Transcript Medicare: The Essentials Juliette Cubanski, Ph.D. Principal Policy Analyst Kaiser Family Foundation for Alliance for Health Reform Washington, D.C. March 16, 2009

Medicare: The Essentials
Juliette Cubanski, Ph.D.
Principal Policy Analyst
Kaiser Family Foundation
for
Alliance for Health Reform
Washington, D.C.
March 16, 2009
Exhibit 1
Medicare Past and Present
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Enacted in 1965 to provide health and economic security to
seniors age 65 and older
Expanded in 1972 to cover younger beneficiaries with
permanent disabilities
Now covers 45 million people, including about 7 million under65 disabled
Covers individuals and spouses without regard to income or
medical history
Benefits include hospital visits and physician services, and
prescription drugs through private plans
Private plans have been playing an increasingly larger role in
the delivery of Medicare benefits
Exhibit 2
Medicare covers a population with diverse needs
and significant vulnerabilities
Percent of total Medicare population:
Income <200% FPL
($20,800 in 2008)
46%
3+ Chronic Conditions
38%
Cognitive/Mental
Impairment
29%
2+ ADL Limitations
17%
Under-65 Disabled
16%
Age 85+
Long-term Care Facility
Resident
12%
5%
NOTE: ADL is activity of daily living.
SOURCE: Income data for 2007 from U.S. Census Bureau, Current Population Survey, 2008 Annual Social and Economic
Supplement. All other data from Kaiser Family Foundation analysis of the Centers for Medicare & Medicaid Services Medicare
Current Beneficiary Survey, Access to Care file, 2006.
Exhibit 3
Benefits Covered by “Original”
Fee-for-Service Medicare
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Medicare Part A – Hospital Insurance Program
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Inpatient hospital, skilled nursing facility, home health, and hospice care
Cost-sharing requirements:
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$1,068 deductible for hospital stays, plus daily copayments after 60 days
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Daily copayments for skilled nursing facility stays
Entitlement to Part A after 10+ years of payroll taxes
Medicare Part B – Supplementary Medical Insurance
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Physician visits, outpatient hospital, preventive services, home health
Cost-sharing requirements:
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$96.40 monthly premium (income-related)
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$135 deductible
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20% coinsurance for physician visits, outpatient hospital services, and some
preventive services
50% coinsurance for mental health services (phasing down to 20% in 2014)
Enrollment in Part B is voluntary, with automatic enrollment at age 65
for Social Security recipients (but can opt out)
Exhibit 4
Medicare Advantage (Part C)
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An alternative to Original Medicare;
beneficiaries can enroll in a private
plan to receive all Medicare-covered
benefits and (often) extra benefits
Includes HMOs, PPOs, and privatefee-for-service (PFFS) plans
The government pays private
insurers a fixed amount per enrollee
Medicare Advantage Enrollment
(in millions)
10.8
8.7
6.9
6.1
6.1
5.3
Medicare pays private health plans
on average 14 percent more than
traditional Medicare costs
Medicare Advantage enrollees:
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generally pay the Part B premium
sometimes pay a supplemental
premium for additional benefits
(e.g., vision, dental)
typically receive drug coverage
(Part D)
1999
2001
2003
2005
2007
2009
Nearly a quarter of all Medicare
beneficiaries are enrolled in
Medicare Advantage plans in 2009
Exhibit 5
Medicare Part D – Prescription Drug Benefit
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Part D is a voluntary benefit offered through private plans
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Beneficiaries in each state have a choice of at least 45 stand-alone drug
plans and multiple Medicare Advantage drug plans
The government defined a “standard” benefit, but allows plans to vary
benefit design, covered drugs, and cost sharing
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9.6 million receiving low-income subsidies in 2009, while 2.6 million low-income beneficiaries
are estimated to be eligible but not receiving extra subsidies
90% of beneficiaries now have drug coverage, up from 66% in 2004
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$30.36 average monthly premium (range $10.30-$136.80)
$295 deductible; 25% coinsurance; $3,454 coverage gap; catastrophic coverage
Additional subsidies for people with low incomes and modest assets
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Stand-alone prescription drug plans to supplement Original Medicare
Medicare-Advantage prescription drug plans
26.7 million out of 45.2 million beneficiaries are enrolled in a Part D plan (two-thirds in
stand-alone drug plans)
7.9 million with employer coverage and 6.2 million with other sources of coverage
4.5 million (10%) lack drug coverage
Exhibit 6
Medicare Benefit Payments, by Type of Service,
in 2009
Outpatient
Prescription
Drugs
Hospital
Outpatient/Other
Part B
Part A
Part B
11%
8%
29%
Hospital
Inpatient
Physicians and
17%
Other Suppliers
5% Skilled Nursing
Facilities
4%
Home Health
24%
Hospice
2%
Medicare
Advantage
Total Benefit Payments = $477 billion
NOTE: Does not include administrative expenses such as spending to administer Part C and Part D.
SOURCE: CBO Medicare Baseline, March 2008.
Part A and B
Part D
Exhibit 7
Medicare’s Funding Sources in FY2009
Payroll Taxes
41%
General Revenue
73%
85%
79%
Payments from
States
39%
12%
3%
5%
Beneficiary
Premiums
1%
TOTAL
$507 Billion
6%
1%
8%
PART A
$244 Billion
25%
2%
PART B
$202 Billion
9%
12%
Taxation of
Social Security
Benefits
Interest and
Other
PART D
$61 Billion
SOURCE: 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical
Insurance Trust Funds.
Exhibit 8
Medicare offers important benefits,
but there are gaps in coverage
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Medicare pays less than half (45%) of beneficiaries’ total
health and long-term care spending
Medicare does not cover all medical benefits
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Medicare has high cost-sharing requirements
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No coverage for hearing aids, eyeglasses, or dental care
Generally does not pay for long-term care
Monthly premiums for Part B, Part C, and Part D
Deductibles for Part A, Part B, and Part D
Part D coverage gap (“doughnut hole”)
No limit on out-of-pocket spending for benefits
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Median out-of-pocket spending as a share of income rose
from 11.9% in 1997 to 16.1% in 2005
Exhibit 9
Most Medicare beneficiaries have
supplemental coverage (as of 2006)
NONE
Original Medicare only
11%
Other
1%
Medicaid
Medigap
35%
16%
Employersponsored
18%
19%
Medicare
Advantage
SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care file, 2006.