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Making the Case Against Medicaid Cuts


A growing national problem (majority of ERs in country are at or over capacity) ... sector in NE (ranging from a low of 5.9% of workforce in VT to 9.2% in RI) ... – PowerPoint PPT presentation

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Title: Making the Case Against Medicaid Cuts

Making the Case Against Medicaid Cuts
  • Michael Miller
  • Community Catalyst/ Alliance for a Healthy New
    England Research Center
  • Presented at the Alliance for a Healthy New
    England Summit
  • December 2002

Community Catalyst is a national advocacy
organization that builds consumer and community
participation in the shaping of our health system
to ensure quality, affordable health care for
all. Community Catalysts work is aimed at
strengthening the voice of consumers and
communities wherever decisions shaping the future
of our health system are being made. Community
Catalyst strengthens the capacity of state and
local consumer advocacy groups to participate in
such discussions. The technical assistance we
provide includes policy analysis, legal
assistance, strategic planning, and community
organizing support. Together were building a
network of organizations dedicated to creating a
more just and responsive health system.
  • Community Catalyst, Inc.
  • 30 Winter Street, 10th Fl.
  • Boston, MA 02108
  • 617-338-6035
  • Fax 617-451-5838

Electronic copies of this presentation are
available by calling 617-275-2892. Organizations
seeking to distribute or otherwise make
widespread use of this publication are asked to
notify Community Catalyst.
Alliance for a Healthy New England is a six-state
initiative bringing health access and tobacco
control advocates together to campaign for
tobacco tax increases to expand health care
access from health advocates around the country.
Medicaid is at Risk
  • Worst State Fiscal Crisis Since the 1940s
  • Health Care Spending Increasing (Medicaid grew by
    13.2 in SFY 02, fastest since 92)

Why Do We Care?
  • Covers 47 million Americans (more than Medicare)
  • Pays for 1/3 of all births
  • Covers 20 of all children
  • Pays for over ½ of all HIV/AIDS and mental
    health/ substance abuse care
  • Pays for 42 nursing home care
  • Pays for treatment of about 20 of all
    tobacco-related illness

The Case Against Medicaid Cuts(In General)
  • Hurt vulnerable populations
  • Undermine the health care system for everyone
  • Hurt the economy
  • Are a high pain/ low gain strategy to achieve
    budget balance

Cuts hurt vulnerable populations
  • If they lose coverage, children, seniors, people
    with disabilities and other low
  • income adults are more likely to
  • have unmet medical needs, no usual source of
    care, and skip medical visits or filling a
    prescription because of inability to pay if they
  • be diagnosed later, hospitalized for conditions
    that could be treated in less intensive settings,
    and die from their illnesses than are the insured
  • incur catastrophic costs (more than 20 of family
    income) than the insured
  • (In the current budget climate this is the least
    effective argument in the abstract, but
  • can still be powerful if humanized)

Cuts undermine the health care system for
everyone, not just the poor
  • Increase ER Crowding
  • Increase the burden of uncompensated care
    (particularly for hospitals)
  • Reduce number of caregivers

Emergency Room Crowding
  • A growing national problem (majority of ERs in
    country are at or over capacity)
  • Rising numbers of uninsured are a major
  • Uninsured are
  • More likely to use ER as usual source of care
  • Spend more time in hospitals for conditions that
    could be treated in an ambulatory setting

Cuts increase the burden of uncompensated care
  • Estimates vary from 25 to 75 of every dollar
    saved from cutting eligibility is shifted onto
  • Cost shift can easily exceed net state savings
  • Part of the cost is passed on in the form of
    higher insurance premiums, part is absorbed in
    the form of weaker financial status of hospitals
  • Increasing co-payments also increases
    uncompensated care since co-payments are
    uncollectable in many cases

Cuts reduce the number of paid caregivers
  • Healthcare is a significant employment sector in
    NE (ranging from a low of 5.9 of workforce in VT
    to 9.2 in RI)
  • Medicaid finances about 15 of the health care
  • Depending on the sector, a Medicaid cut can
    undermine the economic viability of a provider,
    eliminating that service for all

Cuts Hurt the Economy
  • Job loss
  • Income loss
  • Increased personal bankruptcies
  • Lost tax revenue
  • Higher health insurance premiums

Medicaid cuts cost jobs and income
  • When Medicaid is cut, federal funds are withdrawn
    from the
  • state. For example, a South Carolina study found
    that the
  • 2.1 billion the state received in federal
    matching funds in
  • 2001 generated an additional 1.5 billion in
    total income and
  • more than 61,000 jobs. A 4 cut in Medicaid would
  • over 2,400 jobs and 60,000,000 in income.

Increased Personal Bankruptcies
  • Reducing Medicaid coverage increases the number
  • uninsured, leading to increased defaults on
  • debt and household obligations that affect
  • landlords and other sectors of the local economy

Lost Tax Revenue
  • Federal matching funds also generate a modest
    amount of state tax revenue. An analysis in
    Kentucky found that every that for every 10
    million in FFP the state gained about 600,000 in
    tax revenues (in addition to 21 million in net
    output and 9.2 million in increased earnings).
    A recent analysis in Massachusetts found a
    similar effect.

A High Pain/Low Gain Strategy
  • At least 2 in services must be cut for every
    nominal dollar saved
  • FFP is lost but costs remain and are shifted
  • Real savings are further reduced by
  • Lost tax revenue
  • Cost shifts to other state or local government
    programs that do not receive ffp

Cuts often backfire
  • Elimination of coverage for some services can
    lead to substitution of other more expensive ones
    (e.g. increasing demand for inpatient and nursing
    home care)
  • Increasing co-pays, particularly on services like
    Rx can also lead to increased ER and hospital use

Redefining the Problem I
  • Its a revenue problem Yes, Medicaid spending is
    up, but the real reason for the state budget
    crisis is declining revenue.
  • Solution raise revenue dont cut Medicaid (and
    other health programs). tax increases on
    higher-income families are the least damaging
    mechanism for closing state fiscal deficits in
    the short runReductions in government spending
    on goods and services, or reductions in transfer
    payments to lower income families, are likely to
    be more damaging in the short run according to
    Brookings economist Peter Orszag and Nobel Prize
    winner Joseph Stiglitz

Redefining the Problem II
  • Its a Medicare Problem 35 total Medicaid
    spending is paying for services for Medicare
    eligibles that Medicare doesnt cover, mainly
    drugs and long term care.
  • Solution Congress must enact meaningful
    Medicare reform that covers drugs and long term
    care services and improves eligibility for people
    with disabilities

Alternatives to Cuts(Savings that Dont Hurt
  • Reduce drug spending
  • Improve care/disease management
  • Primary prevention
  • Maximize federal funds
  • Reasonable overpayment and fraud control efforts

Reduce Rx Spending
  • Careful use of Preferred Drug Lists
  • Auditing actual prices paid for Rx
  • Better disclosure of true cost of drugs

Primary Prevention
  • Reducing the incidence of tobacco related
    illness, HIV,
  • and other preventable diseases is key to reducing
  • Medicaid spending over the long term but modest
  • short term savings are also available from
  • in low birth-weight babies, reduced asthma
  • hospitalizations, etc.

Improve Care Management(Examples)
  • High risk pregnancy and asthma in VA
  • Coodinated care for disabled/ chronically ill
    (PACE and CMA models)
  • Home visits to frail elders in Los Angeles
  • Increase physician (or nurse practitioner)
    presence in LTC facilities

Maximize Federal Funds
  • Certain services provided by other state agencies
  • management, mental health, school health
    services) can be
  • classified as Medicaid services and draw down
  • match
  • (Caution successful use of this approach makes
  • Medicaid program look bigger)

Better Payment Controls
  • To the extent that the Medicaid payment error
    rate is similar to Medicares states may be
    losing as much as 20 billion. In addition, no
    state is maximizing available federal support for
    Medicaid fraud control. Stepped up payment
    oversight is likely to yield at least modest
    savings (Caution efforts to recover improper
    payment should not degenerate into provider

Concluding Comments
  • We need to make a strong substantive case against
    cutting Medicaid
  • We need to make the political case against cuts
  • We need to offer alternatives to cuts
  • There is no silver bullet but it is possible to
    achieve a moderate level of savings without
    hurting beneficiaries. However
  • Revenue increases must be part of the solution
  • Some savings take time to show up
  • Over the long term, the federal role in financing
    care for the elderly and disabled must increase.