Medicaid has survived another year of tough budget battles. In the end, Congress worked out a compromise – an agreement to develop a plan that will cut Medicaid by $10 billion over the next five years. Even with this compromise, the national debate about the country’s largest single health and long-term care plan has now shifted from ways to improve and better reduce health disparities, to ways to constrain growth and limit services. Unfortunately, many states had already made that shift as they were increasingly unable to afford skyrocketing costs associated with Medicaid growth. Medicaid enrollment has increased by 40 percent in the past five years. Related spending is crowding out other state-level investments in programs that are vital to achieving social equity. According to a recent report by the National Governors Association, in 2003 Medicaid spending surpassed elementary and secondary education spending as the largest single item in overall state budgets.
According to the Kaiser Commission on Medicaid and the Uninsured, a significant number of states have implemented policies to control Medicaid spending in the past two years. Such policies include: reducing or freezing provider payments; controlling prescription drug costs through prior authorization and preferred drug lists; reducing or restricting program eligibility; reducing benefits; and increasing co-payments. (See figure below.)
As documented in a recent Families USA report, racial and ethnic minorities make up a disproportionate share of Medicaid enrollees. Proposals to cut or cap Medicaid, while ostensibly racially neutral, could significantly diminish access to regular and adequate health care services for racial and ethnic minorities and, therefore, exacerbate health disparities.
Governors in Missouri and Tennessee have proposed some of the largest Medicaid cuts in the nation. An estimated 60,000 parents and 15,000 elderly persons with disabilities will lose Medicaid coverage in Missouri. And the proposed cuts in Tennessee would drop more than 300,000 enrollees.
State efforts to control costs, although significant, pale in comparison to recent federal budget proposals for cuts in Medicaid. The recent Senate compromise that forecasts $10 billion less in Medicaid spending growth also commits the White House to creating a bipartisan commission to study the future of the program and issue its findings in 18 months.
Coverage for Children?
More than half of all Medicaid enrollees are children. Children’s coverage, however, is the least expensive portion of Medicaid benefits, accounting for just 22 percent of the program’s spending. Care must be taken not to jeopardize the health and well-being of children as national and state level proposals to constrain Medicaid spending unfold. Black children are particularly vulnerable, as the program covers 44 percent of all African American children and 72 percent of poor African American children. In 2001, black children were three times as likely as white children to be in only fair or poor health, and almost twice as likely to have no usual place of health care. Disparities in health among African American children include disproportionately high rates of asthma, obesity, elevated blood lead levels and infant mortality.
Unlike most budget decisions facing state governments today, the effects of Medicaid cuts will be measured starkly: in life, death, and disability.
The Medicaid program pays for the cost of care of 55 percent of people with HIV/AIDS, including 90 percent of all children with the disease.
The National Association of Children’s Hospitals (N.A.C.H.) warns that cuts could hurt all children and limit hospitals’ abilities to meet the needs of low-income children. African American and other minority children experience disproportionately high rates of hospitalizations for chronic conditions, like asthma. They also experience excess emergency room visits in the many cases where regular health care providers or medical homes (regular place of consistent care) are lacking.
Instead of cutting Medicaid, N.A.C.H. recommends strengthening Medicaid coverage for children by improving enrollment, providing physicians and hospitals with reimbursements that reflect the true cost of care, and investing in the development of quality of care measures for children. Such measures would help to reduce health disparities by improving the access to and the quality of medical services for those in greatest need. Unfortunately, as stated earlier, the debate has shifted from improvement or expansion to program cuts and cost constraints. The new commission will face the challenge of identifying ways to protect the interests of children and the most vulnerable populations in the process. Washington policymakers need not look far for creative, progressive solutions to controlling public health spending without reducing coverage for the most vulnerable.
One such solution concerns prescription costs. Medicaid is the largest purchaser of prescription drugs in this country, paying for 19 percent of the nation's medications. Recently, the Washington, D.C. City Council unanimously passed a measure that would make it illegal in the city to charge "excessive prices" for prescription drugs and, in some cases, would allow the District government to make its own arrangements to have drugs produced more cheaply. The sponsor of the bill, David A. Catania (I-At Large) said the purpose is to "encourage drug companies to 'right-size' their pricing policies."
Another area for savings concerns employers. Recent growth in Medicaid enrollment is due in part to declines in employer-based insurance plans. Last month, Maryland lawmakers approved legislation that could effectively require firms with more than 10,000 employees to spend at least eight percent of their payroll on health benefits – or put the money directly into the state's health program for the poor.
Considering Alternatives
The Joint Center Health Policy Institute (HPI) has funded a project with the Economic and Social Research Institute (ESRI) to examine the economic risks of budget proposals to cap federal Medicaid spending. At a recent forum on Medicaid, co-sponsored by the Joint Center HPI and the American Public Health Association, ESRI unveiled its preliminary findings and offered policy alternatives to reduce Medicaid costs and growth without capping either spending on beneficiaries or enrollment.
ESRI cited proposals to limit asset transfers that qualify seniors for long-term care and reduce states’ ability to “game” the system financially. ESRI also proposed the countercyclical federal matching rates for Medicaid. Under this option, ESRI encourages national policymakers to make automatic changes to the federal matching rate as it did in 2003 when they passed legislation that increased by 2.95 percent the federal match for 15 months. The national and state unemployment rates were cited as possible triggers to making these automatic changes to the federal matching rates for Medicaid.
There were other policy suggestions, which include: facilitating Medicaid fraud prosecutions by private bounty hunters; increasing use of home- and community-based care; integrating systems of payment and care for dual eligibles; increasing state authority to incorporate employer coverage; improving case management for the chronically ill; tightening payment rules for prescription drugs; increasing multi-state capacity to leverage good prices through joint buying of prescription drugs, equipment and supplies; implementing community-based obesity prevention strategies; and limiting cost growth for the overall health care system through, e.g. reforms to direct-to-consumer advertising and better information to providers, consumers and payers about new technology.
The federal government's vision for the nation's health is outlined in an ambitious initiative called Healthy People 2010. One of its two goals is the elimination of racial and ethnic health disparities. Yet nearly 6 in 10 Latinos, and 4 in 10 African Americans, were uninsured for all or part of 2002 and 2003. People of color who do have insurance are more than three times as likely to be covered by public programs such as Medicaid.
National and local policymakers face a real conundrum in working to achieve the Healthy People 2010 goal of eliminating health disparities, while at the same time shrinking the insurance program most responsible for bringing care to communities of color, particularly to children in these communities.