Understanding the U.S. Health Care System

BRIAN BLASE

MEDICAID

TWO MAIN POINTS

Medicaid does not serve enrollees or taxpayers well and needs fundamental reform.

The financing structure leads states to bring loads of federal tax dollars into their state through Medicaid with little incentive for how well that money is spent.

MEDICAID BASIC #1: UNCAPPED FEDERAL REIMBURSEMENT

For Traditional Populations: Reimbursement is Function of State Per Capita Income.

* Historic National Average: 57%

For ACA Expansion Population: Enhanced Reimbursement Rate

MEDICAID BASIC #2: MANDATORY VS.

OPTIONAL BENEFITSMandatory: Inpatient; Outpatient; Physician; Nursing Homes; Laboratory Services; Home Health Services; Others

Optional: Drugs; Physical/Occupational Therapy; Dental Services; Primary Care Case Management; Others

MEDICAID BASIC #3: SPENDING BY ENROLLMENT GROUP

MEDICAID BASIC #4: PROGRAM GROWING RAPIDLY

MEDICAID BASIC #5: ENROLLMENT IS GROWING RAPIDLY

MEDICAID BASIC #6: SPENDING VARIES A LOT ACROSS U.S.

Avg. Spend Per Aged Enrollee Avg. Spend Per Disabled EnrolleeWyoming $32,199 New York $33,808North Dakota $31,155 Connecticut $31,004… …Illinois $11,431 Georgia $10,639North Carolina $10,518 Alabama $10,142

Avg. Spend per Adult Enrollee Avg. Spend per Child EnrolleeNew Mexico $6,928 Vermont $5,214Montana $6,539 Alaska $4,682… …Maine $2,194 Florida $1,707Iowa $2,056 Wisconsin $1,656

Medicaid Financing Consider a state with a 60% federal match rate.

If the state spends $1.00 of its own funds, it gets $1.50 from the federal government. (60% of $2.50 is $1.50.)

In order to cut $1.00 of state expenditures paid by state tax base, a state needs to cut Medicaid by $2.50.

Conclusion: Open-ended federal reimbursement makes it easy to grown Medicaid and difficult to cut.

State Expenditure Growth2015 Total Elem&Seco Higher Ed Medicaid Transport Other

State Spending $1,872,368 $362,044 $193,447 $512,315 $143,466 $661,096% of Spending 19.3% 10.3% 27.4% 7.7% 35.3%

1990 State Spending $899,629 $205,304 $109,367 $112,225 $88,779 $383,955% of Spending 22.8% 12.2% 12.5% 9.9% 42.7%

‘90 to ‘15 Increase 108% 76% 77% 357% 62% 72%

Federal Funding For States

2015 Total Elem&Seco Higher Ed Medicaid Transport OtherFederal Funds $585,674 $54,083 $21,253 $317,302 $41,923 $151,113

% of Federal Funds 9.2% 3.6% 54.2% 7.2% 25.8%1990

Federal Funds $201,078 $23,208 $6,536 $63,855 $25,751 $81,728

% of Federal Funds 11.5% 3.3% 31.8% 12.8% 40.6%

‘90 to ‘15 Increase 191% 133% 225% 397% 63% 85%

RESEARCH ON VALUE OF MEDICAID

Source: Amy Finkelstein, Nathaniel Hendren, Erzo F.P. Luttmer, “The Value of Medicaid: Interpreting Results from the Oregon

Health Insurance Experiment,” NBER Working Paper No. 21308 Issued in June 2015

THE VALUE OF MEDICAID

OREGON MEDICAID EXPERIMENT Lot of people who won the lottery did not take steps to

enroll.

Medicaid enrollees much more likely to use health care services, including preventive services and ERs.

No statistically significant effect on blood pressure, cholesterol, or blood sugar. Did not reduce risk of a heart problem.

Reduced depression and better financial well-being.

MEDICAID’S QUALITY OF CAREPeople with Medicaid generally have worse outcomes from health care

treatments than people with private insurance.

In many states, Medicaid enrollees have more limited access to providers. 

In 2011, The New York Times reported on the widespread access problem in Louisiana that was frustrating both physicians and enrollees. One woman said that “My Medicaid card is useless for me right now. It’s a useless piece of plastic. I can’t find an orthopedic surgeon or a pain management doctor who will accept Medicaid.”

Medicaid enrollees are increasingly served by a subset of providers; numerous studies suggest they receive inferior care.

WHAT HAPPENED AFTER TENNCARE? TennCare represented a large public insurance expansion, similar to

ACA.

Increased regular blood pressure and cholesterol checks.

Fewer people with regular doctor check-up.

Little, if any, change in people who did not see a doctor because of cost.

Self-reported health got worse.

Mortality rate declined more slowly than in control states.

LESSON #1 FROM MEDICAID OVERSIGHT WORK:

“Medicaid” as a Verb In New York, they use the phrase “Medicaid It.”

All states employ strategies/gimmicks to minimize the state share of expenditures and increase the federal money flowing into the state.

LESSON #2 FROM MEDICAID OVERSIGHT WORK:Medicaid LTC is available for just about everyone.

Medicaid estate planning is prevalent.There are a large number of exempt resources.Janice Eulau, assistant administrator of Medicaid Services in Long Island:“As a long-time employee of the local Medicaid office, I have had the opportunity to witness the diversion of applicants’ significant resources in order to obtain Medicaid coverage. It is not at all unusual to encounter individuals and couples with resources [beyond exempt resources] exceeding $500,000, some with over $1 million. There is no attempt to hide that this money exists; there is no need. There are various legal means to prevent those funds from being used to pay for the applicant’s nursing home care. Wealthy applicants for Medicaid’s nursing home coverage consider that benefit to be their right, regardless of their ability to pay themselves.”

Lesson #3 from Medicaid Oversight Work:

Rules are Really Complicated and CMS Doesn’t Know What States Are Doing

Four ExamplesNew York Developmental CentersMinnesota Managed CareBraces in TexasHealth Insurance Tax in California, Pennsylvania, Other States

LESSON #4 FROM MEDICAID OVERSIGHT WORK:

It Is At Least Partially False That Medicaid Underpays Providers

Lobbying for Medicaid Expansion

DSH and Supplemental Payments

Coler Memorial and Coler Goldwater in NYC

N.Y. / REGION | ABUSED AND USEDReaping Millions in Nonprofit Care for DisabledBy RUSS BUETTNERAUG. 2, 2011

BIG QUESTION FOR THINKING ABOUT REFORM:

How can we realign incentives so that we get more value and less spending?

GENERAL PROBLEM OF MEDICAID’S SIZE AND SCOPE

Huge population that is very diverse.

GENERAL PROBLEM WITH HOW MEDICAID IS STRUCTURED

Government-dictated plan with very little patient cost-sharing incentivizes overconsumption of care without regard to value.

GENERAL PROBLEM OF FEDERAL OPEN-ENDED REIMBURSEMENT OF STATE

MEDICAID EXPENDITURES Biases state decisions by making Medicaid spending cheaper for states than other main areas of state spending like education, transportation, and infrastructure.

Looks good for a state when viewed in isolation but all states face the same incentives.

We need to improve the federal-state financing partnership.

ABSENT LARGE SCALE STRUCTURAL REFORM, WHAT’S THE SECOND BEST SOLUTION?

Eliminate/Reduce State Gimmicks and Scams

Provider Taxes Bush and Obama administration proposed limiting

them. Bowles-Simpson proposed scrapping them. Vice President Biden expressed support for scrapping

them during 2011 deficit negotiations.

OTHER IDEAS Limit states’ use of intergovernmental transfers.

Require CMS Office of the Actuary or GAO to certify budget neutrality of Medicaid waivers.

Require that states pay public providers no more than the actual/reasonable cost of services rendered.

Require that states submit institution-level Medicaid data as a condition of receiving federal funds.