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Nevada Medicaid faces "cognitive fiscal dissonance"
With Medicaid enrollment increases of 3,000 a month showing no signs of slowing, having already made virtually all possible cuts to the program, and facing a projected $3 billion shortfall in the state, Charles Duarte, administrator for Nevada's Division of Health Care Financing and Policy, describes the process of planning for an estimated 150,000 more people coming onto the program as one of "cognitive fiscal dissonance."
The state has estimated that the federal requirement to expand Medicaid will cost Nevada $574 million from 2014 to 2019, when the 100% federal subsidy in the health care reform bill expires. Nevada has a $6.5 billion budget.
"So, when you are talking about a $3 billion shortfall, you are talking 40% of the state general revenue not being there in 2011," says Mr. Duarte. "We are using a lot of federal money for Medicaid that's not going to be around either, and on top of that, having to do health care reform. You put all those factors together, and it is one big question mark as to how we will do all of this or maintain the current program."
Currently, Nevada Medicaid is projecting an $82 million state general fund shortfall between now and the end of the state fiscal biennium in June 2011. In addition to the largest projected shortfall in revenue that Nevada has ever seen, there has been rapid growth in programs like Medicaid throughout the recession.
"Because of our dependence on tourism in general and our tax structure, we will probably see a recovery later than some other states," says Mr. Duarte. "What I have seen in national reports is that we are the fastest-growing program in terms of caseload. That has been fairly consistent."
The Medicaid program currently has a caseload of 256,000 individuals, up from around 180,000 two years ago. "Right now, we are at the highest level we have ever been at. We are continuing to grow at about 3,000 people a month, which for us is a very large number. As a result of caseload growth, we are continuing to project serious shortfalls in general funding for the program," says Mr. Duarte.
The program has gone through four cycles of budget reductions since 2008. "We've done practically everything that we could under the constraints of federal law," says Mr. Duarte. "We have touched on probably every aspect of the program, with the exception of eligibility. We have cut benefits, rates, and scope of services."
Cuts were made to hospital rates, physician rates, home, and community-based service rates. Coverage of certain optional items was eliminated, and restrictions were put on certain benefits, including personal care services.
Nevada reduced hospital inpatient rates by 5%, children's mental health rehabilitation service rates, and recently reduced reimbursements for anesthesiologists to levels consistent with other state Medicaid programs and the Medicare program.
"We are closely tracking access to care issues and may need to reconsider some of these cuts," said Mr. Duarte. During last February's special legislative session, Nevada Medicaid went through its fourth round of budget cuts, trimming more than an additional $16 million in state general funds.
Planning is under way
In recognition of the urgency and depth of the planning process, two additional staff positions and some consulting services were approved by the state legislature. "The whole process is creating a tremendous workload issue for current staff," explains Mr. Duarte. "We are going to continue to be very dependent on existing personnel. We are dealing with furloughs and don't have any overtime available."
The additional staff will assist with multiple planning groups already established by the state. One large planning group was broken up into nine subcommittees, all looking at different aspects of health care reform. Some areas of focus are mental health, Medicaid, food stamps, the Temporary Assistance for Needy Families program, interface with the Medicaid program, and eligibility changes including system issues. Projections done through 2019 predict that Nevada Medicaid's caseload will actually decrease in 2015, due to expected improvements in the economy by that time. "That being said, we're still looking at adding on a significant number of additional people to the program. We are taking it to levels we've never experienced before," says Mr. Duarte.
Nevada is one of 20 states that are suing to block implementation of the health care legislation. "The direction that we've been given by our governor, despite that fact, is that the law is the law, until it's not the law," says Mr. Duarte. "And you have to start planning now, because if it's not overturned, you can't start planning then."
High cost of "woodwork"
"Frankly, most of the cost is not going to be with the new eligibles. It's with the people coming on who may be currently eligible but have never applied," says Mr. Duarte. "We call that the 'woodwork.' Some states have been criticized for having woodwork in their cost projections, but that's a fact of life."
If an individual is eligible for Medicaid, but has never applied for whatever reason, he or she may do so when the individual insurance mandate in health care reform requires him or her to obtain coverage. "So, I think that people will be driven into our programs as a result of that," says Mr. Duarte. "However, we think these folks may actually be healthier than others. This is primarily because if they weren't, then they would already be in our programs."
Another source of woodwork is an expected influx of employees at small companies coming onto the program, because their employer decides to stop offering coverage. Instead, these employees will be going through the Health Insurance Exchanges (HIEs) set up by the state to obtain coverage.
"We think we'll see a lot of folks come on that way, because there aren't any penalties for small employers to drop coverage," says Mr. Duarte. "And if you look at the average monthly wage of an employee of a company with less than 50 employees, they probably will qualify in a number of cases."
The woodwork of individuals already eligible for the program don't qualify for the enhanced federal match. However, there is an expectation that the newly eligible population will prove to be less costly than the current Medicaid population. "That is our current hope, anyway," says Mr. Duarte.
Projections are that the total of both the "woodwork" and the newly eligible will add 150,000 individuals to the program. This would take the number of enrolled individuals from 258,000 to 412,000 by 2019. "We don't put a lot of stock in those projections, but right now it's the best guess we can make," says Mr. Duarte.
Unfortunately, the new drug rebates included in health reform are not expected to help, and could actually hinder Nevada Medicaid's fiscal situation. "Right now, we are thinking we are going to lose money on this," says Mr. Duarte.
There are still some unanswered questions on the federal level. However, early estimates completed by the state point to a net loss of about $1 million as a result of the new rebate program.
"I have heard from a number of other states that they are also looking at this as a money loser, even with the managed care rebates," says Mr. Duarte. "However, how much they get in managed care rebates will be highly dependent on how their care delivery system is organized."
Nevada's managed care doesn't have anywhere near the pharmaceutical expenditure level of fee-for-service, explains Mr. Duarte. This is because typically, mothers and children are enrolled in managed care, as opposed to higher-cost clients. "So, the rebate levels will be pretty nominal for managed care," says Mr. Duarte. "Most of our rebates come in through our fee-for-service program, where our high-cost folks reside."
The best approach for tracking new vs. current eligibles also depends on some unanswered questions. "It could be easier, or more challenging, depending on the federal guidance we get. Theoretically, the law could be read in a way that allows CMS [the Centers for Medicare & Medicaid Services] to make it easier to do eligibility or any other aspect of the requirements," says Mr. Duarte. "There is a lot of opportunity there for CMS to help us. To be frank, I have not seen that play out yet, when we are dealing with issues already upon us, such as drug rebates. It seems that the direction we're getting is we're going to be responsible for more administrative burden."
If a Medicaid program is going to lose money from the new drug rebate program, for example, and also has to spend money to administer it, "then it becomes basically a sharp stick in the eye," says Mr. Duarte. "It is not a benefit to the state."
Currently, Nevada Medicaid has a care coordination program in place for a targeted population of high-cost clients, primarily fee-for-service. A work group is looking at expanding similar quality initiatives included in the health care reform bill. Two of particular interest are non-payment of hospital-acquired infections and establishing different payment methodology to incentivize hospitals and physicians to do a better job of post-discharge care.
"We are very, very interested in some of the options for establishing a medical home," adds Mr. Duarte. "We have been working on that for about a year now, looking at program design. Now, this will give us additional federal matching funds to implement that."