[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Program Descriptions]
[Section 2. Medicare]
[From the U.S. Government Printing Office, www.gpo.gov]
SECTION 2. MEDICARE
CONTENTS
Overview
Eligibility and Coverage
Aged
Disabled
Number of Beneficiaries
Benefits and Beneficiary Cost Sharing
Part A
Part B
Financing
Hospital Insurance Trust Fund--Income
Supplementary Medical Insurance Trust Fund--Income
Financial Status of Hospital Insurance Trust Fund
Financial Status of Supplementary Medical Insurance Trust
Fund
Comparison of Medicare Lifetime Benefits with Beneficiary
Contributions
Part A Services--Coverage and Payments
Inpatient Hospital Services
Skilled Nursing Facility Services
Home Health Services
Hospice Services
Part B Services--Coverage and Payments
Physicians Services
Services of Nonphysician Practitioners
Clinical Laboratory Services
Durable Medical Equipment and Prosthetics and Orthotics
Hospital Outpatient Department Services
Ambulatory Surgical Center Services
Other Part B Services
End-Stage Renal Disease Services
Coverage
Reimbursement
Medicare+Choice
Selected Issues
Utilization and Quality Control Peer Review Organizations
Secondary Payer
Supplementing Medicare Coverage
Legislative History, 1980-99
CBO Savings and Revenue Estimates for Budget Reconciliation and
Related Acts, 1981-99
Medicare Historical Data
References
OVERVIEW
Medicare is a nationwide health insurance program for the
aged and certain disabled persons. The program consists of two
parts--part A, hospital insurance (HI) and part B,
supplementary medical insurance (SMI). Total program outlays
were $212.0 billion in fiscal year 1999. Net outlays after
deduction of beneficiary premiums were $190.5 billion.
Coverage
Almost all persons over age 65 are automatically entitled
to Medicare part A. Part A also provides coverage, after a 24-
month waiting period, for persons under age 65 who are
receiving Social Security cash benefits on the basis of
disability. Most persons who need a kidney transplant or renal
dialysis may also be covered, regardless of age. In fiscal year
1999, part A covered an estimated 38.8 million aged and
disabled persons (including those with chronic kidney disease).
Medicare part B is voluntary. All persons over age 65 and
all persons enrolled in part A may enroll in part B by paying a
monthly premium--$45.50 in 2000. In fiscal year 1999, part B
covered an estimated 36.9 million aged and disabled persons.
Benefits
Part A provides coverage for inpatient hospital services,
up to 100 days of posthospital skilled nursing facility (SNF)
care, some home health services, and hospice care. Patients
must pay a deductible ($776 in 2000) each time their hospital
admission begins a benefit period. (A benefit period begins
when a patient enters a hospital and ends when she has not been
in a hospital or SNF for 60 days.) Medicare pays the remaining
costs for the first 60 days of hospital care. The limited
number of beneficiaries requiring care beyond 60 days are
subject to additional charges. Patients requiring SNF care are
subject to a daily coinsurance charge for days 21-100 ($97 in
2000). There are no cost-sharing charges for home health care
and limited charges for hospice care.
Part B provides coverage for physicians' services,
laboratory services, durable medical equipment (DME), hospital
outpatient department (OPD) services, and other medical
services. The program generally pays 80 percent of Medicare's
fee schedule or other approved amount after the beneficiary has
met the annual $100 deductible. The beneficiary is liable for
the remaining 20 percent.
Payments for Services
Taken together, spending for inpatient hospital and
physicians' and related services accounts for close to 70
percent of Medicare fee-for-service payments (spending for
managed care plans is not broken down by service category).
Medicare makes payments for inpatient hospital services under a
prospective payment system (PPS); a predetermined rate is paid
for each inpatient stay based on the patient's admitting
diagnosis. Payment for physicians' services is made on the
basis of a fee schedule. Specific payment rules are also used
for other services.
Administration
Medicare is administered by the Health Care Financing
Administration (HCFA) within the U.S. Department of Health and
Human Services (DHHS). Much of the day-to-day work of reviewing
claims and making payments is done by intermediaries (for part
A) and carriers (for part B). These are generally commercial
insurers or Blue Cross Blue Shield plans.
Financing
Medicare part A is financed primarily through the HI
payroll tax levied on current workers and their employers.
Employers and employees each pay a tax of 1.45 percent on all
earnings. The self-employed pay a single tax of 2.9 percent on
earnings.
Part B is financed through a combination of monthly
premiums levied on program beneficiaries and Federal general
revenues. In 2000, the premium is $45.50. Beneficiary premiums
have generally represented about 25 percent of part B costs;
Federal general revenues (i.e., tax dollars) account for the
remaining 75 percent.
Federal Outlays
Total program outlays were $212.0 billion in fiscal year
1999. Net outlays (i.e., net of premiums beneficiaries pay for
enrollment, largely for part B) were $190.5 billion.
Tables 2-1, 2-2, and 2-3 provide historical spending and
coverage data for Medicare. Table 2-4 provides State-by-State
information for fiscal year 1998.
ELIGIBILITY AND COVERAGE
Aged
Part A
Most Americans age 65 or older are automatically entitled
to protection under part A. These individuals (or their
spouses) established entitlement during their working careers
by paying the HI payroll tax on earnings covered by either the
Social Security or Railroad Retirement Systems.
The HI tax was extended to Federal employment with respect
to wages paid on or after January 1, 1983. Beginning January 1,
1983, Federal employment is included in determining eligibility
for protection under Medicare part A. A transitional provision
allows individuals who were in the employ of the Federal
Government both before and during January 1, 1983, to have
their prior Federal employment considered as employment for
purposes of providing Medicare coverage. Employees of State and
local governments, hired after March 31, 1986, are also liable
for the HI tax.
Persons age 65 or older who are not automatically entitled
to part A may obtain coverage, providing they pay the full
actuarial cost. The 2000 monthly premium is $301 ($166 for
persons who have at least 30 quarters of covered employment).
TABLE 2-1.--MEDICARE OUTLAYS, SELECTED FISCAL YEARS 1967-2010
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Percent
Total Medicare Net increase
Fiscal year Part A Part B Medicare premium Medicare (over
outlays offsets outlays prior
year)
----------------------------------------------------------------------------------------------------------------
1967.......................................... $2,597 $798 $3,395 -$647 $2,748 NA
1970.......................................... 4,953 2,196 7,149 -936 6,213 9.1
1972.......................................... 6,276 2,544 8,820 -1,340 7,480 13.0
1973.......................................... 6,842 2,637 9,479 -1,427 8,052 7.6
1974.......................................... 8,065 3,283 11,348 -1,708 9,640 19.7
1975.......................................... 10,612 4,170 14,782 -1,907 12,875 33.6
1976.......................................... 12,579 5,200 17,779 -1,945 15,834 23.0
TQ............................................ 3,404 1,401 4,805 -541 4,264 NA
1977.......................................... 15,207 6,342 21,549 -2,204 19,345 NA
1978.......................................... 17,862 7,350 25,212 -2,443 22,769 17.7
1979.......................................... 20,343 8,805 29,148 -2,653 26,495 16.4
1980.......................................... 24,288 10,746 35,034 -2,945 32,089 21.1
1981.......................................... 29,248 13,240 42,488 -3,340 39,148 22.0
1982.......................................... 34,864 15,559 50,423 -3,856 46,567 19.0
1983.......................................... 38,551 18,317 56,868 -4,253 52,615 13.0
1984.......................................... 42,295 20,374 62,669 -4,942 57,727 9.7
1985.......................................... 48,667 22,730 71,397 -5,562 65,835 14.0
1986.......................................... 49,685 26,217 75,902 -5,739 70,163 6.6
1987.......................................... 50,803 30,837 81,640 -6,520 75,120 7.1
1988.......................................... 52,730 34,947 87,677 -8,798 78,879 5.0
1989.......................................... 58,238 38,316 96,554 -11,590 84,964 7.7
1990.......................................... 66,687 43,022 109,709 -11,607 98,102 15.5
1991.......................................... 70,742 47,021 117,763 -12,174 105,589 7.6
1992.......................................... 81,971 50,285 132,256 -13,232 119,024 12.7
1993.......................................... 91,604 54,254 145,858 -15,305 130,553 9.7
1994.......................................... 102,770 59,724 162,494 -17,747 144,747 10.9
1995.......................................... 114,883 65,213 180,096 -20,241 159,855 10.4
1996.......................................... 127,683 68,946 196,629 -20,088 176,591 10.5
1997.......................................... 137,884 72,553 210,437 -20,421 190,016 7.6
1998.......................................... 137,298 76,272 213,570 -20,747 192,823 1.5
1999.......................................... 131,500 80,518 212,018 -21,561 190,457 -1.2
2000 \1\...................................... 133,100 88,300 221,300 -21,800 199,500 4.7
2001 \1\...................................... 140,600 98,800 239,400 -23,300 216,100 8.3
2002 \1\...................................... 143,600 103,500 247,100 -25,400 221,700 2.6
2003 \1\...................................... 153,500 114,300 267,800 -28,100 239,800 8.2
2004 \1\...................................... 163,200 123,800 287,000 -31,100 255,900 6.7
2005 \1\...................................... 176,800 136,600 313,400 -34,200 279,200 9.1
2006 \1\...................................... 182,400 141,600 324,000 -37,200 286,700 2.7
2007 \1\...................................... 198,000 155,300 353,200 -40,300 312,900 9.1
2008 \1\...................................... 211,300 167,400 378,800 -43,600 335,300 7.2
2009 \1\...................................... 226,100 181,300 407,500 -47,200 360,200 7.4
2010 \1\...................................... 241,600 196,800 438,400 -51,000 387,400 7.6
----------------------------------------------------------------------------------------------------------------
\1\ Congressional Budget Office projections.
NA--Not applicable.
Note.--Totals may not add due to rounding. TQ = transitional quarter.
Source: For 1967-99: Office of the President, 2000.
Part B
Part B of Medicare is voluntary. All persons age 65 or
older (even those not entitled to part A) may elect to enroll
in the SMI Program by paying the monthly premium. The 2000
premium is $45.50 per month. Persons who voluntarily enroll in
part A are required to enroll in part B.
Disabled
Part A
Part A also covers, after a 2-year waiting period, people
under age 65 who are either receiving monthly Social Security
benefits on the basis of disability or receiving payments as
disabled Railroad Retirement System annuitants. (Dependents of
the disabled are not eligible.) In addition, most people who
need a kidney transplant or renal dialysis because of chronic
kidney disease are entitled to benefits under part A regardless
of age.
Part B
Persons eligible for part A by virtue of disability or
chronic kidney disease may also elect to enroll in part B.
Number of Beneficiaries
In fiscal year 1998, 33.4 million aged and 5.1 million
disabled had protection under part A. In fiscal year 1998, 32.3
million aged and 4.4 million disabled were enrolled in part B
(table 2-2).
BENEFITS AND BENEFICIARY COST SHARING
Part A
Part A coverage includes:
Inpatient hospital care.--The first 60 days of inpatient
hospital services in a benefit period are subject to a
deductible ($776 in calendar year 2000). A benefit period
begins when a patient enters a hospital and ends when he has
not been in a hospital or SNF for 60 days. For days 61-90 in a
benefit period, a coinsurance amount ($194 in calendar year
2000) is imposed. When more than 90 days are required in a
benefit period, a patient may elect to draw upon a 60-day
lifetime reserve. A coinsurance amount ($388 in calendar year
2000) is imposed for each reserve day.
Skilled nursing facility care.--SNF care is up to 100 days
(following hospitalization) in an SNF for persons in need of
continued skilled nursing care and/or skilled rehabilitation
services on a daily basis. After the first 20 days, there is a
daily coinsurance ($97 in calendar year 2000) amount.
Home health care.--Home health visits are provided to
persons who need skilled nursing care on an intermittent basis,
or physical therapy, or speech therapy. The Balanced Budget Act
(BBA) of 1997 gradually transfers from part A to part B home
health visits that are not part of the first 100 visits
following a beneficiary's stay in a hospital or SNF (i.e.,
postinstitutional visits) and during a home health spell of
illness. The transfer is being phased in over 6 years, between
1998 and 2003, with the Secretary transferring one-sixth of the
aggregate expenditures associated with transferred
TABLE 2-2.--NUMBER OF AGED AND DISABLED ELIGIBLE ENROLLEES AND BENEFICIARIES, AND AVERAGE MEDICARE BENEFIT PAYMENTS PER ENROLLEE, SELECTED YEARS 1975-99
[Beneficiaries in thousands]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Projected
Average Average average
1975 1980 1985 1990 1995 1998 1999 2000 2001 annual annual annual
Fiscal year (actual) (actual) (actual) (actual) (actual) (actual) (actual) (est.) \1\ (est.) \1\ growth growth growth
1975-85 1985-95 1995-2001
(percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A
Persons enrolled (monthly average):
Aged......................................................... 21,795 24,572 27,121 30,050 32,649 33,384 33,585 33,816 34,059 2.2 1.9 0.7
Disabled..................................................... 2,047 2,968 2,944 3,313 4,366 5,070 5,259 5,445 5,643 3.7 4.0 4.4
------------------------------------------------------------------------------------------------------------------------------
Total...................................................... 23,842 27,540 30,065 33,363 37,015 38,454 38,844 39,261 39,702 2.3 2.1 1.2
==============================================================================================================================
Average annual benefit per person enrolled: \2\ \3\
Aged......................................................... $432 $853 $1,563 $1,947 $3,078 $3,550 $3,366 $3,331 $3,577 13.7 7.0 2.5
Disabled..................................................... 460 948 1,808 2,176 2,955 3,118 3,055 3,042 3,195 14.7 5.0 1.3
------------------------------------------------------------------------------------------------------------------------------
Total...................................................... 434 863 1,587 1,970 3,063 3,493 3,324 3,291 3,523 13.8 6.8 2.4
==============================================================================================================================
Part B
Persons enrolled (average):
Aged......................................................... 21,504 24,422 27,049 29,426 31,622 32,257 32,350 32,550 32,759 2.3 1.6 0.6
Disabled..................................................... 1,835 2,698 2,672 2,907 3,874 4,422 4,582 4,730 4,892 3.8 3.8 4.0
------------------------------------------------------------------------------------------------------------------------------
Total...................................................... 23,339 27,120 29,721 32,333 35,496 36,679 36,932 37,280 37,651 2.4 1.8 1.0
==============================================================================================================================
Average annual benefit per person enrolled: \2\
Aged......................................................... 153 348 705 1,250 1,728 1,989 2,108 2,395 2,628 16.5 9.4 7.2
Disabled..................................................... 259 610 1,022 1,603 2,282 2,623 2,388 2,667 2,897 14.7 8.4 4.1
------------------------------------------------------------------------------------------------------------------------------
Total...................................................... 161 374 734 1,282 1,788 2,066 2,143 2,430 2,663 16.4 9.3 6.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Represents projections of current law. Does not include legislative proposals.
\2\ Does not include administrative cost.
\3\ Includes part A catastrophic benefits in fiscal year 1990.
Source: Health Care Financing Administration, Division of Budget Formulation.
TABLE 2-3.--BENEFIT PAYMENTS BY SERVICE UNDER MEDICARE PARTS A AND B, SELECTED FISCAL YEARS 1975-2001
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975 1980 1985 1990 \1\ 1995 2000 (est.) \2\ 2001 (est.) \2\ Average annual Projected average
------------------------------------------------------------------------------------------------------------------------------------- growth rate annual growth rate
Service (percent) (percent)
Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount ---------------------------------------
1975-85 1985-95 1995-2000 1995-2001
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A
Inpatient hospital......................................... 70.5 $9,947 67.4 $22,877 65.0 $45,218 55.3 $59,285 49.4 $87,449 40.0 $87,930 38.3 $91,932 16.3 6.8 0.1 0.8
Skilled nursing facility................................... 1.9 273 1.2 392 0.8 550 2.6 2,821 5.1 9,104 5.7 12,598 6.2 14,823 7.3 32.4 6.7 8.5
Home health \3\............................................ 0.9 133 1.5 524 2.7 1,908 3.1 3,297 8.5 14,995 1.8 3,876 1.5 3,504 30.5 22.9 -23.7 -21.5
Hospice.................................................... 0 0 0 0 0 34 0.3 318 1.0 1,854 1.2 2,597 1.1 2,730 NA 49.2 7.0 6.7
Managed care............................................... 0 (\4\) 0 (\4\) 0 (\4\) 0 (\4\) 0 (\4\) 10.1 22,215 11.2 26,880 NA NA NA NA
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total benefit payments................................. 73.3 10,353 70.1 23,793 68.6 47,710 61.3 65,721 64.1 113,402 58.8 129,216 58.2 139,869 16.5 9.0 2.7 3.6
============================================================================================================================================================================
Part B
Physician.................................................. 21.7 3,067 23.0 7,813 24.1 16,788 27.0 28,920 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 18.5 (\5\) (\5\) (\5\)
Outpatient................................................. 3.7 529 5.3 1,803 5.6 3,917 7.8 8,365 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 22.2 (\5\) (\5\) (\5\)
Home health................................................ 0.5 75 0.7 232 0.1 40 0.3 75 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) -6.1 (\5\) (\5\) (\5\)
Other medical and health................................... 0.7 94 0.9 296 1.5 1,063 3.8 4,090 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 27.5 (\5\) (\5\) (\5\)
Physician fee schedule..................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 17.6 31,101 16.2 35,619 15.3 36,647 (\5\) (\5\) 2.8 2.8
Durable medical equipment.................................. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 2.0 3,576 2.0 4,443 2.0 4,714 (\5\) (\5\) 4.4 4.7
Carrier laboratory \6\..................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 1.6 2,819 0.9 2,038 0.9 2,062 (\5\) (\5\) -6.3 -5.1
Other carrier.............................................. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 2.6 4,513 3.1 6,852 3.1 7,343 (\5\) (\5\) 8.7 8.4
Hospital \7\............................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 4.8 8,449 4.1 9,087 4.7 11,356 (\5\) (\5\) 1.4 5.1
Home health \3\............................................ (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1 223 2.6 5,790 2.9 6,884 (\5\) (\5\) 91.8 77.1
Intermediary laboratory \8\................................ (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.8 1,437 0.7 1,607 0.7 1,667 (\5\) (\5\) 2.3 2.5
Other intermediary \9\..................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 2.9 5,111 2.7 6,037 2.7 6,511 (\5\) (\5\) 3.4 4.1
Managed care............................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 3.5 6,253 8.7 19,102 9.63 23,089 (\5\) (\5\) 25.0 24.3
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total benefit payments................................. 26.7 3,765 29.9 10,144 31.4 21,808 38.7 41,450 35.9 63,482 41.2 90,574 41.8 100,273 19.2 11.3 7.4 7.9
============================================================================================================================================================================
Total parts A and B.................................... 100.0 14,118 100.0 33,937 100.0 69,518 100.0 107,171 100.0 176,884 100.0 219,790 ....... 240,142 17.3 9.8 4.4 5.2
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes part A catastrophic benefits in fiscal year 1990.
\2\ Represents current law. Does not include legislative proposals.
\3\ Reflects the Balanced Budget Act of 1997's partial shift of home health to part B, beginning January 1, 1998.
\4\ Part A managed care amounts for fiscal years 1995 and earlier are reflected within the four other service categories.
\5\ Service categories were revised beginning in 1992.
\6\ Laboratory services paid under the laboratory fee schedule performed in a physician's office laboratory or an independent laboratory.
\7\ Includes the hospital facility costs for Medicare part B services which are predominantly in the outpatient department. The physician reimbursement associated with these services is included on the ``physician fee schedule''
line.
\8\ Laboratory fee services paid under the laboratory fee schedule performed in a hospital outpatient department.
\9\ Includes end-stage renal disease (ESRD) freestanding dialysis facility payments and payments to rural health clinics, outpatient rehabilitation facilities, psychiatric hospitals, and federally qualified health centers.
NA--Not available.
Note.--Totals may not add due to rounding.
Source: Health Care Financing Administration, Division of Budget Formulation.
TABLE 2-4.--MEDICARE ESTIMATED BENEFIT PAYMENTS, ENROLLMENT, AND PAYMENTS PER ENROLLEE, BY JURISDICTION, FISCAL YEAR 1998
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
Total estimated HI and/or SMI payments
State Managed care Fee for service benefit payments Medicare per
enrollment enrollee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama....................................................... $205,426,344 $3,355,291,164 $3,560,717,508 662,299 $5,376
Alaska........................................................ NA 159,758,199 159,758,199 36,522 4,374
Arizona....................................................... 1,239,778,917 1,745,752,051 2,985,530,968 636,450 4,691
Arkansas...................................................... 49,224,065 1,879,525,269 1,928,749,334 431,020 4,475
California.................................................... 8,773,118,477 13,784,518,629 22,557,637,106 3,738,081 6,035
Colorado...................................................... 643,203,173 1,635,431,750 2,278,634,923 442,452 5,150
Connecticut................................................... 400,112,935 2,728,217,584 3,128,330,518 507,927 6,159
Delaware...................................................... NA 405,179,514 405,179,514 105,693 3,834
District of Columbia.......................................... 144,373,478 777,918,684 922,292,162 78,151 11,801
Florida....................................................... 4,524,774,836 13,378,150,436 17,902,925,272 2,727,545 6,564
Georgia....................................................... 176,623,168 4,110,432,452 4,287,055,620 869,443 4,931
Hawaii........................................................ 239,875,943 398,863,192 638,739,135 156,103 4,092
Idaho......................................................... 10,980,148 589,589,258 600,569,407 155,810 3,854
Illinois...................................................... 834,190,968 7,656,027,597 8,490,218,565 1,622,181 5,234
Indiana....................................................... 65,964,275 4,197,139,053 4,263,103,328 835,183 5,104
Iowa.......................................................... 12,850,611 1,797,001,383 1,809,851,994 475,786 3,804
Kansas........................................................ 25,109,448 1,783,589,354 1,808,698,803 387,589 4,667
Kentucky...................................................... 53,879,786 2,843,156,472 2,897,036,258 602,570 4,808
Louisiana..................................................... 538,912,807 3,754,572,687 4,293,485,495 592,543 7,246
Maine......................................................... 366,850 792,926,706 793,293,556 207,784 3,818
Maryland...................................................... 517,992,313 3,123,552,630 3,641,544,943 619,700 5,876
Massachusetts................................................. 1,117,102,982 4,689,557,576 5,806,660,558 946,879 6,132
Michigan...................................................... 257,643,533 7,452,965,590 7,710,609,123 1,369,629 5,630
Minnesota..................................................... 355,714,448 2,442,292,853 2,798,007,301 639,293 4,377
Mississippi................................................... NA 2,216,407,663 2,216,407,663 407,440 5,440
Missouri...................................................... 602,636,855 4,092,810,974 4,695,447,829 844,920 5,557
Montana....................................................... 4,359,566 529,898,775 534,258,341 133,089 4,014
Nebraska...................................................... 54,981,437 1,024,707,802 1,079,689,239 251,029 4,301
Nevada........................................................ 399,145,276 706,198,480 1,105,343,755 213,742 5,171
New Hampshire................................................. 43,577,945 603,936,891 647,514,836 161,759 4,003
New Jersey.................................................... 697,261,271 6,210,460,644 6,907,721,916 1,182,204 5,843
New Mexico.................................................... 167,306,872 662,125,184 829,432,056 221,061 3,752
New York...................................................... 2,592,564,064 14,472,498,088 17,065,062,152 2,651,677 6,436
North Carolina................................................ 87,759,036 5,207,921,577 5,295,680,613 1,073,564 4,933
North Dakota.................................................. 1,024,727 479,367,786 480,392,514 102,764 4,675
Ohio.......................................................... 1,175,552,456 7,658,951,361 8,834,503,816 1,683,167 5,249
Oklahoma...................................................... 170,664,498 2,201,883,236 2,372,547,734 497,066 4,773
Oregon........................................................ 679,992,754 1,151,812,303 1,831,805.057 477,022 3,840
Pennsylvania.................................................. 2,783,739,255 10,399,395,849 13,183,135,104 2,084,565 6,324
Puerto Rico................................................... NA 1,085,621,690 1,085,621,690 502,760 2,159
Rhode Island.................................................. 222,688,282 799,438,068 1,022,126,351 169,359 6,035
South Carolina................................................ 8,107,599 2,555,180,022 2,563,287,620 534,827 4,793
South Dakota.................................................. NA 503,514,478 503,514,478 117,931 4,270
Tennessee..................................................... 69,099,978 4,659,088,195 4,728,188,173 796,692 5,935
Texas......................................................... 1,566,883,357 13,099,231,346 14,666,114,703 2,162,917 6,781
Utah.......................................................... 100,786,356 787,529,116 888,315,472 195,326 4,548
Vermont....................................................... 1,282,393 287,952,764 289,235,157 85,562 3,380
Virginia...................................................... 61,555,988 3,595,463,713 3,657,019,701 849,493 4,305
Washington.................................................... 735,189,539 2,147,994,124 2,883,183,663 708,607 4,069
West Virginia................................................. 13,047,291 1,515,162,298 1,528,209,589 333,217 4,586
Wisconsin..................................................... 89,029,594 3,178,402,378 3,267,431,972 770,405 4,241
Wyoming....................................................... NA 218,451,250 218,451,250 62,654 3,487
Outlying areas................................................ NA 53,543,743 53,543,743 323,287 166
-----------------------------------------------------------------------------------------
Total all areas........................................... 32,515,455,895 177,586,359,882 210,101,815,777 38,444,739 5,465
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.
Source: Health Care Financing Administration, Office of Information Services.
visits in 1998; two-sixths in 1999; three-sixths in 2000; four-
sixths in 2001; five-sixths in 2002; and six-sixths in 2003.
Beginning January 1, 2003, part A will cover only
postinstitutional home health services for up to 100 visits
during a home health spell of illness, except for those persons
with part A coverage only, who will be covered for services
without regard to the postinstitutional limitation.
Hospice care.--Hospice care services are provided to
terminally ill Medicare beneficiaries with a life expectancy of
6 months or less for two 90-day periods, followed by an
unlimited number of 60-day periods. The medical director or
physician member of the hospice interdisciplinary team must
recertify, at the beginning of 60-day periods, that the
beneficiary is terminally ill.
Part B
Part B of Medicare generally pays 80 percent of the
approved amount (fee schedule, reasonable charge, or reasonable
cost) for covered services in excess of an annual deductible
($100). Services covered include:
Doctor's services.--This category includes surgery,
consultation, and home, office and institutional visits.
Certain limitations apply for services rendered by dentists,
podiatrists, and chiropractors and for the treatment of mental
illness.
Other medical and health services.--This category includes
laboratory and other diagnostic tests, x ray and other
radiation therapy, outpatient hospital services, rural health
clinic services, DME, home dialysis supplies and equipment,
artificial devices (other than dental), physical and speech
therapy, and ambulance services.
Specified preventive services.--These services include: an
annual screening mammography for all women over age 40; a
screening Pap smear and a screening pelvic exam once every 3
years, except for women who are at a high risk of developing
cervical cancer; specified colorectal screening procedures;
diabetes self-management training services; bone mass
measurements for high-risk persons; and prostate cancer
screenings.
Drugs and vaccines.--Generally Medicare does not pay for
outpatient prescription drugs or biologicals. Part B pays for
immunosuppressive drugs for a minimum of 36 months following a
covered organ transplant, erythropoietin (EPO) for treatment of
anemia for persons with chronic kidney failure, and certain
oral cancer drugs. The program also covers flu shots,
pneumococcal pneumonia vaccines, and hepatitis B vaccines for
those at risk.
Home health services.--Home services include an unlimited
number of medically necessary home health visits for persons
not covered under part A. The 20-percent coinsurance and $100
deductible do not apply for such benefits. As noted above, BBA
1997 gradually transfers some home health costs from part A to
part B, beginning in 1998.
Table 2-5 illustrates the deductible, coinsurance and
premium amounts for both part A and part B services from the
inception of Medicare.
FINANCING
The Medicare Hospital Insurance (HI) Trust Fund finances
services covered under Medicare part A. The Supplementary
Medical Insurance (SMI) Trust Fund finances services covered
under Medicare part B. The trust funds are maintained by the
Department of the Treasury. Each trust fund is actually an
accounting mechanism; there is no actual transfer of money into
and out of the fund. Income to each trust fund is credited to
the fund in the form of interest-bearing government securities.
The securities represent obligations that the government has
issued to itself. Expenditures for services and administrative
costs are recorded against the fund.
Hospital Insurance Trust Fund--Income
The primary source of income to the HI fund is HI payroll
taxes. This source accounted for $134.4 billion (87.8 percent)
of the total $153.0 billion in income for fiscal year 1999.
Additional income sources include premiums paid by voluntary
enrollees, government credits, interest on Federal securities,
and taxation of a portion of Social Security benefits.
Payroll taxes
The HI Trust Fund is financed primarily through Social
Security payroll tax contributions paid by employees and
employers. Each pays a tax of 1.45 percent on all earnings in
covered employment. The self-employed pay 2.9 percent. Prior to
1994, there was an upper limit on earnings subject to the tax.
An upper limit of $76,200 in 2000 continues to apply under
Social Security. Table 2-6 shows the history of the
contribution rates and maximum taxable earnings base for the HI
Program.
Other income
The following are additional sources of income to the HI
fund:
1. Railroad retirement account transfers.--In fiscal year
1999, $430 million was transferred from the railroad
retirement fund. This is the estimated amount that
would have been in the fund if railroad employment had
always been covered under the Social Security Act.
2. Reimbursements for uninsured persons.--HI benefits are
provided to certain uninsured persons who turned 65
before 1968. Persons who turned 65 after 1967 but
before 1974 are covered under transitional provisions.
Similar transitional entitlement applies to Federal
employees who retire before earning sufficient quarters
of Medicare-qualified Federal employment provided they
were employed before and during January 1983. Payments
for these persons are made initially from the HI Trust
Fund, with reimbursement from the general fund of the
Treasury for the costs, including administrative
expenses, of the payments. In fiscal year 1999, $652
million was transferred to HI on this basis.
TABLE 2-5.--PART A AND PART B DEDUCTIBLE, COINSURANCE AND PREMIUMS,\1\ SELECTED YEARS 1966-2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inpatient hospital \2\ HI monthly premium \6\ SMI premium
-------------------------------------------- Skilled ------------------------------- --------------------
60 lifetime nursing
Calendar year First 60 61st-90th reserve days facility 21st- SMI
days day (nonrenewable) 100th day Effective Full Reduced deductible Effective Amount
deductible coinsurance coinsurance per coinsurance date amount amount date
per day \3\ day \4\ per day \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1966........................ $40 $10 (\7\) (\7\) (\8\) (\8\) NA $50 7/66 $3.00
1968........................ 40 10 $20 $5.00 (\8\) (\8\) NA 50 4/68 4.00
1970........................ 52 13 26 6.50 (\8\) (\8\) NA 50 7/70 5.30
1972........................ 68 17 34 8.50 (\8\) (\8\) NA 50 7/72 5.80
1973........................ 72 18 36 9.00 7/73 $33 NA 60 \9\ 9/73 6.30
1974........................ 84 21 42 10.50 7/74 36 NA 60 7/74 6.70
1975........................ 92 23 46 11.50 7/75 40 NA 60 (\8\) 6.70
1976........................ 104 26 52 13.00 7/76 45 NA 60 7/76 7.20
1977........................ 124 31 62 15.50 7/77 54 NA 60 7/77 7.70
1978........................ 144 36 72 18.00 7/78 63 NA 60 7/78 8.20
1979........................ 160 40 80 20.00 7/79 69 NA 60 7/79 8.70
1980........................ 180 45 90 22.50 7/80 78 NA 60 7/80 9.60
1981........................ 204 51 102 25.50 7/81 89 NA 60 7/81 11.00
1982........................ 260 65 130 32.50 7/82 113 NA 75 7/82 12.20
1983........................ 304 76 152 38.00 (\8\) 113 NA 75 (\8\) 12.20
1984........................ 356 89 178 44.50 1/84 155 NA 75 1/84 14.60
1985........................ 400 100 200 50.00 1/85 174 NA 75 1/85 15.50
1986........................ 492 123 246 61.50 1/86 214 NA 75 1/86 15.50
1987........................ 520 130 260 65.00 1/87 226 NA 75 1/87 17.90
1988........................ 540 135 270 67.50 1/88 234 NA 75 1/88 24.80
1989........................ \10\ 560 NA NA \11\ 25.50 1/89 156 NA 75 1/89 31.90
1990........................ 592 148 296 74.00 1/90 175 NA 75 1/90 28.60
1991........................ 628 157 314 78.50 1/91 177 NA 100 1/91 29.90
1992........................ 652 163 326 81.50 1/92 192 NA 100 1/92 31.80
1993........................ 676 169 338 84.50 1/93 221 NA 100 1/93 36.60
1994........................ 696 174 348 87.00 1/94 245 $184 100 1/94 41.10
1995........................ 716 179 358 89.50 1/95 261 183 100 1/95 46.10
1996........................ 736 184 368 92.00 1/96 289 188 100 1/96 42.50
1997........................ 760 190 380 95.00 1/97 311 187 100 1/97 43.80
1998........................ 764 191 382 95.50 1/98 309 170 100 1/98 43.80
1999........................ 768 192 384 96.00 1/99 309 170 100 1/99 45.50
2000........................ 776 194 388 97.00 1/00 301 166 100 1/00 45.50
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For services furnished on or after January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible for the year in which the
services were furnished. For services furnished prior to January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible
applicable for the year in which the individual's benefit period began.
\2\ For care in psychiatric hospital there is a 190-day lifetime limit.
\3\ Always equal to one-fourth of inpatient hospital deductible through 1988 and for 1990 and later; eliminated for 1989.
\4\ Always equal to one-half of inpatient hospital deductible through 1988 and for 1990 and later; eliminated for 1989.
\5\ Always equal to one-third of inpatient hospital deductible through 1988 and for 1990 and later. For 1989 it was equal to 20 percent of estimated
Medicare covered average cost per day.
\6\ Not applicable prior to July 1973. Applies to aged individuals who are not fully insured, and to certain disabled individuals who have exhausted
other entitlement. The reduced amount is available to aged individuals who are not fully insured but who have, or whose spouse has or had, at least 30
quarters of coverage under title II of the Social Security Act. The reduced amount is 75 percent of the full amount in 1994, 70 percent in 1995, 65
percent in 1996, 60 percent in 1997, and 55 percent in 1998 and thereafter.
\7\ Not covered.
\8\ Not applicable.
\9\ For August 1973 the premium was $6.10.
\10\ In 1989, the HI deductible was applied on an annual basis, not a benefit period basis (unlike the other years).
\11\ In 1989, the skilled nursing facility coinsurance was on days 1-8 of the 150 days allowed annually; for the other years it is on days 21-100 of 100
days allowed per benefit period.
NA--Not available.
Note.--In addition to the deductible and coinsurance amounts shown in the table, the first three pints of blood are not reimbursed by Medicare.
Currently there is no deductible or coinsurance on home health benefits. From January 1973 to June 30, 1982, there was a $60 annual deductible and
prior to July 1, 1981, benefits were limited to 100 visits per benefit period under part A and 100 visits per calendar year under part B. Special
limits apply to certain benefits: (1) Outpatient physician services for mental illness; 50 percent of approved charges, up to a maximum of $250 in
benefits per year, July 1, 1966 through December 31, 1987; $450 in benefits per year, January 1, 1988 through December 31, 1988; $1,100 in benefits
per year, January 1, 1989 through December 31, 1989; beginning January 1, 1990, the limit was removed; (2) physical and occupational therapy services
furnished by physical therapists in independent practice: maximum annual approved charges July 1, 1973 through December 31, 1981, $80 per year;
January 1, 1982 through December 31, 1982, $400 per year; January 1, 1983 through December 31, 1989, $500 per year; January 1, 1990 through December
31, 1993, $750 per year; and January 1, 1994 through December 31, 1998; in 1999 there was an annual $1,500 limit on all physical therapy services
(except those provided by a hospital) and an annual $1,500 limit on all occupational therapy services (except those provided by a hospital); and no
limit in 2000.
Source: Health Care Financing Administration, Office of the Actuary.
TABLE 2-6.--CURRENT LAW SOCIAL SECURITY PAYROLL TAX RATES FOR EMPLOYERS AND EMPLOYEES AND TAXABLE EARNINGS
BASES, 1977-2000
----------------------------------------------------------------------------------------------------------------
Employee and employer rates,
each (percent) HI taxable
Calendar year ------------------------------ earnings Maximum HI
OASDI OASDHI base tax
combined HI combined
----------------------------------------------------------------------------------------------------------------
1977...................................................... 4.95 0.90 5.85 $16,500 $148.50
1978...................................................... 5.05 1.10 6.05 17,700 194.70
1979...................................................... 5.08 1.05 6.13 22,900 240.45
1980...................................................... 5.08 1.05 6.13 25,900 271.95
1981...................................................... 5.35 1.30 6.65 29,700 386.10
1982...................................................... 5.40 1.30 6.70 32,400 421.20
1983...................................................... 5.40 1.30 6.70 35,700 464.10
1984...................................................... 5.70 1.30 7.00 37,800 491.40
1985...................................................... 5.70 1.35 7.05 39,600 534.60
1986...................................................... 5.70 1.45 7.15 42,000 609.00
1987...................................................... 5.70 1.45 7.15 43,800 635.10
1988...................................................... 6.06 1.45 7.51 45,000 652.50
1989...................................................... 6.06 1.45 7.51 48,000 696.00
1990...................................................... 6.20 1.45 7.65 51,300 743.85
1991...................................................... 6.20 1.45 7.65 \1\ 125,00 1,812.50
0
1992...................................................... 6.20 1.45 7.65 130,200 1,887.90
1993...................................................... 6.20 1.45 7.65 135,000 1,957.50
1994...................................................... 6.20 1.45 7.65 \2\ no no limit
limit
1995...................................................... 6.20 1.45 7.65 no limit no limit
1996...................................................... 6.20 1.45 7.65 no limit no limit
1997...................................................... 6.20 1.45 7.65 no limit no limit
1998...................................................... 6.20 1.45 7.65 no limit no limit
1999...................................................... 6.20 1.45 7.65 no limit no limit
2000...................................................... 6.20 1.45 7.65 no limit no limit
----------------------------------------------------------------------------------------------------------------
\1\ Prior to 1991, the upper limit on tax earnings was the same as for Social Security. The Omnibus Budget
Reconciliation Act of 1990 raised the limit in 1991 to $125,000. Under automatic indexing provisions, the
maximum was increased to $130,200 in 1992 and $135,000 in 1993.
\2\ The Omnibus Budget Reconciliation Act of 1993 eliminated the ceiling on the earnings base beginning in 1994.
Source: Health Care Financing Administration.
3. Premiums from voluntary enrollees.--Certain persons not
eligible for HI protection either on an insured basis
or on the uninsured basis described above may obtain
protection by enrolling in the program and paying a
monthly premium ($309 in 2000; for persons who have at
least 30 quarters of covered employment, $170 in 2000).
This accounted for an estimated $1.4 billion of
financing in fiscal year 1999.
4. Payments for military wage credits.--Sections 217(g) and
229(b) of the Social Security Act, prior to
modification by the Social Security Amendments of 1983,
authorized annual reimbursement from the general fund
of the Treasury to the HI Trust Fund for costs arising
from the granting of deemed wage credits for military
service prior to 1957, according to quinquennial
determinations made by the Secretary of the U.S.
Department of Health and Human Services (DHHS). These
sections, as modified by the Social Security Amendments
of 1983, provided for a lump-sum transfer in 1983 for
costs arising from such wage credits. In addition, the
lump-sum transfer included combined employer-employee
HI taxes on the noncontributory wage credits for
military service after 1965 and before 1984. After
1983, HI taxes on military wage credits are credited to
the fund on July 1 of each year. The Social Security
Amendments of 1983 also provided for: (1) quinquennial
adjustments to the lump-sum amount transferred in 1983
for costs arising from pre-1957 deemed wage credits;
and (2) adjustments as deemed necessary to any
previously transferred amounts representing HI taxes on
noncontributory wage credits. In fiscal year 1999, this
adjustment was $67 million.
5. Tax on Social Security benefits.--Beginning in 1994, the
trust fund acquired an additional funding source. The
Omnibus Budget Reconciliation Act of 1993 (OBRA 1993)
increased the maximum amount of Social Security
benefits subject to income tax from 50 to 85 percent
and provided that the additional revenues would be
credited to the HI Trust Fund. Revenue from this source
totaled $6.6 billion in fiscal year 1999.
6. Interest.--The remaining income to the trust fund consists
almost entirely of interest on the investments of the
trust fund. Interest amounted to an estimated $9.5
billion in fiscal year 1999.
Supplementary Medical Insurance Trust Fund--Income
Part B is financed from premiums paid by the aged, disabled
and chronic renal disease enrollees and from general revenues.
The premium rate is derived annually based on the projected
costs of the program for the coming year. The monthly premium
amount in calendar year 2000 is $45.50.
When the program first went into effect in July 1966, the
part B monthly premium was set at a level to finance one-half
of part B program costs. Legislation enacted in 1972 limited
the annual percentage increase in the premium to the same
percentage by which Social Security benefits were adjusted for
changes in cost of living (i.e., cost-of-living adjustments).
Under this formula, revenues from premiums soon dropped from 50
to below 25 percent of program costs because part B program
costs increased much faster than inflation as measured by the
Consumer Price Index (CPI) on which the Social Security cost-
of-living adjustment is based.
Beginning in the early 1980s, Congress regularly voted to
set part B premiums at a level to cover 25 percent of program
costs, in effect overriding the cost-of-living adjustment
limitation. The 25-percent provisions first became effective
January 1, 1984. General revenues covered the remaining 75
percent of part B program costs. BBA 1997 permanently sets the
part B premium equal to 25 percent of program costs.
Financial Status of Hospital Insurance Trust Fund
The Hospital Insurance Trust Fund balance is dependent on
total income to the HI Trust Fund exceeding total outlays from
the fund. Tables 2-7 and 2-8 show historical information from
the 2000
TABLE 2-7.--OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND, SELECTED FISCAL YEARS 1970-2009
[In millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements
-----------------------------------------------------------------------------------------------------------------------------------------
Income Payments Net Balance at
Fiscal year \1\ from Railroad Reimbursement Premiums for Interest increase end of
Payroll taxation retirement for uninsured from military and other Total Benefits Administrative Total in fund year
taxes of account persons voluntary wage income \2\ income payments \3\ expenses \4\ disbursements
benefits transfers enrollees credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1970........................... $4,785 NA $64 $617 NA $11 $137 $5,614 $4,804 $149 $4,953 $661 $2,677
1975........................... 11,291 NA 132 481 $6 48 609 12,568 10,353 259 10,612 1,956 9,870
1980........................... 23,244 NA 244 697 17 141 1,072 25,415 23,790 497 24,288 1,127 14,490
1985........................... 46,490 NA 371 766 38 86 3,182 50,933 47,841 813 48,654 \5\ 4,103 21,277
1990........................... 70,655 NA 367 413 113 107 7,908 79,563 65,912 774 66,687 12,876 95,631
1991........................... 74,655 NA 352 605 367 \6\ -1,011 8,969 83,938 68,705 934 69,638 14,299 109,930
1992........................... 80,978 NA 374 621 484 86 10,133 92,677 80,784 1,191 81,974 10,703 120,633
1993........................... 83,147 NA 400 367 622 81 \7\ 12,484 97,101 90,738 866 91,604 5,497 126,131
1994........................... 92,028 $1,639 413 506 852 80 10,676 106,195 101,535 1,235 102,770 3,425 129,555
1995........................... 98,053 3,913 396 462 998 61 10,963 114,847 113,583 1,300 114,883 -36 129,520
1996........................... 106,934 4,069 401 419 1,107 \8\ -2,293 10,496 121,135 124,088 1,229 125,317 -4,182 125,338
1997........................... 112,725 3,558 419 481 1,279 70 10,017 128,548 136,175 1,661 137,836 -9,287 116,050
1998........................... 121,913 5,067 419 34 1,320 67 9,382 138,203 \9\ 135,487 1,653 137,140 1,063 117,113
1999........................... 134,385 6,552 430 652 1,401 67 9,523 153,011 \9\ 129,463 1,979 131,441 21,570 138,683
2000........................... 136,327 7,200 458 470 1,397 68 10,629 156,549 \9\ 131,541 2,310 133,851 22,698 161,381
2001........................... 146,921 6,883 463 453 1,403 \10\ -1,26 12,176 167,035 \9\ 141,106 2,464 143,570 23,465 184,845
4
2002........................... 153,981 7,446 481 205 1,476 68 13,826 177,484 \9\ 144,634 2,603 147,237 30,246 215,091
2003........................... 160,831 8,052 489 176 1,571 68 15,345 186,532 \9\ 154,335 2,748 157,083 29,449 244,540
2004........................... 168,031 8,646 494 167 1,681 68 16,834 195,920 163,103 2,829 165,932 29,988 274,529
2005........................... 177,923 9,211 510 174 1,804 69 18,460 208,151 176,833 2,911 179,744 28,407 302,935
2006........................... 185,688 9,856 528 183 1,938 69 20,026 218,288 183,591 2,997 186,588 31,700 334,635
2007........................... 195,121 10,593 548 195 2,078 70 21,619 230,223 199,209 3,091 202,300 27,923 362,558
2008........................... 204,366 11,464 569 204 2,218 71 23,182 242,074 212,680 3,192 215,872 26,203 388,761
2009........................... 214,167 12,534 592 212 2,357 71 24,752 254,685 226,774 3,298 230,072 24,613 413,374
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Fiscal years 1970 and 1975 consist of the 12 months ending on June 30 of each year; fiscal years 1980 and later consist of the 12 months ending on September 30 of each year.
\2\ Other income includes recoveries of amounts reimbursed from the trust fund which are not obligations of the trust fund and a small amount of miscellaneous income.
\3\ Includes costs of peer review organizations (beginning with the implementation of the prospective payment system on October 1, 1983).
\4\ Includes costs of experiments and demonstration projects. Beginning in 1997, includes fraud and abuse control expenses, as provided for by Public Law 104-191.
\5\ Includes repayment of loan principal from the Old-Age and Survivors Insurance Trust Fund of $1,824 million.
\6\ Includes the lump-sum general revenue adjustment of -$1,100 million, as provided for by section 151 of Public Law 98-21.
\7\ Includes $1,805 million transfer from the SMI catastrophic coverage reserve fund, as provided for by Public Law 102-394.
\8\ Includes the lump-sum general revenue adjustment of -$2,366 million, as provided for by section 151 of Public Law 98-21.
\9\ For 1998-2003, includes moneys transferred to the SMI Trust Fund for home health agency costs, as provided for by Public Law 105-33.
\10\ Includes a preliminary estimate of -$1,332 million for the lump-sum general revenue adjustment provided for by section 151 of Public Law 98-21.
NA--Not applicable.
Note.--Totals do not necessarily equal the sums of rounded components.
Source: Board of Trustees, Federal Hospital Insurance Trust Fund (2000) and Health Care Financing Administration unpublished tables.
TABLE 2-8.--OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND, SELECTED CALENDAR YEARS 1970-2009
[In millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements
-------------------------------------------------------------------------------------------------------------------------------------------
Income Payments Net Balance at
Calendar year from Railroad Reimbursement Premiums for Interest increase end of
Payroll taxation retirement for uninsured from military and other Total Benefits Administrative Total in fund year
taxes of account persons voluntary wage income \1\ income payments \2\ expenses \3\ disbursements
benefits transfers enrollees credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1970......................... $4,881 NA $66 $863 NA $11 $158 $5,979 $5,124 $157 $5,281 $698 $3,202
1975......................... 11,502 NA 138 621 $7 48 664 12,980 11,315 266 11,581 1,399 10,517
1980......................... 23,848 NA 244 697 18 141 1,149 26,097 25,064 512 25,577 521 13,749
1985......................... 47,576 NA 371 766 41 \4\ -719 3,362 51,397 47,580 834 48,414 \5\ 4,808 20,499
1990......................... 72,013 NA 367 413 122 \6\ -993 8,451 80,372 66,239 758 66,997 13,375 98,933
1991......................... 77,851 NA 352 605 432 89 9,510 88,839 71,549 1,021 72,570 16,269 115,202
1992......................... 81,745 NA 374 621 522 86 10,487 93,836 83,895 1,121 85,015 8,821 124,022
1993......................... 84,133 NA 400 367 675 81 \7\ 12,531 98,187 93,487 904 94,391 3,796 127,818
1994......................... 95,280 $1,639 413 506 907 80 10,745 109,570 103,282 1,263 104,545 5,025 132,844
1995......................... 98,421 3,913 396 462 954 61 10,820 115,027 116,368 1,236 117,604 -2,577 130,267
1996......................... 110,585 4,069 401 419 1,199 \8\ 2,293 10,222 124,603 128,632 1,297 129,929 -5,325 124,942
1997......................... 114,670 3,558 419 481 1,319 70 9,637 130,154 137,762 1,690 139,452 -9,298 115,643
1998......................... 124,317 5,067 419 34 1,316 67 9,327 140,547 \9\ 133,990 1,782 135,771 4,776 120,419
1999......................... 132,306 6,552 430 652 1,447 67 10,139 151,593 \9\ 128,766 1,866 130,632 20,961 141,380
2000......................... 141,141 7,200 458 470 1,380 \10\ -1,264 11,404 160,789 \9\ 134,075 2,336 136,411 24,377 165,757
2001......................... 148,750 6,883 463 453 1,411 68 12,983 171,011 \9\ 141,222 2,500 143,721 27,289 193,046
2002......................... 155,748 7,446 481 205 1,497 68 14,582 180,028 \9\ 148,682 2,638 151,320 28,708 221,754
2003......................... 162,906 8,052 489 176 1,595 68 16,084 189,370 \9\ 156,710 2,768 159,478 29,892 251,646
2004......................... 170,576 8,646 494 167 1,709 68 17,648 199,307 165,857 2,849 168,706 30,601 282,248
2005......................... 179,205 9,211 510 174 1,835 69 19,250 210,254 177,342 2,931 180,273 29,981 312,228
2006......................... 187,868 9,856 528 183 1,972 69 20,825 221,302 189,780 3,019 192,799 28,503 340,732
2007......................... 197,497 10,593 548 195 2,113 70 22,410 233,425 202,840 3,115 205,955 27,470 368,202
2008......................... 207,076 11,464 569 204 2,253 71 23,973 245,610 216,431 3,217 219,648 25,962 394,164
2009......................... 217,557 12,534 592 212 2,391 71 25,466 258,823 230,714 3,325 234,039 24,784 418,948
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Other income includes recoveries of amounts reimbursed from the trust fund, receipts from the fraud and abuse control program, which are not obligations of the trust fund and a small
amount of miscellaneous income.
\2\ Includes cost of peer review organizations (beginning with the implementation of the prospective payment system on October 1, 1983).
\3\ Includes costs of experiments and demonstration projects. Beginning in 1997, includes fraud and abuse control expenses, as provided for by Public Law 104-91.
\4\ Includes the lump-sum general revenue adjustment of -$805 million, as provided for by section 151 of Public Law 98-21.
\5\ Includes repayment of loan principal from the Old-Age and Survivors Insurance Trust Fund of $1,824 million.
\6\ Includes the lump-sum general revenue adjustment of -$1,100 million, as provided for by section 151 of Public Law 98-21.
\7\ Includes $1,805 million transfer from the SMI catastrophic coverage reserve fund, as provided for by Public Law 102-394.
\8\ Includes the lump-sum general revenue adjustment of -$2,366 million provided for by section 151 of Public Law 98-21.
\9\ For 1998-2003, includes moneys transferred to the SMI Trust Fund for home health agency costs, as provided for by Public Law 105-33.
\10\ Includes a preliminary estimate of -$1,332 million for the lump-sum general revenue adjustment provided for by section 151 of Public Law 98-21.
NA--Not applicable.
Note.--Totals do not necessarily equal the sums of rounded components.
Source: Board of Trustees, Federal Hospital Insurance Trust Fund (2000) and Health Care Financing Administration, unpublished tables.
Trustees' Report (as amended) on the operation of the trust
fund. The Trustees' Report also included projections that were
subsequently revised. The revised figures are reflected in
tables 2-7 and 2-8.
Each year, the HI Trustees make projections for the date
the trust fund will become insolvent (table 2-9). The 1997
report stated that under the Trustees intermediate assumptions,
the fund would become insolvent in 2001. Subsequent reports
significantly delayed the projected insolvency date. The 2000
report (as amended) projects that the fund will become
insolvent in 2025. The improve-
TABLE 2-9.--HISTORICAL PROJECTIONS OF HI TRUST FUND INSOLVENCY, 1970-
2000
------------------------------------------------------------------------
Projected
number of
Year of Trustees' Report Projected year years
of insolvency until
insolvency
------------------------------------------------------------------------
1970...................................... 1972 2
1971...................................... 1973 2
1972...................................... 1976 4
1973...................................... none indicated NA
1974...................................... none indicated NA
1975...................................... late 1990s NA
1976...................................... early 1990s NA
1977...................................... late 1980s NA
1978...................................... 1990 12
1979...................................... 1992 13
1980...................................... 1994 14
1981...................................... 1991 10
1982...................................... 1987 5
1983...................................... 1990 7
1984...................................... 1991 7
1985...................................... 1998 13
1986...................................... 1996 10
1986 amended.............................. 1998 12
1987...................................... 2002 15
1988...................................... 2005 17
1989...................................... (\1\) NA
1990...................................... 2003 13
1991...................................... 2005 14
1992...................................... 2002 10
1993...................................... 1999 6
1994...................................... 2001 7
1995...................................... 2002 7
1996...................................... 2001 5
1997...................................... 2001 4
1998...................................... 2008 10
1999...................................... 2015 16
2000 \2\.................................. 2025 25
------------------------------------------------------------------------
\1\ Contained no long-range projections.
\2\ As amended.
NA--Not applicable.
Source: Intermediate projections of various HI Trustees' Reports, 1970-
2000.
ments can be attributed to a number of factors including
improvements in the economy as a whole (which are reflected in
higher payroll tax revenues) and a lower rate of growth in
program expenditures. A key factor was the enactment of BBA
1997. This legislation provided for the transfer of a portion
of home health spending (which at the time was the fastest
growing component of part A expenditures) from part A to part
B. It also included additional provisions to stem the growth in
part A expenditures. These provisions included the
implementation of new payment limits for home health services,
a prospective payment system (PPS) for skilled nursing facility
(SNF) services, and limits on the increases in hospital
payments. BBA 1997 also established the Medicare+Choice (M+C)
Program and modified the calculation of payments to managed
care entities.
Following enactment of BBA 1997, a number of observers
claimed that the actual savings achieved by BBA 1997 were
larger than was intended when the legislation was enacted. As a
result, legislation was enacted in 1999 (Balanced Budget
Refinement Act (BBRA) of 1999) which mitigated the impact of
BBA 1997 on providers. Notwithstanding enactment of BBRA 1999,
the 2000 Trustees' Report (as amended) delays the trust fund
insolvency date an additional 10 years over that projected in
the 1999 report (from 2015 to 2025).
The 2000 report states that the fund meets the Trustees'
test of short-range financial adequacy for the first time since
1991. The projected long-range actuarial balance is moderately
improved, but a substantial long-range deficit remains. The
Trustees note that future operations will be very sensitive to
future economic, demographic, and health cost trends and could
differ substantially from the intermediate projections.
Beginning in 2011, the program will begin to experience the
impact of major demographic changes. First, baby boomers
(persons born between 1946 and 1964) begin turning age 65.
Second, there will be a shift in the number of covered workers
supporting each HI enrollee. In 1999, there were 4 workers for
every beneficiary; in 2030 there will only be an estimated 2.3.
Financial Status of Supplementary Medical Insurance Trust Fund
Because the SMI Trust Fund is financed through beneficiary
premiums and Federal general revenues, it does not face the
prospect of depletion, as does the HI Trust Fund. However, the
rising cost of the program is placing a burden on the trust
fund, and by extension on beneficiaries (in the form of
premiums) and Federal general revenues. Table 2-10 shows
historical information from the 2000 Trustees' Report (Board of
Trustees, Federal Supplementary Medical Insurance Trust Fund,
2000).
Comparison of Medicare Lifetime Benefits with Beneficiary Contributions
Medicare beneficiaries typically get back considerably more
in Medicare benefits than they contribute in payroll taxes and
premiums over their lifetimes. The Congressional Budget Office
(CBO)
TABLE 2-10.--OPERATIONS OF THE SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND (CASH BASIS), SELECTED FISCAL YEARS 1970-2000
[In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements
------------------------------------------------------------------------------------------------------- Balance at
Fiscal year \1\ Interest end of
Premium from Government and other Total Benefit Administrative Total year \4\
enrollees contributions \2\ income \3\ income payments expenses disbursements
--------------------------------------------------------------------------------------------------------------------------------------------------------
1970................................. $936 $928 $12 $1,876 $1,979 $217 $2,196 $57
1975................................. 1,887 2,330 105 4,322 3,765 405 4,170 1,424
1980................................. 2,928 6,932 415 10,275 10,144 593 10,737 4,532
1985................................. 5,524 17,898 1,155 24,577 21,808 922 22,730 10,646
1986................................. 5,699 18,076 1,228 25,003 25,169 1,049 26,218 9,432
1987................................. 6,480 20,299 1,018 27,797 29,937 900 30,837 6,392
1988................................. 8,756 25,418 828 35,002 33,682 1,265 34,947 6,447
1989................................. \5\ 11,548 30,712 \5\ 1,022 \5\ 43,282 36,867 \5\ 1,450 \5\ 38,317 \5\ 11,412
1990................................. \5\ 11,494 33,210 \5\ 1,434 \5\ 46,138 41,498 \5\ 1,524 \5\ 43,022 \5\ 14,527
1991................................. 11,807 34,730 1,629 48,166 45,514 1,505 47,019 15,675
1992................................. 12,748 38,684 1,717 53,149 48,627 1,661 50,288 18,535
1993................................. 14,683 44,227 1,889 60,799 \6\ 54,214 1,845 56,059 23,276
1994................................. 16,895 38,355 2,118 57,368 58,006 1,718 59,724 20,919
1995................................. 19,244 36,988 1,937 58,169 63,491 1,722 65,213 13,874
1996................................. 18,731 61,702 1,392 82,025 67,176 1,771 68,946 26,953
1997................................. 19,141 59,471 2,193 80,806 71,133 1,420 72,553 35,206
1998................................. 19,427 59,919 2,608 81,955 \7\ 74,837 1,435 76,272 40,889
1999................................. 20,160 62,185 2,933 85,278 \7\ 79,008 1,510 80,518 45,649
2000................................. 20,405 65,209 3,054 88,667 \7\ 89,571 1,510 91,081 43,235
2001................................. 22,102 71,015 3,048 96,166 \7\ 96,043 1,696 97,738 41,663
2002................................. 24,389 78,322 2,976 105,687 \7\ 102,85 1,753 104,608 42,742
5
2003................................. 26,909 86,262 2,917 116,088 \7\ 114,03 1,827 115,863 42,967
6
2004................................. 29,347 92,268 2,898 124,513 \7\ 122,05 1,903 123,956 43,524
3
2005................................. 31,863 99,291 2,916 134,070 133,145 1,981 135,126 42,469
2006................................. 34,319 106,725 2,969 144,013 137,601 2,063 139,665 46,818
2007................................. 36,865 114,591 3,056 154,512 150,385 2,150 152,535 48,795
2008................................. 39,716 124,009 3,192 166,918 161,939 2,242 164,180 51,533
2009................................. 42,885 135,079 3,396 181,360 174,789 2,336 177,125 55,767
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For 1970 and 1975, fiscal years cover the interval from July 1 through June 30; fiscal years 1980-2005 cover the interval from October 1 through
September 30.
\2\ General fund matching payments, plus certain interest-adjustment items.
\3\ Other income includes recoveries of amounts reimbursed from the trust fund which are not obligations of the trust fund and other miscellaneous
income.
\4\ The financial status of the program depends on both the total net assets and the liabilities of the program.
\5\ Includes the impact of the Medicare Catastrophic Coverage Act of 1988 (Public Law 100-360).
\6\ Includes the impact of the transfer to the HI Trust Fund of the SMI catastrophic coverage reserve fund on March 31, 1993 as specified in Public Law
102-394. Actual benefit payments for 1993 were $52,409 million and the amount transferred was $1,805 million.
\7\ Benefit payments less moneys transferred from the HI Trust Fund for home health agency costs, as provided for by the Balanced Budget Act of 1997.
Source: Board of Trustees, Federal Supplementary Medical Insurance Trust Fund (2000).
has estimated (based on the 1999 Trustees' Report) the extent
to which Medicare enrollees' contributions (through the HI
payroll tax and the SMI premium) cover the expected value of
their benefits under the program. Results are presented only
for self-insured men and women (i.e., those who obtain benefits
on the basis of their own work history) who worked each year at
an average wage from 1966 until retirement at age 65 (table 2-
11). Three groups are shown--persons who reach 65 as of 1985,
1995, and 2005. All estimates are dependent on uncertain
projections of future health spending.
TABLE 2-11.--CONTRIBUTIONS AS A PERCENT OF EXPECTED LIFETIME BENEFITS
UNDER MEDICARE FOR SELECTED SELF-INSURED ENROLLEES REACHING AGE 65 AS OF
1985, 1995, OR 2005
------------------------------------------------------------------------
Year
Category -----------------------------
1985 1995 2005
------------------------------------------------------------------------
Self-insured men who earned average wages:
Hospital insurance (HI)............... 33.1 69.5 111.3
Supplementary medical insurance (SMI). 24.3 22.8 22.1
-----------------------------
Medicare total.................... 29.8 49.6 68.8
=============================
Self-insured women who earned average
wages:
Hospital insurance.................... 30.3 62.2 99.1
Supplementary medical insurance....... 25.3 24.2 23.7
-----------------------------
Medicare total.................... 28.3 45.4 62.4
------------------------------------------------------------------------
Note.--Contributions include employers' and employees' HI payroll taxes,
interest, and SMI premiums. Any other taxes paid by enrollees are not
included. Estimates are for beneficiaries with sufficient work history
to qualify for benefits. However, up to 20 percent of Medicare
beneficiaries qualify on the basis of their spouse's work history, not
their own. For spouse-insured beneficiaries, contributions as a
percent of benefits are lower because spouse-insured beneficiaries
paid little or no HI payroll taxes. Estimates assume an expected
lifetime at age 65 of 15 years for men (to age 80) and 19 years for
women (to age 84). Present discounted values for expected benefits
were obtained using the average interest rate projected for HI Trust
Fund earnings over the same years.
Source: Congressional Budget Office, unpublished tables.
For a self-insured man who worked continuously at an
average wage from 1966 (when Medicare began) until retirement
in 1985, the present discounted value of their contributions is
about 30 percent of the expected value of lifetime Medicare
benefits. For men retiring in 1995, contributions represent
about 50 percent of benefits; for those retiring in 2005,
contributions represent about 69 percent. Contributions through
HI payroll taxes increase relative to HI benefits for later
retirees because the HI payroll tax (which began in 1966) was
paid for a greater proportion of their working years (table 2-
11).
Contributions by self-insured women as a percentage of
expected benefits are smaller than they are for men. Actual
contributions by men and women are the same in the illustrative
calculations. However, a woman's lifetime benefits are larger
because a woman's lifetime expectancy is 4 years longer at age
65 (table 2-11).
In 1995 dollars, the present discounted value of Medicare
benefits net of contributions (i.e., the net transfer or
subsidy value) is estimated at $30,742 for men and $35,623 for
women who retired in 1985. For those retiring in 1995, the
value is estimated at $31,429 for men and $39,069 for women.
CBO projects that values will decline in the future, reaching
$26,429 for men and $36,354 for women by 2005 (table 2-12).
TABLE 2-12.--PRESENT DISCOUNTED VALUE OF LIFETIME BENEFITS,
CONTRIBUTIONS, AND NET TRANSFER UNDER MEDICARE FOR SELECTED SELF-INSURED
ENROLLEES REACHING AGE 65 IN 1985, 1995, OR 2005
[In constant 1995 dollars]
------------------------------------------------------------------------
Year
Category --------------------------------------
1985 1995 2005
------------------------------------------------------------------------
Self-insured men who earned
average wages:
Benefits..................... $43,780 $62,336 $84,627
Contributions................ -13,038 -30,907 -58,198
--------------------------------------
Net transfer............. 30,742 31,429 26,429
======================================
Self-insured women who earned
average wages
Benefits..................... 49,673 71,570 96,802
Contributions................ -14,051 -32,502 -60,448
--------------------------------------
Net transfer............. 35,623 39,069 36,354
------------------------------------------------------------------------
Note.--Contributions include employers' and employees' HI payroll taxes,
interest, and SMI premiums. Any other taxes paid by enrollees are
included. Net transfer is benefits net of contributions. Estimates are
for beneficiaries with sufficient work history to qualify for
benefits. However, up to 20 percent of Medicare beneficiaries qualify
on the basis of their spouse's work history, not their own. Spouse-
insured beneficiaries qualify on the basis of their spouse's work
history, not their own. For spouse-insured beneficiaries,
contributions as a percent of benefits are lower and the net transfer
is larger because spouse-insured beneficiaries paid little or no HI
payroll taxes. Estimates assume an expected lifetime at age 65 to 15
years for men (to age 80) and 19 years for women (to age 84). Present
discounted values for unexpected benefits were obtained using the
average interest rate projected for HI Trust Fund earnings over the
same years. The Consumer Price Index for All Urban Consumers (CPI-U)
was used to get constant 1995 dollars.
Source: Congressional Budget Office, unpublished tables.
PART A SERVICES--COVERAGE AND PAYMENTS
Inpatient Hospital Services
Medicare part A provides reimbursement for inpatient
hospital care through the prospective payment system (PPS),
established by Congress in the Social Security Amendments of
1983 (Public Law 98-21). Before the enactment of PPS, Medicare
paid hospitals retrospectively for the full costs they
incurred, subject to certain limits and tests of
reasonableness. Congress had previously acted to contain
growing hospital costs by placing certain limits on routine
inpatient care operating costs. However, medical costs
continued to grow faster than the rate of inflation in the
early 1980s, so PPS was enacted to constrain the growth of
Medicare's inpatient hospital costs by providing incentives for
hospitals to provide care more efficiently (see appendix D for
further information about hospital services).
Under PPS, fixed hospital payment amounts are established
in advance of the provision of services on the basis of a
patient's diagnosis. Hospitals that are able to provide
services for less than the fixed PPS payment may keep the
difference. Hospitals with costs that exceed the fixed PPS
payment lose money on the case. The system's fixed prices are
determined in advance on a cost-per-case basis, using a
classification system of about 500 diagnosis-related groups
(DRGs). Each Medicare case is assigned to one of the DRGs based
on the patient's medical condition and treatment. DRGs are
assigned relative weights to reflect the variation in the costs
of treating a particular diagnosis. The DRG-based payment rate
is designed to represent the national average cost per case for
treating a patient with a particular diagnosis. Payments for a
particular DRG will vary among different hospitals depending on
the hospital's location and certain other characteristics. In a
particular hospital, all cases assigned to the same DRG are
reimbursed at the same predetermined rate.
The PPS payment rates are updated each year using an update
factor which is determined, in part, by the projected increase
in the hospital market basket index (MBI). The hospital MBI
measures the cost of goods and services that are purchased by
hospitals, yielding one price inflator for all hospitals in a
given year.
In addition to the basic DRG payment for each case, PPS
hospitals may also receive certain supplemental Medicare
payments. Additional hospital payments include indirect medical
education costs, disproportionate share hospital (DSH)
payments, outlier payments, and payments for inpatient dialysis
provided to end-stage renal disease (ESRD) beneficiaries.
Certain categories of hospital expenses, including direct
medical education costs, are not included in the PPS rates and
are reimbursed in some other way. Certain facilities receive
special treatment under PPS, particularly certain types of
isolated or essential hospitals in rural areas, including
regional referral centers, sole community hospitals, and
Medicare-dependent small rural hospitals.
Specialized facilities are excluded from PPS and are paid
on the basis of reasonable costs subject to rate of increase
limits. PPS-exempt facilities include psychiatric hospitals,
rehabilitation hospitals, children's hospitals, cancer research
centers, and long-term care hospitals. States are also allowed
to apply for a waiver from PPS and establish a prospective
system for setting hospital rates instead of what would be paid
under PPS; Maryland is the only State that continues to operate
under such a waiver.
Table 2-13 provides calendar year 1998 data on the
utilization of inpatient hospital services by type of enrollee
and type of hospital.
TABLE 2-13.--USE OF INPATIENT HOSPITAL SERVICES BY MEDICARE ENROLLEES, BY TYPE OF ENROLLEE AND TYPE OF HOSPITAL,
CALENDAR YEAR 1998 \1\
----------------------------------------------------------------------------------------------------------------
Bills \2\ Covered days of care Reimbursement
-----------------------------------------------------------------------------------
Type of enrollee and type of Amount
hospital Number in Per 1,000 Number in Per bill Per 1,000 in Per bill Per
thousands enrollees thousands enrollees millions enrollee
----------------------------------------------------------------------------------------------------------------
All enrollees:
All hospitals............. 11,834 308 69,924 5.9 1,819 $74,153 $6,266 $1,929
Short stay.............. 11,335 295 64,454 5.7 1,677 70,813 6,247 1,843
Long stay............... 499 13 5,470 11.0 142 3,340 6,693 87
Psychiatric........... 205 5 1,837 9.0 48 712 3,473 19
All other............. 294 8 3,633 12.4 95 2,628 8,939 68
Aged:
All hospitals............. 10,021 300 58,849 5.9 1,761 63,372 6,324 1,897
Short stay.............. 9,249 277 55,133 6.0 1,650 60,868 6,581 1,822
Long stay............... 772 23 3,716 4.8 111 2,504 3,244 75
Psychiatric........... 52 2 563 10.8 17 242 4,654 7
All other............. 720 22 2,295 3.2 69 2,262 3,142 68
Disabled:
All hospitals............. 1,775 353 11,075 6.2 2,205 10,780 6,073 2,146
Short stay.............. 1,553 309 9,322 6.0 1,856 9,945 6,404 1,980
Long stay............... 222 44 1,753 7.9 349 835 3,761 166
Psychiatric........... 153 30 1,274 8.3 254 470 3,072 94
All other............. 69 14 479 6.9 95 365 5,290 73
----------------------------------------------------------------------------------------------------------------
\1\ Preliminary data. Totals may not add due to rounding.
\2\ Discharges not available by type of hospital.
Note.--Only services rendered by inpatient hospitals are included.
Source: Health Care Financing Administration, Office of Information Services, unpublished data.
Skilled Nursing Facility Services
Coverage
The Medicare Program covers extended care services provided
in nursing homes for beneficiaries who require additional
skilled nursing care and rehabilitation services following a
hospitalization. These extended care services, commonly known
as skilled nursing facility (SNF) benefits, are covered under
part A of the program for up to 100 days per spell of illness
and must be provided in an SNF certified to participate in
Medicare. A spell of illness is that period which begins when a
beneficiary is furnished inpatient hospital or SNF care and
ends when the beneficiary has been neither an inpatient of a
hospital nor an SNF for 60 consecutive days. A beneficiary may
have more than one spell of illness per year.
In order to be eligible for SNF care, the beneficiary must
have been an inpatient of a hospital for at least 3 consecutive
days and must be transferred to an SNF, usually within 30 days
of discharge from the hospital. Furthermore, a physician must
certify that the beneficiary is in need of skilled nursing care
or other skilled rehabilitation services, which, as a practical
matter, can only be provided on an inpatient basis and which
are related to the condition for which the beneficiary was
hospitalized.
Covered SNF services include the following:
--Nursing care provided by or under the supervision of a
registered nurse;
--Room and board;
--Physical or occupational therapy or speech-language
pathology;
--Medical social services;
--Drugs, biologicals, supplies, appliances, and equipment
ordinarily furnished by an SNF for the care of
patients;
--Medical services of interns and residents in training under
an approved teaching program of a hospital with which
the SNF has a transfer agreement; and
--Other services necessary to the health of patients that are
generally provided by SNFs.
Reimbursement
Prior to the Balanced Budget Act (BBA) of 1997 Medicare
reimbursed SNF care on a retrospective cost-based basis. This
meant that SNFs were paid after services were delivered for the
reasonable costs (as defined by program) they incurred for the
care they provided. SNFs had few incentives to maximize
efficiency and minimize their costs, and little inducement to
control the amount or number of services they provided.
Prospective payment system.--In BBA 1997, Congress required
that a prospective payment system (PPS) for SNF care be phased
in over 3 years, beginning with the SNF's first cost reporting
period after July 1, 1998. Prospective payment involves
grouping patients according to the type and intensity of
services they require and setting a daily payment rate for each
payment group before the services are provided. Like other PPSs
that pay health care providers for care to Medicare
beneficiaries on the basis of predetermined, fixed amounts,
Medicare payments to SNFs are intended to pay the provider for
its Medicare beneficiary costs on average. That is, although
the payment is a fixed daily rate, a facility's actual costs
may be above or below that amount for an individual patient.
The goal for the facility is to incur costs that, on average,
over time, do not exceed the PPS average amounts.
Under BBA 1997 provisions, an SNF is paid a daily rate
(``Federal per-diem rate''), prospectively determined, for all
covered services provided to beneficiaries while they are
eligible for SNF benefits. These include all routine,
ancillary, and capital-related costs. An amount is added to
this daily rate to cover part B services received by SNF-
eligible patients; some part B services are excluded from this
``add on''--primarily the services of physicians and certain
nonphysician practitioners such as physician assistants, nurse
practitioners, and psychologists, who are paid separately under
part B.
The SNF PPS required by BBA 1997 reflects the resource
utilization group (RUG) design developed by HCFA. It is a
hierarchical classification system accounting for the type and
level of care needed by SNF patients and the relative amount of
resources needed to provide a patient's care. Under the
original RUG system implemented in 1998, there were seven basic
categories of care, including, in hierarchical order: (1)
rehabilitation; (2) extensive services; (3) special care; (4)
clinically complex; (5) impaired cognition; (6) behavior
problems; and (7) reduced physical function. These seven
categories were further broken down into 44 specific patient
groupings. The system ascribed a per-diem payment amount for
each of the 44 groupings. These amounts are adjusted by a wage
index to account for geographic variations in wages among urban
and rural areas. The rates are updated annually using an SNF
MBI. HCFA issued a final rule implementing the PPS on July 30,
1999 (64 Federal Register 41644-701).
Transition period.--BBA 1997 provided that the Federal per-
diem rate would apply immediately to all SNFs that received
their first Medicare payment on or after October 1, 1995. For
those that received their first Medicare payment before that
date, a 3-year transition period was established. During the
transition period, the PPS has two components: a Federal PPS
component under the RUG system and a ``facility-specific''
component. This latter is computed separately for each SNF to
reflect the facility's own average costs under the pre-PPS
system. Payments for the first cost reporting period beginning
on or after July 1, 1998, are a blend of 75 percent facility-
specific rate and 25 percent Federal rate. For the second cost
reporting period, the facility-specific percentage is 50
percent and the Federal, 50 percent. For the third period, the
facility-specific percentage is 25 percent and the Federal, 75
percent. For all subsequent years, payments will be based
entirely on the Federal per-diem rate.
Consolidated billing.--Congress also included a
consolidated billing provision in BBA 1997 to address the
potential for fraud and duplicate billing for SNF services.
Under this provision, the SNF is responsible for billing
Medicare for all services (with certain exceptions) provided to
its residents under both parts A and B. This provision applies
to beneficiaries residing in an SNF or in any part of a nursing
home which contains a Medicare-certified SNF portion. It
applies both to patients who are in a part A covered stay and
those who are not. Although the SNF might provide these
services under arrangements with outside providers, the outside
provider must get its payment through the SNF rather than by
billing Medicare directly.
BBA 1997 excluded some services from the SNF consolidated
billing requirement, including those provided by physicians and
certain nonphysician practitioners, and dialysis-related
services and supplies. Regulations excluded hospice care
related to a beneficiary's terminal illness and certain
ambulance trips to and from SNFs. Providers of these services,
which are covered under part B, bill Medicare directly.
BBA 1997 established the PPS for SNFs with the purpose of
slowing the rate of growth in SNF payments under Medicare. In
January 1998, a few months after enactment of BBA 1997, CBO
projected that Medicare spending on SNFs for 1998 would remain
at 1997 levels. However, actual spending in 1998 was much lower
than anticipated. In March 1999, CBO revised its 1998 estimate
to indicate a decrease in SNF spending of $900 million. It has
also revised downward its 5- and 10-year estimates for total
SNF spending. A number of factors contributed to the reductions
in Medicare spending for SNFs. These include lower inflation,
which results in lower payments to providers; and HCFA's
heightened efforts to combat fraud and abuse, resulting in a
reduction in incorrect overpayments. However, SNF industry
spokespersons said that these reductions indicate that changes
made to Medicare's reimbursement policies were too drastic,
causing financial problems for SNFs, and that they should be
reexamined.
In addition, industry representatives and others (including
the Medicare Payment Advisory Commission) were concerned that
the RUG system based on 44 payment categories might not
adequately cover the costs of treating patients with clinically
complex problems requiring skilled nursing care (high acuity
patients), and those needing extensive ancillary nontherapy
services, such as laboratory tests, drugs and biologicals,
imaging services, and transportation.
Balanced Budget Refinement Act (BBRA) of 1999.--In response
to concerns about the adequacy of payments under the RUG
system, Congress enacted, in BBRA, temporary increases for
Medicare payments for 15 of the 44 RUGs. These 20-percent
increases apply to SNF care furnished to patients categorized
as needing extensive services, special care, clinically complex
care, and certain high level and medium level rehabilitation
services. The special payments are available beginning April 1,
2000, and ending the later of October 1, 2000, or the date of
implementation of a refined, revised RUG system.
BBRA also provided for a 4-percent increase in the Federal
per-diem rate for SNF services for fiscal year 2001 and fiscal
year 2002. This increase is not to be considered in the base
amount used to compute updates to the Federal per-diem rate.
Other changes made by BBRA include the following items:
1. SNFs may elect to receive Medicare payments based 100
percent on the Federal per-diem rate, rather than under
the phase-in schedule, if it would be more advantageous
for them to do so.
2. Starting April 1, 2000, separate payments above the RUG
per-diem rate would be made for certain ambulance
services for dialysis patients, certain prostheses, and
certain chemotherapy drugs for SNF patients.
3. If at least 60 percent of an SNF's patients are
immunocompromised, RUG payments will be based 50
percent on the facility specific rate and 50 percent on
the Federal per-diem rate (rather than moving to 100
percent of the Federal rate) until October 1, 2001.
CBO estimates that the changes in payments to SNFs made by
BBRA will increase spending for SNF care by $2.2 billion in the
first 5 years.
SNF payments and utilization
For a number of years, SNF care was one of Medicare's
fastest growing benefits. Tables 2-14 and 2-15 show that SNF
utilization and spending first began to increase substantially
in 1988 and 1989. These increases can be traced to changes that
occurred in the benefit at that time.
TABLE 2-14.--ESTIMATED MEDICARE PAYMENTS FOR SKILLED NURSING FACILITY
CARE, 1983-99
------------------------------------------------------------------------
Payments
(in Percent
billions) change \1\
------------------------------------------------------------------------
Calendar year:
1983...................................... $0.5 NA
1984...................................... 0.5 0.2
1985...................................... 0.5 0.7
1986...................................... 0.6 4.9
1987...................................... 0.6 10.4
1988...................................... 0.8 29.3
1989...................................... 2.8 242.5
1990...................................... 2.5 -11.5
1991...................................... 2.5 -0.3
1992...................................... 3.5 42.4
1993...................................... 5.0 41.0
1994...................................... 6.9 38.3
1995...................................... 9.2 34.1
1996...................................... 11.1 20.2
1997...................................... 13.0 17.1
1998...................................... 13.5 3.8
1999...................................... 11.8 -12.6
------------------------------------------------------------------------
\1\ Rounding in payments may not reflect actual change.
NA--Not applicable.
Note.--Payments reported here are incurred expenditures, net of
beneficiary copayments.
Source: Health Care Financing Administration, Office of the Actuary.
TABLE 2-15.--MEDICARE SKILLED NURSING FACILITY UTILIZATION AND PAYMENTS PER PERSON SERVED, 1983-99
----------------------------------------------------------------------------------------------------------------
People served Days Payment per day
-----------------------------------------------------------------
Number Per
Number Per 1,000 (in person Amount Percent
enrollees millions) served change
----------------------------------------------------------------------------------------------------------------
1983.......................................... 265,000 9 9.3 35.1 $56 NA
1984.......................................... 299,000 10 9.6 32.2 58 3.2
1985.......................................... 314,000 10 8.9 28.4 65 11.1
1986.......................................... 304,000 10 8.2 26.8 71 9.6
1987.......................................... 293,000 9 7.4 25.4 84 19.3
1988.......................................... 384,000 12 10.7 27.8 87 2.6
1989.......................................... 636,000 19 29.8 46.8 117 34.6
1990.......................................... 638,000 19 25.1 39.5 98 -16.1
1991.......................................... 671,000 20 23.7 35.3 123 25.9
1992.......................................... 785,000 22 29.0 36.9 157 27.1
1993.......................................... 908,000 25 34.4 37.9 188 20.1
1994.......................................... 1,068,000 29 37.1 39.7 226 20.1
1995.......................................... 1,240,000 33 43.3 34.9 222 9.5
1996.......................................... 1,384,000 37 47.7 34.4 240 8.5
1997.......................................... 1,570,000 41 50.6 32.2 262 9.1
1998.......................................... NA NA 48.6 NA 268 2.2
1999.......................................... NA NA 50.1 NA 243 -9.3
----------------------------------------------------------------------------------------------------------------
NA--Not applicable.
Source: Health Care Financing Administration, Office of the Actuary.
First, HCFA issued new coverage guidelines that became
effective early in 1988. Prior to this time, studies had
pointed to a lack of adequate written guidance on coverage
criteria that led to inconsistencies in coverage decisions for
a benefit that was intended to be uniform across the country.
As a result, many SNFs were reluctant to accept Medicare
beneficiaries because of the possibility that a submitted claim
would be retroactively denied. The 1988 guidelines clarified
coverage criteria by providing numerous examples of covered and
noncovered care. Furthermore, the guidelines explained that
even when a patient's full or partial recovery is not possible,
care could be covered if it were needed to prevent
deterioration or to maintain current capabilities. Previously,
some care had been denied coverage because patients' health
status was not expected to improve.
The second major, though temporary, change in Medicare's
SNF benefit came in 1988 with the enactment of the Medicare
Catastrophic Coverage Act (MCCA). Effective beginning in 1989,
this legislation eliminated the SNF benefit's prior
hospitalization requirement; revised the coinsurance
requirement to be equal to 20 percent of the national average
estimated per-diem cost of SNF services for the first 8 days of
care; and authorized coverage of up to 150 days of care per
calendar year (rather than 100 days per spell of illness).
These changes were repealed in 1989, and the SNF benefit's
structure assumed its prior form.
Studies have suggested that the coverage guidelines and
MCCA changes together might have caused a long-run shift in the
nursing home industry toward Medicare patients that would not
end with repeal of MCCA. Table 2-14 shows that SNF spending in
calendar year 1990 stood at $2.5 billion; by 1997 it had
increased to $13.0 billion, for an average annual growth rate
of 27 percent. With implementation of the RUG payment system in
mid-1998, however, the rate of increase dropped precipitously:
between 1997 and 1998 the increase was 3.8 percent, and
payments decreased by 12.6 percent in 1999.
Table 2-15 shows that between 1992 and 1997 the number of
Medicare beneficiaries receiving SNF care doubled from 785,000
to 1.57 million. The number of covered days grew from 29
million to 50.6 million, or by 74 percent. Payments per day
grew from $157 in 1992 to $262 in 1997, a 67-percent increase.
However, in 1998 when the RUG system went into effect, these
payments increased by only 2.2 percent to $268, and decreased
to $243 per day in 1999, a 9.3 percent decrease. These
decreases in payments led to the changes enacted in BBRA
described above.
Home Health Services
Coverage and eligibility
Medicare home health services are covered under part A of
the program and, in certain circumstances, under part B. Prior
to BBA 1997, home health care was paid under part A unless an
individual was ineligible for part A but had purchased part B
coverage. In BBA 1997, Congress transferred payment for some
home health care from part A to part B. The transfer applies to
home visits beyond the first 100 visits that follow a stay in a
hospital or an SNF, beginning in 1998, phased in over 6 years.
No beneficiary deductibles or coinsurance are required for home
health care.
To qualify for home health care under Medicare an
individual must be homebound. A homebound individual is defined
as one who cannot leave home without a considerable and taxing
effort and only with the aid of devices such as a wheelchair, a
walker, or through use of special transportation. Absences from
home may occur infrequently for short periods of time for such
purposes as to receive medical treatment.
Homebound individuals qualify for coverage of home health
care if they need intermittent skilled nursing care, physical
therapy, or speech-language pathology services. Beneficiaries
needing one or more of these ``qualifying services'' may also
receive occupational therapy, the services of a medical social
worker, or a home health aide. Occupational therapy can
continue to be provided after the need for skilled nursing
care, physical therapy, or speech therapy ends, but social work
or aide services may not.
Home health care is covered by Medicare as long as the care
is medically reasonable and necessary for the treatment of
illness or injury. Although the number of home health visits a
beneficiary may receive is unlimited, services must be provided
pursuant to a plan of care that is prescribed and periodically
reviewed by a physician. In general, Medicare's home health
benefit is intended to serve beneficiaries needing acute
medical care requiring the services of skilled health care
personnel. It was never envisioned as providing coverage for
the nonmedical supportive care and personal care assistance
needed by chronically impaired persons. It is not a long-term
care program for the disabled or the frail elderly.
For beneficiaries meeting the qualifying criteria,
Medicare's home health benefit covers the following services:
1. Part-time or intermittent nursing care provided by or under
the supervision of a registered nurse;
2. Physical or occupational therapy or speech-language
pathology services;
3. Medical social services;
4. Part-time or intermittent services of a home health aide
who has successfully completed a training program
approved by the Secretary;
5. Medical supplies (excluding drugs and biologicals) and
durable medical equipment (DME);
6. Medical services provided by an intern or resident in
training under an approved training program with which
the agency may be affiliated; and
7. Certain other outpatient services which involve the use of
equipment that cannot readily be made available in the
beneficiary's home.
Home health services are provided by private or public home
health agencies (HHAs) that specialize in provision of such
services and that are certified to participate in Medicare by
HCFA. HHAs may be public or government-sponsored entities,
private nonprofit agencies, or proprietary for-profit agencies.
Hospitals may own or sponsor an HHA. Home health care givers
may be employees of the HHA or may work for an agency under
contract. HCFA characterizes a typical HHA as having 486
Medicare admissions and 30,000 visits per year and an 18 person
staff. Often, Medicare beneficiaries constitute the great
majority of an HHA's caseload, although other users include
individuals covered by Medicaid and those with private
insurance or who pay out of pocket.
According to HCFA data, the overall average number of home
health care visits received by Medicare home health patients in
1997 was 82, up from 23 in 1987. On average, Medicare
beneficiaries qualifying for home health care have one episode
of covered care, and the average number of visits received in
one episode of coverage is 36.
Background of the Medicare home health benefit
In the early years of the program, Medicare part A covered
up to 100 home health visits for beneficiaries who had an
immediate prior hospitalization or care in an SNF. Home health
care was also covered under part B, up to 100 visits, for
beneficiaries who had no prior hospitalization, or who had
exhausted their 100 part A visits, or who had part B coverage
only. It was required that a physician determine that the
individual could be discharged to his or her home but would
require skilled nursing care on less than a full-time basis, or
physical therapy, or speech therapy.
The Omnibus Budget Reconciliation Act of 1980 (Public Law
96-499) made several liberalizing changes in the rules
governing Medicare's coverage of home health services,
including elimination of the requirement for a prior
hospitalization and removal of the limitation on the number of
visits. It also allowed the need for occupational therapy to
trigger coverage of home health services furnished after June
1981, although less than a year later, as part of a larger
strategy to meet budget targets for reductions in Medicare
spending, Congress removed occupational therapy as a qualifying
trigger for home health care (Public Law 97-35, the Omnibus
Reconciliation Act of 1981).
Growth in volume of services and payments.--During the
first 10 years of the Medicare Program, home health care
accounted for less than 2 percent of total Medicare spending.
Between 1977 and about 1990 it accounted for 2-3 percent of
total program spending. This small increase reflected the 1980
liberalizations and, many say, the delayed response to
implementation in 1983 of a PPS for hospital inpatient care
under Medicare. Some analysts had predicted that the inpatient
PPS would lead to large growth in home health care utilization
by Medicare beneficiaries. However, home health care spending
increases that might have occurred as a result of the inpatient
PPS were offset by changes in the law and in certain
administrative procedures. For instance, the 1984 Deficit
Reduction Act required HCFA to reduce the number of ``fiscal
intermediaries'' with which HCFA contracts to process Medicare
home health care claims. These entities approve or deny
beneficiary eligibility for home health care as well as HHA
claims for payment. As HCFA reduced the number of fiscal
intermediaries, eligibility and claims decisions became more
standardized. HCFA also intensified educational programs for
claims processors, required HHAs to submit increased
documentation with each claim, and increased the number of
claims subjected to indepth medical reviews. Some say these
actions tempered the effect of early hospital discharges
prompted by the hospital inpatient PPS, noting that the home
health care claims denial rate rose from 3.4 percent in 1985 to
7.9 percent in 1987.
A significant event in the history of the Medicare home
health benefit was settlement of a class action lawsuit filed
in 1988 (Duggan v. Bowen) which sought to liberalize HCFA's
interpretation of benefit coverage requirements. As a result of
the suit, in 1989, HCFA revised the home health eligibility
criteria to cover patients needing ``part-time or intermittent
care'' instead of the previous requirement that patients need
``part-time and intermittent care.'' This change allowed the
number of visits to be increased because they no longer had to
be ``intermittent'' but could be made on a daily basis. HCFA's
revised guidelines also loosened the claims procedures that had
been tightened between 1985 and 1987. The revised guidelines
may have opened the door to eligibility for persons who have
ongoing medical problems that require personal care assistance
associated more with long-term care rather than acute care.
Home health spending rose from $2.1 billion in 1988 to
$18.1 billion in 1996, an average annual increase of over 31
percent (table 2-16). Medicare payment increases were driven by
the increase in the number of beneficiaries served and the
average number of visits per beneficiary served. The number of
beneficiaries served more than doubled during this time period,
and the average number of visits per home care patient
increased more than threefold, from 23 visits in 1987 and 1988
to 82 in 1997 (table 2-17). The number of HHAs participating in
Medicare also increased sharply, growing from 5,686 agencies in
1989 to 10,492 in 1997. However, the average cost per home care
visit rose relatively modestly, from $55 in 1988 to $71 in
1999, an increase of only 16 percent.
TABLE 2-16.--MEDICARE PAYMENTS FOR HOME HEALTH, 1983-99
------------------------------------------------------------------------
Payments
Calendar year (in Percent
billions) change
------------------------------------------------------------------------
1983.......................................... $1.6 NA
1984.......................................... 1.8 15.4
1985.......................................... 1.9 7.6
1986.......................................... 2.0 1.6
1987.......................................... 1.7 -12.6
1988.......................................... 2.1 19.2
1989.......................................... 2.5 20.4
1990.......................................... 3.7 51.0
1991.......................................... 5.3 40.8
1992.......................................... 7.2 37.0
1993.......................................... 10.3 42.6
1994.......................................... 13.3 28.9
1995.......................................... 16.6 25.2
1996.......................................... 18.1 8.9
1997.......................................... 17.9 -0.8
1998.......................................... 12.0 -33.4
1999.......................................... 9.3 -22.3
------------------------------------------------------------------------
NA--Not applicable.
Source: Health Care Financing Administration.
Medicare payment policies for home health care.--Prior to
the changes made by BBA 1997, Medicare reimbursed HHAs for the
lesser of: (1) their reasonable costs; or (2) a limited amount
per visit, applied in the aggregate. The per-visit limit was
set at 112 percent of the national average cost, which was
calculated separately for each type of service (nursing,
therapy, etc.). It was based on costs for freestanding agencies
(i.e., agencies not affiliated with hospitals) and varied
according to whether an agency was located in an urban or rural
area and according to wage level differentials from area to
area. Per-visit cost limits were updated annually by applying
an MBI to base-year data derived from HHA cost reports. These
limits, however, were applied to aggregate agency payments and
not to individual visits; that is, an aggregate cost limit was
set for each agency equal to the sum of the agency's limit for
each type of service multiplied by the number of visits of each
type provided by the agency.
This cost-based reimbursement system was criticized as
providing few incentives for HHAs to maximize efficiency or
control the volume of services they delivered because HHAs were
paid for every visit their workers made.
Balanced Budget Act of 1997
The Balanced Budget Act (BBA) of 1997 made several changes
to home health eligibility, coverage, and payment rules. In
general, through these changes, Congress sought to curtail the
steep annual rates of increase in the volume of Medicare home
health services and payments. In addition, BBA 1997 provided
for the transfer of some home health spending from part A to
part B; the purpose of this transfer was to reduce part A
spending and thereby extend the solvency period of the part A
trust fund.
TABLE 2-17.--MEDICARE HOME HEALTH CARE UTILIZATION AND PAYMENTS PER VISIT, 1983-99
----------------------------------------------------------------------------------------------------------------
People served Visits
-------------------------------------------------------
Calendar year of service Number Per Payment Percent
Number Per 1,000 (in Per 1,000 person per visit change
enrollees millions) enrollees served
----------------------------------------------------------------------------------------------------------------
1983............................... 1,318,000 45 36.9 1,264 28 $43 (\1\)
1984............................... 1,498,000 50 40.4 1,378 27 46 7.2
1985............................... 1,549,000 51 39.4 1,327 25 49 6.4
1986............................... 1,571,000 51 38.0 1,263 24 50 3.4
1987............................... 1,544,000 49 35.6 1,163 23 53 5.2
1988............................... 1,582,000 49 37.1 1,193 23 55 3.8
1989............................... 1,685,000 51 46.3 1,459 27 55 -0.4
1990............................... 1,940,000 58 69.4 2,146 36 56 1.7
1991............................... 2,223,000 65 98.6 2,996 44 56 1.1
1992............................... 2,523,000 72 132.5 3,958 53 58 3.9
1993............................... 2,868,000 80 167.8 4,939 59 61 4.1
1994............................... 3,175,000 87 218.8 6,388 69 62 2.2
1995............................... 3,457,000 93 266.3 7,801 77 62 0.7
1996............................... 3,583,000 95 284.4 8,439 79 63 1.7
1997............................... 3,370,000 88 276.5 8,390 82 64 0.6
1998............................... NA NA 161.0 4,980 NA 67 5.1
1999............................... NA NA 97.0 3,027 NA 71 6.2
----------------------------------------------------------------------------------------------------------------
\1\ Not applicable.
NA--Not available.
Source: Health Care Financing Administration.
Clarification of coverage rules.--BBA 1997 included several
provisions that clarified coverage criteria for home health
care, including:
1. Clarification of the definition of ``part-time'' and
``intermittent'' regarding skilled nursing care and
home health aide services for purposes of eligibility
for, and coverage of home health care. First, patients
needing skilled nursing care are eligible for
Medicare's home health benefit if the need is for
``intermittent'' care, defined as skilled nursing care
that is either provided or needed on fewer than 7 days
each week, or less than 8 hours of each day for periods
of 21 days or less (with extensions in exceptional
circumstances when the need for additional care is
finite and predictable). Second, for beneficiaries who
qualify for home health care and who need both skilled
nursing and home health aide services, coverage is
provided only to the extent that these two services
combined is ``part-time or intermittent,'' defined as
skilled nursing and home health aide services furnished
any number of days per week as long as they are
furnished (in combination) less than 8 hours each day
and 28 or fewer hours each week (or, subject to review
on a case-by-care basis as to the need for care, less
than 8 hours each day and 35 or fewer hours per week);
2. Elimination of eligibility based solely on needing a
skilled nurse to draw blood;
3. A requirement that claims include a physician identifier;
4. A requirement that home health workers report their
activities during a visit in 15-minute intervals (the
data are used in designing a home health PPS);
5. Extension of savings from a July 1994-June 1996 freeze on
home health cost limit updates;
6. A requirement for a study of the definition of
``homebound'' and a study to establish guidelines to
standardize the frequency and duration of home health
services for patients with similar needs and
circumstances (``normative guidelines''). (The
Secretary determined that no change was needed for the
definition of homebound, and the first results from the
study of normative guidelines will be available in fall
2000);
7. A requirement for ``consolidated billing'' for services to
home health patients, under which payment for any
Medicare-covered service or item provided for a
beneficiary during a spell of home health care coverage
is to be made to the HHA. The HHA would then pay the
provider of the service or item. (BBRA 1999 later
excluded the supply of DME from consolidated billing.)
Transfer certain coverage from part A to part B.--BBA 1997
transfers from part A to part B payments for home health visits
that are not part of the first 100 visits following a
hospitalization. Part A benefits are financed through the
Hospital Insurance (HI) Trust Fund, whereas part B benefits are
financed by beneficiary premiums and general revenues. Thus,
the solvency of the HI Trust Fund is extended by removing from
it some of the costs of home health benefits. The transfer is
being phased in over 6 years, between 1998 and 2003, with the
Secretary transferring one-sixth of the aggregate expenditures
associated with transferred visits in 1998 and an additional
one-sixth each year thereafter until fully implemented in 2003.
Beginning January 1, 2003, part A coverage for home health care
will apply only to postinstitutional home health services for
up to 100 visits during a spell of illness, except for those
persons with part A coverage only, who will be covered for
services without regard to the postinstitutional limitation.
Moving home health care costs to part B could increase
beneficiary premiums for that component of Medicare. The
increase in the part B premium attributable to transferred
expenditures will be phased in over a period of 7 years,
between 1998 and 2004. For 1998 the part B premium was
increased by one-seventh of the extra costs due to the
transfer; for 1999 it was increased by two-sevenths, etc.,
until 2004 when the total cost of the transfer will be included
in the part B premium. The increases have been very small, only
slightly over $1 a month in 1999.
Postinstitutional home health services are defined for
these purposes as services furnished to a Medicare beneficiary:
(1) after an inpatient hospital or rural primary care hospital
stay of at least 3 consecutive days, initiated within 14 days
after discharge; or (2) after a stay in an SNF, initiated
within 14 days after discharge. A home health spell of illness
is defined as the period beginning when a patient first
receives postinstitutional home health services and ending when
the beneficiary has not received inpatient hospital, SNF, or
home health services for 60 days.
Claims administration for transferred visits will continue
to be done by part A fiscal intermediaries.
Requirement for a PPS.--BBA 1997 required that a PPS be
implemented for home health care beginning in 1999 and required
that the PPS be designed to reduce home health payments by 15
percent. It specified that the 15-percent reduction was to go
into effect even if the PPS was not ready for implementation in
1999. In Public Law 105-277 (the Omnibus Consolidated and
Emergency Supplemental Appropriations Act for fiscal year 1999)
Congress delayed the implementation date for the PPS until
October 1, 2000, and moved the 15-percent reduction to coincide
with commencement of the PPS. BBRA 1999 subsequently postponed
the 15-percent reduction to 12 months after implementation of
the PPS.
Implementation of an interim payment system.--Because of
concern about the rapidly rising costs of Medicare's home
health benefit, Congress included in BBA 1997 an ``interim
payment system'' (IPS) for home health care in order to achieve
immediate spending reductions prior to implementation of the
PPS. This interim system was effective for HHA cost reporting
periods starting on or after October 1, 1997, and will remain
in effect until the PPS is implemented in October 2000.
Table 2-16 shows the substantial reductions in Medicare
payments for home health services that have coincided with
implementation of the IPS. In 1999, total payments were almost
half the 1996 level. The IPS achieves cost savings by
establishing a new methodology for limiting aggregate annual
Medicare payments to individual HHAs. Under this procedure, an
agency receives payments totaling the least of three amounts
(pre-IPS payments were the lesser of the first two of these
amounts): (1) the agency's reasonable costs; or (2) payments
determined under the per-visit limits, with the limit set at
106 percent of the national median cost per visit by service
type (pre-IPS limit was 112 percent of the national average
cost per visit); \1\ or (3) aggregate payments under a new
formula based on per-beneficiary limits.
---------------------------------------------------------------------------
\1\ Public Law 105-277 increased the limit from 105 percent of the
national median cost of a service (estimated at the time of BBA 1997
enactment to be about 98 percent of the mean) to 106 percent of the
median.
---------------------------------------------------------------------------
HCFA estimates that 79 percent of HHAs are subject to the
new per-beneficiary limit; the others receive less under the
reasonable cost or per-visit limit. Determining an agency's
aggregate Medicare payment limit under the new per-beneficiary
formula includes four steps:
1. Divide the total payments the agency received from Medicare
for cost reporting periods ending in fiscal year 1994
by the number of Medicare patients it served that year
to get an average amount per beneficiary (certain wage
adjustments and cost updates are applied to bring the
amount up to values in the year to which the limits are
being applied, e.g., in 2000). Per-beneficiary limits
for agencies that were not operational in 1994 are set
at the national median;
2. Reduce that average amount per beneficiary to 75 percent of
the full amount;
3. Add a sum that is 25 percent of the average Medicare per-
beneficiary costs of all agencies in the same census
region to get a new average cost per beneficiary;
4. Multiply the agency's average cost per beneficiary from
step three by the number of Medicare patients the
agency is serving in the current year or cost reporting
period. The result is an aggregate annual payment limit
that an agency is held to for serving all its Medicare
patients in a cost reporting period under the IPS.
If an agency's average costs for its patients are lower
than others in the region, it benefits from the sum that is
added based on the average regional per-beneficiary limits
(step 3, above); if an agency's costs are higher than others in
the area, it loses money from the regional component of the
formula. This regional component of the formula also decreases
disparities that had existed among agencies in the same general
area.
The per-beneficiary aggregate limit does not restrict the
amount an HHA can spend on any individual beneficiary. It is
simply a technique for arriving at an aggregate budget amount
for an agency's Medicare patients. However, many HHAs
misunderstood how this limit works, and there are reports that
some agencies ended a patient's care when spending for that
individual reached the amount of the per-beneficiary payment
(i.e., the amount arrived at by step three above). In reality,
agencies have some patients whose costs are below the per-
beneficiary average and some whose costs are above it. The idea
behind the new formula was that payments on behalf of patients
whose costs were lower than average would ``subsidize'' more
costly patients; the balance of low and high cost patients
would determine whether an agency would exceed its aggregate
per beneficiary cap.
Congress based the per-beneficiary calculation on fiscal
year 1994 levels of operation in order to discount the large
volume growth that still appeared to be occurring after that
year (program costs grew by nearly 25 percent from 1994 to
1995). Using fiscal year 1994 as the base year caused agencies
that had increased their costs per patient after that time
(generally by increasing the number of visits per patient) to
have a larger reduction in their Medicare revenues under the
IPS than agencies that had maintained relatively constant
average costs per beneficiary.
Response to BBA 1997 and the IPS.--Table 2-16 shows the
significant decrease in Medicare spending for home health care
that occurred with implementation of the provisions in BBA 1997
and the IPS. Table 2-17 shows the sharp drop after 1997 in the
number of home health visits covered by Medicare. At the same
time, the average payment per visit increased. Most analysts
agree that the reduction in the number of home health visits is
attributable largely to the IPS, but note also that the
provision of BBA 1997 that eliminated venipuncture (the drawing
of a blood specimen) as the sole home health service qualifying
an individual for home care also contributed to the reduction
in visits. Presumably, elimination of less costly visits (e.g.,
home health aide visits) resulted in an increase in the average
payment per visit from $64 in 1997 to $71 in 1999. Moreover,
the Health Insurance Portability and Accountability Act of 1996
included civil money penalties for physicians who falsely
certify that a beneficiary needs home health care, a provision
some say has had a chilling effect on physician referrals.
As the apparent effects of the IPS began to be evident,
representatives of the home health industry claimed that (1)
the IPS was limiting HHAs' ability to provide necessary care;
(2) agencies with low average costs per beneficiary in the
fiscal year 1994 base period were realizing the severest
reductions; and (3) these older agencies were being paid
inequitably in comparison with newer agencies because agencies
that had not been in business long enough to have had a cost
reporting period ending in fiscal year 1994 were assigned a
per-beneficiary limit equal to the national median.
Because the payment limits imposed by the IPS induce
agencies to balance the number of expensive patients against
the number of inexpensive patients they serve in order to stay
within their total Medicare payment limit, questions arose
about whether the IPS created incentives for HHAs to refuse to
serve beneficiaries with the most serious medical needs and who
require extensive home health visits. An HHA might refuse to
accept certain expensive patients if it were concerned that the
balance of patients in its caseload would be tipped too far
toward costly cases and result in expenditures exceeding the
agency's total funding limit.
In January 1998, the Congressional Budget Office (CBO)
projected 10-year BBA 1997 home health care savings of almost
$75 billion. In March 1999, CBO reestimated the effects of BBA
1997, and the new projections showed an additional $56 billion
in savings. The original CBO estimate reflected an annual rate
of growth in home health spending of 8.3 percent a year over 10
years, but the revised estimate showed an annual increase of
5.6 percent a year. (Under the old law, in the early 1990s,
Medicare home health spending had been growing at rates of
between 20 and 30 percent a year.) However, CBO's revised
estimates included changes in their underlying economic
assumptions as well as revised estimates of the effects of BBA
1997. Additionally, HCFA officials cautioned that reduced
Medicare payments for home health care since 1997 reflect an
intensified case review process HCFA required claims processors
to implement along with the IPS as well as stepped-up fraud and
abuse detection activities.
To address concerns about the impact of the IPS and the
large decrease in estimates of program payments for home health
care, in Public Law 105-277, Congress modified the IPS formula
to increase per-visit limits for HHAs from 105 percent of the
median to 106 percent and increased payments to agencies whose
per-beneficiary limits under the IPS were less than the
national median per-beneficiary limits. The per-beneficiary
limits for older agencies (those in operation in fiscal year
1994) were increased by one-third of the difference between the
agency's per-beneficiary limit and the national median of per-
beneficiary limits; per-beneficiary limits for agencies
starting operation after fiscal year 1994 but before fiscal
year 1999 were set at the national median limit; new HHAs that
began treating Medicare patients on or after October 1, 1998,
were set at 75 percent of the national median, with a 2-percent
reduction. These modifications to home health payments were
estimated to increase Medicare payments to 65 percent of HHAs.
Home health prospective payment system
As noted above, BBA 1997 required a prospective payment
system (PPS) to be implemented for Medicare payments for home
health care. Final PPS rules were published in the Federal
Register on July 3, 2000. Under those rules, beneficiaries are
categorized into one of 80 home health resource groups, each of
which carries a standard payment for a 60-day episode of care
for a beneficiary. The standard payment is computed using the
average national cost per visit (computed and weighted by visit
type, that is, skilled nursing, physical therapy, etc.)
multiplied by the national average number of visits (by type)
in a 60-day period. Average costs for nonroutine medical
supplies, certain therapy services, and administration of the
outcome and assessment information set (OASIS) interview
questionnaire are added.\2\ The payments include adjustments to
reflect geographic wage levels among HHAs, to account for
unusually costly patients (``outlier'' payments), and to
achieve ``budget neutrality.'' The budget neutrality adjustment
ensures that total home health payments under the PPS in fiscal
year 2001 will be equal to the estimated total payments that
would have been made by Medicare in that year had the IPS
continued in effect in fiscal year 2001, including limits on
the market basket index (MBI). Total fiscal year 2001 payments
will equal the IPS projected to that year minus 1.1 percentage
points.
---------------------------------------------------------------------------
\2\ OASIS is a data collection instrument on which a home health
worker records, for new or renewing patients, clinical and other data
required to plan the individual's course of care. Data from OASIS are
also used in the definition of the payment categories under the home
health PPS.
---------------------------------------------------------------------------
Special payment arrangements are made for beneficiaries
receiving fewer than five visits, or who transfer from one HHA
to another, or who have a significant change in their condition
during an episode of illness.
HHAs will be paid 60 percent of the PPS amount after
completing an OASIS questionnaire for each new or renewing
patient and receiving a physician's certification and plan of
care. The remainder of the payment will be made when the
episode is completed (or, if earlier, when care is completed).
If, at the end of an initial 60-day episode, a physician orders
care to be continued, payment for the subsequent episode (or
episodes) is split to provide 50 percent of the payment at the
start of the episode and 50 percent at the end of care or the
episode.
Balanced Budget Refinement Act (BBRA) of 1999
As a result of concern that many provisions of BBA 1997 had
caused unanticipated reductions in Medicare payments across the
spectrum of health care providers, Congress included
modifications to Medicare in BBRA 1999. That act included the
following provisions pertaining to Medicare home health care:
1. Delays the 15-percent payment reduction required under the
PPS by BBA 1997 until 12 months after implementation of
the PPS and requires the Secretary to report within 6
months after implementation of the PPS on the need for
the 15 percent or some other reduction.
2. Provides HHAs with a payment of $10 per beneficiary for
administration of the OASIS questionnaire to new home
health patients for services furnished during cost
reporting periods in fiscal year 2000. One-half of the
payment will be made in April 2000 and the remainder at
cost report settlement. It requires GAO to study the
costs of collecting these data and to report by April
2000.
3. Requires that per-beneficiary limits under BBA 1997 IPS be
increased by 2 percent in cost reporting periods
starting in fiscal year 2000 for those HHAs for which
the per-beneficiary limit is below the national median;
the increase will not be included in the base for
determining the budget neutral PPS amounts.
4. Establishes the surety bond requirement for HHAs as the
lesser of $50,000 or 10 percent of an HHA's Medicare
payments in the previous year and requires the bond to
be in effect for 4 years (or longer if ownership of the
HHA changes). Prior periods covered by a bond may be
counted and Medicare and Medicaid bond requirements are
to be coordinated.
5. Excludes DME from the home health consolidated billing
requirement of BBA 1997.
6. Clarifies that the increase in the home health PPS in
fiscal year 2002 and fiscal year 2003 will be the MBI
minus 1.1 percentage points.
7. Requires the Medicare Payment Advisory Commission to study
and report within 2 years of enactment on the
feasibility and advisability of excluding rural HHAs
and beneficiaries living in rural areas from the home
health PPS.
Because the new PPS will go into effect in fiscal year
2001, the BBRA 1999 provisions pertaining to home health care
under Medicare were not extensive. However, the provision that
had caused substantial concern in the industry was the
requirement that the PPS be designed to reduce total Medicare
payments for home health care by 15 percent compared with pre-
PPS levels. Because of the sharp declines in payments to HHAs
under the IPS, some said that a further 15-percent reduction
would affect the availability of home health services and make
care inaccessible to beneficiaries, particularly those with
extensive and costly care needs. Congress addressed that issue
in BBRA 1999 by delaying implementation of the 15-percent
reduction until 12 months after implementation of the PPS and
requiring the Secretary to evaluate and report, within 6 months
of implementation of the PPS, on the need for payment
reductions.
Hospice Services
Coverage and benefits
Medicare covers hospice care, in lieu of most other
Medicare benefits, for terminally ill beneficiaries. Hospice
care emphasizes palliative medical care, that is, relief from
pain, and supportive social and counseling services for the
terminally ill and their families. Services are provided
primarily in the patient's home. The Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA), Public Law 97-248, first
authorized Medicare part A coverage for hospice care (for the
period November 1, 1983 to October 1, 1986); in 1986, Congress
made the hospice benefit a permanent part of the Medicare
Program, effective April 7, 1986.
For a person to be considered terminally ill and eligible
for Medicare's hospice benefit, the beneficiary's attending
physician and the medical director of the hospice (or physician
member of the hospice team) must certify that the individual
has a life expectancy of 6 months or less. As a result of an
amendment in BBA 1997, persons electing hospice are covered for
two 90-day periods, followed by an unlimited number of 60-day
periods. The medical director or physician member of the
hospice team must recertify at the beginning of each new
election period that the beneficiary is terminally ill.
Services must be provided under a written plan of care
established and periodically reviewed by the individual's
attending physician and by the medical director of the hospice.
Covered hospice services include the following: (1) nursing
care provided by or under the supervision of a registered
nurse; (2) physical or occupational therapy or speech-language
pathology services; (3) medical social services; (4) services
of a home health aide who has successfully completed a training
program approved by the Secretary of the U.S. Department of
Health and Human Services (DHHS); (5) homemaker services; (6)
medical supplies (including drugs and biologicals) and the use
of medical appliances; (7) physician services; (8) short-term
inpatient care (including both respite care and procedures
necessary for pain control and acute and chronic symptom
management); (9) counseling, including dietary counseling, for
care of the terminally ill beneficiary and for adjustment to
the patient's death (bereavement counseling is not a
reimbursable service); and (10) any other item or service which
is specified in a patient's plan of care and which Medicare may
pay for.
Medicare's hospice benefit is intended to be principally an
in-home benefit. For this reason, Medicare law prescribes that
respite care, or relief for the primary care giver of the
terminally ill patient, may be provided only on an
intermittent, nonroutine, and occasional basis and may not be
provided consecutively over longer than 5 days. In addition,
the aggregate number of inpatient care days provided in any 12-
month period to Medicare beneficiaries electing hospice care
can not exceed 20 percent of the total number of days of
hospice coverage provided to these persons.
Only two covered hospice services--outpatient drugs or
biologicals and respite care--are subject to coinsurance.
Outpatient drugs and biologicals are subject to a coinsurance
amount that approximates 5 percent of the cost of the drug to
the hospice program, except that the amount may not exceed $5
per prescription. For respite care, coinsurance equals 5
percent of program payments for respite, but may not exceed
Medicare's inpatient hospital deductible during a hospice
coinsurance period (defined as the period when hospice election
is not broken by more than 14 days).
Covered services must be provided by a Medicare-certified
hospice. Certified hospices must be either public agencies or
private organizations primarily engaged in providing covered
hospice services and must make services available on a 24-hour
basis, in individuals' homes, on an outpatient basis, and on a
short-term inpatient basis. Hospices must routinely and
directly provide substantially all of the following ``core''
services: nursing care, medical social services, and counseling
services. The remaining hospice services may be provided either
directly by the hospice or under arrangements with others. If
services are provided through arrangements with other
providers, the hospice must maintain professional management
responsibility for all such services, regardless of the
facility in which the services are furnished.
The hospice program must also have an interdisciplinary
group of personnel which includes at least one registered
professional nurse and one social worker employed by the
hospice; one physician employed by or under contract with the
hospice; plus at least one pastoral or other counselor.
Reimbursement
In implementing Medicare's hospice benefit, HCFA
established a prospective payment methodology. Under this
methodology, hospices are paid one of four prospectively
determined rates, which correspond to four different levels of
care, for each day a Medicare beneficiary is under the care of
the hospice. Reimbursement will thus vary by the length of the
patient's period in the hospice program as well as by the
characteristics of the services (intensity and site) furnished
to the beneficiary.
The four rate categories for reimbursing hospices are:
1. Routine home care day.--Routine home care day is a day on
which an individual is at home and is not receiving
continuous home care. The routine home care rate is
paid for every day a patient is at home and under the
care of the hospice regardless of the volume or
intensity of the services provided on any given day as
long as less than 8 hours of care are provided. This
rate is $98.96 for services provided between October 1,
1999 and September 30, 2000.
2. Continuous home care day.--A continuous home care day is a
day on which an individual receives hospice care
consisting predominantly of nursing care on a
continuous basis at home. Home health aide or homemaker
services or both may also be provided on a continuous
basis. Continuous home care is furnished only during
brief periods of crisis and only as necessary to
maintain the terminally ill patient at home. Home care
must be provided for a period of at least 8 hours
before it would be considered to fall within the
category of continuous home care. Payment for
continuous home care will vary depending on the number
of hours of continuous services provided. Currently
this rate is $577.59 for 24 hours or $24.07 per hour.
3. Inpatient respite care day.--An inpatient respite care day
is one on which the individual who has elected hospice
care receives care in an approved facility on a short-
term (not more than 5 days at a time) basis for the
respite of his caretakers. Currently this rate is
$102.37.
4. General inpatient care day.--A general inpatient care day
is one on which an individual receives general
inpatient care in an inpatient facility for pain
control or acute or chronic symptom management which
cannot be managed in other settings. Care may be
provided in a hospital, skilled nursing facility (SNF),
or inpatient unit of a freestanding hospice. Currently
this rate is $440.22.
To reflect differences in wage levels from area to area,
each of these four payment rates is adjusted by the hospital
area wage index used by Medicare for adjusting payments to
hospitals, SNFs, and HHAs. HCFA separates each of the national
payment rates for hospice care into components which reflect
the estimated proportion of the rate attributable to wage and
nonwage costs. The wage component of each rate is then adjusted
by the index applicable to the area in which the hospice is
located.
The Omnibus Budget Reconciliation Act (OBRA) of 1989
required that the payment rates be increased by the hospital
market basket percentage increase each fiscal year. OBRA 1993,
however, reduced the updates for the prospective rates as
follows: for fiscal year 1994, the hospital market basket
percentage increase minus 2.0 percentage points; for fiscal
years 1995 and 1996, the hospital market basket minus 1.5
percentage points; and for fiscal year 1997, market basket
minus 0.5 percentage points.
BBA 1997 reduced the hospice payment update to market
basket minus 1.0 percentage point for each of fiscal years
1998-2002.
Medicare law requires that payments to a hospice for care
furnished over the period of a year be limited to a ``cap
amount.'' The cap amount is applied on an aggregate rather than
a case-by-case basis. Therefore, each individual hospice's cap
amount is calculated by multiplying the yearly cap amount by
the number of Medicare beneficiaries who received hospice care
from the hospice during the cap period. Medicare defines a cap
year as the period from November 1 through October 31 of the
following year. The cap amount for the period November 1, 1999
through October 31, 2000, is $15,313.
Updates to hospice payment amounts
Hospice daily payment rates for routine home care,
continuous home care, inpatient respite care, and general
inpatient care are updated annually by the increase in the
hospital MBI. BBA 1997 reduced these updates to the market
basket increase minus 1.0 percentage point for fiscal years
1998-2002. However, BBRA 1999 increased the rates otherwise in
effect for fiscal year 2001 by 0.5 percentage points and for
fiscal year 2002 by 0.75 percentage points.
The hospice cap amount is adjusted annually by the
percentage change in the medical care component of the Consumer
Price Index for All Urban Consumers (CPI-U).
Hospice program data
Table 2-18 shows that the number of hospices participating
in Medicare grew from 553 in fiscal year 1988 to 2,293 in
fiscal year 1998.
Total Medicare payments for hospice care in fiscal year
1988, 2 years after it became a permanent part of the Medicare
Program, totaled less than $120 million. Daily payment rates in
effect in 1989 were increased by 20 percent in 1990, which led
to more serv-
TABLE 2-18.--NUMBER OF HOSPICES BY PROVIDER TYPE, 1988-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Month and year
Provider type -----------------------------------------------------------------------------------------------
7/88 7/89 5/90 9/91 1/92 5/93 8/94 6/95 10/96 12/97 12/98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Freestanding............................................ 191 220 260 394 404 499 608 656 762 875 897
Hospital based.......................................... 138 182 221 282 291 341 401 447 507 559 567
Skilled nursing facility based.......................... 11 13 12 10 10 10 12 18 21 23 22
Home health agency based................................ 213 286 313 325 334 438 583 674 800 829 807
-----------------------------------------------------------------------------------------------
Total............................................... 553 701 806 1,011 1,039 1,288 1,604 1,795 2,090 2,286 2,293
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.
ices becoming available. As shown in table 2-19, Medicare
payments for hospice care increased to $445.4 million in fiscal
year 1991 and subsequently to nearly $2.2 billion in fiscal
year 1998.
From fiscal year 1991 through fiscal year 1998 the number
of beneficiaries using Medicare's hospice benefit increased
nearly fourfold, from 108,413 to 401,140, although the average
payment per beneficiary increased by less than one-third, from
$4,108 to $5,412.
The data show that the average number of days of hospice
utilization increased sharply from fiscal year 1991 to fiscal
year 1992, reflecting the 20-percent increase in payment rates
and concomitant increase in availability and utilization of
this care. However, after 1995 the average duration of coverage
declined. The decline may be the result of: (1) continued
reluctance of physicians to refer patients to hospice rather
than continue treatment; (2) the availability of new treatment
therapies; and (3) increased regulatory scrutiny and focused
medical reviews.
PART B SERVICES--COVERAGE AND PAYMENTS
Physicians Services
Medicare pays for physicians services on the basis of a fee
schedule which went into effect in 1992. The fee schedule
assigns relative values to services. Relative values reflect
three factors: physician work (time, skill, and intensity
involved in the service), practice expenses, and malpractice
costs. These relative values are adjusted for geographic
variations in the costs of practicing medicine. Geographically-
adjusted relative values are then converted into a dollar
payment amount by a dollar figure known as the conversion
factor. The 2000 conversion factor is $36.61.
The annual percentage update to the conversion factor
equals the Medicare economic index (which measures inflation)
subject to an adjustment to match spending for physicians
services under the sustainable growth rate system. This
adjustment sets the conversion factor at a level so that
projected spending for a year will meet allowed spending by the
end of the year. Allowed spending for a year is calculated
using the sustainable growth rate. However, in no case can the
conversion factor update be more than 3 percentage points
above, nor more than 7 percentage points below, the Medicare
economic index.
For a discussion of how Medicare calculates payments to
physicians, see appendix D.
Anesthesiologists are paid under a separate fee schedule
which uses base and time units. A separate conversion factor
($17.77 in 2000) applies.
Medicare payments are made for physicians' services after
the annual deductible requirement of $100 has been satisfied.
Payment is set at 80 percent of the fee schedule with
beneficiaries responsible for the remaining 20 percent, which
is referred to as coinsurance.
Medicare payment is made either on an ``assigned'' or
``unassigned'' basis. By accepting assignment, physicians agree
to take the Medicare fee schedule amount as payment in full.
Thus, if assignment is accepted, beneficiaries are not liable
for any out-of-
TABLE 2-19.--SELECTED MEASURES OF MEDICARE HOSPICE CARE, FISCAL YEARS 1991-98
[By claim approved]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year
Category ---------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash outlays by provider type:
Freestanding.......................................... $219.2 $444.2 $620.4 $724.2 $977.1 $1,042.3 $1,123.1 $1,205.7
Hospital based........................................ 92.0 168.0 205.3 226.1 319.3 331.1 345.3 373.4
Skilled nursing facility based........................ 8.6 17.1 22.6 17.7 26.0 24.5 12.9 16.8
Home health agency based.............................. 125.7 224.3 303.7 348.7 508.1 546.1 543.0 575.1
---------------------------------------------------------------------------------------------
Total............................................. 445.4 853.6 1,151.9 1,316.7 1,830.5 1,944.0 2,024.5 2,171.0
=============================================================================================
Cash outlays by care type:
Routine home care..................................... 376.6 720.0 1,004.9 1,158.6 1,611.6 1,701.5 1,769.5 1,888.7
Continuous home care.................................. 3.9 10.4 12.2 14.5 25.6 29.2 28.5 32.1
Inpatient respite care................................ 1.3 2.5 2.6 2.7 4.4 4.7 4.8 5.4
General inpatient care................................ 59.7 114.0 125.5 134.1 179.1 197.6 209.5 231.7
Physician services.................................... 3.9 6.7 6.7 6.8 9.8 11.0 12.1 13.1
---------------------------------------------------------------------------------------------
Total............................................. 445.4 853.6 1,151.9 1,316.7 1,830.5 1,944.0 2,024.5 2,170.9
=============================================================================================
Average dollar amount per beneficiary:
Freestanding.......................................... 4,121 5,668 6,065 6,355 6,451 6,157 5,796 5,689
Hospital based........................................ 4,234 5,296 5,361 5,631 5,740 5,333 5,028 5,129
Skilled nursing facility based........................ 4,198 5,538 5,344 5,428 6,079 5,953 5,079 5,122
Home health agency based.............................. 3,993 5,169 5,239 5,408 5,569 5,313 4,949 5,084
---------------------------------------------------------------------------------------------
Total \1\......................................... 4,108 5,452 5,681 5,935 6,049 5,747 5,402 5,412
=============================================================================================
Number of beneficiaries:
Freestanding.......................................... 53,184 78,374 102,283 113,959 151,466 169,285 193,765 211,952
Hospital based........................................ 21,717 31,734 38,295 40,156 55,631 62,081 68,688 72,804
Skilled nursing facility based........................ 2,040 3,084 4,221 3,262 4,272 4,124 2,547 3,288
Home health agency based.............................. 31,472 43,391 57,969 64,472 91,239 102,783 109,723 113,096
---------------------------------------------------------------------------------------------
Total............................................. 108,413 156,583 202,768 221,849 302,608 338,273 374,723 401,140
=============================================================================================
Average number of days a beneficiary elects hospice care:
Freestanding.......................................... 46.2 59.1 62.0 63.7 62.9 58.5 63.4 50.8
Hospital based........................................ 44.2 54.6 53.8 55.4 56.7 51.6 47.9 44.1
Skilled nursing facility based........................ 37.6 44.5 42.7 45.5 49.3 47.7 39.9 41.0
Home health agency based.............................. 42.5 52.6 52.2 53.3 53.8 50.0 45.9 44.0
---------------------------------------------------------------------------------------------
Total \1\......................................... 44.5 56.1 57.2 58.9 58.8 54.5 50.1 47.6
=============================================================================================
Number of units by care type:
Routine home care--days............................... 4,667,703 8,564,904 11,324,524 12,699,617 17,257,734 17,862,843 18,189,764 18,454,749
Continuous home care--hours........................... 199,309 442,968 565,903 654,667 1,129,697 1,193,623 1,190,982 1,303,204
Inpatient respite care--days.......................... 14,867 28,495 27,887 28,769 45,932 47,218 47,790 47,905
General inpatient care--days.......................... 161,211 297,190 303,245 299,823 418,093 451,396 470,593 502,199
Physicians--procedures................................ 53,491 111,716 115,560 110,790 165,066 185,970 200,376 204,624
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Weighted by the number of beneficiaries in each hospice type.
Note.--Totals may not add due to rounding.
Source: Health Care Financing Administration.
pocket costs other than standard deductible and coinsurance
payments. In contrast, if assignment is not accepted,
beneficiaries may be liable for charges in excess of the
Medicare approved charge, subject to limits. This process is
known as balance billing.
Medicare's Participating Physician Program was established
to provide beneficiaries with the opportunity to select
physicians (designated as ``participating physicians'') who
have agreed to accept assignment on all services provided
during a 12-month period. Nonparticipating physicians continue
to be able to accept or refuse assignment on a claim-by-claim
basis. There are a number of incentives for physicians to
become participating physicians, the chief of which is that the
fee schedule payment amount for nonparticipating physicians is
only 95 percent of the recognized amount paid to participating
physicians. Additional incentives include more rapid claims
payment and widespread distribution of participating physician
directories.
Nonparticipating physicians may not charge more than 115
percent of Medicare's allowed amount for any service.
Medicare's allowed amount for nonparticipating physicians is
set at 95 percent of that for participating physicians. Thus,
nonparticipating physicians are only able to bill 9.25 percent
(115 percent times 95 percent) over the approved amount for
participating physicians.
Services of Nonphysician Practitioners
The physician fee schedule is also used for calculating
payments made for certain services provided by nonphysician
practitioners.
Physician assistants and nurse practitioners
Separate payments are made for physician assistant
services, when provided under the supervision of a physician.
Separate payments are also made for nurse practitioner
services, provided in collaboration with a physician.
Payment for these services can only be made if no facility
or other provider charges are paid in connection with the
service. Payment equals 80 percent of the lesser of either the
actual charge or 85 percent of the fee schedule amount for the
same service if provided by a physician. For assistant-at-
surgery services, payment equals 80 percent of the lesser of
either the actual charge or 85 percent of the amount that would
have been recognized for a physician serving as an assistant-
at-surgery. The physician assistant may be in an independent
contractor relationship with the physician.
Certified nurse midwife services
Certified nurse midwife services are paid at 65 percent of
the physician fee schedule amount.
Certified registered nurse anesthetists
Certified registered nurse anesthetists are paid under the
same fee schedule used for anesthesiologists (see above).
Payments for services furnished by an anesthesia care team
composed of an anesthesiologist and a certified registered
nurse anesthetist are capped at 100 percent of the amount that
would be paid if the anesthesiologist were practicing alone.
The payments are evenly split between each practitioner.
Clinical psychologists and clinical social workers
Diagnostic and therapeutic services provided by clinical
psychologists are paid under the physician fee schedule.
Payments for services provided by clinical social workers are
equal to 75 percent of the amount allowed for clinical
psychologists. Some services are subject to the psychiatric
services limitation which limits Medicare payments for some
services to 50 percent of incurred expenses.
Physical or occupational therapists
Payments for physical therapy and occupational therapy
services are made under the physician fee schedule. In 1999, an
annual $1,500 per-beneficiary limit applied to all outpatient
physical therapy services (including speech-language pathology
services), except for those furnished by a hospital outpatient
department (OPD). A separate $1,500 limit applied to all
outpatient occupational therapy services except for those
furnished by hospital OPDs. Therapy services furnished as
incident to physicians professional services were included in
these limits.
The $1,500 limits were to apply each year. However, BBRA
1999 suspended application of these limits in 2000 and 2001.
Thus, no limits apply in these 2 years. The limits are slated
to apply again in 2002.
Clinical Laboratory Services
Medicare provides coverage for diagnostic clinical
laboratory services. These services may be provided by an
independent laboratory, a physician's office laboratory, or a
hospital laboratory to outpatients. Since 1984, Medicare has
paid for clinical laboratory services on the basis of a fee
schedule. Fee schedules have been established on a carrier
service area basis. The law set the initial payment amount for
services performed in physicians' offices or independent
laboratories at the 60th percentile of the prevailing charge
established for the 12-month period beginning July 1, 1984.
Similarly, the initial fee schedule payment amount for services
provided by hospital-based laboratories serving hospital
outpatients was set at the 62d percentile of the prevailing
charge level. Subsequent amendments to the payment rules
limited application of the hospital fee schedule to ``qualified
hospitals.'' A qualified hospital is a sole community hospital
(as that term is used for payment purposes under Medicare's
hospital prospective payment system (PPS)) which provides some
clinical diagnostic tests 24 hours a day in order to serve a
hospital emergency room which is available to provide services
24 hours a day, 7 days a week.
The fee schedule payment amounts have been increased
periodically since 1984 to account for inflation. The updates
have generally occurred on January 1 of each year. The Balanced
Budget Act (BBA) of 1997 eliminated the updates for 1998-2002.
It also set the national ceiling on payment amounts at 74
percent of the median for all fee schedules for that test. BBA
1997 required the Secretary to adopt uniform coverage,
administration, and payment policies for laboratory tests using
a negotiated rulemaking process. The policies would be designed
to eliminate variation among carriers and to simplify
administrative requirements. A proposed rule was issued March
10, 2000.
BBA 1997 also required the Secretary to divide the country
into no more than five regions and designate a single carrier
for each region to process laboratory claims (excluding those
for services provided to inpatients of hospitals and SNFs). The
allocation of claims to a particular carrier would be based on
whether the carrier served the geographic area where the
specimen was collected by another method selected by the
Secretary. The requirement would not apply to those physicians'
office laboratories that the Secretary determined would be
unduly burdened by the application of billing responsibilities
with respect to more than one carrier. This requirement has not
been implemented.
Payment for clinical laboratory services (except for those
provided by a rural health clinic) may only be made on the
basis of assignment. The law specifically applies the
assignment requirement to clinical laboratory services provided
in physicians' offices. Payment for clinical laboratory
services equals 100 percent of the fee schedule amount; no
beneficiary cost sharing is imposed.
Laboratories must meet the requirements of the Clinical
Laboratory Improvement Act Amendments of 1988. This
legislation, which focused on the quality and reliability of
medical tests, expanded Federal oversight to virtually all
laboratories in the country, including physician office
laboratories.
Durable Medical Equipment and Prosthetics and Orthotics
Medicare, under part B of the program, covers a wide
variety of medical supplies if they are medically necessary and
are prescribed by a physician. Under the program, durable
medical equipment (DME) includes such items as hospital beds,
intermittent positive pressure breathing machines, blood
glucose monitors, and wheelchairs. Guidelines define DME as
equipment that: (1) can withstand repeated use; (2) is
primarily and customarily used to serve a medical purpose; (3)
generally is not useful to a person in the absence of an
illness or injury; and (4) is appropriate for use in the home.
All of these requirements must be met before an item can be
covered. The benefit also includes related supplies, such as
drugs and biologicals that are necessary for the effective use
of the product.
Medicare also covers prosthetic devices. These are defined
as items that replace all or part of an internal body organ,
such as colostomy bags, pacemakers, breast prostheses for
postmastectomy patients, parental and enteral nutrients, and
intraocular lenses. Prosthetics and orthotics include such
items as leg, arm, back and neck braces, and artificial legs,
arms, and eyes.
Reimbursement for durable medical equipment
Medicare pays for DME on the basis of a fee schedule
originally established by the Omnibus Budget Reconciliation Act
of 1987 (OBRA 1987). Under the DME fee schedule, Medicare pays
the lower of either 80 percent of the item's actual charge or
the fee schedule amount. For payment purposes, covered DME
items are classified into five groups: (1) inexpensive or
routinely purchased DME (defined as equipment that costs less
than $150, or is purchased at least 75 percent of the time);
(2) items requiring frequent and substantial servicing; (3)
customized items (defined as equipment constructed or modified
substantially to meet the needs of an individual patient); (4)
other items of DME (frequently referred to as the ``capped
rental'' category); and (5) oxygen and oxygen equipment. Some
items that do not meet the definition of DME, such as
disposable surgical dressings, are also covered under the fee
schedule.
In general, the fee schedule payment rates for DME are
determined locally (on a statewide basis). However, these local
payments are subject to floor and ceiling limits determined
nationally. Medicare will not pay less than 85 percent of the
median of all local payment amounts (floor), and will not pay
more than 100 percent of this median (ceiling).
Prosthetics and orthotics are also paid according to a fee
schedule similar to the DME fee schedule. The payment rates are
determined regionally and are subject to national limits which
also have ceilings and floors. The floor is 90 percent of the
weighted average of all regional payment amounts, and the
ceiling is 120 percent of this weighted average.
The fee schedules are generally updated annually by the
CPI-U. However, BBA 1997 froze payments for DME at the 1997
level for fiscal years 1998-2002. For oxygen and oxygen
equipment, BBA 1997 reduced payment limits beginning in fiscal
year 1999 to 70 percent of 1997 levels. The update for
prosthetics and orthotics was limited to 1.0 percent through
fiscal year 2002. The Balanced Budget Refinement Act (BBRA) of
1999 amended this provision as it related to DME (including
oxygen), allowing an update for fiscal year 2001 equal to 0.3
percent over fiscal year 2000 levels; for fiscal year 2002 the
update is 0.6 percent over fiscal year 2000 levels. Prosthetics
and orthotics updates were not affected by BBRA 1999.
Medicare pays for a few items of medical equipment on a
reasonable cost basis, rather than under the fee schedule.
These include splints, casts, home dialysis equipment,
therapeutic shoes, and blood products. BBA 1997 authorized the
Secretary to establish fee schedules for these items;
regulations were proposed in July 1999.
Table 2-20 shows total Medicare spending in calendar year
1998 for DME, prosthetics and orthotics, and certain other
items.
Inherent reasonableness authority.--If the Secretary
determines that using standard procedures to calculate payment
for an item under the fee schedule results in an amount which
is ``grossly excessive or grossly deficient and not inherently
reasonable,'' the Secretary is authorized to increase or
decrease the payment amount accordingly. The authority to make
these adjustments is generally referred to as the inherent
reasonableness authority. It involves a complex procedure of
investigation, commentary, and notification.
BBA 1997 sought to simplify the procedure and widen the
application of this authority, requiring HCFA to publish
criteria for determining if a fee schedule charge was
inherently unreasonable, and the factors to be used in
determining charges that are realistic and equitable. Using
these criteria, the Secretary would be permitted to adjust
payment levels. HCFA published interim final regulations (63
Federal Register 687, January 7, 1998) naming criteria such as
competitiveness in a particular marketplace, changes in
technology or supplier costs, and amounts paid by other
purchasers in the same area. However, industry voiced concerns
about how use of this authority might affect prices and
beneficiary access to services. As a result, in BBRA 1999,
Congress prohibited use of the inherent reasonableness
authority until the GAO reports on how the authority is used.
TABLE 2-20.--MEDICARE SPENDING FOR DURABLE MEDICAL EQUIPMENT,
PROSTHETICS, ORTHOTICS, AND CERTAIN OTHER ITEMS, CALENDAR YEAR 1998
[In millions of dollars]
------------------------------------------------------------------------
Medicare
Category spending
------------------------------------------------------------------------
Inexpensive/routinely purchased \1\.......................... $633.9
Items with frequent maintenance \2\.......................... 168.1
Customized items \3\......................................... 43.5
Capped rental \4\............................................ 1,102.3
Oxygen \5\................................................... 1,621.3
Prosthetics/orthotics \6\.................................... 937.5
Surgical dressings........................................... 54.3
Supplies/accessories......................................... 64.6
Parenteral/enteral nutrients................................. 803.0
Other........................................................ 8.0
----------
Total.................................................. 5,436.6
------------------------------------------------------------------------
\1\ Inexpensive defined as equipment for which the purchase price does
not exceed $150. Routinely purchased defined as equipment that is
acquired 75 percent of the time by purchase. These items include
commode chairs, electric heat pads, bed rails, and blood glucose
monitors.
\2\ Paid on a rental basis until medical necessity ends and includes
such items as ventilators and continuous and intermittent positive
breathing machines.
\3\ Includes such items as wheelchairs adapted specifically for an
individual. Payment based on individual determination.
\4\ Items of DME paid on a monthly rental basis not to exceed a period
of continuous use of 15 months. Includes such items as hospital beds
and wheelchairs.
\5\ Payment for oxygen and oxygen equipment based on a monthly rate per
beneficiary. Payment not made for purchased equipment except where
installment payments continue.
\6\ These items include covered prosthetic and orthotic devices (except
for items included in the categories ``customized items'' and ``items
requiring frequent maintenance,'' transcutaneous electrical nerve
stimulators, parenteral/enteral nutritional supplies and equipment,
and intraocular lenses).
Source: Health Care Financing Administration, Office of Information
Services. Data from the Division of Information Distribution.
Administering the DME benefit
HCFA enters into contracts with insurance companies known
as carriers under part B of Medicare, to administer the
program, i.e., to process claims and make payments. In the case
of DME, administration is centralized in four regional carriers
(known as DME regional carriers, or DMERCs) who are responsible
for processing claims for all beneficiaries living within their
areas. As a result of the consolidation, which occurred in
1992, variation in coverage policy and utilization patterns has
been reduced.
Suppliers provide Medicare beneficiaries with medical
equipment and bill the regional carrier in their area. Most
suppliers are small entities located in areas where the demand
is greatest. Before being issued a Medicare supplier number,
suppliers must comply with various standards. These include
maintaining a physical location, filling orders from their own
inventories or under contract with another company, being
responsible for deliveries to beneficiaries and honoring all
product warranties, and providing proof of appropriate
liability insurance. BBA 1997 required that suppliers provide a
$50,000 surety bond issued by a company approved by the
Treasury Department. Although regulations have been proposed
for this requirement, they have not been finalized.
Competitive bidding
Investigations have shown that Medicare pays higher prices
for certain medical supplies than those paid by other health
care insurers and other government agencies, including the
Department of Veterans Affairs. In order to lower payments, the
Secretary currently must initiate the inherent reasonableness
process or rely on legislation. Many observers suggested
granting HCFA the authority to engage in a competitive bidding
arrangement similar to the one used by the Department of
Veterans Affairs. BBA 1997 provided such authority on a limited
basis. HCFA was authorized to establish five 3-year competitive
bidding demonstration projects.
With the demonstration projects, HCFA intends to test how
effective competitive bidding is for the Medicare Program.
Goals for the projects are to maintain beneficiary access to
services and limit their out-of-pocket expenses while lowering
Medicare's payment for medical equipment. The projects will
also prevent Medicare from dealing with suppliers who engage in
fraudulent business practices.
The first demonstration project site selected was in Polk
County, FL. Beginning in 1999, suppliers submitted bids to
HCFA, competing for the right to supply certain medical
equipment to the 92,000 Medicare beneficiaries in the area.
Bids were evaluated on the basis of quality and price. To
maintain beneficiary access to the medical equipment, HCFA
named between 4 and 13 companies for each item. HCFA expects
that savings will average 17 percent on medical equipment
overall, and will be as high as 30 percent for some products.
A second demonstration project is expected to begin in
January 2001 in the San Antonio area of Texas. The project,
involving about 112,000 Medicare beneficiaries, will be similar
to the Polk County project, although different products will be
involved. In 1998, Medicare paid an average of $287 per
beneficiary in the San Antonio area for medical equipment.
Hospital Outpatient Department Services
Hospital outpatient department (OPD) services for Medicare
beneficiaries are paid under Medicare part B. Services provided
in OPDs include: (1) emergency room and clinic services; (2)
surgery and operating rooms; (3) laboratory and pharmacy
services; (4) physical therapy and rehabilitation services; (5)
DME; and (6) chemotherapy and radiation therapy. OPDs also
provide diagnostic and preventive procedures such as radiology,
computer axial tomography (CAT) scans, magnetic resonance
imaging, endoscopies, and colonoscopies.
Table 2-21 shows the percent distribution of hospital OPD
charges by type of service provided to Medicare beneficiaries
in 1998. For example, it shows that, of the $50.6 billion in
hospital outpatient charges (table 2-22) for Medicare
beneficiaries, 20.6 percent were for radiology services, 12.8
percent were for laboratory services, and so forth.
TABLE 2-21.--PERCENT DISTRIBUTION OF HOSPITAL OUTPATIENT DEPARTMENT
CHARGES UNDER MEDICARE, BY TYPE OF SERVICE, 1998
------------------------------------------------------------------------
Service OPD charges
------------------------------------------------------------------------
Radiology.................................................. 20.6
Laboratory................................................. 12.8
Operating room............................................. 11.4
End-stage renal disease.................................... 6.6
Pharmacy................................................... 6.1
Emergency room............................................. 3.3
Clinic..................................................... 1.6
Rehabilitation............................................. 2.7
Medical/surgical supplies.................................. 9.1
All other \1\.............................................. 25.9
------------
Total.................................................. 100.0
------------------------------------------------------------------------
\1\ Includes computerized axial tomography, durable medical equipment,
blood, and so forth.
Note.--Total may not add due to rounding.
Source: Health Care Financing Administration.
TABLE 2-22.--MEDICARE HOSPITAL OUTPATIENT CHARGES AND REIMBURSEMENTS BY TYPE OF ENROLLMENT AND YEAR SERVICE
INCURRED, SELECTED YEARS 1974-98
----------------------------------------------------------------------------------------------------------------
Number of Charges for Program payments
SMI \1\ covered --------------------------------------
Type of enrollment and year of service enrollees services Percent of
(in (in Amount (in Per covered
thousands) thousands) thousands) enrollee charges
----------------------------------------------------------------------------------------------------------------
All beneficiaries:
1974....................................... 23,166,570 $535,296 $323,383 $14 60.4
1976....................................... 24,614,402 974,708 630,323 26 64.7
1978....................................... 26,074,085 1,384,067 923,658 35 66.7
1980....................................... 27,399,658 2,076,396 1,441,986 52 69.4
1982....................................... 28,412,282 3,164,530 2,203,260 78 69.6
1983....................................... 28,974,535 3,813,118 2,661,394 92 69.8
1984....................................... 29,415,397 5,129,210 3,387,146 115 66.0
1985....................................... 29,988,763 6,480,777 4,082,303 136 63.0
1986....................................... 30,589,728 8,115,976 4,881,605 160 60.1
1987....................................... 31,169,960 9,794,832 5,690,786 183 58.2
1988....................................... 31,617,082 11,833,919 6,371,704 202 53.8
1989....................................... 32,098,770 14,195,252 7,160,586 223 50.4
1990....................................... 32,635,800 18,346,471 8,171,088 250 44.5
1991....................................... 33,239,840 22,016,673 8,612,320 259 39.1
1992....................................... 33,956,460 26,799,501 9,941,391 293 37.1
1993....................................... 34,642,500 32,026,576 10,938,545 316 34.2
1994....................................... 35,178,600 36,323,649 11,813,522 336 32.6
1995 \2\................................... 31,806,740 40,476,180 12,933,358 407 31.9
1996....................................... 31,775,280 44,564,665 13,896,048 437 31.2
1997....................................... 31,022,040 47,888,129 14,382,561 464 30.0
1998....................................... 30,304,340 50,607,564 14,212,983 469 28.1
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-98.................................... 1.1 20.9 17.1 15.8 NA
1974-84.................................... 2.4 25.4 26.5 23.4 NA
1984-98.................................... 0.2 17.8 10.8 10.6 NA
================================================================================================================
Aged:
1974....................................... 21,421,545 394,680 220,742 10 55.9
1976....................................... 22,445,911 704,569 432,971 19 61.5
1978....................................... 23,530,893 1,005,467 648,249 28 64.5
1980....................................... 24,680,432 1,517,183 1,030,896 42 69.9
1982....................................... 25,706,792 2,402,462 1,645,064 64 68.5
1983....................................... 26,292,124 2,995,784 2,066,207 79 69.0
1984....................................... 26,764,150 4,122,859 2,679,571 100 65.0
1985....................................... 27,310,894 5,210,762 3,211,744 118 61.6
1986....................................... 27,862,737 6,529,273 3,809,992 137 58.4
1987....................................... 28,382,203 7,859,038 4,522,841 159 56.4
1988....................................... 28,780,154 9,790,273 5,098,546 177 52.1
1989....................................... 29,216,027 11,855,127 5,767,589 197 48.7
1990....................................... 29,691,180 15,384,510 6,563,454 221 42.7
1991....................................... 30,183,480 18,460,835 6,842,329 227 37.1
1992....................................... 30,722,080 22,253,657 7,741,774 252 34.8
1993....................................... 31,162,480 26,556,415 8,522,089 273 32.1
1994....................................... 31,443,800 29,768,892 9,116,610 290 30.6
1995 \2\................................... 28,020,760 33,110,441 9,900,199 353 29.9
1996....................................... 27,849,640 36,099,678 10,542,937 379 29.2
1997....................................... 27,046,120 38,728,484 10,861,323 402 28.0
1998....................................... 26,243,140 41,945,972 10,681,369 407 26.0
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-98.................................... 0.8 21.5 17.5 16.7 NA
1974-84.................................... 2.3 26.4 28.4 25.9 NA
1984-98.................................... -0.1 18.0 10.4 10.5 NA
================================================================================================================
Disabled:
1974....................................... 1,745,019 140,617 102,641 59 73.0
1976....................................... 2,168,467 270,139 197,352 91 73.1
1978....................................... 2,543,162 378,600 275,409 108 72.7
1980....................................... 2,719,226 559,213 411,090 152 73.5
1982....................................... 2,705,490 762,068 558,195 206 73.2
1983....................................... 2,682,411 817,335 595,187 222 72.8
1984....................................... 2,651,247 1,006,351 707,575 267 70.3
1985....................................... 2,677,869 1,270,015 870,560 325 68.5
1986....................................... 2,726,991 1,586,703 1,071,613 393 67.5
1987....................................... 2,787,757 1,773,664 1,167,945 417 65.8
1988....................................... 2,836,928 2,043,646 1,273,158 449 62.3
1989....................................... 2,882,743 2,340,124 1,392,897 483 59.5
1990....................................... 2,944,620 2,961,961 1,607,634 546 54.3
1991....................................... 3,056,360 3,555,838 1,769,991 579 49.8
1992....................................... 3,234,380 4,545,843 2,199,617 680 48.4
1993....................................... 3,480,020 5,470,161 2,416,456 694 44.2
1994....................................... 3,734,800 6,463,757 2,696,912 722 41.7
1995 \2\................................... 3,785,980 7,465,739 3,033,158 801 40.6
1996....................................... 3,925,640 8,464,987 3,353,211 854 39.6
1997....................................... 3,975,920 9,159,645 3,521,238 886 38.4
1998....................................... 4,061,200 9,561,592 3,531,614 870 36.9
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-98.................................... 3.6 19.2 15.9 11.9 NA
1974-84.................................... 4.6 27.4 26.4 20.9 NA
1984-98.................................... 3.1 17.4 12.2 8.8 NA
----------------------------------------------------------------------------------------------------------------
\1\ 1974 is the first full year of coverage for disabled beneficiaries under Medicare.
\2\ Beginning in 1995, Medicare enrollees in managed care plans are not included in the data.
NA--Not applicable.
Source: Health Care Financing Administration, Office of Strategic Planning.
Background
In the early years of the Medicare Program, Medicare paid
for both inpatient and outpatient hospital care based on a
hospital's reasonable costs attributable to caring for Medicare
beneficiaries. These were retrospective payment systems,
meaning payment for the costs incurred in providing care was
determined and made after the service was rendered.
Payment systems for hospital inpatient care and outpatient
services were separated in 1983 when a new prospective system
was implemented for inpatient care. Under that arrangement, a
hospital receives a fixed payment, known in advance of
providing care, covering all care and services required by a
patient during a hospital stay (exclusive of physician fees)
and determined by the diagnosis-related group (DRG) into which
the patient is classified at admission. However, outpatient
services remained under the costs-or-charges retrospective
payment arrangement.
Throughout the 1980s, Medicare payments for hospital
outpatient services grew as the volume of services provided in
that setting increased. Although growth in the Medicare
population contributed to increased utilization of outpatient
care, a substantial share of the growth in the volume of
outpatient services is attributable to advances in medicine and
technology that permit procedures formerly restricted to the
inpatient hospital setting to be provided safely on an
outpatient basis. Implementation in 1983 of the inpatient PPS,
which included aggressive management of inpatient utilization,
also led to a shift in care from hospital inpatient to
outpatient departments. Currently, on average, outpatient
services generate about half of all hospital revenues.
Since the early 1980s, Medicare's payments for OPD services
have grown for reasons other than increased volume, and that
growth is often attributed to the lack of incentives for
efficiency or cost control inherent in the retrospective cost-
based payment system. Congress sought to contain the rate of
increase in Medicare payments for certain outpatient services
by requiring implementation of ``fee schedules'' (a form of
PPS) to pay for those services. For example, Congress required
HCFA to establish fee schedules for many outpatient diagnostic
procedures and tests; provision of orthotics, prosthetics, and
other DME; dialysis for persons with end-stage renal disease
(ESRD); and surgeries that might also take place in another
outpatient setting such as ambulatory surgical centers (ASCs).
These fee schedules save Medicare money because the amounts
paid are generally less than payments under retrospective cost
reimbursement systems.
In the Omnibus Budget Reconciliation Acts of 1986 and 1990,
Congress directed the Secretary of the U.S. Department of
Health and Human Services (DHHS) to develop a PPS for all
hospital OPD care. In addition, to achieve more immediate
savings, legislation required across-the-board reductions in
Medicare payments for hospital operating costs and capital
costs (including those associated with outpatient care)
starting in 1990.
Although Medicare currently uses fee schedules for some OPD
services, payment for other OPD services have remained under
the retrospective costs-or-charges system, resulting in an
extremely complex set of payment rules. For instance, payments
for OPD services such as clinic and emergency room visits have
been paid based on the lesser of hospital costs or charges.
Certain surgeries carried out in OPDs, but which are also
approved by Medicare to be provided in ASCs are paid the lower
of costs, charges, or a blended payment that incorporates the
ASC fee schedule amount (again, excluding physician charges).
Payment for costs for certain radiology services and diagnostic
procedures are based on a blended payment that includes, in
part, the Medicare fee schedule for physician services. To add
to the complexity, blended payment calculations may vary among
different types of hospitals. Some OPD services are paid for
exclusively according to a fee schedule (e.g., laboratory
tests, physical therapy, prosthetics and orthotics, mammography
screening, and some surgical dressings and supplies). Kidney
dialysis services, which are often provided in specialized
dialysis centers to which a PPS applies, are also paid under
the dialysis PPS if provided in an OPD.
Beneficiary and hospital overpayment issues
The complex arrangements under which Medicare's payments
for OPD care have been determined has meant that, often, the
final Medicare approved payment amount is not known until a
hospital's annual cost reports are settled with Medicare, which
might be long after services to any individual beneficiary are
rendered. However, the Social Security Act permits providers to
charge Medicare beneficiaries 20 percent of the reasonable and
customary charges for part B-covered services. In the case of
OPD services for which payment is based on the blended rate
formula, the amount Medicare eventually would approve for the
service might be considerably less than the hospital's charge.
Thus, hospital OPDs have often billed beneficiaries at the time
of service for 20 percent of charges rather than 20 percent of
the amount computed and approved under Medicare's formulas. As
a result, beneficiaries are ``overcharged,'' sometimes paying
as much as 50 percent of the Medicare approved amount. The
Medicare Payment Advisory Commission reported in 1999 that
beneficiary coinsurance for OPD care represented about 47
percent of the total Medicare payment hospitals received for
outpatient services. ``Medigap'' insurance policies, which
Medicare beneficiaries may purchase to pay Medicare's
deductibles, copayments and coinsurance, relieve policyholders
from these high charges, but the insurance industry has noted
that the prices of their policies reflect such overcharges.
When Medicare paid for hospital outpatient services under
the blended rate formula, the program's share of the payment to
the hospital was computed as if the beneficiary had paid only
20 percent of the Medicare approved amount, including the
limited fee schedule payment, instead of 20 percent of the
hospital's charges, which generally disregarded the limitations
of a fee schedule. Thus, the Medicare formula that assumed the
beneficiary had paid a lesser amount resulted in a larger
Medicare payment, and, consequently, hospitals were
``overpaid'' by Medicare. This hospital overpayment situation
was referred to as the ``formula-driven overpayment.''
The Balanced Budget Act (BBA) of 1997
Despite implementation of certain fee schedules and across-
the-board reductions in payments, Medicare payments to hospital
OPDs rose at an annual rate of over 12 percent from 1983 to
1997 and increased from 7 percent to 20 percent as a share of
all Medicare payments to hospitals. Many saw the patchwork
payment arrangements for OPD care as fraught with disincentives
for hospitals to provide care efficiently. Congress responded
to these cost issues in BBA 1997. In order to end the complex
and inequitable retrospective cost and charge-based
reimbursement system, the law directed the Secretary of DHHS to
implement the OPD PPS in 1999. It eliminated the formula-driven
overpayment, effective at the start of fiscal year 1998, a move
that resulted in an almost immediate reduction in Medicare
payments to hospitals for those OPD services for which Medicare
payments duplicated beneficiary payments. BBA 1997 also
extended the across-the-board reductions of 5.8 percent for
operating costs and 10 percent for capital costs through 1999.
BBA 1997 established a procedure to bring beneficiary cost
sharing for OPD services gradually into line at 20 percent of
Medicare approved amounts by ``freezing'' the dollar amount
hospitals may charge beneficiaries at 20 percent of the median
of all hospital outpatient charges per procedure in 1996,
updated to the time of implementation of the PPS. Thus, over
time, as Medicare's payments under the new PPS rise according
to an indexing formula, the ``frozen'' dollar amounts hospitals
may charge beneficiaries will come to equal 20 percent of
Medicare's PPS payments, and Medicare's payment will be 80
percent of the full amount approved under the new system.
However, for those services for which the spread between the
median charge and the PPS approved amount is large, it could
take many years before the beneficiary copayment is 20 percent
of the amount specified in the PPS. The law allows hospitals
voluntarily to limit beneficiary copayments to 20 percent and
to disseminate information regarding their reduced beneficiary
charges.
On September 8, 1998, HCFA published proposed OPD PPS
regulations for comment. Although the new PPS was then
scheduled for implementation in 1999, HCFA delayed
implementation until after the start of the year 2000 in order
to accommodate resolution of ``Y2K'' data processing problems.
HCFA extended the public comment period on the proposed
regulations through July 30, 1999, and published final rules on
April 7, 2000. Implementation began August 1, 2000.
Design and implementation of the outpatient department PPS
Under the hospital outpatient PPS included in final rules
published by HCFA, individual OPD services that are similar
clinically and also in terms of resource utilization are
arranged into groups according to an ambulatory payment
classification (APC) system. The system includes 451 payment
groups. A payment amount is established for each group and is
the same for each service in the group. The payments cover
hospital facility and nonphysician personnel costs. The labor
component of a payment is adjusted to reflect regional
variations.
Services delivered in an OPD that are already covered by a
PPS or fee schedule are excluded from the OPD PPS, but will
continue to be paid under the existing applicable system. The
OPD PPS does not apply for outpatient services provided to
patients receiving services under part A in a skilled nursing
facility (SNF) when the service is part of a patient's SNF plan
of care and which is furnished by the hospital under an
arrangement with the SNF.
Hospitals excluded from the outpatient PPS altogether
include certain facilities in Maryland that are paid under a
special State program and critical access hospitals that are
paid under a reasonable cost-based system according to rules in
the Social Security Act.
Balanced Budget Refinement Act (BBRA) of 1999
The proposed PPS regulations promulgated on September 8,
1998, raised concerns about the adequacy of the payments under
that system for certain kinds of services, patients, and
hospitals. As a result, in BBRA 1999 (Public Law 106-113,
November 19, 1999), Congress legislated several major changes
to Medicare payments under the hospital OPD PPS. The BBRA 1999:
(1) requires the Secretary of DHHS to provide payments (within
specified limits, and on a budget neutral basis) over and above
PPS payments for certain high cost (``outlier'') patients; (2)
as a transition to the PPS, for 2-3 years, on a budget neutral
basis, requires the Secretary of DHHS to provide ``passthrough
payments'' to hospital OPDs above and beyond PPS payments for
costs of certain ``current innovative'' and ``new, high cost''
devices, drugs, and biologicals; (3) limits the cost range of
items or services that are included in any one PPS payment
category so that the highest median (or mean) cost of an item
or service in the group cannot be more than two times higher
than the lowest median (or mean) cost for an item or service
within the group; (4) requires the Secretary of DHHS to review
the PPS groups and amounts annually and to update them as
necessary; (5) as a transition to the PPS, through 2003,
establishes ``transitional corridors'' which phase in
reductions in aggregate Medicare payments individual hospitals
experience due to the PPS; (6) provides special ``hold
harmless'' payments until January 1, 2004, for small, rural
hospitals to ensure that they receive no less under the
outpatient PPS than they would have received in aggregate under
the ``pre-BBA'' system and provides the same protection
permanently for cancer hospitals; (7) caps beneficiary
copayments for OPD care at the amount of the beneficiary
deductible for inpatient care ($776 in 2000, and indexed for
subsequent years); (8) requires that the pre-PPS payment base
used as the budget neutrality benchmark for Medicare spending
under the PPS include beneficiary coinsurance amounts as paid
under the pre-PPS system (i.e., 20 percent of hospital
charges); (9) requires coverage of the cost of implantable
items; (10) allows the Secretary of DHHS to use either the mean
or the median of hospital costs when establishing weights that
determine payment amounts under the PPS; (11) extends across-
the-board reductions to payments for hospital operating costs
and capital costs until implementation of the PPS; (12) allows
reclassification of certain hospitals as urban or rural.
The ``budget neutral'' requirement applicable to some of
these changes means that the total cost of the Medicare Program
is to be the same with the change as it would have been without
the change. Thus, program cost increases would require payment
adjustments elsewhere to offset those increases.
According to HCFA data, on average, hospitals would receive
4.6 percent more in payments under the new outpatient PPS,
including the BBRA 1999 changes, than under the retrospective
cost-based system.
On December 8, 1999, the Congressional Budget Office (CBO)
estimated that the provisions of BBRA 1999 applicable to
Medicare OPD payments would add $11.2 billion in payments to
hospitals over the period fiscal years 2000-2009.
Medicare payments to outpatient departments
Table 2-22 summarizes the history of Medicare payments for
hospital outpatient services from 1974 through 1998. (Starting
in 1995, the data include only beneficiaries enrolled in
traditional fee-for-service Medicare and exclude those who
elected to enroll in a managed care plan.) The total number of
beneficiaries enrolled in part B grew by about 31 percent
during this time period, at an average annual rate of about 1
percent, although disability caseload growth rates were higher
than the rate of increase of elderly beneficiaries. The table
documents the dramatic increase in hospital outpatient
utilization and Medicare payments for OPD services since the
early 1980s. Medicare payments increased 44-fold, from $323
million in 1974 to $14.2 billion in 1998, with annual rates of
increase averaging as high as 26.5 percent from 1974 to 1984.
The substantial rates of increase in OPD payments per part B
enrollee (from $14 in 1974 to $469 in 1998) reflect the
increase in the volume of services provided in OPDs as well as
growth in payments for those services under the retrospective
cost-based payment system.
Since 1983, hospital charges for OPD care for Medicare
beneficiaries increased by 17.8 percent per year, on average.
Medicare's payments for OPD services increased by 10.8 percent
per year during that time period (table 2-22). The table shows
that Medicare's payments as a percent of hospital charges for
Medicare-covered OPD services has declined from nearly 70
percent in 1983 to 28.1 percent in 1998. This declining ratio
reflects primarily the high rates of increase in hospital
charges and, to a lesser extent, limits on the rate of increase
in Medicare's payments for OPD services due to fee schedules
and blended payment formulas. It also reflects the increasing
share of charges billed to beneficiaries. Payment systems under
Medicare have included incentives for hospitals to increase
their OPD charges. For example, since implementation in 1983 of
the PPS for hospital inpatient care, some hospitals have
shifted costs and charges from inpatient accounts to OPD
accounts because they receive higher payments from Medicare
under the outpatient payment formulas. In addition, because
hospitals have routinely billed Medicare beneficiaries (or
their Medigap plan) for 20 percent of charges, higher charges
generate greater revenues from beneficiaries.
Ambulatory Surgical Center Services
Services provided in an ambulatory surgical center (ASC)
are paid under Medicare part B. An ASC is a facility where
surgeries that do not require an inpatient hospital admission
are performed. ASCs treat only patients who have already seen a
health care provider and for whom surgery has been selected as
an appropriate treatment. All ASCs must have at least one
dedicated operating room and the equipment needed to perform
surgery safely and to provide for recovery from anesthesia.
Patients electing to have surgery in an ASC arrive for a
scheduled appointment on the day of the procedure, have the
surgery in an operating room, and recover under the care of the
nursing staff before leaving for home.
Medicare began covering ASC services in 1982 as a way to
reduce costs for surgeries generally carried out on a hospital
inpatient basis but that could be performed safely in a less
costly outpatient setting. ASCs must meet certain conditions
specified by Medicare in order to participate in the program.
Some ASCs limit services to one type of surgery, such as
ophthalmology, and others provide a variety of procedures,
including gastroenterological, orthopedic, pain block, urology,
podiatry, and ear, nose, and throat procedures. About half of
all ASC procedures provided under Medicare in 1999 were related
to cataracts or other types of eye surgery.
Currently, over 2,500 procedures are included on the
Medicare-approved list of ASC procedures. HCFA determines which
procedures will constitute the ASC list on the basis of certain
criteria related to the safety, appropriateness, and
effectiveness of performing the procedure in an ASC setting.
Table 2-23 shows the procedures most often carried out for
Medicare beneficiaries in ASCs in 1999, the volume of those
procedures for Medicare beneficiaries, and Medicare's total
payments per procedure in that year.
TABLE 2-23.--AMBULATORY SURGICAL CENTER UTILIZATION BY MEDICARE BENEFICIARIES IN 1999: INCIDENCE OF HIGH VOLUME
PROCEDURES AND MEDICARE PAYMENTS
----------------------------------------------------------------------------------------------------------------
Medicare
Current procedural terminology code Short descriptor Volume of payments (in
Medicare cases thousands)
----------------------------------------------------------------------------------------------------------------
66984......................................... Remove cataract, insert lens.... 688,700 $689,700
66821......................................... After cataract laser surgery.... 208,342 208,342
43239......................................... Upper GI endoscopy, biopsy...... 133,783 39,791
45378......................................... Diagnostic colonoscopy.......... 114,330 37,283
45385......................................... Colonoscopy, lesion removal..... 74,883 24,210
45380......................................... Colonoscopy and biopsy.......... 58,143 18,321
45384......................................... Colonoscopy..................... 41,948 12,985
52000......................................... Cystourethroscopy............... 35,359 8,348
43235......................................... Upper GI endoscopy, diagnosis... 33,685 7,057
43248......................................... Upper GI endoscopy, guidewire... 16,029 4,824
----------------------------------------------------------------------------------------------------------------
Note.--Data for calendar year 1999 are preliminary and are about 95 percent complete.
Source: Health Care Financing Administration.
Payment for ambulatory surgical centers
From the start of Medicare coverage of ASC services,
Medicare-based payments on a prospective payment fee schedule.
This system was one of the first applications of a fee schedule
for outpatient, or ambulatory, care.
The two primary cost components of a surgical procedure are
the physician's (or practitioner's) professional fees for
performing the procedure and the costs associated with services
furnished by the facility where the surgery is performed.
Medicare pays ASCs for facility and nonphysician personnel
costs incurred in connection with performing specific surgical
procedures. Payments are based on ``reasonable overhead
allowances.'' For example, items included among those covered
by the allowances are nursing and technician services;
supplies; drugs and biologicals; surgical dressings;
housekeeping services; and use of the facility. As with other
Medicare services, physician and certain practitioner fees are
paid under a separate system.
The Medicare-approved ASC procedures (about 2,500
procedures) are consolidated into 8 payment groupings, each of
which has 1 payment amount; that amount is adjusted for
different geographic regions using the hospital wage index.
After a beneficiary meets the part B annual deductible,
Medicare pays ASCs 80 percent of the prospectively determined
rate, and the beneficiary is responsible for 20 percent. In
addition, Medicare and the beneficiary pay the physician or
surgeon separately, with Medicare paying 80 percent of the
approved amount under the physician fee schedule and the
beneficiary being responsible for 20 percent.
Growth in services
At the end of 1983, 1 year after Medicare began coverage of
ASC care, 239 ASCs were approved to provide services for
beneficiaries. Use of ASCs grew rapidly, and, at the end of
1998, over 2,300 facilities participated in Medicare. From 1993
through 1998, the volume of Medicare-covered ASC services
provided grew from 1.06 million to 1.9 million. Medicare
payments to ASCs increased at an average of 12.8 percent per
year, from $495 million in 1993 to $902 million in 1998. Table
2-24 shows the annual volume of ASC services and Medicare
payments since 1993. Note that calendar year 1999 data do not
include a full year of payments.
TABLE 2-24.--AMBULATORY SURGICAL CENTERS: UTILIZATION AND MEDICARE
PAYMENTS, 1993-99
------------------------------------------------------------------------
Number of Medicare payments
Year services to ASCs
------------------------------------------------------------------------
1993................................. 1,059,644 $495,313,388
1994................................. 1,298,740 572,001,981
1995................................. 1,499,866 664,437,432
1996................................. 1,655,538 743,098,264
1997................................. 1,827,410 832,846,641
1998................................. 2,012,271 902,920,576
1999................................. 1,921,356 898,137,203
------------------------------------------------------------------------
Average annual increase 1993-98...... 12.8 percent
------------------------------------------------------------------------
Note.--Calendar year 1999 data are preliminary and are about 95 percent
complete.
Source: Health Care Financing Administration.
Starting January 1, 1995, the Secretary of DHHS has been
required to update ASC rates every 5 years based on a survey of
the actual audited costs incurred by a representative sample of
ASCs for a representative sample of procedures, and to increase
annual payments in the intervening years by the Consumer Price
Index for All Urban Consumers (CPI-U). However, for fiscal
years 1998-2002, BBA 1997 reduced the annual update to the CPI-
U increase minus 2 percentage points. Because the fiscal year
1999 adjustment would have been very small, HCFA made no
adjustment for that year.
Effective October 1, 1999 (for fiscal year 2000), payments
for the eight categories into which all ASC procedures are
grouped were updated by the CPI-U increase minus 2 percentage
points. The increase was 0.8 percent. As of October 1, 1999,
the base rates (prior to geographic adjustments) are:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Group 1.............................. $317 Group 5................. 683
Group 2.............................. 425 Group 6................. 644 + 150 for an intraocular lens
Group 3.............................. 486 Group 7................. 949
Group 4.............................. 600 Group 8................. 784 + 150 for an intraocular lens
Group 5.............................. 683
----------------------------------------------------------------------------------------------------------------
Proposed changes to ASC Medicare payments
On June 12, 1998, HCFA issued proposed rules which would
make major changes in Medicare payments to ASCs. The major
changes include replacing the eight payment groupings with an
APC system comprised of 105 payment groups; updating underlying
cost data using 1994 survey data updated to the present; and
making additions to and deletions from the list of Medicare
covered ASC procedures. Payments would range from $53 to $2,107
and would be updated by the CPI-U annually on a calendar year
basis. As of this writing, HCFA had received extensive comments
on the proposed new APC groups and payments and estimates that
final rules will be published in November 2000 for
implementation in April 2001.
Some surgical procedures approved for ASCs are also
performed in hospital outpatient departments (OPDs). In
designing the new OPD prospective payment system (PPS) and the
new APC groups for ASC procedures, HCFA aimed to keep the
grouping of surgical procedures comparable.
BBRA 1999 did not address ASC payment rates, the APC
system, or update procedures. However, it requires that, if the
Secretary implements new rates based on the 1994 data (or any
rates based on pre-99 Medicare cost survey data), those new
rates must be phased in by basing payments one-third on the new
rates in the first year, two-thirds in the second year, and
fully in the third year.
Other Part B Services
Preventive services
Screening mammograms.--Medicare covers an annual screening
mammography for all women over age 40. Payment for a mammogram
is based on the lesser of the actual charge, the amount
established for the global procedure under Medicare's fee
schedule, or the payment limit established for the procedure.
The 2000 limit is $67.81.
Screening Pap smears; pelvic exams.--Medicare authorizes
coverage for a screening Pap smear and a screening pelvic exam
once every 3 years; annual coverage is authorized for women at
high risk. Payment is based on the clinical diagnostic
laboratory fee schedule (see above). BBRA 1999 requires a
minimum payment of $14.60 for Pap tests furnished in 2000.
Prostate cancer screening tests.--BBA 1997 authorized
coverage, beginning January 1, 2000, for an annual prostate
cancer screening test for men over age 50. The test could
consist of any (or all) of the following procedures: (1) a
digital rectal exam; (2) a prostate-specific antigen blood
test; and (3) after 2002, such other procedures as the
Secretary finds appropriate for the purpose of early detection
of prostate cancer.
Colorectal screening.--BBA 1997 authorized coverage of and
established frequency limits for colorectal cancer screening
tests, effective January 1, 1998. A covered test is any of the
following procedures furnished for the purpose of early
detection of colorectal cancer: (1) screening fecal-occult
blood test (for persons over 50, no more than annually); (2)
screening flexible sigmoidoscopy (for persons over 50, no more
than one every 4 years); (3) screening colonoscopy for high-
risk individuals (limited to one every 2 years); and (4) such
other procedures as the Secretary finds appropriate for the
purpose of early detection of colorectal cancer. Payment limits
are established for the tests.
BBA 1997 required the Secretary, within 90 days of
enactment, to publish a determination on the coverage of
screening barium enema. The Secretary determined that barium
enema tests, as an alternative to either a screening flexible
sigmoidoscopy or a screening colonoscopy, are to be covered in
accordance with the same screening parameters specified for
those tests.
Diabetes screening tests.--Medicare's covered benefits
include diabetes outpatient self-management training services.
These services are defined as including educational and
training services furnished to an individual with diabetes by a
certified provider in an outpatient setting. They are covered
only if the physician who is managing the individual's diabetic
condition certifies that the services are needed under a
comprehensive plan of care to ensure therapy compliance or to
provide the individual with necessary skills and knowledge
(including skills related to the self-administration of
injectable drugs) to participate in the management of their own
condition. Certified providers for these purposes are defined
as physicians or other individuals or entities that, in
addition to providing diabetes outpatient self-management
training services, provide other items or services reimbursed
by Medicare. Providers must meet quality standards established
by the Secretary. They are deemed to meet the Secretary's
standards if they meet standards originally established by the
National Diabetes Advisory Board and subsequently revised by
organizations that participated in the establishment of
standards of the Board, or if they are recognized by an
organization representing persons with diabetes as meeting
standards for furnishing such services.
In addition, Medicare covers blood glucose monitors and
testing strips for type I or type II diabetics (without regard
to a person's use of insulin, as determined under standards
established by the Secretary in consultation with appropriate
organizations). The national payment limit for testing strips
was reduced by 10 percent beginning in 1998.
Bone mass measurements.--Bone mass measurement is covered
for the following high risk persons: an estrogen-deficient
woman at clinical risk for osteoporosis; an individual with
vertebral abnormalities; an individual receiving long-term
glucocorticoid steroid therapy; an individual with primary
hyperparathyroidism; or an individual being monitored to assess
osteoporosis drug therapy. The Secretary is required to
establish frequency limits.
Drugs/vaccines
Medicare generally does not cover outpatient prescription
drugs. Despite the general limitation, Medicare law
specifically authorizes coverage for the following drugs:
--Erythropoietin (EPO).--EPO for the treatment of anemia for
persons with chronic kidney failure.
--Osteoporosis drugs.--Injectable drugs approved for the
treatment of postmenopausal osteoporosis provided to an
individual by a home health agency (HHA). A physician
must certify that the individual suffered a bone
fracture related to postmenopausal osteoporosis and
that the individual is unable to self-administer the
drug.
--Oral cancer drugs.--Oral drugs used in cancer chemotherapy
when identical to drugs which would be covered if not
self-administered. Also covered are oral antinausea
drugs used as part of an anticancer chemotherapeutic
regimen, subject to specified conditions.
Medicare also covers immunosuppressive drugs (such as
cyclosporin) for 36 months following a covered organ
transplant. BBRA 1999 provides for a temporary extension of the
36-month limit on immunosuppressive drugs for persons otherwise
exhausting their coverage in 2000-2004. In each calendar year,
there will be an extension specified by the Secretary (as the
number of months or partial months), applicable to persons who
exhaust their benefits in that calendar year. The increase for
persons exhausting their benefits in 2000 is 8 months. The
minimum increase for persons exhausting their benefits in 2001
is 8 months.
By May 1, 2001, the Secretary may increase the number of
months for the cohort exhausting their benefits in 2001. At the
same time, the Secretary is also required to announce the
additional months of benefits that will be available for the
cohort exhausting their benefits in 2002. Similarly by May 1,
2002 and 2003, the Secretary is required to announce the number
of months that will apply to the cohort exhausting their
benefits in the following year. Total expenditures over the 5-
year period are limited to $150 million.
Medicare payment for drugs (not made on a cost or
prospective payment basis) equals 95 percent of the average
wholesale price. The Secretary is authorized to pay a
dispensing fee to pharmacies. A special payment limit ($10 per
1,000 units) applies for EPO.
Medicare also pays for influenza virus vaccines (flu
shots), pneumococcal pneumonia vaccine, and hepatitis B vaccine
for persons at risk of contracting hepatitis B. Cost-sharing
charges do not apply for pneumococcal pneumonia or influenza
virus vaccines; cost-sharing charges do apply for hepatitis B
vaccines.
Ambulance services
Medicare pays for ambulance services provided certain
conditions are met. The services must be medically necessary
and other methods of transportation must be contraindicated.
Ambulance services are currently paid on the basis of
reasonable costs when such services are provided by a hospital;
otherwise the payment is based on reasonable charge screens
developed by individual carriers based on local billings (which
may take a variety of forms). Based on these local billing
methods, carriers develop screens for one or more of the
following four main billing methods: (1) a single all inclusive
charge reflecting all services, supplies, and mileage; (2) one
charge reflecting all services and supplies, with separate
charge for mileage; (3) one charge for all services and
mileage, with separate charges for supplies; and (4) separate
charges for services, mileage, and supplies. Within each broad
payment method, additional distinctions are made based on
whether the service is basic life support service or advanced
life support, whether emergency or nonemergency transport was
used, and whether specialized advanced life services were
rendered.
The Balanced Budget Act (BBA) of 1997 specified that the
reasonable cost and charge limits would apply through 1999,
with annual increases equal to the Consumer Price Index (CPI)
minus 1.0 percentage point. A fee schedule was to be
implemented in 2000. The aggregate amount of payments in 2000
could not exceed what would be paid if the interim reductions
remained in effect in that year. Annual increases in subsequent
years would equal the CPI increase, except that in 2001 and
2002 there would be a 1.0-percentage point reduction.
Implementation of the fee schedule has been delayed until at
least 2001.
END-STAGE RENAL DISEASE SERVICES
Coverage
Medicare's End-Stage Renal Disease (ESRD) Program
established in the Social Security Amendments of 1972, covers
individuals who suffer from ESRD if they are: (1) fully insured
for Old-Age and Survivors Insurance benefits; (2) entitled to
monthly Social Security benefits; or (3) spouses or dependents
of individuals described in (1) or (2). Such persons must be
medically determined to be suffering from ESRD and must file an
application for benefits.
Benefits for qualified ESRD beneficiaries include all part
A and part B medical items and services. ESRD beneficiaries are
automatically enrolled in the part B portion of Medicare and
must pay the monthly premium for such protection.
Medicare+Choice (M+C) plans may provide ESRD benefits to the
Medicare beneficiary who has been enrolled in an M+C
organization and subsequently develops ESRD. However,
beneficiaries with ESRD cannot enroll in an M+C plan.
Table 2-25 shows expenditures, number of beneficiaries, and
the average expenditure per person for all persons with ESRD
(including the aged and disabled) from 1974 through 2005. Total
projected program expenditures for the Medicare ESRD Program
for fiscal year 2000 are estimated at $10.7 billion. In fiscal
year 2000, there are an estimated 320,005 beneficiaries,
including successful transplant patients and persons entitled
to Medicare on the basis of disability who also have ESRD.
TABLE 2-25.--END-STAGE RENAL DISEASE MEDICARE BENEFICIARIES AND PROGRAM
EXPENDITURES, 1974-2005
------------------------------------------------------------------------
Expenditures
(HI & SMI) HI Per person
Fiscal year in millions beneficiaries cost
of dollars
------------------------------------------------------------------------
1974.......................... $229 15,993 $14,319
1975.......................... 361 22,674 15,921
1976.......................... 512 28,941 17,691
1977.......................... 641 35,889 17,861
1978.......................... 800 43,482 18,398
1979.......................... 1,009 52,636 19,169
1980.......................... 1,245 54,725 22,750
1981.......................... 1,464 61,487 23,810
1982.......................... 1,640 69,267 23,676
1983.......................... 1,984 78,361 25,319
1984.......................... 2,325 87,609 26,538
1985.......................... 2,835 96,965 29,237
1986.......................... 3,165 106,568 29,699
1987.......................... 3,490 117,020 29,824
1988.......................... 3,998 128,075 31,216
1989.......................... 4,653 140,324 33,159
1990.......................... 5,251 154,575 33,971
1991.......................... 5,634 170,718 33,003
1992.......................... 6,115 182,826 33,445
1993.......................... 7,059 201,168 35,091
1994.......................... 7,902 220,972 35,758
1995.......................... 8,751 239,056 36,608
1996.......................... 9,634 256,096 37,620
1997.......................... 9,841 271,880 36,198
1998.......................... 9,943 287,589 34,573
1999.......................... 9,880 303,476 32,557
2000.......................... 10,748 320,005 33,585
2001.......................... 11,580 337,351 34,327
2002.......................... 12,316 355,488 34,645
2003.......................... 13,257 374,769 35,374
2004.......................... 14,242 395,953 35,969
2005.......................... 15,351 415,597 36,938
------------------------------------------------------------------------
Note.--Estimates for 1982-2005 are subject to revision by the Office of
the Actuary, Office of Medicare and Medicaid Cost Estimates;
projections for 1998-2005 are under the fiscal year 1996 budget
assumptions.
Source: Health Care Financing Administration, Office of the Actuary.
When the ESRD Program was created, it was assumed that
program enrollment would level out at about 90,000 enrollees by
1995. That mark was passed several years ago, and no indication
exists that enrollment will stabilize soon.
Table 2-26 shows that new enrollment for all Medicare
beneficiaries receiving ESRD services grew at an average annual
rate of 4.6 percent from 1992 to 1998. Most of the growth in
program participation is attributable to growth in the numbers
of elderly people receiving services and growth in the numbers
of more seriously ill people entering treatment. Table 2-26
shows the greatest
TABLE 2-26.--MEDICARE END-STAGE RENAL DISEASE PROGRAM INCIDENCE BY AGE, SEX, RACE, AND PRIMARY DIAGNOSIS, 1992-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of new enrollees Average
------------------------------------------------------------------------------------ Percent annual
Age, sex, race, and primary diagnosis change percent
1992 1993 1994 1995 1996 1997 1998 1997-98 change
1992-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age:
Under 15 years............................ 410 428 444 465 428 373 342 -8.3 -3.0
15-24 years............................... 1,359 1,301 1,298 1,351 1,288 1,099 1,093 -0.6 -3.6
25-34 years............................... 3,545 3,562 3,638 3,497 3,342 3,120 3,030 -2.9 -2.6
35-44 years............................... 5,892 5,738 6,068 6,438 6,342 5,951 5,891 -1.0 0.0
45-54 years............................... 7,575 7,856 8,968 9,327 9,448 9,589 9,880 3.0 4.5
55-64 years............................... 11,429 11,561 12,843 13,266 13,220 13,753 14,140 2.8 3.6
65-74 years............................... 16,530 17,147 18,832 18,640 19,550 21,472 21,712 1.1 4.6
75 years or older......................... 10,443 11,065 12,571 13,072 14,605 17,405 18,694 7.4 10.2
Sex:
Male...................................... 30,401 31,430 34,434 35,221 36,878 39,021 40,100 2.8 4.7
Female.................................... 26,782 27,228 30,228 30,835 31,345 33,741 34,682 2.8 4.4
Race:
Asian..................................... 1,317 1,441 1,684 1,509 1,570 1,415 1,531 8.2 2.5
African-American.......................... 16,621 17,115 18,675 19,162 19,790 20,451 21,145 3.4 4.1
White..................................... 37,606 38,080 41,597 41,251 42,359 46,611 47,806 2.6 4.1
Native American........................... 774 660 749 1,001 1,109 771 1,133 47.0 6.6
Other/unknown............................. 865 1,362 1,957 3,133 3,395 3,514 3,167 -9.9 4.1
Ethnicity:
Non-Hispanic.............................. 1,302 1,400 1,980 45,103 59,796 64,188 66,085 3.0 92.4
Hispanic.................................. 133 142 186 5,379 7,281 7,327 7,816 6.7 97.2
Unknown................................... 55,748 57,116 62,496 15,574 1,146 1,247 881 -29.4 -49.9
Primary diagnosis:
Diabetes.................................. 21,292 21,751 25,289 27,679 29,486 31,962 33,359 4.4 7.8
Glomerulonephritis........................ 6,535 6,565 7,161 7,267 7,361 7,078 6,933 -2.1 1.0
Hypertension.............................. 17,685 17,447 19,755 17,677 17,947 19,601 20,297 3.6 2.3
Cystic/hereditary disease................. 2,247 2,236 2,359 2,479 2,313 2,256 2,242 -0.6 0.0
Interstitial nephritis.................... 2,532 2,314 2,646 2,918 2,870 2,784 2,925 5.1 2.4
Other..................................... 3,388 3,551 3,876 4,802 5,072 5,488 5,501 0.2 8.4
Unknown................................... 2,623 2,393 2,459 2,446 2,645 2,787 2,991 7.3 2.2
Not reported.............................. 881 2,401 1,117 788 529 806 534 -33.8 -8.0
-----------------------------------------------------------------------------------------------------------
Total number of new enrollees........... 57,183 58,658 64,662 66,056 68,223 72,762 74,782 2.8 4.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Office of Clinical Standards and Quality.
rate of growth in program participation is in people over age
75, at 10.2 percent, followed by people of ages 65-74 with a
growth rate of 4.6 percent. The largest rate of growth in
primary causes of people entering ESRD treatment was diabetes.
People with diabetes frequently have multiple health problems,
making treatment for renal failure more difficult.
The rates of growth in older and sicker patients entering
treatment for ESRD indicate a shift in physician practice
patterns. In the past, most of these people would not have
entered dialysis treatment because their age and severity of
illness made successful treatment for renal failure less
likely. Although the reasons that physicians have begun
treating older and sicker patients are not precisely known, it
is clear that these practice patterns have resulted, and will
continue to result, in steady growth in the number of patients
enrolling in Medicare's ESRD Program.
ESRD is invariably fatal without treatment. Treatment for
the disease takes two forms: transplantation and dialysis.
Although the capability to perform transplants had existed
since the 1950s, problems with rejection of transplanted organs
limited its application as a treatment for renal failure. The
1983 introduction of a powerful and effective immunosuppressive
drug, cyclosporin, resulted in a dramatic increase in the
number of transplants being performed and the success rate of
transplantation.
Table 2-27 indicates that a total of 13,272 kidney
transplants were performed in Medicare-certified U.S. hospitals
in 1998. Despite the significant increases in the number and
success of kidney transplants, transplantation is not the
treatment of choice for all ESRD patients. A chronic, severe
shortage of kidneys available for transplantation now limits
the number of patients who can receive transplants. Even absent
a shortage of organs, some patients are not suitable candidates
for transplants because of their age, severity of illness, or
other complicating conditions. Finally, some ESRD patients do
not want an organ transplant.
For all of these reasons, dialysis is likely to remain the
primary treatment for ESRD. Dialysis is an artificial method of
performing the kidney's function of filtering blood to remove
waste products. There are two types of dialysis: hemodialysis
and peritoneal dialysis. In hemodialysis, still the most common
form of dialysis, blood is removed from the body, filtered and
cleansed through a dialyzer, sometimes called an artificial
kidney machine, before being returned to the body. There are
three types of peritoneal dialysis. Intermittent peritoneal
dialysis and continuous cycling peritoneal dialysis (CCPD)
requires the use of a machine while continuous ambulatory
peritoneal dialysis does not require the use of a machine.
Under peritoneal dialysis, filtering takes place inside the
body by inserting dialysate fluid through a permanent surgical
opening in the peritoneum (abdominal cavity). Toxins filter
into the dialysate fluid and are then drained from the body
through the surgical opening. Hemodialysis is usually performed
three times a week, Intermittent peritoneal dialysis is
performed once or twice a week, while continuous ambulatory
peritoneal dialysis and CCPD require daily exchanges of
dialysate fluid.
TABLE 2-27.--TOTAL KIDNEY TRANSPLANTS PERFORMED IN MEDICARE-CERTIFIED U.S. HOSPITALS, 1979-98
----------------------------------------------------------------------------------------------------------------
Living donor Cadaveric donor
Calendar year Total -------------------------------------------
transplants Number Percent Number Percent
----------------------------------------------------------------------------------------------------------------
1979................................................... 4,189 1,186 28 3,003 72
1980................................................... 4,697 1,275 27 3,422 73
1981................................................... 4,883 1,458 30 3,425 70
1982................................................... 5,358 1,677 31 3,681 69
1983................................................... 6,112 1,784 29 4,328 71
1984................................................... 6,968 1,704 24 5,364 76
1985................................................... 7,695 1,876 24 5,819 76
1986................................................... 8,976 1,887 21 7,089 79
1987................................................... 8,967 1,907 21 7,060 79
1988................................................... 8,932 1,816 20 7,116 80
1989................................................... 8,899 1,893 21 7,006 78
1990................................................... 9,796 2,091 21 7,705 79
1991................................................... 10,026 2,382 24 7,644 76
1992................................................... 10,115 2,536 25 7,579 75
1993................................................... 10,934 2,828 26 8,106 74
1994................................................... 11,312 3,000 26 8,312 73
1995................................................... 11,902 3,416 29 8,426 71
1996................................................... 12,198 3,084 25 8,495 70
1997................................................... 12,427 3,210 26 8,512 68
1998................................................... 13,272 3,453 26 8,752 70
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Office of Clinical Standards and Quality.
Reimbursement
Medicare reimbursement for facility-based dialysis services
provided by hospital-based and independent facilities are paid
at prospectively determined rates for each dialysis treatment
session. The rate, referred to as a composite rate, is derived
from area wage differences and audited cost data adjusted for
the national proportion of patients dialyzing at home versus in
a facility. Adjustments are made to the composite rate for
hospital-based dialysis facilities to reflect higher overhead
costs.
Beneficiaries electing home dialysis may choose either to
receive dialysis equipment, supplies, and support services
directly from the facility with which the beneficiary is
associated (method I) or to make independent arrangements for
equipment, supplies, and support services (method II). Under
method I, the equipment, supplies, and support services are
included in the facility's composite rate. Under method II,
payments are made on the basis of reasonable charges and
limited to 100 percent of the median hospital composite rate,
except for patients on CCPD, in which case the limit is 130
percent of the median hospital composite rate.
Typically, neither the composite rate nor the reasonable
charge payment for method II is routinely updated. To the
extent that kidney transplantation services are inpatient
hospital services, they are subject to the Medicare PPS. There
is no specific update policy for reasonable costs of kidney
acquisition, and 100 percent of reasonable costs is reimbursed.
However, the composite rate for renal dialysis was updated in
the Medicare Balanced Budget Refinement Act (BBRA) of 1999
(Public Law 106-113). The act increased the composite rate by
1.2 percent above the revised composite rate that was in effect
in 1999. In fiscal year 2000, the composite rate is $132 for
hospitals and $128 for freestanding facilities, following an
additional increase of 1.2 percent in the rates in effect in
1999.
MEDICARE+CHOICE
Medicare has a longstanding history of offering its
beneficiaries an alternative to the traditional fee-for-service
program, beginning with private health plans contracts in the
1970s and the Medicare Risk Contract Program in the 1980s.
Then, in 1997, Congress passed BBA 1997 (Public Law 105-33),
replacing the Risk Contract Program with the new
Medicare+Choice (M+C) Program. The M+C Program established new
rules for beneficiary and plan participation, along with a new
payment methodology. In addition to controlling costs, the M+C
Program was also designed to expand health plans to markets
where access to managed care plans was limited or nonexistent
and to offer new types of health plans. Most recently, Congress
enacted legislation in order to address some of the issues
arising from the BBA changes. BBRA 1999 (Public Law 106-33)
changed the M+C Program in an effort to make it easier for
Medicare beneficiaries and plans to participate in the program.
By March 2000, M+C plans were available to about 72 percent
of the 39 million Medicare beneficiaries, and about 16 percent
of them chose to enroll in one of over 260 available M+C plans.
The rapid growth rate of Medicare managed care enrollment in
the 1990s has leveled off since the implementation of the M+C
Program, and there was even a small decline in enrollment in
2000. Despite this recent trend, the Congressional Budget
Office (CBO) projects that M+C enrollment will almost double by
2010, covering 31 percent of the Medicare population.
In order to increase enrollment in Medicare managed care
and to allow beneficiaries to better meet their health care
needs, the M+C Program offers a diverse assortment of managed
care plans. However achieving the goals of the M+C Program has
been difficult, in part because the goal to control Medicare
spending may have dampened interest by managed care entities in
developing new markets, adding plan options, and in maintaining
their current markets (see appendix E for further information
about the M+C Program).
SELECTED ISSUES
Utilization and Quality Control Peer Review Organizations
The Medicare Utilization and Quality Control Peer Review
Organization (PRO) Program was established by Congress under
the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA,
Public Law 97-35). Building on the former Professional
Standards Review Organizations, the new PROs were charged by
the 1982 law with reviewing services furnished to Medicare
beneficiaries to determine if the services met professionally
recognized standards of care, were medically necessary, and
delivered in the most appropriate setting. Major changes were
made to the PRO Program by the Social Security Act Amendments
of 1983 (Public Law 98-21) and subsequent budget reconciliation
acts. Most PRO review is focused on inpatient hospital care.
However, there is limited PRO review of ambulatory surgery,
postacute care, and services received from Medicare health
maintenance organizations (HMOs).
There are currently 53 PRO areas, incorporating the 50
States and the territories. Organizations eligible to become
PROs include physician-sponsored and physician-access
organizations. In limited circumstances, Medicare fiscal
intermediaries may also be eligible. Physician-sponsored
organizations are composed of a substantial number of licensed
physicians practicing in the PRO review area (for example, a
medical society); physician access organizations are those
which have available to them sufficient numbers of licensed
physicians so that adequate review of medical services can be
assured. Such organizations obtain PRO contracts from the
Secretary of the U.S. Department of Health and Human Services
(DHHS) through a competitive proposal process. Each
organization's proposal is evaluated by HCFA for technical
merit using specific criteria that are quantitatively valued.
Priority is given to physician-sponsored organizations in the
evaluation process. Effective October 1, 1999, all 53 PROs are
operating under the sixth round of contracts (also referred to
as the ``sixth scope of work'').
In general, each PRO has a medical director and a staff of
nurse reviewers (usually registered nurses), data technicians,
and other support staff. In addition, each PRO has a board of
directors, comprised of physicians and, generally,
representatives from the State medical society, hospital
association, and State medical specialty societies. The Omnibus
Budget Reconciliation Act of 1986 (Public Law 99-509) requires
each board to have a consumer representative. Because the board
is usually consulted before a case is referred by the PRO to
the DHHS inspector general for sanction, it assumes a major
role in the PRO review process. Each PRO also has physician
advisors who are consulted on cases in which there is a
question regarding the nurse reviewer's referral. Only
physician advisors can make initial determinations about
services furnished or proposed to be furnished by another
physician.
PROs are paid by Medicare on a cost basis for their work.
Outlays for PROs in fiscal year 1998 and in fiscal year 1999
totaled $221.6 million and $213.4 million, respectively, with
fiscal year 2000 outlays projected to be $484.9 million.
Spending varies considerably from year to year depending on
where the PROs are in their contract cycles. HCFA has indicated
that actual outlays for fiscal year 2000 may be considerably
lower than their current projection. Currently HCFA uses an
allocation of 80 percent from the Medicare Hospital Insurance
(HI) Trust Fund and 20 percent from the Supplementary Medical
Insurance (SMI) Trust Fund to finance PRO activity.
The PRO review process combines both utilization and
quality review. In conducting utilization review, the PRO
determines whether the services provided to a Medicare patient
were necessary, reasonable, and appropriate to the setting in
which they were provided. Although some utilization review is
done on a prospective basis, the bulk of the reviews are done
retrospectively. When a PRO determines that the services
provided were unnecessary or inappropriate (or both), it issues
a payment denial notice. The providers, the physicians, and the
patient are given an opportunity to request reconsideration of
the determination.
The PRO checks for indications of poor quality of care as
it is conducting utilization review. If a PRO reviewer detects
a possible problem, further inquiry is made into the case. If
it is determined that the care was of poor quality, the PRO
must take steps to correct the problem. Specific sanctions are
required if the PRO determines that the care was grossly
substandard or if the PRO has found that the provider or the
physician has a pattern of substandard care. In addition, under
section 9403 of COBRA (Public Law 99-272), as amended by Public
Law 101-239, authority exists for the PROs to deny payments for
substandard quality care. This provision, however, has never
been used.
Each of the contracts between DHHS and the PROs must
contain certain similar elements outlined in a document known
as the Scope of Work. Under the third and previous scopes of
work, PRO review was centered on case-by-case examinations of
individual medical records, selected primarily on a sample
basis. This approach to medical review was criticized by the
Institute of Medicine and others as being costly,
confrontational, and ineffective. The fourth scope of work
incorporated a new review strategy called the Health Care
Quality Improvement Initiative. PROs were required to use
explicit, more nationally uniform criteria to examine patterns
of care and outcomes using detailed clinical information on
providers and patients. Instead of focusing on unusual
deficiencies in care, the PROs were instructed to focus on
persistent differences between actual indications of care and
outcomes from those patterns of care and outcomes considered
achievable. HCFA believed that this approach would encourage a
continual improvement of medical practice in a way that would
be viewed by physicians and providers as educational and not
adversarial.
The fifth scope of work similarly emphasized continuous
quality improvement. Sample case reviews, other than those
mandated by law (such as those relating to hospital notices of
noncoverage and to beneficiary complaints) are no longer
required. Instead, each PRO is required to conduct 4-18 quality
improvement projects each year, depending on the size of their
beneficiary populations.
The sixth scope of work includes national and local quality
improvement projects which address clinical priorities that are
designed to improve the health status of Medicare
beneficiaries. The intent is to increase the PRO's experience
in collaborating with providers, practitioners, plans,
purchasers, and beneficiaries to improve quality of care, test
quality indicators and intervention strategies. One more
controversial task has also been included in this most recent
scope of work. PROs will implement a Payment Error Prevention
Program to identify incorrect payments that result from billing
errors. This is a cooperative program and does not include
punitive actions. In the first year of the contract, PROs will
implement review activities to identify unnecessary admissions
and miscoded diagnosis-related group (DRG) assignments.
Secondary Payer
Generally, Medicare is the ``primary payer,'' that is, it
pays health claims first, with an individual's private or other
public health insurance filling in some or all of Medicare's
coverage gaps. However, in certain cases, the individual's
other coverage pays first, while Medicare is the secondary
payer. This phenomenon is referred to as the Medicare Secondary
Payer Program.
An employer (with 20 or more employees) is required to
offer workers age 65 and older (and workers' spouses age 65 and
older) the same group health insurance coverage as is made
available to other employees. Workers have the option of
accepting or rejecting the employer's coverage. If the worker
accepts the coverage, the employer's plan is primary for the
worker and/or spouse who is over age 65; Medicare becomes the
secondary payer. Employers may not offer a plan that
circumvents this provision.
Similarly, a group health plan, offered by a large employer
with 100 or more employees, is the primary payer for employees
or their dependents who are on the Medicare Disability Program.
The provision applies only to persons covered under the group
health plan because the employee (generally the spouse of the
disabled person) is in ``current employment status'' (i.e., is
an employee or is treated as an employee by the employer).
Secondary payer provisions also apply to ESRD individuals
with employer group health plans (regardless of employer size).
Prior to enactment of BBA 1997, the group health plan was the
primary payer for 18 months for persons who became eligible for
Medicare ESRD benefits. The employer's role as primary payer
was limited to a maximum of 21 months (18 months plus the usual
3-month waiting period for Medicare ESRD coverage). The BBA
extended the application of the secondary payer provisions for
the ESRD population from 18 to 30 months. This applies to items
and services furnished on or after August 5, 1997 for periods
beginning on or after February 5, 1997.
Medicare is also the secondary payer when payment has been
made, or can reasonably be expected to be made, under workers'
compensation, automobile medical liability, all forms of no-
fault insurance, and all forms of liability insurance.
The law authorizes a data match program which is intended
to identify potential secondary payer situations. Medicare
beneficiaries are matched against data contained in Social
Security Administration and Internal Revenue Service files to
identify cases in which a working beneficiary (or working
spouse) may have employer-based health insurance coverage.
Cases of previous incorrect Medicare payments are identified
and recoveries are attempted. The BBA clarifies that recoveries
can be initiated up to 3 years after the date the service was
furnished. Further, recoveries may be made from third-party
administrators except where such administrators cannot recover
amounts from the employer or group health plan.
Table 2-28 shows savings attributable to these Medicare
secondary payer provisions. In fiscal year 1998, combined
Medicare part A and B savings are estimated at $3.4 billion.
TABLE 2-28.--MEDICARE SAVINGS ATTRIBUTABLE TO SECONDARY PAYER PROVISIONS BY TYPE OF PROVISION, FISCAL YEARS 1988-
98
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
End-stage
Year and Medicare part Workers' Working renal Automobile Disability Total
compensation aged disease
----------------------------------------------------------------------------------------------------------------
1988:
Part A................................. $110.1 $786.7 $88.4 $149.6 $275.5 $1,410.3
Part B................................. 18.1 313.8 20.2 22.3 93.5 467.9
----------------------------------------------------------------------
Total................................ 128.2 1,100.5 108.6 171.9 369.0 1,878.2
======================================================================
1989:
Part A................................. 99.4 867.7 75.0 179.6 399.3 1,621.0
Part B................................. 27.5 337.1 25.1 28.2 137.0 554.9
----------------------------------------------------------------------
Total................................ 126.9 1,204.8 100.1 207.8 536.3 2,175.9
======================================================================
1990:
Part A................................. 120.9 981.6 144.1 220.1 498.4 1,965.1
Part B................................. 21.6 325.8 21.5 26.4 123.2 518.5
----------------------------------------------------------------------
Total................................ 142.5 1,307.4 165.6 246.5 621.6 2,483.6
======================================================================
1991:
Part A................................. 107.4 932.7 144.9 235.6 526.6 1,947.2
Part B................................. 21.2 417.5 40.2 26.6 186.2 691.7
----------------------------------------------------------------------
Total................................ 128.6 1,350.2 185.1 262.2 712.8 2,638.9
======================================================================
1992:
Part A................................. 118.9 1,044.9 140.8 233.9 600.9 2,139.4
Part B................................. 17.3 398.3 37.4 34.5 182.9 670.4
----------------------------------------------------------------------
Total................................ 136.2 1,443.2 178.2 268.4 783.8 2,809.8
======================================================================
1993:
Part A................................. 100.4 1,073.1 133.6 239.6 657.8 2,204.5
Part B................................. 11.3 392.2 32.8 28.9 192.3 657.5
----------------------------------------------------------------------
Total................................ 111.7 1,465.3 166.4 268.5 850.1 2,862.0
======================================================================
1994:
Part A................................. 96.5 1,101.1 130.2 265.9 682.3 2,276.0
Part B................................. 13.0 398.1 31.8 32.7 211.8 687.4
----------------------------------------------------------------------
Total................................ 109.5 1,499.2 162.0 298.6 894.1 2,963.4
======================================================================
1995:
Part A................................. 107.0 1,068.0 142.0 295.5 728.9 2,341.4
Part B................................. 10.5 360.3 39.0 40.2 215.5 665.5
----------------------------------------------------------------------
Total................................ 117.5 1,428.3 181.0 335.7 944.4 3,006.9
======================================================================
1996:
Part A................................. 93.6 1,062.5 133.4 335.0 728.5 2,353.0
Part B................................. 11.1 295.1 34.3 50.1 196.4 586.9
----------------------------------------------------------------------
Total................................ 104.7 1,357.6 167.6 385.0 924.9 2,939.9
======================================================================
1997:
Part A................................. 99.7 1,046.5 114.3 366.8 697.5 2,324.9
Part B................................. 11.8 276.4 32.4 63.7 178.9 563.2
----------------------------------------------------------------------
Total................................ 111.5 1,322.9 146.7 430.6 876.3 2,888.0
======================================================================
1998:
Part A................................. 96.7 1,303.0 108.1 219.2 810.8 2,683.9
Part B................................. 11.6 364.3 35.0 28.0 238.4 707.7
----------------------------------------------------------------------
Total................................ 108.3 1,667.3 143.1 247.1 1,049.3 3,391.6
======================================================================
----------------------------------------------------------------------------------------------------------------
Note.--Totals may not add due to rounding.
Source: Health Care Financing Administration, Bureau of Program Operations.
Supplementing Medicare Coverage
Most beneficiaries depend on some form of private or public
coverage to supplement their Medicare coverage. In 1996, only
about 11.3 percent of beneficiaries relied solely on the
traditional fee-for-service Medicare Program for protection
against the costs of care; an additional 8.0 percent were
enrolled in managed care organizations.
The majority of the Medicare population (62.5 percent in
1996) have private supplemental coverage. This private
insurance protection may be obtained through a current or
former employer (29.9 percent had such coverage in 1996). It
may also be obtained through an individually-purchased policy,
commonly referred to as a ``Medigap'' policy (28.4 percent had
these plans in 1996). Some persons have both (4.2 percent in
1996). In addition, a smaller percentage (about 16.5 percent in
1996) have Medicaid coverage; a small group (1.7 percent in
1996) have supplemental coverage from one of a variety of other
public sources (such as the military) (table 2-29).
TABLE 2-29.--SUPPLEMENTARY HEALTH INSURANCE FOR THE MEDICARE POPULATION,
1996
------------------------------------------------------------------------
Number Persons
Type of coverage of (in
Persons percent)
------------------------------------------------------------------------
Medicare only..................................... 7,609.0 19.3
Fee-for-service population................... 4,462.3 11.3
Managed care population...................... 3,146.7 8.0
Medigap.......................................... 11,180.4 28.4
Employer-sponsored coverage...................... 11,768.3 29.9
Both private types............................... 1,667.9 4.2
Medicaid, total.................................. 6,494.1 16.5
Full coverage................................. 3,268.6 8.3
Qualified Medicare beneficiaries.............. 2,925.7 7.4
Specified low-income Medicare beneficiaries... 299.9 0.8
Other............................................. 665.4 1.7
---------------------
Total...................................... 39,385.1 100.0
------------------------------------------------------------------------
Source: Eppig, et al., 1997.
Medigap
Medigap policies offer coverage for Medicare's deductibles
and coinsurance and for some services not covered by Medicare.
Premiums vary widely by type of coverage, geographic location
and whether premiums are community-rated or based on a
beneficiary age. The Omnibus Budget Reconciliation Act of 1990
provided for a standardization of Medigap policies; the
intention was to enable consumers to better understand policy
choices and to prevent marketing abuses. Implementing
regulations generally limit the number of different types of
Medigap plans that can be sold in a State to no more than 10
standard benefit plans, known as ``plan A'' to ``plan J.'' The
standardized plan A covers a core benefits package. Each of the
other nine includes the core package plus a different
combination of additional benefits. Only plan H, plan I, and
plan J offer some drug coverage. Beneficiaries who purchased
policies prior to the standardization requirement may renew
these policies; however, policies issued after July 1992 must
be one of the 10 standard plans.
The law contains certain requirements which guarantee the
ability of beneficiaries to enroll in Medigap plans under
certain specified conditions. These guaranteed issue
provisions, which are outlined below, were significantly
expanded by the Balanced Budget Act of 1997.
Six-month open enrollment.--Federal law establishes an open
enrollment period for the aged. All insurers offering Medigap
policies are required to offer open enrollment for 6 months
from the date a person first enrolls in part B (generally when
the enrollee turns 65). During this time an insurer cannot deny
the issuance, or discriminate in the pricing of a policy
because of an individual's medical history, health status, or
claims experience This requirement is known as guaranteed open
enrollment.
There is no guaranteed open enrollment period for the
nonaged disabled population. However, when a disabled person
turns 65, that individual has the same open enrollment
guarantee as other aged persons.
Guaranteed issue.--The law guarantees issuance of specified
Medigap policies (without an exclusion based on a preexisting
condition) for certain persons whose previous supplementary
coverage was terminated. Guaranteed issue also applies to
certain persons who elect to try out an M+C plan but
subsequently disenroll from such plan. In these cases, the
insurer is prohibited from discriminating in the pricing of the
Medigap policy on the basis of the individual's health status,
claims experience, receipt of health care or medical condition.
In general, this right must be exercised within 63 days of
termination of other enrollment. In the case of terminating M+C
plans, beneficiaries may elect to obtain the Medigap policy
within 63 days of the notice of termination (rather than within
63 days of the actual termination date).
Certain requirements enable persons whose previous
supplementary coverage was terminated to obtain Medigap
coverage. These provisions may be particularly important to
persons whose HMO terminates its participation in the M+C
Program.
The following groups of persons whose coverage is
involuntarily terminated are guaranteed issue of any Medigap
plan A, B, C, or F that is sold to new enrollees by Medigap
issuers in the State:
1. An individual enrolled under an employee benefits plan that
provides benefits supplementing Medicare and the plan
terminates or ceases to provide such benefits;
2. A person enrolled with an M+C organization whose enrollment
is discontinued because the plan's certification is
terminated or the organization no longer provides the
plan in the individual's service area; the individual
moves outside of the entity's service area; or the
individual elects termination due to cause; and
3. An individual enrolled under a Medigap policy if enrollment
ceases because: (i) of the bankruptcy or insolvency of
issuer and there is no provision under State law for
continuation of such coverage; (ii) the issuer violates
a material provision; or (iii) the issuer materially
misrepresented the policy's provisions.
Guaranteed issue protections also extend to certain persons
who elect to try out one of the options available under the M+C
Program. An individual is guaranteed issuance of the Medigap
policy in which he or she was previously enrolled if the
individual terminated enrollment in a Medigap policy, enrolled
in an M+C organization or similar entity, and terminated such
enrollment within 12 months. (If the same policy is no longer
sold by the insurer, the individual is guaranteed issuance of
Medigap plans A, B, C, or F.) The guarantee only applies if the
individual was never previously enrolled in an M+C or similar
plan.
One group of persons are guaranteed issuance of any Medigap
policy sold in the State. These are persons who, when they
first become entitled to Medicare at age 65, enroll in an M+C
plan and disenroll from such plan within 12 months.
Preexisting condition exclusions.--At the time insurers
sell a Medigap policy, they are generally permitted to limit or
exclude coverage for services related to a preexisting health
condition; such preexisting condition exclusions cannot be
imposed for more than 6 months. However, preexisting
limitations may not be imposed in the following cases:
1. During the first 6-month open enrollment period, if on the
date of application, the individual had health
insurance coverage meeting the definition of
``creditable coverage'' under the Health Insurance
Portability and Accountability Act.
2. An individual who has met the preexisting condition
limitation in one Medigap policy. The individual does
not have to meet the requirement under a new policy for
previously covered benefits; however, an insurer could
impose exclusions for newly covered benefits (for
example, for prescription drugs if not covered under
the previous policy).
3. Any individual who falls into one of the qualifying events
categories discussed above under ``Guaranteed Issue.''
These include persons whose previous coverage was
involuntarily terminated or persons who elect to try
out Medicare+Choice.
The prohibition applies to persons who had coverage under a
prior policy for at least 6 months. If the individual has less
than 6 months prior coverage, the policy must reduce the
preexisting exclusion by the amount of the prior coverage.
The Balanced Budget Act (BBA) provides for high deductible
Medigap plans. Specifically, it added 2 plan types to the list
of 10 standard Medigap plans. These offer the benefit package
of either plan F or plan J, except for the high deductible
feature. The high deductible was set at $1,500 in 1998 and
1999. In subsequent years, it is increased by the Consumer
Price Index (CPI). The beneficiary would be responsible for
expenses up to this amount. The 2000 deductible is $1,530.
Employer-based policies
In 1996, employer-based policies covered 34 percent of
Medicare beneficiaries. Employer-based plans are typically more
comprehensive than Medigap plans. Generally they are defined
benefit plans which may overlap significantly with Medicare
benefits. As a result, employers use a variety of approaches to
coordinate their plans with Medicare (which is the primary
payer for retirees). The costs of coverage are generally shared
by the employer and retiree.
In recent years, the percentage of employers offering
retiree health coverage for their Medicare retirees has
dropped. Between 1993 and 1999, the number of large firms (with
500 or more employees) offering such coverage dropped from 40
percent to 28 percent (Foster Higgins, 1999).
In addition, many other employers are pursuing strategies
to lower their liabilities for retiree health costs. Some
employers are moving toward a defined contribution model for
retiree health benefits. Others are using Medicare risk plans
and other managed care organizations to deliver services to
their retirees.
Impact of supplemental insurance on Medicare spending
Medicare cost-sharing requirements are intended, in part,
to encourage cost-conscious utilization. Insurance that
supplements Medicare by covering deductibles and coinsurance
removes these incentives. Many analyses have addressed how
supplemental insurance affects beneficiaries' use of Medicare-
covered services and the cost of those services to Medicare.
Typically, these studies have estimated that Medicare spending
for beneficiaries with supplemental coverage are one-quarter to
one-third higher, on average, than expenditures for
beneficiaries without such coverage.
A Physician Payment Review Commission analysis (Physician
Payment Review Commission, 1997) of the Medicare Current
Beneficiary Survey found a similar effect: Medicare
expenditures for beneficiaries covered by supplemental
insurance were about 30-percent higher than they were for those
without such coverage. Subsequent analysis showed that the
effect of secondary coverage on Medicare expenditures differs,
depending on the source of coverage. Expenditures for
beneficiaries having Medicare only are less than 75 percent of
those for beneficiaries with Medigap. Spending for
beneficiaries with employer-provided benefits average only
about 10 percent less (chart 2-1).
CHART 2-1. COMPARISON OF PROJECTED PER CAPITA SPENDING FOR AVERAGE
BENEFICIARIES, BY TYPE OF SUPPLEMENTAL INSURANCE AND YEAR
Note._These spending levels represent the expected
differences in outlays after other factors have been taken into
account.
Source: Physician Payment Review Commission analysis of
data from the 1993 and 1995 Medicare Current Beneficiary
Survey. The sample size for 1993 was 11,285 and the sample size
for 1995 was 13,261.
Higher utilization among beneficiaries with supplemental
insurance translates into increased Medicare costs because
Medicare is the primary payer for those services. The Medicare
Current Beneficiary Survey analysis found that per capita
expenditures for Medicare beneficiaries with Medigap insurance
were from $1,000 to $1,400 higher than those for beneficiaries
with Medicare only. Per capita spending for beneficiaries with
employer-provided supplements were from $700 to $900 higher
than those for beneficiaries with no supplemental coverage.
These results reflect the difference in spending by source
of insurance, once other factors have been considered. High
service use among beneficiaries with secondary insurance
appears to be a consequence of having such insurance,
presumably reflecting the reduced financial burden associated
with using additional services.
Medicaid
Some low-income aged and disabled Medicare beneficiaries
are also eligible for full or partial coverage under Medicaid.
Persons entitled to full Medicaid protection generally have all
of their health care expenses met by a combination of Medicare
and Medicaid. For these ``dual eligibles'' Medicare pays first
for services both programs cover. Medicaid picks up Medicare
cost-sharing charges and provides protection against the costs
of services generally not covered by Medicare. Of particular
importance for this population is coverage for prescription
drugs and long-term care services.
Several population groups are entitled to more limited
Medicaid protection. These include qualified Medicare
beneficiaries (QMBs), specified low-income Medicare
beneficiaries (SLMBs), and certain qualified individuals.
Persons meeting the qualifications for coverage under one of
these categories, but not otherwise eligible for Medicaid, are
not entitled to the regular Medicaid benefits package. Instead,
they are entitled to have Medicaid make specified payments in
their behalf.
Qualified Medicare beneficiaries.--State Medicaid Programs
are required to make Medicare cost-sharing assistance available
to QMBs. A QMB is an aged or disabled Medicare beneficiary who
has: (1) income at or below the Federal poverty line ($8,592
for a single, $11,496 for a couple in 2000, including the $20
per month disregard); and (2) resources below 200 percent of
the resources limit set for the Supplemental Security Income
(SSI) Program (the QMB resource limits are $4,000 for an
individual and $6,000 for a couple). Certain items, such as an
individual's home and household goods, are excluded from the
calculation.
Persons meeting the QMB definition are entitled to Medicare
part A. Included is the relatively small group of aged persons
who are not automatically entitled to part A coverage, but who
have bought part A protection by paying a monthly premium. Not
included are working disabled persons who have exhausted
Medicare part A entitlement but who have extended their
coverage by payment of a monthly premium.
Medicaid is required to pay Medicare premiums and cost-
sharing charges for the QMB population as follows: (1) part B
monthly premiums; (2) part A monthly premiums paid by the
limited number of persons not automatically entitled to part A
protection; (3) coinsurance and deductibles under part A and
part B including the Medicare hospital deductible, the part B
deductible, and the parts A and B coinsurance; and (4)
coinsurance and deductibles that M+C plans charge their
enrollees.
Payment of QMB benefits
States are required to pay part A and part B premiums in
full for the QMB population. They are also required to pay the
requisite deductibles and coinsurance, though the actual amount
of the payment may vary. State Medicaid Programs frequently
have lower payment rates for services than those applicable
under Medicare. Federal law permits States to either: (1) pay
the full Medicare deductible and coinsurance amounts; or (2)
only pay those amounts to the extent that the Medicare provider
or supplier has not received the full Medicaid rate for the
service.
All States have buy-in agreements with the Secretary that
allow them to enroll their QMB population in part B. Some
States have also elected to include payment of part A premiums
under their buy-in agreements. Payment of premiums under a buy-
in agreement is advantageous to the State because premiums paid
through this method are not subject to delayed enrollment
penalties which might otherwise be applicable in the case of
delayed enrollment or reenrollment.
The buy-in agreements for the QMB population are in
addition to the traditional buy-in agreements that States have
for other population groups. Under these traditional buy-in
agreements, States enroll in Medicare part B persons who are
eligible for both Medicare and Medicaid. As a minimum, States
may limit buy-in coverage to persons receiving cash assistance;
alternatively, they may add some or all categories of other
persons who are eligible for both programs.
Specified low-income Medicare beneficiaries.--States are
also required to pay Medicare part B premiums for SLMBs. These
are persons meeting the QMB criteria except that their income
is slightly over the QMB limit. The SLMB income limit is 120
percent of the Federal poverty line. In 2000 this is $10,260
for a single and $13,740 for a couple (including the $20 per
month disregard). Medicaid protection is limited to payment of
the Medicare part B premiums, unless the beneficiary is
otherwise eligible for Medicaid.
Qualifying individuals.--BBA 1997 required State Medicaid
Programs, effective January 1, 1998 through December 31, 2002,
to pay part B premiums for beneficiaries with incomes up to 135
percent of poverty. These persons are referred to as QI-1s. For
Medicare beneficiaries with incomes between 135 and 175 percent
of poverty, State Medicaid Programs are required to cover that
portion of the Medicare part B premium attributable to the
transfer of home health visits from part A to part B. These
persons are referred to as QI-2s.
The Federal Government will pay 100 percent of the costs
associated with expanding Medicare part B premium assistance
from 120 to 135 percent of poverty, as well as the extra
premium cost attributable to the home health transfer for
persons with incomes between 135 and 175 percent of poverty. To
cover these costs, the Secretary is required to provide for
allocations to States based on the sum of: (1) a State's number
of Medicare beneficiaries with incomes between 135 and 175
percent of poverty, and (2) twice the number of Medicare
beneficiaries with incomes between 120 and 135 percent of
poverty, relative to the sum for all eligible States. Total
amounts available for allocations are $200 million for fiscal
year 1998, $250 million for fiscal year 1999, $300 million for
fiscal year 2000, $350 million for fiscal year 2001, and $400
million for fiscal year 2002. The Federal matching rate for
each participating State will be 100 percent up to the State's
allocation. If a State exceeds its allocation, the matching
rate on the excess is zero. Payments are to be made from
Medicare part B for the costs of this program.
Qualified disabled and working individuals (QDWIs).--
Medicaid is authorized to provide partial protection against
Medicare part A premiums for QDWIs. QDWIs are persons who were
previously entitled to Medicare on the basis of a disability,
who lost their entitlement based on earnings from work, but who
continue to have the disabling condition. Medicaid is required
to pay the Medicare part A premium for such persons if their
incomes are below 200 percent of the Federal poverty line,
their resources are below 200 percent of the SSI limit, and
they are not otherwise eligible for Medicaid. States are
permitted to impose a premium, based on a sliding scale, for
individuals between 150 and 200 percent of poverty.
Data
As of July 1998, Medicare reported that there were 331,924
Medicare part A beneficiaries for whom QMB payments for part A
premiums were being made. As of the same date, States reported
a total of 5,109,228 part B buy-ins of which 2,421,298 were
separately identified as QMBs and 272,565 were separately
identified as SLMBs (table 2-30). However, these numbers are
low due to reporting problems. The QMB and SLMB numbers include
persons who were eligible for the full Medicaid benefit
package. No QMB-only or SLMB-only number is available.
Nationwide there were 18 QDWIs in May 1997; this information is
not broken down by State.
TABLE 2-30.--NUMBER OF QUALIFIED MEDICARE BENEFICIARIES, SPECIFIED LOW-INCOME MEDICARE BENFICIARIES, AND STATE
BUY-INS BY JURISDICTION, 1998
----------------------------------------------------------------------------------------------------------------
Part B buy- Part B
State Part A QMBs ins Part B QMBs SLMBs
----------------------------------------------------------------------------------------------------------------
Alabama..................................................... 3,315 121,990 30,575 8,649
Alaska...................................................... 584 7,093 0 16
Arizona..................................................... 451 51,141 32,763 1,944
Arkansas.................................................... 3,708 78,514 20,966 4,792
California.................................................. 94,202 776,832 377,822 10,774
Colorado.................................................... 512 52,175 11,930 0
Connecticut................................................. 2,465 51,335 40,737 3,961
Delaware.................................................... 462 8,900 1,938 514
District of Columbia........................................ 1,152 14,582 390 1,599
Florida..................................................... 41,860 313,744 199,721 16,584
Georgia..................................................... 6,181 171,047 47,531 10,631
Hawaii...................................................... 4,783 19,226 4,434 147
Idaho....................................................... 250 14,909 8,473 864
Illinois.................................................... 3,401 145,976 111,933 13,928
Indiana..................................................... 1,739 81,184 52,626 11,585
Iowa........................................................ 1,176 49,844 34,802 7,033
Kansas...................................................... 635 39,008 15,064 1,675
Kentucky.................................................... 3,242 106,537 29,826 8,029
Louisiana................................................... 5,132 115,031 26,461 4,519
Maine....................................................... 14 33,006 14,128 2,715
Maryland.................................................... 6,387 61,669 43,784 2,154
Massachusetts............................................... 14,885 138,796 116,511 11,465
Michigan.................................................... 6,387 135,769 40,969 15,115
Minnesota................................................... 3,766 57,559 14,871 3,354
Mississippi................................................. 6,814 106,336 68,307 5,169
Missouri.................................................... 666 81,841 60,047 7,615
Montana..................................................... 426 11,882 9,188 1,472
Nebraska.................................................... 1 18,029 7,727 785
Nevada...................................................... 1,047 17,191 12,590 1,839
New Hampshire............................................... 25 6,295 1,411 0
New Jersey.................................................. 7,420 137,598 88,668 15,065
New Mexico.................................................. 496 34,411 7,914 2,427
New York.................................................... 253 363,331 169,511 1,187
North Carolina.............................................. 11,254 210,388 45,553 10,195
North Dakota................................................ 6 5,612 1,394 388
Ohio........................................................ 6,389 180,172 72,377 7,333
Oklahoma.................................................... 4,373 63,142 55,936 6,858
Oregon...................................................... 40 51,392 27,329 3,697
Pennsylvania................................................ 15,903 179,295 113,357 10,595
Rhode Island................................................ 744 17,729 1,540 8
South Carolina.............................................. 1,793 104,111 85,020 5,729
South Dakota................................................ 759 12,791 4,508 1,388
Tennessee................................................... 7,642 171,653 73,825 2,219
Texas....................................................... 42,979 339,648 96,543 18,763
Utah........................................................ 140 14,900 10,147 1,474
Vermont..................................................... 218 13,197 3,330 1,829
Virginia.................................................... 2,939 108,427 42,957 6,450
Washington.................................................. 5,144 89,419 26,461 6,478
West Virginia............................................... 3,560 43,019 38,503 3,911
Wisconsin................................................... 4,021 74,429 16,880 6,896
Wyoming..................................................... 196 5,963 2,020 747
Outlying areas.............................................. 0 1,160 1 0
---------------------------------------------------
Total................................................. 331,924 5,109,228 2,421,298 272,565
----------------------------------------------------------------------------------------------------------------
Note.--Total part B buy-ins include part B QMBs, part B SLMBs, and QI-1s (not separately broken out).
Source: Health Care Financing Administration, Office of Information Services.
LEGISLATIVE HISTORY, 1980-99
This section summarizes major Medicare legislation enacted
into law since 1996. Previous editions of the Green Book review
legislation enacted before 1996.
The summary highlights major provisions; it is not a
comprehensive list of all Medicare amendments. Included are
provisions which had a significant budget impact, changed
program benefits, modified beneficiary cost sharing, or
involved major program reforms. Provisions involving policy
changes are mentioned the first time they are incorporated in
legislation, but not necessarily every time a modification is
made. The descriptions include either the initial effective
date of the provision or, in the case of budget savings
provisions, the fiscal years for which cuts were specified.
Health Insurance Portability and Accountability Act of 1996, Public Law
104-1
Added new criminal health care fraud provisions,
strengthened existing civil and criminal fraud and abuse
provisions and provided funding for new antifraud programs
(generally effective on enactment or January 1, 1997).
Balanced Budget Act (BBA) of 1997, Public Law 105-33
Hospitals
Froze PPS hospital and PPS-exempt hospitals and units and
limited updates for fiscal years 1999-2002. Established a PPS
for inpatient rehabilitation hospitals, effective beginning in
fiscal year 2001. Rebased capital payment rates and provided
for additional reductions over the fiscal year 1997-2002
period. Reduced the indirect medical education payment from the
current 7.7 percent to 5.5 percent by fiscal year 2001 and
reformed direct graduate medical education payments (generally
effective on enactment or October 1, 1997).
Skilled nursing facilities
Provided for a phase in of a PPS that will pay a Federal
per-diem rate for covered SNF services (generally effective
July 1, 1998).
Home health
Provided for the establishment of a PPS for home health
services. Provided for a reduction in per-visit cost limits
prior to the implementation of the PPS, clarified the
definitions of part-time and intermittent care, and provided
for a study of the definition of homebound. Provided for the
transfer of some home health costs from part A to part B
(prospective payment effective October 1, 1999, reduction in
cost limits effective on enactment, definition clarification
effective October 1, 1997, and transfer of costs effective
January 1, 1998).
Hospice
Reduced the hospice payment update for each of fiscal
years 1998-2002, and clarified the definition of hospice care
(generally effective on enactment).
Physicians
Provided for use of a single conversion factor; replaced
the volume performance standard with the sustainable growth
rate; provided for phased-in implementation of resource-based
practice expenses; and permitted use of private contracts under
specified conditions (generally effective January 1, 1998).
Hospital outpatient departments
Extended reductions in payments for outpatient hospital
services paid on the basis of costs through December 1999 and
established a PPS for hospital outpatient departments (OPDs)
for covered services beginning in 1999 (generally effective on
enactment).
Other providers
Froze payments for laboratory services for fiscal years
1998-2002; provided for establishment of a fee schedule in 2000
for payment for ambulance services (generally effective on
enactment).
Beneficiary payments
Permanently set the part B premium at 25 percent of
program costs and expanded the premium assistance beginning in
1998 available under the Specified Low-Income Medicare
Beneficiary (SLMB) Program (effective on enactment).
Prevention initiatives
Authorized coverage for annual mammograms for all women
over 40. Added coverage for screening pelvic exams, prostate
cancer screening tests, colorectal cancer screening tests,
diabetes self-management training services, and bone mass
measurements for certain high-risk persons (generally effective
in 1998, except prostate cancer screening effective 2000).
Supplementary coverage
Provided for guaranteed issuance of specified Medigap
policies without a preexisting condition exclusion for certain
continuously enrolled aged individuals (effective July 1,
1998).
Competitive bidding
Provided for competitive bidding demonstrations for
furnishing part B services (not including physicians services)
(effective on enactment).
Commissions
Established a 17-member National Advisory Commission on
the Future of Medicare (with appointments to be made by
December 1, 1997). Established the Medicare Payment Advisory
Commission replacing the Prospective Payment Assessment
Commission and the Physician Payment Review Commission (with
appointments to be made by September 30, 1997).
Medicare+Choice
Established a new part C of Medicare called
Medicare+Choice (M+C). This program is built on the existing
Medicare Risk Contract Program which enabled beneficiaries to
enroll, where available, in health maintenance organizations
(HMOs) that contracted with the Medicare Program. The M+C
Program expands, beginning in 1999, the private plan options
that could contract with Medicare to other types of managed
care organizations (for example, preferred provider
organizations and provider-sponsored organizations), private
fee-for-service plans, and, on a limited demonstration basis,
high deductible plans (called medical savings account plans)
offered in conjunction with medical savings accounts (effective
on enactment).
Balanced Budget Refinement Act (BBRA) of 1999 (Incorporated in
Consolidated Appropriations Act of 1999, Public Law 106-113)
Prospective payment system hospitals
Froze the indirect medical education adjustment at 6.5
percent through fiscal year 2000, reduced the adjustment to
6.25 percent in fiscal year 2001 and to 5.5 percent in fiscal
year 2002 and subsequent years. Froze the reduction in the DSH
adjustment to 3 percent in fiscal year 2001; changed the
reduction to 4 percent in fiscal year 2002. Changed the
methodology for Medicare's direct graduate medical education
payments to teaching hospitals to incorporate a national
average amount calculated using fiscal year 1997 hospital-
specific per-resident amounts. Increased the number of years
that would count as an initial period for child neurology
residency training programs. Provided for the reclassification
of certain counties and areas for the purposes of Medicare
reimbursement.
PPS-exempt hospitals
Adjusted the labor-related portion of the 75-percent cap to
reflect the wage differences in the hospitals' area relative to
the national average. Increased the amount of continuous bonus
payments to eligible long-term care and psychiatric providers
from 1 percent to 1.5 percent for cost reporting periods
beginning on or after October 1, 2000 and before September 30,
2001 and to 2 percent for cost reporting periods beginning on
or after October 1, 2001 and before September 30, 2002.
Required the Secretary to report on a discharge-based PPS for
long-term care hospitals which would be implemented in a budget
neutral fashion for cost reporting periods beginning on or
after October 1, 2002. Required the Secretary to report on a
per-diem-based PPS for psychiatric hospitals which would be
implemented in a budget neutral fashion for cost reporting
periods beginning on or after October 1, 2002. Required the
Secretary base the PPS for inpatient rehabilitation hospitals
on discharges and incorporate functional related groups as the
basis for payment adjustments.
Rural providers
Permitted reclassification of certain urban hospitals as
rural hospitals. Updated existing criteria used to designate
outlying rural counties as part of metropolitan statistical
areas for the purposes of Medicare's hospital PPS. Changed
certain requirements pertaining to Medicare's Critical Access
Hospital Program. Extended the Medicare dependent hospital
classification through fiscal year 2006. Permitted certain sole
community hospitals to receive Medicare payments based on their
hospital specific fiscal year 1996 costs. Increased the target
amount for SCHs by the full market basket amount for discharges
occurring in fiscal year 2001.
Skilled nursing facilities
Increased, from April 1, 2000, until October 1, 2000, per-
diem payments by 20 percent for 15 resource utilization groups
(RUGs) under the PPS. Permitted payment under the Federal PPS
rate for agencies for which it is more advantageous than under
the transition rates. Provided for payment beyond the
designated PPS rate for ambulance services for dialysis
patients and for specific chemotherapy items and services,
radioisotope services, and prosthetic devices. Until October 1,
2001, fixed PPS per-diem rates at 50 percent of the facility-
specific rate and 50 percent of the Federal rate for facilities
in which 60 percent of the patients are immunocompromised.
Home health agencies
Delayed the 15-percent reduction in home health payments
until 12 months after implementation of the PPS but, within 6
months of implementation, required the Secretary to assess the
need for any reductions. Increased per-beneficiary limits by 2
percent for older agencies; excluded DME from consolidated
billing, and provided $10 per beneficiary to offset HHA costs
for collecting outcome and assessment information set (OASIS)
data.
Hospice
Increased payment rates otherwise in effect under the
hospice PPS for fiscal year 2001 by 0.5 percent and for fiscal
year 2002 by 0.75 percent, provided that these increases are
not to be included in the base on which subsequent increases
will be computed.
Physicians
Made technical changes to limit oscillations in the annual
update to the conversion factor beginning in 2001 and provided
that the sustainable growth rate is calculated on a calendar
year basis. Required the Secretary, in determining practice
expense relative values, to establish by regulation a process
under which the Secretary would accept for use and would use,
to the maximum extent practicable and consistent with sound
data practices, data collected by outside organizations and
entities.
Hospital outpatient departments
Made seven major changes to Medicare payments under the
hospital OPD PPS: (1) required the Secretary of the U.S.
Department of Health and Human Services (DHHS) to provide
payments (within specified limits, and on a budget neutral
basis) over and above PPS payments for certain high cost
(``outlier'') patients; (2) as a transition to the PPS, for 2-3
years, on a budget neutral basis, required the Secretary of
DHHS to provide ``passthrough payments'' to hospital OPDs above
and beyond PPS payments for costs of certain ``current
innovative'' and ``new, high cost'' devices, drugs, and
biologicals; (3) limited the cost range of items or services
that are included in any one PPS category and required the
Secretary to review the PPS groups and amounts annually and to
update them as necessary; (4) as a transition to the PPS,
through 2003, limited the reduction in Medicare payments
individual hospitals experience due to the PPS; (5) provided
special payments until 2004 for small, rural hospitals to
ensure that they receive no less under the outpatient PPS than
they would have received under the prior system and provided
the same protection permanently for cancer hospitals; (6)
limited beneficiary copayments for outpatient care to no more
than the amount of the beneficiary deductible for inpatient
care; and (7) required that the pre-PPS payment base used as
the budget neutrality benchmark for the PPS include beneficiary
coinsurance amounts as paid under the pre-PPS system (i.e., 20
percent of hospital charges).
Therapy services
Suspended for 2 years (2001 and 2002) application of the
caps on physical therapy and occupational therapy services.
Pap smears
Set the minimum payment for the test component of a Pap
smear at $14.60.
Immunosuppressive drugs
Extended the 36-month limit on coverage of
immunosuppressive drugs for persons exhausting their coverage
in 2000-2004. Set the increase for persons exhausting benefits
in 2000 at 8 months, and limited total expenditures to $150
million over the 5 years.
Studies
Required a number of studies including a Medicare Payment
Advisory Commission comprehensive study of the regulatory
burdens placed on all classes of providers under fee-for-
service Medicare and the associated costs. Required GAO to
conduct a study of Medigap policies.
Medicare+Choice
Contained several provisions designed to facilitate the
implementation of M+C. Changed the phase in of the new risk
adjustment payment methodology based on health status to a
blend of 10 percent new health status method/90 percent old
demographic method in 2000 and 2001, and not more than 20
percent health status in 2002. Provided for payment of a new
entry bonus of 5 percent of the monthly M+C payment rate in the
first 12 months and 3 percent in the subsequent 12 months to
organizations that offer a plan in a payment area without an
M+C plan since 1997, or in an area where all organizations
announced withdrawal as of January 1, 2000. Reduced the
exclusion period from 5 years to 2 years for organizations
seeking to reenter the M+C Program after withdrawing. Allowed
organizations to vary premiums, benefits, and cost sharing
across individuals enrolled in the plan so long as these are
uniform within segments comprising one or more M+C payment
areas. Provided for submission of adjusted community rates by
July 1 instead of May 1. Provided that the aggregate amount of
user fees collected would be based on the number of M+C
beneficiaries in plans compared to the total number of
beneficiaries.
Delayed implementation of the Medicare+Choice Competitive
Bidding Demonstration Project.
CBO SAVINGS AND REVENUE ESTIMATES FOR BUDGET RECONCILIATION AND RELATED
ACTS, 1981-99
Table 2-31 shows estimates of savings and revenue increases
for budget reconciliation legislation enacted from 1981 to 1997
and spending increases enacted in 1999. These estimates were
made at the time of enactment by the Congressional Budget
Office (CBO). It should be noted that the estimates are
compared with the CBO budget baseline in effect at the time.
The savings from the various reconciliation bills cannot be
added together.
MEDICARE HISTORICAL DATA
Tables 2-32 through 2-41 present detailed historical data
on the Medicare Program. Tables 2-32, 2-33, and 2-34 present
detailed enrollment data. Table 2-35 describes the percentage
of enrollees participating in a State buy-in agreement. Tables
2-36 and 2-37 show the distribution of Medicare payments by
type of coverage and by type of service. Tables 2-38 and 2-39
show the number of persons served and the average reimbursement
per person served and per enrollee. Table 2-40 shows the
utilization of short stay hospital services. Table 2-41 shows
the number of participating institutions and organizations.
TABLE 2-31.--MEDICARE SAVINGS ESTIMATES, 1981-99
[In billions of dollars]
------------------------------------------------------------------------
Legislative act Savings
------------------------------------------------------------------------
Omnibus Budget Reconciliation Act of 1981:
Spending reductions for fiscal years 1982-84............. $4.3
Tax Equity and Fiscal Responsibility Act of 1982:
Spending reductions for fiscal years 1983-87............. 23.1
Social Security Amendments of 1983:
Spending reductions for fiscal years 1983-88............. 0.2
Revenue increases for fiscal years 1983-88............... 11.5
Deficit Reduction Act of 1984:
Spending reductions for fiscal years 1984-87............. 6.1
Consolidated Omnibus Budget Reconciliation Act of 1985:
Spending reductions for fiscal years 1986-81............. 12.6
Omnibus Budget Reconciliation Act of 1986:
Spending reductions for fiscal years 1987-89............. 1.0
Omnibus Budget Reconciliation Act of 1987:
Spending reductions for fiscal years 1988-90............. 9.8
Omnibus Budget Reconciliation Act of 1989:
Spending reductions for fiscal years 1990-94............. 10.9
Omnibus Budget Reconciliation Act of 1990:
Spending reductions for fiscal years 1991-95............. 43.1
Revenue increases for fiscal years 1991-95............... 26.9
Omnibus Budget Reconciliation Act of 1993:
Spending reductions for fiscal years 1994-98............. 55.8
Revenue increases for fiscal years 1994-98............... 53.8
Health Insurance Portability and Accountability Act of 1996:
Spending reductions for fiscal years 1996-2002........... 3.0
Balanced Budget Act of 1997:
Spending reductions for fiscal years 1998-2002........... 116.4
Spending reductions for fiscal years 1998-2007........... 393.8
Balanced Budget Refinement Act of 1999:
Spending increases for fiscal years 2000-2004............ -15.0
Spending increases for fiscal years 2004-9............... -25.1
------------------------------------------------------------------------
Note.--Savings relative to baseline at time of enactment. Figures cannot
be summed.
Source: Committee on Ways and Means, (1998); Congressional Budget
Office.
TABLE 2-32.--NUMBER OF MEDICARE ENROLLEES BY TYPE OF COVERAGE AND TYPE OF ENTITLEMENT, SELECTED YEARS 1968-98
[In thousands]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual rate of
------------------------------------------------------------------------------------------------------------------------ growth (percent)
Type of entitlement and coverage --------------------------
1968 1975 1980 1982 1984 1986 1988 1990 1995 1996 1997 1998 1968-75 1975-85 1985-98
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total:
HI \1\ and/or SMI \2\...................... 19,821 24,959 28,478 29,494 30,456 31,750 32,980 34,203 37,535 38,064 38,445 38,825 3.3 2.2 1.9
Total HI: 19,770 24,640 28,067 29,069 29,996 31,216 32,413 33,719 37,135 37,662 38,052 38,432 3.2 2.2 1.9
HI only.................................... 1,016 1,054 1,079 1,082 1,040 1,160 1,363 1,574 1,850 1,925 1,985 2,044 0.5 0.4 5.3
Total SMI.................................. 18,805 23,905 27,400 28,412 29,416 30,590 31,617 32,629 35,685 36,140 36,460 36,781 3.5 2.3 1.7
SMI only................................... 51 318 411 425 460 534 567 484 400 402 393 393 29.9 4.5 -1.9
Aged:
HI and/or SMI.............................. 19,821 22,790 25,515 26,540 27,571 28,791 29,879 30,948 33,142 33,424 33,630 33,802 2.0 2.1 1.5
Total HI................................... 19,770 22,472 25,104 26,115 27,112 28,257 29,312 30,464 32,742 33,022 33,237 33,410 1.8 2.1 1.6
HI only.................................... 1,016 845 835 833 807 928 1,098 1,263 1,000 1,440 1,466 1,494 -2.6 0.2 4.7
Total SMI.................................. 18,805 21,945 24,680 25,707 26,765 27,863 28,780 29,686 31,742 31,984 32,164 32,308 2.2 2.2 1.4
SMI only................................... 51 318 411 425 459 534 567 484 400 402 393 392 29.9 4.5 -1.9
All disabled:
HI and/or SMI.............................. (\4\) 2,168 2,963 2,954 2,884 2,959 3,102 3,255 4,393 4,640 4,815 5,023 NA 3.0 4.7
Total HI................................... (\4\) 2,168 2,963 2,954 2,884 2,959 3,101 3,255 4,393 4,640 4,815 5,023 NA 3.0 4.7
HI only.................................... (\4\) 209 244 249 233 232 265 311 451 485 519 551 NA 0.9 7.6
Total SMI.................................. (\4\) 1,959 2,719 2,759 2,682 2,727 2,837 2,943 3,942 4,155 4,296 4,472 NA 3.2 4.4
SMI only \3\............................... (\4\) NA NA NA NA NA NA NA NA NA NA NA NA NA NA
End-stage renal disease only:
HI and/or SMI.............................. (\4\) 13 28 27 30 39 53 65 71 73 75 77 NA 9.1 7.9
Total HI................................... (\4\) 13 28 27 30 39 53 65 71 73 75 77 NA 9.1 7.9
HI only.................................... (\4\) 1 1 2 2 3 4 6 8 8 9 10 NA 7.2 14.4
Total SMI.................................. (\4\) 12 27 26 28 36 49 59 63 65 66 67 NA 9.2 7.2
SMI only \3\............................... (\4\) NA NA NA NA NA NA NA NA NA NA NA NA NA NA
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Hospital insurance.
\2\ Supplementary medical insurance.
\3\ Disabled and end-stage renal disease only must have HI to be eligible for SMI coverage.
\4\ Medicare disability entitlement began in 1973.
NA--Not available.
Source: Health Care Financing Administration.
TABLE 2-33.--GROWTH IN NUMBER OF AGED MEDICARE ENROLLEES BY SEX AND AGE, SELECTED YEARS 1968-98
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual growth Enrollees
-------------------------------------------------------------------------------- rate (percent) as percent
--------------------------- Total aged of total
Sex and age population aged
1968 1975 1980 1990 1995 1996 1997 1998 1968-75 1975-84 1986-98 1998 \1\ population
1998
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All persons.................................................. 19,496 22,548 25,515 30,948 33,142 33,424 33,630 33,802 2.1 2.3 1.3 34,401 98.3
65-69...................................................... 6,551 7,642 8,459 9,695 9,517 9,445 9,317 9,184 2.2 1.6 0.0 9,593 95.7
70-74...................................................... 5,458 5,950 6,756 7,951 8,756 8,745 8,737 8,725 1.2 2.3 1.2 8,802 99.1
75-79...................................................... 3,935 4,313 4,809 6,058 6,563 6,749 6,932 7,055 1.3 2.4 2.08 7,218 97.7
80-84...................................................... 2,249 2,793 3,081 3,957 4,470 4,554 4,619 4,707 3.1 2.2 2.4 4,734 99.4
85 and older............................................... 1,303 1,850 2,410 3,286 3,837 3,930 4,025 4,130 5.1 4.6 2.9 4,054 101.9
Males........................................................ 8,177 9,201 10,268 12,416 13,434 13,583 13,701 13,806 1.7 2.0 1.5 14,199 97.2
65-69...................................................... 2,944 3,420 3,788 4,352 4,348 4,332 4,284 4,234 2.2 1.6 0.3 4,393 96.4
70-74...................................................... 2,322 2,504 2,841 3,406 3,791 3,796 3,808 3,819 1.1 2.4 1.4 3,857 99.0
75-79...................................................... 1,596 1,669 1,854 2,382 2,642 2,730 2,816 2,876 0.6 2.4 2.4 2,997 96.0
80-84...................................................... 864 1,005 1,062 1,369 1,593 1,636 1,670 1,717 2.2 1.6 2.9 1,764 97.3
85 and older............................................... 450 604 722 906 1,060 1,090 1,122 1,159 4.3 3.1 2.9 1,188 97.6
Females...................................................... 11,319 13,347 15,247 18,532 19,708 19,841 19,929 19,996 2.4 2.4 1.2 20,203 99.0
65-69...................................................... 3,606 4,222 4,671 5,343 5,169 5,113 5,032 4,950 2.3 1.5 0.2 5,201 95.2
70-74...................................................... 3,136 3,446 3,914 4,545 4,964 4,949 4,928 4,906 1.4 2.3 1.0 4,945 99.2
75-79...................................................... 2,338 2,644 2,954 3,676 3,921 4,019 4,116 4,179 1.8 2.4 1.7 4,221 99.0
75-84...................................................... 1,386 1,788 2,019 2,588 2,877 2,919 2,949 2,989 3.7 2.4 2.1 2,970 100.6
85 and older............................................... 853 1,246 1,689 2,380 2,777 2,840 2,903 2,972 5.6 5.3 2.9 2,866 103.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ U.S. residents only.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy; and U.S. Department of Commerce, U.S. Census Bureau.
TABLE 2-34.--GROWTH IN NUMBER OF DISABLED MEDICARE ENROLLEES WITH HOSPITAL INSURANCE COVERAGE BY TYPE OF ENTITLEMENT AND AGE, SELECTED YEARS 1975-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual percent growth
------------------------------------------------------------------------------------ rate
Type of entitlement and age -------------------------------
1975 1980 1990 1995 1996 1997 1998 1975-84 1984-94 1984-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
All disabled persons................ 2,058,424 2,425,231 3,254,983 4,393,287 4,640,180 4,814,782 5,022,811 3.8 3.7 4.0
Under age 35.................... 238,070 193,392 483,262 587,709 587,160 570,264 558,417 5.6 4.0 2.6
35-44........................... 251,142 258,374 654,953 973,328 1,030,456 1,057,583 1,093,962 5.9 8.0 7.0
45-54........................... 508,345 572,823 741,193 1,187,993 1,291,453 1,373,326 1,453,356 1.6 6.4 6.7
55-64........................... 1,060,967 1,400,642 1,375,575 1,644,257 1,731,111 1,813,609 1,917,076 3.8 0.5 1.8
All disabled workers................ 1,638,662 2,396,897 2,579,097 3,602,559 3,828,220 3,987,130 4,180,635 3.9 3.8 4.3
Under age 35.................... 100,439 184,619 257,760 357,794 357,442 343,052 333,963 7.5 6.0 4.0
35-44........................... 164,439 253,186 482,071 769,071 819,512 840,790 872,918 6.5 9.4 8.2
45-54........................... 426,451 565,846 612,692 1,023,616 1,120,184 1,195,960 1,269,628 1.4 6.7 7.1
55-64........................... 947,333 1,393,246 1,226,574 1,452,078 1,531,082 1,607,328 1,704,126 3.9 0.3 1.7
Adults disabled as children......... 324,864 409,072 542,416 609,081 621,620 632,300 642,579 3.9 2.6 2.4
Under age 35.................... 151,708 173,684 208,901 213,973 213,456 210,936 208,220 2.1 1.4 0.8
35-44........................... 84,508 105,092 158,725 189,108 195,185 200,758 204,694 4.6 3.8 3.5
45-54........................... 71,484 80,381 107,092 132,484 137,704 142,839 148,336 2.3 3.9 3.9
55-64........................... 45,164 49,910 67,698 73,516 75,275 77,766 81,329 3.2 1.9 2.2
Widows and widowers................. 83,771 110,785 68,793 111,121 117,028 120,137 122,203 0.2 1.9 2.6
Under 55........................ 7,446 7,577 5,615 12,420 13,014 13,198 13,162 -5.2 9.5 7.8
55-64........................... 76,325 103,208 63,178 98,701 104,014 106,939 109,041 0.6 1.3 2.2
End-stage renal disease only........ 11,127 28,334 64,677 70,526 73,312 75,215 77,394 11.5 8.7 7.1
Under age 35.................... 3,729 8,773 16,601 15,942 16,262 16,276 16,234 10.5 5.6 4.2
35-44........................... 2,187 5,188 14,157 15,149 15,759 16,034 16,350 10.9 10.3 8.0
45-54........................... 2,966 6,977 15,794 19,473 20,551 21,328 22,230 9.7 10.4 8.8
55-64........................... 2,245 7,396 18,125 19,962 20,740 21,576 22,580 15.4 9.1 7.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration.
TABLE 2-35.--NUMBER AND PERCENTAGE OF INDIVIDUALS ENROLLED IN SUPPLEMENTARY MEDICAL INSURANCE UNDER STATE BUY-IN
AGREEMENTS BY TYPE OF BENEFICIARY AND BY YEAR OR 1998 AREA OF RESIDENCE, SELECTED YEARS 1968-98
----------------------------------------------------------------------------------------------------------------
All persons Aged Disabled
--------------------------------------------------------------
Year or area of residence \1\ Percent Percent Percent
Number in of SMI Number in of SMI Number in of SMI
thousands enrolled thousands enrolled thousands enrolled
----------------------------------------------------------------------------------------------------------------
Year:
1968......................................... 1,648 8.8 1,648 8.8 NA NA
1975......................................... 2,846 12.0 2,483 11.4 363 18.7
1980......................................... 2,954 10.9 2,449 10.0 504 18.9
1985......................................... 2,670 9.0 2,164 8.0 505 19.2
1990......................................... 3,604 11.0 2,714 9.1 890 30.2
1995......................................... 4,895 13.7 3,369 10.6 1,526 38.7
1996......................................... 5,001 13.1 3,404 10.6 1,597 38.4
1997......................................... 5,089 13.2 3,445 10.7 1,644 38.3
1998......................................... 5,109 13.2 3,492 10.8 1,775 39.7
Area of residence: \1\
Alabama...................................... 122 18.2 86 16.4 34 41.5
Alaska....................................... 7 18.4 4 14.8 2 50.0
Arizona...................................... 51 7.8 31 6.0 15 30.0
Arkansas..................................... 79 18.2 58 16.7 22 41.5
California................................... 777 20.5 561 17.9 204 63.6
Colorado..................................... 52 11.5 32 9.0 17 42.5
Connecticut.................................. 51 10.0 31 7.1 19 51.4
Delaware..................................... 9 8.3 4 4.6 3 33.3
District of Columbia......................... 15 19.7 11 17.5 4 57.1
Florida...................................... 314 11.4 211 9.0 77 42.3
Georgia...................................... 171 19.3 119 17.5 48 45.3
Guam and Virgin Islands \2\.................. 1 5.3 1 9.1 0 6.3
Hawaii....................................... 19 11.9 14 10.8 4 44.4
Idaho........................................ 15 9.4 8 6.2 5 41.7
Illinois..................................... 146 9.0 89 6.4 54 37.8
Indiana...................................... 81 9.6 53 7.5 29 34.9
Iowa......................................... 50 10.5 33 7.8 18 48.6
Kansas....................................... 39 10.0 24 7.1 12 41.4
Kentucky..................................... 107 17.5 67 14.3 35 42.2
Louisiana.................................... 115 19.3 80 17.1 35 44.9
Maine........................................ 33 15.6 18 10.6 12 57.1
Maryland..................................... 62 9.9 44 8.5 19 38.8
Massachusetts................................ 139 14.6 83 10.6 49 59.0
Michigan..................................... 136 9.9 75 6.5 53 37.6
Minnesota.................................... 58 9.0 35 6.3 26 53.1
Mississippi.................................. 106 25.8 77 24.4 30 51.7
Missouri..................................... 82 9.6 48 6.7 28 34.1
Montana...................................... 12 9.0 7 6.3 5 38.5
Nebraska..................................... 18 7.1 9 4.1 8 44.4
Nevada....................................... 17 7.6 10 6.1 5 33.3
New Hampshire................................ 6 3.6 3 2.2 3 23.1
New Jersey................................... 138 11.6 92 9.0 39 42.4
New Mexico................................... 34 15.1 22 12.6 9 40.9
New York..................................... 363 13.6 232 10.5 105 42.7
North Carolina............................... 210 19.2 138 16.1 56 47.9
North Dakota................................. 6 5.8 4 4.3 2 25.0
Ohio......................................... 180 10.7 119 8.3 54 32.5
Oklahoma..................................... 63 12.6 45 10.8 17 38.6
Oregon....................................... 51 10.6 29 7.1 16 42.1
Pennsylvania................................. 179 8.6 105 5.8 64 38.8
Puerto Rico.................................. 0 0.0 0 0.0 0 0.0
Rhode Island................................. 18 10.6 10 7.0 6 40.0
South Carolina............................... 104 19.0 69 16.6 31 48.4
South Dakota................................. 13 11.0 9 8.8 4 44.4
Tennessee.................................... 172 21.3 104 16.4 52 55.3
Texas........................................ 340 15.5 252 14.1 75 41.4
Utah......................................... 15 7.6 8 5.0 6 40.0
Vermont...................................... 13 14.9 8 11.4 5 62.5
Virginia..................................... 108 12.5 74 10.8 34 40.5
Washington................................... 89 12.4 46 7.8 29 49.2
West Virginia................................ 43 12.9 26 9.7 16 34.0
Wisconsin.................................... 74 9.5 45 6.8 31 45.6
Wyoming...................................... 6 9.4 3 5.8 2 40.0
--------------------------------------------------------------
United States............................ 4,892 12.9 3,367 10.7 1,525 41.7
All areas................................ 5,109 13.2 3,369 10.6 1,526 41.0
----------------------------------------------------------------------------------------------------------------
\1\ State of residence is not necessarily State that bought coverage.
\2\ Data for these areas combined to prevent disclosure of confidential information.
NA--Not available.
Source: Health Care Financing Administration, Office of Strategic Planning.
TABLE 2-36.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE AND TYPE OF SERVICE, CALENDAR YEARS
1995-98
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Amount and distribution of payments for enrollees
-----------------------------------------------------------------------------------
Type of coverage and type of 1995 1996 1997 1998
service -----------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
----------------------------------------------------------------------------------------------------------------
Hospital insurance.......... $116,176 100.0 $128,457 100.0 $137,592 100.0 $133,244 100.0
Inpatient................. 81,984 70.6 85,756 66.8 88,498 64.3 87,029 65.3
Skilled nursing facility.. 9,236 8.0 11,101 8.6 12,995 9.4 13,487 10.1
Home health agency........ 16,373 14.1 17,825 13.9 17,680 12.8 11,789 8.8
Hospice................... 1,883 1.6 1,997 1.6 2,082 1.5 2,180 1.6
Managed care.............. 6,701 5.8 11,777 9.2 16,338 11.9 18,759 14.1
Supplementary medical 64,972 35.9 68,598 37.9 72,757 40.2 76,673 42.3
insurance..................
Physicians fee schedule 31,660 17.5 31,631 17.5 31,901 17.6 32,456 17.9
\1\......................
Durable medical equipment. 3,689 2.0 3,826 2.1 4,237 2.3 4,033 2.2
Carrier laboratory........ 2,807 1.5 2,550 1.4 2,386 1.3 2,088 1.2
Other carrier............. 4,530 2.5 5,059 2.8 5,582 3.1 5,937 3.3
Outpatient hospital....... 8,663 4.8 8,691 4.8 9,455 5.2 8,844 4.9
Home health agency........ 236 0.1 262 0.1 261 0.1 166 0.1
Intermediary laboratory... 1,448 0.8 1,311 0.7 1,447 0.8 1,476 0.8
Other intermediary........ 5,329 2.9 5,711 3.2 6,527 3.6 6,334 3.5
Managed care.............. 6,610 3.6 9,558 5.3 10,962 6.1 15,338 8.5
-----------------------------------------------------------------------------------
Total payments.......... 181,148 100.0 197,055 100.0 210,349 100.0 209,917 100.0
----------------------------------------------------------------------------------------------------------------
\1\ Includes other services.
Note.--See table 2-3 for historical fiscal year data.
Source: Health Care Financing Administration, Office of the Actuary.
TABLE 2-37.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE, TYPE OF SERVICE, AND TYPE OF
ENROLLEE, CALENDAR YEAR 1998
----------------------------------------------------------------------------------------------------------------
Type of enrollee
--------------------------------------------------------------------------
All enrollees Aged Disabled
Type of coverage and service --------------------------------------------------------------------------
Amount Amount Amount
(in Percentage (in Percentage (in Percentage
millions) distribution millions) distribution millions) distribution
----------------------------------------------------------------------------------------------------------------
Hospital insurance................... $133,244 100.0 $117,066 100.0 $16,178 100.0
Inpatient.......................... 87,029 65.3 73,945 63.2 13,084 80.9
Skilled nursing facility........... 13,487 10.1 12,825 11.0 662 4.1
Home health agency................. 11,789 8.8 10,659 9.1 1,130 7.0
Hospice............................ 2,180 1.6 2,071 1.8 109 0.7
Managed care....................... 18,759 14.1 17,566 15.0 1,193 7.4
Supplementary medical insurance...... 76,673 100.0 65,882 100.0 10,791 100.0
Physicians fee schedule............ 32,456 42.3 28,491 43.2 3,966 36.8
Durable medical equipment.......... 4,033 5.3 3,299 5.0 734 6.8
Carrier laboratory................. 2,088 2.7 1,794 2.7 294 2.7
Other carrier...................... 5,937 7.7 5,136 7.8 801 7.4
Outpatient hospital................ 8,844 11.5 7,501 11.4 1,343 12.4
Home health agency................. 166 0.2 166 0.3 0 0.0
Intermediary laboratory............ 1,476 1.9 1,181 1.8 296 2.7
Other intermediary................. 6,334 8.3 3,989 6.1 2,346 21.7
Managed care....................... 15,338 20.0 14,326 21.7 1,012 9.4
--------------------------------------------------------------------------
Total payments................... 209,917 100.0 182,948 100.0 26,969 100.0
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Office of the Actuary.
TABLE 2-38.--PERSONS ENROLLED AND PERSONS SERVED UNDER MEDICARE, AND PROGRAM PAYMENTS, BY TYPE OF COVERAGE AND SERVICE, SELECTED CALENDAR YEARS 1967-97
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual rate of
--------------------------------------------------------------- change
Type of coverage and service --------------------------
1967 1980 1990 1994 1996 1997 1967-83 1983-97 1967-97
--------------------------------------------------------------------------------------------------------------------------------------------------------
----------------------------Number of enrollees (in thousands)---------------------------
-----------------------------------------------------------------------------------------
Hospital insurance and/or supplementary medical insurance..... 19,521 28,478 34,213 36,950 38,093 38,465 2.7 1.9 2.4
Hospital insurance........................................ 19,494 28,067 33,731 36,542 37,677 38,059 2.6 2.0 2.3
Supplementary medical insurance........................... 17,893 27,400 32,636 35,179 36,165 36,479 3.1 1.8 2.5
-----------------------------------------------------------------------------------------
Number of persons served (in thousands) \1\
-----------------------------------------------------------------------------------------
Hospital insurance............................................ 3,960 6,752 7,036 7,886 8,175 8,118 4.0 0.7 2.5
Inpatient hospital services............................... 3,601 6,672 6,543 6,938 6,941 6,887 4.4 -0.3 2.3
Skilled nursing facility services......................... 354 257 638 1,063 1,373 1,503 -1.8 14.3 5.1
Home health agency services............................... 126 726 1,936 3,152 3,493 3,458 15.8 7.7 12.1
Supplementary medical insurance............................... 6,523 17,822 26,951 29,912 29,981 29,620 7.1 3.3 5.4
Physician and other medical services...................... 6,415 17,258 26,350 29,222 29,332 28,961 7.0 3.3 5.3
Outpatient services \2\................................... 1,511 7,538 15,511 18,945 20,305 20,543 11.9 6.5 9.4
Home health agency services............................... 118 327 38 37 44 48 -10.5 7.0 -3.1
-----------------------------------------------------------------------------------------
Total................................................. 7,154 18,031 27,099 30,087 30,195 29,847 6.5 3.2 5.0
=========================================================================================
Rate per thousand enrollees \3\
-----------------------------------------------------------------------------------------
Hospital insurance............................................ 203 241 209 234 243 241 1.3 -0.3 0.6
Inpatient hospital services............................... 185 238 194 206 206 205 1.7 -1.3 0.4
Skilled nursing facility services......................... 18 9 19 32 41 45 -4.3 13.2 3.2
Home health agency services............................... 6 26 57 94 104 103 12.8 6.6 10.0
Supplementary medical insurance............................... 365 650 826 926 931 920 3.9 2.4 3.2
Physician and other medical services...................... 359 630 807 905 911 899 3.8 2.5 3.2
Outpatient services \2\................................... 84 275 475 586 630 638 8.5 5.6 7.2
Home health agency services............................... 7 12 1 1 1 1 -13.2 6.1 -5.0
-----------------------------------------------------------------------------------------
Total................................................. 366 633 792 883 886 876 3.7 2.2 3.1
=========================================================================================
Program payments (in millions of dollars)
-----------------------------------------------------------------------------------------
Hospital insurance............................................ $2,967 $23,119 $62,347 $94,205 $107,949 \4\ $114,3 16.9 9.2 13.4
27
Inpatient hospital services............................... 2,667 22,297 56,716 75,715 79,911 84,563 17.4 7.1 12.7
Skilled nursing facility services......................... 274 344 1,971 5,954 9,486 11,237 2.8 28.6 13.7
Home health agency services............................... 26 478 3,660 12,537 16,546 16,487 28.1 21.1 25.9
Supplementary medical insurance............................... 1,272 10,494 39,072 52,343 59,114 61,096 17.6 10.3 14.3
Physician and other medical services...................... 1,217 8,358 30,222 38,490 42,510 43,621 16.3 9.3 13.1
Outpatient services \2\................................... 38 1,962 8,773 13,696 16,387 17,256 32.5 13.2 24.2
Home health agency services............................... 17 175 78 157 216 219 3.4 16.8 9.2
-----------------------------------------------------------------------------------------
Total................................................. 4,239 33,613 101,419 146,549 167,062 175,423 17.2 9.6 13.7
=========================================================================================
Program payments per person served
-----------------------------------------------------------------------------------------
Hospital insurance............................................ 749 3,424 8,861 11,945 13,205 14,082 12.4 8.5 10.6
Inpatient hospital services............................... 741 3,342 8,688 10,913 11,513 12,279 12.4 7.5 10.2
Skilled nursing facility services......................... 774 1,339 3,089 5,603 6,909 7,476 4.7 12.5 8.1
Home health agency services............................... 206 658 1,690 3,977 4,737 4,768 10.6 12.5 11.4
Supplementary medical insurance............................... 195 589 1,450 1,750 1,972 2,063 9.9 6.8 8.5
Physician and other medical services...................... 190 484 1,147 1,317 1,449 1,506 8.7 5.8 7.4
Outpatient services \2\................................... 25 260 566 723 807 840 18.5 6.3 12.9
Home health agency services............................... 144 535 2,053 4,267 4,909 4,588 15.5 9.3 12.7
-----------------------------------------------------------------------------------------
Total................................................. 593 1,864 3,743 4,871 5,533 5,877 10.0 6.1 8.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Does not reflect beneficiaries who received covered services but for whom no program payments were reported during the year. Detail does not add to
totals by type of service because one person may have used several types of services.
\2\ Prior to April 1, 1968, outpatient hospital services were covered by health insurance and supplementary medical insurance. All outpatient hospital
services for 1967 are shown as supplementary medical insurance services for purposes of comparison.
\3\ Beginning with 1994, the utilization rates per 1,000 enrollees do not reflect managed care enrollment; that is, Medicare enrollees in managed care
plans are not included in the denominator used to calculate the utilization rates.
\4\ Includes $2.0 billion for hospice services, not shown separately.
Note.--Medicare Program represents fee-for-service payments only. Numbers may not add to totals because of rounding.
Source: Health Care Financing Administration.
TABLE 2-39.--PERSONS SERVED AND PROGRAM PAYMENTS FOR MEDICARE BENEFICIARIES, BY DEMOGRAPHIC CHARACTERISTICS,
CALENDAR YEAR 1997
----------------------------------------------------------------------------------------------------------------
Persons served \1\ Program payments
--------------------------------------------------------------
Average
Demographic characteristic amount
Number in Percent Amount in Percent per Per enrollee
thousands millions person \2\
served
----------------------------------------------------------------------------------------------------------------
Sex:
Male......................................... 12,113 40.6 $75,357 43.0 $6,221 $5,326
Female....................................... 17,734 59.4 100,066 57.0 5,643 5,306
Age:
Under 65 years............................... 4,129 13.8 25,798 14.7 6,247 5,735
65-74 years.................................. 12,771 42.8 59,687 34.0 4,674 3,953
75-84 years.................................. 9,428 31.6 61,708 35.2 6,545 6,267
85 years or older............................ 3,519 11.8 28,231 16.1 8,023 7,919
Race: \3\
White........................................ 25,801 86.4 145,050 82.7 5,622 5,165
Nonwhite..................................... 2,550 8.5 21,447 12.2 8,409 4,509
Type of entitlement:
Aged......................................... 26,130 87.5 151,655 86.5 5,804 5,319
Disabled..................................... 3,717 12.5 23,768 13.5 6,395 5,284
MSA type \4\
Urban........................................ 21,549 72.2 134,200 76.5 6,228 5,694
Rural........................................ 7,956 26.7 40,142 22.9 5,048 4,648
--------------------------------------------------------------
Total.................................... 29,847 100.0 175,423 100.0 5,877 5,314
----------------------------------------------------------------------------------------------------------------
\1\ Does not reflect beneficiaries who received covered services but for whom no program payments were reported
during the year.
\2\ Beginning with 1994, the utilization rates per 1,000 enrollees do not reflect managed care enrollment; that
is, Medicare enrollees in managed care plans are not included in the denominator used to calculate the
utilization rates.
\3\ Excludes unknown race.
\4\ Excludes outlying areas.
Note.--MSA is metropolitan statistical area. Numbers may not add to totals because of rounding.
Source: Health Care Financing Administration.
TABLE 2-40.--USE OF SHORT-STAY HOSPITAL SERVICES BY MEDICARE EMPLOYEES BY YEAR AND 1997 DEMOGRAPHIC CHARACTERISTICS, SELECTED YEARS 1975-97
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discharges Total days of care Program payments
Hospital -----------------------------------------------------------------------------------------------------
Calendar year, period, and 1994 insurance Per
characteristic enrollees Number in Per 1,000 Number in Per Per 1,000 Amount in Per covered Per
in thousands enrollees thousands discharge enrollees millions discharge day of enrollee
thousands care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1975.............................. 24,640 8,001 325 89,275 11.2 3,623 $9,748 $1,218 $109 $396
1980.............................. 28,067 10,279 366 109,175 10.6 3,890 22,099 2,150 202 787
1982.............................. 29,069 11,109 382 113,047 10.0 3,889 30,601 2,755 271 1,053
1984.............................. 29,996 10,896 363 96,485 8.9 3,217 38,500 3,533 399 1,284
1985.............................. 30,589 10,027 328 86,339 8.6 2,823 40,200 4,009 466 1,314
1986.............................. 31,216 10,044 322 86,910 8.7 2,784 41,781 4,160 481 1,338
1987.............................. 31,853 10,110 317 89,651 8.9 2,815 44,068 4,359 492 1,383
1988.............................. 32,483 10,256 316 90,873 8.9 2,798 46,879 4,571 516 1,443
1989.............................. 33,040 10,148 307 89,902 8.9 2,721 49,091 4,838 546 1,486
1990.............................. 33,719 10,522 312 92,735 8.8 2,750 53,708 5,104 579 1,593
1991.............................. 34,428 10,896 316 93,936 8.6 2,728 58,901 5,406 627 1,711
1992.............................. 35,154 11,111 316 92,900 8.4 2,643 64,976 5,848 699 1,848
1993.............................. 35,904 11,158 311 88,871 8.0 2,475 67,439 6,044 759 1,878
1994.............................. 36,543 11,471 314 85,734 7.5 2,346 70,623 6,157 824 1,933
1995.............................. 37,135 11,681 315 81,282 7.0 2,189 74,836 6,407 921 2,015
1996 \1\.......................... 33,301 11,796 354 77,193 6.5 2,318 78,546 6,953 1,018 2,359
1997 \1\.......................... 32,614 11,919 365 74,901 6.3 2,297 80,751 7,118 1,078 2,476
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in period:
1975-85........................... 2.2 4.8 2.4 1.0 -2.8 -1.5 18.7 14.2 17.6 15.8
1985-95........................... 2.0 -1.3 -3.1 -1.2 -1.7 -3.1 6.3 5.7 7.5 4.2
1975-97 \1\....................... 1.3 1.8 0.5 -0.8 -2.6 -2.1 10.1 8.4 11.0 8.7
========================================================================================================================================================
Age:
Less than 65 years................ 4,829 1,637 364 10,686 6.5 2,213 10,856 7,064 1,016 2,248
65-69 years....................... 9,217 1,765 230 10,442 5.9 1,133 12,886 7,816 1,234 1,398
70-74 years....................... 8,641 2,193 303 13,197 6.0 1,527 15,807 7,613 1,198 1,829
75-79 years....................... 6,830 2,269 393 14,294 6.3 2,093 16,005 7,389 1,120 2,343
80-84 years....................... 4,581 1,914 487 12,352 6.5 2,696 12,503 6,790 1,012 2,729
85 years or older................. 3,960 2,141 610 13,930 6.5 3,518 12,694 6,118 911 3,206
Sex:
Male.............................. 16,383 5,208 371 32,652 6.3 1,993 37,436 7,619 1,147 2,285
Female............................ 21,676 6,712 361 42,249 6.3 1,949 43,315 6,736 1,025 1,998
Race: \2\
White............................. 32,526 10,078 361 62,058 6.2 1,908 67,239 7,010 1,083 2,067
All other......................... 5,349 1,766 388 12,347 7.0 2,308 12,993 7,739 1,052 2,429
Area of residence:
Northeast......................... 6,807 2,496 367 21,858 8.8 3,211 19,812 7,938 906 2,911
Midwest........................... 8,456 3,018 357 19,414 6.4 2,296 19,937 6,606 1,027 2,358
South............................. 12,080 4,533 375 29,657 6.5 2,455 28,884 6,372 974 2,391
West.............................. 4,862 1,730 356 9,477 5.5 1,949 11,718 6,773 1,236 2,410
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Prior to 1996, data were obtained from the Annual Person Summary Record. Beginning in 1996, utilization rates are based on persons receiving fee-for-
service care and total persons not enrolled in prepaid health plans.
\2\ Excludes unknown race.
Source: Health Care Financing Administration, Office of Strategic Planning.
TABLE 2-41.--MEDICARE PARTICIPATING INSTITUTIONS AND ORGANIZATIONS,
1984, 1996, AND 1998
------------------------------------------------------------------------
Year
Institution or organization -------------------------
1984 1998
------------------------------------------------------------------------
Hospitals..................................... 6,675 6,116
Short stay.................................. 6,038 5,038
Long stay................................... 637 1,078
Skilled nursing facilities.................... 5,952 15,032
Home health agencies.......................... 4,684 9,330
Laboratories registered under the Clinical NA 166,817
Laboratory Improvement Act...................
Outpatient physical therapy providers......... 791 2,890
Portable x-ray suppliers...................... 269 659
Rural health clinics.......................... 420 3,551
Comprehensive outpatient rehabilitation 48 590
facilities...................................
Ambulatory surgical centers................... 155 2,649
Hospices...................................... 108 2,317
Facilities providing services to renal disease 1,335 3,581
benefit......................................
Hospital certified as both renal transplant 147 148
and renal dialysis center..................
Hospital certified as renal transplant 16 87
centers....................................
Hospital dialysis facilities................ 117 27
Nonhospital renal dialysis facilities....... 645 NA
Dialysis centers only....................... 359 319
Inpatient care.............................. 51 44
Hospital and skilled nursing facility beds:
Hospitals................................... 1,144,000 1,012,000
Short stay................................ 1,023,000 891,000
Long stay................................. 120,700 122,000
Skilled nursing facilities.................. 530,400 723,000
------------------------------------------------------------------------
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy.
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jurisdiction of the Committee on Ways and Means (WMCP
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Eppig, F.J., & Chulis, G.S. (1997, Fall). Trends in Medicare
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Foster Higgins Survey and Research Services. (1999). National
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Author.
Health Care Financing Administration. Health Care Financing
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Office of the President. (2000 and various years). Budget of
the U.S. Government: Fiscal year 2001 (Historical
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