Health Economics & Health Economics & PolicyPolicy22ndnd Edition Edition

James W. HendersonJames W. Henderson

Chapter 13Chapter 13

Policies That Enhance AccessPolicies That Enhance Access

Copyright 2002, South-Western, a division of Thomson Learning, James W. Henderson, Health Economics and Policy, 2e

MedicareMedicare

Institutional featuresInstitutional features– Part A—Hospital insurancePart A—Hospital insurance– Part B—Physicians’ insurancePart B—Physicians’ insurance– A flawed insurance systemA flawed insurance system

Who pays?Who pays? Who benefits?Who benefits? Economic consequencesEconomic consequences

Medicare SpendingMedicare Spending

YearTotal Number of

Recipients(millions)

Total Spending(billions of current

dollars)

Annual rate ofchange inspending1

(percent)1966 19.1 $ 1.6 -1970 20.5 7.2 45.61975 25.0 15.7 16.91980 28.5 33.9 18.31985 31.1 69.5 14.11990 34.2 107.2 13.81995 37.6 184.2 10.51996 38.1 200.3 8.71997 38.5 213.6 6.61998 38.8 213.2 -0.219992 39.5 212.0 -0.6Source: Health Care Financing Review, 1999 Statistical Supplement Table 5; 1999 Annual Reports of the

Board of Trustees of the HI and SMI Trust Funds, Health Care Financing Administration.1. Average annual change from the previous entry2. Budgeted amounts.

Medicare Payment Medicare Payment Allocations, 1997Allocations, 1997

Payment Range Number ofenrollees(millions)

Percentof total

Spending(billions)

Percentof total

Average perenrollee

Over $10,000 4.7 12.2 $134.6 76.7 $28,648$5,000-$9,999 2.5 6.5 17.6 10.0 7,109$2,000-$4,999 3.9 10.1 12.8 7.3 3,234$1,000-$1,999 3.7 9.6 5.3 3.0 1,430$500-$999 4.2 10.9 3.0 1.7 720Less than $500 10.8 28.1 2.1 1.2 198Zero 8.7 22.6 0 0 0Total 38.5 100.0 $175.4 100.0 $5,877Source: Health Care Financing Review, 1999 Statistical Supplement, Table 16.

MedicaidMedicaid

Institutional featuresInstitutional features– State administeredState administered– Federal cost-sharingFederal cost-sharing– Eligibility standardsEligibility standards

SCHIP expansionSCHIP expansion Economic consequencesEconomic consequences

Medicaid SpendingMedicaid Spending

YearTotal Number of

Recipients(millions)

Total Spending(billions of current

dollars)

Annual rate ofchange1

(in percentages)1966 10.0 $ 1.7 -1970 - 4.9 30.31975 22.0 12.1 20.81980 21.6 24.0 13.81985 21.8 39.4 10.41990 25.3 69.8 11.81995 36.3 151.7 17.21996 36.1 154.4 1.81997 33.6 160.5 4.01998 36.7 170.6 6.31999 37.5 181.12 6.2Source: Health Care Financing Review, 1999 Statistical Supplement, Tables 74 and 77.1. Average annual change from the previous entry2. Budgeted amount.

Spending by Eligibility Spending by Eligibility Categories, 1997Categories, 1997

Category Payment percapita

Numbereligible

(in millions)

Percent oftotal eligiblepopulation

Totalspending

(in billions)

Percent oftotal spending

Aged $9,549 3.95 11.8 $37.72 30.5Disabled 8,830 6.13 18.3 54.13 43.8Children 1,026 15.27 45.5 15.67 12.7Adults 1,809 6.80 20.2 12.30 10.0Other 2,608 1.43 4.2 3.73 3.0Total $3,679 33.58 100.0 $123.55 100.0Source: Health Care Financing Review, 1999 Statistical Supplement, Tables 91-94.

Other Economic IssuesOther Economic Issues

Health outcomesHealth outcomes Enrollment in private insuranceEnrollment in private insurance Labor supplyLabor supply Family structureFamily structure SavingsSavings

Other Government Other Government ProgramsPrograms

FEHBPFEHBP Defense DepartmentDefense Department

– Direct careDirect care– Civilian Health and TriCare StandardCivilian Health and TriCare Standard

Veterans’ AdministrationVeterans’ Administration

Summary and Summary and ConclusionsConclusions

Fulfilled stated goals—improving Fulfilled stated goals—improving medical care access for poor, elderly, medical care access for poor, elderly, and disabledand disabled

Medicare’s structural deficiency—Medicare’s structural deficiency—poor coverage for catastrophic illnesspoor coverage for catastrophic illness

Medicare’s limited benefit package—Medicare’s limited benefit package—lacks outpatient prescription drug lacks outpatient prescription drug coverage and long-term care coverage and long-term care coveragecoverage