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Medicaid Expansion Update—Part 2

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(Part 1 of this article ran in the May 2nd edition of the Jefferson Policy Journal – here.)

Recent progress toward cost-saving reforms is bringing Virginia closer to the conditions the governor and legislature have set for participating in the nationwide Medicaid expansion authorized in 2010 by the Patient Protection and Affordable Care Act, or Obamacare.

The federal government has promised to pay the entire cost of extending Medicaid coverage to new (including less-poor) categories of recipient in the first three years, then trim the funding just slightly to 90 percent over the next four. Tempting though that is, state officials around the nation worry that the massive federal deficit might make it hard to keep this commitment, and harder to continue it in the long run. In Virginia and elsewhere, some want to hold out for reforms that would make the huge program work better and less expensively.

Last month, the U.S. Department of Health and Human Services reached agreement with state officials on a three-year pilot project that will simplify health benefits for people in Virginia’s major population centers who qualify for both Medicaid and Medicare. In addition, the recent resolution of a legal dispute lets the state proceed with a three-year contract under which a private company is supposed to run Medicaid mental-health and addiction treatment more effectively at lower cost.

The patients affected by these developments—people with “behavior health” problems, and “dual-eligibility” seniors who (often for long-term services) need Medicaid in addition to Medicare and will now, in effect, get a single coordinated benefit—are among the most expensive recipient groups.

The agreement with HHS on dual-eligibility patients is intended to consolidate health coverage for 78,000 Virginia residents under a new program called Commonwealth Coordinated Care. Expected to save the state $11 million in its first six months and $22.6 million in the following year, fiscal 2015, it is among Governor Bob McDonnell’s and the legislature’s announced conditions for expanding Medicaid.

Other such conditions that await federal approval are flexibility in running Medicaid for its other recipients, narrower definitions of benefits that would make them comparable to those in typical private insurance coverage, and co-payments or other types of cost-sharing from new recipients.

In a letter to HHS three months ago, McDonnell insisted that Virginia be allowed to establish “an efficient, market-based delivery system” for Medicaid as well as limits on services such as home care and occupational, physical, and speech therapy. The governor also wants permission to require that Medicaid patients take more responsibility for their health so they will have fewer medical problems and those conditions will be caught earlier. For example, continued eligibility might require getting a basic physical exam yearly.

Then there’s the equally crucial problem of trust in Washington promises. McDonnell has not only demanded “reasonable assurance” that the government will maintain its aid for the wider eligibility at 90 percent after 2022, but also said it must implement “a long-term path to financial solvency that can cover the ongoing cost” of the expansion.

Liberals may dismiss all this as tightwad posturing on the backs of the poor. But McDonnell and the General Assembly, which has delegated Virginia’s decision on Medicaid expansion to a special legislative commission that will decide whether federal authorities have given the state enough waivers for serious cost-cutting, are following their duty to attempt major reforms in what has become an out-of-control entitlement.

Medicaid is now the largest and fastest-growing program in most state budgets, responsible for about a quarter of state spending nationwide, according to John Daniel Davidson, a health policy analyst at the Texas Public Policy Foundation. Similarly, just over one-fifth of Virginia’s general fund goes to Medicaid.

At the same time, outcomes for patients have been shown to be poor. Medicaid programs generally can’t charge co-payments or require deductibles, so states often try to partially curb expenditures by keeping providers’ reimbursements unreasonably low. In most states, according to Davidson, those payments don’t cover the actual cost of care. Not surprisingly, then, too few doctors will take Medicaid patients. With this “provider shortage,” Medicaid recipients see a doctor less frequently than they should and their illnesses or conditions worsen—causing more emergency room visits, an expensive means of treatment.
Adding to the mess is the sheer complexity of Medicaid’s structure. As reform advocate Gary Alexander, recently the Secretary of Public Welfare in Pennsylvania, explains: “The Medicaid maze, especially its most costly components that serve the severely disabled and the infirm elderly, requires states to navigate and monitor … thousands of rules, service definitions and conflicting regulations [which] yield operational chaos, cost escalation and a preoccupation with formal compliance with Uncle Sam, not better health outcomes for recipients.”

But even in the vexed business of health care, disaster can mean opportunity. The main example of Medicaid reform is probably Florida. Earlier this year, the state was granted a waiver allowing more leeway in running the program for the purposes of better care coordination and helping to prevent those costly hospital visits. Governor Rick Scott says this will mean better management of chronic conditions and more focus on preventive treatment, resulting in a healthier Medicaid population. (Again, healthier also means less expensive.)

A key element of the Florida reforms is changes in long-term care coordination that should help seniors and people with disabilities stay in their homes instead of moving to nursing facilities. A smaller version of this effort already exists in parts of the state.
Since 2006 and with later geographical extensions, some Florida localities have had a new Medicaid system in which patients, helped by counselors, choose their own health insurance plans from various competing ones. This means the covered services—some of the ones now available aren’t offered by regular Medicaid—more closely match what the individual will most likely need. Each plan includes all the basic services Medicaid provides in Florida and a network of specialists, hospitals, clinics, and drugstores plus a choice of physicians.

Another promising feature of the pilot Medicaid reform is a voluntary rewards program called Healthy Behaviors, in which patients who take better care of themselves earn credits they can spend on over-the-counter medications, vitamins, and other health-related products.

All told, the pilot program was saving up to $161 million a year in Medicaid costs as of late 2011 and could mean up to $1.9 billion in annual savings if it went statewide, according to the Foundation for Government Accountability, a free-market policy institute in Florida.

Good things have happened in Rhode Island too. Four years ago, shortly before the Obama administration took office, the state was granted exemption from many Medicaid rules and mandates. Rhode Island thus moved to a managed-care system while also adopting a Medicaid spending cap.

These policies have been effective in controlling costs and improving access. With private insurers now the key players in the state’s program, better case management has occurred and providers are bidding competitively for Medicaid business. As in Florida, fewer long-term patients are in nursing facilities, and more are at home or in community-based care.
It would be nice to see such results in Virginia.

[can the tag line at the bottom be updated to say that my book was published in 2012 rather than March? thanks.]

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