></ul><ul><li>Others are covered on scheduled timeline only </li></ul><ul><ul><li>Pap smear covered every year – but must be more than 365 days! </li></ul></ul><ul><ul><li>Mammogram covered every 2 years </li></ul></ul>
  20. 20. What does Medicare pay? <ul><li>Depends on who you are </li></ul><ul><li>Original Medicare fee schedule based on usual and customary fee (UCF) in 1965 </li></ul><ul><li>As new services were established, fee schedule based on providers’ recommendation </li></ul><ul><li>Resulted in discrepancy between cognitive services (pre-1965) and most procedural services (post-1965) </li></ul>
  21. 21. What if your fee is more than the “Medicare allowable” <ul><li>You can choose to “participate” in Medicare or be a “non-participating” provider </li></ul><ul><li>Participating providers agree to accept the Medicare allowable as their full compensation – can only bill patient the other 20% </li></ul><ul><li>Non-participating providers can bill the entire difference to the patient </li></ul>
  22. 22. Medicare reimbursement <ul><li>Reimbursement has been revised periodically over last 40 years </li></ul><ul><li>Payments to hospitals generally very good </li></ul><ul><li>Payments to physicians generally bad </li></ul><ul><li>Reimbursement to MUSC/UMA doctors from Medicare around 25% of charges </li></ul><ul><li>Other insurers often base their payments on Medicare fee schedule </li></ul>
  23. 23. Medicare reimbursement reform <ul><li>In 1990, Medicare recognized disparity in reimbursement </li></ul><ul><li>Commissioned a study to look at the relative worth of each service covered by Medicare </li></ul><ul><li>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) </li></ul>
  24. 24. RBRVS <ul><li>What was developed was the “Resource based Relative Value System” </li></ul><ul><li>Each service assigned an RVU (relative value unit) </li></ul><ul><li>Rationale behind RVU: something that either requires twice as much training, time or risk should be paid twice as much </li></ul>
  25. 25. Payment reform <ul><li>Idea was to gradually shift Medicare payment from arbitrary amounts to some multiple of RVU. </li></ul><ul><li>Each year Medicare raising rates for underpaid services and reducing payment for overvalued services </li></ul>
  26. 26. Examples of RVUs <ul><li>RVUs for new patient visits </li></ul><ul><li>99202 New patient, brief 1.67 </li></ul><ul><li>99203 New patient, limited 2.39 </li></ul><ul><li>99204 New patient, extended 3.47 </li></ul><ul><li>99205 New patient, comprehensive 4.38 </li></ul>
  27. 27. Other RVUs <ul><li>99212 Est patient, brief 0.94 </li></ul><ul><li>99213 Est patient, limited 1.32 </li></ul><ul><li>99214 Est patient, extended 2.06 </li></ul><ul><li>99215 Est patient, comprehen 3.06 </li></ul><ul><li>99221 Brief hospital admission 1.87 </li></ul><ul><li>99222 Moderate hospital admit 3.07 </li></ul><ul><li>99223 Complex hospital admit 4.20 </li></ul>
  28. 28. So how does this work? <ul><li>You submit your bill with the appropriate CPT code (eg. 99214) </li></ul><ul><li>Medicare then multiplies the RVUs by a conversion factor (2006= $37.8975/RVU) and that’s what is “reasonable cost” </li></ul><ul><li>But what determines if a visit is a 99212 or a 99214? – Medicare has rules for that! </li></ul>
  29. 29. Upcoming changes in RVUs <ul><li>CMS updates RVUs periodically </li></ul><ul><li>For 2007, CMS changed for RVUs for several services (called CPT codes). </li></ul><ul><li>RVUs of several procedure codes decreased and RVUs for routine E&M codes increased </li></ul><ul><li>Projected impact of these on payments vary: </li></ul><ul><ul><li>Nuclear med - 6.34% Diag Rad - 0.07% </li></ul></ul><ul><ul><li>Dermatology 2.80% Opthalmol 5.08% </li></ul></ul><ul><ul><li>Hem/Onc 20.91% Fam Med 25.27% </li></ul></ul>
  30. 30. Hospital payment: Prospective payment (DRG) system <ul><li>In 1983, Medicare changed way it reimbursed hospitals for care </li></ul><ul><li>Prior to 1983, Medicare paid fee-for-service based on charges </li></ul><ul><ul><li>Medicare paid more for long stays or excessive use of diagnostic services </li></ul></ul><ul><li>In 1983, Medicare started paying based on “Diagnostic Related Groups” </li></ul><ul><ul><li>Shifted risk of cost to hospitals </li></ul></ul>
  31. 31. What is a DRG? <ul><li>DRGs are the 500 most common reasons why people are hospitalized </li></ul><ul><li>Eg. “Myocardial infarction without complication” is assigned a DRG code </li></ul><ul><li>Every time a Medicare recipient is hospitalized with this diagnosis, the hospital gets a set fee (~$2,400) </li></ul><ul><li>If the hospital’s cost is less than $2,400 then they make a profit; if it exceeds $2,400 then these lose money </li></ul>
  32. 32. Example DRGS <ul><li>DRG Dx Reimbursement LOS </li></ul><ul><li>391 Normal newborn $622 2.3 </li></ul><ul><li>127 Heart failure/shock $4,154 5.5 </li></ul><ul><li>143 Chest pain $2,158 2.3 </li></ul><ul><li>88 COPD $3,907 5.4 </li></ul><ul><li>88 Simple pneumonia $4,444 6.3 </li></ul><ul><li>(based on 2001 data) </li></ul>
  33. 33. How are DRG costs set? <ul><li>Based on average cost of caring for patient with that clinical condition </li></ul><ul><li>Adjusted for local differences in costs </li></ul><ul><li>Adjusted for teaching hospital status </li></ul><ul><li>Adjusted for disproportionate share of caring for poorer patients </li></ul><ul><li>Not applied for “outliers”, defined as people whose episode of care is very long or extremely expensive </li></ul>
  34. 34. Might get reports like this 127 HEART FAILURE & SHOCK Number of DRG 24     Total LOS 66     Average LOS 2.8     Total Charges $105,164.00     Average Total Charge $4,381.83     Total Cost (78% of charges) $82,027.92     Average Total Cost (78% of total charges) $3,417.83     Medicare Average National Payment $4,154.00     Medicare Average LOS 5.5
  35. 35. Shift in Medicare concerns <ul><li>Prior to 1983, Medicare hired utilization reviewers to make sure patients were not staying too long or getting too many tests </li></ul><ul><li>After 1983, Medicare shifted emphasis to assure that patients were not being discharged too quickly by hospitals </li></ul><ul><li>Unintended consequence of DRG was the birth and flourishing of “home health care” </li></ul>
  36. 36. Other feature of Medicare: GME <ul><li>Gov’t provides an add-on to teaching hospitals to pay for GME (residency) training </li></ul><ul><li>Hospitals get a premium (25-40%) increase in every DRG depending on the number and types of residents in their hospital </li></ul><ul><ul><li>Direct training expenses: salaries, call rooms, etc. </li></ul></ul><ul><ul><li>Indirect training expenses: added cost of care to patient because residents are caring for them </li></ul></ul>
  37. 37. Future of Medicare <ul><li>Payment will be linked to quality of service </li></ul><ul><ul><li>Hospitals that provide good care will get “raises” </li></ul></ul><ul><ul><li>Hospitals that provide poor care will get reimbursement decreased </li></ul></ul><ul><ul><li>Results of quality measures will be made public </li></ul></ul><ul><li>Next initiative to look at physician quality (P4P = pay for performance) </li></ul><ul><ul><li>Currently, standards for good care being developed </li></ul></ul>
  38. 38. Report cards <ul><li>Medicare has started public web sites so that consumers can compare hospital performance for several diseases </li></ul><ul><li>We can look today at and compare hospitals in the same city </li></ul><ul><li>In the near future, patients will be able to do the same and compare doctors </li></ul>
  39. 39. Medicaid
  40. 40. Medicaid <ul><li>Federal-state partnership </li></ul><ul><li>Federal gov’t matches money put up by state </li></ul><ul><li>Match depends on program and wealth of state </li></ul><ul><li>Ranges from a 2/1 match ($2 fed/$1 state) to a 4/1 match </li></ul>
  41. 41. Program available for M’caid <ul><li>AFDC (Aid to Families with Dependent Children) </li></ul><ul><li>SCHIP (state children’s health insurance program) </li></ul><ul><li>Family planning services </li></ul><ul><li>HIV care coverage </li></ul><ul><li>Disability coverage </li></ul>
  42. 42. Medicaid Payments (1997) <ul><li>Nursing homes 25% </li></ul><ul><li>Inpatient general hospital 19% </li></ul><ul><li>Mentally retarded intermed </li></ul><ul><ul><li>care facilities 8% </li></ul></ul><ul><li>Prescribed drugs 10% </li></ul><ul><li>Home health 10% </li></ul><ul><li>Other care 9% </li></ul><ul><li>Physicians 6% </li></ul>
  43. 43. Medicaid funding <ul><li>Total amount of funding for state depends on how wealthy they are (for match) and how much they put up </li></ul><ul><li>Poorer states that can afford to put up less money for Medicaid then have less to spend for services </li></ul><ul><li>So how do they provide care for Medicaid recipients if they have less money? </li></ul>
  44. 44. Dealing with lack of MCaid funds <ul><li>Because services covered by Medicaid are mandated by federal government, cannot cut back on what is available to patients </li></ul><ul><li>Only ways to deal with less money: </li></ul><ul><ul><li>Cover fewer people </li></ul></ul><ul><ul><li>Pay less for service </li></ul></ul>
  45. 45. Eligibility requirements <ul><li>Usually set at different levels for different services </li></ul><ul><ul><li>AFDC usually most restrictive </li></ul></ul><ul><ul><li>Pregnancy covered up to 185% of FPL </li></ul></ul><ul><ul><li>sCHIP covered up to 200% of FPL </li></ul></ul><ul><ul><li>HIV care covered regardless of income </li></ul></ul>
  46. 46. Medicaid payments <ul><li>Usually very little compared to private payers </li></ul><ul><li>Often less than even Medicare payments for same services </li></ul><ul><li>Results in fewer doctors wanting to care for Medicaid patients (less access to care) </li></ul>
  47. 47. How do states stack up <ul><li> </li></ul>
  48. 48. Oregon Health Plan <ul><li>In mid-1990’s, Oregon proposed a new way of offering Medicaid (and health coverage in general) </li></ul><ul><li>Instead of restricting eligibility, they proposed to make everyone eligible but limit what they paid for </li></ul><ul><li>And what they would cover, they would pay for well so that patients would have access </li></ul>
  49. 49. The Oregon Plan <ul><li>Put together their plan based on the threat to health and evidence of benefit of treatment and ranked all common health care services </li></ul><ul><li>Provide coverage to everyone under the federal poverty level for all approved services </li></ul><ul><li>Decide how far down on the list the state could go based on the funding provided </li></ul>
  50. 50. Example of the list <ul><li>Pneumococcal Pneumonia </li></ul><ul><li>Acute Appendicitis </li></ul><ul><li>……… </li></ul><ul><li>81. Otitis media age > 6 month </li></ul><ul><li>82. Acne vulgaris </li></ul><ul><li>83. Ingrown toenails </li></ul><ul><li>84. Plantar fasciitis </li></ul><ul><li>85. Tinea capitus </li></ul>
  51. 51. Legislature provides $200 million <ul><li>Pneumococcal Pneumonia </li></ul><ul><li>Acute Appendicitis </li></ul><ul><li>……… </li></ul><ul><li>81. Otitis media age > 6 month </li></ul><ul><li>82. Acne vulgaris </li></ul><ul><li>83. Ingrown toenails </li></ul><ul><li>84. Plantar fasciitis </li></ul><ul><li>85. Tinea capitus </li></ul>
  52. 52. Legislature provides $210 million <ul><li>Pneumococcal Pneumonia </li></ul><ul><li>Acute Appendicitis </li></ul><ul><li>……… </li></ul><ul><li>81. Otitis media age > 6 month </li></ul><ul><li>82. Acne vulgaris </li></ul><ul><li>83. Ingrown toenails </li></ul><ul><li>84. Plantar fasciitis </li></ul><ul><li>85. Tinea capitus </li></ul>
  53. 53. Other key component of plan <ul><li>Plan required all Oregon employers to offer either insurance that covered the same service of Medicaid </li></ul><ul><li>Or employers could pay state equivalent of Medicaid cost and employees would be covered by Medicaid </li></ul>
  54. 54. Future of Medicaid <ul><li>States struggling to fund Medicaid costs </li></ul><ul><ul><li>Most have moved to restrictive drug access such as formularies or pre-authorization </li></ul></ul><ul><ul><li>Many states have mandated managed care for Medicaid or offered patients incentives to participate in managed care programs </li></ul></ul><ul><li>Access continuing to be an issue because of poor payment </li></ul>