The Medicaid Program

1

• The Medicaid Program
• Kevin C. Heslin, Ph.D.
• Charles R. Drew University of Medicine Science

2
Overview

• Background
• Who is eligible? -- mandatory optional groups
• What is covered? -- mandatory optional services
• Where does the money come from?
• How is the money spent?
• Issues of Costs Access

3
What is Medicaid?

• A state-federal program to finance health
  services for certain groups of poor people.
• A transfer payment between taxpayers
  recipients.
• A complicated health insurance program. The
  legislation -- 10 pages long in 1965 -- is now
  more than 500 pages of the US Code.

4
An Important Part of the U.S. Healthcare System

• Medicaid pays for
• One in four childrens health care
• One-third of all births in the US
• Half of all nursing home care
• Fills in the gaps in Medicare for 10 of Medicare
  beneficiaries.

5
Who are the Recipients?

• 25 million children
• 13 million adults in families
• 5 million elderly (mostly nursing home residents)
• 8 million blind or disabled people

Source Kaiser Commission on Medicaid the
Uninsured, January 2004
6
Welfare recipients arent the big spenders

7
2002 Expenditures 249 Billion
Long-Term Care 38 Hospitals 26 Drugs
9 Outpatient Care
7 Physicians 4 Other 16
100
8
Who is Eligible?

• Mandatory Groups
• Categorically Needy
• Families with kids on Temporary Aid to Needy
  Familes (TANF)
• Pregnant/postpartum women with kids lt6 yo
• Aged, blind, or disabled receiving SSI

• Optional Groups
• Medically Needy
• Dually eligible who spend down their income
  assets due to medical bills.
• More recently, people who dont qualify for
  welfare, but cant pay for services they need.

9
Its Not Enough to Be Poor

• Generally, you have to be poor enough to need
  cash assistance and
• Have children or be pregnant
• Be disabled, blind, or aged

10
How is Poor Defined?

• The federal poverty level (FPL) is an income
  cutpoint used to define someone as poor
• There are different poverty levels for different
  family sizes

11
Federal Poverty Level, 2006
For a family of 3, the FPL is 16,600 100 of
the FPL 16,600 150 of the FPL 24,900 200
of the FPL 33,200
12
Eligibility Summary

13
The Non-elderly Disabled on Medicaid

• Terminally ill (lt 1 year to live) or
• Have medical conditions expected to last gt1 year
  that prevents recipient from work
• Someone whos wheelchair-bound can work at a
  desk doesnt qualify, nor does someone with
  early-stage cancer or HIV.

14
Does Linking Eligibility Income Create
Perverse Incentives ?

• Because eligibility changes as income changes
• Medicaid punishes people who work, or who return
  to work, because they lose coverage. (Many
  low-paying jobs dont provide health insurance.)
• Policymakers have incrementally de-linked cash
  assistance Medicaid eligibility.

15
What Services Are Covered?

• Mandatory
• Hospital inpatient
• Outpatient services
• Physician services
• X-rays, lab tests, etc.
• There are 13 services that states must cover

• Optional
• Dental care
• Vision care
• Medications
• Inpatient psychiatric for kids
• There are 34 services that states can choose to
  cover

16
What Do Recipients Pay for Care?

• States can charge lt 3.00 per visit or
  prescription
• Premiums enrollment fees are generally not
  allowed (but there are exceptions)
• Exempt from cost-sharing
• Children pregnant women
• Emergency room, hospice, family planning

17
Where Does the Money Come From?

• State
• General tax fund
• As average income decreases, the federal
  contribution (FMAP) increases.

• Federal
• Federal Medicaid Assistance Percentage (FMAP)
• Average 56.3
• Range 50-83
• California 50.2

18
Consequence of Using Average Income States with
More Poverty Dont Get More Help
Massachusetts and New York get 50 from Feds for
every dollar they spend on Medicaid
19
How Do Providers Get Paid?

• Physicians (Medi-Cal)
• California Relative Value Scale
• Like the Medicare RBRVS -- but worse
• Hospitals
• Per diem (by the day), not DRG, not capitation
• What are the incentives?
• How would they affect access to physicians
  hospitals?

20
2002 Expenditures 249 Billion
Long-Term Care 38 Hospitals
26 Drugs 9 Outpatient Care
7 Physicians 4 Other 16
100
21
Ambulatory Care Visits, U.S. Adolescents

• Office-baseda Hospital-basedb
• Private 64 39
• Medicaid 16 35
• Self-Pay 9 10
• Other 11 16
• 100 100

aNational Ambulatory Medical Care Survey
bNational Hospital Ambulatory Medical Care Survey.
22
Evidence suggests that Medicaid is effective
coverage

• See, for example
• Racial and ethnic differences in unmet need for
  vision care among children with special
  healthcare needs.
• Heslin K, Casey R, Shaheen M, Cardenas F, Baker
  R. Archives of Ophthalmology June 2006.

23
National Survey of Children with Special Needs
During the past 12 months, was there any time
your child needed eyeglasses or vision care?
(N 38,866)
Yes n 14,070
No n 24,796
24
Definition of unmet need

• Did your child receive all the eyeglasses or
  vision care he or she needed?
• If respondent said no, then the child was
  regarded as having unmet need for vision care in
  the previous 12 months.

25
Unmet Need for Vision Care by Insurance Type
with unmet need Private 4 Med
icaid 5 S-CHIP 8 Other Type
10 Uninsured 25
26
Odds of Unmet Need for Vision Care by Insurance
typea
OR (95 CI) Medicaid 1.30 (0.88,
1.92) S-CHIP 2.05 (1.24, 3.40) Other
Type 2.50 (0.81, 7.68) Uninsured 7.52 (5.11,
11.07) a Comparison group is private
insurance.
27
Adjusted Odds of Unmet Need by Insurance Typea
OR (95 CI) Medicaid 0.36 (0.23,
0.56) S-CHIP 0.55 (0.31, 0.96) Other
Type 0.52 (0.20, 1.39) Uninsured 1.88
(1.14, 3.08) a Comparison group is
private insurance. Analysis accounted for
race/ethnicity, age, gender, household income,
disability status, number of school days missed
in previous year, number of other unmet needs,
other variables.
28
Why is unmet need for vision care different?

• All states include vision care for children in
  Medicaid S-CHIP without large copayments
• In private insurance plans, vision care is often
  carved out of coverage for medical services.
  There is a separate plan for vision, with a
  separate premium.
• Many families with job-based insurance may opt
  out of vision coverage, because it costs extra
  money (from paycheck)

29
Reforming Medicaid

• Waivers
• Managed Care
• Welfare Reform (1996)
• Deficit Reduction Act (2006)

State

Federal
30
Two Ways for States to Change Medicaid
The easy way File an amendment to the State
Medicaid Plan with the federal government The
not-so-easy way Apply for an exemption, called
a waiver, from federal Medicaid law
31
Why Medicaid Waivers?

• States want to save by
• Innovations in delivery
• Requiring recipients to enroll in HMOs
• Restricting enrollment of optional recipients
• Cost sharing for optional recipients

• Federal agency (CMS) evaluates a waiver by
• Determining whether it would raise costs of
  Medicaid to federal government
• If determined to raise federal costs,waiver is
  denied.

32
Innovations in LTC delivery

• Waiver allows states to deliver LTC
• at home or in community-based settings.
• Elderly, physically disabled, HIV patients.
• In California, a waiver for technology
  dependent kids serves 35,000 clients per year in
  alternative settings.

33
Federal rules that get waived

• Recipients must have a choice of providers
• Benefits must be offered equally to all
  recipients (statewideness).
• The goal
• Place recipients in managed care plans save
  money.

34
Examples from LA County

• Waiving Choice
• In the late 1990s, enrollees could choose from
  two plans LA Care or HealthNet.
• Waiving Statewideness
• Mandatory case managers for managed care
  enrollees, but not others.

35
Percent of Medicaid Recipients in Managed Care

2.7 million in 1992 16.6 million in
1998 31.6 million in 2004
Sources Health Care Financing Administration,
1999 National Academy for State Health Policy,
2006
36
Is Managed Care Saving for Medicaid?

• Not really, because
• Most programs focus on mothers kids, who are
  the least costly recipients
• Most states pay high capitation rates to increase
  HMO participation
• In states where HMO enrollment is not mandatory,
  there is favorable risk selection
• Health services are expensive. How much lower
  can expenditures go?

37
Is the Medicare Drug Benefit Saving for
Medicaid?

• Medicaid used to cover prescriptions for poor
  Medicare beneficiaries. Now Medicare has a drug
  benefit. Does that reduce Medicaid spending?
• No. The clawback provision requires states to
  send money to Medicare -- a portion of what they
  spent on Medicare beneficiaries before the
  benefit existed. 6 billion in 2006 alone.

38
Two Federal Laws that Changed Medicaid

• Personal Responsibility and Work Opportunity
  Reconciliation Act of 1996
• Mostly targeted welfare, but had effects on
  Medicaid
• The Deficit Reduction Act of 2006
• Goal is to reduce federal govt spending on
  social programs

39
Before 1996 Welfare AFDC
Welfare Reform (Personal Responsibility and Work
Opportunity Reconciliation Act of 1996)
After 1996 Welfare TANF
In California, TANF program is called CalWORKs
(California Work Opportunity and Responsibility
to Kids)
40
Key Features of PRWORA

• Adults need to have worked within 2 years of
  entry into welfare
• 5-year LIFETIME limit on cash assistance
• States cannot make Medicaid a lifetime-limited
  program
• States can place caps on families

41
Reducing Perverse Incentives

• If youre not eligible for TANF, but wouldve
  been eligible for AFDC, you can still get
  Medicaid
• If you opt out of TANF assistance (saving for a
  rainy day), you can still get Medicaid
• After getting a job, you can hold on to
  Transitional Medicaid

42
New Challenges
TANF has time limits, Medicaid doesnt. Some
families may not realize theyre still eligible
for Medicaid after losing TANF You have to be
assessed for Medicaid every 12 months. If you
dont respond to notices, you lose coverage
43

• The Deficit Reduction Act of 2005 will reduce
  federal Medicaid spending
• For families that are gt 150 of FPL, states can
  charge unlimited premiums lt 20 of the costs
  of medical services
• Non-mandatory children will be charged for
  services. This has never happened before.
• Providers may deny care if recipient cannot pay
  costs at point of service

44

• Recipients must provide birth certificates,
  passports, drivers licenses, etc, to prove they
  are citizens
• States were already required to check immigration
  status of noncitizens, but they could choose
  whether to require documentation.
• Now everyone must provide documents not just
  non-citizens..
• How will this affect five million elderly
  Medicaid recipients?

45
Representative John Lewis, of Georgia

• Many older Americans do not have birth
  certificates because their parents did not have
  access to hospitals, so they were born at home.
  In the last century, all over the South, because
  of segregation racial discrimination, many
  hospitals would not take minorities.

Pear R. Medicaid hurdle for immigrants may hurt
others. New York Times. April 16, 2006.
46
Report from the Congressional Budget Office

• The DRA will reduce federal Medicaid spending by
  43.2 billion over next 10 years
• 80 of reduced spending will be due to decreased
  use of services by recipients, 20 will be due
  to lower payments to providers
• 65,000 recipients (60 of them children) will
  lose coverage by 2015

47
For more information

• Congressional Budget Office
• http//www.cbo.gov/
• Kaiser Commission on Medicaid
• http//www.kff.org/medicaid/index.cfm
• My email keheslin_at_cdrewu.edu