McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 21 Medicaid

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter Outline THE WHAT’S, THE WHO’S AND THE HOW MUCH’S WHY MEDICAID COSTS SO MUCH MEDICAID AND THE ELDERLY

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. The What’s Medicaid –covers health care for the poor –was established in 1964 –was in full force in 1967 –part of President Johnson’s Great Society Programs –paired with Medicare (which covers health care for those over 65) –is a state-administered program with federal matching funds.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. The Who’s Covers (1994) –18 million children –18 million adults –60% are female (75% of adults are women) –45% white; 24% black; 17% Hispanic (11% “unknown”) Children are eligible if –they are under 19 and in households with income less than 133% of the poverty rate. –they are under 1 and in households with income less than 185% of the poverty rate Adults are eligible if they qualify for –TANF (Temporary Aid to Needy Families) –SSI (Supplemental Security Income) Not all poor are covered –50% of those who live in households with income below 150% of the poverty line are not covered.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. The How Much’s The federal government pays states a matching grant (ranging from 50% to 70%) that depends on the income of the state. The total federal government obligation is $120 billion The total state obligation is $60 billion

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. More Details States establish reimbursement rates for procedures –rates must be high enough so that patients have adequate coverage. States may choose to exclude some procedures –most states choose not to cover abortions. Doctors and hospitals may choose not to accept Medicaid patients –If they accept any patients for any procedure they must accept all patients for all procedures. It is an “all-or-nothing” proposition.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Why Medicaid Costs So Much Per patient expenditures per year on Medicaid are substantially higher (about 20%) than non-Medicaid patients. In part, this is a feature of the clientele –The poor tend to be less healthy and need more expensive treatments. –Medicaid pays for nursing home expenses of the poor.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Medicaid’s Impact on Overall Health Care Prices P* Q poor Q nonpoor D poor+nonpoor P* Q poor Q nonpoor P Q/t S D poor D nonpoor Without Medicaid Q/t S P D poor D nonpoor With Medicaid

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Medicaid and the Elderly Medicare is the program for the elderly. Medicaid is the program for the poor. If a patient is poor and over 65, Medicaid pays for Medicare premiums, deductibles and most of the co- payments.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Expenses by Age Group (1996) Medicaid expenses per patient –overall $4,250 –Children under 5$1,406 –Elderly 75-84$8,956 –Elderly over 85$12,169 Children make up half the Medicaid population and account for 22% of expenses. Those over 65 make up for 13% of the Medicaid population and account for 35% of expenses.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Getting Medicaid to Pay for Nursing Homes People have to show very little income and have very few assets in order for Medicaid to pay for nursing home care. To determine Medicaid eligibility, the government looks at financial records going back 2 years to ensure that the person did not give away their assets so that Medicaid would pay.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. The Relationship Between Medicare and Medicaid Medicare –Part A is mandatory and has premiums, deductibles and co-payments. –Part B is voluntary and has premiums, deductibles and co-payments. When the person is eligible for both Medicare and Medicaid, states choose to have their Medicaid programs pay the Medicare premiums, deductibles and most of the co- payments for both Part A and Part B.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Cost Saving Measures in Medicaid Medicaid costs were rising 10% per year in the 1990s HMOs –Medicaid has increased it use of HMO’s from 5% coverage in 1990 to 50% by Primary Care Physicians were established to minimize inappropriate emergency room use by Medicaid patients.