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Health Insurance is a Family Matter B Overview of Public Health Insurance Programs MEDICARE Background. Medicare is the federal health insurance program for the elderly and disabled—Part A for hospital care, Part B for medical services. It is run by the Centers for Medicare and Medicaid Services. The program was created in 1965 by Title XVIII of the Social Security Act. The end-stage renal disease (ESRD) program has been in operation since 1973 and covers more than 90 percent of the population that suffers from this disease. The Balanced Budget Act of 1997 extended Medicare coverage to include annual mammograms, Pap smears, prostate and colorectal cancer screenings, diabetes management, and osteoporosis diagnosis. Eligibility. Individuals (or their spouses) who have paid into the Social Security system for a total of 10 years, qualify for Medicare if they are aged sixty-five and older; or disabled and eligible for Social Security benefits or have ESRD (permanent kidney failure requiring dialysis or transplant). Enrollment. Medicare covers 34 million Americans ages 65 and older, 5 million younger adults with permanent disabilities, and about 250,000 Americans who suffer from permanent kidney failure. Almost all Part A beneficiaries enroll in Part B, an estimated 37 million in 1999 (Century Foundation, 2001). Most beneficiaries (76 percent) are ages 65 to 84, but the beneficiaries under age 65 that are disabled (13 percent) and those 85 and over (11 percent) are growing more rapidly than the largest age group (Kaiser Family Foundation, 2001). Seventy-eight per
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Health Insurance is a Family Matter cent of beneficiaries have incomes below $25,000, and about one in four has an income of less than $10,000 (Century Foundation, 2001). More than half of the disabled beneficiaries reported incomes of less than $10,000. Program Characteristics. The Medicare program has two components: Part A (Hospital Insurance): Enrollment occurs automatically at age 65 with no premium charges, except for those individuals who did not pay Medicare taxes while employed. They can receive Part A by paying premiums. Part A provides coverage for care in hospitals as an inpatient, critical access hospitals, skilled nursing facilities, hospice care, and some home health care. It does not require periodic re-enrollment. Part B (Medical Insurance): Part A beneficiaries may enroll and may sign up anytime during a sevenmonth period beginning three months before turning 65. Enrollees pay premiums of $54 a month for calendar year 2002 (CMS, 2002a). Part B covers physician and outpatient services, including the services of physical and occupational therapists, and some home health care. Revenue and Expenditures. Part A is financed by a 1.45 percent payroll tax paid equally by employees and their employers (Kaiser Family Foundation, 2001). Part B is financed with premiums and deductibles paid by beneficiaries and from general revenues. Premiums are designed to cover about a quarter of total Part B spending. Medicare Part A accounts for 45 percent of program expenditures and Part B accounts for 33 percent (Kaiser Family Foundation, 2001). Medicare+Choice plans contract with Medicare to provide both Part A and B services to enrolled beneficiaries and account for an estimated 18 percent of Medicare spending (Kaiser Family Foundation, 2001). About 5 percent of the Medicare budget goes to the ESRD program, although only about 0.5 percent of Medicare beneficiaries are ESRD patients (Century Foundation, 2001). Medicare benefit payments totaled $237 billion in 2001, accounting for 12 percent of the federal budget and 19 percent of total national spending for personal health services (Century Foundation, 2001). In 1999, Medicare financed 31 percent of the nation’s hospital services and 20 percent of physician services, but only 2 percent of outpatient prescription drugs (Kaiser Family Foundation, 2001). MEDICAID Background. The Medicaid program was created in 1965 as Title XIX of the Social Security Act. It was designed as a federal–state partnership to provide public funding of health care for low-income children and adults. Initially, Medicaid was
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Health Insurance is a Family Matter a medical care extension of federally funded programs for the poor, with an emphasis on the aged, the disabled, and dependent children and their mothers. Legislation in 1987 and 2000 further expanded Medicaid coverage to low-income pregnant women, more poor children, and some Medicare beneficiaries who were not eligible for any cash assistance program and had not been eligible previously for Medicaid. Most significant has been the increase of coverage for children. The latest census data show that one out of five children in the country and a quarter of all children under age 6 were enrolled in Medicaid in 2000. Enrollment grew from less than 10 million children in 1980 to over 21 million children in 1999 (Kaiser, 2002a). Eligibility. The following groups are entitled to enroll in Medicaid: federal required minimum: children under age 6 and pregnant women whose family income is below 133 percent of the federal poverty level (FPL) ($19,977 for a family of three in 2002) (DHHS, 2002b); federal required minimum: children ages 6–18 with family incomes at or below 100 percent FPL ($15,020 for a family of three in 2002) (DHHS, 2002b); no federal minimum: states set income standards for adults without children; parents of children are categorically eligible if they meet income and asset tests. On average, the states’ income eligibility level for parents is 41 percent of FPL ($6,158 for a family of three in 2002), varying from a low of 21 percent ($3,048 for a family of three) in Alabama to a high of 275 percent ($40,224 for a family of three) in Minnesota (Kaiser, 2002b; Broaddus et al., 2002); Supplementary Security Income (SSI) recipients or those aged, blind, and disabled individuals who qualify in states that apply more restrictive eligibility requirements; recipients of adoption assistance and foster care as designated by Title IV-E of the Social Security Act; special protected groups (typically individuals who lose their cash assistance from SSI due to earnings from work or increased Social Security benefits but may keep Medicaid for a period of time); and qualified Medicare beneficiaries, specified low-income Medicare beneficiaries, and disabled-and-working individuals who previously qualified for Medicare but lost their coverage because of their return to work. States also have the option of expanding Medicaid coverage to other “categorically needy” groups beyond the minimum federal requirements. Over the years, many states have broadened the reach of their programs to cover a greater portion of their low-income populations than federally required. As of January 2002, state-initiated Medicaid expansions have raised eligibility for children to levels above federal minimum standards in all but nine states (Kaiser, 2002b). The most common expansions covered by federal matching funds for coverage under the Medicaid program include the following:
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Health Insurance is a Family Matter infants up to age 1 and pregnant women not covered under the mandatory rules whose family income is up to 185 percent of FPL; recipients of state supplementary income payments; certain aged, blind, or disabled adults who have incomes above those requiring mandatory coverage but below the FPL; persons receiving care under home and community-based waivers; persons infected with tuberculosis (TB) who would be financially eligible for Medicaid at the SSI income level (eligibility is only for TB-related ambulatory services and for TB drugs); institutionalized individuals with income and resources below specified limits; medically needy—persons who meet categorical requirements and have significant health care expenses with incomes in excess of the mandatory or optional levels; these individuals may “spend down” to Medicaid eligibility by incurring medical and/or remedial care expenses to offset their excess income, thus reducing it to a level below the maximum income allowed by that state’s Medicaid plan; and legal resident aliens and other qualified aliens who entered the United States on or after August 22, 1996, made ineligible for Medicaid for five years because of the 1996 welfare reform law. Enrollment. Medicaid is the largest program providing medical and health-related services to America’s poorest people. Medicaid provided coverage to approximately 44 million Americans in 2001 (Kaiser, 2002a). Medicaid eligibility expansions and enrollment simplification efforts have led to increased health coverage of the low-income population. The number of individuals covered by Medicaid has risen from 42 million in 1999 (Kaiser, 2002a). The recent economic downturn is likely to bring renewed pressure to the Medicaid program. This enrollment growth and the accompanying additional costs during a recession come at a time when states are facing mounting budgetary pressures as tax revenues decline and demand on public programs increases (Kaiser, 2002a). Medicaid enrollment among nonelderly adults and children declined after 1995, following a decade of steady increase. Many studies suggest that Medicaid enrollment fell as an unintended consequence of the 1996 state and federal welfare reforms that changed eligibility for family cash assistance and “delinked” the two forms of assistance. Previously, families who received cash assistance had automatically been eligible for Medicaid as well. Total Medicaid enrollment of adults and children fell by 1.5 million from 1995 to 1997 as a strong economy and state and federal welfare reform efforts decreased participation in cash assistance programs (Bruen and Holahan, 2002; Urban Institute, 2002b). Several of the biggest declines in total Medicaid enrollment occurred in states with the largest percentage drops in welfare caseloads, such as Idaho, Kansas, and Wisconsin (Ku and Bruen, 1999). The Medicaid enrollment decline that occurred following welfare reform has
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Health Insurance is a Family Matter now moderated. States have made significant efforts to increase enrollment of those who remained eligible but lost coverage due to confusion on the part of Medicaid eligibility staff or beneficiaries themselves. In addition, section 1931 provisions allow states to extend coverage to parents at much higher income levels than previously available, new opportunities for coverage expansions of which states have taken advantage. Additional growth in Medicaid enrollment has also occurred as the economy experienced a downturn, and more people now meet the current eligibility standards. Financing. Medicaid funding and administrative responsibilities are shared by both federal and state governments. The federal funding share, known as the Federal Medical Assistance Percentage (FMAP), is determined annually by a formula that compares the state’s average per capita income level with the national income average. States with a higher per capita income level are reimbursed a smaller share of their costs. By law, the FMAP cannot be lower than 50 percent or higher than 83 percent. In 2001, the FMAPs varied from 50 percent in 10 states to 76.8 percent in Mississippi and averaged 57 percent overall (DHHS, 2002a). States also can receive federal matching payments to cover additional groups of individuals and provide additional services. These optional groups and benefits account for 65 percent of all Medicaid spending (DHHS, 2002a). As of 2001, more than $200 billion in federal and state funds were spent annually on the Medicaid program (Kaiser, 2002a). Medicaid spending accelerated rapidly between 1999 and 2000 following a period of relatively slow increase. Spending grew by 7.1 percent in 1999 and by 8.6 percent in 2000, compared to an average of 3.6 percent annually from 1995 to 1998 (Bruen and Holahan, 2002). The Congressional Budget Office projects Medicaid spending growth to average 9 percent per year through 2012 (CBO, 2002). These high spending rates are further intensified by the national economic recession that has led to decreasing revenues and tighter budgets in many states (Bruen and Holahan, 2002). Program Characteristics. In exchange for federal financial participation, states agree to cover certain groups of individuals and offer a minimum set of services. Each state decides how to structure eligibility, benefits, service delivery, and payment rates within guidelines established by federal law. The state must enroll all people who apply and are eligible under either a mandatory or an optional group. Enrollment caps and waiting lists are not permitted. States, however, can scale back or eliminate optional eligibility and optional benefits, and they may set limits on the amount, scope, and duration of benefits (e.g., limits on doctor visits). Most elderly individuals who receive nursing home care financed by Medicaid are covered by state option. Federal law, however, does not give states the option to cover childless adults with federal matching payments unless they fit into one of the other eligibility groups (e.g., they are elderly or disabled) except with special waivers. The extent to which states exercise the option to cover low-income
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Health Insurance is a Family Matter groups varies widely. In Massachusetts and Vermont, 41 percent of low-income nonelderly residents are eligible for Medicaid, compared to Virginia, which covers just 14 percent (Kaiser, 2002b). States receive federal Medicaid matching payments for a broad array of mandatory and optional services. The following services must be provided for individuals who are enrolled in Medicaid: inpatient and outpatient hospital services, physician services, early and periodic screening, diagnostic, and treatment services for individuals under 21, nursing facility services for individuals ages 21 years and older, home health care for people eligible for nursing home services, family planning services and supplies, rural and federally qualified health clinic services, laboratory and X-ray services, pediatric and family nurse practitioner services, and nurse midwife services. Specific Medicaid benefits for children were established in 1967, with the creation of the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program. EPSDT is a comprehensive package providing periodic evaluations of health and developmental history, as well as vision, hearing, and dental screening services. Revenue and Expenditures. Under federal law, premiums are not allowed except in limited situations and certain groups of individuals and some services are fully or partially exempt from cost sharing. Copayments and deductibles are not allowed for services provided to children or for pregnancy-related, emergency, and family planning services and supplies. In most other cases, minimal cost sharing is permitted. Deductibles cannot exceed $2 per month per family, copayments may range from $0.50 to $3.00 depending on the cost of the service, and co-insurance requirements cannot exceed 5 percent of the service cost (Kaiser, 2002b). Average program costs vary by type of beneficiary. Medicaid payments for services for children average about $1,150 per enrolled child. For adults under age 65, who comprise 21 percent of recipients, payments for services average about $1,775 per person enrolled (DHHS, 2002a). Certain other specific groups have much larger per-person expenditures. Medicaid payments for services for 4 million elderly, constituting 11 percent of all Medicaid recipients, average about $9,700 per person; for 7.2 million disabled, who make up 18 percent of beneficiaries, payments average about $8,600 person (DHHS, 2002a). The combined total of all expenditures averaged about $3,500 per person in 1998 (DHHS, 2002a).
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Health Insurance is a Family Matter STATE CHILDREN’S HEALTH INSURANCE PROGRAM Background. The Balanced Budget Act of 1997 created the State Children’s Health Insurance Program (SCHIP) and provided new funds for states to cover uninsured children. Nearly $40 billion in federal matching funds over fiscal years 1998 to 2008 were allowed for states to offer coverage to children in families with incomes up to 200 percent of the FPL, who do not qualify for Medicaid (GAO, 2000). This program represents the largest single expansion of health insurance coverage for children in more than 30 years. Under the new Title XXI of the Social Security Act, states were given the option to set up a separate child health program, expand Medicaid coverage, or have a combination of both a separate child health program and a Medicaid expansion. Enrollment. In 2001, 4.6 million children were enrolled in SCHIP. Of the total number of children enrolled, 18 percent were enrolled in separate child health programs (S-SCHIP), 13 percent were enrolled in Medicaid expansion programs (M-SCHIP), and 69 percent were enrolled in combination programs (CMS, 2002b). Throughout 2001, SCHIP enrollments grew nationally at a steady pace and decreased in only six states. Fourteen states at least doubled the number of children enrolled between 1999 and 2001 (CMS, 2002b). In 2001, more than 75 percent of children ever enrolled in SCHIP were between 6 and 18 years of age. Almost 2 million were 6- to 12-year-olds and 1.5 million were 13- to 18-year-olds. However, there are still significant barriers to obtaining coverage through SCHIP. A recent Urban Institute study found that complicated enrollment procedures continue to be at the core of difficulties in getting eligible children covered. Thirty-eight (38) percent of low-income families that inquired about Medicaid and SCHIP alluded to administrative obstacles as the major reason for not applying (Kenney and Haley, 2001). For example, many states require families to provide numerous documents verifying information on their applications, despite the fact that such verification is not required under federal law (Maloy et al., 2002). Program Characteristics. While states with SCHIP Medicaid expansions must provide the same benefits available to other children enrolled in Medicaid, states with SCHIP stand-alone programs have a wide range of options to use in designing their benefit packages, including the benefits available under a state’s Medicaid program. SCHIP stand-alone components must cover basic benefits such as physician services, inpatient and outpatient hospital services, and laboratory and X-ray services. However, states have discretion to provide optional benefits such as prescription drugs and hearing, mental health, dental, and vision services on a more limited basis or not at all. Patient out-of-pocket costs are allowed but limited. Total out-of-pocket costs (premiums, copayments, deductibles, enrollment fees) for children covered in separate SCHIP programs cannot exceed 5 percent of family income (Kaiser,
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Health Insurance is a Family Matter 2002b). In addition, for children with family incomes below 150 percent FPL, premiums and cost-sharing charges cannot exceed nominal amounts prescribed by the Centers for Medicare and Medicaid Services. Eligibility. In the SCHIP program, states may either cover children in families whose incomes are above the Medicaid eligibility threshold but less than 200 percent of FPL or use their SCHIP funds to cover children at higher income levels (Kaiser, 2002b). Most states provide SCHIP coverage for children in families up to or above 200 percent of the poverty level. Seventeen states set lower income or age standards, which is the major reason that 6 percent of lower-income children (<200 percent FPL) are not eligible for SCHIP (Broaddus and Ku, 2000). A number of lower-income children are also ineligible because of their immigration status. Program Expansion. States are starting to expand SCHIP to cover uninsured populations other than children. In 2001, four states (Minnesota, New Jersey, Rhode Island, and Wisconsin) received approval for section 1115 waivers to enroll parents of children in SCHIP. New Jersey and Rhode Island will also enroll eligible pregnant women. These four states enrolled more than 230,000 adults in 2001 (CMS, 2002b). In August 2001 a new initiative was announced to expand coverage to uninsured populations through the Health Insurance Flexibility and Accountability (HIFA) initiative and two states have received approval of their applications: Arizona expects to eventually enroll 50,000 adults. The plan will expand access to health coverage to parents with children enrolled in Arizona’s Medicaid program or SCHIP with family incomes between 100 percent and 200 percent of FPL and to childless adults with family incomes up to 100 percent of FPL. California plans to expand coverage to 300,000 uninsured people, including 275,000 parents of SCHIP children with family incomes at or below 200 percent FPL. In addition, there are currently seven states with approved premium assistance programs: Maryland, Massachusetts, Mississippi, New Jersey, Virginia, Wisconsin, and Wyoming. Premium assistance programs allow states to subsidize health coverage for low-income residents whose employers offer health insurance. Applicants and enrollees are screened for access to employer-sponsored health coverage. The state requests detailed information from potentially participating employers regarding costs, benefit package, employer share of costs, and employee eligibility. If the employer responds and the coverage meets state and federal standards for both benefits and costs, individuals are enrolled in their employer’s plan. The state pays the consumer, insurer, and/or employer a subsidy. States may also apply for family coverage waivers, which allow the state to purchase coverage for the entire family if it is cost-effective. The states with family coverage waivers are Maryland, Virginia, and Wisconsin (CMS, 2002b).
Representative terms from entire chapter: