Group Chap 9: Government Health Plans in US

Question 1

Medicare and Medicaid

Answer 1

1. Medicare is a federal program
2. Medicaid is a joint federal and state program
3. Programs are administered at federal level by Centers for Medicare & Medicaid services (CMS)
   - States have some control over their Medicaid program

Question 2

Medicare

Answer 2

1. Eligibility for coverage is available to the following:
- Persons at least 65 and eligible for Social Security

• Individuals entitled to social security benefits for at least 2 years
• Insured workers with end stage renal disease (ESRD), including spouses and children with ESRD
• Some other aged and disabled individuals who pay mandatory premiums

2. Part A provides HI, Part B provides supplementary medical insurance (SMI), Part D provides prescription drug insurance, Part C is called Medicare Advantage and is an alternative to Part A and Part B

3. Part A services include
(1) Inpatient hospital benefits
(2) Skilled nursing facility (SNF)
(3) Home health agency following discharge from a hospital or SNF
(4) Hospice care is provided to terminally ill patients
- There are no HI beneficiary premiums
- There are cost sharing provisions and limits on coverage

4. Part B (SMI)
- Requires a monthly premium
- A beneficiary can decline SMI coverage
- SMI covered services:
(1) Outpatient hospital
(2) Medicare care (physicians, diagnostic tests, supplies, etc.)
(3) Initial preventive visit within 12 months of enrolling and yearly wellness visits thereafter
(4) Ambulance services
(5) Clinical laboratory and radiology
(6) Physical and occupational therapy
(7) Speech pathology
(8) Outpatient rehabilitation
(9) Raditation therapy
(10) Transplant
(11) Dialysis
(12) Home health care beyond part A
(13) Certain drugs and biological
(14) Certain preventive services
- After the deductible beneficiaries pay, with some exceptions, coinsurance of 20%

5. Medicare Supplements
a. Medigap (a.k.a Medicare Supplement)
- Private “Medigap” insurance fills in out-of-pockeet costs and provides benefits not covered by Medicare
- 10 standardized plans are available in most states
- Medigap carriers are prohibited from selling to beneficiaries enrolled in an MA plan

b. Part C (a.k.a Medicare Advantage)
- A managed care option that substitutes for HI and SMI coverage
- Offers lower out of pocket costs, increased coverage limits, coverage for some services not covered under traditional Medicare
- MA coverage is only available to beneficiaries covered under both HI and SMI

c. Part D
- Provides coverage for most prescription drugs used by Medicare enrollees

• Prescription drug plans (PDP) provide coverage on a standalone basis
• Medicare Advantage Prescription Drug plans (MA-PD) provide drug coverage alongside Part C
• Retiree drug subsidy (RDS) - Subsidies to ERs and other plan sponsors who offer drug coverage through reitree health plans
• Member Premium
  (1) Member premium is 25.5% of the total cost of the standard benefit based on the national average bid
  (2) CMS pays the remaining 74.5%
  (3) If a particular Part D carrier bids more than the national average, its member premium likewise differs from the national average member premium
  (4) member who do not sign up when initially eligible pay a penalty for late enrollment if they subsequently enroll
• Drug excluded from Part D: drugs covered by Part A or B, drugs to treat anorexia and weight loss, fertility drugs, drugs for cosmetic conditions, relieve cough and cold symptoms, vitamins and minerals, over the counter drugs
• Each plan must provide at least the standard Part D coverage; Contracts may enhance plans, and may charge premium for the additional coverage

5. Program Financing
- HI trust finances Part A, and is financed by payroll taxes

• SMI trust fund finances Part B and D, and is financed through contributionsfrom the general fund of the treasury and beneficiary premiums
• Part B and D financed through account within the SMI trust fund
• Board of trustees must report to congress on financial status of the trust each year
  (1) HI fund projected to be exhausted by 2026
  (2) Part B and D expenses are funded by general revenues and premiums that are established annually
  (3) SMI cost increases are expected to outpace GDP growth over the next several decades
• Approaches to improving Medicare solvency
  (1) Higher taxes
  (2) Reduce covered services
  (3) Increase Medicare cost sharing
  (4) Raise the eligibility age
  (5) Adjust reimbursement to providers
  (6) Other initiatives such as ACO

6. Medicare Provider Reimbursement
a. Inpatient Hospital Services - reimbursed on an Inpatient Prospective Payment System (IPPS)

• Hospitals paid a set amount for each discharge based on the DRG method known as the Medicare Severity DRG (MS-DRG)
• Also receive additional reimbursement adjustments for outlier hospital stays, Graduate Medical Education costs, value-based incentive payments, and reductions for excess readmission
• DSH adjustments depending on the portion of services delivered to uninsured and low income patients

b. Professional Services
- The fee schedule uses a resource based relative bsaed scale (RBRVS) based on the following elements
(1) Relative Value Units for the procedure
i. Work Value
ii. Practice Expense
iii. Malpractice Value
(2) Geographic Practice Cost Indices (GPCIs)
i. The sum of rhe GPCI-adjusted RVUs equals to the total RVU for a service
(3) Nationwide coversion factor

• Reimbursement for a aparticular service is equal to the sum of GPCI-adjusted RVUs multiplied by the nationwide conversion factor
• Physicians that are not “participating” may bill patients an additional amount, subject to about a 15% limit above the Medicare reimbursement amount
• The Medicare Access and CHIP Reauthorization Act (MACRA) 2015 has established a Quality Payment Program (QPP)
  i. Quality Incentive payments for providers that exceed quality thresholds
  ii. Negative adjustments for providers that fail to reach baseline thresholds

c. Outpatient Hospital Services
- Hospital outpatient services are reimbursed on an outpatient prospective payment system
i. Also called Ambulatory Payment Classification (APC)

d. Other Reimbursement Methods
- Hospital value-based purchasing
- Medicare Shared Savings Program (MSSP) for accountable care organizations (ACOs)
- Bundled payments for Care Improvement Advanced (BPCI Advanced) Model

7. Medicare Advantage (MA)
a. In exchange for capitation payment, private health plans (HMOs, POS, PPO) offer benefits at least as generous as basic Medicare

b. Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA)
- Introduced regional PPOs and Special Needs Plans (SNPs)
- Introduced a bidding approach to the contracting between Medicare and private MA contractors
- If the bid is less than the benchmark, the plan keeps a percentage of the difference (the “rebate”), which it must use to increase benefits, reduce cost sharing, or reduce premiums
i. Government keeps the remaining amount as savings
ii. Rebate percentage is a function of the plan’s quality start rating
- A bid greater than the benchmark results in premium to the member

c. Risk Adjusted Payments
- Capitation payments recognize the health status of enrollees
- The model (i.e. CMS-HCC) uses both inpatient and outpatient diagnostic data
- Model takes into account age and sex, Medicaid eligibility, originally disabled status, working-aged status, and institutionalized status
- Conditions that are closely related are placed in hierarchies, and only the most costly condition within each related category is recognized
- A separate risk adjustment model for Part D ; Similar to CMS-HCC model, but designed to reflect Part D costs instead of costs for Part A and B services

d. The Affordable Care Act (ACA)
- Modified MA payment to reduce overall funding and introduce payments based on quality measures
- Benchmark payments are generally based on average fee-for-service (FFS) Medicare costs per beneficiaryin a county
- Plan assigned start rating from 1 to 5 stars based on quality measures
- Higher rated plans receive bonus benchmark payments, increased rebate percentaes, and other financial and enrollment advantages
(1) CMS may terminate low-rated plans, if they are unable to achieve a minimum three starts over three consecutive years
- Minimum loss ratio of 85% was introduced by the ACA
(1) If loss ratio <85%, the difference must be returned to CMS in the form of minimum loss ratio rebates

Question 3

Medicaid

Answer 3

1. Medical assistance for low income families, children, pregnant women, elderly adults and people with disabilities
   - Federal and State government finance
   - Federal sets national guidelines
   - Within guidelines, states determine provider reimbursement, eligibility and scope of covered services
   - Unlike Medicare, states administer Medicaid

2. Eligibility
- “Mandatory categorically needy” groups include:
(1) Low income families
(2) Children
(3) Parents or other caretakers with dependent children
(4) Pregnant women
(5) Individuals receiving Supplemental Security Income (SSI)
(6) Seniors
- In addition to “categorical” requirements, income and assets requirements must be met
(1) Income requirements defined as a percentage of the FPL
(2) Changes enacted by ACA eliminated the asset test for States that expanded Medicaid

• There are also “medically needy” when medical expenses reduce income below defined limits
• CHIP allows states to expand coverage to low-income children not eligible for Medicaid
• ACA expanded Medicaid eligibility
  (1) Everyone under age 65 with income up to 133% of FPL would be eligible
  (2) 2021 Supreme Court decision ruled that states have the option to do this or not

3. Financing
- Each state finances its Medicaid program with support from Federal
- Source of Federal funding is general revenues
- Financing requirements driven by number of recipients, coverage of services, and cost of services
- The lower a state’s average per capita income, the higher the federal support
- Medicaid a significant portion of overall state budgets
- Under ACA, federal government finances 90% of the cost for the Medicaid expansion population

4. Covered Services
- Inpatient and outpatient hospital
- Physician
- Lab and X-Ray
- Skilled nursing facility and home health care
- Preventive, prenatal, vaccines for children
- Family planning
- Qualified health centers and rural clinics
- Transportation
- Other services nearly all states offer
(1) Dental
(2) Outpatient prescription drugs
(3) Prosthetic devices, hearing aids
(4) Optometric and eyeglasses
(5) Physical therapy
- Pay Medicare Part B premiums and cost sharing for low-income Medicare beneficiaries

5. Medicaid Providers
- Participaring providers must accept state’s reimbursement as payment in full

• Forbidden from witholding services if patient if unable to pay the cost-sharing
• Must be access and availability comparable to general population
• Medicaid reimbursement lower than Medicare or private health plan
• Hospital Payments
  (1) Many use prospective payment approach similar to Medicare
  (2) Others based on the cost to deliver services
  (3) Hospitals with high proportion of Medicaid, low income receive additional reimbursement known as DSH
• Physician Payments
  (1) According to fee schedule
  (2) Many physicians limit their participation because of the low reimbursements
• Long-term care costs represented 30% of Medicaid costs; decrease in prior years was driven by:
  (1) Historically low increase in LTSS expenditures
  (2) More than usual rapid increase in total Medicaid expenditures due to the expansion under the ACA

6. Medicaid Costs and Managed Care
- Utilization and costs higher than for the commercial population, particularly for aged and disabled recipients

• Federal waivers allow states to contract with managed care organizations
  (1) Payment rates in aggregate are less than expected Medicaid program costs, participating health plans responsible for providing, delivering services

(2) States follow some steps to control the costs of the Medicaid programs
a. Freezing or reducing provider reimbursement rates
b. Limiting or curtailing optional health care benefits
c. Managed care and alternative care delivery approaches

Utili- Types of programs and MC penetration vary significantly by state

Question 4

Governmental Employee Benefit Plans

Answer 4

1. Federal Employee and Retiree Group Plans
- Federal government is the largest employer in the United States and the largest purchaser of group insurance for employees and their dependents

• Programs offered to federal civilian employees and retirees
  a. Federal Employees’ Group Life Insurance (FEGLI)
  b. Federal Employees’ Health Benefits (FEHB) plans
  c. Federal Voluntary Insurance Program (FEDVIP)
  d. LTCFEDS, a group LTC insurance program for federal civilians and their spouses
• The United States Department of Defense (DoD) offer TRICARE, a health insurance program for current and retired service members, and their dependents, survivors and former spouses
• The Department of Veterans Affairs (VA) offers health insurance to US Veterans (former military service members)
• VHA also sponsors the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA), and the large benefit programs

2. State and Local Government Group Plans
- States, counties, cities, public schools and municipalities (police, fire, water, power, etc.) offer group benefits that are governed by legislation at the state level

• In recent years, it has been difficult for states and some local governmental employers to continue offering new employees group LTC insurance

Question 5

Social Security Cash Benefits (OASDI)

Answer 5

1. Covered Population
a. Not covered
- Federal workers hired before 1984
- About 1/4 state and local government employees (those covered by retirement plans)
- People who object to benefits on religious grounds
- Certain agricultural and domestic workers
- Railraod employees

b. Workers pay SS taxes under FICA or SECA (self-employed) up to annual maximum; receive coverage credits

c. Workers with enough coverage credits establish insured status

2. Insured Status
a. Disability-Insured Status
- To receive disabled-worker benefits coverage credits required depends on the age at disability onset

• “Recent Attachment” test
  (1) Those required to have 20 or more coverage credits, at least 20 earned in the 40 calendar quarters ending with disability onset
  (2) Those require required to have fewer than 20 but more than 6, half earned after age 21
  (3) Those required to have 6 coverage credits must have been earned in the 12 calendar quarters eding with disability onset

b. Fully-Insured or Currently-Insured Status
- Fully-insured status provides full survivor benefits
(1) Requires coverage credits equal to age at death less 22, with minimum 6 and maximum 40 coverage credits
- Currently-insured status provides young-survivor benefits only
(1) 6 coverage credits in the 13 quarters ending with death

3. Other Eligibility Conditions
a. Disabled-Worker Benefits
- Disability-insured status unable to engage in “substantial gainful-activity” because of physical or mental impairment expected to last 12 months or result in prior death

• Determination takes into account worker’s age, education and work experience
• Initial disability determinations by state agencies
  (1) Large percentage of initial claims are denied
  (2) Appealed result in hearing before judges employed by SSA
  (3) Ultimately appealed to the federal courts
• Benefits waiting period of 5 full calendar months
• Retroactive benefits are paid in a lump sum
• Disabled reviewed to see whether they remain disabled
  (1) Reviews required every 3 years
  (2) Government must establish beneficiary’s condition has improved before he can be removed
• Automatically converted to retired-worker benefits at normal retirement age
  (1) NRA is age 65 born before 1938 and rises to 67 born after 1959

b. Survivor Benefits
- Surviving spourses and ex-spouses must establish marraige relationship for the required length of time
- Children must establish dependency

4. Benefit Amounts
a. Disabled-worker Benefits
- Disabled amounts computed using same procedures as retired-worker benefit

• Cost-of-living increases every December
• Amount payable to family member is 50% worker’s primary insurance amount
• Total benefits payable maximum 150% of the worker’s own benefit
• Disability benefits integrated with WC and other public disability benefits
• Total beneifts cannot exceed 80% of average current earnings

b. Survivor Benefits
- Decreased PIA computed using standard procedures except
i. Young decreased as if they were age 62 and not applying any actuarial reduction
ii. Earnings if year if death are used in the computations
- Perccent of PIA 75% for for children, to 100% for surviving spouse
i. Widow(er) reduction causes benefit to grade from 71.5% at age 60 to 100% at spouse’s NRA
- Survivng parent receives 82.5% of PIA and 75% if both parents receive benefits
- Maximum family benefit ranges from 150% to 180% of the PIA
i. Ex-spouses excluded from family for this purpose

Question 6

State Disability Insurance and Paid Family Leave Programs

Answer 6

1. Several States provide disability coverage through mandatory employee contributions and optional employer contributions
   a. California
   - Income replacement - 60-70%, for up to 52 weeks (after 8th consecutive day of disability)

b. Hawaii
- Income replacement - 58% for up to 26 weeks (after 8th consecutive day of disability)
- Employer can self-insure or participate in collective bargaining agreements

c. New Jersey
- Income Replacement - 67% for up to 26 weeks (after 8th consecutive day of disability)
- Limited to overall max benefit of 1/3 of New Jersey base year total wages

d. New York
- Income replacement - 50%, for up to 26 weeks (after 8th consecutive day of disability)

e. Rhode Island
- Income replacement - 60% for up to 30 weeks (after 8th consecutive day of disability)
- Also provides dependent childrent allowance and temporary caregiver insurance

f. Puerto Rico
- Weekly benefits of $15-$113 for up to 26 weeks (after 8th consecutive day of disability)
- Additional benefits for dismemberment or death

2. Several states have Paid Family Leave (PFL) benefits that offer partial wage replacement for parents who have new children, or employees that need to take time to care for ill family members
3. States that have adopted PFL programs
   - California
   - New Jersey
   - Rhode Island
   - New York
   - District of Columbia
   - Washington
   - Massachusetts
   - Connecticut
   - Oregon
   - Colorado
4. PFL beneifts vary significantly among the states
   - Wage replacement ratios, maximum benefit amounts, maximum benefit periods, permissible leaves, and funding methods are specific to each state
   - Employers that have operations in multiple states face challenges in administering PFL benefits