government funded health care: medicare

Government funded Government funded health care:health care:

Medicare and MedicaidMedicare and Medicaid

Medicare and MedicaidMedicare and Medicaid

►Similarities:Similarities: Both are federally supported programs Both are federally supported programs

enacted in 1965 to provide health care enacted in 1965 to provide health care coverage to vulnerable populationscoverage to vulnerable populations

Services provided under each program Services provided under each program are mandated by the federal government, are mandated by the federal government, i.e. feds decide what gets covered under i.e. feds decide what gets covered under each program and state or local each program and state or local governments have no inputgovernments have no input

Differences in MCare & Differences in MCare & MCaidMCaid

►Population coveredPopulation covered Medicare provides services to elderly Medicare provides services to elderly

(over 65) and disabled(over 65) and disabled Medicaid provides services to poorMedicaid provides services to poor

►Funding mechanismFunding mechanism Medicare is funded totally by federal Medicare is funded totally by federal

governmentgovernment Medicaid cost is shared between federal Medicaid cost is shared between federal

government and individual statesgovernment and individual states

Other differencesOther differences

►Drug coverageDrug coverage Until recent law, Medicare did not Until recent law, Medicare did not

contribute to cost of prescribed drugscontribute to cost of prescribed drugs Medicaid covered prescribed drugs Medicaid covered prescribed drugs

MedicareMedicare

How does Medicare workHow does Medicare work

►Who is eligible?Who is eligible? Everyone in the U.S. over the age of 65 Everyone in the U.S. over the age of 65

who has paid threshold amount (40 who has paid threshold amount (40 quarters) into social securityquarters) into social security

People who are under age 65 and disabled People who are under age 65 and disabled based on criteria set up by Medicarebased on criteria set up by Medicare

Anyone with End Stage Renal Failure Anyone with End Stage Renal Failure requiring dialysisrequiring dialysis

Two parts to Medicare: Part ATwo parts to Medicare: Part A

Part A: hospital coveragePart A: hospital coverage Covered if patient or spouse has Covered if patient or spouse has

worked 40 or more quarters and paid worked 40 or more quarters and paid SS taxesSS taxes

Premium of $189/mo if worked 31-39 Premium of $189/mo if worked 31-39 quarters quarters

Premium of $343/mo if worked less Premium of $343/mo if worked less than 31 quartersthan 31 quarters

Part BPart B

Part B: outpatient coveragePart B: outpatient coverage►OptionalOptional►Recipient must contribute a Recipient must contribute a premium each month to maintain premium each month to maintain coverage ($93.53/month) plus $131 coverage ($93.53/month) plus $131 deductibledeductible

►Starting 2007, premium will be Starting 2007, premium will be ‘needs based’ – those earning more ‘needs based’ – those earning more than $80,000 a year ($160,000 for than $80,000 a year ($160,000 for a couple) will pay morea couple) will pay more

Part CPart C

►Covers up to 30 days of long-term careCovers up to 30 days of long-term care►Who pays after that? Who pays after that?

The patient (or no one if the patient can’t The patient (or no one if the patient can’t afford it)afford it)

Nursing homes at are risk for not getting Nursing homes at are risk for not getting paid after the 30 days of Part C run outpaid after the 30 days of Part C run out

That’s why it’s so hard to get Medicare That’s why it’s so hard to get Medicare patients into nursing homes!patients into nursing homes!

Part DPart D

►Medication coverageMedication coverage Started January 1, 2006Started January 1, 2006 Does not offer single drug plan: instead Does not offer single drug plan: instead

lets marketplace develop drug plans with lets marketplace develop drug plans with stated formularies and co-paysstated formularies and co-pays

Legislation specifically forbids federal Legislation specifically forbids federal government from using purchasing power government from using purchasing power to negotiate for reduced costs of drugsto negotiate for reduced costs of drugs

Part D Part D

►Patients must go to Web site and select Patients must go to Web site and select individual planindividual plan

►Patients directed to sign on by specified Patients directed to sign on by specified period to participate in planperiod to participate in plan

► If patient did not sign on by deadline, If patient did not sign on by deadline, there is a financial penalty to participate there is a financial penalty to participate in futurein future

►Benefits consist of payment for drugs up Benefits consist of payment for drugs up to $1,500 then catastrophic coverage to $1,500 then catastrophic coverage (>$3,000)(>$3,000)

Medicare growth: 1970-97Medicare growth: 1970-97(enrollees in millions; costs in billions)(enrollees in millions; costs in billions)

218

31

72

34

111

38

214

0

50

100

150

200

250

1970 1985 1990 1997

Enrolled Cost

81%

2,575%

Cost:$381/person

Cost:$5,631/person

Life expectancy at age 65Life expectancy at age 65

0

2

4

6

8

10

12

14

16

18

1960 1970 1980 1990 2000

Where does Medicare money Where does Medicare money go?go?

Acute care hospitals:Acute care hospitals: 48%48%

PhysiciansPhysicians 20%20%

Home healthHome health 9% 9%

Outpatient servicesOutpatient services 8% 8%

Skilled nursing home careSkilled nursing home care 6% 6%

Hospice careHospice care 1% 1%

Where does Medicare money Where does Medicare money go?go?

Acute care hospitals:Acute care hospitals: 48%48%PhysiciansPhysicians 20%20%Home healthHome health 9% 9%Outpatient servicesOutpatient services 8% 8%Skilled nursing home careSkilled nursing home care 6% 6%Hospice careHospice care 1% 1%Administrative overhead 0.7%Administrative overhead 0.7%ProfitProfit 0% 0%

What do you get?What do you get?►Hospital careHospital care

Medicare pays 80% of the Medicare Medicare pays 80% of the Medicare allowable allowable costs for “costs for “medically medically necessarynecessary” services” services

Patient has a $876 annual deductible Patient has a $876 annual deductible before Medicare pays anything (for before Medicare pays anything (for stays <60 days)stays <60 days)

►Ambulatory careAmbulatory care Only covered if recipient elects to pay Only covered if recipient elects to pay

for Part Bfor Part B Covers 80% of medically necessary Covers 80% of medically necessary

services after $100 annual deductibleservices after $100 annual deductible

What do you get?What do you get?

►Long term careLong term care Medicare only covers up to 30 days in a Medicare only covers up to 30 days in a

nursing homenursing home

►PharmaceuticalsPharmaceuticals Medicare only pays part of pharmacy Medicare only pays part of pharmacy

costs if patient enrolls in Part Dcosts if patient enrolls in Part D Part D supported by additional premium Part D supported by additional premium

from patient plus co-pay on medicationsfrom patient plus co-pay on medications

Medicare paymentsMedicare payments

►Who pays the other 20% that Medicare Who pays the other 20% that Medicare doesn’t coverdoesn’t cover The patient orThe patient or Private insurance either paid for by the Private insurance either paid for by the

patient (Medigap insurance) or by pension patient (Medigap insurance) or by pension planplan

►What is the “Medicare allowable cost”?What is the “Medicare allowable cost”? Whatever Medicare says it will pay for that Whatever Medicare says it will pay for that

service – Hint: it’s usually a lot lower than service – Hint: it’s usually a lot lower than you charge!you charge!

Who decides what is “medically Who decides what is “medically necessary”?necessary”?

►Medicare doesMedicare does►Some services are never coveredSome services are never covered►Others are covered on scheduled Others are covered on scheduled

timeline only timeline only Pap smear covered every year – but must Pap smear covered every year – but must

be more than 365 days!be more than 365 days! Mammogram covered every 2 yearsMammogram covered every 2 years

What does Medicare pay?What does Medicare pay?

►Depends on who you areDepends on who you are►Original Medicare fee schedule based Original Medicare fee schedule based

on usual and customary fee (UCF) in on usual and customary fee (UCF) in 1965 1965

►As new services were established, fee As new services were established, fee schedule based on providers’ schedule based on providers’ recommendationrecommendation

►Resulted in discrepancy between Resulted in discrepancy between cognitive services (pre-1965) and cognitive services (pre-1965) and most procedural services (post-1965)most procedural services (post-1965)

What if your fee is more than What if your fee is more than the “Medicare allowable”the “Medicare allowable”

►You can choose to “participate” in You can choose to “participate” in Medicare or be a “non-participating” Medicare or be a “non-participating” providerprovider

►Participating providers agree to Participating providers agree to accept the Medicare allowable as accept the Medicare allowable as their full compensation – can only bill their full compensation – can only bill patient the other 20%patient the other 20%

►Non-participating providers can bill Non-participating providers can bill the entire difference to the patientthe entire difference to the patient

Medicare reimbursementMedicare reimbursement

►Reimbursement has been revised Reimbursement has been revised periodically over last 40 yearsperiodically over last 40 years

►Payments to hospitals generally very Payments to hospitals generally very goodgood

►Payments to physicians generally badPayments to physicians generally bad►Reimbursement to MUSC/UMA doctors Reimbursement to MUSC/UMA doctors

from Medicare around 25% of chargesfrom Medicare around 25% of charges►Other insurers often base their payments Other insurers often base their payments

on Medicare fee schedule on Medicare fee schedule

Medicare reimbursement Medicare reimbursement reformreform

► In 1990, Medicare recognized disparity in In 1990, Medicare recognized disparity in reimbursementreimbursement

►Commissioned a study to look at the Commissioned a study to look at the relative worth of each service covered by relative worth of each service covered by MedicareMedicare

►Worth took into account amount of Worth took into account amount of training needed for the service, time training needed for the service, time required, risk inherent in the service, and required, risk inherent in the service, and other factors other factors (study done at Harvard and (study done at Harvard and headed by Bill Hsaio)headed by Bill Hsaio)

RBRVSRBRVS

►What was developed was the “Resource What was developed was the “Resource based Relative Value System”based Relative Value System”

►Each service assigned an RVU (relative Each service assigned an RVU (relative value unit)value unit)

►Rationale behind RVU: something that Rationale behind RVU: something that either requires twice as much training, either requires twice as much training, time or risk should be paid twice as time or risk should be paid twice as muchmuch

Payment reformPayment reform

► Idea was to gradually shift Medicare Idea was to gradually shift Medicare payment from arbitrary amounts to payment from arbitrary amounts to some multiple of RVU.some multiple of RVU.

►Each year Medicare raising rates for Each year Medicare raising rates for underpaid services and reducing underpaid services and reducing payment for overvalued servicespayment for overvalued services

Examples of RVUsExamples of RVUs

►RVUs for new patient visitsRVUs for new patient visits

9920299202 New patient, briefNew patient, brief 1.671.67

9920399203 New patient, limitedNew patient, limited2.392.39

9920499204 New patient, extendedNew patient, extended3.473.47

9920599205 New patient, comprehensive New patient, comprehensive 4.384.38

Other RVUsOther RVUs

9921299212 Est patient, briefEst patient, brief 0.940.949921399213 Est patient, limitedEst patient, limited 1.321.329921499214 Est patient, extendedEst patient, extended 2.062.069921599215 Est patient, comprehenEst patient, comprehen 3.063.06

9922199221 Brief hospital admissionBrief hospital admission 1.871.879922299222 Moderate hospital admitModerate hospital admit 3.073.079922399223 Complex hospital admitComplex hospital admit 4.204.20

So how does this work?So how does this work?

►You submit your bill with the You submit your bill with the appropriate CPT code (eg. 99214)appropriate CPT code (eg. 99214)

►Medicare then multiplies the RVUs by a Medicare then multiplies the RVUs by a conversion factor (2006= conversion factor (2006= $37.8975/RVU) and that’s what is $37.8975/RVU) and that’s what is “reasonable cost”“reasonable cost”

►But what determines if a visit is a But what determines if a visit is a 99212 or a 99214? – Medicare has 99212 or a 99214? – Medicare has rules for that!rules for that!

Upcoming changes in RVUsUpcoming changes in RVUs

► CMS updates RVUs periodicallyCMS updates RVUs periodically► For 2007, CMS changed for RVUs for several For 2007, CMS changed for RVUs for several

services (called CPT codes).services (called CPT codes).► RVUs of several procedure codes decreased RVUs of several procedure codes decreased

and RVUs for routine E&M codes increasedand RVUs for routine E&M codes increased► Projected impact of these on payments vary: Projected impact of these on payments vary:

Nuclear med - 6.34%Nuclear med - 6.34% Diag Rad - 0.07%Diag Rad - 0.07%

Dermatology 2.80% Dermatology 2.80% Opthalmol 5.08%Opthalmol 5.08%

Hem/Onc 20.91% Hem/Onc 20.91% Fam Med 25.27%Fam Med 25.27%

Hospital payment: Prospective Hospital payment: Prospective payment (DRG) systempayment (DRG) system

► In 1983, Medicare changed way it In 1983, Medicare changed way it reimbursed hospitals for carereimbursed hospitals for care

►Prior to 1983, Medicare paid fee-for-Prior to 1983, Medicare paid fee-for-service based on charges service based on charges Medicare paid more for long stays or Medicare paid more for long stays or

excessive use of diagnostic servicesexcessive use of diagnostic services

► In 1983, Medicare started paying In 1983, Medicare started paying based on “Diagnostic Related Groups”based on “Diagnostic Related Groups” Shifted risk of cost to hospitalsShifted risk of cost to hospitals

What is a DRG?What is a DRG?

►DRGs are the 500 most common DRGs are the 500 most common reasons why people are hospitalizedreasons why people are hospitalized

►Eg. “Myocardial infarction without Eg. “Myocardial infarction without complication” is assigned a DRG codecomplication” is assigned a DRG code

►Every time a Medicare recipient is Every time a Medicare recipient is hospitalized with this diagnosis, the hospitalized with this diagnosis, the hospital gets a set fee (~$2,400)hospital gets a set fee (~$2,400)

► If the hospital’s cost is less than If the hospital’s cost is less than $2,400 then they make a profit; if it $2,400 then they make a profit; if it exceeds $2,400 then these lose exceeds $2,400 then these lose moneymoney

Example DRGSExample DRGS

DRG Dx Reimbursement LOS DRG Dx Reimbursement LOS 391 Normal newborn $622 2.3391 Normal newborn $622 2.3127 Heart failure/shock $4,154 5.5127 Heart failure/shock $4,154 5.5143 Chest pain $2,158 2.3143 Chest pain $2,158 2.388 COPD $3,907 5.488 COPD $3,907 5.488 Simple pneumonia $4,444 6.388 Simple pneumonia $4,444 6.3

(based on 2001 data)(based on 2001 data)

How are DRG costs set?How are DRG costs set?

►Based on average cost of caring for Based on average cost of caring for patient with that clinical conditionpatient with that clinical condition

►Adjusted for local differences in costsAdjusted for local differences in costs►Adjusted for teaching hospital statusAdjusted for teaching hospital status►Adjusted for disproportionate share Adjusted for disproportionate share

of caring for poorer patientsof caring for poorer patients►Not applied for “outliers”, defined as Not applied for “outliers”, defined as

people whose episode of care is very people whose episode of care is very long or extremely expensivelong or extremely expensive

Might get reports like thisMight get reports like this

127 HEART FAILURE & SHOCK Number of DRG 24

Total LOS 66

Average LOS 2.8

Total Charges$105,164.0

0

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

Shift in Medicare concernsShift in Medicare concerns

►Prior to 1983, Medicare hired utilization Prior to 1983, Medicare hired utilization reviewers to make sure patients were not reviewers to make sure patients were not staying too long or getting too many testsstaying too long or getting too many tests

►After 1983, Medicare shifted emphasis to After 1983, Medicare shifted emphasis to assure that patients were not being assure that patients were not being discharged too quickly by hospitalsdischarged too quickly by hospitals

►Unintended consequence of DRG was the Unintended consequence of DRG was the birth and flourishing of “home health birth and flourishing of “home health care”care”

Other feature of Medicare: Other feature of Medicare: GMEGME

►Gov’t provides an add-on to teaching Gov’t provides an add-on to teaching hospitals to pay for GME (residency) hospitals to pay for GME (residency) trainingtraining

►Hospitals get a premium (25-40%) Hospitals get a premium (25-40%) increase in every DRG depending on increase in every DRG depending on the number and types of residents in the number and types of residents in their hospitaltheir hospital Direct training expenses: salaries, call Direct training expenses: salaries, call

rooms, etc.rooms, etc. Indirect training expenses: added cost of Indirect training expenses: added cost of

care to patient because residents are care to patient because residents are caring for themcaring for them

Future of MedicareFuture of Medicare►Payment will be linked to quality of Payment will be linked to quality of

serviceservice Hospitals that provide good care will get Hospitals that provide good care will get

“raises”“raises” Hospitals that provide poor care will get Hospitals that provide poor care will get

reimbursement decreasedreimbursement decreased Results of quality measures will be made Results of quality measures will be made

publicpublic►Next initiative to look at physician quality Next initiative to look at physician quality

(P4P = pay for performance)(P4P = pay for performance) Currently, standards for good care being Currently, standards for good care being

developeddeveloped

Report cardsReport cards

►Medicare has started public web sites Medicare has started public web sites so that consumers can compare so that consumers can compare hospital performance for several hospital performance for several diseasesdiseases

►We can look today at We can look today at www.HospitalCompare.hhs.govwww.HospitalCompare.hhs.gov and and compare hospitals in the same citycompare hospitals in the same city

► In the near future, patients will be able In the near future, patients will be able to do the same and compare doctorsto do the same and compare doctors

MedicaidMedicaid

MedicaidMedicaid

►Federal-state partnershipFederal-state partnership►Federal gov’t matches money put up Federal gov’t matches money put up

by stateby state►Match depends on program and wealth Match depends on program and wealth

of stateof state►Ranges from a 2/1 match ($2 fed/$1 Ranges from a 2/1 match ($2 fed/$1

state) to a 4/1 matchstate) to a 4/1 match

Program available for M’caidProgram available for M’caid

►AFDC (Aid to Families with Dependent AFDC (Aid to Families with Dependent Children) Children)

►SCHIP (state children’s health SCHIP (state children’s health insurance program)insurance program)

►Family planning servicesFamily planning services►HIV care coverageHIV care coverage►Disability coverageDisability coverage

Medicaid Payments (1997)Medicaid Payments (1997)

►Nursing homesNursing homes 25%25%► Inpatient general hospitalInpatient general hospital 19%19%►Mentally retarded intermedMentally retarded intermed

care facilitiescare facilities 8% 8%

►Prescribed drugsPrescribed drugs 10%10%►Home healthHome health 10%10%►Other careOther care 9% 9%►PhysiciansPhysicians 6% 6%

Medicaid fundingMedicaid funding

►Total amount of funding for state Total amount of funding for state depends on how wealthy they are (for depends on how wealthy they are (for match) and how much they put upmatch) and how much they put up

►Poorer states that can afford to put up Poorer states that can afford to put up less money for Medicaid then have less less money for Medicaid then have less to spend for servicesto spend for services

►So how do they provide care for So how do they provide care for Medicaid recipients if they have less Medicaid recipients if they have less money?money?

Dealing with lack of MCaid Dealing with lack of MCaid fundsfunds

►Because services covered by Medicaid Because services covered by Medicaid are mandated by federal government, are mandated by federal government, cannot cut back on what is available to cannot cut back on what is available to patientspatients

►Only ways to deal with less money: Only ways to deal with less money: Cover fewer people Cover fewer people Pay less for servicePay less for service

Eligibility requirementsEligibility requirements

►Usually set at different levels for Usually set at different levels for different servicesdifferent services AFDC usually most restrictiveAFDC usually most restrictive Pregnancy covered up to 185% of FPLPregnancy covered up to 185% of FPL sCHIP covered up to 200% of FPLsCHIP covered up to 200% of FPL HIV care covered regardless of incomeHIV care covered regardless of income

Medicaid paymentsMedicaid payments

►Usually very little compared to private Usually very little compared to private payerspayers

►Often less than even Medicare Often less than even Medicare payments for same servicespayments for same services

►Results in fewer doctors wanting to Results in fewer doctors wanting to care for Medicaid patients (less access care for Medicaid patients (less access to care)to care)

How do states stack upHow do states stack up

http://www2.citizen.org/hrg/medicaid/http://www2.citizen.org/hrg/medicaid/

Oregon Health PlanOregon Health Plan

► In mid-1990’s, Oregon proposed a In mid-1990’s, Oregon proposed a new way of offering Medicaid (and new way of offering Medicaid (and health coverage in general)health coverage in general)

► Instead of restricting eligibility, they Instead of restricting eligibility, they proposed to make everyone eligible proposed to make everyone eligible but limit what they paid forbut limit what they paid for

►And what they would cover, they And what they would cover, they would pay for well so that patients would pay for well so that patients would have accesswould have access

The Oregon PlanThe Oregon Plan

►Put together their plan based on the Put together their plan based on the threat to health and evidence of benefit threat to health and evidence of benefit of treatment and ranked all common of treatment and ranked all common health care serviceshealth care services

►Provide coverage to everyone under Provide coverage to everyone under the federal poverty level for all the federal poverty level for all approved servicesapproved services

►Decide how far down on the list the Decide how far down on the list the state could go based on the funding state could go based on the funding providedprovided

Example of the listExample of the list

1.1. Pneumococcal PneumoniaPneumococcal Pneumonia2.2. Acute AppendicitisAcute Appendicitis3.3. ………………81. Otitis media age > 6 month81. Otitis media age > 6 month82. Acne vulgaris82. Acne vulgaris83. Ingrown toenails83. Ingrown toenails84. Plantar fasciitis84. Plantar fasciitis85. Tinea capitus85. Tinea capitus

Legislature provides $200 Legislature provides $200 millionmillion


Legislature provides $210 Legislature provides $210 millionmillion


Other key component of planOther key component of plan

►Plan required all Oregon employers to Plan required all Oregon employers to offer either insurance that covered the offer either insurance that covered the same service of Medicaid same service of Medicaid

►Or employers could pay state Or employers could pay state equivalent of Medicaid cost and equivalent of Medicaid cost and employees would be covered by employees would be covered by MedicaidMedicaid

Future of MedicaidFuture of Medicaid

►States struggling to fund Medicaid costsStates struggling to fund Medicaid costs Most have moved to restrictive drug access Most have moved to restrictive drug access

such as formularies or pre-authorizationsuch as formularies or pre-authorization Many states have mandated managed care for Many states have mandated managed care for

Medicaid or offered patients incentives to Medicaid or offered patients incentives to participate in managed care programsparticipate in managed care programs

►Access continuing to be an issue because Access continuing to be an issue because of poor paymentof poor payment

government funded health care: medicare

Health & Medicine