Medicaid Heads to the Chopping Block – Again…

It’s starting to look like a sure thing: Medicaid will be a sacrificial cow in the battle to hammer out a bipartisan budget deal. The joint federal-state program that provides medical coverage for 69.5 million of the youngest, poorest, most disabled and oldest Americans—hardly a sign-toting, well-connected or politically important portion of our society—is on the chopping block yet again. Worse, the program, which already makes second-class citizens of recipients in most states by providing limited benefits and reimbursing doctors at such a low rate that many refuse to even see Medicaid patients, is denying benefits to the ever-increasing victims of our country’s struggling economy.

The Wall Street Journal, in an article today about the attempt to raise the debt ceiling reports; “Officials familiar with the talks in both parties say they expect Medicaid to be the biggest source of cuts in federal entitlement programs in whatever compromise emerges.”

How can it be that an entitlement program with the least amount of extra fat is being primed for slaughter? According to Ezra Klein, Social Security has been “untouchable” in the budget negotiations and Democrats have made it clear that their top priority is to limit cuts to Medicare. “The safer Medicare is, the more endangered Medicaid is,” Sen. Jay Rockefeller told Klein last week. “Reading the tea leaves and being in a lot of meetings over the last couple of days, I worry that people are saying, ‘great, now we can really cut into Medicaid.’"

So far the plans put forth by conservatives to cut the costs of Medicaid have been different shades of draconian. Rep. Paul Ryan’s idea of cutting federal funding for Medicaid and turning it into a block grant program that would allow each state to decide how their Medicaid program would be structured is one example. The problem with granting states this “flexibility,” as I explained in this recent post, is that with fewer resources, states would have to reduce enrollment rolls, cut provider reimbursement, slash benefits and increase cost-sharing.

The other prevailing plan for cutting Medicaid is to grant states waivers from meeting so-called “maintenance of effort” requirements that bar them from substantially reducing their Medicaid programs before 2013. That’s when stepped up federal spending for the ACA’s expansion of Medicaid comes into effect.  The 2009 stimulus plan included an injection of more than $100 billion in federal funds into the Medicaid program to help states deal with the ongoing recession and maintain their current benefit levels. But this money runs out at the end of June, and Medicaid spending has risen to an average 22% of state spending this year. In the face of growing unemployment and staggering budget deficits, state legislators are eager to reduce their Medicaid rolls and cut back on reimbursement.

This week, 29 GOP governors signed a letter that was sent to Senator Orrin Hatch (R-UT) and Rep. Fred Upton (R-MI) requesting greater flexibility for states in how they spend their Medicaid dollars. Texas governor Rick Perry (who signed the letter) made this statement; “Aside from the full repeal of Obamacare, no issue is more important to fixing our nation’s healthcare system than improving Medicaid. Governors must be given the flexibility to craft solutions based on their states’ specific needs without constantly needing to ask the federal government for permission.”

According to the Washington Post, two Republican governors are going even further. New Jersey Gov. Chris Christie, “is planning to formally ask the Obama administration to allow his state to dramatically tighten Medicaid eligibility for New Jersey adults.” The Post continues, “Christie’s proposal would deny new Medicaid coverage to adults in a family of three who earn more than $5,300 a year, down from the current cutoff of $24,645. The eligibility change is part of a broader plan to save $300 million in the state’s Medicaid program.”

In a similar action, Arizona’s Governor Jan Brewer signed a bill last January making a formal request to Health and Human Services Secretary Kathleen Sebelius for a waiver to cut 280,000 residents from the state’s Medicaid rolls. HHS hasn’t granted Arizona’s waiver yet and has yet to announce whether it will issue any state Medicaid waivers in coming months.

But with Medicaid ripe for cutting, states have to come up with ways to both reduce spending on the program while ensuring basic and humane benefits for the nation’s most vulnerable citizens. One idea popular with many states is to shift the costliest Medicaid enrollees into managed care programs that are increasingly administered by publicly-traded companies. According to a new issue brief from the Commonwealth Fund, the Center for Medicare and Medicaid Services reported that 36 million Medicaid enrollees—72% of the program’s population—now receives at least some benefits through managed care plans. The Commonwealth brief predicts that “plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population” after the Affordable Care Act rolls out in 2013.

The biggest expense—and first target for managed care—in Medicaid is long-term care of the frail elderly and the gravely disabled. According to the Congressional Budget Office, the elderly and disabled constitute about one-quarter of Medicaid’s enrollees, yet they account for two-thirds of the program’s spending. Overall, one-third of Medicaid’s spending is for long-term care, including “nursing home services, home health care, and other medical and social services for people whose disabilities prevent them from living independently.”

This summer California will require the state’s aged, blind, and disabled—about 380,000 of Medicaid’s most costly beneficiaries—to join one of the state’s Medi-Cal managed care plans. According to an article in Managed Care magazine, Molina Healthcare, one of the country’s largest for-profit Medicaid managed care companies, will add about 27,000 or so of California’s aged, blind and disabled (ABDs) to the 15,000 similar beneficiaries who already voluntarily opted for the plan. The state will pay a higher monthly fee for these high-risk enrollees than it does for mainstream beneficiaries of Medicaid managed care. Yet, California expects that it will save money compared to caring for these patients in the fee-for-service program.

A survey by the Kaiser Commission on Medicaid and the Uninsured found Medicaid managed care is a growing trend for states trying to save money on care for the poor and elderly. Some 13 states expanded the reach of Medicaid managed care plans in 2010 and this year another 20 states had either instituted or were planning new expansions, with many of them mandating enrollment of the aged, blind and disabled in a managed care plan, or in some cases, making enrollment in such plans a requirement for all.

The Managed Care piece notes that “Illinois, with a yawning $15 billion budget hole to plug, is one of the states turning to health plans. Centene and Aetna were picked at the beginning of this year to launch an effort that will see half of the state’s Medicaid population of nearly 3 million shifted into a health plan. In West Virginia, the state mandated that 55,000 recipients with disabilities and mental health problems enroll in managed care plans — which already orchestrate care for half of the state’s Medicaid population — at the beginning of this year.”

The article adds that Florida’s Gov. Rick Scott wants to move his entire state Medicaid population into manage care and that Missouri Medicaid regulators “say they want to join that movement as well”. Texas and New Jersey are also trying to push high-risk beneficiaries into managed care and in Louisiana, Gov. Bobby Jindal wants to convert the state’s Medicaid fee-for-service model into a system of managed care networks run by private insurance firms or provider networks that are awarded state contracts.

There are several reasons to be less than sanguine about this trend toward managed care Medicaid. First of all, it’s not clear that managed care in its current incarnation will save money for states. In Connecticut, for example, Gov. Dan Malloy decided earlier this year to drop managed care contracts it had with Aetna, United Health and a non-profit community health network. “We overpaid by at least $50 million a year, based on an independent audit by Milliman for the Office of State Comptroller,” Ellen Andrews, executive director of the Connecticut Health Policy Project told Managed Care.

The problem, according to the Commonwealth Fund brief, is the growing presence of publicly-traded companies like Molina and Aetna in the Medicaid managed care market. The brief, titled “Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide,” finds that publicly traded “plans that focused primarily on Medicaid enrollees paid out the lowest percentage of their Medicaid premium revenues in medical expenses and reported the highest percentage in administrative expenses across different types of health plans.” The brief continues, “The publicly traded plans also received lower scores for quality-of-care measures related to preventive care, treatment of chronic conditions, members’ access to care, and customer service.”

Higher administrative costs, lower percentage of premiums spent on medical care and lower quality care reported by enrollees. Sound familiar? Some Medicare Advantage plans run by publicly-traded companies have had similar problems, while at the same time driving up Medicare spending by charging a premium for each enrollee. The ACA will save Medicare $132 billion over ten years by ending the practice of paying higher rates to these MA plans. Perhaps states should take a look at their Medicaid managed care plans and move contracts to provider-operated and non-profit networks that have been shown to provide higher quality care with lower administrative costs. Then, this approach might be more fiscally expedient.

In the end, the recent assaults on Medicaid are frankly, frightening and ultimately, short-sighted. Cut the poor, disabled and frail elderly from Medicaid rolls and they will seek out care in emergency rooms and safety-net hospitals that will cost states and taxpayers more. We will also be denying care to a significant and vulnerable segment of our population. But they will not just go away; this blunt action, along with lowering already stingy reimbursements to providers, slashing services and increasing co-payments will shift costs to other areas of the state’s bulging budgets.

Medicaid is an easy target for legislators from both sides of the aisle—the people who make up the program’s ranks are not considered valuable votes. But the pain of budget cuts must be spread equally and must target those Americans who can actually afford to give up more. That includes rethinking targeted cuts to Social Security and Medicare as well as raising taxes on the wealthy. How else can we justify kicking a segment of our population that is already down?

5 thoughts on “Medicaid Heads to the Chopping Block – Again…

  1. I definitely don’t agree with cutting medicare, it’s not the humane thing to do. We should be cutting the payments to retired presidents, sport icons, and celebrities, rather than cutting off the supply that keeps our retired war vets, and loved ones safe from financial struggles.

  2. It doesn’t say too much about our nation’s senior citizens that they insist their Medicare program be allowed to continue gobbling up the budget while their destitute disabled peers and poor children take the cuts.

  3. I find it ironic that the same politicians who derided “rationed care” in the PPACA now want to ration care for the poor, the elderly, and the disabled.

  4. Medicaid is the catch-all for the people that America leaves behind.
    (Over 65% of its expenditures go to the poor and disabled.)
    We have a duty to fund this program.
    Bob Hertz – The Health Care Crusade