Friday, January 23, 2009

A "Perfect Storm" Affects Medicaid Funding

On January 22, 2009, the non-profit Center on Budget and Policy Priorities posted a "Preliminary Analysis of Medicaid Assistance For States in the House Economic Recovery Package", including state-by-state data.

The authors (Iris J. Lav, Edwin Park, Jason Levitis, and Matthew Broaddus) summarized their analysis and article:

The House economic recovery package includes an approximately $88 billion temporary increase in the share of the Medicaid program paid by the federal government over nine calendar quarters.

The states urgently need this type of assistance; states on their own are not able to provide critically needed health insurance under Medicaid as need swells in a recession and in its immediate aftermath.

This analysis features state-by-state estimates of assistance and a detailed technical explanation of the Medicaid provision.

The analysis notes factors that have conjoined to create a short-term crisis, and alludes to the dismal long-term prognosis.
  • Medicaid rolls are soaring, as they have in previous recessions. As people lose their jobs and their incomes, they often also lose their health insurance and qualify for Medicaid. As employers try to cut costs, they drop health coverage. And people who are still working but with reduced hours or income and who lack health insurance may newly qualify for Medicaid. All of these factors drive up enrollment.
  • State revenues are dropping. As unemployment rises and consumption declines, state income and sales taxes dwindle. States are projected to face deficits of $350 billion over the next 30 months. Since almost all states have to balance their budgets, most cannot afford to maintain their existing Medicaid programs, and certainly cannot afford to accommodate a large influx of new enrollees resulting from the recession.
  • The gap between the need for Medicaid and states' ability to meet that need is large. In a recent Kaiser Foundation report, the Urban Institute estimates that the gap over the next two and a half years between Medicaid costs and states’ ability to meet those costs — considering both enrollment increases and revenue losses — would be approximately $100 billion if unemployment averages 9 percent. However, that was calculated as the estimated sum of the “exact” amount each state would need to meet its Medicaid costs. Since it is not practically possible to craft legislation that would give each state exactly what it needs, total federal assistance would need to be significantly more than $100 billion to keep the program whole.
The analysis described the three forms of interim relief proposed for the states, noting that "[t]his fiscal assistance for states would be effective for the period October 1, 2008, through December 31, 2010."

The full analysis (7 pages) is available online in either
HTM or PDF formats on the CBPP website.

This debate for a short-term "bailout" of the states' Medicaid programs is introduced into Congress even while past debates on the scope of funding for Medicaid remain unresolved.

In "
Medicaid funding cuts unresolved as new administration takes office" by Doug Trapp, posted January 12, 2009, by the American Medical Association's AMNews, the issues debated during the Bush Administration were analyzed.
Three Bush administration rules limiting federal Medicaid spending will go into effect on April 1 without action by Congress and the Obama administration, but three others could be rescinded by the new administration alone -- including a rule ending federal funding for graduate medical education.

The six rules are part of a Bush administration effort to scale back the federal government's Medicaid obligations so the program covers only what President Bush contends is required by law. The new policies would reduce federal spending by at least $12.4 billion over five years.

Health care organizations affected by the reductions have argued that the White House and the Centers for Medicare & Medicaid Services are overstepping their authority. * * *
Newspaper reports in early January, 2009, demonstrate how the previous cuts in federal funding for Medicaid have created problems for many states:

How about Pennsylvania's Medicaid situation?

The Commonwealth was in a Medicaid crisis back in 2005, as noted in "Medical Assistance in Pennsylvania: A 600-Pound gorilla in the state budget" (Feb., 2005) posted by IssuesPA (an initiative of the Pennsylvania Economy League).

That article noted that "Pennsylvania's Medical Assistance program is attracting lots of attention," with costs on the rise and more Pennsylvanians qualifying for the program.
One of the biggest stories in Governor Ed Rendell’s proposed state budget for the 2005-06 fiscal year is Medical Assistance, Pennsylvania’s version of Medicaid.

It’s the 600-pound gorilla in the state budget proposal.

In Pennsylvania, as in other states, the cost of the state’s share of health care coverage for low-income residents has been rising much faster than revenue receipts and consuming ever-larger pieces of the state budget.

Medical Assistance now consumes 19% of Pennsylvania’s General Fund Budget -- up from just over 16% five years ago. * * *
The article then noted Governor Rendell's first-term plan of response:
The Governor has proposed this five-fold strategy to deal with the rapidly escalating costs of medical assistance.
  • Increase revenues. The program will require consumers to share in the cost of services through a series of co-payments and premium payments;
  • Limit services. Specific services such as the number of prescriptions filled, visits to doctors, outpatient clinics and hospitals, ambulance rides, and medical equipment would be capped;
  • Revise payments to providers. State reimbursement of certain providers of health care services to medical assistance recipients would be increased 2%;
  • Lower prescription costs. The Department of Public Welfare would implement a preferred drug list;
  • Increase community-based care. The Community Choice program would be expanded to increase the ability to serve older patients at home or a community-based setting rather than in a facility.
The Governor made a conscious decision not to reduce the number of people eligible for benefits -- at least for now.

Other states have reduced or are considering reducing the number of people eligible in order to save money. * * *

Nevertheless, still, in 2009, the crisis swells, according to AARP's preliminary identification of Pennsylvania State Issues:
Current revenue projections show that Pennsylvania may be looking at a $2 [billion] deficit in the 2008/09 state budget.

Such a deficit could have a severe impact on a number of important state programs, particularly Medicaid assistance for long-term care.

The gloomy economic forecast will impact virtually every issue AARP will be concerned about in the 2009 session of the General Assembly. * * *
AARP notes that the state budget issue will interface with the four other key issues affecting seniors -- Health Care Reform, Utilities, Long-Term Care, and Property Taxes.

In early 2009, a short-term federal bailout of Medicaid appears most pressing, according to a Press Release issued on January 16, 2009, by Pennsylvania's Senator Robert P. Casey, Jr., entitled "Casey Calls for Critical Medicaid Help for States in Stimulus."

He warned that "[f]unding should reach $100 billion threshold to avoid service cuts."

Faced with data showing increased demand for Medicaid and state children’s health insurance as more laid-off Americans lose their health insurance, U.S. Senator Bob Casey (D-PA) urged President-Elect Barack Obama to support a minimum of $100 billion in additional Medicaid assistance to the states in the stimulus.

“A perfect storm of state budget shortfalls and job loss is threatening health care for millions of Americans,” said Senator Casey.

“If the federal government does not provide critical Medicaid funding to the states, more states could be forced to cut vital services to the neediest Americans.” * * *

Whether or not the situation should be described as "a perfect storm," there is a present crisis, no doubt, with severe longer-term challenges to follow.

* * *

The phrase perfect storm originates from the 1997 book The Perfect Storm which refers to the simultaneous occurrence of weather events which, taken individually, would be far less powerful than the storm resulting of their chance combination. * * *

Since the 2000 movie by the same name, the phrase has gained popularity and grown to mean any event where a combination of circumstances will aggravate a situation drastically. * * *

The phrase was awarded the top prize by Lake Superior State University in their 2007 list of words that deserve to be banned for overuse.