Health Care Reform will Add to Medicaid's Importance; Help Maryland

Medicaid, the little health program that could, has already grown to be the single largest provider of health coverage in the nation. Over 60 million Americans, mostly children, receive their health coverage through Medicaid. Though it covers more people, Medicaid is often overshadowed by the more well known and more popular Medicare. Part of that lack of recognition stems from the fact that Medicaid is a state/federal partnership. The federal government establishes program regulations and provides at least half of the funding, but states are required to administer the program and have a certain degree of freedom to tailor it to their needs. In that regard Medicaid is actually 50 different programs.


If health reform is enacted (including Senate passage of the reconciliation bill), Medicaid will likely eclipse Medicare in name recognition. The legislation pending in Congress seeks to insure an additional 32 million Americans - and half of them would receive coverage via Medicaid. As currently structured, federal regulations limit the program's availability to childless adults - no matter how poor. But health reform would expand Medicaid to every American with income at or below 133% of the federal poverty line. This change will bring millions of new people into the program. Many states were concerned that the influx of new recipients would overwhelm already strapped budgets – remember, states share in the funding.

The legislation that would reconcile House and Senate differences addresses that concern. According to the proposed bill federal Medicaid matching payments for the costs of services to newly eligible individuals will be provided at the following rates: 100% in 2014, 2015, and 2016; 95% in 2017; 94% in 2018; 93% in 2019; and 90% thereafter. So states only absorb 10% of the cost. Some states have chosen to cover these adults, largely at state expense, and the bill will help them as well by reducing the state share of the costs by 50% in 2014, 60% in 2015, 70% in 2016, 80% in 2017, 90% in 2018. In 2019 and thereafter, these states would bear the same state share of the costs of all other states.

This could help reduce current Medicaid costs for states like Maryland and Massachusetts. In 2007, Maryland expanded coverage to childless adults with incomes up to 116% of poverty. An analysis conducted by the state's Department of Legislative Services (DLS) in January estimated the Medicaid expansion and enhanced funding in the Senate version of health reform would save Maryland roughly $135 million per year between 2014 and 2016 (due to the extra federal money). State costs would then begin to rise to around $200 million per year between 2017 and 2019 - owing to increased enrollment. Based on DLS estimates the expansion would impact 133,000 Marylanders - $200 million in costs would mean the state would be covering these folks for the bargain price of $1,500 each. The state would incur additional savings as well, the state maintains an uncompensated care fund for hospitals to offset the cost of covering the uninsured. Those costs topped $1 billion in fiscal 2009. The increased coverage would reduce those costs.  The state also manages a high-risk pools called the Maryland Health Insurance Plan (MHIP) - MHIP cost $111 million. MHIP would no longer be needed and those funds would be freed.

It is no secret that Medicaid saves money by paying providers less money than they would receive from Medicare or private insurance. In many states providers may earn as little as 35-45% of the usual rate for Medicaid patients. In the past year, 38 states (Maryland included) cut provider payments to try and squeeze savings out of Medicaid. This caused many to worry that the expansion of Medicaid would accomplish little as the newly insured would not be able to find participating doctors.

The reconciliation language requires that Medicaid payment rates to primary care physicians be no less than 100% of Medicare payment rates in 2013 and 2014 (an presumably thereafter). Given that many states could not afford such an increase, the federal government would provide 100% federal funding for the costs to States of meeting the requirement.

In short, the proposed health reform holds the potential of transforming Medicaid into a true national health insurance model. The expansion of the program to new, higher income individuals, and the provision of dramatically improved federal funding, holds the promise that Medicaid may soon become a federal responsibility – freeing states form the tremendous cost burden and freeing Americans from a situation where their access to health care depends on their state of residence.

Full text of the bill is here - Part C. Sections 1201 and 1202 directly address Medicaid.

Proposed Cuts to Maryland Medicaid Threaten Access to Health Care

The following is an editoral comment from Professor Todd Eberly.

As Gov. Martin O’Malley proposes cutting $123 million from Medicaid for the 2011 budget in addition to the $179 million cut from fiscal 2010, a recently published study that I co-authored found that Medicaid has improved access to medical care and reduced racial and ethnic disparities among children and adolescents in Maryland.

Medicaid has proven to be crucial to the health and well being of our children. It provides health insurance for 23 million children every month in the U.S. and nearly 400,000 in Maryland. Unfortunately many states, including Maryland, have had to make cuts to the program in recent years to balance their budgets. According to the Center for Budget and Policy Priorities at least 29 states have made cuts to their public health programs. Given that public health programs like Medicaid and the State Children's Health Insurance Program (SCHIP) account for approximately 25% of a given state's budget (in Maryland it's 27%) it's understandable why they have become the targets of cuts. President Obama's budget proposal holds the promise of additional Medicaid funds for states, but that would be only a one time fix, and in these tight budgetary times there is no guarantee that the funds will be approved by Congress.

In Maryland, the need to close the state's $2 billion budget gap must be balanced with the simple fact that Medicaid has improved the lives of thousands of children.  At a time when access to affordable health care is falling, it would be a shame to see the state forced to make even more cuts to a program so essential to the health of our young people.

Due to federal rules that govern the Medicaid program, the state cannot cut benefits or deny eligibility, doing so would mean the loss of federal money - in Maryland we receive about $0.62 in federal funds for $0.38 in state funds that we spend on Medicaid and our SCHIP (called MCHP). So what Maryland and other states are doing instead is cut reimbursements to providers. In other words, those who provide care for Medicaid patients will be paid less. The net effect of the lower reimbursement will be decreased access to care for folks on Medicaid - including 400,000 Maryland children. Facing the prospect of reduced payments providers will react by seeking to avoid providing care. Though the Maryland cuts target hospitals many physicians may well decide to stop seeing Medicaid patients out of fear that their already low reimbursements will be cut at a future date.

My study also showed that black and Hispanic children in Maryland are more likely to live in areas with fewer providers participating in the program. The continued reductions in reimbursement to hospitals and the potential that this will discourage physicians from seeing Medicaid patients may serve to exacerbate an existing problem. This could undermine the success that Medicaid has experienced with regard to reducing disparities in health care access among children in the state.
 
The most frustrating part of all of this is that fact that cuts are not needed. There are alternative means by which the state could fill the budget shortfall. One proposal would add an additional $0.10 to the excise tax on alcholic beverages generating $200 million per year. Given the upcoming 2010 election, many members of the General Assembly have said that tax increases of any sort are off the table for the current legislative session - but the proposed cuts to hospital reimbursement rates will be paid for by Maryland taxpayers. According to a report at CenterMaryland the proposal from the state "will allow hospitals to raise the rates they can charge patients with private insurance... to generate revenue to offset the decrease in Medicaid payments." In other words, the Medicaid cuts will be offsett via higher prices charged to the privately insured. Make no mistake, this is a tax, but it's a tax implemented with no political price as no legislator will be forced to vote for it. This approach will not prevent providers from refusing to treat Medicaid patients; rather it sets the stage for the very real possibility that Medicaid patients will suffer reduced access AND the privately insured will pay higher prices for care.
 
This approach to budget savings amounts to little more than a stunning act of political cowardice that will result in reduced services to those least able to protest while shifting the potential cost to taxpayers in a way that seeks to avoid any political accountability. Marylanders deserve better from their elected leaders.

The paper, entitled “Managing the Gap: Evaluating the Impact of Medicaid Managed Care on Preventive Care Receipt by Child and Adolescent Minority Populations” examined the impact of Maryland's Medicaid program on 260,000 children as the program was expanded during the past decade. The study was published in the Black History Month edition of the Journal of Health Care for the Poor and Underserved.

President Obama's Budget Would Provide Millions for Maryland

President Obama is receiving heated criticism over his proposed $3.83 trillion budget for fiscal year 2011. Critics have seized on the fact that the budget would add $5.08 trillion in deficits over the next five years an amount that is $1.32 trillion, or 35%, more than the White House predicted just 12 months ago. Lost in the discussion of the budget proposal, however, is the inclusion of some much needed relief for states and an especially important bit of help for Maryland. The President’s budget includes nearly $25 billion in supplemental Medicaid funding for states via a temporary boost to the share of program costs paid by the federal government. The so-called Federal Medical Assistance Percentages, or FMAPs, determine the share of Medicaid costs paid by Washington and all states receive at least a 50% match on dollars spent. Although Medicaid is jointly funded by states and the federal government it is an expensive program and in many states represents the largest slice of the budget pie – averaging about 22% of a typical state’s budget. Medicaid participation is very responsive to changes in the economy and the recent economic downturn has caused state Medicaid enrollment to swell. A study by the Kaiser Commission on Medicaid determined that each 1 percentage point increase in the national unemployment rate translates into one million additional Medicaid participants and state revenue declines of 3 to 4%. It was estimated that nearly 5 million Americans had enrolled in Medicaid since the start of the recession.

To help states defray the cost of this increased demand for Medicaid, Congress included a 6.2% increase in the FMAP as part of the American Recovery and Reinvestment Act past early last year. But that assistance expires on 12/31/2010. Few states expect to experience an economic recovery sufficient to offset the loss of those supplemental funds by then. The House of Representatives had included supplemental Medicaid funding in its version of health reform and more recently included the 6.2% increase in the FMAP in a jobs bill passed in December. The House version of health reform is considered to be dead in light of the special election in Massachusetts that ended the Democrat’s supermajority in the Senate, and the Senate is yet to move on the jobs bill. Many states, Maryland included, were already counting on the receipt of the additional Medicaid funds to avoid making painful cuts in their fiscal 2011 budgets. In an effort to close a nearky $2 billion hole, Maryland Governor Martin O’Malley assumed the receipt of nearly $400 million in supplemental Medicaid funds in the budget that he submitted to the General Assembly on January 20th. The Massachusetts election seemed to put those funds in doubt and state Republican leaders criticized the inclusion of the funds in the governor's budget. But the Presidents budget proposal appears to vindicate O’Malley’s choice to count on the funds. If approved, the 6.2% increase would mean several hundred million additional Medicaid dollars for Maryland in fiscal 2011.