Medicare and health care reform

Although Medicare constitutes one of the most popular programs of the federal government, even its most ardent supporters would likely agree that improvements could be made and likely should be part of any package of comprehensive health care reform. While some changes could be made as stand-alone reforms, it would be better to integrate changes for the under 65-population with those for the Medicare program. For example, cost-containment strategies would work best if they applied to the population as a whole rather than creating differences that lead to cost-shifting and possible discrimination across groups. The generosity of services covered also ought to be balanced between Medicare and whatever happens elsewhere. This would allow Medicare's cost-sharing structure to be less severe in terms of hospital and skilled nursing care, for example. Finally, while it is tempting to use reductions in spending on Medicare as a means for helping to finance other expansions, the impact of such changes needs to be carefully assessed before assuming that they would create no lasting problems. This essay examines some of the options and likely consequences for Medicare as part of comprehensive health reform.     

Medicare on life support: will it survive?

This Issue Brief discusses Medicare reform. The Balanced Budget Act of 1997 reduces spending in the Medicare program by $115 billion between 1998 and 2002. Most of the reduction in spending comes from reducing payments to providers, and most of the savings (36 percent) occur in 2002. By 2007, the Part A trust fund is expected to be insolvent, four years before the baby-boom generation reaches the current Medicare eligibility age of 65. Congress is likely to revisit Medicare reform in the near future. A number of reforms received a significant amount of attention during the Medicare reform debate, but were not included in the final legislation. The Senate-passed legislation would have increased the Medicare eligibility age from 65 to 67, imposed means testing on Medicare Part B, and imposed a Part B home health copayment of $5. While these provisions were not included in the Balanced Budget Act of 1997, they may be the focal point of future Medicare reform. Many changes to the Medicare program are likely to significantly affect employment-based health plans for both active and retired workers. Raising the Medicare eligibility age would undoubtedly affect both workers and retirees. Unless workers are willing to work until age 67, their likelihood of becoming uninsured would increase. In 1995, 15.8 percent of retirees ages 55-64 were uninsured, compared with 11.5 percent of workers in the same age group. Early retirees might also find themselves unable to afford health insurance in the private market. An Employee Benefit Research Institute/Gallup poll indicates a direct link between the availability of retiree health benefits and a worker's decision to retire early. In 1993, 61 percent of workers reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree health benefits. If workers responded to an increase in the retirement age by working longer, employment-based health plans would probably experience an increase in costs, because older workers are the most costly to cover. Some employers might respond to an increase in the Medicare eligibility age by dropping coverage altogether. The message for future beneficiaries is becoming very clear: expect less from Medicare at later ages and higher premiums. As was true prior to the enactment of Medicare in 1965, workers will increasingly need to include retiree health insurance as an expected expense as they plan and save for retirement.     

Health care reform: managed competition and beyond

Since the election, the health care reform debate has focused on three broad features: implementation of managed competition, changes in the tax treatment of health insurance, and the imposition of budget caps or targets. The basic element of managed competition is the creation of sponsors who act as collective purchasing agents for large groups of individuals. One of the potentially most politically difficult issues in implementing any health care reform proposal is likely to be defining the minimum standard benefit package. It will determine the costs society bears, the income of providers, the health of many individuals, and the attributes of a workable health care reform package. Managed competition is intended to foster competition among health plans on the basis of cost and quality. The measures of quality actually employed in the health care system will determine in large part the incentives faced by insurers, providers, and consumers. The problem of adverse selection is potentially the most important issue in reforming the health insurance market. If individuals can opt not to purchase health benefits, poorer risks will be more likely to purchase health insurance than good risks, and at minimum the price of these benefits will be higher than would otherwise be the case. Managed competition requires that individuals share at least some of the financial consequences of their choices among health plans. As a result, most managed competition proposals change the tax code by limiting the exclusion of employer contributions to health insurance from worker's taxable income. Changing the health insurance market, mandating employer health benefits, and changing the tax code may have significant effects on the health care delivery system, but they are unlikely to reduce health care cost inflation in the near term. One of the proposals for restraining the growth in health care costs is the imposition of a budget on the amount spent on health care services. The combination of the constraints placed on federal governmental action by the budget and the significant political problems involved in reaching a consensus on the important elements of health care reform may limit the ability of the federal government to implement national health care reform in the near term. As a result, individual states may be encouraged by the federal government to continue to experiment with their own health reform programs.     

Hospice Eligibility and Election: Does Policy Prepare Us to Meet the Need?

A 7-point policy model is used to examine policy on hospice eligibility and election in the United States. Despite the growth of hospice, many eligible patients continue to lack access due to difficulties experienced by providers in discerning 6-month prognoses among chronically ill patients, the inability of patients to elect hospice alongside curative care, and limited reimbursement for hospice providers. Though the landscape of dying has evolved, with more deaths occurring later in life from chronic illness, Medicare hospice eligibility requirements have historically remained the same. Utilization would increase if hospice agencies were able to provide fewer restrictions by including ongoing treatments such as transfusions, intravenous nutrition, or palliative radiation. Hospices would be more likely to enroll critically ill patients who require some ongoing curative measures if Medicare reimbursement rates were higher, and patients would be more likely to seek hospice earlier if Medicare election policies were altered to allow concurrent care. Participation would also be increased by extending hospice eligibility past the traditional prognosis of 6 months. Though expansion in public spending of hospice care has been met with some opposition, current research suggests that potential savings due to decreased costs in acute care is promising.     

Reforming the health care delivery system

The health care delivery system is evolving rapidly. There have been changes in the way health care is financed, the types of treatments available, the sites of care, and the physician patient relationship. These changes have resulted primarily from reactions to health care cost inflation. Health care reform is likely to accelerate some of these changes. The threat/promise of health care reform has already accelerated the consolidation of the health care services market. Health care reform is likely to reduce the number of insurers, increase the number of Americans in managed health care plans, increase the number of physicians in group practice, change provider income, and in general make the health care delivery system more concentrated and vertically integrated.     

Financing Reform for Long-Term Care

The way the nation provides for the financing and delivery of long-term care is badly in need of reform. The principal options for change are private insurance, altering Medicaid, and 110 FROM NURSJNG HOMES TO HOME CARE public long-term care insurance. This article uses the Brookings-ICE Long-Term Care Financing Model to evaluate each of these options in terms of affordability, distribution of benefits, and ability to reduce catastrophic out-of-pocket costs. So long as private insurance is aimed at the elderly, its market penetration and ability to finance long-term care will remain scverely limited. Affordability is a major problem. Selling to younger persons could solve the affordability problem, but marketing is extremely difficult. Liberalizing Medicaid could help solve the problems of long-term care, but there is little public support for means-tested programs. Finally, universalistic public insurance programs do well in meeting the goals of longterm care reform, but all social insurance programs are expensive and seem politically infeasible in the current political environment. The way the nation provides for the financing and delivery of long-term care is badly in need of reform. No other part of the health care system generates as much passionate discontent as does long-term care. At the heart of the problem is the absence of any satisfactory way to help people anticipate and pay for long-term care. The disabled elderly find, often to their surprise, that the costs of nursing home and home care are not covered to any significant extent by Medicare or private insurance. Instead, they must rely on their own savings or, failing that, turn to welfare in the form of Medicaid. At a national average cost of $40,000 a year for nursing home care, long-term care is a leading cause of catastrophic out-of-pocket health care costs for the elderly. In addition, despite the strong preferences of the disabled for home and community-based services, current financing is highly skewed toward care in nursing homes. While the debate over long-term care reform has many facets, it is primarily an argument over the relative merits of private- versus publicsector approaches. Differences over how much emphasis to put on each sector partly depend on values that cannot be directly proved or disproved. Some believe that the primary responsibility for care of the elderly belongs with individuals and their families, and that government should act only as a payer of last resort for those unable to provide for themselves. The opposite view is that the government should take the lead in ensuring comprehensive care for all disabled older people, regardless of financial need, by providing comprehensive, compulsory social insurance. In this view, there is little or no role for the private sector. Between these polar positions, many combinations of public and private responsibility are possible.     

Medicare and the affordable care act

The recently enacted Patient Protection and Affordable Care Act made modest changes to improve Medicare and obtained a substantial share of funding for the Act's broader reforms from future spending reductions in the program. Drug benefits and preventive services were improved. While painful, the spending reductions will have only moderate impacts on beneficiaries and should help achieve the goals of health care reform: encouraging better primary and preventive care, making providers conscious of finding ways to increase the productivity of care delivered and changing the relative levels of payment across certain providers. Additional costs to beneficiaries will arise from changes in private plan payments and increasing income-related premiums.     

Employee benefits, retirement patterns, and implications for increased work life

This Issue Brief examines why policymakers are concerned about the trend toward early retirement and how it relates to Social Security, Medicare, and employee health and retirement benefits. It reviews the rationale for the effects of economic incentives on early retirement decisions and includes a summary of empirical literature on the retirement process. It presents data on how employee benefits influence workers' expected retirement patterns. Finally, it examines the implications of public policies to reverse early-retirement trends and raise the eligibility age for Social Security and Medicare. An employee Benefit Research Institute/Gallup survey indicates that there is a direct link between a worker's decision to retire early and the availability of retiree health benefits. In 1993, 61 percent of workers reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree health benefits. Participation in a pension plan can be an important determinant of retirement. Twenty-one percent of pension plan participants planned to stop working before age 65, compared with 12 percent among nonparticipants. Workers whose primary pension plan was a defined benefit plan were more likely to expect to stop working before age 65 (23 percent) than workers whose primary plan was a defined contribution plan (18 percent). Expected income replacement rates effect retirement patterns, indicating that as the expected replacement increases, the probability of expecting to stop working before age 65 increases. Twenty-two percent of workers with an expected income replacement rate below 60 percent expected to stop working before age 65, compared with 29 percent for those in the 60-69 percent replacement range, and 30 percent for those in the 70-79 percent replacement range. Workers expecting to receive retiree health insurance are more likely to expect to stop working before age 65 than workers who do not expect to have retiree health insurance. Twenty-one percent of workers with retiree health insurance expected to stop working before age 65, compared with 12 percent of workers not expecting to receive retiree health insurance. The Social Security Old-Age and Survivors Insurance (OASI) program depends on obtaining sufficient revenue from active workers' payroll taxes to fund the benefits received by retired beneficiaries. Funding the program in the past was in large part effortless because of the relatively large number of workers per retiree. Today, funding the program is a greater challenge because the ratio of workers to retirees has fallen. Policymakers have been able to agree that reform of the program is necessary for its survival; however, the debate over options to reform the program is just beginning, and it is likely to be a long time before a consensus emerges.     

The retirement system in transition: the 2007 Retirement Confidence Survey

WORKERS SLOW TO SEE OR ADAPT TO A CHANGING U.S. RETIREMENT SYSTEM: The 17th annual wave of the Retirement Confidence Survey (RCS) suggests that American workers may be slow to recognize how the U.S. retirement system is changing, and those who are aware of these changes may not be adapting to them in ways that are likely to secure them a comfortable retirement. HALF OF WORKERS LESS CONFIDENT ABOUT PENSION BENEFITS: The RCS finds pension-plan changes by employers have left nearly half of workers less confident about the benefits they will receive from a traditional pension plan, but that those experiencing a decline in retirement benefits often fail to react constructively. Moreover, although Americans will rely increasingly on 401(k) retirement savings plans and other personal savings and investments to fund their retirement security, data suggest that many may not follow professional investment advice when it is offered to them. MANY WORKERS COUNTING ON BENEFITS THAT WON'T BE THERE: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 41 percent of workers indicate they or their spouse currently have a defined benefit pension plan, yet 62 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect as retirees are to receive retiree health insurance through an employer, even though the number of employers offering this benefit to future retirees is declining. MANY WORKERS UNLIKELY TO HEED INVESTMENT ADVICE EVEN IF THEY GET IT: More than half of workers indicate they would be likely to take advantage of professional investment advice offered by companies that manage employer-sponsored retirement plans. However, two-thirds of these workers say they would probably implement only some of the recommendations they receive and 1 in 10 think they would implement none of them. AMERICANS OVERESTIMATE LONG-TERM CARE COVERAGE: One-quarter of workers and more than one-third of retirees report they have long-term care insurance (separate from health insurance, Medicare, and Medicaid) to help pay for care they might need in a nursing home, assisted living facility, or at home. But only 10 percent of Americans age 65 and older are estimated to have had private long-term care insurance in 2002, suggesting that many are counting on coverage they do not actually have. MOST SAVINGS LEVELS ARE MODEST: Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000. The majority of workers who have not put money aside for retirement have little in savings at all: Seven in 10 of these workers say their assets total less than $10,000. CONTINUED IGNORANCE ABOUT SOCIAL SECURITY COVERAGE: Despite the longstanding increase in the eligibility age for Social Security, only a small minority of workers are aware of the age at which they can receive full retirement benefits from Social Security without a reduction for early retirement.     

Variations in provider capacity to offer accessible health care for people with disabilities

Since social workers are likely to practice in a range of health care settings, their training focusing on human behavior in the social environment could help providers develop strategies to improve access to care for people with disabilities. In this article, results from a comprehensive survey of providers about access to health care for people with a broad range of disabilities are reported. Results suggest that a minority of providers report difficulty serving people with disabilities. However, dentists and mental health/substance abuse providers are significantly less likely than other providers to report that they provide accessible services to individuals with disabilities. These providers are less likely to report having had training related to mobility impairments, providing mirrors at their facility, having an accessible door, or providing assistance with personal care needs, and are more likely to report that their building poses a barrier for people with disabilities. Social workers are well positioned to take a leadership role in working with providers and patients to improve access to health care for people with disabilities. A social work framework of understanding the individual in a social environment may be the most appropriate perspective for creating innovative strategies for addressing the complex, multidimensional needs of people with disabilities who experience limited access to care.     

ERISA and health plans

This Issue Brief is designed to provide a basic understanding of the relationship of the Employee Retirement Income Security Act of 1974 (ERISA) to health plans. It is based, in part, on an Employee Benefit Research Institute-Education and Research Fund (EBRI-ERF) educational briefing held in March 1995. This report includes a section by Peter Schmidt of Arnold & Porter, a section about multiemployer plans written by Judy Mazo of The Segal Company; and a section about ERISA and state health reform written by Kala Ladenheim of the Intergovernmental Health Policy Project. Starting in the late 1980s, three trends converged to make ERISA a critical factor in state health reforms: increasingly comprehensive state health policy experimentation; changes in the makeup of the insurance market (including the rise in self-insurance and the growth of managed care); and increasingly expansive interpretations of ERISA by federal courts. The changing interpretations of ERISA's relationship to three categories of state health initiatives--insurance mandates, medical high risk pools, and uncompensated care pools--illustrate how these forces are playing out today. ERISA does have a very broad preemptive effect. Federal statutes do not need to say anything about preemption in order to preempt state law. For example, if there is a direct conflict, it would be quite clear under the Supremacy Clause [of the U.S. Constitution] that ERISA, or any federal statue, would preempt a directly conflicting state statute. States can indirectly regulate health care plans that provide benefits through insurance contracts by establishing the terms of the contract. And they also raise money by imposing premium taxes. But they cannot do the same with respect to self-funded plans. That is one of the factors that has caused a great rise in the number of self-funded plans. State regulation [of employee benefits] can create three kinds of problems: cost of taxes, fees, or other charges; cost of dealing with substantive, possibly inconsistent, benefit standards; and cost of identifying, understanding, and complying with the regulations themselves.     

Variations in Provider Capacity to Offer Accessible Health Care for People with Disabilities

Abstract

Since social workers are likely to practice in a range of health care settings, their training focusing on human behavior in the social environment could help providers develop strategies to improve access to care for people with disabilities. In this article, results from a comprehensive survey of providers about access to health care for people with a broad range of disabilities are reported. Results suggest that a minority of providers report difficulty serving people with disabilities. However, dentists and mental health/substance abuse providers are significantly less likely than other providers to report that they provide accessible services to individuals with disabilities. These providers are less likely to report having had training related to mobility impairments, providing mirrors at their facility, having an accessible door, or providing assistance with personal care needs, and are more likely to report that their building poses a barrier for people with disabilities. Social workers are well positioned to take a leadership role in working with providers and patients to improve access to health care for people with disabilities. A social work framework of understanding the individual in a social environment may be the most appropriate perspective for creating innovative strategies for addressing the complex, multidimensional needs of people with disabilities who experience limited access to care.     

Demographic and employment shifts: implications for benefits and economic security

This Issue Brief examines factors affecting the population's age distribution and composition, such as mortality rates, fertility rates, and immigration. In addition, it examines factors affecting labor force composition, such as immigration, increased labor force participation of women, and retirement trends, and discusses the potential impact of these changes on publicly financed programs: Medicare, Medicaid, Social Security, and federal employee retirement systems. The discussion also highlights the implications of these population and labor force changes on employers, employees, and retirees. The elderly population--now 31.8 million, representing 12.6 percent of the population--is projected to experience tremendous growth between 2010 and 2030, when the baby boom generation reaches age 65, rising from 39.7 million, or 13.3 percent of the population, to 69.8 million, or 20.2 percent of the population. Growth in the elderly population has implications for retirement and health care systems. Population projections suggest that the traditionally pyramid-shaped work force, with a proportionately greater number of younger workers than older workers, will be replaced with a more even age distribution. Consequently, significant and continued modifications to benefit packages, such as changes in compensation structures in which earnings automatically rise with age, are likely to occur. Women's labor force participation began to accelerate in the mid-1950s, rising 75 percent among women aged 25-44 in 1991, although there is some indication that this growth may be flattening. With women comprising a greater part of the labor force, employers will be encouraged to develop and implement programs to better accommodate their needs. Increased life expectancy, a decreased percentage of entry level workers, changes in Social Security's normal retirement age from 65 to 67, and employer plans to raise the normal age of retirement or provide incentives to delay retirement, could raise the average age of retirement. However, other factors, such as poor health, other sources of retirement income, and individual preferences for retirement, could still dominate the retirement decision. The combination of increased average life expectancy guaranteeing more years of retirement to finance and rising dependency ratios increases the future cost of Social Security financing. Medicare financing is also an important policy issue because the program is projected to experience financial difficulties in the short term, resulting from explosive health care costs. In addition, Medicaid expenditures are consuming increasing amount of shrinking state budget resources--a large portion of which is used to finance nursing home care for a growing elderly population.     

Adding Long-Term Care to Medicare

The rancor accompanying the repeal of most of the 1988 Medicare Catastrophic Act reflects both the national need to improve health and long-term care benefits for the elderly and the political obstacles to finding new sources of financing for such benefits. Neither the need nor the obstacles will go away, but policymakers are now likely to look for lower-cost, efficient, and privately funded alternatives. The authors have developed and tested one such approach: the Social Health Maintenance organization (SHMO). Operating since 1985. the SHMO model integrates community-based, long-term care services into the managed,prepaid HMO design. The four test sites are adding long-term care to Medicare at no extra cost to the government and only modest premiums for the 17,000 current members. Although the benefits offer limited protection for long-term nursing home care, they do cover long-term care in community settings, where people tend to prefer to stay. Also, integration of the acute and long-term care s stems improves the ability to respond to the medical needs of frail members, who also have high acute-care use. The SHMO's model of front-end, community-oriented, long-term care benefits integrated with Medicare appears to be a practical, affordable, and clinically appropriate way to address the rising concern with the lack of coverage and services for long-term care.     

Emergency departments and street-involved youth: factors influencing utilization

Homeless youth often have untreated health problems and experience barriers to care. Existing evidence suggests that homeless youth use emergency departments (EDs) more frequently than other youth. We hypothesized that street youth with access to primary care services would be less likely to utilize EDs for health care. Data were drawn from a study of housing security and changes to it over time among 150 youth (16–20 years) recruited from service agencies for street-involved youth. Our findings show that those with access to primary care were actually more likely to use the ED, suggesting that access may encourage further engagement with the health care system. Findings support the need to better understand why access to primary care increases ED use and what could be done to change this pattern.     

Adding long-term care to Medicare: The Social HMO Experience

The rancor accompanying the repeal of most of the 1988 Medicare Catastrophic Act reflects both the national need to improve health and long-term care benefits for the elderly and the political obstacles to finding new sources of financing for such benefits. Neither the need nor the obstacles will go away, but policymakers are now likely to look for lower-cost, efficient, and privately funded alternatives. The authors have developed and tested one such approach: the Social Health Maintenance Organization (SHMO). Operating since 1985, the SHMO model integrates community-based, long-term care services into the managed, prepaid HMO design. The four test sites are adding long-term care to Medicare at no extra cost to the government and only modest premiums for the 17,000 current members. Although the benefits offer limited protection for long-term nursing home care, they do cover long-term care in community settings, where people tend to prefer to stay. Also, integration of the acute and long-term care systems improves the ability to respond to the medical needs of frail members, who also have high acute-care use. The SHMO's model of front-end, community-oriented, long-term care benefits integrated with Medicare appears to be a practical, affordable, and clinically appropriate way to address the rising concern with the lack of coverage and services for long-term care.