Medicare and Medicaid

· Private insurance (33%) · Medicare (20%) · Medicaid and SCHIP (15%) · Other public (13%) · Out of pocket (12%) · Other private (7%)

· Hospital care (31%) · Other spending (25%) · Physician and clinical services (21%) · Prescription drugs (10%) · Program Administration and Net Costs (7%) · Nursing Home Care (6%)

53% Private and 47% Public

Part A- Hospital Insurance Origins: Dems and Blue Cross Medicare is financed through the Social Security System- the components of which include Old age, survivors and disability insurance OASDI, MMI Employers pay 1.45% Wage tax Employees pay 1.45% Salary tax What do you know about tax incidence? (Tax burden does not depend on where revenue is collected The tax incidence of payroll tax falls on the employee) Self-employed pay 2.9% Salary tax Financed by Financed by an earmarked HI payroll tax, which is set aside in the Medicare Hospital Trustfund. –In 1994, the total HI tax is 2.9% on all earned income or 1.45% employer/ 1.45% employee (tax is recovered from employee or pushed forward on to consumer).
payroll tax on $135K Flat/ Regressive Tax! Spending over budget depleted by 2030?(baby boomers begin to retire + medicare expenditures sharply increase + workers decline -the growing deficits are predicted to exhaust trust fund reserves

· acute hospital care (up to 90 days per episode of care) · Skilled nursing home care after hospitilization (up to 100 days) · Hospice care for the terminally ill

Upon age 65 people eligible for social security are automatically enrolled in part A. 99% of beneficiaries don't pay premium because they have at least 40 quarters (10 yrs) of Medicare covered employment or the spouse or widow/er of such a person. Ppl under 65 who are totally and permanently disabled may enroll after receiving ss benefits for 2 yrs. Ppl with chronic renal disease requiring dialysis or transplant are eligible immediately. Seniors who do not meet automatic enrollment requirements may enroll through a monthly premium set according to a statutory formula. -ppl with 30+ quarters or disabled pay smaller premium

Supplemental Medical Insurance (SMI)Blue shield and Republicans
Pay $54 per month premium to join
funded by: 25% paid from premium and 75% from - general revenue (income taxes- progressive tax)Premium is matched 3:1 by governement.

Part C = Medicare advantage plans, such as HMO or PPO Part C: Medicare + Choice (PPO, PSO, HMO-POS, private FFS) Program administration accounts for 2% of costs 12% of Medicare enrollees eligible for Medicaid as well <12% of enrollees rely on Medicare alone- Medigap Policies Elderly spent 14% of disposable income on hc; 4% for non elderly Govt pays out 95% or .95 cents on the dollar for predicted costs of Medicare Part C, the govt. used to pay 109%. Why overpay? Govt wants more ppl to enroll bc Part C is more efficient The managed care plan receives a capitation payment (fixed amount for all beneficiaries regardless of whether they seek care or not) from Medicare based on total Part A and Part B expenditures for a beneficiary in that particular geographic region (adjusted for age, sex, and Medicaid institutional status). In return, the managed care plan provides more comprehensive benefits, such as lower out-of-pocket payments and additional services not covered under part B. Beneficiaries’ choice of physician and hospital is limited to those in network. The managed care plan, has a financial incentive to reduce inappropriate care and manage the aged’s care in a more cost-efficient manner.

· Home health (38%) · Hospice (67%) · Hospital care (28% and 49% for rural) · Physician fees (20%)

1965 Title XIX Federal assistance grants for care of the “poor”- “Categorically or medically needy” 40.6 million covered (1998)- $ 142 billion spent/ 2007-$329B General Revenues Federal Share- 50-83% dep on state 1993- Federal $76.1 Billion (1998 Total $142B) States $41.8 Billion cost per child- $955 cost per elderly adult- $8704 disabled and elderly are 26% of members but 68% of expendituresElderly = 1/4 of members, yet represent 70% of costs!

Financed by: · must pay a premium, which represents only 25% of the program’s costs · the remaining 75% of costs are subsidized by federal tax revenues · must pay deductible ($131 in 2007) and · 20% copayment Beginning in 2007, premium became income related (aged earning $80-100,000 will receive 65% subsidy an those earning over $200,00 will receive a 20% subsidy).About 5% are expected to be subjected to higher premium amounts. No concern with insolvency à fed govt. subsidy becomes larger than expected à increase the size of the fed deficit 2005, fed subsidy exceeded $116 billion

Medicare modernization act of 2007: premium = indexed to the annual % increase in part B actuarial rate for aged beneficiaries

PART B BENEFITS: Medicare Pays: Covered medical expenses include “all necessary”: 80% of approved Physician Services amount after deductible Physical, occupational, speech therapy Certain medical equipment Certain diagnostic tests Some preventive care (PAP, mammogram, vaccination) Ophthalmology, Audiology, Dental Not covered

2008 Plan Numbers Premiums: range from $20 to $60 dollars a month Co-Pays: each plan has different co-pay amounts for different drugs, tier 1 is generics, tier 2 is preferred brands, tier 3 is brands and tier 4 is specialty medications. DEDUCTIBLE: $275 in 2008 (not including premium)
COVERAGE LIMIT: $2,510 in 2008 (beginning of donut hole)
OUT OF POCKET THRESHOLD: $4,050 in 2008

Congressional approaches 1. Limit payments to providers- limits, not driving costs 2. Shift more cost to beneficiaries, limit benefits, increase age. 3. MSA’s (MSAs create an incentive for you to become a smart health-care consumer because you get to keep money that is left over. You have two options for handling unspent MSA funds:

1. you can save money (tax-free) for future medical expenses and the interest that you accrue is also tax-free; or
2. you can withdraw money from your MSA at the end of the year, but would need to maintain a minimum balance.)

4. Managed Care- 95% AAPCC Revolving door How about 1. Target components driving inflation- SNF, HHC, Outpt 2. Target fraud (? 12% of costs) 3. Reexamine commitment to market-driven solutions, MC.