Social Insurance

Medicaid and Medicare

Introduction

• No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts. ~President Lyndon Johnson

Medicaid

• Social Insurance for the poor

Other Social Insurance Programs

• State Children’s Health Insurance Program (SCHIP)

• Veterans Administration

Crowding Out

• When private insurance take up falls after introduction of increases in public benefits.

• Concerns over public option.

HHS Estimates of Low-Income Subsidy Eligibility and Participation Under the Medicare Drug Benefit, 2008

Total Eligible for Low-Income Subsidies = 12.5 million

Applied for and receiving subsidy

Eligible but estimated to have

other drug coverage

1.5 million 12%

NOTES: MSP is Medicare Savings Program; SSI is Supplemental Security Income. SOURCE: Kaiser Family Foundation, based on HHS data, January 31, 2008 ( Data as of January 2008).

Eligible but not receiving subsidy

2.6 million 21%

Full dual eligibles

automatically receiving subsidy

6.2 million 49%

Future anticipated facilitated

enrollment <0.1 million (0.5%)

MSP and SSI recipients automatically receiving

subsidy

1.7 million 13%

.5 million 4%

Medicaid Today

Health Insurance Coverage

29 million children & 15 million adults in low-income families; 14 million elderly and

persons with disabilities

State Capacity for Health Coverage

43% of federal funds to states

MEDICAID

Support for Health Care System and Safety-net

16% of national spending on health services and supplies

Assistance to Medicare

Beneficiaries

7.5 million aged and disabled — 19% of

Medicare beneficiaries

Long-Term Care Assistance

1 million nursing home residents; 41% of long-

term care services

Source: Kaiser Commission on Medicaid and the Uninsured, 2008

Medicaid’s Role for Selected Populations

65%

44%

20%

51%

23%

41%

40%

27%

20%

19%

Nursing Home Residents

People Living with HIV/ AIDS

People with Severe Disabilities

Medicare Beneficiaries

Births (Pregnant Women)

Low-Income Adults

Low-Income Children

All Children

Near Poor

Poor

Note: “Poor” is defined as living below the federal poverty level, which was $17,600 for a family of 3 in 2008. SOURCE: Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, and Urban Institute estimates; Birth data: NGA, MCH Update.

Percent with Medicaid Coverage:

Families

Aged & Disabled

Medicaid Enrollees and Expendituresby Enrollment Group, 2005

Enrollees Expenditures onbenefits

Children 18%

Elderly28%

Disabled42%

Adults 12%

Children50%

Elderly10%

Disabled14%

Adults26%

Total = 59 million Total = $275 billion

SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on 2005 MSIS data.

Medicaid Payments Per Enrolleeby Acute and Long-Term Care, 2005

Children Adults Disabled Elderly

Long-Term Care

AcuteCare

$1,617$2,102

$13,524

$11,839

SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on 2005 MSIS data.

Medicaid Enrollment Growth Average Annual Growth Rates, 2000-2006

2.6%

11.4%

2.9%

5.7%

3.3% 3.2%

-0.4%

2.0%

2000-2002 2002-2004 2004-2005 2005-2006

Aged/Disabled Families

SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute estimates based on KCMU Medicaid enrollment data collected by Health Management Associates from 44 states inflated proportionally to national totals, 2007.

Overall Average Annual Total Medicaid Spending Growth, 2000-2006

11.9%

4.0%

7.2%6.5%

-0.2%

NOTE: Adjusted expenditures exclude all prescription drug spending for dual eligibles to remove the effect of their transition to Medicare Part D in 2006.SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute, 2007; estimates based on data from HCFA Financial Management Reports, 2006 (HCFA-64/CMS-64).

$295.9Annual Spendingat End of Period(billions)

‘02-’04

$315.0

‘05-’06

$257.3

‘00-’02 ‘04-’05Adjuste

d ‘05-’06

$314.5 $310.8

Medicaid and SCHIP Enrollment of Children, 1998-2005

20.7 20.9 21.823.4

25.527.3 27.8 28.3

.72.0

3.44.6 5.4 6.0 6.1 6.1

1998 1999 2000 2001 2002 2003 2004 2005

Medicaid SCHIP

SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute analysis of HCFA-2082, MSIS, and SEDS data, 2007.

Millions of Children

Income and Health Status of Medicaid and the Low-Income Privately Insured, 2002

61%

48%49%

16% 15%

27%

0%

25%

50%

75%

100%

Percent of Enrolled Adults:

Poor Health Conditions that

limit work

Fair or Poor Health

SOURCE: Coughlin et. al, “Assessing Access to Care Under Medicaid: Evidence for the National and Thirteen States,” Health Affairs 24(4):1073-1083. Based on a 2002 NSAF analysis for Kaiser Commission on Medicaid and the Uninsured.

Medicaid Low-Income andPrivately Insured

Concentration of Health Spending in the Medicaid Population, 2001

Enrollees Expenditures

SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute estimates based on MSIS 2001 data.

Adults 1%

Disabled 25%

Total = 46.9 million

Total = $180.0 billion

Elderly 20%

<$25,000 in Costs

96%

Children 3%

<$25,000 in Costs

52%

>$25,000 in Costs• Children (.2%)• Adults (.1%)• Disabled (1.6%)• Elderly (1.8%)

>$25,000 in

Costs

Medicaid Expenditures by Service, 2006

Total = $304.0 billionNOTE: Total may not add to 100% due to rounding. Excludes administrative spending, adjustments and payments to the territories.SOURCE: Urban Institute estimates based on data from CMS (Form 64), prepared for the Kaiser Commission on Medicaid and the Uninsured.

Inpatient 14.1%

Physician/ Lab/ X-ray 3.8%

Outpatient/Clinic 6.8%

Drugs5.5%

Other Acute6.9%

Payments to MCOs 18.0%

Nursing Facilities

15.7%

ICF/MR4.3%

Mental Health1.0%

Home Health and Personal Care

14.8%

Payments to Medicare 3.3%

DSH Payments

5.6%

AcuteCare

58.5%

Long-TermCare

35.8%

Medicaid in the Health System, 2006

16% 17%

43%

9%13%

Total HealthServices and

Supplies

HospitalCare

ProfessionalServices

NursingHome Care

PrescriptionDrugs

NOTE: Does not include spending on SCHIPSOURCE: Kaiser Commission on Medicaid and the Uninsured, based on A Catlin et al, “National Health Spending in 2006: A Year of Change for Prescription Drugs,” Health Affairs 27(1)14-29, January/February 2008. Based on National Health Care Expenditure Data, CMS, Office of the Actuary.

Total National Spending(billions)

$2,106

$648 $660 $125

$217

Medicaid as a share of national health care spending:

Medicaid Financing of Safety-Net Providers

Medicare20%

State/ Local Subsidies

14%

Self Pay/ Other7%

Commerical

24%

Medicaid35%

Total = $29 billion

SOURCE: Kaiser Commission on Medicaid and the Uninsured, based on America’s Public Hospitals and Health Systems, 2004, National Association of Public Hospitals and Health Systems, October 2006. KCMU Analysis of 2006 UDS Data from HRSA.

Federal Grants22%

Self Pay7%

State/ Local13%

Private7%

Medicare6%

Medicaid37%

Other9%

Total = $8.1 billion

Public Hospital Net Revenues by Payer, 2004

Health Center Revenues

by Payer, 2006

National Spending on Nursing Home and Home Health Care, 2006

Medicare17%

Private Insurance

7%

Other 6%

Medicaid43%

Out-of-Pocket26%

Total = $124.9 billionNote: Medicaid percentage includes spending through SCHIP. Other includes private and public funds SOURCE: Kaiser Commission on Medicaid and the Uninsured, based on Health Affairs January/February 2008, CMS, National Health Accounts.

Out-of-Pocket11%

Other* 6%Private

Insurance11%

Medicare38%

Medicaid34%

Total = $52.7 billion

Nursing Home Care Home Health Care

Growth in Medicaid Long-Term Care Expenditures, 1990-2006

1990 1995 2000 2002 2004 2006

Home andCommunity-Based

Institutional Care

In Billions:

$32

$54

$75

87%80%

70%13%

20%

30%

32%

68%

$92$100

63%

37%

$109

41%

59%

Note: Home and community-based care includes home health, personal care services and home and community-based service waivers.SOURCE: Kaiser Commission on Medicaid and the Uninsured and Urban Institute analysis of HCFA/CMS-64 data.

Source: Stan Dorn, Bowen Garrett, John Holahan, and Aimee Williams, Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses, prepared for the Kaiser Commission on Medicaid and the Uninsured, April 2008

Impact of Unemployment Growth on Medicaid and SCHIP and the Number Uninsured

1%

Increase in National Unemployment

Rate

=1.0 1.1

Increase in Medicaid

and SCHIP Enrollment

(million)

Increase in Uninsured(million)

&$2.0

$1.4

$3.4

Increase in Medicaid and

SCHIP Spending(billion)

State

Federal

State Authorized Children’s Eligibility for Medicaid/SCHIP by Income, January 2008

AZAR

MS

LA

WA

MN

ND

WY

ID

UTCO

OR

NV

CA

MT

IA

WIMI

NE

SD

ME

MOKS

OHIN

NY

IL

KY

TNNC

NH

MA

VT

PA

VAWV

CTNJ

DE

MD

RI

HI

DC

AK

SCNM

OK

GA

*The Federal Poverty Line (FPL) for a family of three in 2007 is $17,170 per year.**Effective eligibility higher than 250% FPL accounts for earnings disregards. ***IL uses state funds to cover children above 200% FPL.SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for the Kaiser Commission on Medicaid and the Uninsured., 2008.

TX

IL

FL

AL

< 200% FPL (6 states)

Effective >250% FPL (23 states)

200-250% FPL (22 states)

Authorized Medicaid Eligibility for Working Parents by Income, January 2008

AZAR

MS

LA

WA

MN

ND

WY

ID

UTCO

OR

NV

CA

MT

IA

WIMI

NE

SD

ME

MOKS

OHIN

NY

IL

KY

TNNC

NH

MA

VT

PA

VAWV

CTNJ

DE

MD

RI

HI

DC

AK

SCNM

OK

GA

NOTE: The Federal Poverty Line (FPL) for a family of three in 2008 is $17,600 per year. AR, IN, & UT operate waivers allowing higher-income parents to enroll, but the coverage has higher cost-sharing and reduced benefits.SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for the Kaiser Commission on Medicaid and the Uninsured, 2008.

TX

IL

FL

AL

50% - 99% FPL (21 states)< 50% FPL (12 states)

100% or higher FPL (18 states including DC)US Median Eligibility = 63% FPL

Nearly Two-Thirds of States Expanded Access to Medicaid and

SCHIP, July 06 – January 08

SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for the Kaiser Commission on Medicaid and the Uninsured, 2008.

32

26

11

7

Total EligibilityIncreases

EnrollmentProcedure

Simplifications

ReducedChildren'sPremiums

Number of States With…

Community Hospital Payment-to-Cost Ratios, by Source of Revenue, 1980-2006

Note: Payment-to-cost ratios show the degree to which payments from each payer cover the costs of treating its patients. They cannot be used to compare payment levels across payers, however, because the service mix and intensity vary. Data are for community hospitals. Medicaid includes Medicaid Disproportionate Share payments.

Source: American Hospital Association and Avalere Health, Avalere Health analysis of 2006 American Hospital Association Annual Survey data, for community hospitals, Trendwatch Chartbook 2008, Trends Affecting Hospitals and Health Systems, April 2008, Table 4.4, p. A-35, at http://www.aha.org/aha/trendwatch/chartbook/2008/08appendix4.pdf.

70%

80%

90%

100%

110%

120%

130%

140%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Private Payers

Medicare

Medicaid

Medicaid Managed Care and Traditional Enrollment, 1990-2004

2.3 2.7 3.6 4.8 7.8 9.813.3 15.3 16.6 17.8 18.8 20.8 23.1 25.3 26.923.0

25.627.3

28.625.8 23.6

19.9 16.7 14.3 14.2 14.915.8

17.017.5 17.4

0

5

10

15

20

25

30

35

40

45

50

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Number Enrolled in Traditional Medicaid Programs

Number Enrolled in Medicaid Managed Care

Note: Numbers may not produce totals because of rounding. These figures represent point-in-time enrollment as of June 30 of each reporting year. Total Medicaid enrollment for 1996-2004 was collected by states at the same time the managed care enrollment numbers were collected, instead of using the CMS 2082 Medicaid data reporting system as in previous years. The unduplicated managed care enrollment data include enrollees receiving comprehensive benefits and limited benefits. This table also provides unduplicated national figures for the Total Medicaid population and Other population. The statistics also include individuals enrolled in State health care reform programs that expand eligibility beyond traditional Medicaid eligibility standards.

Source: Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace, 2002, May 2002, Exhibit 2.8, p.23, at http://www.kff.org/insurance/3161-index.cfm, using and updated with data from the Centers for Medicare and Medicaid Services, at http://new.cms.hhs.gov/MedicaidDataSourcesGenInfo/04_MdManCrEnrllRep.asp.

Enrollment (in millions)

25.3

28.3

30.9

33.4

33.6

33.4

33.2

32.1

30.9

31.9

33.7

36.6

40.1

42.7

44.4

Enrollment in Medicare Managed Care and Traditional Medicare, 1990-2005

Source: Kaiser Family Foundation calculations using CCP enrollment data from the Centers for Medicare and Medicaid Services' monthly Medicare Managed Care Contract Reports for December 1 of each year, at http://www.cms.hhs.gov/HealthPlanRepFileData/04_Monthly.asp#TopOfPage (Zipped Monthly Summary (MMCC) Text Report, CCP plans), and total Medicare enrollment data from the 2006 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, May 1, 2006, Table III.A3, p. 34, at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2006.pdf

1.3 1.4 1.6 1.8 2.3 3.1 4.1 5.2 6.1 6.3 6.3 5.5 4.9 4.6 4.7 5.2

33.0 33.5 34.0 34.5 34.7 34.5 34.0 33.3 32.8 32.9 33.4 34.6 35.6 36.6 37.2 37.3

0

5

10

15

20

25

30

35

40

45

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Number Enrolled in Traditional Medicare Program

Number Enrolled in Medicare Managed Care

Enrollment (in millions)

34.3

34.9

35.6

36.3

37.0

37.6

38.1

38.5

38.9

39.2

39.7

40.1

40.5

41.2

41.9

42.5

Note: Total Medicare enrollment includes beneficiaries with HI and/or SMI coverage. Medicare managed care enrollment is enrollment in what Medicare calls CCPs (Coordinated Care Plans), which include health maintenance organizations (HMOs), provider-sponsored organizations (PSOs), and preferred provider organizations (PPOs).

0%

5%

10%

15%

20%

25%

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Medicare

Private Health Insurance Premiums

Per Enrollee Growth in Medicare Spending and Private Health Insurance Premiums (for

Common Benefits), 1970-2006

Notes: Per enrollee includes primary policy-holder plus dependents. Common benefits include hospital services, physician and clinical services, other professional services, and durable medical products; they exclude, for example, prescription drugs, home health care, non-durable medical products, and nursing home care.

Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, Table 13, at http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf.

102%

20%

0%

20%

40%

60%

80%

100%

120%

1996 1997 1998 1999 2000 2001 2002 2003 2004

Family Premium Federal Poverty Level

Cumulative Change in Family Health Insurance Premiums and Federal Poverty Level, 1996 - 2004

Source: Premium data from Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 1996-2004, at http://www.meps.ahrq.gov/mepsweb/; Federal Poverty Level based on HHS Federal Poverty Guidelines (1996 through 2004) at http://aspe.hhs.gov/poverty/figures-fed-reg.shtml. Rate of growth based on change for one person (change for 4 person family would be 20.8% rather than 20.3% over the period).

31%

1%

68%

At any time during the past 3 years, was a member of your immediate family or someone you know well receiving long-term care in a nursing home, at home, or in some other type of facility?

Yes

Don’t know/ Refused

No

Source: KFF Update on the Public’s Views of Nursing Homes and Long-Term Care Services (conducted October 1 – October 10, 2007)

American Public's Experience with Long-Term Care, 2007

Median Out-of-Pocket Health Spending as % of Income

11.9% 11.8% 12.0%12.8% 13.0%

14.9%15.5%

1997 1998 1999 2000 2001 2002 2003

Financial Burden of Health Spending Among Medicare Beneficiaries, 1997-

2003

Note: Difference between 1997 and 2003 is statistically significant at .05 level.Source: Kaiser/UCLA analysis of Medicare Current Beneficiary Survey Cost and Use files, 1997-2003.

10.4%

12.7%

8.5%7.7%

6.4%

1.3%2.9%

6.3%7.9%

9.5%

5.6%4.2%

3.2%

0.2%-0.5%

2.2%

2001 2002 2003 2004 2005 2006 2007 2008

Medicaid Spending Growth Medicaid Enrollment Growth

Projected

Percent Change in Medicaid Spending and Enrollment, FY 2001-2008

Notes: Enrollment percentage changes from June to June of each year. Spending growth percentage changes in state fiscal year.Source: KCMU survey of Medicaid Officials in 50 states and DC conducted by Health Management Associates, October 2007.

Distribution of the Increase in Uninsured Children, by Income, 2005-

2006

710,000 Uninsured Children

<200% FPL

200-399% FPL

400%+ FPL

220,000

340,000

150,000

31.3%

47.5%

21.2%

Note: 200% to 399% of the federal poverty level (FPL) is roughly $40,000-$80,000 in annual income for a family of four in 2006.Source: KCMU/Urban Institute analysis of the March 2007 CPS.

Percent of Seniors Who Did Not Fill or Delayed Filling Prescriptions Due to Cost, by Source of Drug Coverage,

2006

NOTES: Did not fill or delayed filling prescriptions due to cost refers to within the past twelve months. VA is Department of Veterans Affairs. Reference group for statistical significance is Part D coverage (*p<0.05).SOURCE: Kaiser/Commonwealth/Tufts-New England Medical Center National Survey of Seniors and Prescription Drugs, 2006.

12% *

8% *

20%

23% *

No Rx Part D Employer VA

(Among Non-Institutionalized Seniors Taking 1 or More Rx)

Distribution of Uninsured Children, 2004

1.0 Million

1.1 Million

0.6 Million

8 Million Uninsured Children

Not Eligible on the Basis of Immigration

Status

Not Eligible <300% FPL

Not Eligible >300% FPL

5.4 Million Uninsured Children

are Eligible but Unenrolled in

SCHIP or Medicaid

SOURCE: Urban Institute analysis of the 2005 Annual Social and Economic Supplement to the CPS for KCMU. Data has been adjusted for the Medicaid undercount.

1.7 Million Eligible for

SCHIP

3.7 Million Eligible for Medicaid

Medicare

• Social Insurance for the elderly– Description 1965

– Medicare Part A, B, C,

Percent of total Medicare population:Percent of total Medicare population:

NOTES: ADL is activity of daily living. The federal poverty (FPL) threshold for people age 65 and over was NOTES: ADL is activity of daily living. The federal poverty (FPL) threshold for people age 65 and over was $9,669/individual and $12,201/couple in 2006.$9,669/individual and $12,201/couple in 2006.SOURCE: Income data from US Census Bureau, Current Population Survey SOURCE: Income data from US Census Bureau, Current Population Survey published on statehealthfacts.org; ; all other data from Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2006 all other data from Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2006 Access to Care file.Access to Care file.

Fair/poor healthFair/poor health

Long-term care Long-term care facility residentfacility resident

3+ chronic conditions3+ chronic conditions

Under-65 disabledUnder-65 disabled

Cognitive/mental Cognitive/mental impairmentimpairment

Age 85+Age 85+

2+ ADL limitations2+ ADL limitations

Characteristics of the Medicare Population, 2006

5%

12%

16%

17%

26%

28%

29%

38%

48%Income less than Income less than 200% FPL200% FPL

Less than high school Less than high school educationeducation

Medicare Enrollment, by Eligibility Status, 2001-2007

34.4 35.1 35.0 35.4 35.8 36.0 36.8

5.7 6.0 6.0 6.3 6.7 7.0 7.2

0

5

10

15

20

25

30

35

40

45

2001 2002 2003 2004 2005 2006 2007

DisabledElderly

40.1 41.1 41.0 41.7 42.5 43.0 44.0

SOURCE: Kaiser Family Foundation, based on Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2002-2008.

In millions:

Medicare: Part A

• Medicare Part A is a type of hospital insurance provided by Medicare. The coverage provided by Part A includes inpatient care in hospitals, nursing homes, skilled nursing facilities, and critical access hospitals. Part A does not include long-term or custodial care. If you meet specific requirements, then you may also be eligible for hospice or home health care.

• Fiscal Intermediaries handle the claims for the Medicare Part A plan. These are private insurance companies that act as agents for the federal government in processing and paying Medicare claims.

Medicare Part A (Health Insurance) Trust Fund Balance, 2001-2019

Under High Cost, Low Cost, and Intermediate Assumptions

0%

25%

50%

75%

100%

125%

150%

175%

2001 2004 2007 2010 2013 2016 2019

Fund balance as % of annual expenditures:

NOTE: The Medicare Trustees recommend that the HI Trust Fund assets should be maintained at a level of at least 100% of annual expenditures. SOURCE: Kaiser Family Foundation, based on 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Actual Projected Low cost

Intermediate

High cost

Medicare: Part B

• Medicare Part B is a medical insurance provided by the federal government to eligible beneficiaries. The coverage provided by Part B includes medically necessary doctor's services, outpatient care, and most other services that Part A does not cover such as some physical or occupational therapies and some home health care services. Part B covers preventive services as well.

Medicare: Part C

• Medicare Part C combines your Part A and Part B options and must cover all medically needed services. The difference is that private insurance companies that are approved by Medicare provide this type of coverage. In most cases, Part C is a lower-cost alternative to the Original Medicare Plan, and providers usually offer extra benefits and include prescription drug coverage (Part D).

• Part C plans often have networks, and you must use the doctors or hospitals that belong to the plan. These plans help you coordinate and manage your overall care. Part C includes specialized care for people who need a large amount of health care services. If you find yourself needing medical attention while traveling out of your plan coverage area, you will still be covered for emergency or urgent care services.

Medicare: Part D

• Prescription Drug Coverage• “Donut hole” $3,600*• * Changes by year• Part D is prescription drug coverage insurance that is

provided by private companies approved by Medicare. You need to enroll when you first become eligible to keep from paying a penalty cost later. Part D was designed to help people with Medicare to lower their prescription drug costs and to protect against future costs. A prescription drug plan will also enable you to have greater access to medically necessary drugs.

Donut Hole

Total drug spend

TrOOPOut-of-pocket cost

Portion covered by Medicare

$0–$295 $0–$295Deductible is out-of-pocket

No Medicare coverage of costs

$295–$2,700 $295–$896.2525% out-of-pocket

75% covered by Medicare

$2,700–$6,154$896.25–$4,350.25

All costs are out-of-pocket

No Medicare coverage of costs

over $6,154 over $4,350.255% out-of-pocket

95% covered by Medicare

Effects of Medicare: Part D

• Shang and Goldman 2007

• Overall, a $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending. Furthermore, the substitution effect decreases as income rises, and thus provides support for the low-income assistance program of Medicare Part D.

Prescription Drug Coverage Among Medicare Beneficiaries, by Income, 2006

9% 13% 13% 11% 9%

37%47% 53%

16%

20%

19%

12%67%

46%

28% 23% 24%

1%<1%1%

1%3%1%

1%2% 2%

2%7%

17%

16%

Part D - Stand-alonePDP

Part D - MedicareAdvantage drug plan

Employer-sponsored

Self-purchased only

Other public/ private

No drug coverage

$10,000 or less

$10,001-$20,000

$20,001-$30,000

$30,001-$40,000

$40,001 or more

(N=6.4 mil) (N=9.4 mil) (N=7.0 mil) (N=5.7 mil) (N=6.7 mil)

NOTES: Percents rounded to the nearest whole number. N=weighted estimate of number of beneficiaries; mil=million. SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care File, 2006.

HHS Estimates of Prescription Drug Coverage Among Medicare Beneficiaries, 2008

NOTES: Estimates do not sum to 100% due to rounding. 1Includes Veterans Affairs, Indian Health Service, state pharmacy assistance programs, employer plans for active workers, Medigap, multiple sources, and other sources. 2Includes Retiree Drug Subsidy (RDS) coverage; retiree coverage without RDS; and FEHBP and TRICARE retiree coverage. 3Includes 0.4 million enrolled in other Medicare health plan types. PDP = Prescription Drug Plan. SOURCE: Kaiser Family Foundation analysis of HHS data, January 31, 2008 (Data as of January 2008).

Total Number of Beneficiaries = 44.2 Million

Total in Part D Plans: 25.4

Million(57%)

Stand-Alone PDPs

Medicare Advantage Drug

Plans3

Dual Eligibles in

PDPs

Retiree DrugCoverage2

No Drug Coverage

Other Creditable

Drug Coverage1

4.6million

10% 11.2million

25%

6.2million

14%8.0

million18%

10.2million

23%

4.0million

9%

Standard Medicare Prescription Drug Benefit, 2008

$320 Average Annual Premium$320 Average Annual Premium

$275 Deductible$275 Deductible

$2,510 in $2,510 in Total Drug CostsTotal Drug Costs

$5,726 in $5,726 in Total Drug CostsTotal Drug Costs ($4,050 out of pocket)($4,050 out of pocket)

$3,216 Coverage Gap (“Doughnut

Hole”)

NOTE: Annual premium amount based on $26.70 national average monthly beneficiary premium (CBO, March 2008). Amounts for premium, coverage gap, and catastrophic coverage threshold rounded to nearest dollar.SOURCE: Kaiser Family Foundation illustration of standard Medicare drug benefit for 2008 (standard benefit parameter update from CMS, April 2007).

Plan Pays 75%

Plan Pays 15%; Medicare Pays

80%

Enrollee Pays Enrollee Pays 100%100%

Enrollee Pays Enrollee Pays 5%5%

Enrollee Enrollee Pays Pays 25%25%

Medicare Part D Enrollees Who Reached the Coverage Gap in 2007

26%74%

Did not reach the coverage

gap

Reached the

coverage gap

Excludes Part D Enrollees Who Receive Low-Income Subsidies and Non-Users

NOTES: Estimates based on analysis of retail pharmacy claims for 1.9 million Part D enrollees in 2007.SOURCE: Georgetown University/NORC/Kaiser Family Foundation analysis of IMS Health LRx database, 2007.

The Standard Medicare Part D Benefit Coverage Gap, 2006-2017

$2,850$3,216

$3,721

$4,358

$5,100

$6,058 $6,241

$5,583

$4,706

$4,041

$3,439$3,051

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Actual Projected

SOURCE: Kaiser Family Foundation, based on 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Amount of beneficiary out- of-pocket costs in the gap

Financing Medicare

• Part A– Payroll Taxes– Medicare FICA is uncapped and 2.9% split

50/50 with the employer

Medicare Cost Containment

• Diagnostic Related Groups (DRGs)

• Move towards risk adjustments

• Reforming Physician Reimursements– Limits balance billing (115% of Medicare rate)

• Growth Rates Capped

• Medicare Managed Care

• Selection Bias in Medicare HMOs

Medicare Spending as a Share of Total Federal Outlays, FY2009

Net Interest8%

Medicare14%

Social Security22%

Defense Discretionary

20%

Nondefense Discretionary

16%

Other12%

Medicaid and SCHIP

7%

SOURCE: Kaiser Family Foundation, based on OMB, Fiscal Year 2009 Budget, February 2008; Baseline Category Totals.

FY 2009 Total Outlays = $3.0 trillion

Supplemental Coverage Among Medicare Beneficiaries, by Income, 2006

14% 16% 11% 7% 5%

52%

19%

9%

20%

21%21% 20%

8%20%

42%52%

59%

1%1%

1%<1%<1% 1% 1%3%

18%

23%

22%

19%15%

Employer-sponsored

Medicare Advantage

Self-purchased only

Medicaid

Other public/ private

None - Medicare fee-for-service only

$10,000 or less

$10,001-$20,000

$20,001-$30,000

$30,001-$40,000

$40,001 or more

NOTES: Percents rounded to the nearest whole number. N=weighted estimate of number of beneficiaries; mil=million. SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Access to Care File, 2006.

(N=6.4 mil) (N=9.4 mil) (N=7.0 mil) (N=5.7 mil) (N=6.7 mil)

Medicare Benefit Payments, by Type of Service, 2007

Low-Income Subsidy Payments

Payments to Union/ Employer-Sponsored Plans

1%

Other Part B Benefits

Payments to Drug Plans

Hospital Outpatient

Hospital Inpatient

Skilled Nursing Facilities

Hospice2%

Physicians and Other Suppliers

Home Health

Total Benefit Payments = $426 billionNOTE: Does not include administrative expenses such as spending for implementation of the Medicare drug benefit and the Medicare Advantage program. SOURCE: Kaiser Family Foundation, based on Congressional Budget Office, Medicare Baseline, March 2008.

Part A

Part B

Part D

Part A and B20%

11% 18%

5%

30%

4%7%

4%

4%

Medicare Advantage (Part C)

Estimated Sources of Medicare Revenue, FY2009

8%3%6%

12%

12% 25% 9%

39%

73%79%

41%

85%

2%5%

1%

1%

Payroll Taxes

General Revenue

BeneficiaryPremiums

Payments fromStates

Taxation of SocialSecurity Benefits

Interest andOther

SOURCE: 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

PART A$243.5 Billion

PART D$60.9 Billion

PART B$202.4 Billion

TOTAL$506.8 Billion

Distribution of Total Medicare Beneficiaries and Spending, 2005

10%

63%

37%

90%

Total Number of FFS Beneficiaries: 37.5 million

Total Medicare Spending: $265 billion

Average per capita Medicare spending (FFS only): $7,064

Average per capita Medicare spending among

top 10% (FFS only): $44,220

NOTE: FFS is fee-for-service. Includes noninstitutionalized and institutionalized Medicare fee-for-service beneficiaries, excluding Medicare managed care enrollees. SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Cost & Use file, 2005.

Medicare Beneficiaries and The Number of Workers Per Beneficiary

79

62

47

19

40

34

20

1966 1970 1990 2000 2010 2020 2030

Millions of beneficiaries

4.0

2.4

2.9

3.7

2000 2010 2020 2030

Number of workers per beneficiary

SOURCE: Kaiser Family Foundation, based on 2001 and 2008 Annual Reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Median Out-of-Pocket Health Care Spending as a Percent of Income for Elderly vs. Non-Elderly

Households, 1998-2003

SOURCE: Kaiser Family Foundation/UCLA analysis of Consumer Expenditure Survey, 1998-2003.

13.4%12.4%

11.8%

13.7% 13.4%14.4%

2.7% 2.6%2.7% 2.6% 2.7% 2.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1998 1999 2000 2001 2002 2003

Elderly

Non-Elderly

$454 $486 $514$567 $568

$636 $681$729

$814 $850 $887

$0

$200

$400

$600

$800

$1,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Projected Medicare Outlays, 2008-2018Total outlays in billions:

NOTE: Numbers have been rounded to nearest whole number. SOURCE: Kaiser Family Foundation, based on Congressional Budget Office, The Budget and Economic Outlook: An Update, January 2008.

16% 16% 16% 17% 17% 18% 18% 19% 20% 20% 20%

3% 3% 3% 3% 3% 3% 4% 4% 4% 4% 4%

Share of:Federal BudgetGross Domestic Product

Medicare Advantage Enrollment, 1999-2008

0.91.7

0.22.3

6.9 6.86.1

5.5 5.3 5.56.1

7.6

9.010.1

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Total Medicare Advantage

Private Fee-for-ServiceEnrollment in millions:

NOTE: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts, Demonstrations, HCPP, and PACE contracts. SOURCE: Kaiser Family Foundation, based on Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription Drug Plans Monthly Report” December 1999-2007. CMS Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report, Monthly Summary Report, July 2008.

Average Payments to Medicare Advantage Plans Relative to Traditional

Fee-for-Service Medicare

113%

112%

119%

117%

115%

All MedicareAdvantage

Plans

Local HMOs Local PPOs Private Fee-For-Service

Plans

Special NeedsPlans

SOURCE: Kaiser Family Foundation, based on Medicare Payment Advisory Commission, March 2008.

Medicare Advantage Plan Types

Traditional Fee-for-Service

Medicare = 100%

Percentage of Children Without Health Insurance, By Poverty Level, 1997-

2005

1997 1998 1999 2000 2001 2002 2003 2004 2005Notes: Survey method change in 2005 affects comparison with earlier years slightly. Children less than 18 years old.Source: L. Ku, “Medicaid: Improving Health, Saving Lives,” Center on Budget and Policy Priorities analysis of National Health Interview Survey data, August 2005.

Children below 200% of poverty

Children above 200% of poverty

23%

14%

6%5%

21%

5%

81%

3%

16%19%

Medicare Private Fee-for-Service Enrollment as a Share of the Total

Medicare Population, 2007

Traditional Medicare

HMO, PPO, and other

Private Fee-for-Service

Total Medicare Beneficiaries = 44 million

Medicare Advantag

e

SOURCE: Centers for Medicare and Medicaid Services, Medicare Advantage, Cost, PACE, Demo and Prescription Drug Plan Contract Report – Monthly Summary Report (Data as of May 2007).

40%

16% 16%

32%

57%49%

12% 10%

3% 3% 3%14% 15% 14%

19%

White African-American

Hispanic

MedicareAdvantage

Medicaid

Private*

None

Other

11 million 2.6 million 2 millionN=Note: Coverage was assigned based on the following hierarchy: Medicare Advantage, Medicaid, Private (employer-sponsored, Medigap), other public and unknown source, and no coverage. Source: Kaiser Family Foundation analysis of 2003 Medicare Current Beneficiary Survey Cost and Use File.

Medicare Advantage and Other Sources of Supplemental Coverage Among Medicare Beneficiaries Below 150% FPL, by

Race/Ethnicity

Total Medicare Private Health Plan Enrollment, 1999-2007

6.9 6.86.1

5.5 5.3 5.56.1

7.68.3

1999 2000 2001 2002 2003 2004 2005 2006 2007Note: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts, Demonstrations, HCPP, and PACE contracts. Source: Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription Drug Plans Monthly Report.” December 1999-2006. CMS Monthly Summary Report, February 2007.

In millions:

Benefits private plans and drug companies too much

Is too complicated

Helps people on Medicare save on

their prescriptions

60%

73%

68%

Percent Agreeing That the Medicare Drug Benefit…

Seniors' Views of the Medicare Rx Drug Benefit, 2006

Notes: Percents include those responding "strongly agree" and "somewhat agree"; margin of error +/- 4 points.

Source: KFF/HSPH The Public's Health Care Agenda for the New Congress and Presidential Campaign (conducted November 9-19, 2006).

Offer Rx Coverage,

Taking Subsidy

78%

Other Strateg

y14%

Do Not Provide Rx Coverage

8%

Large Employers' Expected Medicare Rx Coverage Strategy, 2007

Notes: Virtually all companies not providing drug coverage in 2007 discontinued drug coverage in 2006. "Other Strategy" includes supplementing Medicare drug coverage, contracting with Medicare drug plans, and becoming a Medicare drug plan. Applies to plan with the largest number of age 65+ retirees. Based on a non-probability sample of private-sector firms with 1,000 or more employees offering retiree health benefits.

Source: Kaiser/Hewitt 2006 Survey of Retiree Health Benefits, December 2006.