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

Making the Case Against Medicaid Cuts

Michael MillerCommunity Catalyst/ Alliance for a Healthy New England Research Center

Presented at the Alliance for a Healthy New England SummitDecember 2002

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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 birthsCovers 20% of all childrenPays for over ½ of all HIV/AIDS and mental health/

substance abuse carePays for 42% nursing home carePays for treatment of about 20% of all tobacco-

related illness


The Case Against Medicaid Cuts

(In General)

Hurt vulnerable populationsUndermine the health care system for

everyoneHurt the economyAre 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 lowincome 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 contributor Uninsured are:

More likely to use ER as usual source of careSpend 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 providers.

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 workforce

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 thestate. For example, a South Carolina study found that the$2.1 billion the state received in federal matching funds in2001 generated an additional $1.5 billion in total income and more than 61,000 jobs. A 4% cut in Medicaid would cost over 2,400 jobs and $60,000,000 in income.


Increased Personal Bankruptcies

Reducing Medicaid coverage increases the number of uninsured, leading to increased defaults on consumer debt and household obligations that affect retailers, 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 elsewhere

Real savings are further reduced byLost tax revenueCost 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

It’s a revenue problem: Yes, Medicaid spending is up, but the real reason for the state budget crisis is declining revenue.

Solution: raise revenue don’t 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 run…Reductions 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

It’s a Medicare Problem: 35% total Medicaid spending is paying for services for Medicare eligibles that Medicare doesn’t 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 Don’t Hurt

Beneficiaries)

Reduce drug spending Improve care/disease managementPrimary preventionMaximize federal fundsReasonable 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 reductionsin low birth-weight babies, reduced asthma related hospitalizations, etc.


Improve Care Management(Examples)

High risk pregnancy and asthma in VACoodinated 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 (e.g.casemanagement, mental health, school health services) can beclassified as Medicaid services and draw down federal match

(Caution: successful use of this approach makes your Medicaid program look bigger)


Better Payment Controls

To the extent that the Medicaid payment error rate is similar to Medicare’s 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 harassment)


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.

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

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