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Could this be Medicaid's 'great moment of opportunity?' Experts say it is
Even in the face of plummeting revenues, surging enrollment, and budget shortfalls, "it's a great moment of opportunity for Medicaid programs in many ways," according to Stan Rosenstein, principal advisor of Health Management Associates in Sacramento, CA. Rosenstein is former director of California's Medicaid program.
This is because there is a chance to shift the focus of the program from being just about fiscal issues, to "really define the role of Medicaid in the health delivery environment and how states and the federal government can improve the program, improve access and quality of care, and make Medicaid be an important component of broad health care reform," says Mr. Rosenstein. "We are really at a great moment where the federal government and the states can form a new partnership on Medicaid that is well overdue."
Stimulus is 'savior'
Mr. Rosenstein calls the American Recovery and Reinvestment Act of 2009 (ARRA) a "savior for the Medicaid program." "I cannot stress the importance of that action for saving the Medicaid program and really by it, saving the health care industry, since Medicaid comprises some 15% of all health care expenditures. It avoided cuts in every state," says Mr. Rosenstein.
Due to the budget shortfalls, states were going to be unable to continue to take care of their residents, he says. "Medicaid has been the backbone of the safety net, and the steps the president and Congress have taken have really saved the Medicaid program."
That said, though, whether states can avoid cutting benefits, or possibly even expand coverage, remains to be seen. "There is a wide variety of statuses for the states, and the ability to do more is going to vary," says Mr. Rosenstein. "Some states are not as affected by the economic downturn as others." For some states, such as California, the federal help will not be enough, and they'll continue to have problems just maintaining the Medicaid program as it is.
At a minimum, though, the economic stimulus means that states will preserve eligibility for their growing caseloads. States are required to preserve eligibility in order to receive increased Federal Medical Assistance Program (FMAP) dollars.
"Caseloads are still growing, because unemployment continues to grow. The stimulus package is going to maintain the safety net, which will expand out of necessity," says Mr. Rosenstein. "If someone has lost their job and children are uninsured, there is a safety net for them that is available because of the economic stimulus package."
For every 1% increase in the unemployment rate, 1 million additional individuals become eligible for Medicaid, but it also is notable that there are 1.1 million people who have become uninsured and don't qualify for Medicaid, he notes.
For some states, the stimulus means they'll be able to retain the comprehensive services they previously had, despite dramatic increases in enrollment. "Considering the state of so many of the budgets beforehand, I think that this would be a very good outcome for states," says Neva Kaye, senior program director for the National Academy for State Health Policy in Washington, DC.
Some damage being undone
Policy experts agree that the Obama administration's actions thus far have vastly improved the situation of state Medicaid directors.
"There are great things that the Obama administration has done, which are just vital to the people in the U.S. affected by the Medicaid program," says Mr. Rosenstein. "And we all are, whether we know it or not, affected by Medicaid."
First, the Aug. 17, 2007, directive from the Centers for Medicare & Medicaid Services (CMS) was overturned by Congress. "This was great news for state Medicaid programs," he says.
Through the "Dear State Health Official" letter dated Feb. 4, 2009, clear, consistent guidance was provided to states on issues important to Medicaid and State Children's Health Insurance Program (SCHIP) enrollees, states, and providers.
The letter notified all states that President Obama had issued a Presidential Memorandum directing the Secretary of Health and Human Services to withdraw the Aug. 17, 2007, and May 7, 2008, letters issued to state health officials and indicated that CMS would no longer apply the policies in those letters when reviewing SCHIP plan amendments or Section 1115 demonstration waivers.
"This is but one example," says Patricia MacTaggart, lead research scientist and lecturer at the Health Policy Department at the George Washington University in Washington, DC. Ms. MacTaggart formerly was group director for CMS' Center for Medicaid and State Operations and director of Minnesota's Medicaid program. "President Obama has met with the National Governors Association to begin a dialogue related to current Medicaid issues, ongoing Medicaid funding, and evolving health information technology opportunities."
This is a dramatic change from the policies of the Bush administration, when "consistency and transparency were not evident" for state Medicaid programs, according to Ms. MacTaggart.
Instead, she says, the relationship between the federal government and states became one of audits, reinterpretation of previous policy and restrictive, far-reaching regulations in significant areas of policy for states. These included targeted case management, provider taxes, school-based administration and transportation, outpatient hospital facility services, cost limits for certain providers, graduate medical education, and rehabilitative services.
"The Obama administration has illustrated, in a very direct and immediate way, a commitment to engage states in a real federal-state partnership for Medicaid and SCHIP," says Ms. MacTaggart.
Mark Trail, principal of Health Management Associates in Atlanta, says "several things right out of the gate have improved states' circumstance."
First, the economic stimulus package increased the FMAP to the federal portion of Medicaid's benefit cost for all states. "[The percentage for] states with higher unemployment increased even more," he says. "Without doubt, that step alone prevented states from having to make very substantial cuts to their programs."
As every state except Vermont has to balance its budgets each year, a state's ability to accommodate the increased enrollment and cost resulting from increasing unemployment is critical.
"It is not insignificant to recognize that the increased demand is occurring at a time when state revenues are decreasing. It's the perfect storm for a state," says Mr. Trail.
However, it also is important to note that the increased FMAP alone will not solve all of most states' budget shortages. "States will likely continue to seek other cost-reduction measures," he points out.
The ARRA stipulated that those cost-reducing measures could not include restricting eligibility beyond standards in place on July 1, 2008. Therefore, states needing additional saving will likely turn to utilization controls and benefits.
Trail adds that the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), reauthorizing the SCHIP program, also will help most states.
"Some states have expanded their Medicaid program to create their SCHIP. They are clearly helped," says Mr. Trail. However, most states will benefit even if they have a separate SCHIP, because the CHIPRA improved the funding formula and provided additional funds. This should relieve some overall budget pressure, thereby helping Medicaid programs.
Mr. Trail says three big challenges for state Medicaid programs going forward are the length of the recession, depressed state revenues, and further erosion of existing federal participation.
The latter, he says, is of particular concern for states affected by the six CMS rules that have only been postponed until June 30, 2009. These rules, if finally implemented, will substantially reduce federal participation in many states.
"Should they go into effect, states stand to lose hundreds of millions right in the middle of the current recession," says Mr. Trail. "States will be forced to implement much deeper cuts than even currently planned."
Six regulations need withdrawal
The six regulation packages still are in a status of needing to be withdrawn entirely. "Congress extended the moratorium on some of them through the end of June 2009, with the understanding that the Obama administration will withdraw those regulations," says Mr. Rosenstein. "That is vital, because that will take away billions of dollars of funding to vital health care services. So, those regulations need to be taken away, too. That's another important reversal."
Above all, there is a strong need to revitalize the relationship between the states and CMS. "Medicaid is a partnership between the state and federal governments. Somewhere along the line, the partnership was lost," says Mr. Rosenstein. "That needs to be re-established, so that people can work together on access to care, quality of care, and making sure that people get the services they need."
The problem was that CMS became primarily focused on cutting costs of the Medicaid program, so that states were treated as users of the program instead of partners, he says.
"The relationship got very difficult at the time, because of the direction the federal government had taken," says Mr. Rosenstein. "All states are willing to be accountable for how they spend money. In fact, states are accountable every day; but there is a strong desire for people to focus on what the program was established for, which is to provide quality health care to the poor." There needs to be a balance between that goal and fiscal responsibility, he adds.
Future role of Medicaid?
Mr. Rosenstein says he would hope people will view Medicaid as a safety net for all Americans, not just the poor. "You never know when you will lose a job and not have income," he says. "Medicaid is also support for the safety net. The hospitals, for example, that Medicaid supports, those are the hospitals that operate trauma centers and burn centers. If any of us were in a car wreck and taken to a trauma center, that is a center that is highly dependent on the Medicaid program. So, all of us need that safety net, not just the poor."
Another example is nursing home care, which Medicaid doesn't cover to any degree. "Medicaid is the safety net for people who have to go into a nursing home or need in-home care," says Mr. Rosenstein. "It either doesn't cover things like personal care, or it does with very limited benefits. So, sooner or later, many of us are going to need it, if not for ourselves, for a loved one."
One school of thought is that Medicaid could expand its role to cover childless adults, who currently are not covered by the program regardless of how low their income is. A number of health care reform proposals say Medicaid should be a vehicle to cover the poor whether they have children or not.
"Medicaid would logically be the place to cover all of the poor at a certain level. They would have equal access to Medicaid, and any income above that would go into some other government-subsidized program," says Mr. Rosenstein. "This recognizes Medicaid for what it's really good at, which is coverage for low-income individuals. It does a really good job there."
Contact Ms. Kaye at (207) 874-6524 or firstname.lastname@example.org; Ms. MacTaggart at (202) 994-4227 or Patricia.MacTaggart@gwumc.edu; Mr. Rosenstein at (916) 446-4601, ext. 426 or email@example.com; and Mr. Trail at (404) 313-8432 or firstname.lastname@example.org.