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Medicare Issues GMU. March 19, 2009 Jack Ebeler. Medicare only issues Health reform, insurance coverage Entitlement reform Federal budget Other health care issues (IT, quality….). Medicare improve program partially finance reform, or insurance alternative w/in reform, or

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medicare issues gmu

Medicare IssuesGMU

March 19, 2009

Jack Ebeler

all roads lead to medicare
Medicare only issues

Health reform, insurance coverage

Entitlement reform

Federal budget

Other health care issues (IT, quality….)

Medicare

improve program

partially finance reform, or

insurance alternative w/in reform, or

save budget dollars, or

yield long-term sustainability, or

reduce variation, or improve quality, or…

All roads lead to Medicare…
outline
OUTLINE

I. Brief Medicare basics

II. Health care costs, federal budget

III. Medicare directions

medicare very basic basics
Medicare – very basic basics

Eligibility

  • General: age 65, or receipt of disability insurance, ESRD
  • Part A (HI): eligible for Soc. Sec (paid payroll tax)
  • Part B (SMI): monthly premium ($96.40)
  • Part D (Rx Drug): health plan premium

Benefits

  • Acute care benefits, now including drugs, some post-acute
  • Deductible, cost sharing; no catastrophic limit
  • Medicare covers about half of total health expenditures
  • Most beneficiaries supplement coverage to cover cost sharing, other benefits
multiple programs and ways of financing benefits
Multiple programs and ways of financing benefits
  • Traditional fee for service Medicare, parts A and B (hospital, physician, lab, diagnostic technology, post acute SNF, home health, hospice) – not long-term care
    • Usually with some form of supplemental coverage for cost sharing
  • Prescription drug program – new part D program– administered through competing private insurers
  • Medicare Advantage Program – coverage of Medicare A&B benefits, usually part D drugs as well, through a private insurer that is fully capitated
sources and uses of funds medicare 2009
Sources and uses of funds, Medicare, 2009

Source: Kaiser Family Foundation Fact Sheet (www.kff.org)

medicare population
Medicare Population

About 85 percent of the Medicare population is age 65 and over; the other 15 percent qualify on the basis of disability or ESRD.

  • About half of the population has income below 200% of the federal poverty level
  • About one third have 3 or more chronic conditions
  • Most spending is for those with multiple chronic conditions
  • More than one-fourth have a cognitive or mental impairment.
  • Nearly one-fifth are also eligible for Medicaid

Most have supplemental benefits of some sort.

income status of medicare beneficiaries 2005
Income status of Medicare beneficiaries, 2005

Source: MedPAC Data Book, June 2008; In 2005, poverty level $9,367 for individual; $11,815 for couples

medicare has slowly moved to more means testing of benefits and income related financing
Medicare has slowly moved to more means-testing of benefits and income-related financing

There are now multiple tiers of Medicare beneficiaries:

  • Poorest – Medicaid/Medicare duals
  • Above Medicaid but <@150% of FPL: little/no premium or Medicare cost sharing for covered benefits
  • “Average” beneficiaries: pay part B/D premium (ave. @$130/mo) plus deductibles, copays in parts A, B, D
  • Higher income beneficiaries
    • Tax on 35% of SS benefit ->HI: average about $135/mo.
    • Phasing in higher part B premium – up to 80%
    • Administration budget proposes higher part D (drug) premium as well
spending concentrated among small portion of beneficiaries 2005 typical of health insurance
Spending concentrated among small portion of beneficiaries, 2005 (typical of health insurance)

MedPAC Databook, June 2008 (www.MedPAC.gov)

health care spending both public and private continues to grow as a share of gdp
Health care spending (both public and private) continues to grow as a share of GDP

CBO Long Term Budget Outlook, 2008, Alternative Fiscal Scenario

u s health care spending much higher than other countries
U.S. Health Care Spending Much Higher Than Other Countries

Health Spending as a Percent of GDP, 2002

“U.S. Health Spending Habits Grab International Attention,” Health Affairs July/August 2005 Note: Most recent data show that NHE as percent of GDP in the U.S. in 2002 were 15.4% not the 14.6% given in the graph.

slide16
The federal budget: Medicare and Medicaid account for higher shares of GDP and drive the federal budget up as well

CBO Long Term Budget Outlook, 2008, Alternative Fiscal Scenario

the big entitlement reform issue is not the aging of baby boomers it is rising health care costs
The big “entitlement reform” issue is not the aging of baby boomers, it is rising health care costs

There will be more elderly as baby boomers age. And there will be more of the older elderly (85+) who need even more health care.

But health care costs are the main driver of Medicare’s fiscal issues.

The “entitlement” debate is not, analytically, an “aging” debate. It focuses on underlying health care cost inflation and its impact on public programs and public finance

growth in federal health spending excess cost growth not aging is the issue
Growth in federal health spending: “excess cost growth”, not aging, is the issue

CBO, November 2007

medicare spending per capita varies very significantly
Medicare spending per capita varies very significantly

Total Medicare spending, and spending for patients in their last six months of life, varies significantly by high and low spending regions.

(Lowest)

(Highest)

Medicare Spending Quintile

Fisher, et al., “The implications of regional variations in Medicare spending. Part 1: The content, quality, and accessibility of care.” Annals of Internal Medicine, 2003:138(4)

higher spending is not associated with higher quality satisfaction
Higher spending is NOT associated with higher quality, satisfaction

There is no

correlation between higher spending and specific indicators of quality care and service.

HEDIS Indicators

Medicare Spending Quintile

Fisher, et al., “The implications of regional variations in Medicare spending. Part 1: The content, quality, and accessibility of care.” Annals of Internal Medicine, 2003:138(4)

medicare and medicaid account for higher shares of gdp and drive the federal budget up as well so
Medicare and Medicaid account for higher shares of GDP and drive the federal budget up as well – so?

CBO Long Term Budget Outlook, 2008, Alternative Fiscal Scenario

the federal budget average revenues are about 18 19 of gdp so the fiscal gap is huge
The federal budget: average revenues are about 18-19% of GDP, so the “fiscal gap” is huge

Average revenue

CBO Long Term Budget Outlook, 2008, Alternative Fiscal Scenario

slide24
With those deficits, the resulting interest payments would dwarf the rest of the budget – need constraint and new revenue

Average revenue

CBO Long Term Budget Outlook, 2008, Alternative Fiscal Scenario

all roads lead to medicare1
Medicare only issues

Health reform, insurance coverage

Entitlement reform

Federal budget

Other health care issues (IT, quality….)

Medicare

improve program

partially finance reform, or

insurance alternative w/in reform, or

save budget dollars, or

yield long-term sustainability, or

reduce variation, or improve quality, or…

All roads lead to Medicare…
medicare directions
Medicare directions

Problems well known, driven by problems with FFS medicine

  • Care coordination is all too rare
  • Specialty care, technology favored over primary care
  • Quality inadequate and highly variable
  • Health care costs high, variable and unsustainable

Need for fundamental reform to address underlying costs:

  • Focus of change is improving delivery, focus on value;
  • Need to define payment and coverage approaches to support/incent the changes

Sounds logical: but costs = revenues

medicare short term
Medicare: short-term

Deal with ongoing, critical issues in context of budget and health care issues:

  • Set FFS payment updates
  • Address MD payment levels (SGR), redistribution
  • Access: begin rebuilding primary care w/pay increases
  • Reduce Medicare Advantage 14% overpayment; restructure for original purpose – alternative delivery

What do about benefits/cost sharing – most beneficiaries buy protection from the cost sharing – which increases Medicare spending?

medicare long term vehicle for savings and delivery reform
Medicare, long-term vehicle for savings and delivery reform

Key conceptual trends (1)

  • Shift unit of analysis and payment from CPT code transactions to episodes of care and bundling:
    • Episodes that are clinically and economically relevant, for patient and physician
    • Look to care across providers and over time
  • Support chronic care coordination
  • Re-norm payments from average cost pricing to benchmark providers/areas
medicare long term
Medicare, long-term

Key conceptual trends (2)

  • Evidence-based research trends may provide new options:
    • coverage (comparative effectiveness, coverage with evidence, etc.)
    • patient cost sharing (differentials)
  • Migrate care coordination capacity (IT, people) to delivery system to support care, away from vendor management of delivery for payors
  • Heading to degrees of risk sharing/ provider accountability for some/ or all of a population’s care
  • Continue income-tiering (already very prevalent in Medicare)
some specific policy recommendations phases
Some specific policy recommendations/phases
  • Initial:
    • Payment policy – whack-a-mole; slow redistribution to PC
    • Crosscutting interventions: P4Q; measure, report resource use; comparative effectiveness research, public reporting/transparency
  • Intermediate:
    • Medical home for chronically ill – monthly payment
    • Bundled hospital admission: hospital, MD, 30-day post discharge
      • start w/data reporting; initial reduction for high readmission rates;
      • pilot for systems that can implement soon
    • Better define post-acute coverage, care, payment
  • Longer-term: Accountability at delivery system for care
framing with health reform complicates the equation
Framing with health reform complicates, the equation
  • Two elements of health reform frame/complicate Medicare debate:
    • Financing: President proposes $630 billion set-aside for health reform (coverage expansion):
      • @ ½ from savings (mostly Medicare)
      • @ ½ from expiring tax cuts on higher income
    • Insurance option: policy alternative for expanding coverage – some type of insurance exchange with:
      • Competing private insurers, along with
      • Public program
  • With those alternatives under debate, you get very different views, positions on Medicare options
all roads lead to medicare2
Medicare only issues

Health reform, insurance coverage

Entitlement reform

Federal budget

Other health care issues (IT, quality….)

Medicare

improve program

partially finance reform, or

insurance alternative w/in reform, or

save budget dollars, or

yield long-term sustainability, or

reduce variation, or improve quality, or…

All roads lead to Medicare…
slide34
THANK YOU

Jack Ebeler

202-669-5444

slide35
The revenue constraint: Federal spending and revenues as a share of GDP, 1966-2017: average revenue 18.3 percent

Projected

Actual

Average Outlays, 1966-2006

Between 1966-2006, average spending was 20.6% of GDP, while average revenues were 18.3% of GDP. Revenues hit their 40-year low of 16.3% of GDP in 2004.

Average Revenues, 1966-2006

Congressional Budget Office. “The Budget and Economic Outlook: FY 2008-2017,” Washington, DC, January, 2007

sources of coverage for 65 population 1987 2006
Sources of coverage for <65 population, 1987-2006

Employment-based coverage has slowly declined

Public programs have picked up some of the slack, especially for children in low-income families.

The individual market has remained small

The portion of the population uninsured has slowly increased.

sources of health insurance coverage individuals under age 65 by family income 2005
SOURCES OF HEALTH INSURANCE COVERAGE, INDIVIDUALS UNDER AGE 65, BY FAMILY INCOME, 2005

The likelihood of employment-

based coverage increases with

income.

The likelihood of public

coverage decreases with

income.

Individual coverage is fairly

constant.

The likelihood of being

uninsured decreases with

income.

medicare spending increases as beneficiaries age 2005
Medicare spending increases as beneficiaries age, 2005

MedPAC Databook, June 2008 (www.MedPAC.gov)

components of federal budget fy 2009 pre financial meltdown rescue package
Components of federal budget – FY 2009 (Pre- financial meltdown, “rescue” package)

Five items constitute 2/3 of the federal budget.

Medicare and Medicaid now account for about 19 percent of federal spending – and remain the fastest growing (other than interest)

CBO, Budget and Economic Outlook: An Update, September, 2008

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