Transcript No Slide Title

Medicare 101
Presented by
Tricia Neuman, Sc.D.
Vice President and Director,
Medicare Policy Project
The Henry J. Kaiser Family Foundation
KaiserEDU.org Tutorial
January 2005
Overview
Exhibit 1
Medicare Today
•
Enacted in 1965 to provide health and economic security to seniors
– Expanded in 1972 to cover younger beneficiaries with permanent
disabilities
•
Covers 41 million people
– 35 million elderly, 6 million under-65 disabled
•
Individuals age 65+ are entitled to Medicare (Part A) if they are eligible to
receive Social Security
– Contribute portion of payroll tax throughout working lives to get
Medicare
– Pay monthly premium for Medicare Part B
– Individuals eligible without regard to income or medical history
•
Program now has parts A,B,C; by 2006, a new part D
– Part A – Hospital and skilled nursing care
– Part B – Physician and outpatient hospital care
– Part C – HMOs/Medicare Advantage
– Part D – Outpatient prescription drug coverage begins January 2006
•
Medicare is a popular program; enjoys broad public support and high
satisfaction levels among seniors
The Medicare Population
Exhibit 2
Medicare Covers a Population with Diverse Needs and
Significant Vulnerabilities
Percent of total Medicare population:
Low Income (<150% FPL or
37%
less than $13,965, 2004)
31%
1+ Functional Limitation
29%
Fair/Poor Health
24%
Rural
23%
Cognitive Impairment
Under-65 Disabled
Nursing Home/ Assisted
Living Resident
14%
6%
SOURCE: Medicare Current Beneficiary Survey, 1997-2002; Low-income estimate from
Urban Institute based on March 2003 Current Population Survey.
Exhibit 3
A Small Share of Beneficiaries Account for Majority
of Medicare Expenditures (1999)
Percent of Beneficiaries
6%
9%
Percent of Expenditures
15%
49%
37%
$25,000 or More
$10,000-$24,999
$1,000-$9,999
$1-$999
75%
26%
48%
22%
3%
Total = 29.2 million beneficiaries
Total = $166.7 billion
Note: Totals exclude Medicare beneficiaries with no expenditures in 1999 and
beneficiaries enrolled in Medicare+Choice plans and payments made on their
behalf.
SOURCE: CMS, Medicare and Medicaid Statistical Supplement, 2001.
Medicare Benefits, Spending,
and Financing
Exhibit 4
Medicare Benefit Payments, by Type of Service, FY 2004
Other Part B
Benefits
Hospital
Outpatient
5%
Physicians and
Other
Suppliers
5%
Hospital
Inpatient
39%
Part A
26%
Part B
Parts A and B
5%
4%
Home Health
Total = $295 billion
14%
Skilled
Nursing
Facilities
2%
Managed Care
Hospice
(Part C)
Note: Does not include administrative expenses. Excludes Part D low-income subsidy
payments.
SOURCE: CBO, Medicare Baseline, March 2004.
Exhibit 5
Sources of Medicare Revenue, Parts A and B, 2003
Payroll Tax
51%
General
Revenue
75%
85%
Premiums
Interest and
Other Income
30%
9%
24%
5%
2%
Part A: $175.8 billion*
Part B: $115.8 billion
Supplementary
Medical Insurance
Trust Fund
Hospital Insurance
Trust Fund
10%
6%
Taxation of
Benefits
3%
Part A and B:
$291.6 billion
Combined
Revenues
* Additional 2% of Part A income attributed to premiums, general revenue, and other.
Note: Numbers may not total 100% due to rounding.
SOURCE: 2004 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplementary Medical Insurance Trust Funds.
Exhibit 6
Medicare Represents 13 Percent of the Federal Budget
Medicare
13%
Discretionary
Spending
39%
Net Interest
Minus
Offsetting
Receipts*
2%
Medicaid
8%
Social Security
21%
Other
Mandatory
Spending
17%
Total Federal Budget = $2.3 Trillion, FY 2004
*Includes net interest on the federal government’s debt minus fees and other
charges that are collected without annual appropriations action.
SOURCE: Congressional Budget Office, September 2004 Baseline Budget Projections.
Gaps in Coverage, Benefits, and
Out-of-Pocket Spending
Exhibit 7
Gaps in Medicare Coverage
• Benefit Gaps
– No outpatient drug benefit (until 2006)
– Limited long-term care
– No hearing aids, eyeglasses, or dental care
• High cost-sharing requirements
– Part A deductible ($912/benefit period in 2005)
– Part B monthly premium ($78.20/month in 2005)
– Income-relating the Part B premium (beginning in 2007)
• Medicare pays for about half of all beneficiary health care
spending
• Nearly 9 in 10 rely on supplemental insurance to fill gaps
Exhibit 8
Most Medicare Beneficiaries Have Some Form of
Supplemental Coverage
Medigap
23%
EmployerSponsored
34%
Medicare only
14%
Other public
2%
Medicare Medicaid
14%
HMO
13%
Total = 39.6 million non-institutionalized
Medicare beneficiaries in 2002
Note: Estimates are based on aged and disabled Medicare beneficiaries living in a
community setting. Individuals with both employer-sponsored coverage and individuallypurchased Medigap policy are classified as having employer-sponsored coverage.
SOURCE: Medicare Beneficiary Survey, Cost and Use File, 2002.
Exhibit 9
Medicare HMO Enrollment Has Waxed and Waned,
with Some Uncertainty About the Future
Number of Medicare Advantage Plans, 1992-2013
35%
32%
% of Beneficiaries in MA Plans
30%
CMS
25%
CBO
20%
13%
15%
10%
5%
Projected
Actual
0%
1992
1994
1996
1998
2000
2002
2004
2006
2008
Note: All actual data are from December of the given year, except 2004 from March.
SOURCE: Actual: CMS, Medicare Managed Care Contract (MMCC) Plans Monthly
Summary Report. Projections: CBO testimony before the Committee on Ways and
Means, US House of Representatives, March 24, 2004.
2010
2013
Prescription Drugs and the MMA
Exhibit 10
Context for New Medicare Drug Law
• Seniors rely heavily on prescription drugs
– 98% of seniors nationwide take prescription drugs
– Nearly half of seniors (46%) take 5 or more prescriptions per
month
• Many lack prescription drug coverage
– 43% lack drug coverage for the full year or part year
• Drug coverage matters
– Among seniors with heart failure, diabetes, or hypertension,
those without drug coverage skip doses of medicine at
twice the rate of those with drug coverage
• Annual Medicare beneficiary out-of-pocket drug spending has
been rising
– $600 in 2000, $999 in 2003, and an estimated $1,457 in 2006
SOURCES: Stuart and Briesacher, estimates based on 2000 MCBS;
Kaiser/Commonwealth/Tufts-New England Medical Center 2003 National Survey of
Seniors and Prescription Drugs; Out-of-pocket spending data for 2006 from
Congressional Budget Office, July 2004.
Exhibit 11
Overview of Medicare Prescription Drug
Improvement, and Modernization Act of 2003 (MMA)
Phase 1 – 2004 and 2005
– Medicare-approved discount drug cards
– $600 annual drug subsidy for low-income seniors (<135%
poverty or $12,569/year)
Phase 2 – Begins in 2006
– Drug benefit to be offered by private plans
• Beneficiaries expected to have choice of 2+ plans;
• May sign up beginning November 15, 2005
– Plans provide standard benefit or actuarial equivalent. In
2006: $250 deductible, 25% coinsurance up to $2,250 in
total Rx costs; 100% coinsurance up to $5,100 in total Rx
costs, then 5% coinsurance
– Premium estimated to be $35/month in 2006
– Formularies, cost-sharing structure, premiums expected
to vary
– Generous subsidies for low income
Exhibit 12
Key Questions About New Drug Law
• Who will sponsor new private drug-only plans, where,
and for how long?
• What will Medicare prescription drug benefit
packages look like, which drugs will be covered, and
how much will monthly premiums be?
• Will beneficiaries sign up for Part D? Will seniors
with low-income apply for (and receive) subsidies?
• Can the new benefit be implemented -- without major
glitches – given the magnitude of changes that need
to occur between now and January 1, 2006?
Future Challenges
Exhibit 13
The Medicare Population Will Nearly Double
in Next Quarter of Century
Millions of Beneficiaries:
79.0
71.5
62.4
54.0
24.8
34.3
31.1
28.4
42.7
39.7
37.6
46.9
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
SOURCE: CMS, Office of the Actuary, January 2003.
Exhibit 14
Prescription Drugs Represent a Relatively Small Share of
Beneficiaries’ Out-of-Pocket Spending
Long-Term
Care
41%
Private
Health
Insurance
Premium
Dental
21%
10%
Home Health*
1%
Prescription
Drugs 21%
Inpatient Hospital/SNF
4%
Outpatient Services
5%
Medicare
Physician/ Part B
Supplier Premium
15%
18%
Total Out of Pocket Spending, 1999 = $115 billion
*For home health services not covered by Medicare. Data are for both fee-for-service and
Medicare+Choice enrollees. Total per capita out-of-pocket spending (excluding Part B
premiums and private health insurance premiums) is $1,825.
SOURCE: Medicare Beneficiary Survey, Cost and Use File, 1999
Exhibit 15
Major Policy Challenges Facing Medicare
• Implementing the new Medicare prescription drug benefit
by 2006
• Strengthening protections for low-income, chronically ill,
and otherwise vulnerable beneficiaries
• Setting fair payments while serving as a fair and reliable
business partner for health plans and providers
• Securing Medicare financing for future generations
– While keeping health care affordable for seniors and
beneficiaries with disabilities who rely on the program