Transcript General

PUBLIC SECTOR INITIATIVES TO
CONTROL COSTS: MEDICAID
Jim Verdier
Mathematica Policy Research, Inc.
Citizens’ Health Care Working Group
Arlington, VA
May 13, 2005
Introduction and Overview
1

National Medicaid spending trends

Distribution of Medicaid spending by enrollment
group

Options for containing Medicaid spending growth

Potential to control costs by improving care quality
National Medicaid Spending Trends
2

Annual Medicaid spending growth dipped in 2003
(7.1%) and 2004 (7.9%) following two years of 10-12%
growth (CMS 2005)
– Reflects comprehensive and aggressive state
cost containment efforts

Both CMS and CBO project Medicaid spending
growth at about 8.5% a year from 2007 to 2014

State revenues are likely to grow at no more than
half that rate
Medicaid Enrollees and Expenditures
by Enrollment Group, 2003
Elderly 9%
Elderly 26%
Blind & Disabled 16%
Adults 27%
Blind & Disabled 43%
Children 48%
Adults 12%
Children 19%
Enrollees
Total = 52 million
Expenditures
Total = $252 billion
SOURCE: Kaiser Commission on Medicaid and the Uninsured estimates based on CMS, CBO and OMB data, 2004.
NOTE:
3
Total expenditures on benefits excludes DSH payments.
Cost Containment Options

4
Provider reimbursement
– Nursing facilities (16.8% of total Medicaid
expenditures in 2003)
– MCOs (15.6%)
– Hospitals (13.6%)
– Home health (13.0%)
– Drugs (10.0%)
– All other (31.0%)
Cost Containment Options

Eligibility
– Non-disabled adults and children are 75% of
enrollees, but account for only 31% of costs
 Annual costs per enrollee in 2003 were $1,700
for children and $1,900 for adults
– Disabled are 16% of enrollees and 43% of costs
($12,300 per enrollee per year)
– Elderly are 9% of enrollees and 26% of costs
($12,800 per enrollee per year)
5
Cost Containment Options
6

Benefits
– Most costly benefits are concentrated on most
needy beneficiaries
– Defended by well-organized advocacy and
provider groups

Copayments and other beneficiary cost sharing
– Maximum copayment of $3 or 5% of cost of
service
 Unchanged since 1982
– Greatest potential to change behavior and achieve
savings is with Rx drug and emergency room use
Cost Containment Options
7

Rx drugs
– Beneficiary co-payments/coinsurance
– Pharmacy reimbursement
– Preferred drug lists/formularies
– Manufacturer rebates

Disease management
– Stand-alone vs. managed care

Managed care
– Expand to disabled, long-term care
– New Medicare Special Needs Plans

Long-term care reform
– Greater emphasis on home- and communitybased services
Cost Containment Options
8

Creative financing
– DSH, IGTs, provider taxes, “Medicaid
maximization”
 CMS is cracking down
 Existing and proposed legislative limits

Fraud and abuse
– Crackdowns can be resource-intensive
 Pharmacy
 Medicaid estate planning
 Billing for services not provided
Conclusion
9

Cost pressures in Medicaid will likely continue for
many years
– Reflects underlying health care costs and the
special demographics of Medicaid
 Medicaid functions as the nation’s high risk
pool

Opportunities for improved care abound
– Not hard to improve on unmanaged fee-forservice Medicaid

Improved care can contain costs in some areas over
time
– But savings are neither quick nor assured