Transcript 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
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that builds consumer and community participation in the
shaping of our health system to ensure quality, affordable
health care for all. Community Catalyst’s work is aimed
at strengthening the voice of consumers and communities
wherever decisions shaping the future of our health
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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)
Community Catalyst (c) 2003
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 tobaccorelated illness
Community Catalyst (c) 2003
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
Community Catalyst (c) 2003
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)
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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
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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 care
 Spend more time in hospitals for conditions that could
be treated in an ambulatory setting
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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
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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
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Cuts Hurt the
Economy
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Job loss
Income loss
Increased personal bankruptcies
Lost tax revenue
Higher health insurance
premiums
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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 cost
over 2,400 jobs and $60,000,000 in income.
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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
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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.
Community Catalyst (c) 2003
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 by
 Lost tax revenue
 Cost shifts to other state or local government
programs that do not receive ffp
Community Catalyst (c) 2003
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
Community Catalyst (c) 2003
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
Community Catalyst (c) 2003
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
Community Catalyst (c) 2003
Alternatives to Cuts
(Savings that Don’t Hurt
Beneficiaries)
 Reduce drug spending
 Improve care/disease management
 Primary prevention
 Maximize federal funds
 Reasonable overpayment and fraud control
efforts
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Reduce Rx Spending
 Careful use of Preferred Drug Lists
 Auditing actual prices paid for Rx
 Better disclosure of true cost of drugs
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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 reductions
in low birth-weight babies, reduced asthma related
hospitalizations, etc.
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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
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Maximize Federal Funds
Certain services provided by other state agencies (e.g.case
management, mental health, school health services) can be
classified as Medicaid services and draw down federal
match
(Caution: successful use of this approach makes your
Medicaid program look bigger)
Community Catalyst (c) 2003
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)
Community Catalyst (c) 2003
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.
Community Catalyst (c) 2003