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Why Medicaid is Good – Part 2

Why Medicaid Is Good – Part 2

Medicaid has become a polarizing subject in Washington over the years. Many Democrats view Medicaid as their Holy Grail (and their no-holds-barred defense of anything government entitlement sometimes reminds us more of the Monty Python version). Tinkering with it at all is sinful, no matter how in need of reform.

At the opposite end of things, many Republicans have a knee-jerk reaction to anything government-funded. If the modern-day GOP were the rulers in an Orwellian novel, “Medicaid is Bad!” woul

d be a prominent tenet of their “Seven Commandments of Animalism.”

Our view is that there is a middle ground, one that leverages the proven stability of Medicaid and reforms it for the future so we can meet the insurance access and aging crises.

The major parties would be wise to simply sit down and hash it out. Cancel the August recess and get started. Here’s how:

Medicaid should not be a political bad word for anyone.

Despite the rancor you hear from many Capitol Hill Republicans, Medicaid has significant bipartisan support. To date, 31 states and the District of Columbia have expanded Medicaid. Interestingly, 16 of those states now have Republican Governors. While not all states were Republican-led at the time of the expansion, many of these Governors still support the expansion. The ideologues can call them big government Republicans all they want, but pragmatic and sensible GOP leaders, such as Governor John Kasich of Ohio (who has served in both federal and state roles), get it. It is time others open their minds.

Republicans will have to deal with preserving the Medicaid expansion.

Disenfranchising people who have healthcare now should not be sanctioned. While it sets up an unlevel playing field, reward the 31 states and District of Columbia that have expanded by preserving as much of the 90% funding as possible. These states did the right thing when Obamacare was passed. At least seven states that expanded Medicaid would automatically end their expansions should the House or Senate bills be signed into law. This has major impact on millions of enrollees.

Democrats will have to deal with overhauling Medicaid; Republicans will have to deal with not gutting the program and truly preserving it so it can do what it needs to do in the future.

We have huge healthcare challenges ahead, not the least of which is that the current Medicaid entitlement construct is not sustainable. Excess now will mean chaos and crisis later. More importantly, reforming Medicaid is necessary to meet all of the aging challenges we outlined last week in Part One of this blog.

Specifically, reform tenets should:

  • Preserve the expansion funding noted above.
  • Keep the entitlement for some time as a transition but then convert to a per capita cap formula. This gives states time to plan and decide what their future Medicaid program should look like.
  • It is also time to meet head on the rather ridiculous arguments made by the White House and House and Senate GOP that their proposals don’t actually represent cuts to Medicaid. Perhaps not in the purest sense of the word, but of course they do. We know that to meet ongoing requirements almost every program needs to inflate over time. If you short-fund the increase, it is tantamount to a cut. The potential loss of millions from the Medicaid rolls proves the point.
  • Additionally, the proposals are not equitable. States have much less financial room to maneuver, especially in tough economic times. The formula should assume the federal government picks up and consistently sustains a larger overall share of the program. Everyone should tighten his or her belt, but the rough allocation of risk and cost should be the same. The GOP would shift costs to states over time. Surely we can come to a national consensus of a reasonable future level of funding and the equitable breakout between the federal government and states.
  • On the face of it, a per capita cap formula would appear to take into consideration many factors, including enrollment growth. But reality is far more nuanced. The formula must be constructed to be sensitive to the following: healthcare inflation, population growth trends (including within the various eligibility groups), temporary recessionary trends (which badly hit states when Medicaid enrollment soars and rash decisions must be made), aging demographics, and extraordinary changes in healthcare (e.g., drug innovation, technology and other similar trends). Given the complexity of all this, a base year alone probably does not safeguard states. Because of the factors above and the vagaries of picking a single base year for states, a periodic rebasing might need to be looked at.
  • While a case can be made that the formula should drive to or set national spending benchmarks, the reality is there is a significant variation in costs (overall and within eligibility groups) between states today. Some of this is tied to variations in healthcare systems and infrastructure (e.g., urban vs. rural states) while others are related to state policies regarding the scope of Medicaid (e.g., rich benefit states vs. lean ones).
    Given all of this, some variability by state (and by eligibility groups) will need to be recognized in the formula.
  • For sure, some states will argue still that they want a richer safety net and it should always be funded, in part, by the federal government as it is now. But we are not terribly sympathetic here as long as reasonable recognition is put in place to acknowledge legitimate differences in state costs and perhaps for additional investments already made by some states (we can’t pull the rug out from them now). But any future extraordinary decisions made by states in terms of benefits and scope outside a national norm or corridor should be borne 100% by state taxpayers.
  • The annual inflation formula should be reasonably generous yet provide for savings against the anticipated costs of continuing an unfettered entitlement. While any inflation factor will have its pros and cons, using a “Consumer Price Index — Medical Plus X% Formula” permanently makes the most sense to us. And, as we noted in last week’s blog, remember that it is much cheaper to provide consistent access to coverage in the Medicaid program than through private insurance – even if a “plus” factor is added to CPI-M so as to better alleviate concerns at the state level.
  • Include in the formula reasonable categories of eligible expenses. Some should not ever be factored in as they work against promoting quality and transformation. Still other categories of Medicaid spending should always be held harmless along the way, including payments made by Medicaid for dual eligibles’ premiums, cost-sharing, etc.
  • An extended analysis published by the Congressional Budget Office (CBO) at the request of Democrats says that Medicaid spending would be 26% lower in FFY 2026 and 35% lower in FFY 2036 if the Senate replacement bill (the Better Care Reconciliation Act or BCRA) is adopted. Certainly, a reasonable middle ground can be found between the current Medicaid entitlement (which funds all expenditures at a matching rate between 50% and 74% depending on a state’s relative wealth) and the Senate bill; one that preserves the Medicaid program, retools it for success, meets future demands, and still is fiscally responsible.
  • Funding Medicaid at a reasonable rate is important because private managed care plans need incentive to remain in the Medicaid market, aid in the transformation, and carry the burden of reform. We know that traditional Medicaid fee-for-service (FFS) systems are decrepit and need to be sunsetted. Over the past few years, Medicaid managed care has proven a good model (with some regulatory urging from the Centers for Medicare and Medicaid Services (CMS) and Medicaid agencies) that can ensure better access, improve quality over time, and be cost-effective. Indeed, the only vehicle out there that has any shot at managing the moving parts of coordinating Medicare and Medicaid acute and long-term care is Medicaid managed care. This is the key to future affordability. Without a reasonable funding formula and a chance at a reasonable margin, private health plans will not participate in long-term care or dual eligible plans. Even if plans remain in the market for now, over time private plans undertaking these experiments could very well abandon the programs if funding becomes insufficient as more and more costs are shifted to state government.
  • Let’s truly reform the benefit to make it sustainable and emphasize personal responsibility. This should include contributions by enrollees at reasonable levels and rewards for good healthcare behaviors and penalties for bad ones. Today, except in certain waiver situations, states deal with a level of mandates and bureaucracy that is obscene. Every member is given the same gold-plated benefit. Free states from the regulation stranglehold – from excessive regulatory mandates (e.g., EPSDT), mandatory benefits, mandatory eligibility groups and even the traditional non-discrimination mandate that dictates the same benefits to mandatory and voluntary eligibility groups. This will allow states to truly innovate.
  • Think out of the box when it comes to such reforms. True innovation would recognize that perhaps every state is different in terms of its healthcare needs. Some states have older demographics than others; some are more affluent than others; and some have naturally higher rates of insurance than others. So state-tailored and flexible solutions have merit. States will fashion fair and sustainable benefits and program rules. The current law allows states to effectively bring Exchange/Marketplace dollars into Medicaid waivers to cover members. When the subsidy scheme is overhauled, this aspect should be preserved as it could be very cost effective.

Deal now with what our long-term system will look like. We can’t wait. We are already far behind.

In a 2016 blog we spoke to the aging demographic. As complex and problematic as our healthcare challenges are today, aging increases risk exponentially as acute and long-term care become inextricably linked in the elderly. In summary, our long-term care agenda must include:

  • Educating the broader public about planning for their long-term care future, much like we approach health insurance and retirement savings.
  • Purchasing long-term care insurance vehicles early in life.
  • Making it harder in the future for Americans to transfer assets easily to access Medicaid long-term care.
  • Expanding and marketing the Long-Term Care Partnership Program in Medicaid.
  • Building a broad range of alternatives to nursing home care (assisted living, home care, supportive housing, congregate housing, adult day care and personal care attendants, to name a few) and making more services eligible for reimbursement. We must make more atypical services eligible for Medicaid reimbursement (e.g., rent, food, and other non-clinical supports). Funding these services will still mean alternatives run one-quarter to one-half the cost of a nursing home monthly.
  • Adopting broad, income-based “buy-in” schemes in Medicaid to help support access to alternatives to nursing home care. Set sliding scale contribution schemes based on income to allow the lower and middle class income groups to access the coverage system.
  • Coordinating acute and long-term care to further reduce costs and trends.

Enact a reasonable federal policy infrastructure that emphasizes quality transformation.

A blanket devolution of authority to states will likely mean that many states lose sight of the need to enhance quality, prevention, and management in the healthcare system. Remember, this is the key to reducing healthcare’s reliance on GDP. In a surprise move, CMS has opted (at least for now) to keep the Medicaid mega or Uber rule in place which significantly expands federal oversight over Medicaid across the board, including quality monitoring and incentives, rate-setting soundness, and a minimum medical loss ratio. We think this is a positive step overall despite opposition from some states and plans. It has some onerous provisions, but clearly lays out a Medicare-like compliance and quality foundation for Medicaid’s future.

In the end, underfunding Medicaid does little to get us to our goals of a sustainable healthcare system and serving aging Baby Boomers. Indeed, those costs will be there in the future anyway. With a dysfunctional and underfunded Medicaid system, such costs may be even more of a drag on society and the economy as a whole. This is the point both sides miss in the great debate on what to do with Medicaid.

Set aside the politics and come to a common sense consensus on a program that has served America well for more than 50 years and undoubtedly will be one of the bulwarks of our healthcare system long into the future.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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