The Impact of Medicaid Reform on People with Disabilities

1
The Impact of Medicaid Reform on People with
Disabilities
The Arc of California February 24, 2005

• Jeffrey S. Crowley, M.P.H.
• Project Director
• Health Policy Institute, Georgetown University
• 2233 Wisconsin Avenue, N.W., Suite 525
• Washington, DC 20007
• [phone]/[phone] F
• jsc26_at_georgetown.edu

2
Medicaid is being set up as a bogeyman

• Medicaids detractors and critics have
  selectively used facts to claim
• Medicaid is broken
• Medicaid spending is out of control
• Medicaid is crowding out other state
  prioritiessuch as education
• Medicaid provides a Cadillac benefits package
  when the nation can only afford a Chevy
• Medicaid, in its current form, is unsustainable

3
The Presidents budget includes significant cuts
to Medicaid

• Significant Cuts to Medicaid (60.1 Billion over
  10 years)
• 11.9 Billion Restricting Intergovernmental
  Transfers (IGTs)
• 3.3 Billion Cost-based reimbursement for
  government providers
• 6.2 Billion Phase down of safe harbor tax
• 1.4 Billion Managed care provider tax reform
• 4.0 Billion Reduce targeted case management
  (TCM) match to 50
• 7.7 Billion Narrow services elible for federal
  match as TCM services
• 6.0 Billion Cap on Medicaid administrative
  claiming
• 15.1 Billion Restructure pharmacy reimbursement
• 4.5 Billion Reform of transfer of assets policy
• Capped Financing for Administrative Costs
• Essentially proposing to block grant
  administrative costs when states are being asked
  to do more such as improve quality, minimize
  fraud, and assist with transition of dual
  eligibles to Medicare drug coverage
• Weakening Core Protections
• Budget proposes to give states additional
  flexibility in Medicaid to further increase
  coverage among low-income individuals and
  families without creating additional costs for
  the federal government. Believed to foreshadow
  a proposal to weaken or eliminate core Medicaid
  protections for so-called optional populations
  and optional services.

4
If adopted, Presidents budget proposals could
lead to broader policy changes

• Entitlement Cap
• Policy proposed in the 108th Congress to limit
  federal spending on entitlement programs (i.e.
  Medicaid and Medicare) to require across the
  board reductions in spending. Coming after a
  period of successive years of greater efforts to
  control Medicaid spending, even a seemingly small
  cut could be devastating
• Block Grant
• Policy that would change Medicaid from an
  open-ended financing system to one that limits
  the level of federal funding. Could result in a
  huge cost shift to states and could harm
  beneficiaries by leading to severe benefits cuts
  or extreme eligibility restrictions
• Waivers
• Authority given by Congress to the Secretary of
  HHS to waive (or disregard) provisions of the law
  (such as requirements that services be comparable
  or statewide, or that services must be sufficient
  in amount, duration, and scope)
• Waivers have been used to innovate in the
  delivery of health care (i.e. Home- and
  Community-Based Services (HCBS) waivers) and to
  expand Medicaid coverage to previously uninsured
  populations. Recently, waivers have been used to
  limit coverage or weaken protections for current
  beneficiaries

5
States are seeking waivers that harm people with
disabilities

• Waivers are being used to undermine critical
  features of Medicaid. Examples
• Florida Released a waiver concept paper that
  would impose both global spending caps and per
  capita limits on level of Medicaid support
  available require individuals to purchase
  private coverageprivate plans would have
  complete flexibility to determine benefits
  covered and coverage policies impact on LTC is
  unclear
• Mississippi State eliminated coverage for
  65,000 people with disabilities and sought waiver
  to provide limited coverage to selected
  groupscovering fewer than a third of people
  losing coverage court delayed coverage loss,
  legislature may reverse the Governors cuts
• New Hampshire Released a waiver concept paper
  that would radically reform the LTC system
  eliminate the nursing home entitlement move
  people into the community with individual
  budgets, and theoretically reduce institutional
  spending by 30 over 5 years
• Tennessee Dropping coverage for more than
  300,000 people, changing medical necessity
  definition, and seeking waiver to permit
  excluding drugs from coverage (gastric acid
  reducers and antihistamines) and to receive
  pre-approval for further benefits cuts

6
To address Medicaids real challenges, we need a
new narrative

• We need to tell the story of Medicaids success
• Medicaid works for people with disabilities
• Medicaid supports national health policy goals
• Medicaid allows other parts of the health system
  to function
• Medicaid is a good deal for states
• Even in tight fiscal times, Medicaid is a good
  investment

7
Medicaid works forpeople with disabilities

• While improvements are needed, no major public
  program has been more responsive to the needs of
  people with disabilities than Medicaid
• Provides health care coverage to more than 52
  million low-income people in the United States,
  including more than 8 million people with severe
  disabilities
• Largest source of financing for long-term
  services and covers nearly 70 of nursing home
  residents and pays for nearly half of all nursing
  home spending
• EPSDT benefit provides for screening, early
  detection, and treatment of disabilities and
  other health conditions in children
• Largest funder of developmental disability
  services largest funder of state and local
  spending on mental health services and largest
  source of health coverage for people with
  HIV/AIDS
• Medicaid covers services needed by people with
  disabilities that the private market, Medicare,
  and SCHIP do not cover (So-called optional
  services are generally disability services)
• Open-ended financing and flexibility in the
  Medicaid law has permitted states to innovate and
  improve the delivery of services to people with
  disabilities (e.g. Katie Beckett option, HCBS
  waivers, Medicaid buy-in programs)
• Enforceable right to coverage ensures access to
  critical services

8
The current Medicaid financing structure supports
national health care objectives

• Current Medicaid Financing
• Federal state governments share financial
  responsibility and risk
• States set spending levels
• Incentives for states to control costs
• Federal government reimburses states based on the
  match rate
• Federal matching funds are guaranteed entitlement
  to states
• No set limits helps states manage unpredictable
  economic conditions and demographic changes
• Supports entitlement to coverage
• Not subject to federal appropriations
• Matching system plays an vital role
• Creates incentives for states to take up federal
  options
• Discourages cuts in Medicaid

• National Healthcare Objectives
• Provides health coverage to low-income families
• Fills in the gaps in Medicare coverage
• Serves as the nations principal source of
  coverage for long-term care and mental health
  services
• Helps states respond to economic downturns and
  public health epidemics and disasters like
  HIV/AIDS
• Provides essential financing for urban and rural
  health care providers and disability services
  providers

K A I S E R C O M M I S S I O N
O N Medicaid and the Uninsured
9
Medicaid enables all other parts of the
healthcare system to work
Private Health Insurance Relies on Medicaid to
help keep premiums lower by covering high-cost
cases and services
Medicare Relies on Medicaid to finance half the
care for low-income beneficiaries (even after
Medicare Part D is implemented)
MEDICAID
Safety-Net Hospitals and Clinics Rely on Medicaid
to support ER capacity and for revenues from
beneficiaries and direct subsidies
Public Health Infrastructure Relies on Medicaid
to support immunization programs, respond to
pressing epidemics (like HIV/AIDS) and
bioterrorism
K A I S E R C O M M I S S I O N
O N Medicaid and the Uninsured
10
Federal Medicaid financing is a good deal for
states

• The federal government matches state spending.
• Depending on the relative wealth of the state,
  the federal governments share of Medicaid costs
  ranges from 50 up to a statutory maximum of 83.
• In 2005, 13 states had a 50 Federal Medical
  Assistance Percentage (FMAP) of 50 (CA, CO, CT,
  DE, IL, MA, MD, MN, NH, NJ, NY, VA, and WA). In
  these states, 1 of state Medicaid spending
  produces 1 of federal Medicaid support for the
  state.
• In 2005, Mississippi has the highest FMAP of
  roughly 77. In MS, 1 of state Medicaid
  spending produces roughly 3.35 of federal
  Medicaid support for the state.
• Best deal states have, and largest source of
  federal funding for states. Matched financing
  has led states to shift health care spending to
  Medicaid to maximize federal support.

11
Criticisms distort Medicaids true record

• Critics have said
• MYTH Spending is out-of-control
• FACT Medicaid spending has been increasing more
  slowly than the private market. From 2002-2004,
  per person Medicaid spending rose 6.7, almost
  half the rate of the private market (12.5)
  despite serving a sicker and needier population
  (CBO estimates and Kaiser Family Foundation/HRET
  survey of employer-sponsored health benefits,
  2004)
• MYTH Medicaid eclipses state spending on
  education
• FACT In FY 2003, Medicaid spending comprised
  16.5 of state general fund expenditures, less
  than half of state spending on elementary and
  secondary education (35.5). (State Expenditure
  Report 2003, National Association of State
  Budget Officers, October 2004) States often
  exaggerate Medicaid spending by counting federal
  Medicaid payments.
• MYTH Medicaid is a drain on state resources
• FACT A review of 17 studies on the economic
  impact of Medicaid showed that every study found
  that Medicaid generates state and local economic
  activity. (The Role of Medicaid in State
  Economies A Look at the Research, Kaiser
  Commission on Medicaid and the Uninsured, April
  2004.) Using a Department of Commerce model,
  Families USA found that in 2005, the return on
  every state dollar spent on Medicaid results in
  1.92 to 6.22 in new economic activity,
  depending on the state. On average, Medicaid
  generates nearly 70,000 jobs per state.
  (Medicaid Good Medicine for State Economies,
  2004, Families USA, May 2004)

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Most current challenges arebigger than Medicaid

• The major financing issues facing Medicaid
  programs stem from problems that are bigger than
  Medicaid and call for broader national solutions.
  Unresolved issues include
• Controlling health costs (across all payers) that
  consistently rise faster than inflation
• Controlling escalating prescription drug costs
• Financing access to new medical technology
• Establishing a system for financing long-term
  services for moderate income people (which would
  take the pressure of Medicaid, thereby allowing
  it to focus on the low-income population)
• Adapting to demographic changes that are
  increasing the demand for public services when
  fewer workers are able to support such services

13
Federal Revenues in 2004 As a Share of the
Economy A Historical Comparison
Source Center on Budget and Policy Priorities
14
Legislation Adding to DeficitsMostly Tax Cuts
Defense
Cost in 2005 of legislation enacted since January
2001
Source Center on Budget and Policy Priorities
calculations from Congressional Budget Office
data. Reflects costs above an adjusted CBO
current services baseline. Last revised February
3, 2005.
15
Opportunities exist to improve Medicaid

• While Medicaid requires a continued large
  investment of public resources, opportunities
  exist to make Medicaid stronger and take pressure
  off the program. Bipartisan efforts could be
  focused on
• Controlling rising drug costs by increasing
  rebates building on successful state efforts to
  manage pharmacy costs and moving drug pricing
  away from AWP (average wholesale price) to ASP
  (average sales price)
• HOWEVER, it is unclear whether Congress could
  enact the pharmacy reforms in the Presidents
  budget and unclear whether they would yield the
  level of savings specified
• Rebalancing the long-term care system to comply
  with the Olmstead mandate and to employ cheaper
  and better models of delivering long-term
  serviceswithout undermining core Medicaid
  protections
• Taking pressure off states by shifting more costs
  to Medicare for services for dual eligibles

16
About 42 percent of all Medicaid spending
forbenefits is for dual eligibles
Financing services for Medicare beneficiaries is
a burden on states
Non-Prescription (82.7 Billion)
36
Spending on Dual Eligibles 42
Spending on Other Groups (136.7 Billion)
59
6
Prescription Drugs
(13.4 Billion)
6
2002 Total Spending on Benefits 232.8 Billion
SOURCE Urban Institute estimates prepared for
KCMU based on an analysis of 2000 MSIS data
applied to CMS-64 FY2002 data.
17
Medicaid defenders have a few factors working in
their favor

• Medicaid is a critical program that serves the
  national interest. People working to protect the
  program can be heartened by
• Our track record
• Efforts have been made to block grant Medicaid in
  1981, 1995, and 2003. Medicaids defenders have
  succeeded in protecting the program by working
  together and reminding policy makers of the
  important role of Medicaid
• Broad range of stakeholders
• Past efforts to weaken or restructure Medicaid
  have been thwarted, in part, by the collective
  efforts of a large number of stakeholders and
  interests affected by the program. In addition
  to beneficiaries, doctors, hospitals, clinics,
  pharmaceutical manufacturers, medical supplies
  providers, health care workers, and others have
  spoken out in support of Medicaid
• We have the better story to tell
• While we can defend Medicaid by telling
  innumerable stories of the lives saved or
  improved by Medicaid, proponents of restructuring
  cannot promise something better. Rather, they
  argue that the program is broken, Medicaid is too
  generous, or poorly runwithout offering a more
  positive alternative

18
Success will require anunprecedented response

• We must still do things we have never done
  before.
• Every disability organization must make defending
  Medicaid a priority. Not just health staffers,
  but senior leadership must be prepared to
  continually tell the positive story of Medicaids
  essential role for people with disabilities
• New resources are needed. This includes money
  and staff time
• State groups are critical. In addition to
  day-to-day legislative work, federal lobbyists
  must support state and local groups to become
  engaged in federal (and state) Medicaid issues
• Reaching out to the mediaand giving state and
  local affiliates the tools to reach out to the
  mediawill be critical
• Whether it is in the context of a budget battle
  or a block grant fight, we need to make the
  debate about Medicaidand make it personal