3 l; K ii’: ‘I’, e.‘ L. E 3; 3:5; -4 ~» ’ N E. A LC . /32- “ I ET.‘ ‘ Washéngmn aJnmmiW 3'41-r..n\‘z~v-as’-u.w I-‘:34.’ :2 »-1: - ‘ .r;,\*-_I:-, 213?:-ts x:.:x:1-cg: 3-,..-{,.,,,3:§,zx._.l ‘ X.‘ -. ,4 .3 “ . p. _ _ t_._.‘_:~. 3 ' xx. ‘ , ~ ' - ' f1 s ,' a nu‘ T" ' " > , - - . ~ aw ‘ . . C ' . ,1 s . ‘ ‘ ‘\ . 5 cm‘ K‘ SS 9 .: * _‘ -W161-».'. -4 1- ' -I \ 9. 5} '.' tr ‘ .~, . . . ~ \ r v ~ k " QC“ «'1 '\ . T ONGFIESSIONAL RESEARCH SERVICE niversiT of M sour: um is ol U _C °F HIIWII |!N|| 010-103860323 CONGRESS 3 MEDICARE AND MED ICAID ISSUE BRIEF NUMBER IB76028 AUTH OR : O'Sullivan, Jennifer Education and Public welfare Division THE LIBRARY OF CONGRESS CONGRESSIONAL REEARCH SERVICE MAJOR ISSU E S YSTEM DA ‘E ORIGINATED DATE UPDATED IOIO W" I-13 33k‘ IWIQ |OlO\ FOR ADDITIONAL INFORMATION CALL 287-5700 0521 CBS‘ 1 IB76028 UPDATE-05/20/80 é§Q§-2§El!l$lQ! Medicare and Medicaid are the popular names given to the two programs enacted by Congress in 1965 that help aged and poor persons pay for the costs of their medical care. Medicare is a nationwide health insurance program for the aged and disabled, while Medicaid is a federally aided, State-operated and -administered program for certain categories of low-income persons. Medicare will cost an estimated $38.5 billion in FY81 -- a 10.6% increase over the $33.6 billion estimated for FY80. Medicaid costs are expected to increase 9.0% over the same period, from $25.3 billion to $27.6 billion. The spiralling costs of these two programs and their impact on Federal and State budgets has become a subject of increasing concern. Proposals directed toward making Medicare and Medicaid both more efficient and economical are being considered by the 96th Congress. Medicare is a nationwide health insurance program for the aged and certain disabled individuals. The eligibility requirements and benefit structure are the same throughout the country. The pmogram is administered by the Health Care Financing Administration of the Department of Health and Human Services (HHS). Medicaid is a federally aided, Statewaperated and -administered program lat certain categories of low—income persons. The States establish, subject to Federal guidelines, eligibility requirements and the scope of benefits to be provided. As a result, the program varies considerably from State to State. At the Federal level, Medicaid program responsibility is assigned to the Health Care Financing Administration of HHS. Certain very-low-income aged and disabled are eligible for both programs. In cases of dual coverage, Medicaid pays for Medicare premiums, deductibles and copayments, and for services not covered under Medicare. Total program costs under Medicare and Medicaid are estimat $66.1 billion for FY81. Federal costs are estimated at $5u.1 billion for the same period; this represents a 12.9% increase over the $47.9 billion estimated for FY80. A little over 96% of Federal program costs represents actual benefits payments -~ $52.0 billion in FY81. State and local expenditures for Medicaid will represent an estimated additional $12.0 billion in FY81, a 9.0% increase over the $11.0 billion estimated for FY80. Proposals directed toward making Medicare and Medicaid more efficient and economical are currently under consideration by the Congress. 3 Jurisdiction over Medicare and Medicaid is assigned in the Senate to the Finance Committee. In the House, the ways and Means Committee has jurisdiction over Medicare while the Committee on Interstate and Foreign wmmerce has jurisdiction over Medicaid. Proposals affecting both programs . LS require consideration by both House committees. — Major amendments to»the Medicare and Medicaid programs were included in the Social Security Amendments of 1972 (P.L. 92-603). This legislation CRS- 2 IB76028 upnnrz-05/2o/an extended Medicare eligibility to certain social security disabilitv beneficiaries and patients with chronic kidney disease who are under age 6: It also contained a number of provisions designed to control costs strengthen program administration, and improve the delivery and review or services.. The legislation included a number of provisions directed toward improving the quality of long term care services, including a single definition of care and coordination of certification procedures for facilities participating in both programs. P.L. 92-603 also provided for the establishment of Professional Standards Review Organizations (PSRO's0 throughout the country. These organizations, representing substantial numbers of practicing physicians in local areas, are charged with the ongoing review of services provided under Medicare and Medicaid. During the 93d Congress, several technical measures were enacted, principally relating to»the coordination of Medicaid eligibility requirements with the new Federal Supplemental Security Income (SSI) program. Several technical changes were enacted for these two programs during the .94th Congress. These included assuring that recognized, prevailing charges for physician services under Medicare would not be lowered, facilitating funding of Professional standards Review Organizations (which are charged with review of the necessity and quality of services provided under the programs) and protecting recipients of the Supplemental Security Income program from losing Medicaid as a result of increases in income resulting from future social security increases. The Congress also enacted and subsequently repealed a controversial provision that required States to waive their constitutional immunity from litigation with respect to suit concerning Medicaid payments for inpatient hospital services. Allegations of fraud and abuse were the subject of several congressional investigations beginning in the 9!-lth Congress. The "Moss Report," prepared by the Subcommittee on Long-Term Care of the Senate Special Committee on Aging, focused on the so-called "Medicaid mills" in New York City. These facilities were shown to provide substandard care while at the same time engaging in fraudulent and abusive practices that cost the program millions of dollars.. An earlier report by the same committee documented similar findings in clinical laboratories providing Medicare and Medicaid services. Additional testimony on fraud and abuse in the two programs was presented to the House Interstate and Foreign Commerce Committee and the Senate and House Government Operations Committees. In 1976, the Congress enacted P.L. 9a-505, which establishes an Office of the Inspector General for HEW. While this Office has responsibility for oversight of all HEW programs, one of its primary functions is to:deal with investigations relating to Medicare and Medicaid. On Oct. 25, 1977, the President signed into law the "Medicare-Medicaid Anti—Fraud and Abuse Amendments" (P.L. 95-142). The measure is designed to facilitate governmental efforts to identify and prosecute cases of fraudulent and abusive activities and to strengthen penalties for persons convicted _of program-related violations. On Dec. 13, 1977, the President signed into law P.L. 95-210, a bi?‘ authorizing reimbursement under Medicare and Medicaid for services provix by nurse practitioners and physician assistants in rural clinics. On June 13, 1978, the President signed into law P.L. 95-292 which would ‘amend the end-stage renal disease program under Medicare to provide incentives for use of self-dialysis. 7 cns- 3 IB76028 UPDATE-05/20/sh Rising costs and the need for administrative reforms in the two programs were reviewed in the 95th Congress and again in the 96th Congress. The major focus of this discussion is~on the containment of hospital costs. H.R. 934; he "Medicare—Medicaid Administrative and Reimbursement Reform Act," as :ported by the Senate Finance Committee (introduced as S. 505), limits control efforts to inpatient routine operating costs under Medicare and Medicaid. For a discussion of hospital cost containment, see Issue Brief 77059 - Hospital Cost Containment. H.R. 93a also contains a number of other amendments to the Medicare and Medicaid programs including benefit and reimbursement modifications and long term care reforms. (See Legislation below) i g The House Ways and Means Committee has reported H.R. 3990 (the “Medicame Amendments of 1979") and H.R. 4000, which contain a number of modifications to the Medicare and Medicaid programs. The House Interstate and Foreign Commerce Committee, to which the bills were jointly referred, has also reported these measures. There are a number of differences between the House Ways and Means Committee and Commerce Committee versions of these bills. § The Senate Finance Committee has reported a measure that would replace the early and periodic screening, diagnosis and treatment program (EPSDT) under Medicaid with a child health assessment.program. On Dec. 11, 1979, the House passed H-R. H962 which would replace EPSDT with a child health assurance program. There are substantial differences between the two bills. A number of bills have been introduced in the 96th Congress (as in previous Congresses) that would expand the scope of services available under Medicare, lower or eliminate certain Medicare cost-sharing charges, amd nprove and expand long term care services available under Medicare and ~dicaid. i QEQLQABE Qggggiptigng Medicare (authorized under Title XVIII of the Social Security Act) is a nationwide program that provides health insurance to most individuals age 65 and over, to persons nder 65 who have been entitled for a period of 24 months to social security or railroad retirement benefits because they are disabled, and to certain workers and their dependents who need kidney transplantation or dialysis. Medicare is a Federal program with uniform eligibility and. benefit structure throughout the United States. Protection is available to insured persons without regard to their income or assets. Medicare is composed of two parts -— the Hospital Insurance Program (Part A), and the Supplementary Medical Insurance Program (Part B). The vast majority of persons reaching age 65 are automatically entitled to protection under Medicare Part A. lThose over 65 not automatically covered may voluntarily obtain protection by paying the full actuarial cost of such coverage (currently $69). Also eligible (after receiving social security (or railroad retirement disability benefits:for 2n months) are disabled workers, disabled widows, and disabled dependent widowers between ages 50 and 65, beneficiaries over 18 who receive benefits because of disability prior to reaching age 22, and disabled railroad annuitants. Fully or currently wsured workers under social security and their dependents with chronic renal . sease may be considered disabled for purposes of coverage. ' Part A is financed principally through a special hospital insurance payroll tax levied on employees, employers, and the self-employed. During CRS- u IB76028 upnarr-os/2o/an calendar year 1980, each will pay a tax of 1.05% of the first $25,900 of covered earnings. During each benefit period (defined as beginning when a insured enters a hospital and ending when he has not been in a hospital I skilled nursing facility for 60 days), Part A will pay for: (1) 90 days of inpatient hospital care subject to $180 deductible; a $45 a day copaynent is required for the 61st through 90th day. An additional lifetime reserve of 60 days (subject to»a $90 a day copayment) may be drawn upon when an individual exceeds 90 days in a benefit period. t (2) 100 days of postéhospital skilled nursing facility care subject to a $22.S0—a—day copaynent after the first 20 days. 5 (3) 100 medically necessary post—hospital home health visits. Part B of Medicare is a voluntary program financed jointly through monthly premium charges on enrollees (currently $8.70) and by the Federal Government. All persons age 65 and older and all persons enrolled under Part A may elect to enroll in Part B. Persons age 65 or over who elect to "buy into" Part LA are required to buy Part B protection as well. Part B (with certain exceptions) pays 80% of “reasonable charges" for the following covered services after the insured meets a $60 deductible: services of independent practitioners (primarily physicians), 100 home health visits (not subject to coinsurance), medical and related services, outpatient hospital services, and laboratory services. Radiology) and pathology services that physicians provide to hospital inpatients are ‘reimbursed without regard to the coinsurance or deductible requirements. ’ In general, reimbursement under the Medicare program is based up). "reasonable costs" in the case of hospitals and other institutional providers, and "reasonable charges? in the case of physicians and other noninstitutional suppliers of services. 1 CR5. 5 IB76028 upnn-.rr—o 5/2o/so TABLE 1 L1.e.<1i_c.§.1;e_.2£99£an.22s_2§...tin..2i;.li9:.1.§.). FY79 FY80 FY81 2299222 .(:c.1.§.t.-.1. 1§§.t.-.1. .(§§.t;). Hospital insurance 1 total $2o,u3o $23,238 $26,338 Benefit payments 19,932 22,763 25,33u Supplementary medical insurance total 8,868 10,362 12,160 Benefit payments 8,310 9,663 11,013 Total costs 29,297 33,601 38,098 Total benefit payments 23,2u5 32,026 37,287 FY79 ,FY80 FY81 2292992222 .(a.accept the allowable charge as payment in full) was 50.6% Concern has been expressed about the substantial fee differentials that exist between physicians in different localities, that is, the sometimes relatively high fees paid in urban areas versus the relatively low fees sometimes paid in rural and ghetto communities which may discourage physicians from practicing in these physician-scarce fareas. Concerns over excessive payments have persisted in the case of pathologists, teaching physicians and other practitioners who bill for services that are produced either wholly or in part by hospital employees. « (The question of paying teaching physicians and the effect of Medicare payment levels on the geographical and specialty distribution of physicians was the subject of a March 1976 report by the Institute of Medicine, "Medicare-Medicaid Reimbursement Policies.") Legislation was enacted in the 95th Congress that would (1) facilitate governmental efforts to identify and prosecute cases of fraudulent and abusive activities and strengthen penalties for program violators; (2) amer“ the renal disease program authorized under Medicare to provide incentives use of self dialysis and clarify the reimbursement mechanism, and (5) authorize Medicare and Medicaid reimbursement for services provided by nurse practitioners and physician assistants in rural areas. c:Rs- 7 IB76028 upon-12-o 5/20/80 The President's FY81 Budget includes.a number of proposed amendments to the Medicare program including those that would (1) restructure Medicare for ‘He working aged to reduce Medicare costs; (2) eliminate the second 2H-month titing period for reentitled disability beneficiaries; (3) extend coverage Ir disabled workers who return to work.but are not medically recovered; (Q) liberalize coverage for outpatient mental health services, and (5) establish certain limits on reimbursement. The Administration's cost containment proposal would also have a significant impact on costs under the Hedicane program. .!.1.§P.I.§£1.l.P. Q§§§£iEEi9E: The Medicaid program (authorized under Title XIX of the Social security Act) is a Federal-Stateematching program providing medical assistance for low—income persons who are aged, blind, disabled, or members of families with dependent children. All States (except Arizona) and the District of Columbia, Guam, Puerto Rico, and the Virgin Islands currently participate in the program. The Federal. Government's share of medical expenses is tied to a formula based upon the per capita income of the State. As a minimum, the Federal Government will pay 50% of the costs of medical care; this amount may range up to 78% in the lower per capita income States. Each State administers and operates its«own program, and, subject to Federal guidelines, determines eligibility and the scope of benefits to be provided. The programs vary considerably from state to State. FY79 FY80 FY81 .Q§E§ 1§§§:l J§_§:l l§§E:l Payments to medical vendors Federal 11,560 13,525 10,773 State 9,023 10,098 11,067 Total $20,582 20,023 26,200 Administrative costs Federal 707 783 816 State #66 511 538 Total $ 1,173 1,290 1,350 Total costs Federal 12,267 14,308 15,590 State 9,089 11,009 12,005 Total $21,755 $25,3T7 $27,590 Eligibility for Medicaid is linked to actual or potential receipt of cash assistance under the federally assisted Aid to Families with Dependent Children Program (AFDC) and the Federal Supplemental Security Income Program ‘SI) for the aged, blind, and disabled. States must cover the Ttegorically needy“ under their Hedicaid programs. In general, ithese are persons receiving assistance under AFDC or SSI. States have the option of limiting Medicaid coverage of SSI recipients by requiring them to meet any more restrictive eligibility standard that was in effect on Jan. 1, 1972 CRS- 8 IB76028 UPDATE-05/20/30 (before implementation of SSI). States choosing the more restrictive criteria must allow applicants to deduct medical expenses from income determining eligibility. In 15 States, Medicaid coverage is limited to tho’ who can meet the more restrictive criteria. Thirty-four States and the District of Columbia cover all persons eligible for SSI, and 30 States cover some persons eligible for State supplementary payments under the program- States may also cover additional persons as categorically needy. These might include persons who would be eligible for cash assistance, except that they are residents in medical institutions (such as skilled nursing facilities}. States may also cover the “medically needy," i.e., persons whose income is slightly in excess of the standards for cash assistance, provided that (10 they are aged, blind, disabled, or members of families with dependent children, and (2) their income (after deducting incurred medical expenses) falls below the State standard-38 States have elected this option. States may also cover all needy and medically needy children under the age of 21, even though they are not eligible for cash assistance. ? .'-£A;§LE 3; H:e.d1c<2..i.