Classen_HealthEcon_Class21

Classen_HealthEcon_Class21 - Public Programs for Health...

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Unformatted text preview: Public Programs for Health Care Public Programs for Health Care Class 21 Loyola University Chicago Prof. Tim Classen March 18, 2011 Class Outline Public Programs in Health Care Training Public Health Insurance Public Programs for Public Programs for Medical Care Reasons for Intervention Risk sharing (Govt as insurer) Equity Market Failures Supply Side (Providers, hospitals) Demand side (Insurance) Types of Public Programs Incentive Effects Problems/Concerns and Scheduled Reforms Federal and State Governments now pay over $1 trillion annually for health care services Types of Public Health Care Types of Public Health Care Interventions Demand side Subsidize insurance via tax system Medicare for elderly and disabled Medicaid for certain low income groups CHIP for lower income children and in some cases parents Supply side Community health centers VA system Subsidies to educate providers Subsidies to build facilities NIH research What lies behind a role for What lies behind a role for government health programs? Externalities Public health – reduce spread of disease & improve productivity Transmittable diseases impose costs on others, so govt. may intervene to limit spread of communicable diseases (AIDS, tuberculosis, etc.) Concern over suffering of others (disabled, poor, elderly) Market failures Immunizations Clean water No private firms willing to supply health insurance for elderly or disabled (Medicare/Medicaid) Large positive spillovers from medical research, but too costly for private firms (NIH) Costs of Public Programs for Costs of Public Programs for Health Insurance Program costs at core are a function of N = number of enrollees (eligibility) P = price paid for services (reimbursement rates) Q = amount of services (extent of coverage) C = N*(P*Q) + Administrative costs How to reduce/control costs: Reduce N by changing eligibility, increasing the costs of enrolling (eliminate presumptive eligibility; require more evidence of income, increase frequency of need to establish eligibility.) Reduce P via reimbursement (or shift greater share to patient) Reduce Q by changing reimbursement to capitation; requiring utilization review; threatening to eliminate providers from eligibility to participate in plan based on profile Contracting for services at only certain locations. Making obtaining care more costly in terms of time (to get appointment, to get to provider, wait) Medicare Coverage Medicare Coverage Medicare Part A (40% of expenses, 77% of enrollees) Medicare Part B (27% of expenses) Hospital Insurance $461/month premium (not paid by 99% of beneficiaries w/ 10 years employment) $1,100 deductible First dollar coverage, but not catastrophic (no copay for first 60 days, $275/day for 60­89, $550/day for 90­150, no coverage after 150 days) Funded by 2.9% payroll tax (1.45% from employer & employee each) Supplemental Medical Insurance (physician & outpatient services) Monthly premium of $96.40 (or higher for high income) & 20% copay ¼ receive assistance for $0 premium (dual eligibles w Medicaid) Medicare Advantage – Private plans (HMO, PPO or private FFS) Receive capitated payments to provide Medicare benefits Prescription Drug Coverage Monthly premium around $30 (vary by plan) Medicare Part C (21% of expenses, 23% of enrollees) Medicare Part D (11% of expenses) Estimated Sources of Medicare Revenue, 2010 Payroll Taxes 40% 7 3% General Revenue 85% 39% 77% Beneficiary Premiums Payments from States Taxation of Social Security Benefits 12% 3% 4% 2% 7% 7% 1% 2 5% PART B $196 Billion 2% 11% 13% PART D $66 Billion I nterest and Other TOTAL $499 Billion PART A $237 Billion Medicare Expenditures Medicare Expenditures Standard Medicare Prescription Drug Benefit, 2010 Enrollee pays 5% 15% paid by plan; 80% paid by Medicare 25% reach donut hole. Reform to reduce drug prices in donut hole and eventually reduce enrollee payments to 25% of drug costs. Catastrophic coverage limit: $6,440 in total drug costs ($4,550 out­of­pocket) Beneficiaries with spending in the doughnut hole get $250 rebate in 2010 100% paid by enrollee Coverage gap: $3,610 Coverage Gap (“Doughnut Hole”) Initial coverage limit: 25% paid by enrollee 75% paid by plan 100% paid by enrollee $2,830 in total drug costs ($940 out­of­pocket) Deductible: $310 SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit in 2020 under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. M edicare Spending as a Share of Total Federal Outlays, FY2010 Defense Discretionary 19% Social Security 20% Nondefense Discretionary 19% Medicare 13% Net I nterest 5% Other 16% Medicaid and SCHI P 8% 2010 Total Outlays = $3.5 trillion SOURCE: OMB, Fiscal Year 2010 Budget, February 2009. Budget Sum mary by Category. Share of Medicare in economy Share of Medicare in economy will reach 10% by 2060 Share of Federal Spending on Share of Federal Spending on Health Care is Growing Medicare Advantage Enrollment, 1999­2009 Enrollment in millions: Total Medicare Advantage 10.1 10.8 Private Fee­ for­ Service Nearly 2/3 in local HMOs, large growth in private FFS which now makes up 22% of Medicare Advantage enrollees. 9.0 Costs are 15% higher than FFS 7.6 6.9 6.8 6.1 6.1 5.5 5.5 5.3 0.2 0.9 1.7 2.3 2.4 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 NOTE: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts, Demonstrations, HCPP, and PACE. SOURCE: Kaiser Family Foundation, based on Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription Drug Plans Monthly Report” December 1999­2007. CMS Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report, Monthly Summary Report, July 2008, February 2009. Medicare Beneficiaries as a Share of the U.S. Population, 1970-2030 The U.S. population will age rapidly through 2030, when 22 percent of the population will be eligible for Medicare. 25 65 & Over Disabled 22.0% 20 Percent of Population 18.5% 15.0% 2.4 2.7 2.4 15 10 9.5% 12.1% 1.3 13.1% 1.2 13.9% 1.9 5 9.5 10.8 11.9 12.0 12.6 15.8 19.5 0 Total Number of Medicare Beneficiaries: (millions) 1970 20.4 1980 28.4 1990 34.3 2000 39.6 2010 46.5 2020 61.6 2030 78.6 Source: Social Security Administration, Office of the Actuary. Median Out­of­Pocket Health Care Spending As a Percentage of Income Among Medicare Beneficiaries, 1997–2005 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 5.5% 5.3% 4.2% 5.4% 4.4% 5.5% 4.9% 6.0% 5.2% 6.5% 5.5% 6.7% 5.8% 6.9% 5.6% 7.4% Premium out of pocket Nonpremium out of pocket 11.9% 11.8% 12.0% 12.8% 14.0% 14.9% 15.5% 15.6% 16.1% Total health care out of pocket 5.8% 4.1% 1997 1998 1999 2000 2001 2002 2003 2004 2005 SOURCE: Kaiser Family Foundation analysis of CMS Medicare Current Beneficiary Survey Cost and Use files, 1997­2005. Hospital Payment-to-Cost Ratios 140% 130% Payment to Cost Ratio 120% 110% 100% 90% 80% 70% 60% 19 80 19 82 19 84 6 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 19 8 Medicare Medicaid Private Payer Source:Trendwatch Chartbook 2009, Trends Affecting Hospitals and Health Systems, Table 4.4, p. A­35, at http://www.aha.org/aha/trendwatch/chartbook/2009/appendix4.pdf. ...
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