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Medicaid Reform


In 2016 total Medicaid spending equaled 550.9 Billion Dollars, which was greater than Seventeen (17%) percent of the total national healthcare spending. Historically, the federal share has averaged about 57%; however, under the ACA, the matching rate is higher at 100% for newly eligible. Starting in 2017, this matching rate was supposed to decline slightly until it reaches 90% in 2020. BCS advocates for a Medicaid Reform package that includes the following:

  1. Provide essential coverage for low income citizens who may not otherwise have ready access to health care services.
  2. Reduce the Long Term Federal expenditures for the program to pay for health care for this target population.
  3. Increase the number of qualified people that can be enrolled in the Medicaid program.
  4. Reduce the impact of uncompensated health care incurred by our health care providers and reduce its effect on the overall cost of health care and health insurance.

The current Congressional reforms generally take a few concrete steps toward achieving these goals. Medicaid was originally intended to cover low income families with children, pregnant woman, disabilities and long-term care. Approximately twenty-five percent of the budget pays for nursing home care. This is an essential program for assisting low income families but it has a lot of problems and there are a lot of gaps in it. This program currently covers 74 million people and will probably costs upwards of 790 billion dollars in 2018. (29) Obamacare covers about 9 million members and its cost of 124 billion which is one-sixth the cost of Medicaid. ACA/ Obamacare, as previously stated, is the tail wagging the dog. The real purpose behind last years ACA Reform proposals may very well have been Medicaid reform. BCS Consultants and the Republican Conservative caucuses of advocate fixing the problems with the spending problems associated with of both these programs in the same way.

The federal government is supposed to share the cost of Medicaid with the States on a $1 for $1 basis with exceptions, including the cost of the ACA Medicaid expansion. This expansion increased Medicaid enrollment by 11 million people in 31 States. The Obama Administration agreed to pay 100% at first, gradually reducing to 90%. The 19 States that didn’t accept this offer, perhaps because they didn’t trust Obama’s Trojan horse, do not now face federal budget cuts, but they are under threat from HHS in their ability to participate in certain enhancements to the Medicaid program. Although coverage in the expansion states successfully added millions of presumably medically needy people, Senator John Barrasso, M.D., WY described his State’s experience with this give-away expansion as follows, “Obama made Medicaid the dumping ground for low-wage employees in his state, making it more difficult for those people that really need the program to get the health care they need.” This is an important perception, because just maybe Medicaid is NOT the best way for us to take care of our low-wage working population that qualified for the Obamacare Medicaid expansion? We have developed a viable Community Health Center system and it is conceivable that an MA insurance option compliment that appeals succinctly to this population, in integration with the Health Center network, would be a more appropriate way to offer them affordable healthcare coverage?

The federal government, being generally a more than equal partner in the Medicaid program, rightly insists on dictating most of the regulations (like Obamacare -ACA- does not-so-rightly to the health insurers). However, this often prevents states from making basic changes in the program without approval federal, basically slowing down the efforts of the states to organize their programs and make them cost effective. Prominent Governors, included Florida’s Governor Rick Scott, have successfully lobbied the Trump Administration for greater freedom to opt out of harmful Title I regulations, and allow their states to determine the fate of their own Medicaid programs and even get all the money for the programs in a block grant, which the states can determine how best to spend. (30.)

Some states have done better jobs than others in organizing and developing their Medicaid programs. In a June 20th letter, Ten (10) prominent health insurance executives sent to the Majority and Minority leaders of the Senate, it was noted that,” Most states have turned to Medicaid managed care plans to leverage their experience and expertise to deliver coverage that coordinates and manage health care, improve health outcomes, and build partnerships with providers to curb fraud, waste and abuse for the efficient use of public funds.” (31.) Massachusetts and Ohio have implemented public and private sector programs that saved billions of dollars for Medicaid.

The principle problems with the proposed Graham-Cassidy ACA and Medicaid Reform proposals include not incidentally, that the Medicaid managers from all 50 states self-avowed inability to make the necessary changes of proposed in Capitation funding, etc. required by the legislation but also the state budget cuts that all-to-often result in reductions to covered services or provider reimbursement under the state Medicaid programs. To understand this point, you need to read Paul Krugman’s April 24, 2018 OP-ED in the New York Times entitled, We Don’t Need No Education. “… You need to know what governement in America does with your tax dollars.

The federal governement, as an old line put it, is basically an insurance company with an army: nondefense spending is dominated by social security, Medicare and Medicaid. State and local governements, however, are basically school districts with police departments. Education accounts for more than half the state and local work force; protective services like police, (Medicaid) and fire departments account for much of the rest.

So what happens when hard-line conservatives take over a state, as they did in much of the country after the 2010 tea party wave? They almost invariably push through big tax cuts. Usually these cuts are sold with the promise that lower taxes will provide a huge boost to the state economy.

This promise is, however never – and I mean never – fulfilled; the right’s continuing belief in the magical payoff from tac cuts represents the triumph of ideology over overwhelming negative evidence.

What tax cuts do instead in sharply reduce revenue, wreaking havoc with the state finances. For a great majority of states are required by law to balance their budgets. This means that when tax receipts plunge, the conservatives running many states can’t do what Trump and his allies in Congress are doing at the federal level – simply let the budget deficit balloon. Instead, they have to cut spending.”

This invariable results in cuts to school budgets as well as what many consider to be essential health services to the poor and disadvantaged residents covered by their state Medicaid programs. We need look no further that the State of Florida, which last year was forced to strip over 500 Thousand Dollars from their Medicaid budget paying for hospital services. Since Medicaid constituencies are not usually the most active and vocal conservative constituencies, Medicaid is usually an easy target, although the Kaiser Family Foundation noted that the opposition to Graham-Cassidy demonstrated that Medicaid has a more effective base of political support than previously thought possible.

An added irony to this Graham-Cassidy ACA/ Medicaid Repeal and Replace effort, is that the means chosen in the bill to accomplish the proposed Medicaid reform goals are essentially the same (per capita funding) means that are being used successfully to keep the costs of the Medicare Part C – Medicare Advantage plans (for the Over age 65 retirees) under control. As you know, BCS Consultants has been advocating for Medicare Part C – Medicare Advantage private health insurance plans using capitation funding to solve the problems with Obamacare!

ACA and Medicaid programs suffer from similar circumstances. In the reform bills proposed by the House and the Senate, the federal government is planning to cap the Medicaid program with the same tools and techniques the government uses with the Medicare Advantage (MA) insurance carriers, i.e. to convert federal reimbursement to the states for Medicaid to a “per capita” system. This is the same funding mechanism used by CMS for the MA plans.

Here is a quotation from pages 28 - 29, of the CBO’s most recent Report to Congress on the Senate bill (H.R. 1628), June 26, 2017 to repeal and replace ACA: (In the following quotations, I have purposely substituted the name “Medicare Advantage” in place of the name “Medicaid” and the words “health insurance companies” have been substituted in place of the word “states”, for the purpose of elucidating the irony of Congresses Medicaid recommendation as it relates to the expansion of Medicare Part C. Hopefully, this transposition will make clear that these same paragraphs could, for the most part, be used to describe exactly what we want Congress to enact in the relationship between the federal government and the insurance companies for the expansion of Medicare Part C to enrollees under age 65.

The following text is from the beginning of the CBO Quotations - from the Report to Congress, June 26, 2017, p. 28 – 29.

“CAPS ON FEDERAL “MEDICARE ADVANTAGE” SPENDING. Under current law, the federal government and the “health insurance companies” share in the financing and administration of “Medicare Advantage”. In general, the “health insurance companies” pay health care providers for services to enrollees, and the federal government reimburses the “health insurance companies” for a percentage of their expenditures. All federal reimbursement for medical services is open-ended, meaning that if a “health insurance company” spends more because enrollment increases or costs per enrollee rise, additional federal payments are automatically generated. This bill would establish per capita “cap” on most spending for medical services and offers the “health insurance companies” an option for a block grant to provide medical services for certain adults. In addition to affecting total spending, the caps would have a variety of other effects on the “health insurance companies” and enrollees, including an interaction with the effects of work requirements, in the near and longer term.

Per Capita Cap for – “Health Insurance Companies - Under this legislation, beginning in fiscal year 2020, the federal government would limit the amount of reimbursement it provides to the “health insurance companies”. That limit would be set for a “health insurance company” by calculating the average per-enrollee cost of medical services…

If a “health insurance company” spent more than the amount eligible for federal reimbursement, the federal government would provide no reimbursement for spending over the limit.” (28.)

(This is more or less what CMS does for Medicare Part C – Medicare Advantage Plans with the health insurance companies.)

As we have previously stated, this type of Capitation reimbursement scheme has been used by the purchasers of health insurance buying health insurance from the carriers and in turn by the health insurance carriers purchasing health care services from providers. It is generally considered to be a cost containment vehicle and it has been used with great success, if for no other reason than allowing a superb control over the expense budgeting process. As you will see in the BCS Consultants proposed budgeting process for MA reimbursement, capitation plays an important role in making the MA national health insurance programs affordable for everybody.