Medicaid System Reform Proposal

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

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Abstract

On January 31, 2003, the White House presented a new proposal to restructure the program. States which decide to join the new optional program would receive all of their Medicaid and State Children?s Health Insurance Plan dollars as a combined block grant instead of as matching funds. The amount of the state?s allotment would be based on expenditures in fiscal year 2002 trended forward.

Purpose of health policy or idea

Title XIX of the Social Security Act is a program which provides medical assistance for certain individuals and families with low incomes. The program, known as Medicaid, became law in 1965 as a jointly funded venture between the federal and state governments to assist states in the provision of adequate medical care to eligible low-income and needy persons. Medicaid is the largest program providing medical and health-related services to America's poorest people serving 47 million people. Medicaid plays a major role in the U.S. health care financing system, accounting for 17% of all personal health care spending. The program has essentially been a state/federal funds match in which state dollars spent for Medicaid beneficiaries are matched by the federal government. The federal government matches states' spending for covered services on an open-ended basis. Within broad national guidelines which the federal government provides, each of the states:

• establishes its own eligibility standards (the neediest populations are required);
• determines the type, amount, duration, and scope of services;
• sets the rate of payment for services; and
• administers its own program.

Thus, the Medicaid program varies considerably from state to state, as well as within each state over time. For example, outside of the neediest population which is required to be covered, a person who is eligible for Medicaid in one state may not be eligible in another state, and the services provided by one state may differ considerably in amount, duration, or scope from services provided in a similar or neighbouring state. In addition, state legislatures may change Medicaid eligibility and/or services during the year.

A state's Medicaid program must offer medical assistance for certain basic services (e.g. inpatient and outpatient hospital services, prenatal care, vaccines for children, physician services, nursing facility services for persons aged 21 or older, family planning services and supplies, rural health clinic services, home health care for persons eligible for skilled-nursing services, laboratory and x-ray services, pediatric and family nurse practitioner services, nurse-midwife services, federally qualified health-center (FQHC) services and ambulatory services of an FQHC that would be available in other settings, and early and periodic screening, diagnostic, and treatment (EPSDT) services for children under age 21) to most categorically needy populations. States may also receive federal matching funds to provide certain optional services (e.g., diagnostic services, clinic services, intermediate care facilities for the mentally retarded, prescribed drugs and prosthetic devices, optometrist services and eyeglasses, nursing facility services for children under age 21, transportation services, rehabilitation and physical therapy services, and home and community-based care to certain persons with chronic impairments).

On January 31, 2003, the White House presented a new proposal to restructure the program. States which decide to join the new optional program would receive all of their Medicaid and State Children's Health Insurance Plan dollars as a combined block grant instead of as matching funds. The amount of the state's allotment would be based on expenditures in fiscal year 2002 trended forward.

Under the block grant system proposal, which would need to be approved by Congress, states would no longer need to apply for federal waivers to deviate from federal standards for Medicaid eligibility and benefits. For "non-mandatory" beneficiaries, which include many of the sickest and poorest Medicaid beneficiaries and compose about one-third of beneficiaries, states would be permitted to change Medicaid rules and regulations, simplifying and altering alter eligibility requirements, "tailor" or cut benefits at their own discretion.

States that decide to join the program would receive increased federal payments of $3.25 billion in 2004 to fund new programs and $12.7 billion over seven years, but for the three years after that, federal funding would decrease, to offset the additional upfront payments, so that the program would be cost-neutral to the federal government over 10 years. States would no longer put up matching funds, but instead be subject to Maintenance of Effort (MOE) spending requirements, based on the amount the State spent on Medicaid in 2002, adjusted yearly to the Medical Consumer Price Index.

The administration says the plan would: preserve comprehensive benefits for "mandatory" groups, while giving states expanded flexibility to tailor coverage for "non-mandatory" recipients and services (the proposal would be built on the SCHIP model); encourage coverage for whole families, not just the children in a low-income family, and encourage "medical homes," so that all the members of the familiy are treatd by the same providers, whenever appropriate; and support increased use of home and community based services services for Americans with disabilities, enabling them to be served outside of institutional settings - including older Americans needing care that can help prevent premature use of nursing home care.


Type of incentives (financial, non-financial):
The main incentive for states built into the proposal is new flexibility in serving non-mandatory Medicaid populations. For the federal government, the main incentive is achieving cost neutrality over ten years.

Group(s) affected:

1. States that opt into this block grant plan will receive some upfront fiscal relief in fiscal years 2004 through 2010, but their allotments will be reduced in fiscal years 2011 through 2013 to offset the cost of the fiscal relief. If Medicaid expenditures for the mandatory coverage groups continue to rise quickly states could be adversely affected and at risk.
2. States will have more freedom to alter or cut benefits for cost savings or to create program innovations with greater latitude.
3. States could extend coverage to new populations, e.g. childless adults, but fiscal realities may prevent substantial new coverage initiatives.
4. For the federal government, the proposal is cost neutral over the ten years it addresses but it is not clear what happens after ten years and whether Medicaid expenditures would be lower than the current Medicaid and SCHIP funding trajectory.
5. "Non-mandatory" beneficiaries may lose coverage or see significant coverage changes (reductions in services) as states modify benefits under the block grant system. Opponents claim this could affect up to 12 million current beneficiaries.
6. The State Children's Health Insurance Program (SCHIP), which has covered 5 million low income children since 1997, would be effectively eliminated in States taking the option, and this dedicated funding stream and enhanced federal match for uninsured children, designed as an incentive to expand coverage, would be lost.

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

Political and economic background

The current Administration has promoted Medicaid reform and promised tax cuts, but also faces increases in defense expenditures, a weak U.S. economy, and growing budget deficits. At the same time governors are facing severe budget crises.

Change of government

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

Where, when, and by whom was the idea generated?
Reforming Medicaid to cover more uninsured Americans with quality health services has been proposed for many years. For example, in the mid 1990's as part of their "Contract with America," Republicans unsuccessfully tried revamping Medicaid to end the automatic guarantee of health benefits to the poor. While less sweeping, the Administration proposal has some of the same elements. The proposal was generated by the Administration (with the support of several Republican governors) and was formally announced January 31, 2003, but the plans had been referenced since 2001 in speeches and addresses.

Who were or are the driving forces behind this idea and why?
This proposal was presented by the White House and aims to give states greater flexibility over Medicaid program spending, and provide a 10-year cost-neutral Medicaid expectation for the federal government. Both the President and senior Administration officials have spoken to groups including the legislature, state governors, the public and health sector organizations and leaders to promote the policy. It is strongly supported by a small number of Republican state governors, although the National Governor's Association has been noncommittal and has not endorsed the plan.

Is it an entirely new approach, does it follow earlier discussions, has it been borrowed from elsewhere?
As stated above, the formal proposal is new but the Administration has discussed Medicaid reform and block grants since taking office. The Republican proposal noted above to block grant Medicaid in the mid 1990's and end automatic coverage guarantees was introduced in the Republican-controlled Congress but opposed by President Clinton. The larger issue of the need to reform Medicaid to make it a viable program in future years has been discussed for many years. There was less emphasis on the subject when the economy was particularly strong in the late nineties as states and the federal government were enjoying substantial economic health.

Is it aimed at amending / updating a prior enactment ("reforming the reform"), and why would it have been passed?
Medicaid itself is a reform from 1965 so this is technically reforming a reform, although since it is almost 40 years later, it is more correctly a reform of a program.



Who were the main actors?
President Bush and Administration officials have been the most vocal advocates of the proposal. Since its announcement there have been extensive responses for and against it. Administration officials and several Republican congress members and governors applaud the flexibility it gives states to innovate and the opportunity it gives them to cover more uninsured individuals with basic services. However, a significant number of Republicans and the National Governor's Association have remained noncommittal, recognizing the need for Medicaid reform, but not endorsing any details of the proposal.

Are there small-scale examples for this innovation (e.g. at local level, within a single institution, as pilot projects)?
In August 2001, the Administration introduced the Health Insurance Flexibility and Accountability (HIFA) demonstration initiative. HIFA was designed to increase state flexibility in creating innovations to increase access to health insurance with an emphasis on private health insurance coverage using Medicaid and/or SCHIP funds. This has been cited as a "first step" for the flexibility aspects of the new proposal.

Stakeholder positions

Since the proposal was largely developed by the White House, most groups were not involved until after the proposal was announced. At this stage, they are responding to the idea.

Who opposes / opposed this idea or policy and why?
Congressional Democrats and consumer and family advocacy organizations including Families USA have opposed the proposal based on concerns that it would eliminate the Medicaid entitlement for nearly 12 million "optional beneficiaries," including 100 percent of children enrolled in SCHIP, 56 percent of seniors, 22 percent of people with disabilities, 43 percent of parents and 20 percent of children enrolled in Medicaid, and put access to health care at risk for these people who rely on SCHIP and Medicaid to get the medical care they need.

Democrats and these groups propose increases in Medicaid federal matching funds instead of a block grant system in order to assist states experiencing fiscal crises. Bipartisan legislation is currently pending in the Senate to provide states with $20 billion over 18 months to fill state Medicaid budget gaps.

While a small number of governors openly support or oppose the plan, the National Governors Association has remained noncommittal not endorsing any of the plan specifics. The governors have appointed a bipartisan group to negotiate an alternative to the Administration's proposal.

Critics point out that states, no longer responsible for matching funds, would be subject to Maintenance of Effort requirements pegged to their 2002 Medicaid spending. As the MOE requirements will be adjusted to the Medical Consumer Price Index, which increased at an average rate of 4 percent per year between 1995 and 2002 while Medicaid expenditures grew at 7.5 percent yearly, the lower growth rate would allow states to lower their contribution to the program. Also, since states would receive less money beginning in 2011, they will face increased pressure to reduce coverage for low income people.

Has the idea or policy been accepted by relevant actors; or was it abandoned?
This remains to be seen as Congress has not acted to approve, alter, or reject the proposal to date.

Was a policy paper formulated?
The Administration included information on the potential reforms in its 2004 Department of Health and Human Services budget document, detailed press releases, and fact sheets on health coverage. Opponents in the Democratic Party have issued fact sheets and analysis critiquing the proposal. Many academic articles on expanding health insurance have examined the idea of block grants and Medicaid reform in publications such as Health Affairs, the leading U.S. health policy journal. Health policy foundations such as the Kaiser Family Foundation have also formulated extensive papers, fact sheets, and policy statements on the proposal and the issues in general. Finally, consumer advocacy groups such as Families USA have issued several reports on the President's proposal and the relationship between state economies and Medicaid.

Who held the leadership role in bringing forward this idea or policy?
The White House and Administration officials.

Were there alliances between stakeholders in support of the idea or new policy?
Not initially as this was largely a White House proposal, but officials have reached out to governors and legislators to garner support for the proposal since its release.

Who mediated conflicts of interest between stakeholders?
Congress

Influences in policy making and legislation

• It will likely be debated and altered prior to being introduced in the House or Senate.
• In how far has the original proposal been changed or modified in the process?
  Very little to date as it is a new proposal.

Adoption and implementation

Which actors and stakeholders were, are, or will be involved in the adoption process towards implementation?
The White House, Department of Health and Human Services / Center for Medicare and Medicaid Services, Congress, governors and state Medicaid officials.

Which means are necessary?
Congressional approval will be necessary, and then individual states voluntarily participating will alter Medicaid program accordingly.

Who moderates the process? Were or are these actors and stakeholders actively participating in the process?
The approval process will be moderated by Congressional leadership. The implementation process will be moderated federally by the Center for Medicare and Medicaid Services (CMS) and in each state by their state leadership.

Who else is or will be directly or indirectly affected by this implementation?
State Medicaid directors who must implement new plans. Health care providers and organizations that will participate in the new plan structures will likely lobby how their state alters its individual Medicaid plan under the new system as they will be paid by it. Low income populations and organizations that represent them in states will also be affected by the implementation since the services they will be able to utilize may be at stake in various states.

How successful was implementation or, in your opinion, what are the chances of implementation?
It seems unlikely that Democrats and consumer groups will be supportive of the reform. The significant obstacle will be the grant amounts and whether they will be able to adjust to rising costs in the long run.

What incentives would facilitate the implementation of this policy, in addition to, or instead of the incentives provided?
Greater funds allocated by the Federal government and a mechanism to ensure that block grant amounts will increase proportionally with rising health care costs and Medicaid eligibility.

Protections for non-mandatory populations to ensure that these 12 million "optional" beneficiaries would not lose coverage.

What was done to convince, or promised to appease, the opponents to this policy?
Nothing to date. The proposal was just announced.

Expected outcome

If it is implemented, it will achieve a cost neutral federal expenditure on Medicaid services and will increase flexibility for states in the short run, but will likely reduce flexibility as expenditures shrink in later years. It also may not achieve the objective of increasing coverage to more uninsured individuals or ensuring the long term survival of Medicaid if states continue to face increasing budget crises and use the block grant flexibility to cut coverage for non-mandatory populations.

What might be its unexpected or undesirable effects?
States facing sever budget crises could limit their liability by capping enrollment, cutting benefits, and increasing cost sharing for the nation's most vulnerable populations (people with severe disabilities, nursing home residents, and poor families)

Individuals who are currently covered under Medicaid could lose health coverage.

State fiscal crises could become more severe since block grants will not match expenditures which would go up if costs continue to rise or there are increases in enrollment or utilization due to continued economic downturn.

The State Children's Health Insurance Program could effectively be eliminated since the block grant will fold SCHIP funds into the single grant and not require expenditures on SCHIP.

Medicaid cuts could reduce jobs and worsen the recession.

What are or will be the effects on costs, quality, equity etc.?
Federal expenditures will be cost neutral over ten years. Quality will suffer if services are cut and equity will be harmed if the numbers of uninsured grow in the long run. Some innovations that improve quality in specific areas may occur given the increased state flexibility.

References

Empfohlene Zitierweise für diesen Online-Artikel:

. "Medicaid System Reform Proposal". Health Policy Monitor, 01. Available at http://www.hpm.org/survey/us/c1/1