Medicaid

1
Medicaid

• Professor Vivian Ho
• Health Economics
• Fall 2009

2
Topics

• Coverage and Financing
• Current Challenges
• Restraining costs
• Improving health

3
Medicaid Trends
of Recipients (m)
Total Cost (m)
Year

• 6,300
• 12,242
• 37,508
• 48,710
• 54,500
• 64,859
• 120,141
• 142,318
• 186,905
• 298,200

• 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
• 2005 57,300

4
Medicaid Recipients, 2005
http//www.cms.hhs.gov/MedicareMedicaidStatSupp/
(2008 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 50 federal funding
• MS, WV receive 76 and 72.99 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 Childrens 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 childrens health insurance
  program
• Both
• SCHIP enrollment gt7m in 2007.
• 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)

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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
  MRMC

13
Medicaid Nursing Homes

MC
P0
ATC
Demand
MR
NH patient days
Q0
14
Medicaid the Nursing Home Market

• Now, assume instead that there are no private
  patients, and the govt must set a reimbursement
  level for care provided to Medicaid patients
• If the govt 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
NH patient days
Q3
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
NH patient days
Q3
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 MRMC. 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
NH patient days
Q3
Q1
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
• Govt attempts to subsidize care for low-income
  individuals can lead to crowd-out of private
  care

21
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23
Does Medicaid work?

• In late 1980s, income ceilings for Medicaid
  coverage were raised
• Pregnancy care for women with incomes lt133 of
  poverty
• Children lt6 covered if family income lt133 of
  poverty
• Children lt9 covered if family income lt100 of
  poverty

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• 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?

25

• 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

26
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

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Was the expansion worth it?

• Should Medicaid be better targeted?
• In 2002, Medicaid surpassed Medicare as nations
  largest health insurance program
• Could we have gotten the same result cheaper?

28
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

29

• 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

30
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

31
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 didnt have to pay commercial rates to
  providers, could also transfer risk
• HMO industry was making high profits at this time

32
Impact of Medicaid managed care

• In early 2000s, 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

33
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

34

• 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 months
  capitation per member)

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• 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

36
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