Federal Medicaid Reform Helen Kent Davis Texas Medical Association

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Federal Medicaid ReformHelen Kent DavisTexas
Medical Association
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Why are Congress and the States Calling for
Reform?

• Federal deficit and expenditures rising rapidly,
  resulting in Congressional calls to restrain
  growth and reduce entitlements
• National Medicaid expenditures estimated to be
  329 billion (2.6 of GDP) for 2005
• 186 B (federal)
• 143 B (states)
• Medicaid enrollment now exceeds Medicare
• State revenues plummeted during recession and
  have been slow to recover
• State revenue growth in 2004 3.4
• Medicaid cost growth 6 to 9

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Why are Congress and the States Calling for
Reform?

• Perception that Medicaid spending is out of
  control and crowding out funding for other
  priorities, such as public education
• Nationally, Medicaid spending still below
  educational spending
• Yet, as in private sector, Medicaid costs are
  rising.
• Factors
• Health care inflation
• Better diagnostic tools, new generation
  medications, general medical inflation
• Enrollment growth
• 5 average national annual growth, though higher
  in fast growing states such as Texas

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Why are Congress and the States Calling for
Reform?

• Perception among lawmakers that Medicaid design
  and benefit structures are antiquated and ripe
  with abuse
• Common themes
• Medicaid enrollees lack sense of personal
  responsibility or ownership
• Medicaid patients and/or providers overutilize
  services or receive services that are not
  medically necessary
• Medicaid benefits are too generous and
• Medicaid contributes to health disparities among
  minorities and disadvantaged populations

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Federal Medicaid Reform

• April 2005 Congressional budget resolution
  instructed oversight committees to propose
  mechanisms to reduce discretionary spending by
  35 billion over 5 years
• some 10 billion assumed to be from Medicaid
  (though resolution did not specify actual amount)
• Sept/Dec Both chambers develop reform packages,
  which were reconciled during conference
  committee final vote in both chambers was very
  close and concerns about deep cuts expressed by
  both parties
• Senate 51-50
• House 216-214
• February 2006 -- President Bush signed Deficit
  Reduction Act of 2005.
• Reduces federal spending on a variety of domestic
  programs, including Medicare, Medicaid, child
  support enforcement, TANF, child care subsidies,
  and student loans
• Over the next five years, the Congressional
  Budget Office (CBO) forecasts 39 billion in
  savings over ten years, the savings are
  estimated to be 99 billion.
• House version 50 billion
• Senate version 35 billion

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Federal Medicaid Reform

• CBO estimates net savings of 11.6 billion over
  five years and 48.7 over 10 years from Medicare
  and Medicaid
• Medicaid 4.7 b (5 years) 26.3 b (10 years)
• Medicare 6.4 b (5 years) 22.4 b (10 years)
• Net reduction misrepresents level of Medicaid
  cuts because it includes new monies to offset
  Katrina costs. Excluding Katrina relief funds,
  Medicaid reductions are 6.9 billion over 5 years
  and 28.3 billion over 10
• S. 1932 reduces expenditures primarily by
  altering eligibility for nursing home services
  and giving states new authority to establish
  cost-sharing and alter benefits
• Limits on asset transfers 2.4 b
• cost sharing/premiums 1.9 b
• Benefit changes 1.3 b

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Federal Medicaid Reform

• S. 1932 reduces expenditures primarily by
  altering eligibility for nursing home services
  and giving states new authority to establish
  cost-sharing and alter benefits
• Limits to asset transfers 2.4 b
• CBO estimates about 15 percent of Medicaid
  nursing home applicants (120,000) will face a 3
  month delay in obtaining services

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Federal Medicaid Reform

• Cost-sharing/premiums 1.9 b
• Cost-sharing divided into 4 subcategories that
  may be implemented at state option
• Premiums -- exempts mandatory groups of children
  and pregnant women and patients with incomes
  between 100 to 150 FPL no explicit language
  exempting patients below 100 FPL, but intent
  seems to do so failure to pay premiums could be
  grounds for exclusion
• 2. Copays for medical services exempts
  mandatory groups of children and certain types of
  services, including preventive, prenatal care,
  and family planning
• 3. Copays for non-preferred drugs
• 4. Copays for non-emergent use of ER
• -State must show that alternative providers are
  
• available to provide weekend and evening services

No populations exempted, although states may make
exceptions.
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Federal Medicaid Reform

• Benefit changes 1.3 b
• States, at their option, may establish a
  benchmark benefit plan (similar to CHIP
  process) based on benefits of largest commercial
  HMO, BCBS federal employee plan, state employee
  health plan, or Secretary-approved package
• Benefits may not be altered for dual eligibles,
  patients with disabilities, patients receiving
  long term care, or pregnant women or parents in
  mandatory categories. However, option is
  applicable to both mandatory and optional
  categories of children
• Requires that states provide wrap around
  coverage for EPSDT services
• States cannot use savings to expand coverage to
  new populations because provision only applies to
  existing categories of enrollees

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Federal Medicaid Reform

• Other provisions
• Lowers pharmacy reimbursements by altering
  ingredient cost formula
• Tightens criteria for defining case management
• Improve program integrity
• Establishes new verification requirements for
  citizens
• During conference, legislators added a provision
  requiring states to verify enrollees citizenship
  via a passport or birth certificate. Savings
  impact unknown, but could cause 3 to 5 million
  enrollees to lose coverage.
• S. 1932 also includes new Medicaid initiatives as
  well
• Katrina relief 2 billion
• Buy-in program for children with disabilities
  (new state option) 1.4 billion
• Health Opportunity Accounts authorizes up to 10
  Secretary-approved pilots to test HSAs in
  Medicaid

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Federal Medicaid Reform

• Whats not in S. 1932?
• Conferees excluded or limited Senate provisions
  to increase in Medicaid pharmacy rebates and to
  reduce payments to Medicare managed care plans

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Federal Medicaid Reform

• On the horizon
• President Bushs 2007 budget request
• Recommends additional Medicaid savings of 14
  billion over 5 years and 35 billion over 10
  years through a combination of legislative and
  regulatory changes most of the changes would be
  achieved through regulatory reform, thus not
  requiring Congressional approval
• Medicaid Commission
• Established by congress in 2005
  multi-disciplinary members appointed by DHHS
  Secretary
• Work overshadowed by S. 1932, but committee will
  meet this year to develop long-term approaches to
  restructuring Medicaid

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Putting Medicaid Growth in Perspective

• Reflecting national health care trends, costs are
  up, but growing at a slower rate than private
  sector (6.9 versus 12)
• 42 of program costs spent on patients dually
  eligible for Medicare
• Medicaid provides critical wrap around services
  not paid for by Medicare, including long term
  care and prescription drugs
• Higher costs also a function of more people in
  need
• More employees losing or unable to afford private
  health insurance -- Medicaid mitigated rise in
  number of uninsured, particularly among children
• Number of uninsured and people living in poverty
  is steadily increasing
• In 2004, 1.1 million more people living in
  poverty according to latest Census data

On 1/1/2006, Medicare Part D program began
providing outpatient drug coverage for the first
time however, states required to pay 80 of
costs. In February, Texas reinstated payment for
drugs provided to dual-eligibles because of
start-up problems with Part D and resulting
barriers to care.
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Perception vs. Reality

• Are Medicaid costs out of control?
• Costs are definitely increasing. Medicaid
  experiencing same cost trends as other payers
• Caseload growth major factor in increasing
  Medicaid costs and reflects growing need
• Per capita, Medicaid costs and administrative
  expenses growing at lower rate
• Is Medicaid crowding out funding on other
  priorities, such as public education?
• Depends on how you count.
• Yes, if federal funds included federal Medicaid
  matching rate better than educational programs
• No, when counting state-only expenditures, but
  again Medicaid costs growing quickly
• Does Medicaid need radical reform?
• Medicaid is 40 years old. Modernizing program
  makes sense, but reforms should preserve what
  works now.
• Is spending on Medicaid too high?
• Recent survey of consumers indicates strong
  support for spending more money, not less, on
  Medicaid and health care programs.
• Costs can be better managed by assuring patients
  receive the right mix and level of services for
  their needs