PHP 0310 Exam 1 Review

Lecture 1: Introduction to the

Course
Jessica Eskander

Readings
NEJM Fuchs Major Trends*
NEJM Schneider From Last to First
Reinventing American Health Care
Intro (pgs 1-13)
Review the readings and (re)take
the quiz!
*This article has many important trends
Just a few takeaways:
➔ There is a rapid growth of health
➔
expenditures
Fuchs article argues that the most
important reason for this growth is
new medical technology &
therefore increased specialization
➔ U.S. population is sicker and has
higher mortality than that of other
high-income countries
➔ Three features that prevent timely
access to care: cost of care,
administrative burden, disparities
in delivery of care
The U.S. does some things well...

◆ 3rd most populous country (China, India, USA, Indonesia, Brazil)

◆ Highest GDP (USA, China, Japan, Germany, UK)
◆ 14-16 of the world’s top 20 universities
◆ Greatest number of Nobel Prizes in five categories
◆ More than $30 billion used annually on basic science research
◆ Teaching hospitals that are centers of specialized care
◆ Superior amenities in excellent health care facilities
 ...but it also does things poorly

➔ High health care expenditure as

a percentage of GDP
➔ Lowest ranking in health
system performance + highest
health care spending = poor
health care value
◆ value = health / $
Lecture 2: Introduction to the
Health Care System
Jessica Eskander

Readings
JAMA Wilson HRQL
KFF Beyond Health Care: SDOH
Urban Institute Picture of Health
Shi and Singh Chapters 1&2
Review the readings and (re)take
the quiz!
Just a few takeaways:
➔ Know the conceptual model!
➔ Social determinants of health
(SDOH) are the conditions in which
people are born, grow, live, work and
age
➔ SDOH include socioeconomic status,
education, environment,
employment, access to health care,
etc.
➔ ACA provisions helped bridge health
care and community health
➔ “Income is so closely tied to health”
➔ “Education and health are closely
tied”
Health
● WHO: “A complete state of physical, mental, and social
well-being, and not merely the absence of disease or infirmity”
● Health is about the individual
● Health has multiple meanings beyond biomedical sciences
● Patients’ preferences and emotional/psychological factors play
a critical role
● Life expectancy is LOWER in places with MORE income
inequality
 Health-Related Quality of Life

Biological & Physiological Variables: molecular/genetic factors; function of cells,

organs, and organ systems; diagnoses; lab values; exam findings; mental diagnosis
Symptom Status: focus on whole organism incl. physical/emotional/psychological
symptoms; symptoms drive care seeking and care costs
Functional Status: 4 dimensions: physical, emotional, role, social; objective
measurement possible (through questionnaires)
General Health Perceptions: how well you think you are (answer to “how are you?”)
Overall Quality of Life: how happy one is; relationship to functional status may be
surprisingly weak (someone with quadriparesis may report high overall quality of life)
Health-Related Quality of Life
Biological & Physiological Variables
Brown
Symptom Status
Students
Functional Status
Face
General Health Perceptions
Great
Overall Quality of Life
Opportunities
 Impact of Health Care on Health?
➔ Whitehall Study
◆ Looked at civil servants in Britain
◆ Demonstrated the connection between employment grade (education)
and mortality
◆ The higher the civil service grade, the lower the mortality rate
➔ Virtually every measure of social/economic status is associated with health
➔ The only risk factor for which the U.S. is a top third performer among other
OECD countries is: smoking in adults.
➔ Social factors are stronger determinants of health than medical care is.
◆ 10% of health is attributable to medical care
Lecture 3: Beliefs, Values, and
Health in the US
Morgan Brinker
● Mackey: Healthcare
is an individual Required Readings
responsibility.
Therefore, we should
“move toward less
government control
and more individual
empowerment.”
● Fuchs: There is a
deep distrust of the
government. U.S.
political system
makes it possible for
interest groups to
have a big impact.
● Krugman: Healthcare
cannot function in a
free market Required Readings
○ Insurance
companies want
(cont.)
to make a profit
○ No comparison
shopping
● Brooks: The repeal of
Obamacare will
promise to cover
what Obamacare
covered under free
market conditions
○ Proves health
care is a right
● Gawande
○ Duttons believed
that people had a Required Readings
right to “access
health care,” but (last one, I promise)
they fear
government
intervention and
infringement on
others
○ Differing views on
what people
“deserve”
■ Experiences
■ Political beliefs
Sensipar Story and Markets
● Medicare pays for kidney dialysis
○ When excluded from bundling, Medicare costs shot up by $500M
■ Role of interest groups (lobbying)
● Try not to think of markets and government regulation in moral terms
● Market justice: focuses on efficiency
○ Free market conditions
● Social justice: focuses on fairness/equity
● Market failures
○ Ex: orphan drugs: pharma companies will not create drugs if there is
no chance of recovering investment → government intervention
Private Insurance

● Blue Cross (hospitals)

○ Began in 1929 with arrangement between Dallas school teachers, Baylor Univ. Hospital
● Blue Shield (physicians)
○ Great Depression reduced patient’s ability to pay MD fees
○ Blue Shield ensured revenue
● Blue Cross-Blue Shield
○ provider-driven
● AMA
○ Powerful interest group
○ Opposed Medicare, compulsory medical insurance
EBI

● WWII: Competition for workers on basis of fringe benefits

● Continued after the war, negotiating for health benefits as a part of
compensation
● Employer and employee contributions were not taxable
○ Tax subsidy: regressive
■ More wealthy, more benefit
■ Only available through private EBI
American Values

● American cultural values

○ Rugged individualism
○ Distrust in government
○ Faith in markets, not government
● Fuchs
○ Reluctance to achieve more equal outcomes through redistributive
public policy
○ US political system makes it possible for special interests to have
more impact
Lecture 4: Health Insurance
Principles Part 1
Megan Tran
 Lecture 4: Takeaways:

➔ “Though it doesn’t offer complete

Readings
● Austin Frakt’s NYT article
● *Oregon Health Insurance
Experiment*
● Review videos
financial security to everyone,
health insurance expansion has
decreased financial strain.”
➔ Oregon Health Insurance
Experiment (2008) found that
covering the uninsured with
Medicaid:
◆ Diminished financial strain
◆ Increased utilization of health care
services without improving physical
outcomes, employment, or earnings
◆ Reduced depression
Lecture 4

● Insurance is a means of protection from financial loss

○ Risk management
● Insure against RARE and UNPREDICTABLE events
● Health insurance vs other insurance
○ Similar because most serious health events are rare
○ Different because most health insurance protects against most or all kinds of
utilization
Lecture 4

● Not having insurance is associated with dramatically higher rates of not

getting the care you need
● If you’re uninsured, children have a dramatically higher chance of not
receiving health care
● Uninsured have a higher probability of financial problems
● Uninsured have a higher probability of late stage cancer diagnosis
● Uninsured have a higher probability of death for colorectal cancer
● Uninsured almost 3 times as likely to have late stage melanoma than
people with private insurance.
 Lecture 4
● EMTALA - Emergency Medical Treatment & Labor Act (1986) - Can’t get primary care, follow up
care, cancer care, or medications in ER
● For most things, access to appropriate health care requires insurance
○ Debate on how to accomplish it: more market oriented vs. more gov oriented (affordability)
● Goals of insurance:
○ Improve access to health care, and thereby improve health
○ Reduce financial risk
● Oregon Medicaid Experiment
● Gave 10K people Medicaid & compared them to those w/o Medicaid
● Increased use of health care services; reduced financial strain
● raised rates of diabetes detection and management; lowered rates of depression
● No significant improvements in measured physical health outcomes in the first 2 yrs
 Lecture 4
● Asymmetric knowledge problem: you (the consumer) know more about
individual/family health risks/history than the insurer
● Adverse selection: people who want insurance are always sicker and have
higher costs than those who don’t
● Insurers dealing with random events
○ Risk pooling: the larger the number of insured people (the risk pool), the more predictable
their health experiences and health costs will be (large pools = more actuarial stability and
less business risk)
● Insurers dealing with non-random events (ex. You don’t disclose your risks)
○ Adverse selection → arises bc of asymmetric information → Solution: get more info
● Medical underwriting: the process of assessing risk
● Rate making: deciding what to charge people with different risks
 Lecture 4
● Cream skimming or cherry picking: Try to select and insure healthy people
● Lemon dropping: Not insure or drop people who are more expensive
● Insurance death spiral: only sick, very expensive employees left in pool, none of
whom can afford the premium, plan fails
● Individual mandate: require healthy people to buy health insurance (ACA) [which
was repealed as part of the Tax Cuts and Jobs Act, passed Dec 22, 2017]
● Balancing of right to own or operate something with the responsibilities that
accrue when harms occur related to that ownership or operation
Costs highly skewed
th
● 158M in the top 50
percentile: 97% of
costs
● 158M in the bottom
th
50 percentile: 3% of
costs
Lecture 4: What Health Insurance Costs You

● Premium: amount you pay to purchase insurance

○ Employer based: $ from your paycheck + $ from employer
○ Individual: monthly bill
● Deductible: the amount that an individual or family has to pay out of pocket each
year before insurance takes effect
○ No deductible = “first dollar coverage”
● Co-pay: a fixed amount that the insured person has to pay at the time a service is
provided
● Co-insurance: a fraction of the cost of a service that the insured person has to pay
● Even if you have insurance … total out of pocket costs can really add up
Lecture 5: Health Insurance
Principles
Viknesh Kasthuri
Readings

● Donna Dubinsky - tries to buy plan for fam; denied because

pre-existing condition.
● Patients' Costs Skyrocket; Specialists' Incomes Soar
○ Mohs’ – overutilization?, huge range in prices
○ Germany - order of magnitude less costs
○ RVS update committee - full of specialists.
● Reinhardt – skin in the game idea is flawed
● Kate Zernike – tax subsidies on ESI large expenditure.
○ Politically difficult to eliminate, but could help rein in costs
Moral Hazard

● More insurance -> more likely to use health services.

● Tension b/w too much & too little health benefits
● Cost sharing at point of service
○ Copays
○ Deductibles
○ Coinsurance
RAND Health Experiment

● Randomized to different levels of cost sharing

● Higher sharing -> lower utilization across the board: both effective
and ineffective
● Not better shoppers; blunt instrument
● It’s not like shopping for groceries b/c information asymmetry
○ Lack of price transparency
Health Insurance Benefits

● ACA tries to fix Private Markets. How?

○ Guaranteed Issue – can’t deny, even if pre-existing conditions
○ Guaranteed Renewability – can renew your policy even if new condition unless fraud
○ Modified Community Rating – 3:1 max ratio, based on tobacco, family coverage, geography, age
■ repealed
○ Single Risk Pool – all individual plans pooled, reduces risk that sick pay more
○ Essential Health Benefits – 10 guaranteed benefits
■ repealed
○ Medical Loss Ratio – 80% premium$ for care, quality improvement
● Repeals -> more affordable to people who need it? Junk Plans?
Public and Private Insurance

● Gov’t share of health expenditures increasing

● 65+ = mostly gov’t; <65 = mostly private
● Increase in direct purchase plans and Medicaid (why?)
● Private insurance tax loophole.
Private Insurance Concepts

● EBI/ESI (group) vs Individual

○ Underwriting for groups is easier; ACA pools individuals
● Large v small (200 is threshold)
○ Large > Small for pooling
● Fully-insured v self-insured
○ Fully-insured = state-licensed/regulated. Smaller employers.
○ Self-insured = employer insures themselves, administration by insurance company.
■ Fed Regulation under ERISA
Lecture 6: Private Insurance
and the ACA
Shawn Young
shawn_young@brown.edu
Lecture 6: Readings
● Bagley and Frakt: The Problem w/ One-SIze-Fits-All Health Insurance
○ Employer based insurance tax exemption is regressive → Cadillac tax attempts to
disincentivize overly luxurious insurance plans
○ Insurers cover any procedure with a “clinical benefit” = insurers cover any procedure no
matter how expensive
○ Low income folks are hit the hardest by this → less money for wages because money is
being used to pay for premiums
● Sanger-Katz: The Football Team at the Buffet: Why Obamacare Markets are in Crisis
○ Obamacare exchange premiums are increasing
○ Article describes adverse selection → health insurance plans that cover a lot of services
will attract sicker customers
○ Hard for insurance companies to predict who’s going to be in the marketplace (football
team at the buffet) so they charge higher prices
○ Obamacare forces insurance companies to charge people of the same age for the same
insurance
○ Article describes some of the regulations Obamacare put on insurers
Lecture 6: Readings
● Abelson: Cost, Not Choice, Is Top Concern of Health Insurance Customers
○ Not as many healthy people are enrolling in Obamacare exchanges, more sick people
○ Sick people are willing to pay more for insurance, healthy people don’t care about “choice”
they care about how much they pay
○ ⅔ of people went for lowest or second-lowest priced plan in each tier
○ Insurance companies are worried about sustainability
● Reinhardt: Why Are Private Health Insurers Losing Money on Obamacare
○ Obamacare exchange premiums are increasing even though growth in National Health
Spending slowed down
○ Reinhardt says that it’s because 80% of healthcare costs are attributable to 20% of patients
→ Community rating mandated by ACA + individual mandate were supposed to allow the
sickest to afford insurance while preventing adverse selection → individual mandate was
set too weak → healthy people don’t buy insurance → premiums go up for everyone
Lecture 6: Background
● Changes in private insurance due to ACA (But there
● Majority of insurance in US is private are still problems)
● Insurance that was gained through ACA is ○ Guaranteed issue
mostly private (gov plans inc too) ○ Guaranteed renewability
○ Modified community rating: age (3:1 ratio),
● Health insurance family size, tobacco use, geographic area)
● Public ○ Single risk pool: everyone in same risk pool
○ Required coverage of “Essential Health
○ Medicaid/Medicare Benefits”
● Private ○ Medical Loss Ratio: 80/20 rule
○ Individual insurance (non-group) ● Pre ACA: dysfunctional individual markets
● ACA created state exchanges (online insurance
○ Group/employer sponsored marketplaces)
insurance
 Lecture 6: Employer Sponsored Insurance
(Group Insurance)

● Employer Sponsored Insurance (ESI)

○ Premiums (employer contribution + employee contribution) increasing (both family +
individual)
○ Growth in Worker contribution > Growth in premiums > Growth in earnings > Growth in
inflation
■ Means that people are paying more of their money in healthcare (less money to
spend on other things) → American workers are getting poorer
● Large businesses (200+ employees) vs. Small businesses (3-199 employees)
○ Large businesses pay more towards employee premiums than small business
○ Large business most likely to offer health insurance
■ Even so, if you are a temporary/part-time worker you won’t get ESI
■ Not everyone who is offered ESI buys it, why? Too expensive!
Lecture 6: Employer Sponsored Insurance
(Group Insurance)

● Deductibles for ESI increasing (employee is paying more over time)

● ESI is changing dramatically over time
○ Conventional FFS plans: declined over time to practically nothing
○ Prevalence of High-Deductible Health Plans increased
● ESI is still first resort (people like it), but costs continue to rise in ESI
● Trend: More cost shifting to patients, (higher use of high-deductible health
plans)
Lecture 6: How did the ACA change private
insurance?
● Individual Mandate
○ Requires everyone to have insurance, or else pay a fine
○ Reason for mandate: Markets fail if healthy people aren’t part of market
○ Originates from conservative think tank, Heritage Foundation, not Obama
(democrat)
○ States sued the federal government, stating that the individual mandate was
unconstitutional
● State based exchanges (online insurance marketplace)
○ Formerly uninsured would be in risk pool
○ Originally wanted every state to create an insurance exchange, as long as it
complied with ACA standards/rules
○ Funding was made available to create marketplaces, but not all states chose to
Lecture 6: Rationale for the individual
mandate

● Small fraction of people account

for disproportionate share of
healthcare costs
○ If healthy people don’t
enroll, then adverse
selection occurs and
markets fail
■ This is the rationale
for the individual
mandate
Lecture 6: Aftermath of ACA

● Legal Challenges! 2012 Supreme Court Decision (NFIB vs. Sebelius)

○ Individual mandate was constitutional (5-4 decision)
○ Justice Roberts: the penalty is a tax, and the federal government has the right to tax
○ The Medicaid expansion is “unconstitutionally coercive” (7-2)
○ States can decide whether to expand their Medicaid programs or not
● Exchanges
○ Four types: federally-facilitated, state-based, state-based marketplace w/ federal platform,
state partnership marketplace
○ Original intent: 51 exchanges/marketplaces, respecting state’s rights → didn’t happen
● Medicaid
○ Some states expanded Medicaid, some did not.
Lecture 6: How does the ACA (theoretically)
cover the uninsured?

● <138% of FPL (Lowest income persons): Medicaid expansion covers them

● 138% to 400% of FPL: purchase private insurance on exchanges, with graduated tax credits and
subsidies
○ Subsidies are progressive (the closer you get to 400% FPL, the less help you get)
■ Between 138 and 250% of the FPL, you get both tax credits and Cost Sharing
Reduction (CSR) Subsidies.
■ Between 250% and 400% of the FPL, you only get tax credits
● >400% FPL: Purchase private insurance on exchanges, but no help
Lecture 6: How do the the exchanges work?

● There are four types of insurance plans on the exchanges, separated into 4 metal
categories based on level of cost sharing
○ Bronze, Silver, Gold, Platinum (all plans cover 10 essential health benefits)
■ Bronze plans (premiums LOW, cost sharing HIGH)
■ Platinum plans (premiums HIGH, cost sharing LOW)
● In effect, there are 2 different markets in the Obamacare exchanges (majority &
minority)
○ 85% of people have incomes less than 400% FPL and receive tax credits (used
to be tax credits and subsidies) → insulated from effects of premium increases
○ 15% of people have incomes more than 400% FPL and pay full price, which is
increasingly difficult, particularly in some states
Lecture 6: What has the Trump
administration done?

● Defunded enrollment support/shortened enrollment period (decreased

enrollment)
● Trump ended Cost Sharing Reductions in Oct. 2017
○ But increase in premiums for those <400% FPL were offset by
increase in tax credits
● Tax Cuts and Jobs Act repealed the individual mandate but still in effect
for 2018
Lecture 6: What do people say about the
ACA?
● People got insurance! 20% uninsured → 12% uninsured between ‘10 and
‘16
○ Young adults (19-34) gained the most in insurance
● Surveys
○ ACA made it easier for people to buy insurance: people found it easier find affordable
coverage and get coverage they needed
○ Everyone, regardless of insurance status, thinks insurance is important
○ Repeal of individual mandate didn’t cause people to drop out of market
○ People are satisfied with insurance choices available to them
○ People are not impressed with the value of insurance...because it’s too expensive
○ Everyone think exchanges are collapsing, but Rs more likely than Ds to think so
■ Markets are actually stabilizing, but lower enrollment
Lecture 7: Managed Care
Swata Alagar
Provider Reimbursement Methods

The spectrum from fee-for-service (FFS) to capitation:

Fee-for-service (FFS)
● FFS = Providers receive a fixed, predetermined amount for a particular
service
○ Historically physicians set the usual, customary, and reasonable (UCR) rates and
patients/insurers paid them → this has mostly disappeared
● Over time, fee schedules determined by the insurers has replaced this
○ The Center for Medicare & Medicaid Services (CMS) adopted the Resource-Based
Relative Value Scale (RBRVS) in 1992 → followed by most private plans
■ “Relative value” = measures physician work, practice expense, and professional
liability insurance
■ Rewards effort rather than patient outcomes
■ Relative Value Update Committee (RUC): run by the American Medical
Association (AMA), consists mainly of specialists
Perspectives of FFS
● Providers always have an incentive to increase VOLUME → do not have
incentive to increase quality of care
○ If the RUC decides to lower RBRVS prices, providers simply increase VOLUME → providers
can see more patients, make more money
● Payers are responsible for paying for every service performed → no way
for them to cut down costs
● Patients could be urged to overutilize services, could receive lower quality
care from providers → their care from providers is more likely to be
focused on procedures, rather than prevention/wellness
● Patients can see any provider!
● Providers = essentially none of the risk, Payers = all of the risk
Readings on FFS

● IMRT article: high-cost, less invasive radiation therapy for prostate cancer
○ Medicare spent $1B on IMRT in 2008→ federal spending on Medicare is only rising!
○ Self-referral: urologists refer patients to their own facilities → personal financial gain!
○ Urology groups buy IMRT equipment to increase their practice revenue
● Stents article: highest-earning cardiologists accused of performing
unnecessary stents → relieve blockages in peripheral vessels (arms/legs)
○ These procedures in outpatient offices → providers claim this is actually saving Medicare
money! (cheaper than inpatient procedures)
○ Lawsuits target providers who perform unnecessary procedures
● THEME: In FFS, providers can always find new avenues for revenue.
Capitation

● Payers pay providers a fixed yearly/monthly amount per patient

● This “puts providers on a budget” → providers have to manage their
spending per patient and only provide care that is actually needed
● BUT providers have an incentive to “stint on care” to pocket more money
○ Use of “cream skimming” or “lemon dropping” to self-select a healthy patient pool
● Patients’ main concern is underutilization of care
Perspectives on Capitation
● Payers’ financial risk is greatly reduced → can easily calculate yearly
spending and avoid unexpected payments to hospitals/providers
● Providers have a higher financial risk BUT are rewarded for efficient care
○ Little micromanagement by payers
○ Reduction in billing paperwork (at least in theory)
○ Can no longer bill for every single service
● Patients enjoy more integrated care
○ Payers and providers communicate, providers communicate with each other
○ Main concern is underutilization and rationing of health services/procedures
● Policy perspective: need sophisticated management systems to
coordinate communication between payers and providers
Managed Care

● Definition: approach that aims to coordinate the insurance and delivery of healthcare services →
price negotiation is key
○ Controlling costs is a GOAL, but often not a reality!
● Methods for cutting costs:
○ Reduce utilization
■ Fewer and shorter hospitalizations (avoid inpatient stays whenever possible)
■ Fewer specialists visits/invasive procedures (IMRT, stents in peripheral arteries)
■ Narrow networks: make care inconvenient and inaccessible to patients!
○ Reduce unit price/service:
■ Payers negotiate with hospitals and pharmaceutical companies to pay lower prices
● Reading on narrow networks: result when the number of hospitals in a network is reduced →
unforeseen result of the ACA
○ Premiums are often reduced, BUT patients must travel far distances for routine care
○ “The lone insurer” in New Hampshire → some providers are no longer in-network
Prepaid Group Practice (PGP)

● Begun in 1938 with Kaiser Permanente offering prepaid services to Grand Coulee Dam
workers; also applied during World War II for workers
○ Hospital care, specialist care, and outpatient care all offered under “one roof”
● Payers give most financial risk to the PGP
● Providers are usually paid a salary by the PGP
○ Do not have to spend resources competing with other providers for patients, unlike FFS
● Patients can only get care within PGP → limited choice
○ Receive specialist referrals to only specialists within the PGP
● Few true PGPs exist today → group, staff, or network model health maintenance
organizations (HMOs) instead
○ Staff model: doctors are directly employed by the HMO
○ Group model: HMO contracts with an independent group to provide services
○ Network model: more than one independent group is contracted to provide services
 Independent Practice Association (IPA)
● Developed in 1954 because
physicians like their autonomy!
● The IPA creates a provider
network by contracting with
solo and group practices
○ Providers contract with the IPA,
not an insurer
○ Insurer pays the IPA capitation
dollars for every patient
○ IPA creates many risk sharing
relationships with providers
Perspectives on IPAs

● Payers prefer sharing risk with a large IPA rather than sharing risk with
individual physicians/practices
● IPA has substantial financial risk → has to pay all providers
● Providers only give up some autonomy to be in the IPA
● Patients have some limited choice → referral network is limited to the IPA
● There can be many IPAs in a single HMO
HMO vs PPO
● Health maintenance organization (HMO)
○ IPAs and PGPs are types of HMOs
○ Patients usually have to choose a PCP to manage all of their care
○ Most restrictive in terms of provider choice
● Preferred provider organization (PPO): payer negotiates discounted FFS
rate with “preferred providers”
○ Patients can see preferred providers for a lower copay/less cost-sharing
● Payers still retain financial risk → prefer efficient providers
● Providers take lower reimbursement → more autonomy than PGP or IPA
● Patients have more choice BUT less coordination of care
● Virtually all care today is managed! → think of managed care as a CONTINUUM
● FFS, PGP, IPA, and PPO work similarly for both public (Medicare/Medicaid) and private payers
Lecture 8: Medicare Parts A and B
Iladro Sauls
History of Medicare

● Lots of historical opposition for the creation of Medicare and Medicaid, ex.
the AMA
● In 1965, LBJ signs Medicare and Medicaid into law as Title XVIII of Social
Security Act (Medicaid was title XIX)
○ Categorical programs- target certain segments of the population
● Administered by executive branch. HHS > CMS
● Medicare spends a large chunk of the federal budget ($1+ trillion, 15% of
overall spending)
Medicare Eligibility & Population

● Medicare is an entitlement program -- guaranteed to all those who qualify

-- and is funded automatically by Congress
○ Legislation authorizes a certain level of spending automatically (mandatory)
○ Rest is appropriated by Congress (discretionary)
● Who’s eligible?
○ 65+ who have paid taxes for 10 years
○ <65 who are disabled or have end-stage renal disease (kidney failure) or ALS
● 59 million Medicare enrollees
○ Old: Vast majority are 65+
○ Medically complex: 30%+ have 5+ chronic conditions
How Parts A and B are Financed

● Part A (Hospital Insurance Program)- hospital/inpatient services

● Part B (Supplementary Medical Insurance Program)- physician/outpatient
services
● Part A financed by #1 payroll tax on employees and their employers “FICA”
○ Progressive tax: those with higher incomes pay higher %
○ Employers/employees each pay 1.45%, increased to 2.35% for wealthy (under ACA)
○ ESI premiums are tax deductible
■ A regressive measure because wealthy will gain larger tax shield from this provision
● Part B financed by general revenues and enrollee premiums (which are
also progressive)
Medicare Part A

● Inpatient hospital care

○ Unlimited # of benefit periods (hospital admission -> 60 days after discharge)
○ In, the past retrospective reimbursement (based on costs)
○ Today, prospective payment system (PPS)- payment per inpatient day based on diagnoses (a system
called DRGs)
○ Incentivizes hospital to reduce unnecessary stays and procedures
● Skilled nursing facility (SNF) care
○ Retrospective -> per diem (up to 100 days before out of pocket) PPS based on RUGs
● Home health care
○ For homebound patients, must be ordered by physicians
○ PPS based on 60-day episodes of care
● Hospice care
○ For those with less than 6 months to live, must waive Medicare coverage of curative treatment
Medicare Part B

● Physician services
● Hospital outpatient services (surgery, diagnostic, lab)
● Emergency room, ambulance, outpatient rehab, mental health
● Kidney dialysis, blood transfusions, medical equipment/supplies, rural health clinic services
● In the past, FFS reimbursement with the fee schedule based on UCR prices
● Today, RBRVS which is controlled by the RUC, a committee controlled by the ACA and
dominated by specialists
○ As a result, specialized procedures are reimbursed much better than primary/mental health
○ Private payers follow Medicare’s lead
● Medicare Access & CHIP Reauthorization Act, “MACRA” (2015): slowly moving away from FFS
○ MIPS & APMs
○ Innovative and quality-based models of paying physicians
Dual Eligible & Medigap

● “Dual eligibles”: people who qualify for both Medicare and Medicaid
● Medicaid covers premiums/deductibles/cost-sharing of regular Medicare
as well as services not typically covered by Medicare (i.e. nursing home
care)
● 11 million dual eligibles/Medicare and Medicaid eligibles/MMEs
○ ACA enhances coordination of care for dual eligibles between both programs
● Medigap: supplemental private insurance purchased by ~ ¼ Medicare
enrollees (9 million enrollees) to cover Out-of-pocket Medicare costs
○ Medicare has significant cost-sharing for enrollees (especially near poor), who sometimes
struggle to pay for their benefits
Acronyms Recap

AMA = American Medical Association

HHS = Health & Human Services
CMS = Center for Medicare & Medicaid Services
PPS = Prospective Payment System
DRGs = Diagnosis Related Groupings
SNF = Skilled Nursing Facility
RUGs= Resource Utilization Groups
FFS = Fee For Service
UCR = Usual, Customary, & Reasonable
RBRVS = Resource-Based Relative Value Scale
RUC = RBRVS Update Committee
MACRA = Medicare Access & CHIP Reauthorization Act
MIPS = Merit-Based Incentive Payment Systems
APMs = Alternative Payment Models
CMMI = Center for Medicare and Medicaid Innovation
ACO = Accountable Care Organization
MMEs = Medicare & Medicaid Enrollees
OOP = Out Of Pocket
Resources

● Kaiser Family Foundation fact sheet

○ Clear, to-the-point resource on Medicare
● Khan Academy video on Medicare:
https://www.khanacademy.org/partner-content/brookings-institution/intro
duction-to-healthcare/v/medicare
● Lots of details
○ Focus on the big picture first -> most important!!!
○ Then, use big picture to remember smaller details
Lecture 9: Medicare Parts C and D
Iladro Sauls
Part C (Medicare Advantage)

• Part C: Medicare “outsourcing” Medicare enrollee care to private companies

• MUST cover all the benefits guaranteed under A and B
○ Benefit design may vary as long as actuarially equivalent to A+B

• You pay your part B premium + extra MA premium

• Your part C plan (MA) may have part D benefits in it, but is not required to (most
MA plans do include prescription drug coverage)
• No need for supplemental coverage (out of pocket limits for Part A and B costs)

• You CANNOT have both Medicare Advantage and a Medigap plan

Demographics of Part C

• Geographic variation between states in how many Medicare

enrollees have part C
• Nationally, ~35% of Medicare beneficiaries are in a Part C
plan, of those ~2/3 are in HMOs & ~1/3 are in PPOs
• Patients in MA tend to be poorer, non-white, and healthier
than those in FFS
History of Part C

● Private plans in Medicare started with 1973 HMO act

● 1997 Balanced Budget Act Formally Established Part C as
“Medicare+Choice” (which included PPOs, FFS, HDHPs)
● 2003 Medicare Modernization Act rebranded Medicare + Choice as
Medicare Advantage (MA) and increased reimbursements to private plans
● Part C enrollment dropped from 1998-2003, has been on the rise since
Part C enrollment (in millions):

BBA MMA ACA

Total Medicare Advantage Enrollment, 1992-2014
Balanced Budget Act
Medicare Modernization Act
Affordable Care Act
Why use Medicare Advantage?

• Generally, variety of plans available (except rural areas)

• Quality is generally good
• Out-of-pocket limits
• Out-of-pocket costs generally lower than FFS Medicare
• Generally, less administrative hassle for the enrollee (don’t
need to organize Medicare, Medigap, and Part D coverage)
Part D (Prescription Drug Coverage)

• “Voluntary” coverage run through private plans

• Can be standalone or be combined with Part C
• Enrollee MUST have Parts A and B to get Part D
• Financed through general revenue (at both state and federal level) and
beneficiary premiums
○ Premiums vary according to benefits and income (make more, pay more)
• Total cost is $88 billion/year
Part D’s “Doughnut Hole” to be closed by 2020
Impact of Part D

• Today only 12% of Medicare beneficiaries are uncovered

• People are happy with Part D
• Part D is working but drug prices are rising
Overall Efficiency in Medicare

• Medicare admin. costs are significantly lower than those of private

insurance (5-10% of private insurance admin. cost)
• Keep in mind USA admin costs highest in the world
• THM: Medicare constitutes a uniquely American mix of public and
private enterprise
Lecture 10: Medicaid 1
Alyssa Rust

Readings
Make sure to review the readings
and re-do the quizzes!!
Takeaways
★ Medicaid is NOT just
“somebody else’s insurance”
○ ⅓ elderly adults will be in a nursing
home at some point
○ ¾ of those who are will eventually
★
be covered by Medicaid
Medicaid is the government’s
largest safety net for low
income people
★ Access to healthcare under
Medicaid coverage is
comparable to access under
private insurance
History of Medicaid
● Signed into law in 1965 (along with Medicare!)
● Originally small: families receiving cash assistance
● Grown exponentially since (75M individuals!)
○ Low income pregnant women, children, & families
○ Low income adults w/ disabilities
○ Children w/ special needs
○ Low income elderly
○ Low income childless adults (expansion states only*)
● First major expansion: SCHIP (1997)
● Who is still left out?
○ Immigrants (5 year wait), temporary residents, illegal immigrants, low-income childless
adults (Non-expansion states only**)
 Medicaid Expansion
● Enacted in 2014 as part of the ACA
● Expansion of Medicaid to all individuals
(including childless adults) under 65 with
incomes up to 138% FPL
○ Eliminates CATEGORICAL restrictions
● NFIB vs. Sibelius (2012)
○ Medicaid expansion is optional for states
■ As of 2019, 14 states have still not
expanded while 36 have or are
expanding in 2019
● Offers:
○ More federal funds! (federal government
covers 100% until 2016 and 90% until
2020)
○ Reduces uncompensated care
○ Reduces financial stress and increases
access to care for low-income adults
■ People want Medicaid!!!
Non-Expansion States
● 3.6M fewer people insured
● Residents paying taxes that go to fund healthcare benefits for OTHER states
○ Lose $8.4B in federal funding
● State will have to pay more for uncompensated care
● Uninsured who have incomes 100-138% FPL allowed to buy insurance on
marketplace
○ Usually can only buy insurance on marketplace if you have an income >138% FPL
○ 48% of people who would qualify for expansion live in non-expansion states
● Childless adults below 100% FPL → coverage gap
○ Too low-income for subsidies, do not qualify for Medicaid
○ Down from 138%
 Medicaid Benefits

● Federally required benefits (12)

○ Physician services, hospital, lab/s-ray,
pediatric, nurse midwife, nursing facilities,
HCBS, rural clinic services, transportation,
family planning services, tobacco
cessation
● Benefits administered by states
○ Determine amount, duration, and scope of
services
● Also many “optional benefits”
○ ⅓ Medicaid spending on these benefits
○ Many are essential for healthcare:
prescription drugs, PT, dental, vision,
hospice, etc.
 Medicaid Delivery

● Traditional: FFS
● Moving more towards Managed Care
Organizations (MCO)
○ States contracting w/ private insurance companies
○ Approx. 70% of Medicaid enrollees
○ Capitation
● Benefits of MCO??
○ Network and comparable coverage for Medicaid
enrollees
Medicaid Financing
● Jointly funded by federal and state governments
● Single largest category of state government expenses (24% of budget)
○ Funding from taxes, intergovernmental revenue, misc. Revenue
● FMAP (Federal Matching Assistance Program)
○ Federal funds transferred to states
○ Based on per capita income (poorer states receive more federal funding)
○ Funds are NOT capped
● Cost Sharing:
○ Varies by state
○ Small charges & premiums for voluntary groups
■ Higher income → greater likelihood of OOP costs
○ Exemptions: children, pregnant women, vulnerable populations
● States can use budget neutral waivers to test new ways to deliver care without increasing costs
 Medicaid Costs
● ⅙ of all healthcare spending is
done by Medicaid
● Who is driving the costs?
○ Disabled and elderly
● ¼ of Medicaid enrollees
contribute to more than HALF the
costs
○ ⅓ of all Medicaid spending goes
towards long-term care
○ Children are the biggest group and the
cheapest to insure
Lecture 11: Medicaid 2
Meghna Tummala
Dual Eligible Beneficiaries ~(9 Million)

● Eligible for Medicare AND Medicaid benefits

○ Very low income typically: sickest and poorest individuals -> enrollees typically elderly or
younger individuals with disabilities
● Medicaid fills Medicare package gaps- 25% of Medicaid spending for duals
goes to Medicare premiums and cost-sharing for services
● 60% over 65 years of age, remaining are younger with disabilities
● Account for 15% of Medicaid enrollees, varies per state
● Account for 40% of Medicaid; 62% of expenditures for Long term care; 25%
account for Medicare cost sharing and premiums
ACA impact on Dual Eligible Enrollees

1. Establishment of a Federal Coordinated Health Care Office

- Established in CMS; integrates dual benefits and coordination between
CMS and states; ensure those who are eligible get full benefits from
both Medicare and Medicaid
2. Coordination of Care
- States can make innovative delivery models to improve care. Ex.
health homes for chronic conditions- provider designated as a health
home (NOT AN ACTUAL HOME), patients with 2+ conditions, states
receive 90% matching for services
CONT. ACA impact on Dual Eligible Enrollees

3. Long Term Care (LTC) and Chronic Illness

○ Medicaid Community FIrst Option
i. States can provide home and community-based attendant services; 6% point increase in
matching payments to states
○ Medicaid Home and Community Based Services (HCBS) Option
i. HCBS provide services to Medicaid beneficiaries in own home/community instead of
institution
○ Extension of Money follows the person
i. Helps states rebalance long-term care system
ii. Program promotes increased use of HCBS and no restriction on Medicaid funds->
beneficiaries can get care where THEY want
 Disproportionate Share Hospitals (DSH)
● “Safety Net” Hospitals- financial relief for hospitals serving poor
● Federal payments for hospitals with high Medicaid or low-income patient volume
○ 11.3 billion in 2011 from federal gov’t; payments differ per uninsured person in each state
● State decides threshold of Medicaid/low-income patient level and services
provided by hospitals to be eligible for DSH funds (State flexibility)
○ Federal statute states DSH hospitals must have Medicaid utilization one SD above mean for
hospitals in the state that receive Medicaid payments, low income inpatient utilization >25%
● Future of DSH- 2% decline from 2018-2025 for payments (beginning in 2017)
○ ACA reduced uninsured per state, less DSH payments should make sense if increased insurance, but
DSH reductions don’t reflect reduction in uncompensated care (hospitals with high volume of
undocumented immigrants; gaps in cost of care + what providers paid by Medicaid); also states that
didn’t expand Medicaid.
 State Children’s Health Insurance Program
(CHIP)
● 1997: coverage for uninsured low-income children not eligible for Medicaid
○ Reauthorized in 2009, expired in Sept 2017 (extension passed in Jan 2018 for 6 years)
● States receive enhanced match rate of 65%, but capped funding
● 2017: 9 million enrolled in SCHIP, 35 million in Medicaid/CHIP; $17.5 billion dollars (16.3 billion
federal, 1.2 billion state)
● If not refunded-> states use funds from previous years, some states came close to exhausting
finding, notify families
● HEALTHY KIDS Act- Funding for CHIP till FY2023; after October 1, 2019 requirement limited to
children/families with income <300% FPL
○ Continues 23% enhanced federal match rate established with ACA- eventually reducing
● Eligibility- parent coverage with waiver; 2009 reauthorization-> pregnant women covered by
states; states can submit waiver to cover SCHIP parents
Medicaid vs CHIP Income Eligibility Levels
 CHIP Services

● Must provide benchmark-equivalent coverage; modeled after Private insurance

● Usually don’t cover services like vision, dental, mental health, personal care,
medical equipment unlike Medicaid
● State’s can impose cost sharing/premiums-> can’t exceed 5% family income
○ Income <150% FPL, no more than $16 month for premium or $5 for services
● ACA required broad definition of income; 50% + of states already cover children in
families with income >= 300% FPL
 Medicaid Future: Waivers
● Waivers- states can test out new delivery and payment methods for Medicaid/CHIP-
more flexible, must be budget neutral, different types
● Arkansas- waiver to restrict eligibility (usually waiver goal is to improve access or
benefits, but here used to restrict)
○ Waiver approved: enrollees between 19-49 must work 80 hrs per month and report. Exempt if already
working, dependent child, medically frail, or exempt from work/training requirements
● Lots of AR enrollees have lost coverage for failing to report, most enrollees who are
exempt are already working 80 hours
● These waivers risky if overturn Medicaid guarantees and claim to promote Medicaid
objectives because Medicaid is a barrier to health OR if cut of eligibility to “teach”
people about insurance/compliance => any state can challenge Congress w/ waivers
Cont. Medicaid Future: Waivers

● Section 115 Waivers by Arkansas and 9 other states imposed work as a

condition of eligibility (is this in line with the purpose of a Waiver?)
● Most nonelderly Medicaid adults already working or have barrier to work-
little research if tying eligibility to work promotes health
● Working minimum wage full time-> could make people ineligible (15k =
125% FPL) -> impact on non-expansion adults
● Many enrollees haven’t been contacted about new requirements;
coverage loss could mean gaps in care and increased uncompensated
care
 Medicaid Future: Block Grants and Per
Capita Caps
● Block Grants: pre-set funding given to states for Medicaid program
○ Dependent on base year + annual amount; states save if spend less than expected, BUT have to pay
out of pocket or reduce services if spending goes over
○ Implication: Medicaid Cuts WOULD GROW over time
● Per Capita Cap: federal funding PER Enrolled (different than Block Grant)
○ Sum per enrollee amounts multiplied by enrollees per group (can have broad Medicaid groups)
○ Base year + increase over time; cap in amount per enrolled
○ Average per capita Medicaid spending varies across eligibility groups AND STATES
○ Hard to set base per enrollee, project annual growth rates
● Overall: shifting of costs to states, who might reduce eligibility, services and
provider payment rates; could impose work requirement and terminate coverage
for those deemed non-compliant
Block Grants vs Per Capita Cap
 Medicaid Expansion Impacts and Future
● Increase in access, quality, and spending; increased coverage among all potential eligible;
More primary care -> increase in glucose monitoring, hypertension control, Pap smear, and
prostate cancer screening; increase in rx drug reimbursements and Medicaid spending
● Post 2018 Midterm elections: potential for expansion in new states b/c new governors or
ballot initiatives
● Majority of expansion costs borne by federal gov’t
● State officials who are opposed to expansion- Medicaid = financially irresponsible, but little
research proving so, expansion states not reducing spending compared to non-expansion
● Future is uncertain for federal matching funds; challenges in states like Montana where dates
exist on expansion expiration
Lecture 12: The Uninsured
Blessed Sheriff
 Mainly a review lecture...by now you should
know:
How the ACA influenced Medicaid/ESI/Individual market to reduce the number
of uninsured.

You should know how well these fixes worked

You should know who benefited from ACA reforms

Why are some people still uninsured?

Why does health insurance matter?

How did the ACA change Medicaid?: Medicaid Expansion
BEFORE AFTER
- Categories eligible: Children, parents, - Eligibility based on income rather than
pregnant women, disabled categories
- Variation in income eligibility from state to - Everyone up to 138% of the poverty
state level eligible (this means single
- WHO PAYS: States/Federal Gov. share childless adults!)
costs - WHO PAYS: Federal government covers
100% of costs 2014-2016. Fed/state gov.
share costs afterward
Medicaid Expansion
- National Federation of Independent Business v Sebelius
- States no longer coerced into expanding
- Coverage gap in states that did not expand Medicaid: those with incomes
<100% of the FPL and don’t qualify for Medicaid under old eligibility rules
remain uninsured
How did the ACA change Employer Sponsored Insurance?
- SHOP: Small Business Health Options Program
- Provide affordable insurance options to small businesses (<50 employees)
- Penalties for large businesses (50+ employees) who do not offer insurance
- Plans that offer dependent child coverage must make coverage available
until the child reaches the age of 26.
But...
- Number of firms offering health benefits has declined by ~10% and keeps
dropping over time
- 57% of employers offer health insurance
- Most large employers (50+ employees) offer insurance...but they don’t employ the majority
of Americans
- Not all employees are eligible, and not all that are eligible take it!
- Young/Poor employees less likely to take up insurance offered by employers
- ESI still expensive
- Cost of premiums going up dramatically (3x increase in last 15 years)
How did the ACA change the individual (non-group) market?
- Creation of a single risk pool for individuals in the exchanges
- Risk pooling occurs in the exchanges, individuals purchase insurance as a group
- Some states choose to run their own exchanges, there are also federal exchanges for states
who choose not to run their own exchanges
- Tax credits and subsidies to purchase insurance for those between 138%-400% FPL
(NO LONGER IN PRACTICE)
- Individual mandate: Everyone must purchase acceptable insurance or
face a penalty (NO LONGER LAW)
- Enrollment in non-group market decreased after revocation of tax credits/subsidies/the individual mandate
Summary: The “Fixes”
- Expand ESI market
- Make individual market more accessible/affordable
- Expand Medicaid

Note: Universal coverage (getting everyone health insurance) doesn’t

necessarily require a single payer system (getting everyone health insurance
the same way)
Did it work?
For whom did it work best?
- The non-elderly adult population (+16-20 million more insured)
- Low income individuals (Those with incomes 100-199% of the poverty level)
- Minorities: esp. Black/Hispanic/Asian
- States that expanded Medicaid
Who is still uninsured and why?
- Uninsured people:
- Disproportionate share of uninsured are minorities
- Most uninsured (77%) are full time workers!
- Low-income childless adults residing in the South/states that didn’t expand Medicaid
- Employees at low-income jobs in small companies that don’t offer ESI
- Of the nonelderly uninsured (27.4 million) 55% are eligible for financial assistance
- Non-citizens
- Insurance is still very expensive and cost remains the primary reason why
people are uninsured
Why is health insurance important? (from “The Uninsured: A Primer”)
- The uninsured have more issues with
- Obtaining a usual source of care
- Postponing care
- Going without needed care
- Postponing/not getting prescription drugs
- Paying medical bills

Insurance is NECESSARY for obtaining health and financial well-being!!!

Good luck on the exam!

Love,
Your TAs