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Supercommittee Legislation Could Generate Big Savings on 'Duals', Medicaid Chiefs Say

By John Reichard, CQ HealthBeat Editor

September 14, 2011 -- Any automatic cuts triggered under the debt ceiling law can't touch Medicaid. But legislation developed by the Joint Select Committee on Deficit Reduction can—and in a completely unfettered way.

So how could the so-called supercommittee best tackle Medicaid spending in a way that eases state budget burdens? Let states reap a greater share of the savings from better managing the care of the "duals," says Matt Salo, executive director of the National Association of Medicaid Directors.

Salo said that is the No. 1 priority for state Medicaid directors in the legislative package developed by the debt reduction panel.

Responding to reporters' questions after moderating a panel at an insurance industry conference, Salo said the legislation should permit states to share in some of the Medicare savings generated through improved management of the care of the 9 million or so Americans enrolled in both Medicare and Medicaid. They make up some of the sickest, frailest people in America and account for a big chunk of Medicaid spending and a relatively small share of its enrollment.

The Department of Health and Human Services (HHS) recently armed state officials with better tools to manage care of the duals by giving them access to Medicare claims data. That allows states to track how their Medicaid enrollees use Medicare services, such as hospital care and prescription drug benefits. By analyzing that data, states can identify high-cost patients and ways to redesign their Medicaid programs to save both Medicaid and Medicare money, state Medicaid officials say. But right now states benefit only from Medicaid savings from better management of the duals, not from Medicare savings.

Salo said that providing incentives to state officials by letting them share in Medicare savings would generate "huge" reductions in outlays for both Medicare and Medicaid.

Salo said the debt panel also could save big by streamlining the process for changing Medicaid programs through waivers. Getting the Centers for Medicare and Medicaid Services (CMS) to approve a waiver can sometimes take a state years. States have had to obtain waivers to add mandatory managed care to their Medicaid programs, he noted. It makes no sense to require states to obtain a waiver for something that is standard industry practice, he added.

The process should be overhauled so that far fewer waivers are required for states to change their Medicaid programs, and in instances where they must still apply for waivers, CMS should decide within a few months, he said. "It could save an enormous amount of money."

Salo said he thinks the supercommittee is considering such changes. A big question about the fate of legislation on the duals is to what extent the Congressional Budget Office (CBO) will score savings, he said.

Salo said that the "blended rate" proposal to reduce Medicaid spending is under consideration but is "losing steam." The Obama administration has proposed to save $100 billion by establishing a uniform figure for the percentage the federal government pays states for Medicaid costs. State Medicaid directors oppose that cut. Critics say it would also end the Children's Health Insurance Program.

President Obama has proposed cutting federal Medicaid funding by reducing the amount that states could tax providers, such as hospitals, to help finance Medicaid. Those taxes allow states to collect higher federal Medicaid matching payments. Salo says state directors oppose the Obama approach.

Salo said he thinks the supercommittee is also looking at ways to save Medicaid money by reducing fraud. Although there is much fraud in the program, it's hard to root out, he said, and people who say 10 percent could be cut from Medicaid spending by shutting down fraud are advocating a "highly simplistic solution to an extraordinarily complex problem."

Another idea states have advocated is ending the "maintenance of effort" rule in the health law, or "MOE".

The rule requires that states maintain current levels of Medicaid eligibility. But because it's part of the health care law, which Democrats on the deficit panel are expected to guard fiercely, Salo says he doesn't think it will be part of legislation developed by the committee.

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