CHAPTER 5—FINANCING, COVERAGE, AND COSTS OF HEALTH CARE
CHANGES IN THE FEDERAL FINANCING OF HEALTH CARE
In 1965 the U.S. government passed legislation designed to improve access to acute health care for people who are old, disabled, or poor. During the decades that followed, the resulting Medicare and Medicaid programs expanded, evolved, and spawned thousands of supplemental commercial insurance plans. Today, a complex and often confusing array of personal payments, public programs, and private insurance plans (see Figure 5.1) pays for and thereby determines much of the health care that older Americans receive.
This chapter describes, through the eyes of patients and providers, how these programs influence the day-to-day care of older people. It illustrates their effects during a year in the life of Mrs. Rose Murat, an imaginary 79-year-old retired schoolteacher who lives with her 83-year-old husband in a small older home. Mrs. Murat has hypertension, coronary artery disease, and mild heart failure, for which she takes hydrochlorothiazide, metoprolol, lisinopril, and nitroglycerine. Her total out-of-pocket payments for these medications are $104.67 per month.
At the end of her quarterly office visit, Mrs. Murat asks for advice on joining a health maintenance organization (HMO) that has been marketing a Medicare health plan in her county. She is impressed by the HMO’s offer of free eyeglasses, hearing aids, and preventive check-ups, all of which she has purchased out-of-pocket in the past. Her options, summarized in Table 5.1, are as follows: staying with traditional fee-for-service (FFS) Medicare as her only coverage; keeping FFS Medicare and applying for either Medicaid or supplemental (“medigap”) coverage; or exchanging her FFS Medicare coverage for membership in the Medicare HMO. Depending on the Murats’ income, savings, and state of residence, they may also qualify for a Medicare assistance program that pays for some combination of their Medicare premiums, deductibles, and co-insurance costs. Some older Americans may have additional health insurance options through the federal Department of Veterans Affairs or through their (or their spouses’) present or previous employer or union.
Medicare is a federal insurance program run by the Centers for Medicare and Medicaid Services (CMS) that pays health professionals and organizations to provide acute health care for Americans who are 65 and older, disabled, or suffering from end-stage renal disease. As originally enacted, Medicare comprises two separate FFS plans (Part A and Part B), each of which pays predetermined amounts for specified health-related goods and services that are needed by its beneficiaries. More than 80% of older Americans are covered by both plans.
Medicare Part A uses regional insurance companies (“intermediaries”) to pay hospitals, nursing homes, home-care agencies, and hospice programs for the Medicare-covered services they provide. Older Americans (and their spouses) who have had Medicare taxes deducted from their paychecks for at least 10 years are entitled to coverage through Part A without paying premiums. Others may be able to purchase Part A coverage (for $189 to $343 per month, depending on how long they had Medicare taxes deducted from their paychecks).
Medicare Part B uses other regional insurance companies (“carriers”) to pay physicians, nurse practitioners, social workers, psychologists, rehabilitation therapists, home-care agencies, ambulances, outpatient facilities, laboratory and imaging facilities, and suppliers of durable medical equipment for the Medicare-covered goods and services they provide. At age 65, people become eligible for Part B coverage if they are entitled to Part A coverage or if they are citizens or permanent residents of the United States. To obtain this coverage, eligible persons must enroll in Part B and pay premiums ($78 per month), usually by agreeing to have them deducted from their monthly Social Security checks.
Physicians must choose whether to participate in the FFS Medicare program. For each Medicare-covered service performed, a participating physician will submit a claim to the Part B carrier, accept Medicare’s fee for the service (80% of its preestablished “allowed” amount), and bill the patient or her secondary insurer for no more than a 20% co-insurance payment. For services not covered by Medicare, the physician may bill the patient, if the patient agrees in advance in writing. Physicians who do not participate in Medicare can bill patients directly for up to 15% more than 95% of Medicare’s allowed amounts. The patients pay the physicians and then submit their requests to Medicare for partial reimbursement (ie, for 80% of 95% of the allowed amounts). Some physicians choose to enter into “private contracts” with older patients. Under these contracts, Medicare (and medigap insurance plans) pay nothing, and patients pay physicians the full amount of the fees specified by the contracts.
Neither Part A nor Part B of the Medicare program covers periodic physical examinations, outpatient medications, dental care, hearing aids, eyeglasses, foot care, orthopedic shoes, cosmetic surgery, care in foreign countries, or custodial long-term care at home or in nursing homes. Part B covers some preventive services (see Table 5.1).
Beneficiaries pay out-of-pocket for:
In 2003, the U.S. Congress passed and President George W. Bush signed a sweeping Medicare reform bill that included an option (Medicare Part D) for beneficiaries to purchase insurance coverage for prescription medications beginning in 2006. If Ms. Murat were to choose this option, she would pay annual premiums ($420), deductibles ($250), and co-insurance (25% of her remaining medication expenses = $250). Her total out-of-pocket medication costs would be reduced 26% from $1250 to $920 per year (from $104.67 to $76.67 per month).
Medicaid is a joint federal and state program that provides supplemental health insurance to people of all ages who have low incomes and limited savings. The exact criteria for Medicaid eligibility and the benefit packages provided by Medicaid programs vary considerably from state to state. Most programs pay Medicare Part B premiums, and some pay Medicare deductibles and co-insurance costs. Most important, Medicaid pays for long-term custodial care in nursing homes for those who qualify. Several states have begun offering fixed capitation payments to managed-care organizations that are willing to provide Medicaid and Medicare benefits to residents who are “dually eligible” (for Medicaid and Medicare).
Medigap supplemental plans fill some of the holes in the insurance coverage provided by Medicare Part A and Part B. Private insurance companies offer FFS medigap plans of ten types (A through J), classified according to the benefits they cover. For new Medicare beneficiaries at age 65, the premiums for A-level (basic) plans across the United States range from $40 to $125 per month. These policies cover a person’s Part A and Part B co-insurance costs, for example, 20% of Medicare’s allowed fees for durable medical equipment and physicians’ services. (In Minnesota, Wisconsin, and Massachusetts, A-level medigap policies are required by law to cover more than just the costs of Medicare co-insurance.) B-level plans cover Part A and Part B co-insurance, plus the Part A deductible ($912 per benefit period). Each successive level of medigap policy provides additional benefits and costs more. J-level plans cover co-insurance, deductibles, care in foreign countries, preventive services, and some of the cost of medications—at a cost of $175 to $400 per month. Consumers can obtain less expensive medigap coverage by purchasing plans that require the insured to pay high deductibles (F- and J-level plans only) or plans that cover the services of only selected physicians and hospitals (“Medicare SELECT” policies). Medigap policies do not cover long-term care, dental care, eyeglasses, hearing aids, or private-duty nursing.
Within 6 months of their initial enrollment in Medicare Part B, beneficiaries are entitled to purchase any medigap policy on the market at advertised prices. After this open enrollment period, medigap insurers can refuse to insure individual beneficiaries or charge them higher premiums because of their past or present health problems.
Medicare HMOs hold contracts with CMS specifying that, for each Medicare beneficiary they enroll, they will provide at least the standard Medicare benefits in return for fixed monthly capitation payments. In order to attract enrollees, most Medicare HMOs also cover additional benefits and charge low or no premiums, deductibles, and copayments. The HMOs achieve cost savings by managing their enrollees’ use of services within their networks of providers, with whom they negotiate price discounts in return for patient volume. Each January the HMOs have the option of changing their premiums, benefits, and provider networks—or of discontinuing their Medicare plans altogether.
Each November, beneficiaries covered by Medicare Part A and Part B have the option of joining any Medicare HMO operating in their area; they cannot be denied enrollment because of any health problems except end-stage renal disease. Enrollees must continue to pay their monthly Medicare Part B premiums, and they must obtain their health care from the HMO’s provider network. They have the option of leaving the HMO at any time and going back to the FFS Medicare program. The primary advantages and disadvantages of each of Mrs. Murat’s options are outlined in Table 5.2. Extensive information about all the options is available to consumers at each state’s medical assistance office, at 1-800-MEDICARE (1-800-633-4227) or 1-877-486-2048 for hearing-impaired TTY users, and at the Medicare Personal Plan Finder (http://www.medicare.gov/MPPF/home.asp).
Mrs. Murat’s provider of primary care, knowledgeable about her health and prognosis, can help her to choose the plan(s) that will cover the goods and services that she needs, both now and in the future. If she can obtain what she is likely to need from the HMO’s network of providers, joining the HMO might be her best option, because it will allow her to obtain “free” eyeglasses, hearing aids, and preventive services and to avoid paying the usual Medicare premiums, deductibles, and co-insurance. Data about the quality of care and the satisfaction of other enrollees in all the local Medicare HMOs are available at the Medicare Personal Plan Finder.
In the event that she needs health care that is not available from the HMO’s network, or if she is reluctant to change providers, retaining the flexibility of her traditional Medicare coverage (which covers her use of any provider that participates in the Medicare program) might be a better choice, especially if she also qualifies for Medicaid or buys a medigap policy. Information from Medicare’s information line or from the Medicare Personal Plan Finder would help her compare the prices and coverage of the medigap policies available in her area.
The primary care provider’s recommendations to Mrs. Murat are likely to be influenced by the characteristics of the different plans she is considering. For instance, if the primary care provider is not in the HMO’s service network, he or she would point out to Mrs. Murat that her enrollment in the HMO would require her to select a new primary care provider. If the primary care provider is in the HMO’s network, Mrs. Murat’s enrollment would change (ie, probably reduce) the payment for her care. As shown in Table 5.3, the payments would depend on the type of HMO involved. If it is a group or independent practice association (IPA) model, the HMO may pay providers “discounted FFS,” that is, less than Medicare Part B would pay for each service. Or it may pay primary providers a fixed capitation amount each month to cover specified services. If these services are limited to primary ambulatory care, the capitation amount will be relatively small. The HMO may reward primary providers with end-of-the-year bonus payments if they have limited their referrals to specialists and their admissions to hospitals. If the covered services also include specialty and inpatient care, the capitation amounts will be considerably larger, and the provider will have incentives to use these services judiciously because he or she will have to pay for them, at least in part.
Under the Medicare FFS system, providers obtain the fairest possible reimbursement by understanding and following CMS’s payment system, which is based on evaluation and management (E&M) codes (see Table 5.4).
For each Medicare-covered service provided, the provider submits to the regional Medicare carrier the appropriate E&M code and the international classification of disease (ICD) code that indicates the diagnosis for which the service was provided. Entries in the medical record, which are subject to audit, must document that the data collection and medical decision-making aspects of the service conform to standards established for the E&M code submitted. By providing and documenting services efficiently, providers can maximize their FFS reimbursements within the (tight) limits imposed by the Medicare fee schedules.
Regardless of the payment mechanism, the crucial question is whether the amount of payment suffices to support high-quality care. For example, if capitation rates are below the aggregate cost of the services they are intended to cover, the provider will feel pressure to take on more patients and limit the amount of service that each patient receives. Similarly, if FFS amounts are too small, the provider will feel pressure to schedule more visits and procedures and to reduce the time devoted to each patient. Each provider should, therefore, monitor carefully and continuously the many changing elements in the practice environment (eg, payment schedules, covered services, expenses, patients’ and families’ expectations, population demographics) to help determine the numbers and types of services that are appropriate for each older patient.
Four months later, Mrs. Murat awakes dysarthric and unable to feel her left hand. Her face is asymmetric, and her left arm and left leg are weak. Her husband calls 911; the ambulance rushes her to the nearest emergency department, where the physician on duty diagnoses a right hemispheric stroke and admits her to the hospital.
If Mrs. Murat had joined the Medicare HMO, the HMO would pay for the ambulance, emergency, and physician services; in most cases, it would pay the hospital a prenegotiated lump sum or a per diem fee to cover all of her inpatient care. The amount of this lump sum would be determined by the diagnosis-related group (DRG) of her discharge diagnosis, in this case stroke. If the admitting hospital had no contract with her HMO, Mrs. Murat would probably be transferred to a hospital in the HMO’s provider network as soon as she was medically stable. Depending on the HMO’s benefit package, she might be responsible for copayments and deductibles for some of these services.
If Mrs. Murat had retained traditional Medicare as her only health insurance, she would have to pay Medicare’s required deductibles ($110 per year under Part B for the ambulance and the emergency medical care, plus $912 under Part A for the hospital admission) and co-insurance amounts (20% of Medicare’s allowed charges by physicians and the ambulance service). She would also have to pay any ambulance charges in excess of Medicare’s approved fee. If she had supplemented her Medicare coverage, her Medicaid or private medigap coverage would cover some of these deductibles and co-insurance payments. She would not be transferred to another hospital for insurance reasons.
The hospital would submit its claim for emergency and inpatient care, which would be based on the DRG of her discharge diagnosis, to Medicare’s Part A regional intermediary insurance company. The involved physicians and the ambulance service would submit their E&M coded claims to Medicare’s Part B regional insurance carrier. The intermediary and the carrier would pay their shares of these costs and, if Mrs. Murat had supplemental coverage, they would forward requests for payment of the balances to the state Medicaid program or her medigap insurance company. Ultimately, CMS would reimburse the intermediary from the Medicare Part A Trust Fund and the carrier from the Medicare Part B Trust Fund.
After 4 days of stabilization, evaluation, and rehabilitation, Mrs. Murat is deemed stable enough for discharge from the acute-care hospital. She has improved somewhat, but she is still mildly hemiparetic and dysarthric, and she is apathetic and easily fatigued. Because her days in the hospital are fewer than the average number of hospital days associated with the DRG of her discharge diagnosis (ie, 5.9 days) and because her discharge diagnosis is one of those listed in Table 5.5, CMS regards her “early” discharge as a “transfer.” This permits CMS to reduce the amount it pays the hospital for her care. The consulting neurologist advises her and her husband that her progress during the next few weeks will determine her potential for functional recovery. Mr. Murat asks the neurologist to recommend a rehabilitation facility for his wife.
If she had joined the Medicare HMO, Mrs. Murat’s insurance coverage would include postacute rehabilitative care, probably at a nursing home in the HMO’s provider network rather than at a rehabilitation facility. Some nursing homes concentrate such high-acuity patients in transitional (or postacute) care units and provide them with coordinated rehabilitative (physical, occupational, and speech), social, and nursing services. Most homes, lacking such units, offer only custodial care supplemented by rehabilitative services as needed. The HMO would also cover the physician’s postacute services, but the Murats may be responsible for a deductible and copayments.
If Mrs. Murat could participate in rehabilitative therapy, Medicare Part A would pay for 20 days of postacute rehabilitation, in either a rehabilitation facility or a transitional (postacute) care unit of a nursing home. Upon her admission to either type of postacute care unit, rehabilitation professionals would evaluate Mrs. Murat’s functional status, establish a plan for her care, and certify her as needing one of 26 levels of intensity of care according to the resource utilization group system (RUGS). Her RUGS category would determine the daily rate that Medicare Part A would pay the facility for the first 2 weeks of her care as long as she was demonstrating progress in rehabilitation. After 2 weeks, a nurse would reevaluate her status, update her plan of care, and adjust her RUGS category and thereby adjust Medicare’s payments to the facility for the next 2 weeks. Under this prospective payment system (PPS), the facility would be responsible not only for Mrs. Murat’s nursing, rehabilitative, and social services, but also for the costs of her medications, laboratory tests, and visits to an emergency department not resulting in admission to the hospital.
Using nursing-home rates, Medicare Part B would pay 80% of the allowed charges for the postacute medical care provided by her physician. Any postacute care related to an inpatient surgical procedure would be the responsibility of the surgeon, who would receive a “global fee” to cover the surgery and all postoperative surgical care. The Murats would need to satisfy Medicare Part B’s $110 annual deductible and then make 20% co-insurance payments for the physician’s care. Their out-of-pocket expenses would be reduced or eliminated by any Medicare supplements in effect, such as Medicaid, medigap, or long-term-care coverage.
More than 3 million Americans have long-term-care insurance policies, but these policies pay for less than 2% of all nursing-home care. The high premiums for these policies, combined with consumers’ uncertainty about needing long-term care in the future and their doubts about the policies’ ability to cover the costs of long-term-care in the future, have limited the growth of the long-term care insurance sector. Many middle-aged Americans believe they will retain good health and independence into old age; they appear to be relying on a combination of good fortune, social insurance (ie, Medicaid), and their personal assets to see them through their later years. Those who are interested in long-term-care insurance can obtain information by reading “Choosing Long-Term Care: A Guide for People with Medicare” (CMS Publication No. 02223) or “A Shopper's Guide to Long-Term Care Insurance” (available from state insurance departments or the National Association of Insurance Commissioners, 2301 McGee St., Suite 800, Kansas City, MO 64108-3600).
During the first 10 days of rehabilitative therapy, Mrs. Murat regains her ability to speak, and her left arm becomes stronger. During the following 8 days, however, she makes few additional gains. After 18 days, she is still unable to walk, cook, bathe, or dress herself without help. Her lack of continued progress toward functional independence will probably make her ineligible for coverage of additional rehabilitative services in either the HMO or the FFS Medicare program. The Murats will have to purchase any future physical therapy or occupational therapy on their own.
To obtain long-term care for her functional deficits, they will need to choose between a home-health agency and a custodial nursing home. If she returns home, neither the HMO nor the FFS Medicare program will be likely to pay for a home-health aide unless she is homebound and requires the services of a registered nurse or rehabilitation therapist. Local community agencies, however, may be able to offer assistance. The Murats’ choice of a home-health agency could be informed by comparisons of their local agencies’ recent clinical performance—available at Home Health Compare (http://www.medicare.gov/HHcompare/home.asp).
If Mrs. Murat’s condition made her homebound and dependent on skilled professional services, her HMO probably would pay a home-health agency a fixed fee to provide her with the services and equipment necessary to treat her primary diagnosis. The HMO would also provide her with the services of a primary care physician.
In the FFS environment, if Mrs. Murat were homebound and dependent on skilled professional services, the traditional Medicare Part A would pay any Medicare-certified home-health agency a fixed fee to provide her with the services and equipment necessary to treat her primary diagnosis. Medicare Part B would pay her primary care physician 80% of the allowed charges for house calls, office visits, and care plan oversight services. In addition, Medicare Part B will pay her physician for home-health certifications and recertifications. The Murats would be responsible for the annual Part B annual deductible ($110) and the 20% co-insurance payments, unless they had supplemental coverage through Medicaid, a medigap policy, or a long-term-care policy. (See also Community-Based Care.)
If a health care organization in the area had contracted with CMS and the state Medicaid agency to create a Program for All-inclusive Care of the Elderly (PACE), it could provide community-based long-term care for “dually eligibles” (people eligible for both Medicare and Medicaid) whose disabilities qualified them for custodial care in a nursing home. (See also Community-Based Care.) If she were eligible for Medicaid and she enrolled in PACE, Mrs. Murat would attend an adult day health care center several days each week and receive comprehensive outpatient, inpatient, acute, and long-term care from a salaried interdisciplinary team composed of a physician, a nurse, a social worker, rehabilitation therapists, and other members of the PACE staff.
Three months after Mrs. Murat returns home, Mr. Murat, now 84 years old, suffers a myocardial infarction and is no longer able to care for his wife at home. Their daughter logs on to Nursing Home Compare (http://www.medicare.gov/NHcompare/home.asp) to shop for a nursing home. After comparing the local facilities’ nurse-to-resident ratios, results of recent quality-of-care inspections, and rates of pressure ulcers and behavior problems, she arranges for her mother to enter a high-quality nursing home in her neighborhood, at least until Mr. Murat recovers.
If Mrs. Murat had joined the Medicare HMO, one of the HMO’s physicians would provide her primary care in the nursing home. Unless she was covered by Medicaid or a long-term-care policy, however, she and her husband would be responsible for the nursing home’s per diem charges for room, board, and other basic services, usually about $100 per day. After “spending down” their savings at this rate, the Murats might become sufficiently impoverished to qualify, if they had not qualified previously, for Medicaid coverage. If the Murats owned their house, some states would put a lien on it in order to recover some of its payments to the nursing home when the house was eventually sold.
The FFS Medicare program would pay 80% of the allowed charges submitted by her physician for visits to the nursing home. The Murats would be responsible for the annual Medicare Part B deductible ($110) and the 20% co-insurance payments. Medicare would not cover any of the nursing home’s per diem charges.
After residing in the nursing home for 6 months, Mrs. Murat suffers a massive stroke that leaves her physiologically stable, but in a persistent vegetative state. Her husband reports that she had always said she would not want to go on living in such a condition if there were little hope of recovery. Although she is unable to swallow thin liquids, her husband says she would not want to be fed through any sort of tube. Her physician says that, with oral feeding, she is likely to live for several weeks. With the understanding that she will receive palliative care without life-prolonging interventions, her husband agrees to enroll her in a hospice program.
Enrollment in hospice would require the traditional FFS Medicare program (Part A) to pay a Medicare-certified hospice program a daily fee that would cover all care of her terminal diagnosis, including home care, medications, equipment, respite, counseling, and social services even if she had enrolled in (and remained in) the Medicare HMO.
If she had remained in the FFS Medicare program, Part B would pay her primary care physician, 80% of the allowed charges for home or office visits and care plan oversight services. Mr. Murat would be responsible for the 20% co-insurance and for small copayments for outpatient prescription medications, and respite care.
The complex and evolving combinations of coverage and programs create difficult choices for older Americans and powerful incentives for the providers of their health care. The U.S. Congress and CMS continue to revise the Medicare program.
In 1997 Congress passed, and President Bill Clinton signed, the Balanced Budget Act (BBA 97) through which they intended to limit future growth in the cost of the Medicare program, improve the quality of the health care it provides, and expand the number and variety of managed-care plans from which Medicare beneficiaries could choose. It authorized five types of “Medicare Plus Choice” (recently renamed “Medicare Advantage”) plans:
Perhaps because of the risks and uncertainties involved, very few PPOs, PSOs, private FFS insurance companies, or MSA providers have entered into Medicare Advantage contracts with CMS. Citing inadequate capitation payments and burdensome administrative requirements, many HMOs have withdrawn from the Medicare market, constricted their service areas (eliminating many rural counties), reduced the scope of the benefits they cover, and increased the premiums, deductibles, and copayments for which their enrollees are responsible. The total number of Medicare beneficiaries enrolled in Medicare Advantage plans declined from 6.4 million (17%) in 1999 to 4.6 million (11%) in 2003. As a result, nearly 2 million older Americans had to select new health plans and new health care providers. Between 2003 and 2005, the number of enrolled beneficiaries increased to 4.9 million.
Federal actuaries projected that BBA 97 would save the Medicare program $116 billion during 1998–2003 and extend the life of the Medicare Part A Trust Fund until 2023. The specific actions by which BBA 97 attempted to control costs include restricting Medicare benefits (eg, home care), reducing payments to providers (eg, hospitals and HMOs), and requiring CMS to begin risk-adjusting the capitation rates at which it paid managed-care plans.
CMS pays each managed-care plan a monthly county-specific capitation fee for each of its Medicare enrollees, an amount based on CMS’s recent average adjusted per capita cost (AAPCC) for FFS Medicare beneficiaries in the county. The AAPCC amounts range from about $450 per month in many rural counties to more than $800 per month in some urban areas. Before BBA 97, the payment formulas adjusted these capitation amounts only for enrollees’ age, sex, Medicaid enrollment status (yes or no), and living situation (nursing home or independent residence). BBA 97 required that CMS also begin adjusting capitation amounts according to enrollees’ risk of requiring expensive health care. This results in higher capitation payments for high-risk enrollees and lower payments for low-risk enrollees.
The current risk-adjustment method is based on the diagnoses associated with beneficiaries’ health care during a recent 12-month period. If a hospital or outpatient provider designated as a reason for providing a health care service a diagnosis included in CMS’s list of 61 “selected significant disease” groups, CMS would increase the amount of its capitation payment for that beneficiary during the following year. For example, if a beneficiary received care for heart failure during the 12 months from July 2004 to June 2005, CMS would adjust its capitation payments for the beneficiary during 2006 to provide the extra funds typically needed to care for people who have heart failure. In order to make this risk-adjustment system cost-neutral, CMS offsets the diagnosis-related increases in capitation payments by reducing its capitation payments for beneficiaries who have not received care for diagnoses in the 61 disease groups during this 12-month period. CMS is incorporating this risk-adjustment method into its formula for computing its capitation rates gradually over several years. In 2004, 30% of the capitation amounts were determined by diagnoses; during subsequent years, this percentage will increase to 100%.
BBA 97 provisions for improving the quality of health care for older Americans include:
CMS summarizes the information generated by all three systems and makes it available at the Medicare Personal Plan Finder to help older Americans make informed choices about Medicare’s FFS program and its various managed-care options.
Within the first 18 months of the enactment of BBA 97, the quality of health care for older Americans began to erode, and the decreases in the payments to providers proved to be steeper than projected. For example, Medicare payments for home-health care decreased by 45% between 1997 and 1999. In response, Congress passed the Balanced Budget Revision Act at the end of 1999. This legislation restored some of the budget cuts made 2 years earlier, including $4.5 billion to Medicare Advantage plans.
The contentious Medicare Prescription Drug Improvement and Modernization Act of 2003 required dramatic changes in the nature and scope of the Medicare program during the following years, including:
The results of this act will be determined by the specific programs that it spawns and by subsequent legislative and administrative reactions during the years after its enactment.
CMS is now conducting dozens of demonstration projects designed to improve the quality and outcomes of care for beneficiaries with chronic conditions. In most of these demonstrations, CMS is paying provider and managed-care contractors capitated monthly fees for providing case management or disease management services to beneficiaries with specified chronic conditions, such as heart failure, diabetes mellitus, or other “special needs.” Many of these demonstrations are based on the principle of “pay for performance,” which stipulates that CMS will pay the capitation fees only to the extent that the contractor attains pre-agreed standards of performance, eg, performing certain diagnostic tests, reducing Medicare’s overall FFS payments, and satisfying beneficiaries with the services they provide.
The aging of the baby-boom generation, technology-driven increases in health care spending, and a decline in the number of workers per Medicare beneficiary will contribute to serious financial challenges for the Medicare program in the years ahead. Similarly, imminent sharp increases in the number of older Americans with serious disabilities will soon surpass states’ ability to pay for their long-term care. To meet these challenges, the nation needs visionary leaders, committed professionals, and rapid major changes in its systems for providing and paying for health care.
■ American Geriatrics Society. Information on the Medicare Prescription Drug, Improvement, and Modernization Act 2003 (Public Law No: 108-173). Available at http://www.americangeriatrics.org/policy/medicare_info.shtml (accessed October 2005).
This exhaustive resource describes the Medicare Modernization Act of 2003 and its implications for providers and beneficiaries.
■ Centers for Medicare and Medicaid Services, Department of Health and Human Services. Medicare Modernization Act. Available at http://www.cms.hhs.gov/medicarereform (accessed October 2005).
This is an informative, user-friendly Web site that provides a summary and the text of the Medicare Modernization Act of 2003, as well as periodic addenda that describe revisions to the act.
■ Centers for Medicare and Medicaid Services, Department of Health and Human Services. Medicare: Resident and New Physician Guide: Helping Health Professionals Navigate Medicare. 7th ed. Rockville, MD: US Government Printing Office; 2003.
This well-written handbook provides detailed information about most facets of the Medicare program.
■ Emmer S, Allendorf L. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003. J Am Geriatr Soc. 2004;52(6):1013–1015.
This is a clear description of the major provisions and implications of the Medicare Modernization Act of 2003.
■ Ettinger WH Jr. The Balanced Budget Act of 1997: implications for the practice of geriatric medicine. J Am Geriatr Soc. 1998;46(4):530–533.
This article provides a succinct summary of the major provisions of the Balanced Budget Act of 1997, the most significant piece of federal health care legislation since the creation of Medicare and Medicaid in 1965. It defines the four new channels through which Congress authorized the Centers for Medicare and Medicaid Services to purchase health care for Medicare beneficiaries: provider-sponsored organizations, preferred provider organizations, private fee-for-service plans, and medical savings accounts. It also describes Medicare’s new coverage of screening tests, telemedicine services, and care provided by geriatric nurse practitioners, physician assistants, and clinical nurse specialists.
■ Health Care Financing Administration. 2004 Guide to Health Insurance for People with Medicare. Rockville, MD: US Government Printing Office; 2004. Pub. No. HCFA-02110. Available in regular and large print at http://www.Medicare.gov/publications/home.asp (accessed October 2005).
This well-written handbook provides detailed information about the coverage, the costs, and the purchase of Medicare supplemental (medigap) insurance policies. An introductory section describes the Medicare program and explains how different medigap policies fill its gaps in coverage. A “beyond the basics” section answers most questions about selecting and using medigap policies and lists telephone numbers, addresses, and a Web site for obtaining additional information.
■ Health Care Financing Administration. Medicare and You 2005. Rockville, MD: US Government Printing Office; 2004. Pub. No. HCFA-10050. Available in regular and large print at http://www.Medicare.gov/publications/home.asp (accessed October 2005).
This clear, easy-to-read booklet is intended to help older people use the Medicare program. It describes Medicare’s structure, function, and covered services, and it gives sound advice about purchasing supplemental (medigap) insurance and joining Medicare Advantage plans. It also lists telephone numbers, addresses, and a Web site for obtaining more specific information about Medicare in any area of the country.
■ Medicare: The Official U.S. Government Site for People with Medicare. Available at http://www.medicare.gov (accessed October 2005).
This is an informative, user-friendly Web site that supplies consumers and professionals with extensive information about most aspects of the Medicare program. It provides detailed side-by-side comparisons of the available Medicare Advantage plans, medigap insurance policies, home-health care agencies, and nursing homes in each community in the United States.
Chad Boult, MD, MPH, MBA