Governors share their vision for Medicaid and health care reform
Governors share their vision for Medicaid and health care reform
In their most specific and comprehensive recommendations yet, the nation’s governors have laid out a vision of health care policies that would reform Medicaid, enhance quality and reduce costs in the overall health system, strengthen employer-based and other forms of private health care coverage, slow growth of Medicaid long-term care, and address state contributions to the Medicare drug benefit.
The governors said they were looking beyond the confines of Medicaid because that program is linked inextricably to the rest of the nation’s health care system and its payers. "Consequently, the scope of our paper is wider than the existing Medicaid program as it focuses both on populations that may become Medicaid eligible as well as some underlying cost drivers in the overall health care system," Mark Warner, governor of Virginia and National Governors Association (NGA) chairman, and Mike Huckabee, governor of Arkansas and NGA vice chairman, told House and Senate committee hearings in June.
Matt Salo, NGA Health and Human Services Committee director, tells State Health Watch the association decided to move in a new direction because "this is the time when there is a perfect confluence of events — we have the ability to get a bipartisan consensus among the governors and both sides in Congress are interested in what we have to say. All of this is driven by fiscal problems at both the federal and state levels."
The governors said their position paper was developed by 11 governors on a Medicaid Working Group with input from most other governors and their state Medicaid directors.
In another break with past practice, they characterized their recommendations as "preliminary," noting that the working group would continue to meet over the next year to complete its work and provide Congress and the administration with policy clarifications and further recommendations.
Mr. Salo says the decision to keep the Working Group active is a recognition of an obvious point — that Medicaid reform is hard.
"We recognize it isn’t possible to put something on the table without igniting controversy with some stakeholders," he says.
"We can’t tell Congress to fix it and then walk away. Keeping the working group on the job is all about follow-through and getting things done," Mr. Salo adds.
While the governors have declined to participate in the administration’s Medicaid commission, they said they intended to work with that body and also have volunteered the NGA Center for Best Practices to assist Mike Leavitt, Health and Human Services secretary, with the commission’s work.
Mr. Salo points out that the governors want to be sure there is state representation on the commission, but believe it wouldn’t make sense for them to be voting members of the group at the same time they are developing their own proposals.
"We’ll be putting our recommendations in front of the commission and see what they think," he adds.
Medicaid’s 3 major problems
According to the governors, there are three major problems affecting Medicaid. First, they said, Medicaid increasingly serves populations with very serious and expensive health care needs, including low-income frail seniors, people with HIV/AIDS, ventilator-dependent children, and other individuals with serious mental and physical disabilities. Although these populations represent only 25% of the total Medicaid caseload, they account for more than 70% of the program’s budget.
The second factor affecting Medicaid is a 40% caseload increase in the last five years. The governors said that while much of the growth has been in the relatively low-cost populations of women, children, and families, an influx of 15 million beneficiaries over five years still has presented a significant challenge to states. Because Medicaid is the primary safety net, unless something is done, the caseload will continue to grow in the high single-digit rate and perhaps even higher over the next 20 years as increasing costs shift individuals from private coverage to Medicaid or to the ranks of the uninsured, they said.
The third problem is that the consumer price index for health care has been increasing at a rate two to three times the average price index. "It is the combination of caseload growth and health inflation that makes Medicaid unsustainable in the short-run, let alone the long-run," Mr. Warner and Mr. Huckabee told Congress.
According to the NGA report, six themes underlie the reform recommendations:
- There are incentives and penalties for individuals to take more responsibility for their own health care.
- Moving to a more flexible benefit package for nonelderly, nondisabled Medicaid beneficiaries, as well as for individuals gaining access through an individual health care tax credit, will reduce total costs and increase access.
- Creation of state purchasing pools should strengthen the ability of small purchasers to gain more competitive rates in the health care marketplace.
- Technology and other state innovations are focused on reducing the long-run costs.
- There are a number of policies designed to reduce reliance on Medicaid coverage.
- The paper has a number of short-run policy changes as well as long-run structural changes that are intended to improve the U.S. health care system.
Medicaid’s 3 major functions
The NGA identified three major functions fulfilled by Medicaid:
- providing comprehensive primary, and acute care coverage for all who are eligible for the program;
- providing long-term care services for beneficiaries who qualify;
- financing services for people with chronic and disabling conditions such as HIV/AIDS, severe mental illness, and mental retardation/ developmental disability.
In addition, Medicaid is a source of funding for uncompensated care in hospitals and is a supplement to Medicare for low-income beneficiaries for whom it pays cost-sharing and wraps around for various services in addition to long-term care.
"All of these roles could be improved upon by a greater focus on wellness and health promotion as opposed to simply sick care treatment," the report said. "These goals can be achieved by relying more heavily on care management and coordination."
The governors said that for low-income relatively healthy people who rely on Medicaid as a health insurance product, the program should be transformed into a more mainstreamed SCHIP-type program that could be coordinated with state and federal tax credits.
For individuals with disabilities who have to rely on Medicaid, reforms should encourage more consumer choice and benefit packages that improve the quality of their care where possible, but not jeopardize their stability of care.
And a new national dialog is needed to confront the issues of an aging population and potential funding sources for end-of-life care, the NGA said.
Short-term fixes sought
Short-run flexibility in Medi-caid sought by the governors include the following:
- Changes to the prescription drug benefit to reduce costs to states.
- Changes to asset policy to prevent people from sheltering assets that could be used to pay for health care and to encourage reverse mortgages as a source of funds for health care costs.
- Making Medicaid more like SCHIP with state flexibility to establish any form of premium, deductible, or copay for all populations and all services.
- Giving states the ability to offer a different level of benefits to different populations, again using SCHIP as a model.
- Comprehensive waiver reforms to increase the ease with which states get current waivers, expand the ability to seek new types of changes, and change the federal statute to eliminate the need for many waivers altogether.
- Congressional and HHS authori-zation for states to make basic operating decisions about optional Medicaid categories.
- Revisions to the Medicaid partnership with U.S. commonwealths and territories that has become so unbalanced that some jurisdictions are financing more than 80% of their Medicaid costs and many expansions, such as transitional medical assistance, are not available.
Mr. Salo says that so far the most bipartisan interest has been shown in making some changes to the prescription drug benefit. And, he says, Democrat members of Congress have let it be known that cost-sharing proposals are not up for discussion.
Broader changes
In the overall health care system, the governors want Congress to establish a National Healthcare Innovation Program to support implementation of 10 to 15 state-led large-scale demonstrations in health care reform over a three-to-five year period. A core objective of the demonstrations would be use of information technology to control costs and increase quality.
Employer-based and other forms of private health insurance coverage would be strengthened by individual health care tax credits, new employer tax credits for small businesses, and a catastrophic care/reinsurance model to address unsustainable legacy costs.
The governors recommended slowing the growth of Medicaid long-term care through tax credits and deductions for long-term care insurance, partnerships between Medicaid and the long-term care insurance industry, improving access to home- and community-based care, and improving chronic care management.
As debate on the governors’ recommendations began in Congress, House Democrats attempted to stake out the high ground, charging Republicans with an "immoral" attempt to fund tax cuts for the rich through actions that would increase the suffering of the most vulnerable Americans.
Seeking bipartisan support
However, the Commonwealth Fund reported that the House Democrats’ arguments might have been weakened by statements by NGA chairman Mark Warner, also a Democrat, that Medicaid in its current form is unsustainable no matter what Republican budget priorities are.
Arkansas Republican Gov. Mike Huckabee said Medicaid is outdated, calling it a "45-rpm program in an MP3 world." Huckabee told a congressional committee that Democrat and Republican governors alike were united in their conviction that Medicaid can no longer continue in its current form.
Rep. John Dingell, ranking Democrat on the House Energy and Commerce Committee, criticized proposals to have Medicaid recipients pay more out of pocket for health care, saying they would probably lead to "no services for many." And he also was troubled by an NGA request he said would take services away from children.
In the end, Mr. Dingell warned, "the nation will pay the social costs" of such treatment of children.
"I simply don’t think Medicaid is in need of reform," said Rep. Bobby Rush (D-IL). He said that in the current Congress, "reform" always seems to be reserved for programs that aid the poor and vulnerable.
"We sit here with salaries of more than $150,000 a year, we have health care subsidized by the American taxpayer, and we are taking health care from the most vulnerable among us," complained Rep. Ted Strickland (D-OH).
States trying to avoid ruin
Republicans countered that doing nothing with Medicaid is not an option. "Some will say that any change to the system they love will hurt the poor," said Energy and Commerce Committee chairman Joe Barton (R-TX).
"The critics conveniently ignore the fact that the system is already changing as states try to avoid ruin," Mr. Barton explained.
He pointed out that between 2002 and 2005, all states reduced provider rates and implemented drug cost controls, 38 states reduced eligibility, and 34 states reduced benefits. "We must do something because doing nothing hurts Medicaid patients every day," Mr. Barton declared.
"I want to save Medicaid. If we cannot make Medicaid more affordable to states and the federal government, we will have put the beneficiaries who depend on the program at grave risk," he added.
Mr. Warner told the committee that Medicaid must be dealt with now or "it’s going to get exponentially worse over the next decade." He also said he found it frustrating that critics say the changes would harm people in need.
Mr. Warner noted that he ran into some criticism from Democrats on the committee.
Rep. Sherrod Brown (D-OH) asked Mr. Warner how he can support recipient cost-sharing as part of the NGA proposal when he had dropped a plan to charge premiums in Virginia’s SCHIP program. And Rep. Henry Waxman (D-CA) said Mr. Warner was timid in presenting NGA’s proposal, complaining about the absence of a plan to increase federal matching payments to states as a way out of the Medicaid fiscal crisis.
At a Senate Finance Committee hearing, Sen. Blanche Lincoln (D-AR) said charging low-income people more for their medical care could mean they don’t get the care they need. But Mr. Huckabee replied that the lowest income families would not have to pay more than 5% of their income on health care.
Sen. Max Baucus (D-MT) said he feared that benefits for mandatory populations might be jeopardized by the NGA proposals, but Mr. Huckabee assured him that would not be the case. The governors were asked by Sens. John Kerry (D-MA) and John Rockefeller (D-WV) to back a Democrat request to roll back tax cuts for Americans earning more than $300,000 a year.
Mr. Kerry said such a move would yield enough money to provide health care coverage for children who don’t have it and also return $6 billion to states.
But Mr. Warner replied that Mr. Kerry’s plan was "nice" but would do little to respond to rising costs of long-term care.
[For the NGA report and recommendations, go to www.nga.org. Contact Mr. Salo at (202) 624-5336.]
In their most specific and comprehensive recommendations yet, the nations governors have laid out a vision of health care policies that would reform Medicaid, enhance quality and reduce costs in the overall health system, strengthen employer-based and other forms of private health care coverage, slow growth of Medicaid long-term care, and address state contributions to the Medicare drug benefit.Subscribe Now for Access
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