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Medicaid Discussions Heat Up as Funding Pressures Grow

By John Reichard, CQ HealthBeat Editor

June 17, 2011 -- From a call by Republican governors to overhaul the program, to forums, speeches and new reports, the Medicaid program attracted an unusual level of attention in Washington the week of June 13–17, but whether the heightened scrutiny will push the federal–state program in new directions is unclear.

At the start of the week, 29 Republican governors released a set of principles for overhauling Medicaid. Two days later, Sen. Orrin G. Hatch of Utah, the top Republican on the Finance Committee, unleashed an attack on the program and on the provisions of the health law (PL 111-148, PL 111-152) that expand it.

In a speech to the Heritage Foundation, Hatch said that the law's 2014 expansion of the 67-million-enrollee Medicaid program to add 16 million uninsured is a "direct assault" on states' rights in the Constitution. And Hatch essentially said that he agreed with the view that being on Medicaid is worse than having no coverage at all in terms of the health care recipients get.

Sen. John D. Rockefeller, IV., D-W.Va., let loose with a similarly fiery speech—in defense of the program. "Medicaid does exactly what it was designed to do ... provide a safety-net for low-income Americans," he said in a June 13 speech on the Senate floor. "There are lots of worthwhile and positive ways that we can improve the program. But trashing Medicaid for political gain should not be an option," he said.

The sense of gravity surrounding the future of the program also was apparent at a June 13-15 Washington, D.C., conference called the National Medicaid Congress. Some speakers emphasized the deep damage they said would be inflicted on the nation's health care safety net if a proposal backed by Rep. Paul D. Ryan, R-Wis., to turn Medicaid into a block-grant system becomes law.

They emphasized that the debate about Medicaid's future focuses on dollars and budgets and not on the possibility that big cuts might mean that safety net hospitals could close and that recipients who are severely disabled might not be able to get the care they need on the private market. But attendees also were reminded that the nation faces a grave economic threat associated with its national debt and that the Medicaid entitlement must be addressed.

Dean's Take

Warnings of the big stakes involved in curbing Medicaid growth were not confined to Republicans. Former Vermont Gov. Howard Dean said at a different forum sponsored by the University of Virginia that the growth of health spending is so severe a threat crowding out education and other societal needs that everyone in the nation should be part of a "capitated" managed care plan, whether they are in private insurance, Medicare and Medicaid. Under capitated plans, providers get fixed per-capita payments made ahead of time to deliver a specified set of benefits.

Dean called for a "global budget" for U.S. health care spending. "The key here is you have to put substantial downward pressure on the medical-industrial complex," said Dean. "If we keep feeding the beast it's going to get bigger and bigger," he said. "I really don't think throwing more money at health care is a good idea."

Urban Institute President Robert Reischauer defended the Medicaid expansion, saying that "more people are in need and have had to turn to the government for this help." But he said that the consequences of failing to control health spending growth are "tragically large" because higher state Medicaid costs are translating into them not spending enough on education. Reischauer said the U.S. is not exactly the world leader in primary and secondary education and is losing its leadership position in higher education.

The week's wide-ranging discussions about Medicaid did not suggest that support is coalescing for specific cost control tactics.

GOP governors spoke favorably about Medicaid block grants in their statement of principles but were otherwise vague in their policy prescriptions other than to emphasize state control of Medicaid. Democrats are unlikely to accept block grants in debt ceiling negotiations with Republicans, however.

Removal of "maintenance-of-effort" standards that require keeping current Medicaid eligibility standards in the health law is a real possibility as part of those talks. But elimination of the "MOE" is unlikely to trim enrollment levels or spending in a big way.

The Medicaid and CHIP Payment Assessment Commission released a report during the week detailing the role of managed care in Medicaid.

The report did not point the way to specific cost control strategies but it did note that an increasing number of people, including those with complex health care needs, now belong to private managed care plans that contract with Medicaid.

But there's no consensus that moving Medicaid recipients into capitated managed care plans is an effective cost control tactic. A Connecticut state official told the National Medicaid Congress that his state is moving away from such private plans because they aren't really working closely with providers to make health care more efficient.

And a study by the Commonwealth Fund concluded that payments to capitated plans entail considerable waste.

Another study documented problems with access to specialty care in Medicaid. Researchers posing as the mothers of sick children covered by Medicaid or the Children's Health Insurance Program called clinics representing eight medical specialties in Cook County, Illinois. Overall, 66% of Medicaid–CHIP callers were denied an appointment, compared to 11 percent of privately insured callers, the study found. Among 89 clinics that accepted both private and publicly funded insurance, the average wait time for Medicaid–CHIP enrollees was 22 days longer than that for privately insured children, said the study, published in the New England Journal of Medicine.

"As we encounter new opportunities for restructuring the U.S. health care delivery system, there is a need for empirical data on policy mechanisms that can minimize disparities in access to care," the researchers said.

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