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Postcards: On the Pathway to Medicaid Reform

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On the Pathway to Medicaid Reform

Dear Friends,

In the last Congress, I was asked to lead a task force on Medicaid, the joint federal and state program that finances health care for low income women and children, the adult disabled and low income seniors. Our task force began meeting with and learning from a wide variety of experts in health care, interest groups, advocacy organizations, Governors and think tanks. We recommended hearings and began to more fully understand the problems facing this program.

Medicaid is now the largest health insurance program in the country, serving over 50 million Americans. It is about 9% of the federal budget and between 15 and 20% of most state budgets. This year, the federal government will spend $188 billion on Medicaid.

Medicaid is one of the most complicated federal programs there is, which makes it very difficult to reform. Unlike Medicare, which serves primarily seniors, Medicaid serves a wide variety of people. In New Mexico, there are 47 different eligibility pathways in Medicaid. It has a joint federal-state management scheme that makes the program different in all fifty states.

Over the last three years, every state in the nation has reduced eligibility, benefits or payment rates to providers under Medicaid or some combination of all three. Yet, because of the way the program is structured, states have very little flexibility on how they can make these decisions.

One of the biggest challenges facing Medicaid is long term care. A lot of seniors think that, if they need it, nursing home care will be taken care of by Medicare. With very few exceptions, it is not. Almost 70% of the nursing home beds in this country are paid for by Medicaid. Medicaid pays less than the actual cost of care for nursing homes, shifting the cost to other patients and putting pressure on nursing homes to cut corners on the quality of care we want our parents to have. And there is a sub-specialty of the bar that advises elders on how to protect their kids' inheritance and qualify for Medicaid if they need a nursing home.

We cannot afford for middle and upper income Americans to give away their assets in order to qualify for Medicaid while we pay less than the actual cost for the minimum quality of care we expect low income seniors to have.

Medicaid is biased toward institutional care in nursing homes rather than community care to keep people out of nursing homes, much as it is biased towards paying for acute periods of illness rather than managing and preventing disease.

In successive hearings in the Energy and Commerce Committee I have asked state Medicaid directors what health indicators they monitor for people who depend on Medicaid and what they are learning. Most of them look at me like I am from Mars. Most states do not look at results or health status at all. Medicaid is not set up to improve anyone's health: it is set up to pay claims.
Because the program is so rigid, states apply for waivers to the federal rules. Waivers can take up to two years, sometimes more, to get approved and there are now 2,500 approved waivers to the federal rules. When we have made 2,500 exceptions to the rules, that should be a pretty good indication that its time to change the rules.

Medicaid is in need of reform so that it better meets the needs of the people who depend upon it. In this year's budget, I worked hard to make sure policy would drive the budget and not the other way around. And, after about six weeks of work, we have put ourselves on a pathway to make that happen.

Our state government in New Mexico only budgets one year at a time. In the federal budget, we set actual numbers for the year we are about to start and then make general projections for five years and sometimes ten years. And, in the federal system, we start out with an overall framework - the budget resolution. Then we fill in separate appropriations bills within the framework of the budget resolution. In state government, there is only one bill that includes all of state agency spending

We continue to anticipate that Medicaid costs will continue to rise faster than almost any other program in the federal budget. Over the next 5 years, we plan in the budget for Medicaid to grow by 7.1% per year, or about $215 billion dollars more added to the Medicaid program over current expenditures during this five year period. The states may not be able to sustain that rate of growth. Tennessee just ended Medicaid eligibility for 300,000 people and Mississippi will have a real reduction in Medicaid expenditures next year. States struggle to find the state "match" for a program that is growing this fast.

In the first year of our budget, FY06, there are no anticipated changes in the current program design. That was a major concession by those who want to slow the growth of this program. Part of the budget agreement included establishing a bipartisan commission to review Medicaid and make major recommendations for change so that we do things that make sense and let policy drive the budget.

In the second through fifth years of the budget we just passed, we anticipate slowing the growth of the program through reform. Our budgeteers estimate that, if we make no changes to the Medicaid program over the next five years, we would increase spending by $225 billion. We have budgeted a $215 billion increase instead. The House originally argued for a $20 billion reduction in this rising slope. We were able to reduce that amount through negotiation. That was an important change too. And, of course, we get to review all of these decisions for future years when we have the recommendations of the Medicaid Commission in hand and are working on the budget next year.

Medicaid is very important to the people who depend upon it and they deserve better than they are getting from the program as designed. Last week, we made some progress that was worth fighting for.

Wish you were here,

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