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Medicaid fix demands benefits cuts
Slashing eligibility, services is inevitable to control spiraling costs, policy-makers say
Karen Rahm, who is on dialysis, was barred from the kidney transplant list while she waited months to have her infected teeth pulled because of dental service cuts.
Michigan has cut back on provider payments, reduced benefits, imposed co-pays, stepped up fraud and abuse enforcement, expanded managed care, pooled prescription drug buying and drawn up a preferred drug list to contain Medicaid costs. Alabama is the only state not taking steps this year to cut Medicaid expenses. Here's what the states are doing:
Pharmacy controls: 43 states.
Source: Health Management Associates
Following are specific examples of how states are cutting Medicaid costs:
Sources: National Conference of State Legislatures, Health Management Associates
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LANSING — Take away basic health care from kids barely above the poverty level.
Make it mandatory that grandma sell her house, car and other assets to pay for her nursing home care.
Eliminate prescription drug coverage for 1.35 million low-income Michiganians.
Raise taxes for everyone, or single out certain groups for higher levies such as smokers and drinkers.
These are among the tough options that Michigan policy makers are facing as they try to address the runaway, $7.1 billion state Medicaid program, which pays health care costs for the poor.
“Medicaid is the bleeding ulcer of state government,” said House Appropriations Committee Chairman Marc Shulman, R-West Bloomfield. “It represents 25 percent of our budget, and our revenue is not going to allow us to grow out of the problem.”
The number of people receiving Medicaid has expanded by more than one-quarter and spending for the program has grown by 40 percent since 2000, even as state tax receipts have dropped. The decline in revenues coupled with the upward spiraling Medicaid budget has begun to hobble other state programs and services, including university spending, aid to local communities for police and fire protection and the state regulatory staff that oversees everything from food inspection to child care licensing.
So far, Michigan has shied away from making dramatic cuts in Medicaid eligibility and services. But human services advocates fear the day for such reductions is near.
“Any time you have a target as big as Medicaid, it’s impossible for elected officials to ignore,” said Karen Schrock, CEO of Adult Well-Being Services in Detroit. “The Medicaid funding problem is a symptom of the nation’s inability to deal with health care.”
Impact is widespread
Gov. Jennifer Granholm and lawmakers are mindful that when they take steps to cut costs, they affect people like Marcia Yakes of Detroit and Karen Rahm of Lewiston.
Yakes, 52, who has diabetes and disabilities, lost dental and podiatric care due to Medicaid program cuts this year. She fears severe problems with in-grown toenails and decaying teeth eventually will lead to medical emergencies.
“We’re all impacted by the state deficit, but it’s not going to do any of us any good if taxpayers have to pick up a bigger cost down the road,” Yakes said. “Because Medicaid won’t pay for my teeth or my feet, I can’t get the work done unless I can find a sugar daddy.”
The dental service cuts forced Rahm, 47, to wait months to get her infected teeth pulled. Eventually, the county health department found some grant money to pay her bills. Meanwhile, the mouth infection barred Rahm, who also has diabetes, from taking a slot on the kidney transplant list.
“Because Medicaid would not pay for it, I had to go through a lot of red tape to get the dental work done,” said Rahm, who is on dialysis. “That whole time, I could have been on the transplant list.”
Rahm added that Medicaid eligibility rules compelled her to get a divorce from her husband, Mike, in January of last year. His income as a mason meant the couple had to spend $1,300 a month on medical expenses before Medicaid would pick her up. “We couldn’t survive,” she said, adding that she and her husband share ownership of their home and he still occasionally lives there.
Federal relief sought
Granholm, who is proposing $400 million in new taxes to temporarily close the deficit in Medicaid spending, says the federal government ultimately will have to foot a larger share of the bill for indigent health care because the problem is too big for the states to handle.
“It’s very clear we need relief from Washington,” she said. “The federal government has shifted costs to the states without shifting any additional financial assistance … it’s not just Michigan but every state is facing the exact same thing.”
If the federal government is not willing to bear a greater share of the costs, it must at least renegotiate rules so the states can decide how to run their programs, said Michigan Medicaid Director Paul Reinhart.
He singled out long-term care, which costs Michigan $1.7 billion a year.
“If the federal government was responsible for most of that, it would buy us another decade before Medicaid is unsustainable again,” Reinhart said.
Rep. Shulman is working on a plan to shift some of the expenses the state pays out of Medicaid for the elderly to the federal Medicare program.
But with Washington facing record deficits and trying to deal with the escalating costs of the war on terrorism, talk about a Medicaid bailout is probably unrealistic.
Here are the most likely cost-containment measures the states will take while awaiting help from Washington that may never come:
Medicaid cuts
Only 40 percent of Medicaid spending in Michigan is for benefits required by federal law. The other 60 percent goes to people above the federal poverty line and for optional services such as prescription drugs and nursing home care.
Michigan has cut $700 million out of the Medicaid budget since 2002. The state eliminated dental care and other services for adults, reduced home help services for people who can’t handle everyday chores, and convinced drug companies to provide discounts on prescriptions.
Other states have made far more dramatic changes, including removal of older children from the Medicaid rolls, requiring co-pays for emergency visits and lowering income thresholds for eligibility.
“We’ve done a pretty remarkable job of protecting the integrity of our Medicaid program in the face of deep budget cuts. We haven’t cut eligibility like a lot of states have,” said Janet Olszewski, director of the state Department of Community Health. But she said she’s concerned about the ability of the state to continue to protect the integrity of the program.
Granholm has said that 200,000 Medicaid recipients — mostly families with annual household incomes between $15,000 and $30,000 — will be dropped from the program should the Legislature fail to pass proposed increases in cigarette, liquor and inheritance taxes.
Human services advocates give Granholm high marks for sparing Medicaid from severe cuts, but they say they’re still waiting for a long-term plan from the governor.
“Although the governor has proposed revenue increases that will help with some of the immediate budget problems, there doesn’t seem to be a plan for looking long term at how to sustain the program and how to address the issues of the uninsured in Michigan,” said Jackie Doig, staff attorney for the Center for Civil Justice based in Saginaw.
Merrill Matthews, director of the Virginia-based Council for Affordable Health Insurance, said states need to look at cutting back their programs.
“Eligibility and services got out of control in the ‘90s when the economy was strong, and it has become a real problem for states now that are turning back some of that coverage,” he said. “Many states are serving people now who have a higher income than the program was intended for.”
Estate recovery
Michigan is the only state that has not put a law in place calling for the recovery of Medicaid outlays for nursing home care from patients’ estates, according to Olszewski. Federal law requires that such a plan be enacted.
When it happens, the losers will be the children of deceased nursing home patients who now can inherit their parents’ houses, cars and other assets.
State officials say an estate recovery law is inevitable, but it won’t bail Michigan out of its budget problems.
“On aggressive estate recovery, we’d save $30 million to $40 million and we’d have to split that with the federal government,” Medicaid Director Reinhart said.
To put that into perspective, the state is trying to come to grips this year with a $500 million shortfall in Medicaid.
Tax increases
Lawmakers are loathe to approve general tax increases. That’s why Granholm proposed in February a 75-cents-a-pack increase in cigarette taxes, a markup that would raise the price on hard liquor by a couple bucks a bottle, and an inheritance tax on estates worth over $1 million that would affect about 900 Michiganians each year.
But even those narrowly targeted tax boosts are facing tough battles in the Legislature.
“We’re not sure yet whether the cigarette tax and the other tax increases are the way to go,” said Sen. Tony Stamas, R-Midland, who chairs the Senate Appropriations Subcommittee on Community Health. “Those are the governor’s proposals, and we’re still looking at them.”
Fraud investigation
Some states have taken a much more aggressive stance on Medicaid fraud investigation. Florida, for example, more than doubled the amount of money recovered through stepped-up enforcement efforts.
In Michigan last year, there were 120 full-scale fraud investigations recovering nearly $6 million, according to the state Attorney General’s Office. That’s by far the most money recovered in any one year over the past five years, but the amount is dwarfed by the sheer size of the overall Medicaid spending problem.
Cut payments
Michigan already is ranked low among states in the Medicaid rates it pays to physicians and hospitals. Furthermore, the federal government has required that the state increase by about $67 million the amount it pays for managed care provided by HMOs.
State Medicaid Director Reinhart estimates the state would have to cut payments to providers by a dramatic 20 percent to balance the budget, even if that were an option.
Low payments already have affected the availability of health care for the poor in some pockets of the state because providers are deciding not to participate because of the low reimbursement rates. The number of providers fell by nearly 10 percent last year, according to numbers furnished by Community Health officials.
Also, the reimbursement rates for indigent health care are causing financial hardships for hospitals that serve a large number of poor, particularly in large urban areas.
“The state might look at lowering the rates it pays to hospitals, but that would have been easier before the Detroit Medical Center and Hurley Hospital (in Flint) budget problems,” said Tom Clay of the Citizens Research Council of Michigan.
You can reach Mark Hornbeck at (517) 371-3660 or mhornbeck@detnews.com.
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