Chapter 10: Government Health Insurance Programs: Medicaid, CHIP, and Medicare Chapter Overview • Chapter 10 provides a basic overview of the major public health insurance programs in the United States, including changes to the programs under the Affordable Care Act. • Chapter 10 focuses on: – Medicaid – Children’s Health Insurance Program – Medicare Entitlements v. Block Grants • Entitlement: Everyone who is eligible for and enrolled in the program is legally entitled to receive benefits from the program. Beneficiaries may not be refused service for lack of funds or other reasons. • Block Grants: A defined sum of money (often from the federal government to the states) that is allocated for a particular program over a certain amount of time. Beneficiaries may be refused service for lack of funds or other reasons.There is no legal entitlement to the benefits. Medicaid • Overview: A federal-state public health insurance program for the indigent. • Program administration – Federal: Center for Medicare and Medicaid Services (CMS) outlines mandatory and optional populations and benefits covered under Medicaid – State: state Medicaid agencies run programs, select which optional populations and benefits to cover in the state program • All states participate in Medicaid Medicaid – Eligibility • Medicaid generally covers low-income • Pregnant women • Children • Adults in families with dependent children • Individuals with disabilities • Elderly • Must meet 5 eligibility requirements: Categorical, Income level, Resources, Residency and Immigration status Medicaid — Benefits • Medicaid covers extensive acute care and Long-Term Care benefits – Some benefits are mandatory, others are optional – Early and Periodic Screening Diagnostic and Testing services are a comprehensive set of mandatory services for children • Deficit Reduction Act of 2006 (DRA) created a new benefit option that allows states to use one of 5 benchmark or benchmark equivalent options to set their benefit package Medicaid — Financing • Medicaid is jointly financed by the federal and state governments • Matching system – Federal Medical Assistance Percentage determines the matching rate; rate is tied to each state’s per capita income with poorer states receive a higher federal match, and must be at least 50/50 • Beneficiary cost-sharing – Prior to DRA, very limited cost-sharing allowed – DRA provides expanded cost-sharing options Medicaid – Provider Reimbursement • Reimbursement levels vary by state and type of provider – States have a lot of discretion in setting rates • Fee-for-service provides paid on a state-determined fee schedule • Managed care providers paid according to contracts between the state and the managed care organization • Medicaid reimbursement is typically much lower than private insurance or Medicare reimbursement Medicaid — Waivers • States may appl ...

1. Chapter 10:
Government Health Insurance
Programs: Medicaid, CHIP,
and Medicare
Chapter Overview
• Chapter 10 provides a basic overview of the
major public health insurance programs in the
United States, including changes to the
programs under the Affordable Care Act.
• Chapter 10 focuses on:
– Medicaid
– Children’s Health Insurance Program
– Medicare

2. Entitlements v. Block Grants
• Entitlement: Everyone who is eligible for and
enrolled in the program is legally entitled to receive
benefits from the program. Beneficiaries may not be
refused service for lack of funds or other reasons.
• Block Grants: A defined sum of money (often from
the federal government to the states) that is allocated
for a particular program over a certain amount of
time. Beneficiaries may be refused service for lack of
funds or other reasons.There is no legal entitlement to
the benefits.
Medicaid
• Overview: A federal-state public health insurance
program for the indigent.
• Program administration
– Federal: Center for Medicare and Medicaid
Services (CMS) outlines mandatory and optional
populations and benefits covered under Medicaid
– State: state Medicaid agencies run programs, select

3. which optional populations and benefits to cover in
the state program
• All states participate in Medicaid
Medicaid – Eligibility
• Medicaid generally covers low-income
• Pregnant women
• Children
• Adults in families with dependent children
• Individuals with disabilities
• Elderly
• Must meet 5 eligibility requirements: Categorical,
Income level, Resources, Residency and Immigration
status
Medicaid — Benefits
• Medicaid covers extensive acute care and Long-Term
Care benefits
– Some benefits are mandatory, others are optional
– Early and Periodic Screening Diagnostic and

4. Testing services are a comprehensive set of
mandatory services for children
• Deficit Reduction Act of 2006 (DRA) created a new
benefit option that allows states to use one of 5
benchmark or benchmark equivalent options to set
their benefit package
Medicaid — Financing
• Medicaid is jointly financed by the federal and state
governments
• Matching system
– Federal Medical Assistance Percentage determines the
matching rate; rate is tied to each state’s per capita
income with poorer states receive a higher federal
match, and must be at least 50/50
• Beneficiary cost-sharing
– Prior to DRA, very limited cost-sharing allowed
– DRA provides expanded cost-sharing options
Medicaid –

5. Provider Reimbursement
• Reimbursement levels vary by state and type of
provider
– States have a lot of discretion in setting rates
• Fee-for-service provides paid on a state-determined
fee schedule
• Managed care providers paid according to contracts
between the state and the managed care organization
• Medicaid reimbursement is typically much lower than
private insurance or Medicare reimbursement
Medicaid — Waivers
• States may apply to the federal government for
waivers of Medicaid requirements
• Section 1115 waivers
– Secretary of Health and Human Services may
grant a section 1115 waiver to allow for a research
and demonstration project that “assists in

6. promoting the objectives” of Medicaid
– Use states as “policy laboratories” to test health
reform ideas
– Health Insurance Flexibility and Accountability
Act
Affordable Care Act Changes to Medicaid:
Significant eligibility expansion
• All non-Medicare eligible adults under 65 with
incomes up to 133% of poverty will be eligible in
every state
– Do not have to fit a category
– Standardized resource test
• Also, must cover all children 6–19 at 133% of
poverty
• Immigrants still have 5 year bar but states have option
to cover legal immigrant pregnant women and
children who have been in the country > than 5 years

7. Affordable Care Act Changes to Medicaid
• Benefits
– Newly eligible individuals entitled to essential
health benefit package, not traditional Medicaid
services
• Financing
– Federal government pays 100% of newly eligible
expansion for two years then phases down to
covering 90% by 2020
• States have a maintenance of effort
requirement for adults and children
CHIP
• Overview: A 10-year, $40 billion block grant
program designed to provide health insurance
to low-income children whose family income
is above the Medicaid eligibility level in their
state
– Reauthorized in 2009 and extended in the ACA;

8. Authorization through 2019, funding through 2015
• All states participate in CHIP
CHIP – Structure
• Three options for CHIP structures
– Incorporate CHIP into Medicaid program as an
expansion population
– Create separate CHIP program
– Hybrid program: Some CHIP children are in
Medicaid and some are in a separate CHIP
program
• All three types of options are used by the states
CHIP — Financing
• Federal-state matching program
– “Enhanced” match — CHIP match will always be
higher than the state’s Medicaid match
• States receive payments in 2-year allotments

9. – If Beneficiary cost-sharing requirements are
allowed
CHIP — Eligibility
• States may cover children up to 300% Federal
Poverty Level (FPL)
– Children who are eligible for Medicaid must be
enrolled in Medicaid, not CHIP
• States may impose waiting periods, enrollment
caps, and other measures to limit expenses
CHIP — Benefits
• CHIP programs must provide “basic” benefits
– Inpatient and outpatient hospital care
– Physician services
– Laboratory
– X-ray
– Well-baby & well-child

10. • CHIP programs may provide additional benefits such
as Prescription drugs, Mental health, vision, and
hearing
CHIP — Benefits
• Benefit packages are based on one of five
benchmark health plans
– Similar to DRA option in Medicaid
• Overall, Medicaid programs generally offer
much more comprehensive benefits than CHIP
programs
CHIP — Waivers
• States may apply to the federal government for
waivers of CHIP requirements
• States may cover pregnant women without a
waiver but no new waivers will be granted for
other adults
• States also use waiver for premium assistance

11. Medicare
• Overview: A federally-funded health insurance
program for the elderly and some persons with
disabilities.
• Medicare is administered by CMS
– No state administration
– National rules, apply uniformly in all states
Medicare — Eligibility
• Medicare covers two main groups of people – elderly
and disabled
• Elderly requirements
– At least 65 years old
– Eligible for Social Security by having worked and
contributed to Social Security for at least 10 years
• Disabled requirements
– Individual is totally and permanently disabled and has
received Social Security Disability Insurance for at least 24
months OR

12. – Has End Stage Renal disease
Medicare — Benefits
• Medicare split into 4 parts, each with its own set of
benefits
• Part A: Hospital Insurance: Inpatient hospital, skilled
nursing facility, hospice
• Part B: Supplemental Medical Insurance: Physician
services, outpatient services, limited preventive
services
Medicare — Benefits
• Part C: Managed Care: Same services (sometimes
receive additional services) delivered through a
managed care arrangement; Part C includes other
types of plans as well
• Part D: Prescription Drug Coverage: May receive
through private drug plans or managed care

13. arrangement
Medicare — Financing
• Part A
– trust fund funded through a mandatory payroll tax
– deductibles and cost-sharing paid by beneficiaries
• Part B
– general federal tax revenues
– monthly premiums, deductibles, and cost-sharing
paid by beneficiaries
Medicare — Financing
• Part C
– Receives funding for Part A and B services
through funding sources described above; Plans
may also require monthly premiums, deductibles,
and cost sharing to be paid by beneficiaries
• Part D
– General federal tax revenues

14. – Monthly premiums, deductibles, and cost-sharing
paid by beneficiaries
– State payments for dual enrollees
Medicare –
Provider Reimbursement
• Physicians
– Paid on a fee-for-service basis according to a Medicare fee
schedule
• Hospitals
– Paid on a prospective payment system based on diagnosis
• Diagnostic Related Groups for inpatient care
• Ambulatory Payment Classification for outpatient care
• Managed Care
– Plans paid a negotiated capitated rate by the federal
government
Affordable Care Act Changes to Medicare

15. • New coverage for preventive services without cost
sharing
• Eventually closes Part D doughnut hole
– Short-term relief as well
• Reimbursement changes
• Cost changes to beneficiaries
• Creation of Independent Payment Advisory Board
• CMS innovation center
Chapter 9:
Health Reform in the United
States
Chapter Overview
• Chapter 9 discusses the history of health
reform in the United States and details the key
provisions of the Affordable Care Act (ACA)

16. • Chapter 9 focuses on:
– Previous attempts at national health reform
– Why health reform is difficulty to achieve
– The passage and provisions of the Affordable
Care Act
Health Reform
• There have been numerous health reform
attempts in the U.S.
– Prior to 2010, all attempts at national health reform
to crate universal or near-universal coverage have
failed
– Some successes at the state level
Health Reform –
Difficulty of Reform in the U.S.
• Individualistic culture
• Dislike of big government

17. • Lack of consensus
• Federal system rules and structure make it
difficult to achieve major reform
• States generally home to social welfare issues
• Powerful interest groups against national health
reform
• Path dependency
Health Reform – Key Failed Attempts
at National Health Reform
• 1912 Progressive Party candidate Teddy Roosevelt
supported social insurance platform that included
health insurance
• 1915 American Association for Labor Legislation
proposal for working class health insurance
• President Truman supported national health reform
upon taking office, won re-election on national health
insurance platform in 1948
• President Nixon initial health reform proposal in
1969 and revised proposal in 1972
• President Clinton Health Security Act in 1993

18. The Affordable Care Act (ACA)
• Why did the Affordable Care Act pass when so
many prior attempts had failed?
– Commitment and leadership
– Learned lessons from past failures
– Political pragmatism
The Affordable Care Act (ACA)
• Individual Mandate: most people have to
purchase health insurance or pay a penalty
starting in 2014
– Exemptions for certain populations and based on
affordability
• Controversy
– Too much government interference in private
lives?
– Constitutional?
The Affordable Care Act (ACA)
• State Health Insurance Exchanges

19. – American Health Benefit Exchanges for
individuals
– Small Business Health Options program for small
businesses
– Must offer essential health benefits (Abortion
compromise)
– Four cost levels for plans based on actuarial value
The Affordable Care Act (ACA):
Premium and Cost Sharing Subsidies
• Premium tax credits available for individuals who
purchase insurance in an exchange and have income
between 133%–400% of poverty
• Cost sharing subsidies available for individuals who
purchase insurance in an exchange and have income
up to 250% of poverty
• To quality, must be a US citizen or legal resident,
not eligible for any type of public insurance, and not

20. have access to employer-sponsored insurance
The Affordable Care Act (ACA):
Employer Mandate
• In 2014, employers with 50 or more employees
must provide affordable health insurance or
pay a penalty
– Insurance is affordable if it has an actuarial value
of at least 60% or is not more than 9.5% of an
employee’s income
– Penalty is per employee after first 30 employees
The Affordable Care Act (ACA)
• Private Insurance Market Changes
– No pre-existing condition exclusion
– Dependent coverage to age 26
– Preventive services without cost sharing
– Prohibitions against lifetime and annual coverage

21. limits
– No rescission without fraud
– New appeals process
– Premium rate reviews
The Affordable Care Act (ACA)
• Private Insurance Market Changes, cont.
– Guaranteed issue and renewability
– Rate variation limits
– Essential health benefits
– Wellness plans
• Some plans may be grandfathered in and not
subject to all of these changes
The Affordable Care Act (ACA):
Financing health reform
• Changes to Medicare provider reimbursement
• Changes to Medicare Advantage
reimbursement

22. • Medicare Part A increases for high earners
• Changes in Medicare Part D subsidies
• Changes in Medicare employer subsidy
The Affordable Care Act (ACA):
Financing health reform
• Changes in Disproportionate Share payments
• Increase Medicaid prescription drug rebate
paid by manufacturers
• Income tax code changes
• Health industry fees
• Tax on high cost health insurance plans