While Medicaid Enrollment Rates Increase, States Face Financial Pressure to Decrease State Medicaid Spending

Last week, the Kaiser Family Foundation released a report indicating a large jump in state Medicaid enrollment from June 2008 to June 2009.  The report said that the 7.5 percent increase was the greatest one-year jump in enrollment rates ever, with over 3 million people joining the public health program funded jointly by the federal government and individual state governments.  The reason for the increase  is thought to be that because more people became unemployed due to the economic crash, more individuals turned to Medicaid for health coverage.  However, because the economic downturn meant less revenue entering into state budgets, state Medicaid programs have not been able to keep up with the rise in new enrollees.

During a convening of state governors at the White House this week, state officials will likely raise the issue of Medicaid spending. The issue is pressing in light of the impending funding cut when stimulus money from the American Recovery and Reinvestment Act of 2009 will expire in December of this year.  The governors will likely ask that the stimulus funding be continued until states can somehow make up for their large current budget deficits.  In addition to asking for more money, the governors will also likely discuss the feasibility of health care reform efforts.  With both House and Senate versions of health care reform proposing increases to state Medicaid programs to ensure the coverage of more uninsured individuals, the state governors would, understandably, like to know where the money for such expansion would come from.

The National Association of State Medicaid Directors estimates that states’ budgets will fall  short  $140 billion in the next fiscal year.  This means even less money for the likely further increase in Medicaid enrollment to come this year, as Medicaid enrollment generally lags behind unemployment.  To account for the deficit, many states are planning to reduce their Medicaid programs. USA Today finds that three categories of such reductions exist:

• California, Arizona and Virginia propose reducing who’s eligible. In Arizona, 310,000 people would lose coverage. California also wants to increase premiums.
• Michigan, Tennessee, Massachusetts and others propose eliminating benefits. Masachusetts’ elimination of restorative dental services would save $56 million, says Medicaid director Terry Dougherty.
• Texas, Pennsylvania, Louisiana and others propose cutting payments to hospitals, doctors or nursing homes. Several states are considering new taxes on hospitals as a way to avoid cutting these payments.

States that accepted stimulus money to expand their Medicaid programs in 2009 are restricted from any such cuts that would affect low-income enrollment.  However, if the stimulus funding is not extended, some states are planning on heightening eligibility requirements.  For other states, while decreasing hospital and doctor reimbursement seems like the worst possible option– given that many doctors have already stopped accepting  Medicaid patients due to what they deem to be an insufficient rate of reimbursement– many states’ officials find that the only other viable option they have is raising taxes.  Many state leaders refuse to increase taxes in fear of the political backlash come November.

Realizing the need for health care reform to help manage the burden of paying for health care, state governors have stated a desire to be part of the health care reform conversation.  Many have already expressed their dislike for individual mandates, which they believe will drive more individuals to state Medicaid programs.  For the most part, however, the governors want reform and they want it now, finding that they simply can’t afford to wait another year.

It is also worth noting that an underlying issue from these new numbers is whether the Medicaid program is actually a good prototype for expanding health care coverage.  Drew Altman, President and CEO of Kaiser, put in perspective Kaiser’s report as well as the concerns of public spending that were sparked by the Centers for Medicare and Medicaid Services’ projections for 2009-2019– which forecast that public spending on health care will surpass private spending.  He noted that while spending in public health insurance programs would increase, the cost-benefit would be better, since per capita costs on health care were lower in government-run programs than in private insurance programs.  According to Altman, such numbers did not undermine health reform efforts, but instead denoted “the need to control health care costs in the public and the private sectors alike.”

Kaiser Health News, New Jersey Gets a New Hospital?, & Kicking Medicaid Grandma to the Curb

In the wake of declining newspaper presence, the Kaiser Family Foundation, a nonprofit private operating foundation known for its health care concerns, has started Kaiser Health News. In the present issue, there are two articles of special note for New Jerseyans. The one regards the plans of Hackensack University Medical Center, a 775-bed teaching and research hospital that is one of New Jersey’s most prestigious, [which] requested state permission to open a new hospital in Pascack Valley’s empty [hospital] buildings. Although Hackensack is a nonprofit, it announced that Westwood would be getting a for-profit facility financed by a private equity firm from Texas.

Not everyone approves.

The other regards measures that New Jersey legislators are considering in response to a recent investigation of assisted living facilities. KFN reports

Associated Press/Philadelphia Inquirer reports that “lawmakers this week will consider measures to enhance protections for assisted living residents in New Jersey to ensure they aren’t discharged simply because they pay with Medicaid.” The legislation comes in response to an investigation that found a Wisconsin-based assisted living firm called Assisted Living Concepts, which has eight facilities in New Jersey and more than 200 nationwide, “wrongly showed New Jersey residents the door once they exhausted their savings and were about to go on Medicaid, despite promises to allow them to stay.”

Both stories are worth reading.

Senator Baucus on Delivery System Reform

Tim Greaney,

Director, Center for Health Law Studies

Chester A. Myers Professor of Law

Saint Louis University School of Law

Senator Baucus’ March 3 press conference sponsored by the Kaiser Family Foundation Health Care Reform Newsmaker Series: Sen. Max Baucus (D-MT) offered a few insights into the early state of the debate on health reform legislation.

Two points stood out.  First, he observed that “delivery reform” was for him a central element in designing reform legislation. Pressed to define what he meant, Baucus mentioned value based purchasing and the medical home concept.  Second, he stated that the tax exclusion for employer health insurance payments was on the table, noting two characteristics that make it an appealing target:  regressivity and potential source of considerable “revenue.”  On these and other issues, Baucus stressed the critical role OMB scoring will play in shaping the ultimate design of the legislation.

The known unknown here, however, is how some of the relatively novel delivery reforms like medical homes will be defined and implemented — and hence ultimately scored by OMB for their impact on system costs. One problem is that the “medical home” may encompass a wide range of delivery/financing arrangements. In general the medical home has been broadly defined as a physician-directed practice that provides care that is “accessible, continuous, comprehensive and coordinated and delivered in the context of family and community.” But as Bob Berenson and colleagues pointed out in Health Affairs last September,[1] few primary care medical practices are close to having the size, management capabilities and infrastructure (electronic and otherwise) to function as medical homes.  Transitioning to such practices (even on a virtual office basis) will surely take time, money, and a sea change in culture and practice style.  Estimating the pace and effectiveness of such change may prove as daunting as projecting next months Dow Jones average.

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[1] Robert Berenson et al., A House is Not a Home: Keeping Patients at the Center of Practice Design, 27 Health Affairs 1219 (Sept/Oct 2008)

DOJ Plans To Intervene In Two Qui Tam Actions Against Scios

Kaiser Family Foundation reports the intervention of two qui tam civil False Claims Act actions.  The qui tam actions involve the off-label marketing of medication unapproved for certain usages.  The medication in question is Natrecor, a heart failure medication.  There are two qui tam actions against Scios, a subsidiary of Johnson and Johnson.  Kaiser states:

The Department of Justice on Thursday announced plans to join two whistleblower lawsuits filed against Johnson & Johnson subsidiary Scios over allegations that the company illegally marketed the heart failure medication Natrecor for unapproved uses and defrauded Medicare and other federal health care programs, the San Francisco Chronicle reports. FDA in 2001 approved Natrecor for use in hospital patients who experienced shortness of breath caused by acute congestive heart failure (Egelko, San Francisco Chronicle, 2/20).

Read more

More Prescriptions Go Unfilled, is Uncle Sam “Penny Wise?”

The New York Times reports that “One in seven Americans under age 65 went without prescribed medicines in 2007″ and that “that figure is up substantially since 2003, when one in 10 people under 65 went without a prescription drug because they couldn’t afford it, according to the Center for Studying Health System Change in Washington, D.C.”

The Times also reported that Laurie E. Felland, a senior health researcher at the center and lead author of the study, noted that because these numbers are from 2007, they may well be higher now due to the recession.

“The people who were least able to afford medicine were often those who needed it most, Ms. Felland said: uninsured, working-age adults suffering from at least one chronic medical condition. Almost two-thirds of them in the survey said they had gone without filling a prescription.”

The affect among those with chronic conditions is particularly disturbing in light of the data on the relative expense of treating chronic conditions, and the additional expense that neglect in treatment can cause. The Department of Health and Human Services (HHS) has reported that

Chronic Conditions Contribute to Higher Health Care Costs

Twenty-five percent of the U.S. community population were reported to have one or more of five major chronic conditions: ·

• Mood disorders
• Diabetes
• Heart disease
• Asthma
• Hypertension

Spending to treat these five conditions alone amounted to $62.3 billion in 1996. Moreover, people with chronic conditions tend to have other conditions and illnesses. , according to 1996 MEPS data. On an individual level, treatment for the average patient with asthma was $663 per year in 1996, but when the full cost of care for asthma and other coexistent illnesses is taken into account, the average cost was $2,779.

When the other illnesses are added in, total expenses for people with these five major chronic conditions rise to $270 billion, or 49 percent of total health care costs

Expenses for people with one chronic condition were twice as great as for those without any chronic conditions. Spending for those with five or more chronic conditions was about 14 times greater than spending for those without any chronic conditions. Persons with five or more conditions also have high hospital expenditures. In New York State during 2002, of the 1.3 million different persons admitted to the hospital, the 27 percent with five or more chronic conditions accounted for 47 percent of all inpatient costs. (emphasis added, footnotes omitted).
Perhaps as we consider the large number of persons with chronic conditions who are not taking prescribed medications, we should also consider a recent five-year retrospective study of almost 5 million California residents which found that “People who have spotty Medicaid coverage are more than three times likelier than those who maintain continuous coverage to be hospitalized for an illness that could have been managed outside the hospital with doctors’ visits and medication.”

Hospitalization is expensive.

Also, as we noted in a recent post, the Kaiser Foundation has shown that many seniors , who account for a great deal of the health expense in this country (but are not included in the the Center for Studying Health System Change report), also cease or diminish the use of their medications as a result of “the donut hole” in Medicare prescription drug coverage-a gap in coverage which leaves many seniors “on their own” for payments of thousands of dollars per year.