Healthcare Reform Resource Guide and Fact Book_March2009

8/9/2019 Healthcare Reform Resource Guide and Fact Book_March2009

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Resource Guide and HealthResource Guide and HealthCare Reform Fact BookCare Reform Fact Book

Prepared by

Dylan H. Roby, Ph.D.

Adjunct Assistant Professor

UCLA School of Public Health

[email protected]

Service Employees International Union (SEIU) Nurse AllianceChange That Works: A Prescription for Quality Affordable Healthcare

Jackson Memorial Hospital, Miami, FLMarch 12th to 13th, 2009


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Background on theBackground on theEmployerEmployer--Based SystemBased System


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How did EmployerHow did Employer--Based InsuranceBased InsuranceCoverage become the main source ofCoverage become the main source of

health care in the U.S.?health care in the U.S.? Prior to 1929, the only source of payment for

health care was Workers Compensation Workers Comp was a cash benefit, used to pay for

workplace injuries Medical care was generally paid for out-of-pocket and

there was no insurance to subsidize health care costs

In 1929, a group of teachers negotiated a pre-paid health services plan with physicians at

Baylor University hospital This was the first attempt at private health insurance

coverage in the U.S. Blue Cross (1932) $6 per year for each of 1,500 schoolteachers to cover

21 days of hospital stay


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When Did EmployerWhen Did Employer--BasedBased

Coverage Take Over in the U.S.?Coverage Take Over in the U.S.? During World War II, there was a large amount

of growth in employee benefits Due to wage freezes, competition for employees

resulted in health care benefits becoming far morepopular

Labor unions played a large part before, during andafter the war in maintaining this momentum

After the war ended, employer-based health

insurance coverage dominated the U.S. health caresystem

Tax benefits = less payroll tax for employers, pre-taxbenefit for employees


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Descriptions of GovernmentalDescriptions of GovernmentalInsurance ProgramsInsurance Programs


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Medicare (Title XVIII)Medicare (Title XVIII)

Federal program, no state funding Multiple Parts A, B, C, and D Part A is Financed through federal payroll tax (1.45%

from employee and employer) Part B is voluntary and financed through monthly

premiums ($131 per month), taxes, and interest from the

trust fund Part C is a voluntary program allowing Part A&B

enrollees to opt into commercial Managed Care plans(i.e. Secure Horizons, Humana GoldPlus) These now include HMO, PPO, or prepaid FFS plans

Government provides high rates to the private insurers to makesure they stay in the market (Benchmark rate + 75% of biddifference)

Part D was created in the 2003 Medicare ModernizationAct (MMA) Covers prescription drugs through separate pharmacy benefit

commercial plans ($28+ per month)


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Who qualifies for Medicare?Who qualifies for Medicare?

Designed to provide health care to elderly and disabledU.S. residents Age 65 and over, must pay payroll tax (1.45%) on at least 10

years of income (40 work credits) Having a spouse who paid into the Medicare payroll tax for

10 years is also acceptable

You can earn up to 4 work credits per year, one work credit isequal to $1,090 of income.

The Permanently Disabled Certified as permanently disabled by SSI (2 years) Amyotrophic lateral sclerosis (ALS) End Stage Renal Disease

Everyone gets Part A Free with 40 work credits People with partial work credit can buy-in for an added

premium Part B, C, and D are voluntary and require additional premiums


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What Does Medicare Cover?What Does Medicare Cover? The Medicare benefit package is outdated

Similar to the Major Medical plans that werepurchased by employers and consumers in the 1960s

You would not find the Medicare benefit package in

any mainstream insurance plan No Pharmacy Benefit until 2003 (Part D)

Part A inpatient hospital care

Part B outpatient/physician office care

Part C Managed Care (combination of A&B)

Part D Prescription Drug Benefit


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How Is Medicare Paid For?How Is Medicare Paid For?Part A: Payroll tax 1.45% each from employer and employee

Look at the Medicare line item on your next paycheck OASDI (Social Security) represents another 6.2% of your paycheck

Part B:

Monthly premium from beneficiaries => about 25% of total General tax revenues => about 71% of total Interest on trust fund => about 4% of total

Administrative expense => about 1.5-2.0% of expenditures Medicare (CMS) does not actually process claims, they contract with

commercial insurance plans as fiscal intermediaries

Patients in Medicare pay for a significant share of their own care throughdeductibles, co-payments (% of fee), and premiums Only 55% of Medicare-related costs are paid for by the Medicare program Medigap supplemental coverage


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Hospital Payment Under MedicareHospital Payment Under Medicare

Since October 1983, Medicare has paid for inpatientcare according to the Hospital Inpatient ProspectivePayment System (PPS)

Patients are assigned to 1 of almost 550 categories,known as Diagnosis-Related Groups (DRGs), based ontheir diagnosis

Hospital receives a fixed payment based on the patientsDRG, regardless of the cost of treatment

The adoption of PPS in 1983 had a ripple effect on therest of the health care system More use of prospective payment by other payers

Need for cost shifting

PPS spread into other parts of Medicare (outpatient - APC, long-term care - RUG, etc)


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Physician Payment Under MedicarePhysician Payment Under Medicare

Since January 1992, Medicare pays for physician servicesaccording to the Medicare Fee Schedule (MFS)

MFS assigns 3 relative value units to more than 6000services provided by physicians defined according to CurrentProcedural Terminology (CPT) codes

RVU for physician work, based on the Resource-BasedRelative Value Scale (RBRVS)

RVU for office expense

RVU for malpractice expense Payment calculation accounts for geographic location,

overhead costs, and resources used for each service


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Medicare Advantage (Part C)Medicare Advantage (Part C) Medicare Modernization Act of 2003 renamed Medicare+Choice to Medicare

Advantage

Effective January 1, 2006, all companies offering a Medicare Advantage plan mustoffer at least one plan with prescription drug coverage, and added: Regional PPOs Private FFS plans Special Needs Plans (SNPs)

MSAs were renamed Health Savings Accounts (HSAs) Medicare beneficiaries are still not eligible

Increased growth rate of premiums Benchmark fee-for-service rate + 75% of bid difference + yearly 2% inflator Provides an incentive for companies to continue offering Medicare products and

not abandon the market

Starting in 2006, beneficiaries in Part A and B can choose to enroll in a health planduring an annual enrollment period at the end of the calendar year, but are locked into their choice of health plan for an entire year With the exception that they can still make one change during an open-

enrollment period in the first 3 months of the following calendar year


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Prescription Drugs (Part D)Prescription Drugs (Part D)

Effective January 1, 2006, created a voluntaryprescription drug benefit plan

Monthly premiums of about $28

$275 deductible 25% copayment from $276 to $2,510

100% copayment from $2,511 to $5,726.25

the so-called doughnut hole

Maximum Out of Pocket Threshold is $4050

= 275 + [(2510-275)*.25] + [(5726.25-2510)*1]

Premium and deductible support for low-incomebeneficiaries


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Medicaid (Title XIX)Medicaid (Title XIX) State-Federal partnership Regulated by CMS (Centers for Medicare and Medicaid

Services) Each state submits a plan for their Medicaid program design States can seek Medicaid waivers (1115, 1915b, 1915c) Federal Medical Assistance Percentage (FMAP) Federal Match

Delivered by individual state Medicaid offices California Department of Health Care Services Florida Agency for Health Care Administration Ohio Department of Job and Family Services Pennsylvania Department of Public Welfare

Medicaid is an entitlement program, its inclusion in thefederal budget is guaranteed

Can be delivered via fee-for-service and managed care 50% of Californias Medicaid beneficiaries are in Fee-for-Service

(aged, blind, disabled, rural residents, medically needy), while other50% are in managed care plans (run by commercial or publicinsurance companies)


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Who qualifies for Medicaid?Who qualifies for Medicaid?

Designed to provide health care to poorfamilies and pregnant mothers, chronicallyill and medically needy, disabled, and blindresidents of the U.S.

Eligibility levels depend on the state

Required to have proof or citizenship or legalresidence, must live in U.S. for at least five

years (DRA Requirements) Presumptive eligibility and Emergency

Medicaid (Partial Scope)

Some beneficiaries have a share of cost


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Medicaid Payments Often LowMedicaid Payments Often Low

Medicaid Fee Schedules in many states are much lowerthan Medicare and Commercial Rates

Many physicians opt-out of Medicaid participation,resulting in larger burden on safety net clinics and

hospitals Medicaid is also dominated by disabled, blind, medically

need, and aged expensive groups to treat!

Results in cost-shifting for hospitals, overcrowdedemergency departments, difficulty securing specialtyreferrals, despite the patient being insured!


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SCHIP (Title XXI)SCHIP (Title XXI) State-Federal partnership

Regulated by CMS (Centers for Medicare and MedicaidServices) Each state submits a plan for their SCHIP program design States receive a higher Federal Medical Assistance Percentage

(FMAP) Federal Match, however, it is a block grant

Delivered by individual state offices Californias Healthy Families program is administered by the

Managed Risk Medical Insurance Board of the Department ofHealth Care Services

SCHIP was originally authorized for 10 years (1997-2007),and was recently re-authorized for another 10 years

Can be delivered via fee-for-service and managed care States had flexibility in program design to piggyback on current

Medicaid program or start new SCHIP program from scratch Many states created new programs focus on marketing, removing

Medicaid stigma, and setting up better provider networks throughprivate insurance mechanisms


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Who qualifies for SCHIP?Who qualifies for SCHIP?

Designed to provide health care to workingpoor, low-income families who areresidents of the U.S. Eligibility levels depend on the state

Must be above Medicaid eligibility levels Required to have proof or citizenship or legal

residence, must live in U.S. for at least fiveyears (DRA Requirements)

Most beneficiaries have to pay cost sharing inthe form of premiums and co-pays

Cost sharing cannot exceed 5% of familyincome


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Managed CareManaged Care


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All Major Health Insurers andAll Major Health Insurers and

Payers Use Managed CarePayers Use Managed Care Preferred Provider Organizations (PPOs) are

effectively discounted fee-for-service

arrangement Health Maintenance Organizations (HMOs) are

staff, network, or group model health serviceplans, often paid based on capitation HMOs focus on prevention and primary care

HMOs engage in active utilization review

Hybrid model: Point of Service (POS) combines HMO (in-network) and PPO (out-of-network) ideas


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Different Payers = DifferentDifferent Payers = Different

Managed Care PlansManaged Care Plans Medicare Medicare Advantage Plans Medicaid States are allowed to enroll beneficiaries into

Commercially-run Medicaid HMOs

SCHIP Many States used completely HMO-basedsystem to deliver care

Employer-Based and Individually-Purchased Plans arepredominantly HMO/PPO/POS

Even county and state indigent care programs have

adopted managed care principles Medical Home Primary Care Gatekeeping and Specialty Referral systems

Designed to reduce ER overcrowding, improve health status,and empower patients using managed care ideas


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Recent Examples of StateRecent Examples of Stateand Local Reformand Local Reform


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The Massachusetts Model of ReformThe Massachusetts Model of Reform

Individual Mandate First Layer is an employer mandate pay-or-play provision

Requires Employers or 11 people or more to offer fair andreasonable coverage or pay into a purchasing pool ($295 annuallyper employee)

Massachusetts provides subsidized health care for residentsearning up to 100% of the FPL (through Medicaid), and partiallysubsidized health care those earning up to 300% of the FPL,depending on an income-based sliding scale.

Commonwealth Health Insurance Connector Authorityofferssubsidized coverage and facilitates the selection and purchaseof private insurance plans by individuals and small businesses.

Incentives for residents to obtain health insurance coverageinclude tax penalties for failing to obtain an insurance plan.

Helped by $700 million Uncompensated Care Pool that hasexisted for several years, funded by provider tax levies

Maximum of 650,000 uninsured individuals in MA during 2006, intwo years more than two-thirds are now insured.


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San Franciscos Universal HealthSan Franciscos Universal Health

Care Reform: Healthy SFCare Reform: Healthy SF Employer Mandate Currently being phased-in by income level (now at 500% FPL) Still uses existing county indigent care system, Medi-Cal,

Healthy Families (SCHIP), and commercial insurance Pay-or-Play: Employers are required to offer commercial

insurance coverage or pay a fee to City of San Francisco If individuals are uninsured, they receive coverage , not

insurance Employer fees go to county to provide care Enrollees receive a medical home, have access to specialty

referrals, and pay enrollment fees and some share-of-cost

Through County system (SF General Hospital, County HealthDepartment Clinics)

Employees who do not need insurance or live out of area willreceive Medical Reimbursement Account due to employercontributions


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Key Terms, 1Key Terms, 1Adverse Selection a situation in which a riskier individual (i.e. chronically ill or medically

needy) is more likely to opt into an insurance plan than a lower-risk individual. This can resultin higher risk to the insurance company or governmental health plan.

Capitation A per member per month (PMPM) rate paid to physicians to provide health carefor a specific managed care enrollee for a set time period.

Commercial Insurance Insurance coverage provided through a private insurancecompany. Premiums are either paid by an employer on behalf of an employee or by an

individual who purchased the plan directly from the insurer or broker.

Contracted Rate The amount of money a physician, hospital, clinic or other billing providerhas agreed to accept for a specific service or bundle of services from an insurance payer

Cost-Based Reimbursement A method of payment for health services in which theprovider is able to bill for and be paid the actual cost of the service provided. This method isstill prominent in the Federally Qualified Health Center program, where the FQHC-rate is a

cost-based prospective payment.

EMTALA The Emergency Medical Treatment and Active Labor Act (1986) is a law requiringhospitals with an emergency department to triage and stabilize emergent patients regardlessof ability to pay. This policy was designed to prevent wallet biopsies and patient dumping(i.e. transfers of unstable patients to safety net hospitals).


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Key Terms, 2Key Terms, 2Employer Mandate (also known as a Pay-or-Play Provision): Governmental imposedrequirement for employers to provide health insurance to employees or pay into agovernment-run fund to subsidize the uninsured

Fee-for-Service The method of payment for health services where a provider bills aninsurance company their usual, customary, and reasonable charge for a service, and isreimbursed the entire amount of the charge. This type of billing is no longer prevalent,even in Medicare FFS or Medicaid FFS, where the rates are based on a set, prospectivefee schedule that does not represent the full charge.

FQHC Federally Qualified Health Centers are community-based, non-profit clinics andare part of the federal Community, Migrant, and Homeless Health Center program(Section 330 of the Public Health Service Act). These clinics are an integral part of thehealth care safety net and provide comprehensive primary care services to people

regardless of ability to pay. They receive an FQHC rate for primary care services underMedicaid, and also receive 20-25% of their operating revenue from a federal grantadministered by the Bureau of Primary Health Care within the Health Resources andServices Administration


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Key Terms, 3Key Terms, 3

HMO Health Maintenance Organizations are managed care firms, also calledhealth service plans and regulated by the Knox-Keene Health Service Act of 1975.

Organized in three ways:

Network Model (network of private physicians)

Group Model (one or more contracted Medical Groups)

Staff Model (i.e. Kaiser Permanente) all three represent different ways ofcontracting with physicians for care delivery.

Often reimburse for primary care and some inpatient services via capitated rateswhich are negotiated with individual physicians, medical groups, or hospitals. HMOsuse evidence-based utilization review, primary care gatekeeping, closed physiciannetworks, and capitated rate negotiations to reduce costs and improve member

health care/status.


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Key Terms, 4Key Terms, 4Indigent Care A term for care provided to the uninsured. Counties and states often have

indigent care programs or indigent care pools to finance health care for the uninsuredresidents of their county that cannot qualify for Medicaid or afford their own insurance.

Individual Mandate Government imposed requirement that all resident obtain insurancecoverage through any available source. This requirement can be met through Medicaid,Medicare, SCHIP, commercial insurance supplied by an employer, or privately purchasedcoverage. Senator Baucus suggests that using this method will limit Adverse Selection.

Managed Care The general term to describe HMO, PPO, and POS-based physiciannetworks that use contracting, evidence-based utilization review, and cost controls toprovide health care.

Medicaid State operated health care insurance program for poor families and pregnantmothers. It is a state-federal partnership, administered by states in collaboration with CMS.The federal match is based on the FMAP for each state. Medicaid beneficiaries arecategorically eligible, meaning they must meet certain eligibility requirements related to

income, family characteristics, and assets.

Medicare It is a federally administered health care insurance program for people age 65and over who worked at least 10 years (40 work credits) in the U.S., or have spouses whomet the work requirement. Medicare can be delivered through Fee-for-Service (Part A andB) or Managed Care (Part C) arrangements. You can also become eligible due to disability(two years of SSI), End-State Renal Disease, or ALS.


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Key Terms, 5Key Terms, 5Per Diem Rate A daily rate paid to hospitals, usually for inpatient days. Negotiatedbetween the hospital and insurer.

POS While this stands for Point of Service, it is a hybrid managed care plan in which amember can choose to use the HMO network and pay a simple co-pay and lower costsharing to use their primary care physicians and specialty referral system, or go out-of-network to use any willing provider at a higher cost to themselves. However, like a PPO, aportion of the out-of-network visit will be paid by the insurance company (usually between

60 to 80% of the UCR rate).

PPO A Preferred Provider Organization is a health insurance arrangement that allows amember to seek care from a group of in-network physicians for either primary or specialtycare at a lower cost (10% co-pay, insurance pays 90% of contracted rate). Or, the membercan go out-of-network to any willing provider and the insurer will pay a lower rate (60 to80% of the UCR). PPOs contract with their in-network physicians at a discounted fee-for-service rate, or a bundled rate (rather than a capitated rate like an HMO). PPOs will alsocontract with hospitals using per diem or discounted fee-for-service rates.

Prospective Payment This is a very popular method of payment for health services inwhich the insurer or payer pays an agreed upon amount for a specific service, rather thanpaying the charge that is submitted on a claim by a provider. Contracted rates, RBRVS,and the FQHC-rate methodology are all prospective payment systems.


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Key Terms, 6Key Terms, 6RBRVS Resource Based Relative Value Scale payments are prospective paymentscalculated for use in Medicare to compensate physicians or hospitals who have providedhealth care to Medicare beneficiaries. The RBRVS is based upon Diagnosis RelatedGroups for inpatient care, where a specific RVU value and RVU-unit cost is calculatedbased on the usual course of treatment for a condition or service.

RVU A Relative Value Unit is used in RBRVS to establish how much input went into aspecific encounter, so that payment can be calculated for a specific service.

SCHIP The State Childrens Health Insurance Program was created in 1997 as part ofthe Balanced Budget Act. It provides health insurance coverage to children aged 0 through18 who cannot qualify for Medicaid or afford their own private insurance coverage. This isa state-federal partnership program, similar to Medicaid. The federal match is higher foreach state because they use an enhanced FMAP rate.

Uncompensated Care Health care provided by physicians and hospitals that is not paid

for, usually provided to uninsured patients who cannot afford to pay for the services used.These uncompensated care costs are often written off by hospitals or physicians as charitycare or bad debt.


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Key PlayersKey PlayersSenator Max Baucus a proponent of health care reform through an individual mandate

proposal

Representative John Conyers A proponent of single-payer health care reform(Medicare for All HR 676).

Department of Health and Human Services (DHHS) Administration responsible forhealth care in the U.S., has oversight of CMS, CDC, etc. Secretary Kathleen Sebelius

directs the agency for the Obama Administration.

Office of White House Health Care Reform A new office created by PresidentObama to function as a liaison between DHHS, the President, and the Legislature.Directed by Nancy-Ann Min DeParle, a former health care consultant and Director ofHCFA (the former CMS).

Centers for Medicare and Medicaid Services (CMS) the office responsible for

administering Medicare and Medicaid.


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Web ResourcesWeb Resources

http://www.nchc.org/facts/cost.shtml

http://www.statehealthfacts.org

http://www.kff.org/healthreform/index.cfm

www.healthpolicy.ucla.edu

Healthcare Reform Resource Guide and Fact Book_March2009

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