Why Medicaid Matters to Medicare Beneficiaries and Their Families

Medicare and Medicaid, which together serve over 95 million Americans,[1] are our two major national public programs offering secure and stable access to health care for beneficiaries, and peace of mind to the their families.

Medicaid is under attack by proposals that would limit its scope and/or eliminate current program structures that provide important protections to vulnerable older people and people with disabilities.  Medicare beneficiaries and their advocates – indeed, all Americans – should be concerned about such proposals.

Who Uses Medicare and Medicaid?

Both Medicare and Medicaid provide benefits to older people and people with disabilities; in addition, Medicaid provides benefits to pregnant women and families with children.  Beginning in 2014 (and sooner for states that so choose), Medicaid will provide coverage for all Americans with incomes less than 133% of the Federal Poverty Level (about $1,200/person/month in 2011).

Medicaid matters particularly to the nearly nine million Medicare beneficiaries who are eligible for both programs.  It matters to all Medicare beneficiaries because Medicaid payments account for nearly 20% of all personal healthcare spending nationwide,[2] making it a significant source of support for the healthcare infrastructure of the United States.

Why Do Medicare Beneficiaries Need Medicaid?

Medicare has high cost-sharing – premiums, deductibles and co-insurance – and significant gaps in its coverage, most notably for non-skilled long-term care, which is costly.[3]

The nine million Medicare beneficiaries who are eligible for some Medicaid coverage are generally poorer and sicker than the general Medicare population and thus require more health services.  They comprise 21% of Medicare enrollees, and use 36% of Medicare dollars.[4]  They comprise 15% of Medicaid enrollees and use 40% of Medicaid dollars.[5] Medicaid helps them with Medicare's cost-sharing and with coverage for services not covered by Medicare.

Assistance with Medicare Cost-sharing

Medicare has high cost-sharing requirements: For 2011, more than $1,300 in premiums for Part B alone, plus nearly $1,200 in deductibles for an individual with one hospitalization in the year, and 20% of the cost of every physician visit and of most other out-patient services or supplies.[6]  For some dually-eligible beneficiaries, Medicaid pays just the Part B premium; for the poorest, Medicaid assumes responsibility for all the cost-sharing, relieving the beneficiary of liability for the payments.

Assistance with Services Not Covered by Medicare

For those Medicare beneficiaries eligible for full Medicaid services, Medicaid fills in gaps in Medicare's coverage, such as vision and dental care and non-skilled long-term care.  In 2007, for example, about 70% of all Medicaid spending for dual eligibles was for long-term care services.[7]

In fact, many Medicare beneficiaries become eligible for Medicaid because of the very high cost of long-term care services: nursing homes can cost more than $70,000 a year.[8]  After Medicare beneficiaries use most of their own resources to pay for such care, they depend on Medicaid for help.[9]  Medicaid pays for some of the care of 70% of all nursing home residents.[10] It pays nearly 45% of all nursing home costs in the country and nearly 50% of all long-term supports and services.[11]

How Will Current Proposals Hurt Dually-Eligible Medicare Beneficiaries?

Deficit reduction proposals that have been released over the past year, and that are under serious consideration in 2011, include substantial changes to Medicaid.  Based on past experience with efforts to change Medicaid's program structure and reduce beneficiary protections, and analyses of the current deficit reduction proposals, individuals and their families will be hurt by the changes under consideration.

Past and current proposals refer to providing greater "flexibility" in the design of Medicaid.  Such changes will literally affect all Medicaid beneficiaries and all Medicaid services that are not required to be covered by current federal law.  Such so-called "optional" groups include 56% of older people receiving Medicaid and 22% of people with disabilities receiving Medicaid.[12]  More than 83% of Medicaid spending for older people and over 66% of spending for people with disabilities is for "optional" services.[13]  Most nursing home beneficiaries are in an "optional" category and virtually all community-based long-term care services are "optional."

States already have great flexibility with respect to initiating coverage for optional groups of individuals and for including coverage of optional services,[14] but proposals that include "health care spending caps" that could significantly constrain spending would expand that flexibility.  For example, states could require high cost-sharing, even though their Medicaid program is serving very low-income individuals.  They could have waiting lists for access to services, allowing only a specified number of people to apply for nursing home coverage.  They could eliminate currently-required strong nursing home quality standards and financial protections for the spouses and children of people needing Medicaid assistance to pay for long-term care. They could require adult children of nursing home residents – who might be putting their own children through college or caring for their own health needs – to pay part of the cost of their parents' nursing home bills.  States might put liens on the property of family members of Medicaid beneficiaries, or recover Medicaid dollars spent from the estates of family members.

For Medicare beneficiaries with low incomes, or those who need long-term care, Medicaid fills the gaps in Medicare's coverage to minimize out-of-pocket expenditures, reducing them from 17% of income for the average beneficiary to 10% for those will full Medicaid.[15] (The poorest beneficiaries who do not have Medicaid spend 22% of their income on out-of-pocket costs.)  This extra coverage provides security to those beneficiaries who most need health care services, and provides peace of mind to families who know that their relatives' health care needs are met. 

Conclusion

Changes to Medicaid that are currently under consideration might result in some savings to the federal government and to the states, but they would shift the cost of care to Americans with the lowest incomes and greatest health care needs, and to their families.