Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
May 05, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3603 words
HEADLINE:
TESTIMONY May 05, 1999 DIANE ROWLAND, SC.D EXECUTIVE VICE PRESIDENT THE HENRY J.
KAISER FAMILY FOUNDATION SENATE FINANCE CHANGES TOTHE MEDICARE
SYSTEMS
BODY:
Diane Rowland, Sc.D. Executive Vice
President The Henry J. Kaiser Family Foundation And Executive Director Kaiser
Commission on Medicaid and the Uninsured for Hearing on
Medicare Reform The Committee on Finance The United States Senate May 5,1999
Thank you Mr. Chairman and members of the committee for this opportunity to
provide an overview of the role Medicare plays in meeting the
health needs of our elderly and disabled populations. I am
Diane Rowland, Executive Vice-President of the Henry J. Kaiser Family Foundation
and Executive Director of Kaiser Commission on Medicaid and the
Uninsured. I also serve as an Adjunct Associate Professor of
Health Policy at the Johns Hopkins University School of Public
Health. Since its enactment in 1965, Medicare has made
health care more available and affordable to millions of aged
Americans, helping to close gaps in care between the poor and non-poor, whites
and minorities, and urban and rural residents. Since 1972, it has extended
similar assistance to the totally and permanently disabled population. Today 1
in 7 Americans receives their health care coverage from
Medicare. My testimony today will focus on the population served by Medicare,
the extent to which Medicare coverage is meeting their health
care needs, and the challenges facing the program. The Medicare Population
Medicare provides health insurance coverage to 34 million
elderly and 5 million disabled beneficiaries. Because Medicare coverage is
limited to those who are age 65 or older or disabled, the Medicare population is
by design older and more disabled than the general population and thus at
greater risk for chronic illness and disabling medical conditions.
Health needs increase with age. Over a quarter (28 percent) of
those age 65 and above report their health as fair or poor
compared to only 8 percent of those age 25 to 44 (Figure 1). Nearly a quarter
(23 percent) of Medicare beneficiaries have cognitive impairments and one in
five (20 percent) has functional impairments. Despite their greater
health needs, the elderly have lower incomes with which to pay
for their care. Median income rises through ages 45 to 54 and then begins to
decline, leaving those age 65 and above with a median income of roughly $20,000
compared to over $50,000 for the 45 to 54 year old age group (Figure 2). This
combination of poor health and reduced incomes leaves
Medicare's beneficiaries particularly vulnerable to health care
costs that would be unaffordable without Medicare's assistance. Two out of three
Medicare beneficiaries (63 percent) have either health problems
or incomes that are below 200 percent of the federal poverty level (roughly
$16,500 for an individual and $22,000 for a couple in 1999) (Figure 3). One in
five Medicare beneficiaries has both fair or poor health and an
income below 200 percent of poverty, leaving them to face
health problems with few resources with which to pay for needed
care. While Medicare, coupled with Social Security, is credited with improving
the financial security of elderly and disabled Americans, nearly half of all
beneficiaries live on incomes below 200 percent of the poverty level (Figure 4).
Fourteen percent of beneficiaries --- 5 million people--have incomes below the
poverty level ($8,240 for an individual and $11,060 for a couple in 1999). Those
who are under-65 and disabled and those age 85 and older represent a
disproportionate share of low-income Medicare beneficiaries. Gender and race are
also linked to low incomes among Medicare beneficiaries: women account for
two4hirds (67 percent ) of all beneficiaries with incomes below the poverty
level, but only 56 percent of the total Medicare population; racial and ethnic
minorities account for about 30 percent of those who are poor, but less than 15
percent of all people covered by the program. The link between poverty and poor
health among the elderly population has been well documented.
Beneficiaries with incomes at or below the poverty level are significantly more
likely to report health problems than beneficiaries with higher
incomes. Nearly half of all beneficiaries living below the poverty level (44
percent) perceive their health status as fair or poor - more
than double the rate of beneficiaries with incomes above twice the poverty level
(Figure 5). Cognitive impairments are also more prevalent among the poor; nearly
40 percent have reported problems with mental functioning, a rate nearly 3-times
that reported by those with incomes above 200 percent of poverty. While Medicare
is often thought of as a program for elderly people, disabled beneficiaries
under age 65 represent 12 percent of the overall Medicare population (Figure 6).
Under-65 disabled beneficiaries are significantly more likely than their older
counterparts to have low incomes. Nearly one in three (30 percent) has an income
below the federal poverty level. Poverty rates among the under-65 disabled are
more than two and a half times those for the elderly. Disabled beneficiaries are
also obviously a group with very significant health care needs
as a result of their disability. A disproportionate share also have problems
with mental functioning. At the other end of Medicare's age spectrum are those
age 85 and older - now 11 percent of the total Medicare population. The 85- plus
segment of the Medicare population is more likely than younger seniors to be
female, poor, in relatively poor health, and to have long-term
care needs. Women account for 56 percent of all beneficiaries, but 70 percent of
Medicare's oldest-old beneficiaries. These oldest beneficiaries are also more
likely to have low incomes, with 59 percent living on incomes below 200 percent
of poverty compared to 45 percent of the total Medicare population. Those age 85
and older are more likely than the general Medicare population to have
functional limitations (45 percent vs. 28 percent) and to have problems with
mental functioning (52 percent vs. 20 percent). Thus, while the Medicare
population is often described in homogenous terms, the health
needs and ability to afford care differs markedly among the program's 39 million
beneficiaries. Although most beneficiaries have good health,
more than one in four is in fair or poor health, one in four
has long-term care needs and about one in five has cognitive impairments. Nearly
one- fifth (17 percent) are hospitalized each year and more than 75 percent use
prescription drugs regularly. By definition, Medicare is the program providing
health coverage to the old, the disabled, and the sick --- a
population with notably greater health needs than the
non-elderly working population covered by private health
insurance plans. Reflecting the diverse and often expensive
health needs of this population, Medicare spending varies by
the health status of its beneficiaries. Medicare spends, on
average, five times more for beneficiaries in poor health
($11,739) than for those in excellent health ($2,134) (Figure
7). Overall, ten percent of Medicare's beneficiaries account for 75 percent of
Medicare's spending. Medicare's Scope of Coverage With the advent of Medicare,
universal coverage was provided to virtually all elderly and later disabled
Americans, keeping these vulnerable groups from the ranks of the
uninsured. Medicare provides basic health
insurance coverage for hospital, physician, and diagnostic services. Of the $217
billion in Medicare expenditures in 1997, hospital care accounted for 41 percent
of spending, physician care for 15 percent, and managed care plan payment for
another 15 percent. The remaining third of spending covered hospital outpatient,
home health, skilled nursing facility, hospice, and other
ambulatory care benefits. Despite the significant protections offered by
Medicare, Medicare does not provide fully comprehensive health
insurance coverage. There are gaps in Medicare's benefit package, and relatively
high deductibles and cost-sharing for most covered services. Medicare actually
is less generous than coverage in health plans typically
offered by large employers. Most notably, Medicare does not cover outpatient
prescription drugs, nor does it cap the maximum amount that beneficiaries are
required to pay for covered services (stop- loss protection). Long-term care
services, most especially nursing home care and non-medical in-home assistance,
are also not part of Medicare coverage. Supplementing Medicare Coverage Many
beneficiaries rely on supplementary insurance to help fill in Medicare's gaps
and provide additional protection. In 1995, a quarter (26 percent) of all
Medicare beneficiaries purchased private insurance, known as Medigap, to
supplement Medicare, and others (34 percent) received supplemental coverage from
a former employer or through a union as a retiree health
benefit (Figure 8). One in seven Medicare beneficiaries (14 percent) relied on
the Medicaid program for supplemental assistance in covering the Medicare
premium and some cost-sharing requirements, and, for some, providing coverage
for prescription drugs and other benefits. Another 9 percent elected to enroll
in Medicare HMOs that, unlike Medigap policies, generally have no additional
premiums and offer benefits, such as outpatient prescription drugs, that are not
covered under the traditional Medicare program. Managed care is attractive
because of its potential to improve the delivery and coordination of services
and reduce spending, but it is risky because people with chronic conditions may
be underserved, not better served, in managed care. However, a substantial share
of the Medicare population (12 percent) lack supplemental coverage of any kind
and depend solely on Medicare for assistance with their medical expenses. Those
relying solely on Medicare are the most at risk for high out-of- pocket spending
because they have no assistance for cost-sharing or uncovered services.
Low-income beneficiaries are more likely to rely solely on Medicare than their
higher income counterparts. The nature and scope of health
insurance coverage to supplement Medicare varies significantly by income. Among
the poor, 16 percent relied solely on the traditional Medicare program for their
health insurance coverage in 1995. About half of Medicare's
poor (49 percent) had Medicaid assistance, 6 percent were enrolled in a Medicare
HMO, and 25 percent had private coverage. The likelihood of having a retiree
health benefit to supplement Medicare increases significantly
with income, from 8 percent of the poor to 26 percent of the near-poor and 52
percent of those with incomes above 200 percent of the poverty level.
Conversely, Medicaid coverage is highest among the poor and diminishes as income
increases, although it is notable that less than half of all poor Medicare
beneficiaries receive Medicaid's financial protections. The combination of
supplementary insurance and Medicare provides varying levels of coverage within
the Medicare population. Retiree health benefits as a
supplement are generally the most comprehensive fill-ins and offer most
enrollees some prescription drug coverage. Individually purchased Medigap
policies, on the other hand, tend to have the most limited coverage despite
their substantial premiums. The more affluent elderly are most likely to have
the more comprehensive retiree benefits while the lower income beneficiaries
obtain additional coverage by purchasing private Medigap plans. Increasingly,
many beneficiaries are leaving traditional Medicare coverage and opting for
enrollment in a managed care plan to gain supplementary benefits and expand
their coverage for little or no premium increase. Medicaid's Role for Medicare's
Poor The poorest of Medicare's beneficiaries are eligible for assistance from
Medicaid to provide expanded benefits and help pay for cost-sharing and Medicare
premiums. Today, 6 million Medicare beneficiaries receive some assistance from
Medicaid (Figure 9). The 5 million poorest beneficiaries, including those
receiving cash assistance from welfare and those who have exhausted their
personal resources paying for health care, receive the full
range of Medicaid benefits including prescription drugs, long-term care, and
payment of Medicare premiums and some cost-sharing. Others with somewhat higher
incomes primarily receive assistance with their Medicare Part B premium and, in
some cases, cost-sharing. They are referred to as Qualified Medicare
Beneficiaries (QMB), Specified Low-Income Beneficiaries (SLMB) and more
recently, Qualifying Individuals (QI 1 and QI 2) (Figure 10). The Medicare
beneficiaries with full Medicaid benefits are those whose eligibility is based
on receipt of cash assistance or impoverishment due to substantial and ongoing
health needs, most often long-term care services in a nursing
home. For them, the Medicaid wrap-around to Medicare benefits is the most
comprehensive, covering not only premium and some cost-sharing requirements, but
also prescription drugs, dental and vision care, and long-term care. Of the 5
million people dually eligible for Medicare and Medicaid, a quarter are in
nursing homes, nearly half are in fair or poor health, over a
quarter have two or more limitations in activities of daily living, and over 40
percent have cognitive impairments (Figure 11). Because of their extensive
health needs, dual eligibles account for a substantial share of
spending in both programs ($106 billion in 1995). They represent 16 percent of
Medicare beneficiaries and 30 percent of spending. For Medicaid, they account
for 17 percent of beneficiaries and 35 percent of spending, largely due to their
use of expensive long- term care services. It is often suggested that fully
integrating Medicare and Medicaid benefits and capitating payments for this
vulnerable population will save money, but evidence is limited. For those with
low-incomes who are not poor enough to qualify for full Medicaid benefits,
Medicaid provides coverage of the Medicare Part B premium ($45.50 per month in
1999) for those with incomes below 120 percent of the federal poverty level and
the premium plus some cost-sharing for those with incomes below the poverty
level. However, many do not avail themselves of these protections either because
they are unaware of the benefits or unwilling to apply through the state-based
welfare system that administers Medicaid. Approximately 78 percent of those
eligible for the QMB program participate, but many are automatically enrolled as
part of receiving cash assistance. Only 16 percent of those potentially eligible
for the SLMB program's coverage of the Medicare Part B premium take advantage of
this assistance. Given the limited scope of Medicare coverage and the greater
health needs of the low-income population, it is particularly
important that low-income beneficiaries receive help from Medicaid when
available. Of the 20 million Medicare beneficiaries with incomes below 200
percent of poverty, Medicaid today only assists one in four (Figure 12).
Improving the scope of protection for the low-income population is critical to
achieving effective reform of Medicare while preserving and improving access to
care. Today those who rely solely on Medicare without supplementary coverage
from Medicaid or private insurance are more likely to not have a regular source
of care, to have delayed care due to cost, or to have not seen a physician in
the course of a year (Figure 13). Clearly, having financial security and
improved coverage helps to improve access to care for our most vulnerable
citizens. Financial Burdens and Medicare Beneficiaries Out-of-pocket spending on
acute medical services and insurance premiums for both Medicare and private
supplemental policies are significant expenses in the budgets of elderly and
disabled Medicare beneficiaries. Medicare is not a program in which enrollees
have too little price sensitivity, for Medicare beneficiaries themselves pay a
substantial share of their medical bills directly. It is estimated that the
average out-of-pocket spending for Medicare beneficiaries who are not in nursing
homes was $2,149 in 1997 (Figure 14). Private insurance premiums, including HMO
premiums, accounted for nearly one-third of spending and the Medicare Part B
premium payments for another 20 percent. Prescription drugs accounted for 16
percent of spending. However, the averages mask the vulnerability of particular
groups. While the elderly on average pay a fifth of their income on
out-of-pocket medical expenses, the poor and the sick bear the heaviest burden
(Figure 15). The poor spend one-third (34%) of their income on
health care as do those with a limitation in activities of
daily living and those in fair or poor health spend over a
quarter (27%) of their income on health care. For the
low-income population, having Medicaid coverage makes a substantial difference
in out-of-pocket spending. Those with Medicaid spend only 8 percent while the
poor without Medicaid coverage spend over half (54%) of their incomes on medical
expenses in the traditional Medicare fee-for-service program and fare only
slightly better when enrolled in a Medicare HMO (48% of income for medical care)
(Figure 16). One of the most substantial expenses for most Medicare
beneficiaries is the cost of prescription drugs, which are not included on an
outpatient basis in the Medicare benefit package. As medical care has
increasingly shifted from inpatient hospital care to medical management at home,
prescription drugs have become an essential part of most treatment plans.
Three-quarters of all Medicare beneficiaries use prescription medications.
Drugs, however, are often expensive, particularly new ones that offer help to
those with arthritis, diabetes, ulcers, depression, heart conditions, and other
illnesses. Although Medicare does not cover outpatient prescription drugs,
two-thirds of Medicare beneficiaries obtain some amount of coverage through
their supplementary insurance coverage or from Medicaid. Drug coverage is most
often provided through the retiree health benefits that tend to
be provided to higher income beneficiaries. Over a third (35%) of Medicare
beneficiaries, including many with private Medigap policies, have no coverage
for prescription drugs (Figure 17). The liability for paying for prescription
drugs varies by the type of supplementary coverage and the generosity of the
supplementary benefit in terms of deductibles, cost- sharing, and limits on
covered drugs. Overall, Medicare beneficiaries directly pay for half of all
prescription drug spending on their behalf (Figure 18). Those who rely solely on
Medicare bear the full cost of any drugs and those with private Medigap policies
pay directly for 80 percent of their drug bills depending on the type of policy
they own. Employer -sponsored retiree plans and Medicare HMOs reduce
out-of-pocket payments to about a third of beneficiaries drug spending. Medicaid
provides the best protection, but the low-income population with Medicaid
coverage still pays for about one-fifth (21%) of their drug costs because not
all individuals with Medicaid have coverage for prescription drugs. Thus, while
Medicare provides invaluable health insurance coverage to
elderly and disabled Americans, it is not fully meeting the
health care needs nor protecting against financial burdens for
many of its beneficiaries. The economically better off, especially those with
employer-sponsored retiree coverage, have the best protection and the lowest
income get needed assistance for Medicaid. Yet, millions of low and modest
income Medicare beneficiaries are in need of assistance with medical bills and
especially prescription drug coverage to make the promise of Medicare a reality
in their daily lives. Conclusion Medicare has served the nation's elderly and
disabled well for more than 30 years. When Medicare was enacted, only half of
the nation's elderly had health insurance protection. Today,
virtually all elderly Americans and the severely disabled population have
health coverage through Medicare. Much progress has been
achieved through Medicare in alleviating disparities in access to care and
bringing life-saving medical advances to our elderly and disabled citizens. In
evaluating Medicare's role and assessing needed improvements to reform and
modernize Medicare to meet the needs of the aging of the baby boom generation,
care should be taken to preserve the best of Medicare while addressing its gaps
and securing its financial viability. Medicare is a popular and well-liked
program despite its less than comprehensive coverage. While some would move
Medicare to be more like the private insurance options available to the working
population, Medicare beneficiaries report higher levels of satisfaction with
their coverage, medical care, and choice of doctors than those with private
insurance (Figure 19). Medicare beneficiaries also report fewer access problems
(Figure 20). Given that Medicare's population is older, sicker, and less
affluent than the working population, it is notable that the people it serves
hold the program in such high regard. As changes in the program are considered,
it is important to assure that the protections Medicare has brought to our
elderly and disabled populations are strengthened, not weakened, in the future
and especially that the needs of Medicare's most vulnerable - the low-income,
the sick, and the frail are addressed. Efforts to reform the program should
assure that future generations of elderly Americans have affordable
health care when they need it.
LOAD-DATE: May 6, 1999 
