Fiscal Fitness: How States Cope: Minnesota Medicaid faces decreased revenue and rising enrollment
Fiscal Fitness: How States Cope
Minnesota Medicaid faces decreased revenue and rising enrollment
Demand is growing significantly for Minnesota State Health Care Programs, which include the state's Medicaid and children's health insurance programs, due to the economic downturn. Over the next two years, another 100,000 enrollees are expected-an increase that Brian Osberg, Minnesota's health care assistant commissioner, believes is unprecedented. This will bring the total of enrollees to 800,000.
"Enrollment has been slowly growing over the last year or so, but we expect, beginning this summer, to see that accelerate," he reports.
Enrollment is growing across the board in terms of population but especially in the state's program for low-income working families. Those individuals are becoming eligible for coverage, because it's more difficult for employers, especially small businesses, to continue to provide coverage.
Currently, parents and children are covered up to 275% of the FPL, under the state's MinnesotaCare program. This group is where Mr. Osberg expects to see the greatest increase, but he also expects to see growth in Medical Assistance, Minnesota's Medicaid program, which covers children at 150% FPL and parents at 100% FPL. "We expect to see a dramatic increase for the entire spectrum of low-income people," he predicts.
Worsening revenue situation
Under the stimulus, the state will receive close to $2 billion through the end of 2010 in Medicaid funding. "Unfortunately, the economic situation in this state worsened between November 2008 and February 2009, when the new budget forecast was done," says Mr. Osberg. "The $2 billion does not make up for the worsening of the budget forecast. We still had a $4.6 billion deficit for the state overall, even with the federal stimulus money. It helps a lot, but it does not remedy the budget deficit."
He says the worsening revenue situation didn't come as a surprise, due to the state's strong reliance on corporate and personal income tax. "We are doing all we can to maximize the stimulus money, to be sure all the maintenance requirements are being met, to make sure we do have access to those funds," says Mr. Osberg. "The Medicaid stimulus money helps us delay some difficult choices around eligibility, until we hopefully can recover."
Cuts are delayed
At the start of the legislative session, three categories of possible cuts were looked at: Eligibility, benefits, and provider payments. "In order for us to balance the budget, we were looking at significant cuts," says Mr. Osberg. "What we wanted to do was preserve eligibility as best we can. We looked first at cutting provider rates or benefits."
However, Gov. Tim Pawlenty proposed delaying any cuts that would affect the maintenance of efforts provision until after the funding period. Proposed cuts for adults who are parents were delayed until January 2011.
The legislature did not pass Gov. Pawlenty's proposals to eliminate coverage under MinnesotaCare for adults without children. It did, however, make some benefit cuts and reduce payments to providers.
MinnesotaCare coverage is scheduled to expand for adults without children from 175% of the FPL to 250% on July 1. To help balance the state budget, the governor vetoed funding for the state-funded General Assistance Medical Care program as of July 1, 2010. A majority of the adults without children who are enrolled in that program, which covers up to 75% FPL, are expected to move to MinnesotaCare.
"There is the potential for additional cuts in state health care programs by the governor through unallotments to balance the state budget, a task that was not completed when the legislature adjourned," says Mr. Osberg.
HIT gets a push forward
Mr. Osberg says the Minnesota Medicaid program is "very well positioned" to move forward with implementing health information technology (HIT) and plans to take full advantage of the incentives provided through the recently passed Health Information Technology for Economic and Clinical Health Act (HITECH) legislation.
"We have been working on this for the last five years," he reports. "We have developed an e-health steering committee, with all of our key stakeholders helping us to develop an HIT plan. So, the HITECH money comes at a very good time, in terms of advancing our HIT agenda."
Mr. Osberg says the stimulus money will be a "huge carrot" for providers to invest in HIT. "It is perfect timing for us to say, 'OK, we've put some sticks out there, but now here comes the carrot as well.' So, it couldn't have been timed better," he says. "Health plans and purchasers maybe benefit more over time from HIT than the providers do. Now, the providers will have an incentive to participate in this effort."
About two years ago, the state partnered with the private sector to form the Minnesota Health Information Exchange, which includes private partners and Medicaid, to link providers to exchange clinical information in a secure and efficient way.
"This will be the entity that facilitates the exchange of clinical information as required under HITECH," reports Mr. Osberg. "We think that 'meaningful use' is going to clearly include the ability to exchange data. Providers will need a vehicle to do that."
Another goal is to ensure that Medicaid's providers develop interoperable electronic health records (EHRs). "In fact, we have a law that requires by 2015, that all providers have interoperable EHRs. Now, the incentives available to Medicaid and Medicare providers will really expedite that further," he explains. "We feel real good about where we're at, at this point." The state is well positioned to assist its providers, and the providers are in a good position to secure some of the incentive payments that are provided through the HITECH legislation.
Providers also are required by law to have e-prescribing in place by 2011. "We have been working on that issue for some time, and we are well on our way to doing that," reports Mr. Osberg.
Loans have been extended to providers for the purpose of EHR development. The idea is to get loans out to providers who don't have the capital to implement EHRs, to enable them to receive the Medicaid incentive payments. "They will get money up front from the loans, and then they get a revenue stream in order to pay off those loans," he says. "We want to make sure our providers will get their incentive payments on the Medicaid side."
The department of human services has worked closely with the health department on all of these initiatives. "We also work hand in hand with the private sector on this," says Mr. Osberg. "We also established a Chartered Value Exchange here in Minnesota that focuses on these issues. We really pride ourselves on working together within state government, as well as with the private sector, to advance these issues."
All this has been done not just for the sake of implementing HIT, but as a critical part of the state's health reform agenda. "We see HIT as facilitating everything from quality improvement, to quality and efficiency reporting, to care coordination and payment reform," he says. "All of the HIT development is the backbone, not just simply to share information with each other, but to increase value of health care services, including managing costs."
The budget deficit is a short-term issue, but Minnesota Medicaid is taking the necessary steps to be sure health care costs are managed over time.
Investments are being made to more effectively purchase health care services as a state government, including a health care home initiative, chronic care management, evidence-based policy coverage, and managing pharmacy costs.
"In order to do that, we feel we have to work hand in hand with the private sector and not have our own agenda," says Mr. Osberg. "We can't advance this without being in sync with other purchasers, especially large employers and health plans, but also providers."
What is 'big-picture' impact of soaring Medicaid enrollment?
The number of individuals becoming eligible for Medicaid shows no signs of slowing down, with many states seeing unprecedented numbers. "It's hard to think back over the last 40 years to a time with more beneficiaries," says Mark Rukavina, executive director of the Access Project, a national health research and advocacy group in Boston.
Rising Unemployment, Medicaid and the Uninsured, a January 2009 analysis from the Washington, DC-based Kaiser Commission on Medicaid and the Uninsured (KCMU), examined the relationship between rising unemployment and changes in the number of uninsured and the number of people enrolled in Medicaid and the State Children's Health Insurance Program (SCHIP). The general rule of thumb is that for every 1 percentage point increase in the unemployment rate, there is a 1.1 million increase in the number of uninsured and a 1 million increase in Medicaid/SCHIP enrollment.
"We know that the unemployment rate has gone up from 4.9% at the start of the recession in December 2007, to 8.9% in April 2009, so you are talking about an increase of 4 million," says Robin Rudowitz, a principal policy analyst for KCMU.
State Medicaid directors interviewed in July 2009 by KCMU projected a caseload growth of 3.6% for fiscal year 2009, a small increase from 2008. These were the numbers that state budgets were based on, with most adopted in July 2009, well before the major impact of the recession hit. When the Medicaid directors were interviewed again in November 2009, at four months into the state fiscal year, about half anticipated growth higher than what they originally projected. Kentucky Medicaid had anticipated a 1,000 per month increase in July 2009, for example, but saw enrollment growing at 3,000 a month by November.
"During a recession, you do see a boost in enrollment, but that declines and eventually fades away once people get back to work," says Edwin Park, a senior fellow at the Center on Budget and Policy Priorities. "It does show you the importance of the program during these times," he adds.
Mr. Park says, however, that "unfortunately, one of the problems with Medicaid is that childless adults are generally not covered," he says. "And for working parents, the median income eligibility for Medicaid is a little over two-thirds of the poverty level. But for unemployed parents, it's only 40% of the poverty level and, in some states, it's less than 20%."
With eligibility varying widely, coverage is uneven across the states. "Many people may not have access to Medicaid, because they may have some income even though they lost their job," adds Mr. Park.
However, Mr. Rukavina notes that Medicaid programs are very efficient. "The money really goes to pay medical claims without high overhead. It is a good use of federal dollars to maintain coverage for people during this recession," he says. "And there is no start-up cost-Medicaid is in place in all 50 states."
In working with the Access Project's medical debt resolution program, Mr. Rukavina says that he has noticed an "expansion of the demographics, in terms of the people who are calling us for assistance."
Individuals who previously had no interactions with the public safety net system are becoming eligible for Medicaid. "In the worst recession in a decade, having that safety net is vitally important," says Mr. Rukavina. "We would be facing a crisis far worse than what we have if the safety net programs were not there."
Due to the recession, the importance of Medicaid is becoming clear not only to low-income Americans, but also to working Americans "finding themselves in a predicament they probably never imagined being in," he says.
"I think there are lots of misconceptions about Medicaid and other safety net programs. And this could be game-changing, in terms of public perception," says Mr. Rukavina. "These are very trying times. To have people receiving benefits under the program who traditionally have not been, I think is a very good thing."
Medicaid is providing a safety net for millions of Americans who find themselves suddenly unemployed. "Being out of work and not having a job is a terrible thing, and obviously, it's foremost on the minds of many in our country. That, combined with not having health insurance, is terrifying for anyone with a condition they know needs to be treated," says Mr. Rukavina. "To be helped by that safety net will provide millions with security they normally would not have had."
Mr. Rukavina says many of the people on Medicaid today ultimately will become eligible for employee-sponsored coverage.
"So, they will see Medicaid as providing them with important protection when times were tough," he says. "It may mean that some of these same people may be advocates to defend the program, because they will have seen the benefits that come from it firsthand," says Mr. Rukavina. "They will have been touched by the program and may have a very different attitude about the program in the future because of that direct experience."
Mr. Rukavina says this is a "win-win situation," because it provides short-term benefits to people in need, which is what the program has always done, but also because the demographics of some recipients are different than individuals who received benefits in the past. He says that could bring a new understanding of just how important the program is.
'Not a dollar more than necessary'
"In Washington, like many other states, increasing Medicaid enrollment has changed the degree, but not the nature, of the problem that we confront with this difficult economy-namely, an unprecedented state budget deficit that has and will continue to challenge our ability to maintain appropriate government services," says Jonathan Seib, a policy advisor to Gov. Chris Gregoire in Olympia.
This means that Medicaid directors probably will be pushed even harder to find efficiencies and other cost-saving measures to accommodate increasing caseloads under extremely tight budget constraints. "They will be required to walk the very fine line that delivers to enrollees the care they need and deserve, but that costs not a dollar more than is necessary," he says.
Provider reimbursement rates may prove to be a particularly difficult issue. "These are often a popular cost-cutting target but have a significant bearing on a state's ability to assure the access to care that it should provide and that the law requires," Mr. Seib says.
Clearly, state Medicaid programs are under pressure to cover an increasing number of people with limited dollars. "This will require benefit design and program management decisions that are less likely to be made when budgets are flush," he explains.
During economic downturns, states tend to look at issues that will have an immediate impact on their budget. "During the last downturn, states looked at a whole array of cost-cutting measures, including all sorts of cost controls around prescription drugs," says Ms. Rudowitz. "States are always looking to control their Medicaid costs."
Over the last few years, there has been a great deal of focus by states on getting more quality and value for their Medicaid dollar. "There has been a lot of focus on those types of initiatives, but sometimes they may not get short-term cost savings," she says. "There is also a discussion about a more permanent change to the Medicaid laws that would automatically adjust the FMAP rate during these economic downturns."
Kathleen A. Dunn, MPH, director of New Hampshire's Office of Medicaid Business and Policy, says she feels strongly that this is a "time of opportunity" for Medicaid.
"From a Medicaid perspective, we need to look at how we are purchasing health care services and look at transforming our delivery network, via establishing patient-centered primary care medical homes and looking at health care payment reform," she says.
New Hampshire is seeing unprecedented growth in the number of individuals seeking and being found eligible for Medicaid services. Ms. Dunn estimates that New Hampshire's Medicaid program will receive about $150 million as a result of the stimulus package.
However, she says, "I think there is a misunderstanding by the public that there's extra funds coming to the state as 'surplus' when, in fact, they are funds that are making up deficits in state revenue. Unless the economy turns around and the state revenues recover, I am not sure what is going to happen after the ARRA [American Recovery and Reinvestment Act of 2009] expires."
Contact Ms. Dunn at (603) 271-5258 or [email protected]. Mr. Park at (510) 524-8033 or [email protected], Ms. Rudowitz at (202) 347-5270 or [email protected], Mr. Rukavina at (617) 654-9911 ext. 229 or [email protected], and Mr. Seib at (360) 902-0557 or [email protected].
Demand is growing significantly for Minnesota State Health Care Programs, which include the state's Medicaid and children's health insurance programs, due to the economic downturn. Over the next two years, another 100,000 enrollees are expected-an increase that Brian Osberg, Minnesota's health care assistant commissioner, believes is unprecedented. This will bring the total of enrollees to 800,000.Subscribe Now for Access
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