This document provides an overview of major public health insurance programs in the United States, including Medicaid, CHIP, and Medicare. It discusses eligibility requirements, covered benefits, financing structures, and changes made by the Affordable Care Act. The document also examines quality control measures like licensing and accreditation. It describes efforts to define and improve healthcare quality, as well as legal standards and theories of liability for medical negligence. Federal preemption of state laws by ERISA is also summarized.

1. CHAPTER 11
GOVERNMENT
HEALTH
INSURANCE
PROGRAMS:
MEDICAID,
CHIP, AND
MEDICARE

2. Chapter Overview
 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
(ACA).
 Focuses on:
 Medicaid
 Children’s Health Insurance Program (CHIP)
 Medicare

3. Entitlements Versus 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—Defined sum of money (often
from the federal government to the states) is
allocated for a particular program over a
certain period of time. Beneficiaries may be
refused service for lack of funds or other
reasons. There is no legal entitlement to the
benefits.

4. 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.

5. Medicaid: Eligibility
 Medicaid generally covers low-income:
– Pregnant women
– Children
– Adults in families with dependent children
– Individuals with disabilities
– Elderly
 Must meet five eligibility requirements: categorical,
income level, resources, residency, and immigration
status

6. 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
three benchmark or benchmark-equivalent
options to set their benefit package.

7. 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 receiving 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

8. Medicaid: Provider
Reimbursement
 Reimbursement levels vary by state and type of
provider.
 States have a lot of discretion in setting rates
 Fee-for-service providers paid on a state-determined
fee schedule
 Managed care providers paid according to contracts
between the state and managed care organization
 Medicaid reimbursement is typically much lower than
private insurance or Medicare reimbursement

9. 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 promoting the objectives” of Medicaid
 Use states as “policy laboratories” to test health reform ideas
 Health Insurance Flexibility and Accountability Act

10. ACA 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
 All children 6–19 at 133% of poverty
 Immigrants have 5-year bar; states have
option to cover legal immigrant pregnant
women and children who have been in the
country less than 5 years

11. ACA 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 2 years; phases down to covering 90% by 2020
 States have a maintenance of effort requirement for
adults and children

12. 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;
authorization through 2019, separate bills fund through
2027
 All states participate in CHIP

13. 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 options are used by the states

14. 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
 Rebased every 2 years to reflect actual use
 Higher cost sharing allowed as compared with
Medicaid

15. 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.

16. CHIP: Benefits
(1 of 2)
 CHIP programs must provide “basic” benefits.
 Inpatient and outpatient hospital care
 Physician services
 Laboratory
 X-ray
 Well-baby and well-child checkups
 Dental coverage or dental-only supplemental coverage
 CHIP programs may provide additional benefits
such as prescription drugs, mental health,
vision, and hearing.

17. CHIP: Benefits
(2 of 2)
 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.

18. 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 may also use waiver for premium
assistance.

19. 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

20. 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
 Has end-stage renal disease

21. Medicare: Benefits
(1 of 2)
 Medicare split into four 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

22. Medicare: Benefits
(2 of 2)
 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
arrangement

23. Medicare: Financing
(1 of 2)
 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

24. Medicare: Financing
(2 of 2)
 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
 Monthly premiums, deductibles, and cost-sharing paid by beneficiaries
 State payments for dual enrollees

25. Medicare: Provider Reimbursement
 Physicians
 Fee-for-service basis according to a Medicare fee schedule
 Hospitals
 Prospective payment system based on diagnosis
 Diagnostic-related groups for inpatient care
 Ambulatory payment classification for outpatient care
 Managed care
 Capitated rate negotiated by the federal government

26. ACA Changes to Medicare
 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

27. Chapter 12
HEALTHCARE
QUALITY
POLICY AND
LAW

28. Chapter Overview
(1 of 2)
 Discusses licensure and accreditation in the
context of healthcare quality
 Describes the scope and causes of medical
errors
 Describes the meaning and evolution of the
medical professional standard of care
 Identifies and explains certain state-level legal
theories under which healthcare professionals
and entities can be held liable for medical
negligence

29. Chapter Overview
(2 of 2)
 Explains how federal employee
benefits law often preempts medical
negligence lawsuits against insurers
and managed care organizations
 Describes recent efforts to measure
and incentivize high-quality health
care

30. Quality Control Through
Licensing and Accreditation
(1 of 3)
 Licensing of healthcare professionals and
institutions is an important function of state law,
as it filters out those who may not have the
requisite knowledge or skills to practice medicine
 State licensure laws define the qualifications
required to become licensed and the standards
that must be met for purposes of maintaining
and renewing licenses

31. Quality Control Through
Licensing and Accreditation
(2 of 3)
 Historically, licensing has been used in the promotion of
healthcare quality in only the bluntest sense. This is because the
only method by which to promote quality through licensure is
the granting or denial of the license to practice medicine—no
real middle ground.
 Private professional and industry ethical and practice standards
exist, though their effect on day-to-day quality is debatable.
 State licensing schemes were designed not with healthcare
quality per se in mind, but rather with an eye toward protecting
the medical professions from unscrupulous or incompetent
providers and bad publicity.

32. Quality Control Through
Licensing and Accreditation
(3 of 3)
 Licensure plays an important role in defining the
permissible “scope of practice” of the various
types of healthcare providers.
 It is one thing for state legislators to define the
meaning of practice for various broad medical
fields, but quite another for legislators to define,
for example, the lawful activities of doctors as
compared to physician assistants as compared to
nurses.

33. Medical Errors
(1 of 3)
 Although medical errors are not a new problem,
framing the issue as a public health problem is a
relatively new phenomenon.
 Overall, more people die each year from medical
errors than from motor vehicle accidents, breast
cancer, or AIDS.

34. Medical Errors
(2 of 3)
 Causes of medical errors may include the failure to
complete an intended medical course of action,
implementation of the wrong course of action, use
of faulty equipment or products in effectuating a
course of action, failure to stay abreast of one’s
field of medical practice, health professional
inattentiveness, the fact that optimal treatments
for many illnesses are not yet known, and the
culture of medicine itself.

35. Medical Errors
(3 of 3)
 Policy makers have begun shifting their attention
to medical error reforms that are less reactive
and more centered on error prevention and
patient safety improvement.
 Two primary objectives of these reforms:
 Redesign healthcare delivery methods and structures
to limit the likelihood of human error.
 Prepare for inevitable errors that will occur in
healthcare delivery regardless of the amount and types
of precautions taken.

36. Promoting Healthcare Quality
Through the Standard of Care
(1 of 3)
 The professional standard of care is the legal
standard used in medical negligence cases to
determine whether health professionals and entities
have adequately discharged their responsibility to
provide reasonable care to their patients.
 A patient seeking to hold a health professional
responsible for substandard care or treatment must
demonstrate (1) the appropriate standard of care,
(2) a breach of that standard by the defendant, (3)
measurable damages, and (4) a causal link between
the defendant’s breach and the patient’s injury.

37. Promoting Healthcare Quality
Through the Standard of Care
(2 of 3)
 The standard has its origins in 18th-century English
common law.
 Courts in England established that a patient looking to
hold a physician legally accountable for substandard
care had to prove either that the doctor violated the
customs of his own profession as determined by
others within the profession (i.e., the “professional
custom rule”) or that the testimony provided on
behalf of a patient as to whether a physician’s actions
met the standard of care could only come from
physicians who practiced within the same or similar
locality as the physician on trial (i.e., the “locality rule”).

38. Promoting Healthcare Quality
Through the Standard of Care
(3 of 3)
 Over time, the standard was updated by courts.
 Courts now consider a range of relevant evidence in
addition to custom and today determine whether a
health professional’s treatment of a particular patient
rose to the standard of care is whether it was
reasonable given the “totality of circumstances.”
 A physician’s actions are now measured objectively
against those of a reasonably prudent and competent
practitioner under similar circumstances, not against
the actions of physicians who practice within a
particular defendant’s locality.

39. Tort Liability of Hospitals, Insurers,
and Managed Care Organizations
(1 of 3)
 Vicarious liability—where one party can be held
legally accountable for the actions of another
party based solely on the type of relationship
existing between the two parties
 Premised on principles of “agency” law, under which one party to
a relationship effectively serves as an agent of another party

40. Tort Liability of Hospitals, Insurers, and
Managed Care Organizations
(2 of 3)
 The general rule is that employers are not
vicariously liable for the improper actions of
independent contractors; however, courts have
developed exceptions to this rule—e.g., actual
agency and apparent agency—that are more
concerned with the scope of a relationship than
with the formal characterization of the
relationship as determined by the parties.

41. Tort Liability of Hospitals, Insurers, and
Managed Care Organizations
(3 of 3)
 Corporate liability—holds entities accountable for their
own “institutional” acts or omissions when their
negligence causes or contributes to an injury
 Several general areas give rise to litigation around
entities’ direct quality-of-care duties to patients:
 Failure to screen out incompetent providers
 Failure to maintain high-quality practice standards
 Failure to take adequate action against clinicians whose practices fall
below accepted standards
 Failure to maintain proper equipment and supplies

42. Federal Preemption of State
Liability Laws Under ERISA
(1 of 4)
 ERISA was established in 1974 to protect the employee
pension system from employer fraud.
 However, the law was drafted in such a way as to extend
to all employee benefits offered by ERISA-covered
employers, including health benefits.

43. Federal Preemption of State
Liability Laws Under ERISA
(2 of 4)
 ERISA implicates two different types of
preemption.
– Conflict preemption—when specific provisions of state law clearly
conflict with federal law, in which case the state law is superseded
– Field preemption—when courts interpret federal law to occupy an
entire field of law (e.g., employee benefit law), irrespective of
whether there are any conflicting state law provisions

44. Federal Preemption of State Liability
Laws Under ERISA
(3 of 4)
 ERISA’s conflict preemption provisions (preemption
clause, insurance saving clause, and deemer clause) are
more sweeping than any other federal preemption
provisions and have engendered an enormous amount
of litigation.

45. Federal Preemption of State
Liability Laws Under ERISA
(4 of 4)
 The U.S. Supreme Court has interpreted ERISA’s
field preemption provisions to be the exclusive
remedy for negligent administration of an
employee benefit plan covered by ERISA.
– This means that all other state remedies generally available to
individuals to remedy corporate negligence are preempted (thus
not available) to employees whose health benefits are provided
through an ERISA-covered plan.

46. Measuring and Incentivizing
Healthcare Quality
(1 of 4)
 As the single largest payer in the U.S. health
system, Medicare is a major national driver of
policy in other markets (both public and private).
Therefore, how the Medicare program addresses
issues pertaining to quality is important not only
to Medicare beneficiaries and providers but also to
other purchasers/insurers whose policies and
procedures are often driven by Medicare policy.

47. Measuring and Incentivizing
Healthcare Quality
(2 of 4)
 All payment systems (public and private) tend to
incentivize something, whether indiscriminate
increases in the volume of treatments and
services or indiscriminate reductions in volume.
 Whatever the payment arrangement, the
challenge is to promote both quality and value
while also apportioning financial risk
appropriately.

48. Measuring and Incentivizing
Healthcare Quality
(3 of 4)
 Congress has passed a series of laws (including the
ACA) designed to move the Medicare program from a
passive purchaser of volume-based health care to an
active purchaser of high-quality, high-value health
care.
 The ACA’s vision for improving quality focuses on:
 Quality measure development
 Quality measurement (including payment incentives)
 Public reporting
 Value-based purchasing

49. Measuring and Incentivizing
Healthcare Quality
(4 of 4)
 The ACA also requires the development of a
National Quality Strategy to improve the delivery
of healthcare services, patient health outcomes,
and population health.