Medicaid at the Crossroads

Cindy MannCenter for Children and Families

Georgetown University Health Policy Institutecrm32@georgetown.edu

Medicaid SummitChicago, Illinois

November 3, 2005

What’s At Stake?

• Coverage– Children, families– Pregnant women– Adults and children with disabilities– Elderly

• Integral to other systems/programs• Major source of financing

– States– Health care providers– Communities

Slide 1

Medicaid’s Current Role in Illinois

Individual5%

Medicaid 20%

11%

Employer64%

Uninsured

Individual5%

18%

Medicaid 6%

Employer68%

UninsuredMedicare

2%

Sources of Coverage

All Children0-18

Non-Elderly Adults18-64

Source: Data based on pooled 2003 and 2004 Current Population Survey (CPS) data.

Slide 2

Why the Attention to Medicaid?

Slide 3

Average Annual Growth in Medicaid Expenditures, 1991-2003

27.0%

10.0%

3.6%

7.8%

11.8%

7.1%

1991-1992 '92-'95 '95-'98 '98-2000 '00-'02 '02-'03

Source: Urban Institute, 2005; data from HCFA Financial Management Reports, 2004 (HCFA-64/CMS-64).

Slide 4

Education*45.5%

All Other28.6%

Public Assistance

0.5%

0.3%

Medicaid19.0%

Corrections6.1%

Transportation

Corrections3.3%

Medicaid25.4% 11.2%

Public Assistance

0.4%

All Other29.5%Education*

30.2%

Transportation

Medicaid as a Percent of Illinois’ Expenditures

General Fund Expenditures Total Expenditures

Total= $19.0 billion Total= $37.7 billion*“Education” includes elementary, secondary and higher education. *“All Other” varies by state. It includes federal funds for the State Children’s Health Insurance Program and may include a range of other federal funds such as economic development, housing, parks and recreation. Source: Georgetown Center for Children and Families analysis based on National Association of State Budget Officers (NASBO), 2003 State Expenditure Report, Fall 2004.

Slide 5

Percentage of All Firms Offering Health Benefits, 2000-2005

69%

60%

2000 2005*The difference between the offer rate in 2000 and the offer rate in 2005 is statistically significant at p<.05.Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2005; KPMG Survey of Employer-Sponsored Health Benefits, 1996

Slide 6

Elderly and People with Disabilities Account for 70% of

Medicaid Expenditures in Illinois

Adults11%

Elderly & Disabled

70%

Children 19%

Total Illinois Medicaid Expenditures in 2002 = $9.2 billion

Slide 7

Source: Georgetown Center for Children and Families analysisbased on FY 2002 CMS MSIS data.

Ideological Divide

• “Medicare and Medicaid have grown exponentially, beyond original fiscal projections, and their trajectories pose a serious threat to other budgetary priorities and to overall long-term economic growth.. (They) must evolve into individual-centered health systems..”– Newt Gingrich, AEI

• “Jeb Bush, has a different, better cure -- a consumer-driven program that fundamentally alters Medicaid's power equation: it allows consumers to allocate their own health care, instead of bureaucrats doing so on their behalf.”– Herzlinger and Nerney, Manhattan Institute

Slide 8

Solutions?

• Reduce scope of coverage

• Increase beneficiary costs

• Reduce federal role– Financial support– Minimum program standards

• Move from defined benefits to defined contribution

Slide 9

What’s At Stake?Key Elements of Medicaid

• Affordable

• Comprehensive and defined benefits; “EPSDT” for children– Covers services typically not covered under

ESI

• Guarantee of coverage if eligible (“entitlement”)

• Open-ended federal financing

Slide 10

House proposal Selected state waivers

Entitlement Generally retained– but for what?

Enrollment freezes/caps for some populations

Open- ended federal

financing

Retained Aggregate and per capita caps on federal funding

Slide 11

House proposal Selected state waivers

Affordable Cost sharing allowed up to 5% of income for many groups of beneficiaries

New premiums and copays; in one state, very broad discretion particularly for adults

“Premium assistance”/

“consumer choice” model would leave many of the rules to private plans

Slide 12

OHP Standard Enrollment January 2002-October 2003

100,952

50,938

95,701

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Premiums and Other OHP2 Changes Implemented

Source: McConnell, J. and N. Wallace, “Impact of Premium Changes in the

Oregon Health Plan,” Office for Oregon Health Policy and Research, February 2004.

Slide 13

15

70

28

124

Serious Adverse Events* Emergency Dept. Visits

Pre-copay Post-copay

Drug Copayments Reduced Use of Essential Medications and Led to

Serious Problems88% increaseIn emergencydept. visits78%

increase in adverse events

# Events per 10,000 person-months

*Includes hospitalizations, institutionalizations, and deaths.Source: R. Tarnblyn et al. JAMA 285(4): 421-9, 2001.

Slide 14

House proposal Selected state waivers

Comprehensive and defined

benefits

“EPSDT” eliminated for “optional” children

Broad discretion to state to set benefits

“Health Opportunity Accounts” 10-state demo

Bare bones plan allowed (for adults)

“Premium assistance”/ “consumer choice” model would leave much of the design of the benefit package to private plans

Slide 15

Florida Estimates of Total Medicaid Spending, With and Without Waiver

$8

$9

$10

$11

$12

$13

$14

2006-07 2007-08 2008-09 2009-10 2010-11

Bil

lio

ns

Total 5-year reduction in spending: $4.58 billion

With Waiver

Without Waiver

Slide 16

Source: Georgetown Center for Children and Families analysis of Tables 4 and 5 from

Florida Medicaid Reform Section 1115 Waiver Application, August 31, 2005.

Federal rules for all aspects of the program

State rules only- minimal federal standards

Federal minimum requirements and state options

Federal guarantee of shared financing

Flexibility and Financing: Finding the Right Balance

Capped federal financing needed to limit federal exposure

Full federal financing

Slide 17

Real Issues Facing Medicaid

• Millions of people who are uninsured • State revenue system issues

– Added pressures during downturns

• Broader issues relating to health care costs• Managing care for high cost cases

– Disconnect between Medicaid and Medicare

• Alignment of responsibilities between federal government and states– Cost of “dual” eligibles and aging population

Slide 18

Dual Eligibles Account for More than One-Fourth of Total Medicaid

Expenditures in Illinois

Dual Eligibles28%

Source: Urban Institute estimates based on data from the Medicaid Statistical Information System (MSIS) and Medicaid Financial Management Reports preparedfor the Kaiser Commission on Medicaid and the Uninsured, 2003.

Slide 19

Medicaid Is An Important Part of the Solution

Slide 20

Transportation1.6%

Education*22.5%

Public Assistance

0.9%

Medicaid56.7%

All Other*18.3%

Total = $8 billion

($4.53 billion)

Federal Medicaid Payments as a Share of Total Federal Funds to Illinois, FY 2003

*“Education” includes elementary, secondary and higher education. *“All Other” varies by state. It includes federal funds for the State Children’s Health Insurance Program and may include a range of other federal funds such as economic development, housing, parks and recreation. Source: Georgetown Center for Children and Families analysis based on National Association of State Budget Officers (NASBO), 2003 State Expenditure Report, Fall 2004.

Slide 21

Average Annual Medicaid Spending Growth Compared to Growth in

Private Health Spending, 2000-2003

6.9%

9.0%

12.6%

Medicaid Acute CareSpending Per

Enrollee

Health Care SpendingPer Person with

Private Coverage1

Monthly PremiumsFor Employer-

Sponsored Insurance2

Sources: 1 Strunk and Ginsburg, 2004. 2 Kaiser/HRET Survey, 2003.

Slide 22

Trends in the Uninsured Rate of Low-Income Children, 1997 - 2003

22.6% 22.1% 21.5% 21.1%

17.8%15.8% 15.0%

10%

15%

20%

25%

30%

1997 1998 1999 2000 2001 2002 2003

Uninsured rate of children under 18

Source: Georgetown Center for Children and Families calculations based on Cohen, R. et al., Health Insurance Coverage: Estimates from the National Health Interview Survey, January – September 2004, Centers for Disease Control, March 2005 and Trends in Health Insurance and Access to Medical Care for Children Under Age 19 Years: United States, 1998 – 2003, April, 2005.

Slide 23

48%

20%

11% 13%

Adults Children

Medicaid Privately Insured

Self-Reported Health Status Among Low-Income Adults and Children

Source: Urban Institute analysis of MEPS data from 1996, 1997, 1998, and 1999; Hadley and Holahan, Inquiry, Vol. 40, No. 4 (Winter 2003/2004).

Slide 24

*Poverty status is based on family income and family size using the U.S. Census Bureau poverty thresholds for 2002. Federal Poverty Level (FPL) in 2002 in the 48 contiguous states and the District of Columbia is $15,020 for a family of three. Source: National Health Interview Survey, 2003.

94.4% 92.8%

61.2%

96.2% 95.5%

67.9%

Percent of Poor and Near-poor Children with a Usual Place of Care

Public, Private, and Uninsured

Poor Children* Near-Poor Children*

Slide 25

Moving Forward Without Moving Backward

Slide 26