Classen_HealthEcon_Class22

Classen_HealthEcon_Class22 - Medicare Medicare Class 22...

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Unformatted text preview: Medicare Medicare Class 22 Loyola University Chicago Prof. Tim Classen March 21, 2011 Class Outline Public Health Insurance programs Medicare Medicaid CHIP Read Chapter 21 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 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. 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 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. 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. Medicare’s Prospective Payment Medicare’s Prospective Payment System Began in 1983 to control escalating costs under fee­for­service (FFS) reimbursement Reimburses care providers at fixed level based on Diagnosis­Related Group (DRGs) Not affected by cost of care or duration of hospital stay. Based on: Reduced costs by 20% by 1990 Based on characteristics of hospital combined with relative DRG cost Principal Diagnosis (why the patient was admitted) Complications and Comorbidities (other secondary diagnoses) Surgical Procedures Age and Gender Discharge Disposition (routine, transferred, or expired) Large urban hospitals vs. other hospitals. Local wage variations Teaching hospitals and hospitals with a disproportionate share of financially indigent patients are compensated higher. Case Management Index (CMI) is measure of patient health used to determine hospital reimbursement Modifications to PPS Modifications to PPS Many changes to rate of payment for DRGs over time 1985 COBRA legislation included provision for hospitals serving low­income patients Expansions of PPS to other Medicare programs Rate freezes during budget crises Changes due to technology innovations Resource­based relative value scale (RBRVS) developed in 1992 for physician reimbursement Sets relative payment schedule based on physician time, effort, costs of services and malpractice costs Attempt to remedy disparity between specialist and primary­care physician reimbursement (Sound familiar?) Implications of PPS Implications of PPS Who benefits from PPS relative to fee­for­service reimbursement? How will quality of care and provider behavior change? Providers with low cost patients and most efficient care Why is setting of RBRVS and DRG reimbursement so contentious? Reduced duration of hospital stays Shift toward lower cost treatments Increased coding of diagnoses Other Effects of PPS Other Effects of PPS How does modification to reimbursement affect new technology adoption? Difficult to measure impact since policy was implemented across entire country at same time How are DRG reimbursement rates determined? Need capital subsidization to compensate? If everyone’s cost are above reimbursement rate, how long before change? ...
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This note was uploaded on 04/14/2011 for the course ECON 329 taught by Professor Classen during the Spring '11 term at Loyola Chicago.

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