As state governments struggle with budgetary shortfalls resulting from the economic recession and try to anticipate the financial impact of the Affordable Care Act (ACA), reforms to state Medicaid programs have become a primary focus of their efforts to achieve cost control and budgetary predictability.
In an article titled "The Impact of State Medicaid Reform on Vulnerable Populations Needing Long-Term Care Services and Supports" featured in the Fall 2012 issue of the NAELA Journal, co-authors Elizabeth P. Allen, Wendy Cappelletto, and Shana Siegel review recent legislative actions in Florida, Illinois and New Jersey related to their Medicaid programs and assess the potential impact of these changes on senior citizens and persons with disabilities.
Their analysis offers a valuable and unique state perspective of the forces now reshaping Medicaid, the single largest health care program in the United States - already covering more than 55 million individuals prior to its anticipated expansion under the ACA.
The NAELA Journal article:
- Begins with a primer on the Medicaid program.
- Highlights important Medicaid changes resulting from health care reform.
- Provides a national overview of the states’ overall budgetary and fiscal condition.
- Outlines the types of actions and reforms states have undertaken to reduce Medicaid and control growth.
- Specifically analyses legislative steps taken in Florida, Illinois, and New Jersey to control Medicaid costs as well as their potential impact.
Medicaid Primer - Selected Highlights
- Medicaid is a jointly financed partnership where the federal government provides a framework of minimum standards and states have flexibility for program design and administration.
- Each state’s Medicaid program, referred to as its “state plan,” identifies the services a state elects to provide and how the state intends to comply with federal requirements.
- States can change their Medicaid program by several methods (which must be approved by CMS) including a state plan amendment or a waiver to make a program change not otherwise allowable under federal rules.
- Federal law requires states to cover “mandatory” groups but states have flexibility to determine their own income and asset tests.
- For both mandatory groups and optional benefits, states determine the amount, duration, and scope of covered benefits,
- Senior citizens and persons with disabilities represent 25 percent of the Medicaid population but account for 66 percent of Medicaid spending.
- Low-income individuals enrolled in both Medicare and Medicaid make up 18 percent of the Medicaid population, but account for 46 percent of Medicaid spending.
- For several years before the 2008 financial crisis, Medicaid enrollment increased 4.2 percent per year.
- Between June 2008 and June 2009 Medicaid enrollment grew by 3.3 million, or 7.5 percent.
Impact of Health Care Reform (ACA) - Selected Highlights
- Beginning January 1, 2014, states must provide Medicaid coverage for individuals under age 65 with incomes up to 133 percent of the federal poverty level (FPL) without any asset test.
- Although not be entitled to standard comprehensive Medicaid benefits, states must provide at least a benchmark benefit package to the majority of this newly eligible population.
- This new enrollment will represent the largest ACA-related Medicaid cost and states with the lowest previous Medicaid eligibility enrollment will have the largest enrollment increases.
- The federal government will finance approximately 96 percent of the increase in Medicaid costs attributable to the ACA through 2020.
- All states will receive a 90 percent federal medical assistance percentage (FMAP) beginning in 2020.
- The ACA does not significantly change Medicaid’s eligibility rules or coverage methodologies for long-term care services and supports (LTCSS).
- The ACA does authorize new programs and enhances existing programs to help Medicaid recipients access community services.
- The most significant immediate source of ACA savings for states will be their reduced payments for uncompensated care for uninsured or low-income populations.
- Some estimates project aggregate savings due to reductions in uncompensated care will outweigh new state costs under the ACA.
- In addition, because newly eligible individuals will likely be healthier than traditional Medicaid enrollees, some experts expect they will not require full Medicaid benefits.
States' Fiscal Condition - Selected Highlights
- At the start of FY 2012, 42 states faced budget shortfalls.
- Legally required to balance their budgets, state options to achieve that goal include using reserves, increasing taxes, or cutting spending.
- On average, states spend about 20 percent of their general funds on Medicaid, making it the second largest item, following education, in most states’ general budgets.
- Before the 2008 economic downturn, Medicaid enrollment increased at an average annual rate of 4.2 percent.
- Between June 2008 and June 2009, however, Medicaid enrollment grew by 3.3 million, or 7.5 percent.
- The federal government provides matching dollars for state Medicaid expenditures using the FMAP based on state per capita income.
- In 2011, matching rates ranged from 50 percent (the floor amount) to 75 percent with poorer states receiving more federal assistance.
State Reforms in General - Selected Highlights
- States have used a variety of tactics trying to contain Medicaid spending: provider rate reductions, limitations on benefits, use of co-pays, increased use of waivers and managed care, and limits to Medicaid planning techniques.
- In recent years, states have increased the use of managed care to deliver and finance Medicaid services with the goals of increasing access to care, improving quality, and reducing costs.
- With managed care, states establish a network of providers or contract with health plans and/or providers who agree to accept Medicaid patients and meet certain access to care requirements.
- The share of Medicaid beneficiaries enrolled in some form of managed care reached 71.7 percent as of June 30, 2009, according to CMS.
- Many states are expanding managed care to serve persons newly eligible for Medicaid in 2014 as a result of the ACA.
- Although public demand for home and community-based services is high, overall spending for such services represents only 43 percent of Medicaid long-term care spending.
- As of 2009, the number of individuals nationally on waiting lists for home and community-based services waiver programs totaled over 365,000.
State Specific Reforms - Selected Highlights
- In 2010-2011, Florida's Medicaid program had over 2.9 million enrolled recipients costing $20.3 billion and representing 28 percent of the state's annual budget.
- Florida's Medicaid enrollment increased by 42 percent during the past several years mostly as a result of the state’s economic condition.
- Since 1996, the Florida legislature has cut $5.2 billion from its Medicaid program using rate reductions, utilization limits, fraud and abuse efforts, and other cost control initiatives.
- As a result of the ACA, Florida is expected to gain 379,000 new Medicaid enrollees in 2014.
- Florida also expects significant continuing growth in its population eligible for Medicaid long-term care services (those age 65 and older).
- Attempting to close a $4.5 billion budget shortfall in 2011, Florida enacted legislation (subject to CMS approval) to replace its fee-for-service Medicaid model with a capitated managed care model.
- Managed care advocates anticipate savings based upon studies and because HMOs:
- Are better able to prevent, reduce, or eliminate systemic fraud and abuse; and
- Can better address healthcare disparities due to their emphasis on primary care, member education, disease and case management, and provider collaboration.
- Managed care opponents argue, however, that a Florida managed care pilot program initiated in 2005 did not demonstrate any cost savings.
- In 2011, Illinois had more than 2.7 million individuals receiving Medicaid benefits.
- As a result of the ACA, another 500,000 adults are expected to qualify for Medicaid in 2014.
- In 2011, Illinois had $9 billion in unpaid bills, approximately $2 billion of which were Medicaid related.
- The Medicaid shortfall existed despite Illinois having the tenth lowest average Medicaid cost per enrollee of any state due in part to low provider reimbursement rates.
- In 2011, the Illinois legislature enacted Medicaid reform mandating Medicaid managed care programs.
- Among other provisions, the 2011 legislation also authorized Illinois Medicaid authorities to gain information from various state and federal agencies for the purpose of verifying individual eligibility for Medicaid benefits.
- In June 2012, Illinois enacted additional legislation intended to save $2.7 billion in Medicaid costs by cutting spending and eliminating certain optional services including most pooled trusts for individuals age 65 and over.
- New Jersey
- New Jersey faces a total $10.5 billion state budget deficit in 2012 with anticipated state Medicaid spending in excess of $10 billion for its 1.3 million Medicaid beneficiaries.
- New Jersey's Medicaid program historically has offered optional services (including dental, durable medical equipment, and vision) and has covered additional eligibility groups such as low-income parents of eligible children.
- Medicaid coverage for long-term care, however, has been inadequate and inefficient despite spending $3.5 billion for long-term care in 2010.
- New Jersey spends 70 percent of its Medicaid long-term care dollars on nursing home care compared to 41 percent nationally.
- Prior to 2011, New Jersey attempted to limit its Medicaid long-term care budget primarily by restricting Medicaid planning strategies such as gift and return, caregiver agreements, promissory notes, and annuities.
- In October 2011, New Jersey submitted a comprehensive waiver application to CMS seeking : 1) expansion of managed care to all Medicaid recipients; 2) consolidation of various Medicaid programs into one unified system; 3) greater flexibility for the scope and duration of services and co-payments; 4) expanded use of home and community-based services; and 5) an expedited process for future CMS approvals.
- The recession has created significant budgetary shortfalls for states resulting in a greater focus on Medicaid reform to achieve cost control and budgetary predictability.
- States are implementing various types of reforms with managed care playing a prominent role.
- Whether or not the reforms produce cost savings for states, they will likely harm the health and welfare of senior citizens and persons with disabilities.
For additional S2KM reporting about government benefits and health care reform, see the structured settlement wiki.