Jeffrey S. Crowley, M.P.H. Project Director Health Policy Institute, Georgetown University 2233 Wisconsin Avenue, N.W.,

1. Preparing for the Coming Medicaid Debate: Defending the Single Most Important Program for Meeting the Health and Long-Term Services Needs of People with Disabilities Jeffrey S. Crowley, M.P.H. Project Director Health Policy Institute, Georgetown University 2233 Wisconsin Avenue, N.W., Suite 525 Washington, DC 20007 (202) 687-0652/(202) 687-3110 F jsc26@georgetown.edu CCD Co-Chairs Meeting • January 6, 2005

2. Medicaid is being set up as a bogeyman Medicaid’s detractors and critics have selectively used facts to claim: • Medicaid is broken • Medicaid spending is out of control • Medicaid is crowding out other state priorities—such as education • Medicaid provides a Cadillac benefits package when the nation can only afford a Chevy • Medicaid, in its current form, is unsustainable

3. Proposals to restructure Medicaid will be raised during the year ahead • Federal Changes • “Entitlement Caps” (across the board cuts in entitlement programs) • Block Grants (Global Caps, Per Capita Caps) • Waivers (could used to achieve policy objectives on a state-by-state basis that Congress would not support) • Federal Processes • President’s Budget Submission (indication of President’s priorities) • Budget Resolution (blueprint to determine spending and revenue levels for the federal budget – may require spending reductions without naming Medicaid – adopted with simple majority vote, no filibuster) • Budget Reconciliation (can pass legislation with simple majority vote, no filibuster) • State Level Changes • Additional cost containment strategies • 1115 Waivers

4. Certain policy options may frame the debate about Medicaid restructuring • Entitlement Cap • Policy proposed in the 108th Congress to limit federal spending on entitlement programs (i.e. Medicaid and Medicare) to require across the board reductions in spending. Coming after a period of successive years of greater efforts to control Medicaid spending, even a seemingly small cut could be devastating • Block Grant • Policy that would change Medicaid from an open-ended financing system to one that limits the level of federal funding. Could result in a huge cost shift to states and could harm beneficiaries by leading to severe benefits cuts orextreme eligibility restrictions • Waivers • Authority given by Congress to the Secretary of HHS to waive (or disregard) provisions of the law (such as requirements that services be comparable or statewide, or that services must be sufficient in amount, duration, and scope) • Waivers have been used to innovate in the delivery of health care (i.e. Home- and Community-Based Services (HCBS) waivers) and to expand Medicaid coverage to previously uninsured populations. Recently, waivers have been used to limit coverage or weaken protections for current beneficiaries

5. To address Medicaid’s real challenges, we need a new narrative We need to tell the story of Medicaid’s success: • Medicaid works for people with disabilities • Medicaid supports national health policy goals • Medicaid allows other parts of the health system to function • Medicaid is a good deal for states • Even in tight fiscal times, Medicaid is a good investment

6. Medicaid Works forPeople with Disabilities While improvements are needed, no major public program has been more responsive to the needs of people with disabilities than Medicaid • Provides health care coverage to more than 52 million low-income people in the United States, including more than 8 million people with severe disabilities • Largest source of financing for long-term services and covers nearly 70% of nursing home residents and pays for nearly half of all nursing home spending • EPSDT benefit provides for screening, early detection, and treatment of disabilities and other health conditions in children • Largest source of health coverage for people with HIV/AIDS and largest funder for state and local spending on mental health services • Medicaid covers services needed by people with disabilities that the private market, Medicare, and SCHIP do not cover (So-called “optional” services are generally disability services) • Open-ended financing and flexibility in the Medicaid law has permitted states to innovate and improve the delivery of services to people with disabilities (e.g. Katie Beckett option, HCBS waivers, Medicaid buy-in programs) • Enforceable right to coverage ensures access to critical services

7. Current Medicaid Financing Federal & state governments share financial responsibility and risk States set spending levels Incentives for states to control costs Federal government reimburses states based on the match rate Federal matching funds are guaranteed entitlement to states No set limits helps states manage unpredictable economic conditions and demographic changes Supports entitlement to coverage Not subject to federal appropriations Matching system plays an vital role Creates incentives for states to take up federal options Discourages cuts in Medicaid The current Medicaid financing structure supports national health care objectives • National Healthcare Objectives • Provides health coverage to low-income families • Fills in the gaps in Medicare coverage • Serves as the nations principal source of coverage for long-term care and mental health services • Helps states respond to economic downturns and public health epidemics and disasters like HIV/AIDS • Provides essential financing for urban and rural health care providers and disability services providers K A I S E R C O M M I S S I O N O N Medicaid and the Uninsured

8. Medicaid enables all other parts of the healthcare system to work Private Health Insurance Relies on Medicaid to help keep premiums lower by covering high-cost cases and services Medicare Relies on Medicaid to finance half the care for low-income beneficiaries (even after Medicare Part D is implemented) MEDICAID Safety-Net Hospitals and Clinics Rely on Medicaid to support ER capacity and for revenues from beneficiaries and direct subsidies Public Health Infrastructure Relies on Medicaid to support immunization programs, respond to pressing epidemics (like HIV/AIDS) and bioterrorism K A I S E R C O M M I S S I O N O N Medicaid and the Uninsured

9. Federal Medicaid financing is a good deal for states • The federal government matches state spending. • Depending on the relative wealth of the state, the federal government’s share of Medicaid costs ranges from 50% up to a statutory maximum of 83%. • In 2005, 13 states had a 50% Federal Medical Assistance Percentage (FMAP) of 50% (CA, CO, CT, DE, IL, MA, MD, MN, NH, NJ, NY, VA, and WA). In these states, $1 of state Medicaid spending produces $1 of federal Medicaid support for the state. • In 2005, Mississippi has the highest FMAP of roughly 77%. In MS, $1 of state Medicaid spending produces roughly $3.35 of federal Medicaid support for the state. • Best deal states have, and largest source of federal funding for states. Matched financing has led states to shift health care spending to Medicaid to maximize federal support.

10. Criticisms distort Medicaid’s true record Critics have said: • MYTH: Spending is out-of-control • FACT: Medicaid spending has been increasing more slowly than the private market. From 2002-2004, per person Medicaid spending rose 6.7%, almost half the rate of the private market (12.5%) despite serving a sicker and needier population (CBO estimates and Kaiser Family Foundation/HRET survey of employer-sponsored health benefits, 2004) • MYTH: Medicaid eclipses state spending on education • FACT: In FY 2003, Medicaid spending comprised 16.5% of state general fund expenditures, less than half of state spending on elementary and secondary education (35.5%). (State Expenditure Report: 2003, National Association of State Budget Officers, October 2004) States often exaggerate Medicaid spending by counting federal Medicaid payments. • MYTH: Medicaid is a drain on state resources • FACT: A review of 17 studies on the economic impact of Medicaid showed that every study found that Medicaid generates state and local economic activity. (The Role of Medicaid in State Economies: A Look at the Research, Kaiser Commission on Medicaid and the Uninsured, April 2004.) Using a Department of Commerce model, Families USA found that in 2005, the return on every state dollar spent on Medicaid results in $1.92 to $6.22 in new economic activity, depending on the state. On average, Medicaid generates nearly 70,000 jobs per state. (Medicaid: Good Medicine for State Economies, 2004, Families USA, May 2004)

11. Most current challenges arebigger than Medicaid The major financing issues facing Medicaid programs stem from problems that are bigger than Medicaid and call for broader national solutions. Unresolved issues include: • Controlling health costs (across all payers) that consistently rise faster than inflation • Controlling escalating prescription drug costs • Financing access to new medical technology • Establishing a system for financing long-term services for moderate income people (which would take the pressure of Medicaid, thereby allowing it to focus on the low-income population) • Adapting to demographic changes that are increasing the demand for public services when fewer workers are able to support such services

12. Opportunities exist to improve Medicaid While Medicaid requires a continued large investment of public resources, opportunities exist to make Medicaid stronger and take pressure off the program. Bipartisan efforts could be focused on: • Controlling rising drug costs by increasing rebates and building on successful state efforts to manage pharmacy costs • Rebalancing the long-term care system to comply with the Olmstead mandate and to employ cheaper and better models of delivering long-term services—without undermining core Medicaid protections • Taking pressure off states by shifting more costs to Medicare for services for dual eligibles

13. Financing services for Medicare beneficiaries is a burden on states About 42 percent of all Medicaid spending forbenefits is for dual eligibles Non-Prescription ($82.7 Billion) 36% Spending on Dual Eligibles 42% Spending on Other Groups ($136.7 Billion) 59% 6% Prescription Drugs ($13.4 Billion) 6% 2002 Total Spending on Benefits = $232.8 Billion SOURCE: Urban Institute estimates prepared for KCMU based on an analysis of 2000 MSIS data applied to CMS-64 FY2002 data.

14. Medicaid defenders have a few factors working in their favor Medicaid is a critical program that serves the national interest. People working to protect the program can be heartened by: • Our track record • Efforts have been made to block grant Medicaid in 1981, 1995, and 2003. Medicaid’s defenders have succeeded in protecting the program by working together and reminding policy makers of the important role of Medicaid • Broad range of stakeholders • Past efforts to weaken or restructure Medicaid have been thwarted, in part, by the collective efforts of a large number of stakeholders and interests affected by the program. In addition to beneficiaries, doctors, hospitals, clinics, pharmaceutical manufacturers, medical supplies providers, health care workers, and others have spoken out in support of Medicaid • We have the better story to tell • While we can defend Medicaid by telling innumerable stories of the lives saved or improved by Medicaid, proponents of restructuring cannot promise something better. Rather, they argue that the program is broken, Medicaid is too generous, or poorly run—without offering a more positive alternative

15. Success will require anunprecedented response CCD should be proud of the work of the Health and Long-Term Services Task Forces. Nonetheless, we must still do things we have never done before. • Every disability organization must make defending Medicaid a priority. Not just health staffers, but senior leadership must be prepared to continually tell the positive story of Medicaid’s essential role for people with disabilities • New resources are needed. This includes money and staff time • State groups are critical. In addition to day-to-day legislative work, federal lobbyists must support state and local groups to become engaged in federal (and state) Medicaid issues • Reaching out to the media—and giving state and local affiliates the tools to reach out to the media—will be critical • Whether it is in the context of a budget battle or a block grant fight, we need to make the debate about Medicaid—and make it personal