Making the Case Against Medicaid Cuts

1
Making the Case Against Medicaid Cuts

• Michael Miller
• Community Catalyst/ Alliance for a Healthy New
  England Research Center
• Presented at the Alliance for a Healthy New
  England Summit
• December 2002

2
Community Catalyst is a national advocacy
organization that builds consumer and community
participation in the shaping of our health system
to ensure quality, affordable health care for
all. Community Catalysts work is aimed at
strengthening the voice of consumers and
communities wherever decisions shaping the future
of our health system are being made. Community
Catalyst strengthens the capacity of state and
local consumer advocacy groups to participate in
such discussions. The technical assistance we
provide includes policy analysis, legal
assistance, strategic planning, and community
organizing support. Together were building a
network of organizations dedicated to creating a
more just and responsive health system.

• Community Catalyst, Inc.
• 30 Winter Street, 10th Fl.
• Boston, MA 02108
• 617-338-6035
• Fax [phone]
• www.communitycatalyst.org

Electronic copies of this presentation are
available by calling 617-275-2892. Organizations
seeking to distribute or otherwise make
widespread use of this publication are asked to
notify Community Catalyst.
Alliance for a Healthy New England is a six-state
initiative bringing health access and tobacco
control advocates together to campaign for
tobacco tax increases to expand health care
access from health advocates around the country.
3
Medicaid is at Risk

• Worst State Fiscal Crisis Since the 1940s
• Health Care Spending Increasing (Medicaid grew by
  13.2 in SFY 02, fastest since 92)

4
Why Do We Care?

• Covers 47 million Americans (more than Medicare)
• Pays for 1/3 of all births
• Covers 20 of all children
• Pays for over ½ of all HIV/AIDS and mental
  health/ substance abuse care
• Pays for 42 nursing home care
• Pays for treatment of about 20 of all
  tobacco-related illness

5
The Case Against Medicaid Cuts(In General)

• Hurt vulnerable populations
• Undermine the health care system for everyone
• Hurt the economy
• Are a high pain/ low gain strategy to achieve
  budget balance

6
Cuts hurt vulnerable populations

• If they lose coverage, children, seniors, people
  with disabilities and other low
• income adults are more likely to
• have unmet medical needs, no usual source of
  care, and skip medical visits or filling a
  prescription because of inability to pay if they
• be diagnosed later, hospitalized for conditions
  that could be treated in less intensive settings,
  and die from their illnesses than are the insured
• incur catastrophic costs (more than 20 of family
  income) than the insured
• (In the current budget climate this is the least
  effective argument in the abstract, but
• can still be powerful if humanized)

7
Cuts undermine the health care system for
everyone, not just the poor

• Increase ER Crowding
• Increase the burden of uncompensated care
  (particularly for hospitals)
• Reduce number of caregivers

8
Emergency Room Crowding

• A growing national problem (majority of ERs in
  country are at or over capacity)
• Rising numbers of uninsured are a major
  contributor
• Uninsured are
• More likely to use ER as usual source of care
• Spend more time in hospitals for conditions that
  could be treated in an ambulatory setting

9
Cuts increase the burden of uncompensated care

• Estimates vary from 25 to 75 of every dollar
  saved from cutting eligibility is shifted onto
  providers.
• Cost shift can easily exceed net state savings
• Part of the cost is passed on in the form of
  higher insurance premiums, part is absorbed in
  the form of weaker financial status of hospitals
• Increasing co-payments also increases
  uncompensated care since co-payments are
  uncollectable in many cases

10
Cuts reduce the number of paid caregivers

• Healthcare is a significant employment sector in
  NE (ranging from a low of 5.9 of workforce in VT
  to 9.2 in RI)
• Medicaid finances about 15 of the health care
  workforce
• Depending on the sector, a Medicaid cut can
  undermine the economic viability of a provider,
  eliminating that service for all

11
Cuts Hurt the Economy

• Job loss
• Income loss
• Increased personal bankruptcies
• Lost tax revenue
• Higher health insurance premiums

12
Medicaid cuts cost jobs and income

• When Medicaid is cut, federal funds are withdrawn
  from the
• state. For example, a South Carolina study found
  that the
• 2.1 billion the state received in federal
  matching funds in
• 2001 generated an additional 1.5 billion in
  total income and
• more than 61,000 jobs. A 4 cut in Medicaid would
  cost
• over 2,400 jobs and 60,000,000 in income.

13
Increased Personal Bankruptcies

• Reducing Medicaid coverage increases the number
  of
• uninsured, leading to increased defaults on
  consumer
• debt and household obligations that affect
  retailers,
• landlords and other sectors of the local economy

14
Lost Tax Revenue

• Federal matching funds also generate a modest
  amount of state tax revenue. An analysis in
  Kentucky found that every that for every 10
  million in FFP the state gained about 600,000 in
  tax revenues (in addition to 21 million in net
  output and 9.2 million in increased earnings).
  A recent analysis in Massachusetts found a
  similar effect.

15
A High Pain/Low Gain Strategy

• At least 2 in services must be cut for every
  nominal dollar saved
• FFP is lost but costs remain and are shifted
  elsewhere
• Real savings are further reduced by
• Lost tax revenue
• Cost shifts to other state or local government
  programs that do not receive ffp

16
Cuts often backfire

• Elimination of coverage for some services can
  lead to substitution of other more expensive ones
  (e.g. increasing demand for inpatient and nursing
  home care)
• Increasing co-pays, particularly on services like
  Rx can also lead to increased ER and hospital use

17
Redefining the Problem I

• Its a revenue problem Yes, Medicaid spending is
  up, but the real reason for the state budget
  crisis is declining revenue.
• Solution raise revenue dont cut Medicaid (and
  other health programs). tax increases on
  higher-income families are the least damaging
  mechanism for closing state fiscal deficits in
  the short runReductions in government spending
  on goods and services, or reductions in transfer
  payments to lower income families, are likely to
  be more damaging in the short run according to
  Brookings economist Peter Orszag and Nobel Prize
  winner Joseph Stiglitz

18
Redefining the Problem II

• Its a Medicare Problem 35 total Medicaid
  spending is paying for services for Medicare
  eligibles that Medicare doesnt cover, mainly
  drugs and long term care.
• Solution Congress must enact meaningful
  Medicare reform that covers drugs and long term
  care services and improves eligibility for people
  with disabilities

19
Alternatives to Cuts(Savings that Dont Hurt
Beneficiaries)

• Reduce drug spending
• Improve care/disease management
• Primary prevention
• Maximize federal funds
• Reasonable overpayment and fraud control efforts

20
Reduce Rx Spending

• Careful use of Preferred Drug Lists
• Auditing actual prices paid for Rx
• Better disclosure of true cost of drugs

21
Primary Prevention

• Reducing the incidence of tobacco related
  illness, HIV,
• and other preventable diseases is key to reducing
  
• Medicaid spending over the long term but modest
• short term savings are also available from
  reductions
• in low birth-weight babies, reduced asthma
  related
• hospitalizations, etc.

22
Improve Care Management(Examples)

• High risk pregnancy and asthma in VA
• Coodinated care for disabled/ chronically ill
  (PACE and CMA models)
• Home visits to frail elders in Los Angeles
• Increase physician (or nurse practitioner)
  presence in LTC facilities

23
Maximize Federal Funds

• Certain services provided by other state agencies
  (e.g.case
• management, mental health, school health
  services) can be
• classified as Medicaid services and draw down
  federal
• match
• (Caution successful use of this approach makes
  your
• Medicaid program look bigger)

24
Better Payment Controls

• To the extent that the Medicaid payment error
  rate is similar to Medicares states may be
  losing as much as 20 billion. In addition, no
  state is maximizing available federal support for
  Medicaid fraud control. Stepped up payment
  oversight is likely to yield at least modest
  savings (Caution efforts to recover improper
  payment should not degenerate into provider
  harassment)

25
Concluding Comments

• We need to make a strong substantive case against
  cutting Medicaid
• We need to make the political case against cuts
• We need to offer alternatives to cuts
• There is no silver bullet but it is possible to
  achieve a moderate level of savings without
  hurting beneficiaries. However
• Revenue increases must be part of the solution
• Some savings take time to show up
• Over the long term, the federal role in financing
  care for the elderly and disabled must increase.