Temporary Assistance for Needy Families (TANF)
A federal government program into which the Aid to Families with Dependent Children and Supplemental Security Income programs have been incorporated.
Medicare and Medicaid
[APRIL 1, 1998] The nations Medicare and Medicaid programs (titles XVIII and XIX, respectively, of the Social Security Act) were created in 1965 as part of the so-called Great Society legislation. The programs were enacted at the same time that comprehensive private health insurance coverage was becoming available to most of the nations population. Congress enacted Medicare (a federal program) and Medicaid (a state and federal program) to ensure that certain vulnerable populations had access to health care coverage. Today, Medicare targets mainly the elderly, and Medicaid targets mainly the poor.
Over time, the two initiatives have become much more expensive than originally envisioned.
From 1970 to 1996, total federal expenditures for Medicare grew from $8 billion to $203 billion.
From 1970 to 1996, total state and federal expenditures for Medicaid grew from something over $5 billion to almost $148 billion.
The two initiatives also have become much more expansive: Since first initiated, both have undergone substantial change in regard to the people they help and the health care services they cover.
As originally enacted, a persons eligibility for Medicare was determined by his/her eligibility for Supplemental Security Income (SSI). In 1966 this meant that a person had to
be a U.S. citizen,
meet certain asset and income requirements,
be aged 65 or older, and
in many cases, have paid a certain amount in payroll taxes (into the Social Security Trust Fund).
As eligibility requirements for SSI expanded, so did those for Medicare. In the 1970s Congress extended access to the program to those who
are blind and/or severely disabled, and
suffer from end-stage renal disease.
In Medicares first year, there were just over 19 million enrolled; by 1997despite there not having been a major Medicare eligibility expansion since the 1970sthe number had doubled, to 38 million. About 87 percent of the programs enrollees are elderly (aged 65 or older); the remainder are blind or disabled. In Michigan, approximately 1.3 million people are eligible for Medicare benefits.
Today, for its beneficiaries, Medicare provides two types of health care coverage: hospital insurance (Part A) and medical insurance (Part B).
Medicare Part A is provided automatically to qualified people aged 65 and over and to most who are severely disabled and entitled to SSI benefits. It reimburses participating institutional providers for care rendered; coverage includes inpatient hospital services, care given in skilled nursing facilities, home health services, and hospice care. Part A is financed by the Medicare Trust Fund, which is funded by a 2.9 percent payroll tax that is split between employer and employee.
Medicare Part B benefits also are available to almost all citizens aged 65 and over, certain aliens aged 65 and over (even those not entitled to SSI benefits), and blind or disabled people entitled to Part A. Part B coverage is optional and to obtain it, recipients must pay a monthly premium, which accounts for one-third of Part B funding; the rest is paid for by general tax revenue. Almost all people entitled to Part A choose to enroll in Part B, which covers
- physician services (in both hospital and nonhospital settings),
- clinical laboratory tests,
- durable medical equipment,
- flu vaccinations,
- drugs that cannot be self-administered (except certain anticancer drugs),
- most medical supplies,
- diagnostic tests,
- ambulance services,
- hospital outpatient and ambulatory surgical center services,
- some therapy, and
- blood products not covered by Medicare Part A.
Medicare generally will not cover any service unless it is medically necessary, nor does it cover dentures, dental care, prescription drugs (except certain self-administered anti-cancer drugs), eyeglasses, hearing aids, and certain other services (some of these services may be covered under certain managed-care arrangements).
Medicaid is a state/federal cost-shared program that provides medical assistance for certain individuals and families with low income and limited assets. The federal government has established certain parameters within which each state may
establish its own eligibility standards,
determine the type, amount, duration, and scope of services,
set payment levels for services, and
administer the program.
Medicaid does not provide medical assistance for all poor peopleonly for designated groups (categories). Although there are only two eligible populationsthe categorically and medically needythe categories have been expanded numerous times and so have the services offered.
Originally, "categorically needy" included only families receiving cash assistance through Aid for Families with Dependent Children (AFDC) and aged, blind, and disabled people receiving Supplemental Security Income benefits; in 1997 AFDC and SSI were incorporated on the national level into a single programTemporary Assistance for Needy Families (TANF). Over the years, categorically needy has been expanded to include the following:
Infants, children, and pregnant women in lower-income families
Low-income elderly and disabled persons
Individuals eligible for transitional Medicaid (provided for 12 months to beneficiaries who get a job or a better job and, because of the income increase, become ineligible for Medicaid)
Certain low-income Medicare beneficiaries
Within the categorically needy population, there are many for whom states must provide Medicaid services and many for whom the state may choose to provide the services; most states choose to extend Medicaid services to their most vulnerable populations who meet certain asset and income levels.
States may choose, as Michigan has done, also to establish programs for the "medically needy" people who have substantial medical costs, but their income is too high for them to be eligible for Medicaid. Such people must "spend down" their income until it reaches a level at which they meet Medicaids income and asset requirements. States that establish a medically needy program must serve children aged under 18 and pregnant women from low-income families.
Medicaid services have expanded over time. When the Michigan Medicaid program was implemented, in 1966, the state indicated that "the medical services are of a curative, not a preventive, nature. Thus, routine medical examinations and immunizations are not covered." Today, the programs focus is different: For example, the Early and Periodic Screening Diagnosis and Treatment program (EPSDT) for children places a strong emphasis on disease prevention and immunization for children.
Originally, the federal government required states to cover only five Medicaid services. Since 1966 the list has expanded substantially and now includes
inpatient and outpatient hospital services,
services provided at rural health clinic and federally qualified health centers,
laboratory and x-ray services,
nursing home services,
physicians services, including medical and surgical services provided by a dentist,
home health services,
EPSDT for youth under age 21,
family planning services and supplies,
necessary medical transportation, and
services provided by a nurse midwife, certified pediatric nurse, and certified family nurse practitioner.
Michigans Medicaid program also covers 24 of 33 optional services (for some, the state may require recipients to make a copayment), including
dental services and dentures,
physical, occupational, and speech therapy,
podiatry, optometry, and chiropractic services,
inpatient psychiatric services for people aged 2165 and intermediate-care- facility services for the mentally retarded, and
eyeglasses, hearing aids, and prosthetic devices.
Currently, Michigans Medicaid program serves 25 eligible populations, which fall roughly into the following seven categories:
Family Independence Program (FIP) participants (Michigans name for its AFDC program)
Infants and pregnant women in families who have annual income under 185 percent of the federal poverty level (the 1998 FPL for a family of three is $13,650)
Children older than one year but younger than 16 in families with income below 150 percent of the FPL
Elderly and disabled persons with income below the FPL
Former FIP recipients whose cases were closed due to employment but do not have health insurance coverage (this is referred to as the transitional Medicaid population)
In Michigan approximately 1.1 million people are eligible to receive Medicaid. In 1997 the states total spending (including state and federal funds) on the Medicaid program totaled almost $5 billion, including about $1.3 billion in state general funds. Of the people who receive Medicaid services in Michigan,
46 percent are children,
25 percent are low-income adults,
21 percent are blind or disabled, and
8 percent are elderly.
Although almost half of Michigans Medicaid population are children, three-quarters of the programs spending goes to the elderly, disabled, and blind. Of total spending,
50 percent goes to the blind and disabled;
25 percent to the elderly;
13 percent to children; and
Nationwide, only 10 million people were enrolled in the program in 1960; now more than 38 million are served, nearly four
times as many as in the beginning. Nationally, in 1997, Medicaid financed care for approximately
18 million children,
8 million adults in low-income families,
almost 7 million people who are blind and disabled,
almost 5 million elderly, and
Almost 14 percent of the American population are eligible to receive Medicaid benefitsup more than 35 percent from 1990.
Since their inception, the Medicare and Medicaid programs have grown substantially.
From 1970 to 1996, total federal Medicare spending rose nearly 24-fold.
From 1970 to 1996, total federal and state Medicaid spending rose nearly 29-fold.
From 1966 to 1997, Medicare enrollees increased by 100 percent.
From 1966 to 1997, Medicaid enrollees increased by 280 percent.
Very soon, federal and state spending on these programs will not able to keep pace with the demand for their services. The Medicare program is in particular jeopardy: In 1995 there were only 34 million American elderly, but by 2025 the number is projected at almost 61 milliona 79 percent increase. Additional utilization and spending because of this populations growth is expected to push the programs cost beyond $447 billion by 2008. Although the Medicare-spending growth rate has subsided somewhat in recent years, policymakers expect it to increase in the future. In fact, Congress estimates that Medicare will become bankrupt by 2010, just as the first wave of babyboomers begins retiring.
Current demographic trends portend a considerable problem for Medicaid as well. Although the elderly (aged 65 and over) account for the smallest segment of this programs population, their care is the most expensive. In Michigan, Medicaid services cost about only about $790 per child but $9,400 per elderly adult. As the number of elderly who qualify for the program grows, so will the cost.
To address Medicare and Medicaids financial future, policymakers are debating changes in the way in which health care services are delivered to beneficiaries. Managed care is seen as a way to substantially reduce costs. Federal officials are addressing Medicare costs also by considering changes to eligibility standards and requiring recipients to pay more for the care.
One way that the federal government and the states hope to save Medicare and Medicaid dollars is by switching from fee-for-service to managed care. Managed care is an approach to health care that (1) coordinates patient care so as to ensure that services are appropriately utilized (that is, care is not unnecessarily rendered), and (2) routinely monitors and measures provider performance so as to control cost and maintain or improve the quality of care.
Today only 13 percent of the entire Medicare population receives health care through a managed-care system, but this soon will change. In 1997 Congress voted to extend this option to Medicare recipients. The federal plan allows managed-care organizations other than health maintenance organizations (HMOs)for example, provider-sponsored organizationsto compete to give care to Medicare beneficiaries. The plan, known as Medicare+Choice, also establishes payment incentives that will encourage MCOs to provide services in rural areas, which usually are considered a less lucrative market than others. The federal government will begin a marketing campaign to encourage (but not require) senior citizens to enroll in MCOs.
Michigan is one of many states that to reduce program costs and improve health care access and quality has adopted a mandatory Medicaid managed-care strategy. In 1997 several HMOs and clinic plans were selected through a competitive bid process to begin providing comprehensive, capitated managed-care services to recipients in five southeast Michigan counties; officials expect to have statewide managed care in place by mid-1998. Under the plan, enrollment in a managed-care organization (either an HMO or other preferred-provider arrangement) will be mandatory for all but a few Medicaid recipients for whom the state is devising separate managed-care plans. (Excepted from the mandatory managed care requirements will be those needing mental health and substance abuse services, those needing long-term care, and children with special health care needs.) Michigan officials expect total Medicaid managed-care savings to reach nearly $120 million.
Although Michigan officials are confident that the Medicaid managed-care initiative will be a great success, many observers are concerned about some of its potential effects. Opponents of the program fear that consumers will have to leave their regular physician to select one who has agreed to participate in a managed-care plan, and this affects continuity of care. Others worry that because capitation limits the amount that carriers are paid to cover health care services, some managed-care organizations, to save money, may deny Medicaid managed-care enrollees medical services they need or limit their access to them.
Managed care is not the only answer to Medicare and Medicaids future financial concerns; other options are to limit program eligibility and require beneficiaries to contribute more out of pocket.
As Congress considered whether to expand Medicare managed care, many lawmakers argued that a more economical course would be to raise the agefrom 65 to 67at which a person becomes eligible to receive benefits. Although the Senate approved the initiative, the House defeated it. Many believe that the idea failed because it is unpopular with the elderly (a national poll conducted before the vote on the issue showed 65 percent of Americans opposed to it), who tend to vote more regularly and in greater number than younger people.
Rather than raise the eligibility age, Congress considered requiring the affluent to pay a higher Medicare premium. Although this option was not adopted, its supporters argued that those who can afford to pay more out of pocket for their health care ought to be required to do so. Opponents argued that people who are aged 65 and over already have paid for their Medicare services: For years they paid payroll taxes that fund the program. Others contend that the elderly receive much more in benefits than they contributed in payroll taxes.
In their effort to control Medicare spending, policymakers also have adopted policies to
restrain the growth in Medicare payments to providers,
impose fees on physicians who violate certain Medicare standards, and
eliminate spending fraud and abuse.
These, combined with the federal governments recently adopted managed-care initiatives, are expected to save $115 billion over five years. Despite this, Congress estimates that Medicare faces bankruptcy as early as 2010.
Despite Medicares financial difficulties, President Clinton met lawmakers proposal to raise the Medicare eligibility age with a proposal to lower it. Under the presidents plan, able-bodied adults aged 5564 could buy into Medicare with a $300400 monthly premium. Supporters argue that the extension will pay for itself; detractors contend that it will not.
Most states, including Michigan, are deferring a decision on narrowing Medicaid eligibility limits or requiring additional patient out-of-pocket contributions until the results are in on the managed-care initiatives.
Michigan policymakers, however, dealt with a new Medicaid question: How should health care services be extended to uninsured children? In 1997 Congress appropriated $24 billion to help states to do just that, and of this money, the State of Michigan will receive $467 million over five years. (This is a textbook example of "devolution," the shift from a higher to a lower level of government the responsibility for decision-making in regard to government services.) The states are permitted to (1) expand their existing Medicaid program or (2) create an entirely new childrens health care program; Michigan lawmakers opted for a combined approach.
Originally, the Michigan Department of Community Health (MDCH) proposed a new health insurance program for uninsured children who (1) are aged under 19, (2) live in a family having income at or below 200 percent of the federal poverty level, and (3) are ineligible for any other health insurance program, including Medicaid.
Although legislators, childrens advocates, and others agreed that coverage should be extended to this uninsured population, many disagreed with the decision to create a new, state-run health plan. Opponents of the MDCH initiative argued instead for expanding Medicaid, contending that this would avoid having to allocate limited state and federal resources to developing a separate
health care benefits package for children;
health care provider network to deliver those benefits; and
administrative system, including information technology, to monitor the results of the program and coordinate childrens health care.
After much debate, legislators adopted and the governor signed a plan (Public Act 54 of 1998) that supersedes the MDCH proposal. It both expands Medicaid and creates a new program: Uninsured children in families with income under 150 percent of FPL will become eligible for Medicaid, while children in families with income of 150200 percent of FPL shall obtain coverage through the new plan, called MIChild. NOTE: Many people may refer to both the Medicaid expansion and the new program as the MIChild initiative.
Opponents of the combined approach argue that it will be difficult to administer, but supporters contend that provisions in the plan allowing families to apply simultaneously for the new program and Medicaid will save them from having to apply for Medicaid, then, if denied, go though another application process for MIChild, or vice versa.
Those who created Medicare and Medicaid could not have envisioned the programs present cost and scope. Todays policymakers have the unenviable legacy of having to maintain, if not improve, vulnerable populations access to health care, while at the same time manage the cost of doing so. The biggest question for state and federal officials, however, is whether the responsibility should continue to be governments or whether a greater share should be assumed by the private sectoremployers and individuals.