Hurricanes create major changes in the nation's health care system

In mid-September, as the Gulf Coast recovered from Hurricane Katrina and prepared for Hurricane Rita, some health care analysts started to assess the storm's broader impact on the nation's health care system. Since then, it is becoming increasingly clear these hurricanes caused disruptions and dislocations unlike anything known in many decades and may lead to radical changes in the way care is delivered and paid for.

Consider that the hurricanes were centered on several states that are among the poorest in the country — Louisiana has a poverty rate of 22%, Mississippi 23%, and Alabama 20%. Katrina caused the evacuation of a major city in which 23% of the residents lived in poverty before the levees were breached. While many evacuees went elsewhere within their own states, an estimated 500,000 or more went to Texas, which itself had a 22% poverty rate before the influx of those forced from their homes and jobs in other states.

"Undoubtedly, Katrina has raised both the number of people in poverty and the number of uninsured living in the states hit by Katrina as well as in the states of refuge," the Kaiser Commission on Medicaid and the Uninsured said in an issue brief on Katrina's health care impact. "The only issue is the magnitude of the increase. An estimated 400,000 jobs have been lost; many of those who lost their jobs have lost not only their source of income but also the health insurance coverage that their former employers offered. Hospitals, clinics, nursing homes, pharmacies, and other facilities have been damaged or destroyed. Areas that, prior to Katrina, faced shortages of needed health care providers now have either fewer resources or none at all. Underserved populations with substantial health disparities before Katrina are now at risk for falling even further behind the rest of America."

The Kaiser report said because so many of those displaced were impoverished before Katrina, and because many more have become impoverished, it is not realistic to expect those displaced, many of whom now have no income and no health coverage, to bear the cost of needed health care services. And the ability of the states hit by the storms to finance provision of needed health care services is questionable given the damage to their economies.

Hard-hit states will lose revenues

For example, both Louisiana and Mississippi are likely to lose revenue from the temporary shutdown of many industries in the affected regions, including the oil, natural gas, refining, petrochemical, shipping and shipbuilding, agriculture, and seafood industries; the shutdown of the Port of New Orleans; the destruction of the large casinos in Mississippi and New Orleans; and the collapse of the tourism industry through which visitors spent an estimated $5.2 billion in Louisiana last year, mostly in the New Orleans area.

Consider also that in addition to the massive intrastate relocations, Katrina has caused the largest interstate migration of Americans since the 1930s Dust Bowl. As the days and weeks went by, many states reported receiving Katrina survivors and it was unclear when or even whether these displaced individuals would be able to return to their communities.

"Many of these states of refuge, like Texas, had high rates of poverty and uninsurance prior to this influx," the report said. "These states and their localities face the challenges of delivering health care to the displaced, many of whom are in poor health, while at the same time ensuring the continued delivery of health care to their own residents as well as administering their Medicaid, public health, and cash assistance programs. The economic effect of Katrina is likely to undermine the capacity of these states to meet this rapid, unexpected expansion in the numbers of impoverished people with significant health and mental health care needs."

Two major issues

The two major issues facing states and the federal government several weeks after the storm hit were the rules governing provision of Medicaid and other health care services in each state and the question of how care was to be paid for.

Within days of the hurricane's arrival, CMS said it was acting to assure that the Medicaid, Medicare, and SCHIP programs could be flexible enough to accommodate the emergency health care needs of beneficiaries and medical providers in the states devastated by the storm.

"Many of the programs' normal operating procedures will be relaxed to speed provision of health care services to the elderly, children, and persons with disabilities who depend upon them," a CMS fact sheet said. CMS assured hospitals in neighboring states that the normal burden of documentation would be waived and a presumption of eligibility should be granted.

CMS also said it was implementing these provisions immediately:

Health care providers who furnish medical services in good faith but cannot comply with normal program requirements because of Hurricane Katrina will be paid for services provided and exempt from sanctions for noncompliance unless it is discovered that fraud or abuse occurred.

Crisis services provided to Medicare and Medicaid patients who have been transferred to facilities not certified to participate in the program will be paid.

Programs will reimburse facilities for providing dialysis to patients with kidney failure in alternative settings.

Medicare contractors may pay the costs of ambulance transfers of patients being evacuated from one health care facility to another.

Normal prior authorization and out-of-network requirements will be waived for those covered by Medicare, Medicaid, or SCHIP managed care plans.

Normal licensing requirements for doctors, nurses, and other health care professionals who cross state lines to provide emergency care in stricken areas will be waived as long as providers are licensed in their home states.

Certain HIPAA privacy requirements will be waived so providers can talk to family members about a patient's conditions even if the patient is unable to grant permission to the provider.

Hospitals and other facilities can be flexible in billing for beds that have been dedicated to other uses, such as if a psychiatric unit bed is used for an acute care patient admitted during the crisis.

Hospital emergency rooms will not be held liable under the EMTALA for transferring patients to other facilities for assessment if the original facility is in an area when a public health emergency has been declared.

While that initial response seemed to cover many issues for those who were enrolled in the programs before the storm hit, a larger question was how to provide health care services to those who had not been eligible before, or who were eligible but had not enrolled.

CMS enrollment template

CMS administrator Mark McClellan said the agency was developing a template states could use to have evacuees apply for emergency Medicaid waivers, retroactive to one week before the hurricane. Evacuees with or without documentation were able to use the template and states were given flexibility to lower copayments and beneficiary contributions.

McClellan said CMS was working with states to develop a new category of Medicaid and SCHIP eligibility for evacuees who can't prove either current eligibility or eligibility in their home state.

In a Kaiser Commission on Medicaid and the Uninsured telephone briefing, Ohio Medicaid director Barbara Edwards said states needed CMS to provide "simple and straightforward" answers about financial reimbursement for health services provided to hurricane victims. They needed to know, she said, how to proceed with Medicaid eligibility for Katrina victims whose Medicaid status could not immediately be verified and for individuals who now qualify for the program as a result of losses suffered.

Louisiana deputy Medicaid director Ruth Kennedy said the storm damage increased the demand for Medicaid-provided services. Thus, elderly people previously cared for by family members at home might now require nursing home care. And evacuees have significant health needs and must be enrolled in Medicaid coverage as quickly as possible.

One model pointed to by some experts was the Disaster Relief Medicaid program implemented in New York City in the months after Sept. 11, 2001. While that situation was much more localized and much of the health care infrastructure remained intact, it showed how to provide eight months of continuous Medicaid coverage for more than 350,000 New York City residents.

"Such a process could include a single page application form, self-attestation of residence and income information, and issuance of temporary Medicaid cards to eligible individuals at the time of initial application," Kaiser said. "To fully realize the benefits of the Disaster Relief Medicaid model, a single income eligibility standard could be applied to those displaced and impoverished by Katrina regardless of the state in which they were living at the time of application. In the absence of such a standard, each state will otherwise apply its own Medicaid income and resource standards, which vary substantially from state to state."

Because so many of those displaced by Katrina are impoverished, the Kaiser analysis suggested the federal government adopt time-limited changes to Medicaid as a vehicle for temporarily assisting those without coverage. Because Medicaid funds "follow the person," with payments for services that are medically necessary to beneficiaries made to the providers actually serving the beneficiaries, Medicaid is seen as the most accurate mechanism for targeting federal assistance to the areas, providers, and low-income individuals who need it most, regardless of where they are living now or move to.

It has to be recognized, Kaiser said, that increasing Medicaid enrollment will place additional demands on the budgets of states taking in evacuees, because they are responsible for their share of Medicaid administrative and service costs for the displaced populations. And at the same time, the displaced individuals who qualify for Medicaid will not be able to contribute to the tax revenues of the receiving states until they find jobs.

"The resulting increased demands on state funds may lead to reductions in Medicaid eligibility, benefits, or provider payments for the entire population in the states of refuge," Kaiser cautioned.

Is congressional action needed?

The report said the federal government could consider obtaining congressional approval to pay 100% of the costs of Medicaid coverage for those impoverished or displaced by Katrina, both in the three states hit by the storm and in any state receiving evacuees.

To make Medicaid work as a source of coverage for all individuals displaced or impoverished by Katrina, limits on program eligibility would have to be changed since Medicaid generally only covers people who fall into certain defined categories — children, parents of dependent children, pregnant women, individuals with disabilities, and the elderly. Thus, adults who are not elderly, disabled, or pregnant, and who don't have dependent children, are not eligible for Medicaid regardless of their poverty status.

"It seems that many of those displaced or impoverished by Katrina are childless single adults or couples, including older adults with chronic health conditions," the report said. "To help these individuals, the federal government could make 100% federal matching funds available for the cost of furnishing Medicaid services to evacuees without regard to the categorical requirements that normally apply."

While several bills had been introduced to make Medicaid modifications and provide funding, CMS said the most efficient approach was for states to obtain expedited approval of Section 1115 waivers. Three weeks into the crisis, waivers had been approved for Texas, Mississippi, Alabama, and Florida, and CMS said it would approve waivers for other states that have large numbers of evacuees.

Under the agreement, states get immediate support for the medical care provided to Katrina evacuees, including money for uncompensated care. The waiver also supports innovative ways to provide needed care that differ from standard approaches in Medicaid, including expanded community-based health care centers, mobile units for providing basic care at convenient locations for evacuees and new referral networks, and care provided by health care professionals who don't otherwise participate in Medicaid.

Evacuees with little ability to pay for care can get coverage through Medicaid or SCHIP for up to five months, even without the usual documentation. Needed medical services will be delivered to evacuees who are children up to age 19 and their parents, pregnant women, individuals with disabilities, low-income Medicare beneficiaries, and those who need long-term care and meet certain income requirements. Evacuees will be asked to complete a simplified application form declaring their income and assets, if any. Services provided will be through states' standard benefits packages.

However, many state officials and policy experts say those Section 1115 waivers, while welcome, don't go far enough to address the needs that exist. The National Governors Association wrote to Senate and House leaders urging quick passage of legislation that would temporarily provide 100% federal financing for all the Medicaid and related healthcare needs of displaced individuals.

Kaiser Commission on Medicaid and the Uninsured staff member David Rousseau, who helped write the report, tells State Health Watch that while negotiating waivers with states was a quick approach to the problem, the waivers are with the states rather than the individual beneficiaries and don't cover people as they move from one state to another. He said legislation for federal funding was likely to help survivors more directly as they move to new locations.

Working on Grassley's bill

While several emergency health care bills had been introduced in both the House and Senate, the one that appeared to have the most traction was submitted by Senate Finance Committee chairman Chuck Grassley, R-IA, and that committee's ranking Democrat, Max Baucus, D-MT.

Under their Emergency Health Care Relief Act of 2005, Louisiana, Mississippi, and Alabama counties under a disaster declaration would receive a 100% federal match until the end of 2006. And there would be targeted, temporary Disaster Relief Medicaid coverage to those people in or evacuees from the hardest-hit counties in Louisiana, Mississippi, and Alabama. Coverage would be for all people up to 100% of the federal poverty line or up to 200% for pregnant women, children, and the disabled. States would be reimbursed at 100% federal match for care provided through Disaster Relief Medicaid.

Assistance would be provided to help individuals who qualify for Disaster Relief Medicaid but have private health insurance so they could pay their premiums and maintain their private coverage. There also would be assistance to qualified employers in the hardest hit counties to help them maintain private health insurance coverage for their employees. Qualified employees would be those who operated in the disaster area and are 1) inoperable as a result of damage sustained from Katrina; or 2) not paying salary or benefits to employees as a result of damage.

The Disaster Relief Medicaid would be in effect for five months from the date of enactment, retroactive to the day before the hurricane made landfall, and could be extended by the president for another five months.

The bill would create a disaster relief fund to provide payments to Medicaid providers experiencing a significant increase or decrease in patient volume due to Hurricane Katrina. Direct payment also could go to providers to offset costs incurred as a result of the hurricane and to enable them to continue operations.

The letter from the National Governors Association said the governors "are very supportive of your relief package and appreciate that you have been willing to work with us in making sure the needs of our most vulnerable citizens are addressed." It said the bill would be "critical to help these individuals put their lives back together and retain some semblance of stability."

However, the White House's initial position was that the issue could be better addressed without a legislative solution. Pursuing that reasoning, McClellan said, "I don't think it's necessary or helpful or timely to set up new federal systems to deal with this problem." And even as some members of Congress questioned the wisdom of continuing with Medicaid reform efforts aimed at cutting $10 billion from the Medicaid budget over the next five years, given the magnitude of hurricane-related needs, McClellan said such reform was "even more urgent" since the hurricane, insisting that expanded use of generic medicines and stricter asset transfer rules could reduce Medicaid spending "without reducing benefits to anyone."

The Kaiser report concluded that with more than a million people, including many who are poor, elderly, and suffering from a range of chronic conditions and disabilities, displaced from their homes and relocated in other parts of their own states or other states, three health issues need an immediate response: the loss of health coverage by hundreds of thousands of impoverished Katrina victims, restoring the shattered health care infrastructure in the impacted areas, and avoiding further disruption in access to medications for dual eligibles.

"The Medicaid program provides an immediate and practical solution for addressing the health care coverage needs of low-income survivors," Kaiser said. "Medicaid's availability in every state, coverage of a range of health and long-term care services, established payment arrangements with providers, and targeting of coverage to low-income beneficiaries makes it uniquely equipped to assist the low-income individuals who need medical or mental health services quickly. Policy-makers have already recognized that normal documentation requirements will be impossible for most survivors to fulfill and are taking steps to streamline enrollment. Facilitating a quick and effective Medicaid response at the state level also requires the federal government to address two primary issues: the level of federal financing and eligibility for assistance."

In addition to resolving the Medicaid issues, Rousseau tells SHW it's important the government move quickly to repair the health care infrastructure in the areas ravaged by the hurricanes so people are able to obtain the physical and mental health services they need when they return.

[Many background documents and the Kaiser Commission issue brief are available on-line at www.kff.org. Also find National Governors Association materials at www.nga.org. Legislation is available at thomas.loc.gov. Contact David Rousseau at (202) 654-1431.]