Fiscal Fitness: How States Cope

In a redesign of its Medicaid program, Idaho is poised to focus on preventive care, wellness

Idaho is redesigning its Medicaid program to provide individualized benefits to three groups of people — low-income children and working-age adults, individuals with disabilities or special needs, and elders.

State officials have said Idaho can't afford the escalating costs in the growth of expenditures for Medicaid. Since 1987, they said, Medicaid program expenditures have increased more than 17% a year. Rather than reduce services or cut enrollment, they said they want to redesign the program to make it consumer-oriented and promote preventive health care and wellness.

"By designing plans around similar populations, we can encourage people to improve their health," the officials said. "As an example, for healthy children and adults, we can offer incentives for mothers to take their babies to their health care provider for well-baby checks or immunizations. For people who are elderly, we can design a package that offers them supports so they can live in their homes as long as possible without having to move to a nursing facility. We know that one size does not fit all. By working together, we can design a system to meet people's unique needs."

Idaho is making its changes under provisions of the Deficit Reduction Act of 2005 that gave states many options for redesigning their Medicaid programs. In approving Idaho's plans, HHS Secretary Mike Leavitt said Idaho "is on the cutting edge in crafting Medicaid benefit packages to the needs of its residents. These changes make sense for beneficiaries and the very future of the Medicaid program."

CMS administrator Mark McClellan said the new targeted system "will be more efficient while meeting the specific needs of the people who count on it. We expect more states to follow Idaho's lead in redesigning their programs to give people access to affordable care that better reflects their own health needs and preferences. These changes will make Medicaid more sustainable without restricting eligibility or access to services that low-income and disabled individuals need."

The redesigned Medicaid program will offer:

  • The Benchmark Basic plan to serve healthy children and adults by covering most of the traditional Medicaid benefits except for long-term care, organ transplants, and intensive mental health treatment. Children younger than age 19 will continue to receive all of these and other benefits through Medicaid's Early Periodic Screening, Diagnostic, and Treatment program.
  • The Enhanced Benchmark plan to serve individuals with more complex health care needs, such as the disabled and the elderly. It will cover all traditional Medicaid benefits, including long-term or institutional care. People enrolled in the Basic plan who need benefits not covered under that plan will be moved into the Enhanced plan.
  • The Coordinated Benchmark plan will include all the benefits of the state's traditional Medicaid program and will serve Medicaid enrollees who are also eligible for the Medicare program, known as dual-eligibles. This group will be required to enroll in the Medicare Part B outpatient coverage plan and the Medicare Part D prescription drug plan.

All three plans will include some new benefits such as preventive and nutrition services and "preventive health assistance" to help the obese, smokers, and others adopt healthier habits.

The plan has drawn praise from the Medicaid commission that will be making recommendations to Congress on the best ways to revise the program.

In a presentation to that commission earlier this year, Idaho Gov. Dirk Kempthorne said Medicaid reform must come from the states.

"We are all aware of the problems many states have experienced by cutting eligibility and services for their Medicaid recipients," he said. "It's resulted in more emergency room visits, more expensive treatment, and more lawsuits. Compare that to what we've done in Idaho. When our budget problems forced holdbacks, we looked for ways to reduce spending with a minimal impact on our citizens. We focused on improving the management of Medicaid. And what have been the results? No cuts in eligibility. No cuts in services. More than $150 million in savings and better care for patients."

But Mr. Kempthorne said if the problems of the current Medicaid system are to be solved, it is necessary to turn the focus away from an antiquated, regulation-based system and toward one that focuses on results. He said his redesign will focus on results instead of rules, outcomes instead of cumbersome regulations. "It is a vision of what Medicaid should be," he declared, "not just what it's allowed to be under the current bureaucratic framework."

Key elements

While the three plans are at the heart of Mr. Kempthorne's proposal, there are other noteworthy elements:

1. He proposes providing a health risk assessment in the form of a comprehensive physical exam to ensure every participant has access to needed benefits. His budget recommendation includes increased provider payments to ensure every child will have a comprehensive check-up at the time of enrollment. Health assessments also will be completed for any adult who enrolls in the program and Medicaid will partner with Medicare for the elderly and dual-eligible populations.

2. For relatively healthy low-income children, there is a focus on primary care, prevention, and wellness.

3. There are efforts to eliminate barriers that prevent people with disabilities from seeking employment. And the plans are intended to enhance individuals' ability to choose and direct the services that are most appropriate under a model of consumer-directed care.

4. The program for the elderly is to focus on strengthening support services through family and informal caregivers and helping individuals stay in their homes and communities longer, rather than being forced to rely on more expensive nursing home care. This will involve some changes in federal Medicaid law.

5. A pilot pay-for-performance project is planned with the state's physician residency programs and community health centers. This will require a federal waiver.

6. A pilot program will test providing preventive health services in public schools. This will require changes in Medicaid law.

7. The reform proposal seeks to implement selective contracting strategies to help control Medicaid cost growth. The idea is to identify vendors to deliver medical supplies and save through volume purchasing. "States should have broad authority to employ the common network management tools — like private insurance plans do — to increase Medicaid's purchasing power and generate savings," Mr. Kempthorne said.

8. The governor proposed "common-sense, enforceable cost-sharing provisions such as copayments for certain services," saying they would address inappropriate emergency department utilization, inappropriate emergency transportation, nonpreferred prescription drugs, and missed appointments with primary care providers.

9. Equalized eligibility rules between Title 19 and Title 21 children's programs to base different benefit packages on health needs as opposed to arbitrary distinctions based on income levels.

10. Use benefit plan design to address inappropriate service utilization.

11. Expand home- and community-based services to prevent or delay more costly institutional-based care.

12. Implement respite care programs and training for informal care providers to prevent or delay more costly institutional-based care.

13. Promote use of non-Medicaid financing programs such as reverse mortgages and long-term care insurance.

14. Enact 100% tax deduction for long-term care insurance at the state and federal level.

15. Encourage individuals to transition from the last payment to their children's education savings account to the first payment toward purchase of long-term care insurance.

16. Allow all states to participate in the long-term care partnership program.

State officials said a set of "filters" will be used to guide decision-making in the modernization effort. Thus, changes will need to be holistic, to foster simplicity, to promote fairness, and to create value.

Not everyone is agreed the plan is sound. The Idaho Community Action Network (ICAN) issued a report, "Don't Waiver on Medicaid," opposing approval of the waiver needed to implement the proposal and has lobbied the state legislature against it.

ICAN says limiting health care benefits and making health care programs more difficult to access "will harm the health of Idaho's low-income families, people with disabilities, and the elderly." It says there are better ways for the state to address rising health care costs, including strategies for restraining the cost of prescription drugs, removing eligibility barriers, and making institutional care the last resort rather than the first resort.

At a rally at the state capitol, ICAN member Jolene Poen said her family lives on a very limited income. "If they impose premiums for my children's Medicaid, there is a very good chance we won't be able to afford them," she said. "We'll lose our health coverage and wind up uninsured with 250,000 other Idahoans."

The ICAN report cites statistics from states that have imposed premiums as a way of controlling Medicaid costs. It says in Oregon, after monthly premiums of $6 to $20 were imposed in 2003, more than half the affected people were disenrolled from Medicaid and overall 50,000 people lost their Medicaid coverage and two-thirds remained uninsured.

"The proposed waiver will shift costs to providers and counties," ICAN member Terri Sterling said. "More people will end up uninsured but still needing care, and we all pay for that care indirectly. The proposal will also endanger federal matching funds, since the state receives $24.44 from the federal government for every $10 it spends on Medicaid. This is a serious gamble for Idaho."

Information on the Idaho Medicaid reform proposal is available from the state on-line at and from the National Conference of State Legislatures at Information on the Idaho Community Action Network position is available at Download "Don't Waiver on Medicaid" at't%20waiver%20on%20medicaid%22.