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Medicaid: Front and Center in the Policy Debate

Medicaid: Front and Center in the Policy Debate. Presented by: Robin Rudowitz Senior Associate, Kaiser Commission on Medicaid and the Uninsured Presented to: Grant Makers in Health November 15, 2005. Why is Medicaid at the Center of State and Federal Budget Debates?.

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Medicaid: Front and Center in the Policy Debate

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  1. Medicaid: Front and Center in the Policy Debate Presented by: Robin Rudowitz Senior Associate, Kaiser Commission on Medicaid and the Uninsured Presented to: Grant Makers in Health November 15, 2005

  2. Why is Medicaid at the Center of State and Federal Budget Debates? • Pressures in health care system • Rising health care costs • Rising numbers of uninsured • Aging population • State fiscal pressures • Slow revenue growth in recovery • Medicaid spending increases outpacing revenue growth • Intense focus on Medicaid cost containment for several years • Federal fiscal pressures • Growing federal deficit • Pressure to cut deficit and extend tax cuts • Interest in reducing federal spending on Medicaid

  3. Part I: Medicaid’s Role

  4. Medicaid Today • Medicaid provides health and long-term care coverage for over 52 million low-income people: • Comprehensive, low-cost health coverage for 39 million people in low-income families • Acute and long-term care coverage for over 13 million elderly and persons with disabilities, including over 6 million Medicare beneficiaries • Guarantees coverage to eligible individuals and federal financing to states • Federal and state expenditures of $300 billion—with federal government funding 57% • States determine eligibility levels, covered benefits, provider payments within federal guidelines

  5. Medicaid’s Role for Selected Populations Percent with Medicaid Coverage: Families Aged & Disabled Note: “Poor” is defined as living below the federal poverty level, which was $14,680 for a family of three in 2003. SOURCE: Kaiser Commission on the Uninsured (KCMU) and Urban Institute estimates; Birth data: NGA, MCH Update.

  6. Medicaid Enrollees are Poorer and Sicker Than The Low-Income Privately Insured Population Percent of Enrolled Adults: Low-Income and Privately Insured Medicaid Poor Health Conditions that limit work Fair or Poor Health SOURCE: Coughlin et. al, 2004 based on a 2002 NSAF analysis for KCMU.

  7. Medicaid Covered Many Individuals, Especially Children, Who Would Have Otherwise Been Uninsured Low-Income Adults Low-Income Children Note: Low-income is defined as below 200% of the federal poverty level ($29,360 for a family of three in 2003). SOURCE: KCMU and Urban Institute analysis of March 2004 Current Population Survey data.

  8. Part II: Medicaid Spending

  9. Medicaid’s Role in the Health System, 2003 Medicaid as a share of national personal health care spending: Total National Spending (billions) $1,441 $516 $542 $111 $179 SOURCE: Smith, et al, 2005. Based on National Health Care Expenditure Data, CMS, Office of the Actuary.

  10. Medicaid Expenditures by Service, 2003 DSH Payments 5.4% Home Health and Personal Care 13.0% Inpatient Hospital 13.6% Ambulatory Care 10.4% Long-Term Care 35.9% Acute Care 58.3% Nursing Facilities/ ICF/MR/ Mental Health 22.9% Drugs 10.0% Other Acute 6.3% Managed Care Payments 15.6% Medicare Premiums 2.3% Total = $266.1 billion SOURCE: Urban Institute estimates based on data from CMS (Form 64), prepared for the Kaiser Commission on Medicaid and the Uninsured.

  11. Medicaid Enrollees and Expendituresby Enrollment Group, 2003 Elderly 9% Elderly 26% Disabled 16% Adults 27% Disabled 43% Children 48% Adults 12% Children 19% Total = 52.4 million Total = $252 billion Note: Total expenditures on benefits excludes DSH payments. SOURCE: Kaiser Commission on Medicaid and the Uninsured estimates based on CMS, CBO, and OMB data, 2004.

  12. Medicaid Payments Per Enrolleeby Acute and Long-Term Care, 2003 $12,800 $12,300 Long-Term Care Acute Care $1,900 $1,700 SOURCE: KCMU estimates based on CBO and Urban Institute data, 2004.

  13. Medicaid Fills in for Medicare’s Gaps Medicare Beneficiaries (Dual Eligibles) 42.4% Total 2002 Expenditures = $214.9 billion Source: Bruen B, Holohan J. “Shifting the Cost of Dual Eligibles: Implications for States and the Federal Government.” Kaiser Commission on Medicaid and the Uninsured, November 2003.

  14. Medicaid Spending Growth, 1996-2006 Economic Downturn, Enrollment & Cost Growth, 2000-2003 Health Care Cost Growth 1998-2000 Start Economic Recovery, Slower Enrollment Growth 2004-2006 Strong Economy, Welfare Reform, Enrollment Declines, Managed Care 1995-1998 * NOTE: Estimates in State Fiscal Year. FY 2006 estimate based on states adopted FY 2006 budget. SOURCE: KCMU analysis of CMS Form 64 Data and KCMU / HMA State Budget Survey, 2005

  15. Medicaid Spends Less Per Capita than Private Insurance Per capita expenditures (in 2001 dollars) based on non-disabled population Adults Children Note: “Low income” defined as income below 200% of the Federal Poverty Level. “Children” defined as age 0-18. “Non-disabled” defined as those not reporting any limitations. SOURCE: Analysis of MEPS data from 1996, 1997, 1998, and 1999; Hadley and Holahan, Inquiry, Vol. 40, No. 4 (Winter 2003/2004).

  16. Per Capita Medicaid Spending Growth Compared to Growth in Private Health Spending, 2000-2003 1Strunk and Ginsberg, 2004 2Kaiser/HRET Survey, 2003 SOURCE: John Holahan and Arunabh Ghosh, “Understanding the Recent Growth in Medicaid Spending, 2000-2003,” Health Affairs Web Exclusive, 26 January 2005

  17. Part III: State Medicaid Spending and Policy Initiatives

  18. Medicaid Spending In the States, 2004 State General Fund Spending $516 billion Federal Funding Spent by States $358 Billion State $ State $ SOURCE: National Association of State Budget Officers, 2003 State Expenditure Report

  19. Underlying Growth in State Tax Revenue Compared with Average Medicaid Spending Growth, 1997-2005 NOTE: State Tax Revenue data is adjusted for inflation and legislative changes.Preliminary estimate for 2005. SOURCE: KCMU Analysis of CMS Form 64 Data for Historic Medicaid Growth Rates and KCMU / HMA Survey for 2005 Medicaid Growth Estimates; Analysis by the Rockefeller Institute of Government for State Tax Revenue.

  20. Regional Variation in State Revenue Recovery, 2004-2005 SOURCE: Preliminary Estimates, Rockefeller Institute of Government

  21. Increase (9 states) 29 States Face a Decline in their Federal Medical Assistance Percentage (FMAP) in FY 2006 Decrease (29 states) No Change (12 & DC states) SOURCE: Federal Register, November 24, 2004 (Vol. 69, No. 226), http://aspe.os.dhhs.gov/health/fmap06.htm

  22. States Anticipate Challenges Related to Implementation of Medicare Part D • As of 1/1/06 Medicaid drug coverage for duals will end and Medicare Part D coverage begins • Duals will be randomly assigned to a Medicare drug plan • Many states expect increased costs, administrative responsibilities and challenges for beneficiaries • Costs associated with “Clawback” payments and new Medicaid enrollment • Challenges helping duals understand the transition to Medicare Part D • Administrative responsibilities related to low-income subsidy

  23. States Undertaking New Medicaid Cost Containment Strategies FY 2002 – FY 2006 NOTE: Past survey results indicate not all adopted actions are implemented. SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, September and December 2003, October 2004 and October 2005.

  24. States Undertaking Increases/Expansions in FY 2005 and FY 2006 SOURCE: KCMU survey of Medicaid officials in 50 states and DC conducted by Health Management Associates, October 2005.

  25. Some States Are Proposing Fundamental Restructuring of Medicaid Coverage • Some states are expanding coverage or restoring previous cuts (Illinois, Washington, Texas) • Other states are cutting back substantially • Tennessee - eliminate coverage for adult expansion groups (226,000) • Missouri - reducing income eligibility for parents and aged and disabled beneficiaries (70,000) • Florida - eliminate coverage non-institutionalized Medicare eligible beneficiaries (77,000) • Mississippi - eliminate coverage for aged and disabled between 100-133% FPL (65,000) • Still other states are proposing complete restructuring • Vermont has asked federal government for cap on federal Medicaid funding in exchange for flexibility • Florida and South Carolina – defined contribution / not defined set of benefits

  26. When People are Disenrolled From Medicaid, Most Become Uninsured Coverage of Individuals Disenrolled from Oregon Medicaid’s OHP Standard Program Source: Carlson, M. and B. Wright, “The Impact of Program Changes on Enrollment, Access, and Utilization, in the Oregon Health Plan Standard Population,” March 2005.

  27. Part IV: Medicaid Debate Unfolding at Federal Level

  28. Net Medicaid and Medicare Spending Reductions over 5 Years $ Millions $10,006 $9,324 Medicare Medicaid Medicaid SOURCE: CBO

  29. Savings from Reducing Medicaid Drug Costs andPayments to Medicare Managed Care Plans over 5 Years $ Millions SOURCE: CBO

  30. Medicaid Spending Reductions Over 5 Years,by Category ($ in millions) $13,350 Cost-Sharing Benefit Package $8,007 Prescription Drugs Long-Term Care Other Note: “Other” provisions include targeted case management, third-party recovery, provider taxes (House and Senate), and requiring evidence of citizenship (House only) SOURCE: CBO

  31. Beneficiary Impacts of House Energy and Commerce Package CBO Estimates: • 17 million affected by cost sharing changes by 2015 • 11 million subject to new cost sharing requirement (half are children) • 6 million subject to increases in cost sharing • Savings generate from reduced utilization of services • 2 million affected by premium changes by 2015 • 110,000 would lose coverage • 5 million affected by benefit changes by 2015 • Half would be children

  32. Future Outlook • Reconciliation • Will the House pass the spending cuts package? • Will there be an agreement between the House and Senate? • Will the compromise look more like the House or Senate? • Secretary’s Medicaid Commission is to make long term recommendations on “the future of the Medicaid program that ensures the long-term sustainability of the program” by December 2006. Recommendations could include: • Capped federal funding • Enrollment caps; no guarantee of coverage • “Private health accounts” modeled on South Carolina/Florida • Significantly increased cost sharing and premiums • Tax credits • Limited benefits packages

  33. Under Capped Federal Funds… • How will states meet the growing cost of health care? • How will states continue efforts to cover the uninsured? • How will states maintain adequate benefits ensure that coverage remains affordable to low-income people? • How will provider payments be improved? • How will states meet the challenge of an aging population? • How will states respond to unanticipated public health emergencies?

  34. Medicaid Restructuring: What is at Stake Health Insurance Coverage 25 million children and 14 million adults in low-income families; 6 million persons with disabilities Assistance to Medicare Beneficiaries 7 million aged and disabled — 18% of Medicare beneficiaries Long-Term Care Assistance 1 million nursing home residents; 43% of long-term care services MEDICAID Support for Health Care System 17% of national health spending State Capacity for Health Coverage 43.5% of federal funds to states

  35. Topics and Methods for Research • Research Topics • Experience of the uninsured and ways to expand coverage • Impact of proposed and implemented changes in Medicaid policies on beneficiaries and safety-net providers • Impact of the implementation of Medicare Part D on low-income Medicare beneficiaries and dual eligibles • Role of Medicaid for access to long-term care and mental health services • Research Methods • Put a “face” on Medicaid beneficiaries and the uninsured through focus group studies and longitudinal analysis of individual experiences • Promote public dialogue about Medicaid through discussion forums • Fund projects to assess and evaluate the impact of proposed and implemented Medicaid changes • Conduct state/local surveys designed to assess public opinion about Medicaid and proposed changes

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