Let’s start at the bedside

Example Patient

  • Lisa is a 45 year old woman with obesity (BMI 32) who has struggled with weight management.
  • She does not have diabetes but is concerned about her risk for cardiovascular disease due to weight, family Hx of heart disease, and elevated cholesterol levels.
  • Lisa heard from a friend about Wegovy, and inquires about whether she should start taking it.

Example Patient

  • Lisa works as a nurse for an Ascension hospital, which recently dropped coverage of weight-loss medications due to concerns over “long-term outcomes, national coverage benchmarks, and cost-effectiveness.”
  • Lisa’s predicament is not uncommon …

Example Patient

  • If you prescribe Wegovy, it could cost Lisa up to $1,349 per month.
  • How would you counsel Lisa?
  • More broadly, how can we reconcile the clinical benefits of semaglutdie against the access and affordability challenges patients now face?



Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378)
France
Germany ($328)
Spain
Netherlands ($296)

Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378) Not covered
France
Germany ($328)
Spain
Netherlands ($296)

Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378) Not covered
France Not covered
Germany ($328)
Spain
Netherlands ($296)

Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378) Not covered
France Not covered
Germany ($328) Not covered
Spain
Netherlands ($296)

Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378) Not covered
France Not covered
Germany ($328) Not covered
Spain Just became available in May 2024.
Netherlands ($296)

Availability and Access to Wegovy for Lisa

Country Would National Health Program Cover?
US ($1,349) No and Yes (with prior authorization)
UK ($378) Not covered
France Not covered
Germany ($328) Not covered
Spain Just became available in May 2024.
Netherlands ($296) Not covered

Key Distinctions: U.S. vs. Other Countries

  • Socially vs. privately pooled risk.
  • Explicit vs. implicit mechanisms to say “no.”

Health Insurance Coverage in the US, 2019

Why should you be familiar with Medicare and Medicaid?

  • Large proportion of your patients will be enrolled in one or both
    • Major source of income for most—but not all—MDs
  • Large effects on organization and delivery of care system-wide (esp. Medicare)
  • Main funder of residency training in U.S. (Medicare)
  • Sizable portion of taxes you pay fund them

Social and Private Insurance in the U.S.

  • It’s very difficult to get Medicare to say no.
  • It’s very difficult to get Medicaid to say yes.

Creation of Medicare and Medicaid

  • Social Security Amendments of 1965 created to fill gaps in the employment-based health insurance system:
    • Medicare (Title 18) for older people
    • Medicaid (Title 19) for welfare recipients

Source: LBJ Presidential Library, The 1965 Medicare Amendment to the Social Security Act, available at: http://www.lbjlibrary.org/press/the-1965-medicare-amendment-to-the-social-security-act

Why the Need for Medicare?

  • Primary Target: older people
    • Not usually attached to the labor force
    • Tended to be lower income
    • Tended to have greater medical needs
  • Experience-rating of individual policies meant high premiums for elderly
  • Less than one half of older people had health insurance just before launch of Medicare

Eligibility for Medicare

  • Age 65 and over
  • Under age 65 with disabilities
    • After 2 years of federal disability benefits
    • Disability severe enough to prevent work
  • Need 40 quarters of work credits (self/spouse)
    • Can buy into coverage if short on credits

Medicare Today

  • Covers approximately 67.2 million people (2024)
    • 33.3 million in traditional Medicare (TM)
    • 33.9 million in a private Medicare Advantage (MA) plan
  • ~9 million non-elderly persons with disabilities
  • ~300,000 persons with end stage renal disease and persons with ALS

Medicare Today

  • Estimated expenditures of nearly one trillion dollars annually.
  • Federally financed, but administered federally (TM) or privately (MA)
  • 15% of the Federal budget

Characteristics of the Medicare Population

NOTE: ADL is activity of daily living. SOURCE: Kaiser Family Foundation analysis of the Centers for Medicare & Medicaid Services Medicare Current Beneficiary 2013 Cost and Use file; Urban Institute/Kaiser Family Foundation analysis of DYNASIM data, 2017 (for income and savings).

The A, B, C and D’s of Medicare

Part A: Hospital Insurance Program

  • Automatic enrollment
  • Funded by payroll tax
  • Includes inpatient hospital services, post-acute skilled nursing facility (SNF) and home health, hospice care

Part B: Supplmentary Medical Insurance

  • Voluntary
  • Funded by general revenues, premiums
  • Includes MD services, outpatient surgery, lab tests, medical equipment, ambulance, preventive services

Part C: Medicare Advantage

  • Since 1985, beneficiaries have had option to enroll in private managed care plans
  • By law, covers same services as Parts A and B; typically offers supplemental services as well
  • Not separately funded

Part D: Drug Benefit

  • Not available until 2006
  • Outpatient prescription drug benefit delivered through private plans that contract with Medicare
  • Funded by premiums, general revenues and state payments for “dual eligibles” (defined in a few slides)

Part D: Drug Benefit

  • Medicare Part D legislation defines certain categories of drugs that plans are not required to cover.
  • This list includes medications used for weight loss, weight gain, or anorexia.

Medicare Advantage Enrollment

Financing Medicare: Providers

Payment Mechanisms

  • Traditional Medicare pays physicians on a fee-for-service basis.
  • Hospital facilities are paid slightly differently.

A Brief History of Hospital Payment

Sec.1801 42 U.S.C. 1395



Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided …

Sec. 1802 42 U.S.C. 1395a



Any individual entitled to insurance benefits under this title may obtain health services from any institution, agency, or person qualified to participate under this title if such institution, agency, or person undertakes to provide him such services.

A Brief History of Hospital Payment

  1. Physicians and facilities paid separately for an inpatient stay.
  2. 1965 to 1983: Hospitals paid based on “reasonable costs.”
  3. Seems bulletproof. What could possibly go wrong??

Hospital Days per 1,000 Medicare enrollees

Hospital Days per 1,000 Medicare enrollees

Financing Medicare: Patients

Medicare as an Insurance Product

  • Traditional Medicare is generous, covering a wide array of services …

  • Notable exceptions:

    • Long-term care
    • Most dental services and dentures
    • Eye exams
    • Cosmetic surgery
    • Hearing Aids

Medicare as an Insurance Product

  • Medicare is a poor insurance product, requiring significant cost-sharing.

Medicare as an Insurance Product

For a hospitalization, patients are subject to

  • $1,600 deductible per benefit period (60-days)
  • Daily coinsurance of $400+ if stay exceeds 60 days

Medicare as an Insurance Product

For physician services, patients are subject to

  • $226 annual deductible, then…
  • 20% coinsurance

Medicare as an Insurance Product

  • Beneficiaries also must pay monthly premiums for Part B (physician) services, and Part D (Rx).

  • No caps on out-of-pocket spending for Part A and Part B services.

  • Until 2025, no cap on out of pocket Rx costs.

    • After 2025, $2,000 cap.

Medicaid

Medicaid

  • Covered 92.6 million people in June 2023.

Medicaid Eligibility

  • The 2010 Affordable Care Act (“Obamacare”) created a single income standard (138% of federal poverty line = $20,120 for an individual).
    • Was intended to be nationwide standard…
  • In 2012, the U.S. Supreme Court ruled that Medicaid expansion was optional for states.

Medicaid: Financing and Benefits

  • Medicaid is an optional state program that is jointly financed between the federal gov’t and states.

  • Federal government sets minimum requirements for eligibility and benefits and states administer program.

Medicaid: Financing and Benefits

  • FMAP: Federal Medical Assistance Percentages
    • At least 50% match
    • Based on state’s average personal income
    • Lower income states -> higher match
  • Currently, 43% overall funding from states

There is tremendous variation across states regarding eligibility, benefits, and provider payment …

Required Services

  • Inpatient and outpatient care
  • Physician services
  • Lab tests and imaging
  • Long-term nursing home care
  • Home health care

Optional Services

  • Prescription drugs (all states cover)
  • Dental care
  • Hearing aids
  • Hospice
  • Physical and occupational therapy
  • Prosthetic devices
  • Home and community-based services

Managed Care Plays a Strong Role …

  • State Medicaid programs have moved increasingly to managed care.

    • 39 states use MCOs for Medicaid population.
    • Around 70% of all Medicaid beneficiaries in MCOs.

  • Most common arrangement for children and parents; less frequently used for the disabled and elderly.

  • In states’ interests because of potentially more efficient care and predictability for budgeting.

Dual Eligibles

How Do Medicare And Medicaid Work Together?

  • Medicare is primary payer for dual eligibles’ hospital, physician, prescriptions, and other acute medical care.

  • Medicaid covers what Medicare doesn’t.

How Do Medicare And Medicaid Work Together?

  • Key difference between Medicare and Medicaid is coverage of long-term services & supports (LTSS).
    • Medicare pays for short-term post-acute SNF stays.
    • Medicaid covers long-term LTSS needs.
  • Under this structure, neither program has the financial incentive to lower costs or improve quality of care for dual eligibles.

Summary

Summary

  • Medicare and Medicaid two most prominent social insurance programs in U.S.

  • They represent two very different approaches to government financing of health insurance.

  • Significant changes are currently being considered but with sizeable political hurdles to doing so.

It’s Very Difficult for Medicaid to say “Yes”

It’s Very Difficult for Medicare to say “No”

Kaiser Family Foundation Health Insurance Quiz