A Policy Option to Enhance Access and Affordability for Medicare's Low-Income Beneficiaries.

Issue: An estimated 40 percent of low-income Medicare beneficiaries spend 20 percent or more of their incomes on premiums and health care costs. Low-income beneficiaries with multiple chronic conditions or high need are at particular risk of financial hardship. High cost burdens reflect Medicare premiums and cost-sharing, gaps in benefits, and limited assistance. Existing policies to help people with low incomes are fragmented ­ meaning that beneficiaries apply separately, sometimes to different offices ­ and require Medicare beneficiaries to navigate complex applications. Goals: With the goal of enhancing access and affordability for people vulnerable due to low incomes and poor health, this issue brief proposes a policy that would reduce Medicare's cost-sharing and premiums for beneficiaries with incomes below 150 percent of the federal poverty level. Methods: Profile current cost burdens by income groups and assess the potential impact of a policy to expand cost-sharing and premium assistance using the 2012 Medicare Current Beneficiary Survey projected to 2016. Results and Conclusion: The policy described could help 8.1 million low-income beneficiaries, significantly lowering their risk of high cost burdens. It also could simplify the administration of assistance provided to these enrollees.

Medicare Benefit Redesign: Enhancing Affordability for Beneficiaries While Promoting Choice and Competition.

Issue: Out-of-pocket expenses are capped for enrollees in Medicare Advantage (MA) plans but not for beneficiaries in traditional Medicare, which also requires a high deductible for hospital care. The need for supplemental Medigap coverage adds to traditional Medicare's complexity and administrative costs. Shortfalls in financial protection also make it difficult to offer traditional Medicare as a choice for people under age 65, as some have proposed. Goals: Describe alternative benefit designs that would limit out-of-pocket costs for traditional Medicare's core services, assess their cost, and illustrate financing mechanisms. Methods: Analysis of a $3,500 ceiling on annual out-of-pocket expenses for Parts A and B benefits and options for replacing Part A hospital cost-sharing with a $350 or $100 copayment per admission. Key Findings: Estimates of the costs of the reforms are $36­$44 per beneficiary per month, assuming no behavioral or supplemental coverage changes. This could be financed by a $9­$11 increase in premiums combined with a 0.3-to-0.4-percentage-point increase in the Medicare payroll tax (split between employer and employees). Medicaid costs would decrease, while employers, retirees, and Medigap enrollees would see reduced premiums. Conclusion: The reforms would improve affordability and put traditional Medicare on a more equal footing with MA plans. They would also make it easier to open traditional Medicare to people under age 65.

Medicare Beneficiaries' High Out-of-Pocket Costs: Cost Burdens by Income and Health Status.

ISSUE: Fifty-six million people--17 percent of the U.S. population--rely on Medicare. Yet, its benefits exclude dental, vision, hearing, and long-term services, and it contains no ceiling on out-of-pocket costs for covered services, exposing beneficiaries to high costs. GOAL: To inform discussion of possible changes to Medicare, this issue brief looks at beneficiaries' out-of-pocket costs by income and health status. METHODS: Spending estimates based on the Medicare Current Beneficiary Survey. FINDINGS AND CONCLUSION: More than one-fourth of all Medicare beneficiaries--15 million people--spend 20 percent or more of their incomes on premiums plus medical care, including cost-sharing and uncovered services. Beneficiaries with incomes below 200 percent of the poverty level (just under $24,000 for a single person) and those with multiple chronic conditions or functional limitations are at significant financial risk. Overall, beneficiaries spent an average of $3,024 per year on out-of-pocket costs. Financial burdens and access gaps highlight the need to approach reform with caution. Already-high burdens suggest restructuring cost-sharing to ensure affordability and to provide relief for low-income beneficiaries.

Physical and/or Cognitive Impairment, Out-of-Pocket Spending, and Medicaid Entry among Older Adults.

While Medicare provides health insurance coverage for those over 65 years of age, many still are underinsured, experiencing substantial out-of-pocket costs for covered and non-covered services as a proportion of their income. Using the Health and Retirement Study (HRS), this study found that being underinsured is a significant predictor of entering into Medicaid coverage over a 16-year period. The rate of entering Medicaid was almost twice as high for those who were underinsured and with physical and/or cognitive impairment than those who were not, while supplemental health insurance reduced the rate of entering Medicaid by 30 %. Providing more comprehensive coverage through the traditional Medicare program, including a ceiling on out-of-pocket expenditures or targeted support for those with physical or cognitive impairment, could postpone becoming covered by Medicaid and yield savings in Medicaid.

Risks for Nursing Home Placement and Medicaid Entry Among Older Medicare Beneficiaries with Physical or Cognitive Impairment.

Issue: More than half of individuals who age into Medicare will experience physical and/or cognitive impairment (PCI) at some point that hinders independent living and requires long-term services and supports. As a result of Medicare's limits on covered services, Medicare beneficiaries with PCI experience financial burdens and reduced ability to live independently. Goal: Describe the characteristics and health spending of Medicare beneficiaries with PCI and estimate the likelihood of Medicaid entry and long-term nursing home placement. Methods: The Health and Retirement Study 1998­2012 is used to estimate long-term nursing home placement, as well as Medicaid entry. The Medicare Current Beneficiary Survey 2012 provides information on health care spending and utilization. Key findings and conclusions: Almost two-thirds of community-dwelling Medicare beneficiaries with PCI have three or more chronic conditions. More than one-third of those with PCI have incomes less than 200 percent of the federal poverty level but are not covered by Medicaid; almost half spend 10 percent or more of their incomes out-of-pocket on health care. Nineteen percent of individuals with PCI and high out-of-pocket costs entered Medicaid over 14 years, compared to 10 percent without PCI and low out-of-pocket costs.

Improving Benefits and Integrating Care for Older Medicare Beneficiaries with Physical or Cognitive Impairment.

Issue: Two-thirds of Medicare beneficiaries with physical and/or cognitive impairment (PCI) who live in the community have three or more chronic conditions and could benefit from integrated medical and social services. Over one-third of those with PCI have incomes under 200 percent of the federal poverty level but are not covered by Medicaid, exposing them to risk of financial burdens and nursing home placement. Goal: To analyze two policy options that expand financing for home- and community-based care for older adults with PCI. Methods: Potential costs are estimated using the Medicare Current Beneficiary Survey. Key findings and conclusions: Medicare Help at Home­a proposal to add supplemental home- and community-based services­could be financed by income-related cost-sharing, beneficiary monthly premiums of $42, and an incremental payroll tax on employers and employees of 0.4 percent. This could produce savings to Medicaid of $1.6 billion over 14 years. Using a different option­an extension of Medicaid Community First Choice­would cost $16,224 per person assisted, with costs offset by reduced nursing home placement.

On Medicare But At Risk: A State-Level Analysis of Beneficiaries Who Are Underinsured or Facing High Total Cost Burdens.

Medicare provides essential health coverage for older and disabled adults, yet it does not limit out-of-pocket costs for covered benefits and excludes dental, hearing, and longer-term care. The resulting out-of-pocket costs can add up to a substantial share of income. Based on U.S. Census surveys, nearly a quarter of Medicare beneficiaries (11.5 million) were underinsured in 2013­14, meaning they spent a high share of their income on health care. Adding premiums to medical care expenses, we find that 16 percent of beneficiaries (8 million) spent 20 percent or more of their income on insurance plus care. At the state level, the proportion of beneficiaries underinsured ranged from 16 percent to 32 percent, while the proportion with a high total cost burden ranged from 11 percent to 26 percent. Low-income beneficiaries were most at risk. The findings underscore the need to assess beneficiary impacts of any proposal to redesign Medicare.

Modernizing Medicare's Benefit Design and Low-Income Subsidies to Ensure Access and Affordability.

Insurance coverage through the traditional Medicare program is complex, fragmented, and incomplete. Beneficiaries must purchase supplemental private insurance to fill in the gaps. While impoverished beneficiaries may receive supplemental coverage through Medicaid and subsidies for prescription drugs, help is limited for people with incomes above the poverty level. This patchwork quilt leads to confusion for beneficiaries and high administrative costs, while also undermining coverage and care coordination. Most important, Medicare's benefits fail to limit out-of-pocket costs or ensure adequate financial protection, especially for beneficiaries with low incomes and serious health problems. This brief, part of a series about Medicare's past, present, and future, presents options for an integrated benefit for enrollees in traditional Medicare. The new benefit would not only reduce cost burdens but also could potentially strengthen the Medicare program and enhance its role in stimulating and supporting innovations throughout the health care delivery system.

State trends in the cost of employer health insurance coverage, 2003-2013.

From 2010 to 2013--the years following the implementation of the Affordable Care Act--there has been a marked slowdown in premium growth in 31 states and the District of Columbia. Yet, the costs employees and their families pay out-of-pocket for deductibles and their share of premiums continued to rise, consuming a greater share of incomes across the country. In all but a handful of states, average deductibles more than doubled over the past decade for employees working in large and small firms. Workers are paying more but getting less protective benefits. Costs are particularly high, compared with median income, in Southern and South Central states, where incomes are below the national average. Based on recent forecasts that predict an uptick in private insurance growth rates starting in 2015, securing slow cost growth for workers, families, and employers will likely require action to address rising costs of medical care services.

Serving Older Adults with Complex Care Needs: A New Benefit Option for Medicare.

Medicare was originally designed to protect beneficiaries from the financial burden of acute episodes of illness. As lifespans lengthen, Medicare must adapt to serve beneficiaries with substantial long-term physical or cognitive impairment who need personal care assistance. These beneficiaries often incur high out-of-pocket costs for Medicare-covered services as well as home and community care not covered by Medicare. This latter category of care is often key to continued independence. To improve Medicare's capacity to serve such beneficiaries, and to prevent unnecessary institutionalization, this issue brief, one in a series on Medicare's future challenges, proposes a complex care benefit option that would include home and community services, and describes how it might be structured to balance the goals of improving care for beneficiaries and ensuring affordability.

Access to primary and preventive health care across states prior to the coverage expansions of the Affordable Care Act.

One goal of health insurance is ensuring people have timely access to primary and preventive care. This issue brief finds wide differences in primary and preventive care access among adults under age 65--across states and within states by income--before the Affordable Care Act's major insurance expansions took effect. When comparing experiences of adults with insurance, the analysis finds that state and income differences narrow markedly. When insured, middle- and lower-income adults across states are far more likely to have a regular source of care, receive preventive care, and be able to afford care when needed. The findings highlight the potential of expanding health insurance to reduce the steep geographic and income divide in primary and preventive care that existed across the country before 2014. Success will depend on the participation of all states. This brief offers baseline data for states and the nation to track and assess change.

National trends in the cost of employer health insurance coverage, 2003-2013.

Looking at trends in private employer-based health insurance from 2003 to 2013, this issue brief finds that premiums for family coverage increased 73 percent over the past decade--faster than median family income. Employees' contributions to their premiums climbed by 93 percent over that time frame. At the same time, deductibles more than doubled in both large and small firms. Workers are thus paying more but getting less protective benefits. However, the study also finds that while premiums continued to rise through 2013, the rate of growth slowed between 2010 and 2013, following implementation of the Affordable Care Act. While families experienced slower growth in premium contributions and deductibles over this period, sluggish growth in median family income means families are paying more in premiums and deductibles as a share of their income than ever before.

Paying for value: replacing Medicare's sustainable growth rate formula with incentives to improve care.

This brief sets forth a set of policy options to improve the way health care providers are paid by Medicare. The authors suggest repealing Medicare's sustain­able growth rate (SGR) formula for physician fees and replacing it with a pay-for-value approach that would: 1) increase payments over time only for physicians and other provid­ers who participate in innovative care arrangements; 2) strengthen primary care and care teams; and 3) implement bundled payments for hospital-related care. These reforms would be adopted by Medicare, Medicaid, and private plans in the new insurance marketplaces, with the goal of accelerating innovation in care delivery throughout the health system. Together, these policies could more than offset the cost of repealing the SGR formula, saving $788 billion for the federal government over 10 years and $1.3 trillion nationwide. Savings also would accrue to state and local governments ($163 billion), private employ­ers ($91 billion), and households ($291 billion).

The Affordable Care Act's new tools and resources to improve health and care for low-income families across the country.

The Commonwealth Fund Scorecard on State Health System Performance for Low-Income Populations, 2013, finds wide gaps by income in access to care, quality of care received, and health outcomes in all states, and major differences between states in health system performance for people with below-average incomes. The Affordable Care Act provides state and local leaders with unprecedented opportunity along with new tools and resources to raise the standard for everyone and to begin to close the geographic and income divide. This issue brief reviews provisions of the law that have the potential to benefit low- and modest-income individuals, including those that expand health insurance coverage; strengthen primary care and improve care coordination; bolster the capacity of providers serving low-income communities; move toward greater accountability for the quality and cost of care; and invest in public health. It concludes by highlighting some of the challenges that lie ahead.

State trends in premiums and deductibles, 2003-2011: eroding protection and rising costs underscore need for action.

Rapidly rising health insurance premiums and higher cost-sharing continue to strain the budgets of U.S. working families and employers. Analysis of state trends in private employer-based health insurance from 2003 to 2011 reveals that premiums for family coverage increased 62 percent across states--rising far faster than income for middle- and low-income families. At the same time, deductibles more than doubled in large and small firms. Workers are thus paying more but getting less-protective benefits. If trends continue at their historical rate, the average premium for family coverage will reach nearly $25,000 by 2020. The Affordable Care Act's reforms should begin to moderate costs while improving coverage. But with private insurance costs projected to increase faster than incomes over the next decade, further efforts are needed. If annual premium growth slowed by one percentage point, by 2020 employers and families would save $2,029 annually for family coverage.

A call for change: the 2011 Commonwealth Fund Survey of Public Views of the U.S. Health System.

More than seven of 10 adults believe the U.S. health system needs fundamental change or complete rebuilding. Most adults surveyed reported difficulties accessing care, poor care coordination, and struggles with the costs and administrative hassles of health insurance. In addition, the survey finds substantial evidence of inefficient and wasteful delivery of health services. When looking toward the future, nearly three of four adults worry about getting high-quality care or paying medical bills. Respondents favor policies that encourage more patient-centered and integrated care, and nearly nine of 10 think it is important for private and public payers to work together to negotiate prices and improve quality. These experiences attest to the value of reforms aimed at stimulating and supporting the spread of more patient-centered, accountable care organizations. To the extent reforms succeed, patients and their families stand to gain from more accessible, safer, responsive, and less wasteful care.

State trends in premiums and deductibles, 2003-2010: the need for action to address rising costs.

Rapidly rising health insurance costs continue to strain the budgets of U.S. families and employers. This issue brief analyzes changes in private employer-based health premiums and deductibles for all states from 2003 to 2010, and finds total premiums for family coverage increased 50 percent across states and employee annual share of premiums increased by 63 percent over these seven years. At the same time, per-person deductibles doubled in large, as well as small, firms. If premium trends continue at the rate prior to enactment of the Affordable Care Act, the average premium for family coverage will rise 72 percent by 2020, to nearly $24,000. Health reform offers the potential to reduce insurance cost growth while improving financial protections. If efforts succeed in slowing annual premium growth by 1 percentage point, by 2020 employers and families together would save $2,161 annually for family coverage, compared with projected premiums at historical rates of increase.

Delivery system reform tracking: a framework for understanding change.

The health care delivery system is changing rapidly, with providers forming patient-centered medical homes and exploring the creation of accountable care organizations. Enactment of the Affordable Care Act will likely accelerate these changes. Significant delivery system reforms will simultaneously affect the structures, capabilities, incentives, and outcomes of the delivery system. With so many changes taking place at once, there is a need for a new tool to track progress at the community level. Many of the necessary data elements for a delivery system reform tracking tool are already being collected in various places and by different stakeholders. The authors propose that all elements be brought together in a unified whole to create a detailed picture of delivery system change. This brief provides a rationale for creating such a tool and presents a framework for doing so.