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Mid-year cuts to Medicaid are on the table for more
More than 3 million more people were enrolled in state Medicaid programs in June 2009 compared to the previous June, according to a February 2010 analysis by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured (KCMU) in Washington, DC. This is the biggest one-year increase in enrollment since the program's early implementation in the 1960s. Also, for the first time since the early 1990s, enrollment has gone up year to year in all 50 states.
Another February 2010 KCMU report, "Medicaid's Continuing Crunch in a Recession: A Mid-Year Update for State FY 2010 and Preview for FY 2011," says that 44 states and the District of Columbia are experiencing higher-than-expected program enrollment, resulting in increased spending for FY 2010. At least 29 Medicaid directors say they are considering additional mid-year cuts in provider rates and program benefits.
Robin Rudowitz, one of the authors of the KCMU report, says she was well aware that enrollment and spending pressures were going up, based on her ongoing discussions with Medicaid directors but was somewhat surprised by the rate of increase and the number of states experiencing high enrollment.
"This has been a similar story for a little while, but it seems that the intensity of the pressure on the program is growing," says Ms. Rudowitz, a principal policy analyst for KCMU and former Medicaid director in the Office of Legislation at the Centers for Medicare & Medicaid Services (CMS).
"Medicaid directors certainly have a hard job these days. They are a dedicated group of professionals working very hard to balance fiscal constraints with the needs of the beneficiaries," says Ms. Rudowitz. "While states need to deal with mid-year cuts for 2010 immediately, they also need to look forward to the next fiscal year."
Even when the economy begins to recover, the employment rate and Medicaid case growth are likely to be lingering problems for states. "Many states are saying that 2011 and potentially even further ahead are going to be even more difficult than what they've already experienced," says Ms. Rudowitz. "It can take two or three years to get back up to pre-recession levels of employment and revenue."
At the same time, of course, budget crunches make it harder for states to pay for the increased demand. "During the last downturn, and during this one this far, states have already done a lot of cost controls. So, they are really getting into some core program cuts," says Ms. Rudowitz. "As revenue tends to deteriorate and states are left with even fewer good options for cuts to the program, we are seeing more states looking at benefit cuts."
New enrollees less costly
"The health reform bill's expansion of Medicaid will have a large cost and enrollment growth impact on Utah's program," says Michael Hales, Utah's Medicaid director.
While Utah's Medicaid program had projected a 12% caseload growth from July 2009 through June 2010, an annual growth rate of 15% is expected. While this is a bit higher than projected, a higher per member/per month cost was also projected.
Although supplemental funding was needed to get through FY 2010, as there wasn't any growth built into the budget from the last legislative session, Hales says that "overall, we are pretty close to where we are projected being."
In part, this is because the costs associated with the new enrollees is less than what the previous base had been. This is because additional children and parents became eligible for Medicaid during the downturn.
"So, it's changed the mix of our enrollment population," says Mr. Hales. "When the economy started to falter, the biggest enrollment we have seen has been in our lowest-cost groups, which are children and their parents. They generally cost less to cover than our elderly, disabled, and pregnant women." While those populations have been pretty constant in their enrollment, the lower-cost groups have increased at a higher rate.
"When the economy improves, we expect that a lot of these people would come off of our enrollment rolls," says Mr. Hales. "We will go back to our more traditional enrollment base, which tends to have a higher cost structure, versus our current mix."
Payers sharing burden
For the previous five months, Utah Medicaid has seen 1,400 to 1,800 additional enrollees coming onto the program. "We haven't seen a month with a negative net on the program since November 2007. And we are still seeing very steady growth," says Mr. Hales. "Given the overall state of our budget in Utah, we did spend a lot of time working with our legislature looking for ways to save money."
During the last legislative session, cuts were made to reimbursement of inpatient services, including some cuts that didn't take effect until this year. A two-tier implementation involved a 15% reduction effective on July 1, 2009, with an additional 17% reduction that is scheduled to take effect July 1, 2010.
"As a result, the hospitals have worked with our legislature to get a hospital provider assessment in place to trade off some of those reductions," says Mr. Hales. "They had to come together and decide that was what they wanted to do, rather than take an additional level of cuts. By getting an assessment imposed, they could at least keep their rates closer to what they had been." The assessment will be retroactive for payments dating back to Jan. 1, 2010.
During the same legislative session, pharmacies were given an additional reduction of 5% in their reimbursement as of July 1, 2010. Also, outpatient and ambulatory surgical procedures received an 11% reduction in payment. "They made those cuts effective in our current fiscal year, so we had to work to make those changes immediately," says Mr. Hales. Provider rate reductions for outpatient services alone will save about $4 million, while the pharmacy reimbursement cuts will save about $1 million.
For the most part, Utah Medicaid's optional services already had been eliminated. Dental coverage for the adult population was eliminated as of July 1, 2009, which saved about $2 million in state general funds. There was some discussion about getting a small amount of funding for emergency dental services for that population, but this didn't occur. One-time funding is being used to cover physical and occupational therapy through June 30, 2010, and, although this was being looked at as a possible cut, it was funded for FY 2011.
Initiatives still under way
Utah Medicaid is working to make its premium subsidy program, which is part of its Section 1115 waiver, easier to access. The program, called Utah Premium Partnership for Health Insurance, allows a subsidy to be paid for adults or children who purchase private health insurance. However, it requires that the insurance be employer-sponsored.
"We have been looking into expanding that to individual health insurance policies, COBRA, and the state's high-risk pool," says Mr. Hales. "CMS approved an amendment for COBRA participation but still hasn't acted on the others. That is something that we continue to pursue."
Waste, fraud, and abuse is another current concern. "Over the next year or so, we are going to be working more aggressively on looking at the accuracy of our payments. We will be investing some money into better screening for inappropriate claims," says Mr. Hales. "We think we could be recovering more if we could get some more tools there."
Utah received a CMS grant for a multistate pilot initiative for medical homes. "We are going to be working with the state of Idaho to test out some theories on medical homes with the delivery of care for children," says Mr. Hales. If the strategies are found to be effective for both states, these could be utilized on a regional or national basis. An all-payer database and a clinical information exchange tool will be incorporated into the pilot.
"Utah is doing a lot with health reform in general. I think that the bigger infrastructure that the state is investing in will have downward pressures on costs as a whole and will allow Medicaid to participate in that savings," says Mr. Hales.
The all-payer database will give Medicaid a benchmark to see how its payments compare with those of private insurers. The clinical information exchange tool will reduce the number of duplicate tests that are performed on an individual, because a physician in one part of the state can now access test results from a different physical location or hospital network.
"We think we will see some savings through that," says Mr. Hales. "We have an advance planning schedule, approved by CMS, to do a really comprehensive assessment of our HIT needs, so we can plan for the other changes we need to make. We are just starting that evaluation process."
Growth was planned
"There's no question that the economic downturn has driven more people to apply and qualify for MO HealthNet, our Medicaid program in Missouri, but the caseload growth had been anticipated," says George L. Oestreich, PharmD, MPA, deputy division director of clinical services for the Missouri HealthNet Division of the Department of Social Services.
The strategy for FY 2010 was to conduct a comprehensive review of the entire Medicaid platform. Potential cost-containment measures were identified that would not threaten enhanced federal funding.
"We pursued those that made the most sense, while preserving access to quality health care services," says Mr. Oestreich. Use of generic medications was increased, the ability to review the prescription of psychotropic medications was enhanced, and management of both high-cost users and reimbursement categories was improved.
"For certain provider and service classes, we have moved Medicaid reimbursement rates more into line as a percentage of Medicare rates," says Mr. Oestreich. "We always make these decisions with a focus on maintaining access to care. Better management of these reimbursement categories will help us maintain that access within the overall budget constraints." Durable Medical Equipment (DME) reimbursement and advanced imaging utilization management are two examples.
"We are committed to containing costs through comprehensive program review, identification of opportunities for more efficient program management, and maintenance of cost avoidance and recovery efforts," says Mr. Oestreich. "We do not, at this time, anticipate eligibility reductions or wholesale elimination of specific optional Medicaid services."
Trish Riley, director of the Governor's Office of Health Policy and Finance in Augusta, ME, says, "Like most states, Maine is continuing to experience the challenges of this unrelenting recession. We have made proposals for significant Medicaid cuts, which our legislature is now deliberating as they tackle the biennial budget. We maintain eligibility, but do focus on benefits and some targeted provider cuts."
The latest numbers from MaineCare, the state's Medicaid program, show that from February 2009 to January 2010, MaineCare enrollment grew 6.33%, or by more than 22,000 people. "Importantly, that enrollment shows no signs of abating. It has grown by at least 2,000 people every month in the last several months," says Ms. Riley.
Contact Mr. Hales at (801) 538-6689 or firstname.lastname@example.org, Mr. Oestreich at George.L.Oestreich@dss.mo.gov, Ms. Riley at (207) 624-7442 or Trish.Riley@maine.gov, and Ms. Rudowitz at (202) 347-5270 or RobinR@kff.org.