1. Medicare, Medicaid, and Health Care Reform Todd Gilmer, PhD Professor of Health Policy and Economics Department of Family and Preventive Medicine 1

3. Medicare Social insurance program for the elderly and disabled; federally financed and administered –Eligibility: 65 and over (or disabled or ESRD) and worked for 10 years (or dependent of a worker) Pays for hospital and physician services, limited skilled nursing services and home health, and prescription drugs Enacted in 1965, benefits package mirrors 1965 Blue Cross package; few changes since then, until the addition of Part D on January 1, 2006

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15. Medicaid Joint state - federal social welfare program Feds set basic rules on eligibility and benefits; some mandatory requirements, many state options States administer the program, making many choices on eligibility, covered services, and payment levels Feds pay a percentage of total Medicaid spending: 50% in CA; 85% in poor states; averages 57%

17. Medicaid Eligibility To be eligible for Medicaid, a beneficiary must belong to a ‘Category’ that is eligible, and meet strict financial tests Categories of eligibility – Poor children, and their parents – Disabled – Elderly

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30. Health Care Reform 30

31. Health Reform and Coverage Provisions Individual Mandate Health Benefit Exchanges Changes to Private Insurance Employer Requirements Expansion of public programs: Medicaid /SCHIP

32. Individual Mandate Individual required to purchase insurance starting 2014 Financial penalty greater of $695 per person (up to $2085 per family) to 2.5% of household income Exceptions – Financial hardship, religious objections, American Indians – People who have been uninsured less than 3 months – People for whom insurance costs exceed 8% income – Those with incomes below tax filing threshold ($9,350 individual)

33. Health Benefit Exchanges Individuals (US citizens and legal immigrants) and small employers (up to 100 employees) can purchase insurance New marketplace will provide consumers with information to help them chose among plans Premium and cost-sharing subsidies available to make coverage more affordable (100-400% FPL) Two FEHBP based multi-state plans available

34. Changes to Private Insurance Cannot deny coverage or adjust premiums based on health status or gender Plans must provide comprehensive coverage that meets a standard minimum, caps annual out-of-pocket spending, does not impose cost-sharing for preventive services, does not impose lifetime limits on coverage Premiums allowed to vary based on age (by 3:1), geographic area, tobacco use (1.5:1), and number of family members Young adults allowed to remain on insurance until age 26

35. Employer Requirements No employer mandate Employers (50+) must pay fees if they do not offer coverage or if their employees receive a premium credit through the exchange Employs that offer coverage must auto enrollee employees unless they opt-out

36. Medicare and Health Reform Phases in coverage of Part D coverage gap, also known as the “doughnut hole” Improves coverage of prevention benefits Reduces Medicare Advantage payments and provides bonus payments to plans receiving high ratings for quality Establishes a new Independent Payment Advisory Board to recommend ways to reduce spending

37. Medicare Payment Reforms Provisions related to provider payment – Increased payments to providers in underserved and rural areas Pilot programs to bundle payments for post-acute care, value-based purchasing for providers, establishment of accountable care organizations A new Center for Medicare and Medicaid Innovation will test payment and service delivery models aimed to improve quality and efficiency

38. Medicare Financing Reforms Modifies and expands the use of income-related premiums – Freezes thresholds for Part B related premium at 2010 levels ($85,000 per individual / $170,000 per couple) – Adds income related premium for Part D Increases the Medicare Hospital Insurance (Part A) payroll tax for high earners – Increases 0.9% from 1.45% to 2.35% for high earners ($200,000 per individual / $250,000 per couple)

39. Medicaid and Health Reform Expands Medicaid to a national floor of 133% FPL Includes adults without children Income is modified AGI without asset or resource tests States receive full federal match for new eligibles Subsidies for individuals between 133% and 400% FPL through the State Health Exchanges

40. Medicaid and Health Reform Benchmark benefit package Increases Medicaid payment rates in FFS and managed care for primary care services provided by primary care doctors to 100% Medicare payment rates A new Center for Medicare and Medicaid Innovation will test payment and service delivery models aimed to improve quality and efficiency Funding for pilot programs for medical homes and accountable care organizations

41. Health Reform and Medicaid LTC Establishes the Community First Choice Option to allow states to provide community-based services and supports to individuals with incomes up to 150% FPL who require an institutional level of care A new Federal Coordinated Health Care Office will improve the integration of care for dual eligibles

42. Congressional Budget Office Estimates Increase coverage by 32 million – 24 million in SHE – 16 million Medicaid / CHIP Net cost of $938 billion from 2010 to 2019 Financed through a combination of savings on Medicare and Medicaid and taxes and fees, includingan excise tax on high-cost insurance