Originally health insurance to those 65 years of age and older
Expanded to include certain disabilities (20% now below age 65)
Medicare consists of four parts:
Part A: Hospital Insurance
Part B: “Medical” Insurance (physician visits and outpatient care)
Part C: Private supplemental care (Medicare plus Choice, now Medicare Advantage)
Part D: Prescription Drug Coverage
Medicare Part A
Automatic enrollment for anyone 65 and older who worked over their lifetime
Financed with combination of payroll tax (current workers) and cost-sharing (deductibles, etc.)
Funds exist as part of “Federal Hospital Insurance Trust Fund”…can’t finance through debt
Part A benefit structure:
Very good for short inpatient stays
Very bad for major problems with long stays
Doesn’t cover nursing home care beyond 30 days
Medicare Part B
Voluntary, but almost everyone enrolls
Requires monthly premium ($144 in 2020)
Small deductible and 20% co-insurance
Medicare Part C
Private insurance provision of Medicare benefits
Formally created under Balanced Budget Act in 1997 (existed informally before)
Heavily revised in Medicare Modernization Act in 2003
Medicare pays insurers a risk-adjusted amount to enroll a given beneficiary
Broader benefits than Part A and B, often with $0 additional premiums, but restrictive networks
Medicare Part D
Created under the Medicare Modernization Act in 2003
Private insurance for prescription drugs
Insurers receive payments from Medicare to enroll a given beneificiary (much like Part C)
Many insurers offer a combined Part C+D plan
Privatization of Medicare
Medicare Advantage (both Parts C and D) has been well-received and generally thought to be a success story for Medicare benefits
Accounts for nearly half of total Medicare enrollees
Some early difficulties with adverse selection and risk-adjustment
Still slightly sicker people staying in traditional Medicare
Could be a big part of any future “Medicare-for-all” type program
Medicare payments for inpatient services
Prospective payment system
Begin with two “base” rates:
Operating base payment rates, $5,797 in 2020
Capital base payment rates, $462 in 2020
Adjustments:
Diagnosis Related Group (higher adjustments for more complicated things)
Academic Medical Center
Disproportionate Share
More recently:
Introduction of quality incentives through…
Value Based Purchasing (VBP)
Hospital Readmission Reduction Program (HRRP)
Quality Payment Program for physicians (choose between merit based payment system or advanced alternative payment models)
Introduction of capitated payments through…
Bundled Payments
Accountable Care Organizations
Medicaid
Background on Medicaid
Also created by the Social Security Act in 1965
Originally provided health insurance to people receiving “Aid to Families with Dependent Children”, mainly extremely poor families
Expanded over time with different rules by state
Huge program: about 40% of births are covered by Medicaid/CHIP
ACA and Medicaid Expansion
Big part of ACA was Medicaid expansion
Originally mandatory but made voluntary by Supreme Court
Expansion covers all adults (with or without children) below age 65 and with incomes below 138% of the federal poverty line ($35,535 for family of 4 in 2020)
Medicaid Funding
Paid for by states and federal funding
State funding is matched by federal funds, and the match amount depends on the state’s per capita income
Incentivizes services to be provided by Medicaid that historically may not be
Medicaid Benefits
Pretty generous coverage
Low to no copayments, deductibles, co-insurance
Usually covers dental, vision, hospitals, and physician services
Covers long term care (unlike Medicare), with about 40% of all long term care paid for by Medicaid
Medicaid Payments
Works similarly to Medicare with a base rate plus adjustments
Account for a little less than half of total Medicaid payments on average
Privatization in Medicaid
Increasing reliance on Medicaid managed care (80% of Medicaid enrollees)
States outsource Medicaid benefits to private insurers, with oversight
Veterans Administration
“Integrated” healthcare provider and insurer
Comprehensive medical services without out-of-pocket payments or insurance claims
Operates its own healthcare facilities and employs healthcare providers directly, covering the costs of care provided to veterans
Funding for VA healthcare comes from the federal government’s budget allocated to the VA, which covers staffing, facilities, equipment, medications, and other necessary resources for delivering healthcare services to veterans