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Medicare & Medicaid

Medicare & Medicaid. Medicare – Medical Care for the Elderly. Institutional features Part A—Hospital insurance Part B—Physician, Outpatient hospital, diagnostic and lab testing, PT, and durable equipment insurance Part D—Outpatient prescription drugs. Medicare Spending. Medicare Features.

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Medicare & Medicaid

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  1. Medicare & Medicaid

  2. Medicare – Medical Care for the Elderly • Institutional features • Part A—Hospital insurance • Part B—Physician, Outpatient hospital, diagnostic and lab testing, PT, and durable equipment insurance • Part D—Outpatient prescription drugs

  3. Medicare Spending

  4. Medicare Features • Part A Features: (2007) • $992 deductible • Coinsurance (days 2-60, zero; days 61-90, 25% of the deductible per day; days 91+, no coverage unless 60 lifetime reserve days are still available) • Part B Features: (2007) • Voluntary participation w/ $93.50 monthly premium • Deductible of $131 per year & Medicare pays 80% thereafter • 50% MDs accept assignment, so patient only pays 20%. Max bill = 115%

  5. Medicare coverage gaps • Pays 87% of inpatient charges, 67% of physicians’ services, 8% of outpatient drugs (Part D changes this percentage), and 0.5% of nursing home • Does not provide catastrophic coverage, custodial nursing home care, preventive services or routine physical examinations.

  6. Part D – The donut hole • About 8 million seniors get drug coverage through Medicare Advantage • Premiums vary (basic plan - $27.35 monthly) • Annual deductible - $265

  7. Financing • Overall funded by individuals < 65 years old – 90% • Part A funded by a payroll tax of 2.9% • Part B premium pays 25% of expenses • Part D premiums pay 25% of expenses • Financing is Inequitable • Part A Trust Fund insolvent by 2020 – need to increase tax from 2.9% to > 10% • Part B & D subsidy will need to double from $350 billion today to $700 billion by 2015.

  8. Financing Inequities • Part A payroll tax has low income workers subsidizing high income retirees • Parts B & D financed by income tax, which is progressive • Intergenerational transfer – retirees receive $5 in benefits per $1 contributed

  9. Medicare Payment Allocations, 2002

  10. Suggested Liberal Reforms • Increase eligibility age to 67 • Decrease provider reimbursements • Increase payroll tax & premiums (already done for high income retirees) • Ban Medigap policies to decrease moral hazard • Reduce subsidy to Medicare Advantage (Part C) plans

  11. Suggested Conservative Reforms (Ryan Proposals) • Phase out Medicare, convert to private voucher program (start in 2022) • Voucher amounts tied to income: $11,000 for < $80K, $5500 for $80-200K, and $3300 for >$200K individual $ • Those turning 65 by 1/1/2021 keep Medicare but premiums for Part D tied to income • If payroll taxes pay <55% Medicare costs, provider payments decrease 1%

  12. Medicaid • Institutional features • State administered • Federal cost-sharing • Eligibility standards • SCHIP expansion

  13. Medicaid Spending

  14. Medicaid – Large State Spending, 2004

  15. Economic Consequences • Nationwide, 50% of poverty population covered. Eligibility differs by state (for family of 3 in AL $3048 and MN $40,224 in 2002) • Nursing home care and home health care constitute over 70% of outlays- just 30% to nonelderly and nondisabled • Payments per capita for children and adults only $1454 and $2067 in 2001.

  16. Spending by Eligibility Categories, 2001

  17. Expansion of Medicaid Impacts • 10% expansion leads to a 2.8% decrease in infant mortality and 3.4% decrease in child mortality • Decreases enrollment in private insurance (employers & persons) • Decreases labor supply for fear of losing Medicaid • Decreases willingness to marry • Decreases willingness to save due to asset test

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