1. Medicare and Medicaid

2. Medicare Populations Elderly Eligible if 65 years old and worked and contributed to Social Security for at least 10 years No means test 43 million elderly enrolled Disabled Totally and permanently disabled Receive Social Security Disability Insurance for 24 months or have End Stage Renal Disease or Lou Gehrig’s disease and receive SSDI No age requirement or means test 8.7 million enrolled Enrollment expected to double by 2030

5. NOTE: Analysis of Medicare beneficiaries 65 and older. SOURCE: Kaiser Family Foundation analysis of CMS Medicare Current Beneficiary Survey 2009 Cost and Use file. Income Distribution of Medicare Beneficiaries 65 and Older, by Gender, 2009 WomenMen Income level: 43% 27%

6. NOTE: ADLs refer to Limitations in Activities of Daily Living (bathing, dressing, eating, walking, using the toilet, getting in and out of chairs). *indicates statistically different than men (p=0.05) SOURCE: Kaiser Family Foundation analysis of CMS Medicare Current Beneficiary Survey 2009 Cost and Use file. Health and Functional Status of Older Medicare Beneficiaries, by Age and Gender, 2009 3+ Chronic Conditions 2+ ADL Cognitive/Mental Impairment

8. Medicare Spending Total spending on Medicare was $583 billion in 2013 Medicare spending = 14% of federal budget 20% of total national health care spending Spending growth rate estimate 5.3% Slower growth rate per person than expected for private insurance Expected to reach $858 billion in 2024 3.2% GDP by 2024

13. Higher spending doesn’t mean better quality

14. 4 Part Structure Part A: Hospital Insurance (HI) Part B: Supplemental Medical Insurance (SMI) Part C: Managed Care Part D: Prescription Drug benefit

16. Part A: Hospital Insurance Mandatory enrollment Benefits Inpatient hospital care Skilled Nursing Facility (SNF) Home health Hospice care Long-Term Care NOT covered

17. Part A: Hospital Insurance Financing Mandatory payroll tax – employers and employees each pay 1.45% Put into Hospital Insurance Trust Fund Health reform: Increase payroll tax for wealthy by.9% and add a 3.8% Medicare tax on unearned income for high income earners No premiums Deductibles for each in patient stay Cost sharing Hospital care after 60 days Skilled Nursing Facility care after 20 days Outpatient drugs Inpatient respite care

18. SOURCE: Kaiser Family Foundation based on the 2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Millions Medicare Beneficiaries and The Number of Workers Per Beneficiary

19. Part B: Supplemental Medical Insurance Voluntary (95% enrolled) Benefits Physician services Outpatient services, including Durable Medical Equipment Specified preventive services Expanded in health reform Home health visits

20. Part B: Supplemental Medical Insurance Financing General federal tax revenue covers 72% of Part B costs Monthly premium $ 104/month in 2013 Tiered so higher income pay more ($85,000/$170,000) –Pay between $146-$335 per month –Health reform freezes thresholds at 2010 levels Covers 25% of Part B costs Annual deductible ($147) Cost sharing

21. Part C: Managed Care (Medicare Advantage) Voluntary (30%/15 million enrolled) Up 30% since 2010 Patients enroll in private managed care plan Same benefits May offer additional benefits Financed through Parts A, B, and D 114% of costs of FFS Health reform: payment reduction, cost-sharing limits, 85% medical loss ratio, quality bonuses

22. NOTE: Includes cost and demonstration plans, and enrollees in Special Needs Plans as well as other Medicare Advantage plans. SOURCE: MPR/Kaiser Family Foundation analysis of CMS Medicare Advantage enrollment files, 2008-2014, and MPR, “Tracking Medicare Health and Prescription Drug Plans Monthly Report,” 2001-2007. Report of the Medicare Board of Trustees, 2002. Total Medicare Advantage Enrollment, 1992-2014 In millions: ACABBAMMA

23. NOTE: HMO is health maintenance organization; PPO is preferred provider organization. SOURCE: Medicare Payment Advisory Commission, December 2008. Medicare Advantage Plan Types Traditional Fee-for-Service Medicare 100% Medicare Advantage Payments Relative to Traditional Fee-for-Service Medicare, 2009

24. Part D: Prescription Drug Benefit Voluntary (35 million enrolled) Dual eligibles must receive drugs through Medicare Penalty if don’t enroll without equivalent coverage Premiums tiered using same tiers as Part B Avg. premium $40/month, $11-$66/month for higher income Covers outpatient prescription drugs Federal guidelines for minimal formulary requirement Variation in plan design, covered drugs, utilization management tools Offered through stand-alone prescription drug plans or Medicare Advantage

26. Part D: Prescription Drug Benefit Financing Monthly premium Annual deductible Cost sharing Low-income subsidy State contributions (clawback) Health reform $250 rebate in donut hole 50% discount on brand name drugs in donut hole Additional subsidies for brand name and generics phased in Eventually close donut hole so standard 25/75 split Reduce out-of-pocket amount to reach catastrophic threshold Employer subsidy Beneficiary cost sharing is plan specific Pay Part D premium up to $66 plus plan premium

28. NOTE: LTSS are long-term services and supports and include home health spending. Premiums include Medicare Part A, B, C, and D and private health insurance premiums. SOURCE: Kaiser Family Foundation analysis of CMS Medicare Current Beneficiary Survey 2009 Cost and Use file. Out-of-Pocket Health Spending by Medicare Beneficiaries 65 and Older, by Gender and Type of Service, 2009 WomenMen Services $4,844 $4,230

29. Provider Reimbursement Physicians Eliminated Standard Growth Rate, replace with quality based system Health reform: primary care bonus Hospitals Inpatient: Diagnostic Related Groups (DRG) Outpatient: Ambulatory Payment Classification (APC) Health reform: reduce market basket updates, DSH payments, services associated with preventable readmissions and hospital-acquired conditions Managed Care Submit bid to federal government Actual payment depend on relation to benchmark Health reform: payment reductions

30. Medicare Quality Measurement in Health Reform HHS must identify gaps and develop needed quality measurements and outcome measures Incentive payment for participating in Physician Quality Reporting program in 2014 and penalty for not participating in 2015 Quality reporting requirements for LTC, inpatient rehabilitation, psychiatric, PPS-exempt cancer hospitals and hospice programs Requires value-based purchasing for many hospitals and physicians (plus plans to expand to other providers) Public reporting of quality information

31. Additional Medicare Health Reform Changes Center for Medicare and Medicaid Innovation Test innovative payment and service delivery models while maintaining or improving quality Medicare Independent Payment Advisory Board Accountable Care Organizations Medicare demonstration projects to improve quality Value based purchasing Independence at home demonstration Additional fraud and abuse prevention efforts Bundled payment pilot program

33. Medicaid and CHIP

34. Medicaid: Joint Program Administration Federal level Sets program parameters (floors and ceilings) Provides policy guidance Provides funding Approves waivers Run through Centers for Medicare and Medicaid Services State level Makes choices within program parameters Provides funding May seek waivers Run through state Medicaid agencies

35. Medicaid: Eligibility Entitlement program Generally covers poor individuals who are also Pregnant or disabled or elderly or children or adults in families with dependent children Deserving poor 66 million enrolled at some point during the year 25% of children in U.S. Pre-Health Reform, generally did not cover Low-income adults without disabilities Women who are not pregnant Near-poor 30 million low-income individuals are uninsured

40. Medicaid: Eligibility Must meet all five criteria to be eligible Category Income Resources Residency Immigration status Medically needy Disability catch-22

41. Health Reform: Eligibility and Financing Changes Eligibility Changes: All non-Medicare eligible adults under 65 who earn up to 133% (138%) FPL Was mandatory, now option due to Supreme Court decision No categorical requirement, no asset or resource test in most cases CHIP Children between 100% and 133% FPL move to Medicaid If eligible for Medicaid, not eligible for state exchange subsidies Maintenance of Effort requirement Minimum eligibility of 138% for all children up to 19 Must cover kids aging out of foster care to age 26 Expansion Financing 100% Federal financing in 2014, reducing to 90% in 2020 and beyond

42. Health Reform: Supreme Court Decision Court ruled eligibility change was a change in “kind” not “degree ” From covering blind, disabled, medically needy, and elderly to covering all non-elderly poor people (up to 133% FPL) Change from program for the poor to a “comprehensive national plan to provide universal health insurance coverage” A change states could not have anticipated; created a new program 7-2, only Ginsberg and Sotomayor upheld Medicaid provision Federal government may create an expansion option and lure states with additional money Federal government may not mandate expansion option and penalize states by withholding existing Medicaid funds if do not comply Unconstitutional as undue coercion Based on spending clause – spending programs like contracts between state and federal government Preserves expansion while limiting federal powers

43. Medicaid Expansion Jan 2016: 31 states plus DC expanding Considering expansion: AL, SD In expansion states, median eligibility for parents up to 138% FPL instead of 106% Non-expansion states, median eligibility for parents 49% About 5 million fall in coverage gap in non-expansion states don’t qualify for Medicaid but too poor to qualify for subsidies (less than 100% FPL) http://www.advisory.com/Daily- Briefing/Resources/Primers/MedicaidMap

44. Medicaid Expansion Some states use alternative expansion structures with federal waivers Use federal money to purchase private insurance AR, IA, NH (2016, if obtain waiver), PA Additional premium/cost-sharing IA, MI, PA

45. Traditional Medicaid: Mandatory Benefits Physician services Lab and X-ray services Inpatient hospital services Outpatient hospital services EPSDT (under 21) Family planning FQHC and rural health clinic Nurse Midwife Certified nurse practitioner Nursing facility (21+) Home health for those in nursing facilities

46. Traditional Medicaid: Optional Benefits Acute Care Benefits Prescription drug Medical/remedial care by non- physician Rehabilitation and other therapy Clinic services Dental services DME, prosthetics, eyeglasses Primary care case management TB services Other specified medical or remedial care Long Term Care Benefits Intermediate care facilities for mentally retarded Inpatient/nursing facilities in mental disease institution (65+) Inpatient psychiatric hosp (<21) Home/community based waiver Home health care Targeted case management Respiratory care Personal care services Hospice care PACE

47. Traditional Medicaid: Other Benefits Limits: Abortion services/Ru-486, needle exchange Amount, Duration, and Scope requirements Reasonableness Statewideness Comparability Non-discrimination

48. Medicaid Benefits: Deficit Reduction Act (DRA) State option May use benchmark to develop benefit list Federal Employee Health Benefit Plan State employee health plan Largest commercial non-Medicaid HMO HHS Secretary-approved plan May use benchmark equivalent plan States must include EPSDT in benchmark Some populations exempts Limits on Amount, Duration, and Scope requirements Increased cost sharing Citizenship documentation

49. Health Reform Changes (2014): Newly eligible population receive benchmark equivalent of Essential Health Benefits through Alternative Benefit Plans (ABP) States may choose to offer more generous benefits to traditional population Adult dental not required in EHB Require mental/physical health parity Requires smoking cessation for pregnant women without cost sharing Incentive to cover USPSTF A&B rated services for traditional population Expansion Medicaid: Health Reform Benefits

51. Medicaid Enrollees and Expenditures, FY 2009 NOTE: Percentages may not add up to 100 due to rounding. SOURCE: KCMU/Urban Institute estimates based on data from FY 2009 MSIS and CMS-64, 2012.MSIS FY 2008 data were used for MA, PA, UT, and WI, but adjusted to 2009 CMS-64. Total = 62.6 million Total = $346.5 billion

52. Top 5% of Enrollees Accounted for More than Half of Medicaid Spending, FY 2009 SOURCE: KCMU/Urban Institute estimates based on data from FY 2009 MSIS and CMS-64, 2012.MSIS FY 2008 data were used for MA, PA, UT, and WI, but adjusted to 2009 CMS-64. Children 3.7% Adults 1.9% Children 0.3% Disabled 30.4% Total = 62.6 millionTotal = $346.5 billion Elderly 18.6% Bottom 95% of Spenders Top 5% Adults 0.2% Disabled 2.5% Elderly 2.0% Top 5% 5% 55% Bottom 95% of Spenders

53. Medicaid Expenditures by Service, 2010 NOTE: Total may not add to 100% due to rounding. Excludes administrative spending, adjustments and payments to the territories. SOURCE: Urban Institute estimates based on data from CMS (Form 64), prepared for the Kaiser Commission on Medicaid and the Uninsured. Total = $389.1 billion Inpatient 13.6% Physician/ Lab/ X-ray 3.7% Outpatient/Clinic 6.7% Drugs 4.1% Other Acute 9.6% Payments to MCOs 22.8% Nursing Facilities 13.0% ICF/MR 3.5% Mental Health 0.9% Home Health and Personal Care 14.1% Payments to Medicare 3.5% DSH Payments 4.5% Acute Care 64.0% Long-Term Care 31.5%

54. Dual eligible beneficiaries account for a substantial share of Medicaid spending SOURCE: KCMU/Urban Institute estimates based on data from FY 2009 MSIS and CMS-64, 2012. MSIS FY 2008 data were used for MA, PA, UT, and WI, but adjusted to 2009 CMS-64. Total = 63 Million Medicaid Enrollment, 2009 Medicaid Spending, 2009 Total = $359 Billion Duals 15% Children 49% Other Aged & Disabled 10% Adults 26% Children & Adult Spending 34% Long- Term Care 25% Prescribed Drugs 0.4% Premiums 3% Medicare Acute 7% Other Acute 2% Duals Spending 38% Other Aged & Disabled Spending 28%

55. Medicaid: Financing $415 billion in FY 2012 Federal Medical Assistance Percentage (FMAP) Based on state’s per capita income Range from 50%-75% Administrative match set at 50% for most services Federal government pays for 57% of Medicaid Medicaid = 16% of state budgets Nominal cost sharing under traditional Medicaid Increased cost sharing under DRA Health Reform Federal gov’t pay 100% costs of newly eligible 2014-2016, phase down to 90% by 2020 States may save money on uncompensated care with newly insured

57. Medicaid: Provider Reimbursement FFS rates vary by state About 60% of private health insurance rates Managed care 72% enrollees in full managed care or primary care case management Mandatory for most enrollees Capitation rates vary widely by state Health Reform Changes Pay primary care providers 100% Medicare rates 2014-2016 Increased costs paid with full federal financing

58. Medicaid Managed Care and Traditional Enrollment, 1999-2009 Note: Numbers may not produce totals because of rounding. Unduplicated count. Includes managed care enrollees receiving comprehensive and limited benefits. SOURCE: 2009 Medicaid Managed Care Enrollment Report. CMS. Enrollment (in millions) 31.9 33.7 36.6 40.1 42.7 44.4 45.445.746.0 47.1

59. Medicaid: Waivers 1115 Waivers Test policy innovations Health Insurance Flexibility and Accountability (HIFA) Managed Care/Freedom of Choice (1915b) Implement managed care Limit freedom to select provider Home and Community Based Waivers (1915c) Provide LTC services in community setting

60. Other Medicaid Health Reform Changes New option to expand community based LTC New option for family planning services New funding for demonstration programs Opportunities for states to be innovative in payment and delivery Grants to states to lower tobacco use, obesity rates, diabetes etc Center for Medicare and Medicaid Innovation New coordination for dual eligibles Expands Medicaid and CHIP Payment Access Commission Financial incentive to provide preventive services Prohibits payments for certain hospital acquired infections Reduces DSH payments Increase Medicaid drug rebate Increased data reporting

61. Children’s Health Insurance Program (CHIP) Created in 1997 after failed Clinton health reform 10 year block grant of $40 billion Optional program but all states participate Target population Children who are poor but earn to much to qualify for Medicaid in their state 2012: 5.5 million Uninsured children fell 40% since CHIP began in 1997 7.2 million children still uninsured 75% of uninsured children eligible for Medicaid or SCHIP

62. CHIP Reauthorization SCHIP expired in 1997 2 bills passed Congress but vetoed by Bush Extended program to March 2009 under current rules Reauthorization signed by Obama in first week Reauthorized for 4.5 years Health Reform Funds CHIP for two more years to 2015 Authorizes program until 2019 Maintenance of Effort regarding eligibility

63. CHIP Eligibility May cover over 300% FPL But reduced matching from feds over 300% FPL Expected to enroll 4.1 million children under Medicaid or SCHIP that would be uninsured by 2013 Not eligible for Medicaid Not otherwise insured May cover pregnant women without a waiver May cover immigrant pregnant women and children within first 5 years No new waivers for parents or childless adults Health Reform If can’t enroll because of funding shortage, must screen for Medicaid eligibility or will be eligible for tax credits in exchange

65. CHIP Financing Reauthorized for $33 billion for 4.5 years Financed by $.62 increase in federal cigarette tax Enhanced matching rate Federal gov’t covers 70% of SCHIP Two-year state allocation formula Health care inflation Growth in children’s population Use of funds Redistribute to states after two years Health Reform: 23% CHIP match increase up to 100% in 2015 (not funded)

66. CHIP Benefits Required to provide “basic” benefits Inpatient, outpatient, physician, lab, x-ray, well-baby/well-child and dental (new with reauthorization) May use CHIP funds for dental cost sharing or dental only supplemental coverage Not defined May provide other benefits Mental health, vision, Rx, hearing, other needed services If provide mental health, must have parity Limits ADS requirements

67. CHIP Benefits Benchmarks Health insurance plan offered by HMO with largest commercial non-Medicaid enrollment in state Standard BCBS PPO for federal employees Health plan available to state employees Actuarially equivalent plan HHS secretary approved coverage Generally less generous than Medicaid

68. CHIP Interaction with Private Insurance Want to avoid crowd-out May have waiting lists, cost-sharing Premium assistance Dental only cost-sharing assistance

69. CHIP Outreach, Documentation, and Waivers New reauthorization provisions State performance bonuses for enrolling uninsured children who are already eligible for Medicaid State performance bonuses for administrative simplification and renewal Increased outreach funding Citizenship documentation requirements Options to ease proof of citizenship Waivers limited under reauthorization