Where Did the Uninsured Go? Into Cash-Strapped State Medicaid Programs

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Published May 18, 2011

| FOXBusiness

If reforming Social Security is equivalent to stepping on the “third rail of politics,” reforming Medicaid is like driving into an electrical transformer.

But reform is desperately needed, as health reform will blow out the number of people enrolled in Medicaid by a third. The Administration, though, is restricting the states, who manage Medicaid, from enacting cost-saving, common-sense changes that fit their locales. That is triggering "state budget crises," and that will increase deficit spending on Medicaid into the trillions of dollars over the next decade, says a new report based on information from the nation's governors that was issued by the House Committee on Energy and Commerce and Senate Finance Committee on May 3. 

However, most any attempt to reform an increasingly impoverished Medicaid system in Washington has been pilloried by the media over the last few decades as an attack on the poor. “Republicans hate poor people,” now shouts one blog. “House Republicans hate poor people,” hollers another.

But both Republicans and a growing number of Democrats now say Medicaid must be saved via reform, or else the poor will be seriously hurt. And that reform has to go beyond the managed-care reforms for Medicaid now on the table.

Reforming Medicaid often takes a back seat in DC to debate over reforming Social Security and Medicare, due to mindless high dudgeon and demagoguery by people who have not studied the issue and who have no more sense than a flock of geese. 

That is what is happening to Congressman Paul Ryan (R-Wisc.), the only elected official courageous enough to do what other legislators have failed to do, and that is offer meaningful reform. These attitudes have got to change, because poor people will be hurt without fixing the system, as Medicaid is now the first responder in health reform.

Ask any American of any income bracket, and they’ll tell you this nation must take care of its poor. That belief is in the DNA of this country.

But a nation cannot take care of its poor without sound economic policy. 

A nation cannot have welfare without wealth creation. 

A nation cannot take care of its poor without a healthy, thriving Medicaid system.

Where the 32 Million Uninsured Are Heading

Health reform will add an estimated 16 million new enrollees, mostly uninsured adults, into the Medicaid system by 2019, on top of the estimated 49 million already enrolled. 

That means the number covered by Medicaid will grow by a third.

At the same time, an additional 16 million people are projected to gain private health coverage through new, state-based health insurance exchanges, with government subsidies provided for those up to 400% federal poverty level. The states will manage those exchanges, too.

That covers the roughly 32 million uninsured people at the center of the health reform debate. Set aside the onerous fact that the U.S. faces a severe doctor shortage. The AAMC Center for Workforce Studies projects a shortage of 91,500 physicians by 2020.

“Over the next ten years, the federal government will spend $4.6 trillion on Medicaid -- a substantial contributor to the growing $14 trillion national debt,” says a new report from the House Committee on Energy and Commerce and Senate Finance Committee issued on May 3. “At the state level, Medicaid spending now consumes nearly a quarter of state government budgets -- a significant driver of state budget crises.”

Health Reform Made Medicaid the First Responder

Medicaid is the country’s largest health care program for poor people. It is jointly funded by federal and state governments, political dysfunction in high definition. 

Medicaid is also the single largest source of federal revenue to the states, who manage this system and are now experiencing a national nervous breakdown due to health reform.

Health reform tightened the federal government’s grip on state budgets via new restrictions on how Medicaid is managed, stopping the states from common‐sense measures that could protect both the poor and taxpayers, says the new report from the House Committee on Energy and Commerce and Senate Finance Committee.

For example, as many as one in five Medicaid enrollees in Oregon may not even be eligible for the Medicaid program, but health reform restrictions prohibit the state from updating its eligibility determination procedures to correct this problem, the report says.

Health and Human Services Secretary Kathleen Sebelius acknowledged the problems states are facing in a letter to governors on February 3, 2011. “Unfortunately, the letter simply reiterated the limited options available under current law” to fix this concern, the new Congressional report says.

Meanwhile, health reform’s legal handcuffs on state Medicaid programs are crowding out state budgets, as the states opt instead to make Draconian cuts in budgets for education, public safety and transportation, and “in many states, new taxes have also been imposed,” says the Congressional report.

Deficit Spending on Cruise Control

And this is why federal deficit spending, which Congress has put on cruise control, is a dire issue now.

Today, the United States spends roughly 75 cents of every federal tax dollar on just four things: Medicare (the federal insurance program for seniors), Medicaid, including the Children’s Health Insurance Program ($732 billion total for all three), Social Security (another $707 billion) and interest (about $200 billion) on the $14 trillion debt.

That leaves a quarter out of every buck of federal revenue to pay for everything else the federal government does.

Think about that. The U.S. pulled in $2.162 trillion in total federal tax and other revenues in 2010--76% of that is $1.639 trillion.

Left remaining is a dwindling $523 billion for everything else, for the Defense Dept., for Homeland Security, for the Dept. of Labor, of Education, Housing and Urban Development, the wars in Iraq and Afghanistan.

Meanwhile, the federal government spent $3.5 trillion in fiscal 2010, which is a little less than a quarter of GDP. Of that sum, the U.S. borrowed about $1.3 trillion.

The new health reform bill will increase spending even more.

Creeping Costs of Health Reform

Health reform enacts new eligibility rules that say states must extend coverage in Medicaid to people with incomes at or below 133% of the federal poverty level by 2014, and it says new health insurance exchanges must be launched, subsidized by taxpayers.

“The Congressional Budget Office (CBO) estimates the direct cost of premium and cost-sharing subsidies to be $350 billion from 2010 to 2019, and $8 billion in indirect costs,” says the Kaiser Family Foundation. That's just for those costs alone.

But the Administration touts a future crackdown on waste, fraud and abuse in the Medicare and Medicaid systems as offsetting those costs.

A recent report issued by the Centers for Medicare and Medicaid Services claims that health reform launches “new tools and resources for combating health care waste, fraud and abuse": which "will save taxpayers $120 billion over the next five years.”

Submarined in the Report

But drill down into what’s behind the $120 billion, and you’ll see ephemera such as “reforming provider payments [and] rewarding quality and efficiency, $55 billion,” or “reducing excessive Medicare payments to insurance companies, $50 billion” and “investing in patient safety – lowering hospital re admissions and hospital-acquired conditions, $10 billion through 2013.”

You’ll also see in a heavily footnoted section called “cracking down on fraud and abuse in the Medicare system,” you’ll see just $1.8 billion.”

The Administration says in a footnote submarined in the report that these are merely “estimated savings” for “integrity provisions in the Affordable Care Act,” though it does not include other, ongoing government anti-waste and fraud initiatives.”

The Problem With Medicaid

So you may ask, what exactly are the issues with Medicaid? 

Health Reform Worsens an Already Broken Medicaid System, Driving the U.S. Deeper into Debt 

The experts and economists at the Heritage Foundation, a conservative think tank, who have made it their life’s work to study Medicaid. Robert E. Moffit, a senior fellow, and Audrey C. Jones, assistant director in public relations, relayed the following:
• Between 1990 and 2010, national Medicaid spending increased from $72 billion to over $400 billion.
• Federal spending alone increased from $40 billion in 1990 to an estimated $271 billion in 2010.
• At the state level, Medicaid spending has increased four times faster than elementary and secondary spending, five times faster than higher education, and nine times faster than transportation spending over the past two decades.

Doctors are Ditching the Medicaid Program

• Doctors are ditching working with Medicaid patients because of low reimbursement rates (often getting paid just a third of commercial rates) and an enormous amount of required paperwork. Just half of all doctors now accept Medicaid patients. There is evidence of poor quality care.
• Medicaid is in large part conditional upon low income and lack of assets, meaning that homes that work can be penalized with a cutoff.

Research Shows Expanding Medicaid Could Worsen Already Poor Quality Care

• Low provider payments (again, a third of commercial rates) mean Medicaid recipients have a hard time finding a doctor.
• Only 10% of primary care physicians believe that new Medicaid enrollees in their area will find a suitable primary care physician after health reform kicks in, one survey shows. This massive inflow of patients with few providers will necessarily mean worse care.
• Medicaid recipients already have a hard time finding a doctor, forcing many to rely on expensive and overcrowded hospital emergency rooms for non-emergency care.
• They frequently receive inferior medical treatment, are assigned to less-skilled surgeons, receive poorer post-operative instructions, and often suffer worse outcomes for identical procedures than similar patients both with and without health insurance.
• There is no evidence that suggests states that have expanded Medicaid have had better health outcomes for their poorer populations.
• One study found Medicaid patients had a higher chance of complications and death in the hospital than even the uninsured did. Those with private insurance fared better than both.
• Another study found that Medicaid patients had lower cancer survival rates than even the uninsured. Those with private insurance fared better than both.

How Children Are Affected

• Take a child with asthma. An asthmatic child was five times more likely to see an asthma specialist if she had private coverage than if she were insured by Medicaid.
• Asthmatic poor children on Medicaid were also 50% more likely to be seen in the emergency room in the past year and 40% less likely to have had three or more routine primary care visits for their condition.

How Can Medicaid Be Worse Than Being Uninsured?

• Medicaid can be worse than even being uninsured because of the enormous amount of paperwork and the denial rate for Medicaid claims, which is three times larger than for Medicare and commercial insurance.
• That translates into limited access to providers and less care.

Wasn't Health Reform Supposed to Be Good For Insurers, Given the Larger Pool of Insured People? 

Not likely:
1.) As Medicaid enrollees grow by a third, and the nation’s doctors grow less in number, individuals will be crowded out. That includes the truly impoverished, who need this program most of all;
2.) The fear is, as households with private coverage become eligible for public coverage, many of them could switch to the highly subsidized public coverage, causing strains on US taxpayers;
3.) In a recent study done by the State Children’s Health Insurance Program, or SCHIP, for every 10 individuals who became Medicaid eligible, six decided to replace their private insurance with Medicaid.

Rep. Paul Ryan's Plan

Member of the Republican party and a growing number of Democrats are listening to proposals by Congressman Paul Ryan (R-Wisc.), which includes turning Medicaid into a block grant to the states:
• Gives each state a fixed, rather than open-ended, allotment of money, forcing states to allocate more efficiently and be more disciplined.
• The CBO scored a similar version to the Ryan plan as saving about $690 billion between 2012 and 2020.
• Provides economic certainty of the Medicaid liability at the federal level, rather than just a rough idea. More transparency allows more-informed policy-makers.
• Allows greater flexibility in federal mandates so states can innovate and better manage their programs.
• Pushes reform, not expansion

Medicaid Safety Net Plan

Heritage Foundation’s reform ideas include:
• Removing consumer barriers to the purchase of health insurance, such as existing limits on interstate purchase;
• Developing mechanisms, such as risk-adjustment and high-risk pools, to address access issues for the hard-to-insure;
• Making available new pooling arrangements, such as individual association plans; and
• Supporting strong state-led initiatives to promote innovation and experimentation with consumer-centered, market-based reforms.

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