Medicaid Mandate Targeted in Debt Talks, but Savings Are Questionable - CQ Healthbeat

Medicaid Mandate Targeted in Debt Talks, but Savings Are Questionable

By John Reichard, CQ HealthBeat Editor

As talks intensify over reducing the nation’s debt, there is a real chance that negotiators could end up eliminating a 2009 rule requiring states to maintain current levels of Medicaid eligibility.

Republicans don’t much like the rule, called the “maintenance of effort” mandate, which was supposed to expire this month but was extended in the 2010 health care law. And eliminating it would give them a psychological lift in their so-far futile effort to bring down the health care law (PL 111-148, PL 111-152). Democrats and the Obama administration might find scrapping it useful as well — they could say they have started to overhaul costly entitlement programs.

But it’s a mistake to think that eliminating the “MOE” rule would significantly reduce Medicaid spending and enrollment. There are two reasons for this. First, states would only be able to roll back eligibility to a point, meaning savings would be limited. Second, those states most eager to get rid of the rule don’t cover that many people in Medicaid anyway.

The MOE originated in the 2009 stimulus law (PL 111-5), which gave states billions in extra Medicaid funding. In exchange, states had to maintain “eligibility standards, methodologies, and procedures” in place as of July 1, 2008 until June 30, 2011, the day the extra stimulus funding stops. That effectively prevented states from using the new money for non-Medicaid budgetary needs.

The 2010 health overhaul then extended the MOE for adults on Medicaid until 2014 when the state insurance exchanges start and for children through 2019. But the law did not continue the flow of extra money to maintain coverage levels required by the MOE.

“The reason they put it in effect was to say we ought to not slide backward so we have a higher mountain to climb in 2014,” said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured. In 2014, the Medicaid eligibility threshold rises to 133 percent of the federal poverty level, extending coverage to an estimated 16 million uninsured Americans.

But even with somewhat improved revenues, states continue to struggle to balance their budgets, especially because the stimulus money is almost gone. Republican governors are pressuring members of Congress to pass a bill (HR 1683) that would eliminate the MOE rule, easing states’ ability to curtail enrollment.

At the same time, officials in Washington are under heavy pressure to cut federal spending in many areas, including Medicaid.

“They’re talking about trillions — with a ‘t’ — in cuts,” said Matt Salo, executive director of the National Association of Medicaid Directors. “And when you’re talking about trillions in cuts, almost everything has to be on the table,” including removing the requirement barring eligibility reductions.

But with trillions to cut, ending MOE provisions would do little to balance the federal budget. The Congressional Budget Office estimates that HR 1683 would reduce deficit spending by just $2.1 billion in 2012-2021.

The Power of the MOE

States want to eliminate the MOE not to slash Medicaid enrollment but to make some pragmatic changes, said Salo, who added that the requirement has also blocked some anti-fraud efforts. “We had situations in a couple of states where they do self-attestation of income — no documentation of income required. Tell us what your income is and we’ll enroll you. You don’t check. That’s a really easy tool to get people in.”

That procedure, Salo said, lacks the oversight needed to verify an applicant’s income. When states tried to toughen it, the Health and Human Services Department objected, saying that would violate the MOE prohibition on enrollment policy changes, he said.

He also said the MOE has gotten in the way of states’ efforts to crack down on people who transfer or hide assets in order to qualify for Medicaid. A 2006 deficit reduction law (PL 109-171) gave states new tools to fight that kind of fraud. But when Virginia tried to use the power, Salo said, HHS blocked it on MOE grounds.

Other analysts say that the MOE does not, in fact, inhibit anti-fraud efforts and that Medicaid loses far more money to phony billing by providers and suppliers than it does through undeserving enrollees slipping into the program. And the states that most ardently back MOE removal won’t save much, they add.

“Many states have not expanded beyond core federal minimum eligibility requirements, except for children. If the MOE is repealed, states still could not reduce eligibility below these federal minimums. However, states could tighten enrollment procedures which would make it difficult for individuals to obtain and retain coverage if the MOE is repealed,” said Robin Rudowitz, a Kaiser Family Foundation analyst. CBO estimates that 300,000 Americans would lose coverage if the MOE were repealed, small compared to the 67 million now in Medicaid.

Health care law defenders say if the MOE rule goes, many children would lose coverage. And the planned Medicaid expansion in 2014 would be even more of a stretch. Urban Institute President Robert Reischauer said that if enrollment does contract, “two years from now we’ll be sitting here saying, ‘How can the states make such a huge change in who’s covered under Medicaid?’ I mean the expansion’s going to be even bigger than we thought.”

Medicaid Discussions Heat Up as Funding Pressures Grow

By John Reichard, CQ HealthBeat Editor

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 Thursday 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 (See related story, CQ HealthBeat, June 17, 2011). 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 (See related story, CQ HealthBeat, June 15, 2011).

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 (See related story, CQ HealthBeat, June 14, 2011).

And a study by the Commonwealth Fund concluded that payments to capitated plans entail considerable waste (See related story, CQ HealthBeat, June 15, 2011).

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.