Medicaid – You already pay for it, and soon you might pay more…

If you’re a Volvo-driving, yoga-practicing, latte-sipping, NPR-listening San Franciscan like myself, then you know what it’s like to contemplate California’s fiscal crisis every morning on the way to work.  This is a joke, but kind of not really.  I live really well, but its unreal how badly much of this state is struggling to get by.  I volunteer with kids who receive state services, but it’s not like they talk to me about it.  One thing I heard frequently, but rarely contemplated before taking this class, is how Medicaid interacts with each state and how important it is that the funding make ends meet for the program.  In California, the Governator and state lawmakers had to make major, major cuts to services like Medicaid (which they call MediCal) to help close the deficit.  However, it’s not just California — this problem is felt all over the country (that’s you CT, MD, and DC).

Background on Medicaid:

The Medicaid program provides healthcare coverage for the poor and the disabled, and the federal government splits the cost with states; but states largely decide who and what services are covered.  Karen Tumulty is covering health care reform for “Time” magazine. She says many people don’t really understand Medicaid. “The Medicaid program was established back in the 1960s, right alongside the Medicare program; but people really don’t understand what it is, said Tumuly. “They think it’s a health care program for the poor; but the fact is that in many, many states, to qualify for Medicaid you have to be poor and something else. You have to be poor and disabled; you have to be poor and pregnant; poor and elderly; or poor and with children.

MediCal in California has almost 7 million enrollees, making it the nations largest Medicaid program.  Like every state, costs are split with the government in varying proportions, and in California’s case 50-50.  On average, the federal government pays 57 percent. The state will spent $11B on the program this year, making it the biggest item in the state’s entire budget.

I could research and write volumes about California’s problems, but instead here I’ll just focus on the macro issue and what some legislators are perhaps overlooking.

First, the good things about Medicaid:

Medicaid is already serving more than 60 million Americans and, depending upon the trajectories of unemployment and health care reform, could hit 100 million in the next decade. It’s a major market leader, and has tremendous purchasing power. As the Health Affairs Blog says, “Medicaid expansion is less expensive (both to government and to the beneficiaries) than subsidized private coverage, and also generally better for the beneficiaries (who get access to more preventive services and prescription drugs). The flexible, state-based variation inherent, by design, in Medicaid programs may minimize the anti-big government argument of some reform opponents. These factors explain why Medicaid enrollment has grown far faster than Medicare’s, even though it is Medicare that has been long touted as the presumed path to universal coverage.”

Medicaid already works to cover the uninsured, records performance and outcomes metrics which can be used as a data mine, reduces racial and ethnic disparities.  In other words, it’s not all bad.  It’s probably true that the costs of expanding Medicaid is peanuts compared to the overall health care cost increases we as a nation are facing….  plus the safety net is a good thing and VERY important to a lot of people, but can the reform bill expand it in a fair and sustainable way?

2009 So Far and Medicaid:

Today, nearing the end of 2009, Medicaid in many states is running on fumes and stimulus dollars.  Typically Medicaid programs are funded by taxes, and as we know tax revenue declined this year with the loss of jobs.  (In California this was magnified because we tax the highest earners the most, and since this recession affected everyone including high-wage industries, we lost a LOT.)  When cuts need to be made, states usually trim or freeze the rates doctors are paid to see Medicaid patients, and restrict their benefits, like doing away with dental care.

States are freaking out a little right now because as the federal stimulus funds run out at the end of next year, more cuts will likely have to be made.  A report by the Kaiser Family Foundation released on Sept. 30 said, Medicaid enrollment grew by 5.4% in fiscal 2009 — the highest rate in six years — while total program spending increased by 7.9%, the fastest pace in five years. Meanwhile, state revenues plummeted: Tax collections dropped by 16.6% in the 12 months leading up to June 2009, according to U.S. Census Bureau statistics. This contributed to a 6.3% decline in the state portion of Medicaid spending — the first in the program’s history.”

Although legislatures have closed billions in budget gaps, they could face combined deficits of $350 billion in their 2010 and 2011 budgets, according to Robin Rudowitz, principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured.

Health Care Reform and Medicaid:

As we know, the central tenet of this year’s health care reform proposals is to expand access to health coverage and health care.  Health reform proposals in both the House and Senate would expand Medicaid by allowing anyone who makes less than $14,000 per year (133% of the federal poverty line to sign up. Currently the threshold is $10,830.  According to the San Jose Mercury News, “The governor’s staff estimates that Medi-Cal rolls could jump by 1.6 million as a result; nationwide, 11 million new people are expected to sign up for Medicaid if either of the Democratic proposals becomes law, according to the nonpartisan Congressional Budget Office.”

The House bill would pay for the expansion using only federal funds, but the pending Senate bill would provide less federal support to states.  In fact, it would actually penalize states that have already enacted Medicaid expansions, by providing them less money.  One of the reasons the Senate Finance bill is less expensive than some of the prior versions is because the Senate Finance Committee chose to push more of the costs onto the states.

Because states have to balance their budgets each year, this is a big freaking deal.  It will likely result in higher state income, sales, and property taxes, which will have a disproportionate impact on the middle class.

The state of Tennessee has estimated the bill would add about $1 billion in extra Medicaid costs for the first five years after expansion, while California has estimated the expansion could cost around $8 billion each year.  With numbers in the trillions being thrown around left and right, a billion or $8 billion might not sound like a lot, but for a state that has to get back to zero each and every year, it really is.

When states get less money through state taxes, federal funds dry up, AND more people enroll, the only thing they can do is cut benefits.  When benefits can’t be cut any further, the only thing they can do is reduce what doctor’s are paid.  As a result, as the “Health Care Policy and Marketplace Blog” says, “Lower income residents had greater difficulty finding a physician, according to the study, as 24% of residents enrolled in state-subsidized health plans were told a doctor didn’t accept their insurance, compared with 7% of residents with private coverage. So while the legislation may be successful in adding 10 million people to the Medicaid rolls, it isn’t clear that physicians have the capacity and willingness to serve all the newly insured members, particularly if they are being paid at Medicaid reimbursement rates.”

The middle class, who will be shouldered with having to pay for a big part of this expansion, don’t really have a voice in the discussion.  What about the states?  The National Governor’s Association speaks for them, and predictibly this organization spends a lot of time talking about Medicaid.  Here’s their policy statement:

Governors believe that a national strategy for sustainable financing of long-term care services and supports for elderly and people with disabilities, regardless of income, must be developed. The absence of any national strategy has thrust the responsibility to states and to the Medicaid program specifically. Enhancing the quality of care and containing costs are also critically important. Governors believe that Medicaid reform must be driven by good public policy.

In other words, please ensure stability and enact a secure long-term financing mechanism so at the very least, we know what to expect.  You can read this NY Times article to see quotes from both Democratic and Republican governors, but basically both sides of the aisle think this is a heinous solution.  The Merc (you probably don’t even know what that is) says that, “Congressional leaders say they’re mindful of the problem, although they’re caught between competing imperatives: ensuring that health care reform doesn’t add to the deficit but doing so in a way that doesn’t heap unfair costs on states and individuals.”   Anyway, it’s a damn good thing for Congress that the governors don’t vote for bills!

BTW: If you can find me a Republican alternative iea related to Medicaid, I’ll be really pumped.  All I can find is suggestions to retract Medicaid and provide discounts and subsidies for private insurance for poor people, reserving Medicaid for the blind and disabled.

What the Outcome might look like:

The final bill will probably have some expanded federal assistance for the Medicaid expansion, but some states will get more than others and after about 5 years all states will be forced to take on the majority of the burden.  Barbara Boxer, clearly very aware that she  is facing a big election next year, has a little extra incentive to remember her constituents.  She said in a statement last week that she received a verbal commitment from Senate Majority Leader Harry Reid that California would be included among a handful of “high need” states when it comes to Medicaid costs stemming from health care reform.  This agreement would be great if it holds up.  It doesn’t say much for the other states however… we shall see….


~ by Kathryn Bailey on October 19, 2009.

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