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Medicaid

Medicaid. Professor Vivian Ho Health Economics Fall 2007. Topics. Coverage and Financing Current Challenges Restraining costs Improving health. 1972 17,606 1975 22,007 1985 21,814 1988 22,907 1989 23,511 1990 25,255 1995 36,282 1998 40,096

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Medicaid

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  1. Medicaid Professor Vivian Ho Health Economics Fall 2007

  2. Topics • Coverage and Financing • Current Challenges • Restraining costs • Improving health

  3. 1972 17,606 1975 22,007 1985 21,814 1988 22,907 1989 23,511 1990 25,255 1995 36,282 1998 40,096 2001 45,766 2003 51,971 $ 6,300 12,242 37,508 48,710 54,500 64,859 120,141 142,318 186,905 233,206 Medicaid Trends # of Recipients (m) Total Cost ($m) Year

  4. Medicaid Recipients, 2003 http://www.cms.hhs.gov/MedicareMedicaidStatSupp/ (2006 Edition)

  5. Medicaid Financing • Joint financing by federal and state governments • States w/ lowest per capita income receive larger federal subsidies • CA, NY receive about 52% federal funding • MS, WV receive 79.2% and 77.5% federal funding respectively

  6. Minimum requirements for federal matching funds: • Must cover Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) beneficiaries • Must provide inpatient and outpatient hospital services, and physician services

  7. State Variations • States have wide latitude in setting eligibility and medical benefits • Access and costs vary by state • Mean Medicaid fee for an office visit, new patient, 30 minutes in 2003: $54.87 (Zuckerman et al 2004) • $31.46 for established patient, 15 minutes • But wide variation across states (see Exhibit 2) • Fees well below Medicare fees in many states

  8. State Variations • Do differences in the Medicaid program across states make a difference? • See Zuckerman et al, Table 4

  9. SCHIP • State Children’s Health Insurance Program • Part of 1997 BBA • Gave federal funding to states to reduce # of uninsured children • States have considerable latitude in programs • Expand Medicaid • Develop separate children’s health insurance program • Both • SCHIP enrollment 3.9m in Dec 2004 • Income eligibility levels vary from 300% of federal poverty level in Connecticut, to 133% in Wyoming

  10. Medicaid & the Nursing Home Market • Individuals who meet certain low-income and disability requirements qualify for nursing home care covered by Medicaid • Medicaid reimburses nursing homes on a fixed price basis (e.g. price per day)

  11. Medicaid & the Nursing Home Market • How can the Medicaid program set prices in order to insure adequate access, but also restrain costs? • Keep in mind that nursing homes can choose to serve private pay or Medicaid patients

  12. Medicaid & the Nursing Home Market • We assume that most nursing homes have a local monopoly • i.e. Most nursing homes face a downward sloping demand curve • A nursing home with monopoly power which serves only private-pay patients will set price where MR=MC

  13. Medicaid & Nursing Homes $ MC P0 ATC Demand MR Q0 NH patient days

  14. Medicaid & the Nursing Home Market • Now, assume instead that there are no private patients, and the gov’t must set a reimbursement level for care provided to Medicaid patients • If the gov’t wants care provided at the lowest possible cost per day, it will choose a price equal to the minimum of the average total cost curve

  15. Medicaid & Nursing Homes $ MC ATC MRM PM Demand MR Q3 NH patient days

  16. Medicaid & the Nursing Home Market • Now, consider the graph when a nursing home can serve private pay patients and/or Medicaid patients • The demand curve for private pay patients indicates that some are willing to pay more than PM for nursing home care

  17. Medicaid & Nursing Homes The nursing home will now view its MR curve as the line ABMRM $ MC A ATC MRM PM B Demand MR Q3 NH patient days

  18. Medicaid & the Nursing Home Market • For all private pay patients “up to” point B on the MR curve, the nursing home knows that its MR will be greater than the Medicaid reimbursement rate • Thus, for private pay patients, the nursing home no longer prices at MR=MC. Instead, it serves the number of private pay patients “at” point B

  19. Medicaid & Nursing Homes The nursing home will care for Q1 private pay patients and Q3-Q1 Medicaid patients. $ MC A P0 ATC MRM PM B Demand MR Q1 Q3 NH patient days

  20. Medicaid & the Nursing Home Market • Policy challenge: Medicaid can increase access to nursing homes by raising PM • However, raising the reimbursement rate will lead to higher expenditures • Some patients who might have been willing to pay out-of-pocket without Medicaid now may get Medicaid coverage • Gov’t attempts to subsidize care for low-income individuals can lead to “crowd-out” of private care

  21. Does Medicaid “work?” • In late 1980’s, income ceilings for Medicaid coverage were raised • Pregnancy care for women with incomes <133% of poverty • Children <6 covered if family income <133% of poverty • Children <9 covered if family income <100% of poverty

  22. Did health insurance coverage for the poor increase, or did it “crowd out” private insurance? • Some low income people may have dropped private insurance to go on Medicaid • Did health status among the poor improve?

  23. 1987-1992: Medicaid coverage of children rose (15%21%), but private insurance coverage fell (77%69%) • But private insurance may have fallen for other reasons (e.g. 1990-91 recession) • States could increase eligibility beyond federal minimums • Compare increases in Medicaid coverage and falls in private insurance across states

  24. Results • The Medicaid expansion increased coverage for 1.5 million children • But decreased private insurance by .6 million • Similar results for women of childbearing age • The expansions lowered infant mortality by 8.5%; child mortality by 5.1% • Cost per life saved: $1-1.6m

  25. Was the expansion worth it? • Should Medicaid be “better targeted?” • In 2002, Medicaid surpassed Medicare as nation’s largest health insurance program • Could we have gotten the same result cheaper?

  26. Current challenges to Medicaid • Rising Medicaid costs have strained state budgets during recessions • Problematic, because most state governments required by law to balance their budgets • Many states have made Medicaid program changes

  27. 1) Modest reductions in funding • Lower physician, nursing home reimbursement rates • Limits on prescription drug use • Noncoverage of optical, dental care 2) Expansion of Medicaid managed care 3) Cost shifting to the federal government • States shifting all state-run health programs into Medicaid, in order to receive matching funds

  28. Medicaid and Managed Care • States vary widely in financing and delivery arrangements for managed care plans • Low-intensity: primary care case management (PCCM) • Gatekeeper bears no risk for cost overruns • High-intensity: mandatory enrollment in fully capitated plans

  29. Impact of Medicaid managed care • Medicaid managed care grew rapidly in mid 1990s due to attractive business opportunities • “Foot in the door” for providing state employee health care coverage • Insurers didn’t have to pay commercial rates to providers, could also transfer risk • HMO industry was making high profits at this time

  30. Impact of Medicaid managed care • In early 2000’s, HMO profits disappeared • Mirrors problems w/ health care costs in private sector and Medicare • Still have 2-fold variation in capitation rates across states • Difficult to monitor quality • TennCare had significant differences in LBW babies and death in 1st 60 days across its Medicaid managed care programs

  31. Future challenges to Medicaid • HMOs have enrolled AFDC beneficiaries, but not the higher cost elderly, or chronically disabled • High-cost populations may require carve-out programs

  32. Eligibility, Marketing, and Enrollment • Intermittent eligibility as enrollees cycle in and out of welfare • High turnover forces HMOs to market aggressively, to maintain revenues (costs up to 1 month’s capitation per member)

  33. Traditional providers may not be able to compete with commercial HMOs • Community health centers, urban hospital outpatient programs, indigenous community-based physicians have provided much care to Medicaid beneficiaries • Subsidized in past due to high level of uncompensated care • If forced to close, creates access problems for persons w/o coverage

  34. Wrap-up • Funding the Medicaid program provides health benefits, but sometimes at significant costs • Future decisions on Medicaid should be made within the context of wider welfare reform

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