Making sense – and stories – of Medicaid

By Joanne Kenen

Medicaid doesn’t get anywhere as much attention as Medicare. That’s nothing new – it’s been that way pretty much since the twin programs were enacted in 1965. But reporters should pay attention to Medicaid right now, for a lot of reasons:

• It’s smack in the middle of the debt/spending/entitlement debate going on in Washington.
• It’s a lynchpin for the insurance coverage expansion starting in 2014.
• Keep in mind, too, that the federal stimulus package gave the states a lot of extra Medicaid money – and that runs out at the end of June. States know that’s coming, but it doesn’t mean they like it or that they are as prepared as they might be.

If it seems like the Medicaid headlines are going in several directions at once – that’s because they are. Expand, contract, reinvent, blow up, save, destroy … What’s really going on?

Here are the three basic story lines – a bit overstated here for the sake of illustrating main points.

1. Medicaid costs are going through the roof, and to save the program for future generations, it has to be destroyed in its present form and reinvented better, though not necessarily bigger. (This is a Republican story line – Congressional Republicans and the Republican governors.)

2. The “maintenance of efforts” (MOE) requirements in the health care reform law – which require states to keep eligibility and enrollment procedures the way they are or better between now and 2014 – are burdens on the states, and must be repealed or at least loosened. (Largely a Republican story line but Democratic governors want more wiggle room too.)

3. Medicaid will be expanded dramatically and seamlessly in 2014, absorbing 16 million more people, many of whom are now uninsured. (Largely a Democratic story line)

So how should reporters wade into this?

First, don’t be afraid if you are confused about which is Medicare and which Medicaid is – you won’t be the first. The Alliance for Health Policy’s Source Book has good introductory overview chapters but the simple “entitlements for dummies” version is this:

Medicare is a federal program that covers everyone, rich and poor, from age 65 as well as some of the disabled. It pays for hospitals, doctors, lab tests, etc., and it now includes prescription drugs. It does not pay all bills; people still have out of pocket expenses. It does not pay for long-term care.

 Medicaid is a joint federal-state program for certain low-income groups (mostly children, mothers and pregnant women). It also pays for long-term care (nursing homes, etc.) for poor people and middle class people who spend down their assets on nursing home care. (There is some gaming of the system, although the government has tried to make it harder for people to hide assets or divvy them up among relatives – experts disagree on how much. It might be worth looking at your state’s rules on what assets people can keep and what they have to spend down – and how well they are enforced).

Both Medicare and Medicaid were created in 1965 as part of the “Great Society.” Both are entitlements – meaning if you are part of one of the eligible groups, your coverage is guaranteed.

What stories should reporters look for?

Let’s look a little more at the three scenarios above. A lot of this is going to play out locally and in the states so there are going to be some good stories – and it’s not just fighting about money, this is going to affect who receives care, and what kind of care they receive. There also is a lot of overheated rhetoric on both sides – Republican governors are probably not going to rush pell mell to throw 95-year-old nursing home patients out in the street, and Democrats are not completely oblivious to the fiscal and structural problems in Medicaid, including low payments to doctors and other providers that mean it can be hard for people on Medicaid to get the care to which they are entitled. (One reason they end up in emergency rooms. But that’s a story for another day.)

So here are some questions reporters can ask:

Scenario I

The Republicans want to end Medicaid as an entitlement, and turn it into a block grant – i.e. lump sum payments from the feds to the states. The grants are not expected to keep up with the rising cost of health care. Backers of this plan say that once freed of federal bureaucracy, governors can come up with innovative ways of covering people at lower cost. They may well be able to be more efficient – but the Congressional Budget Office doubts they can save enough money to make up for the lower payments they would get from the feds.

What to ask

Does your state have any of these care innovations under way? (Both Republican and Democratic states are exploring or embarking on these initiatives)

Are they following specific, promising test programs in other states?

Where and when would they begin innovating – and are they pursuing any federal waivers to do so?

The block grants face huge Democratic opposition in the Senate and are unlikely to become law in the foreseeable future, but the Obama administration has promised to try to streamline what many describe as a very lengthy and cumbersome waiver process.

 Scenario II

Lifting the maintenance of effort rules has a lot of support among congressional Republicans, but anything that sweeping faces opposition in the Senate. HOWEVER, HHS has acknowledged that states are in fact facing a budgetary bind. So look for some flexibility. HHS Secretary Kathleen Sebelius wrote to the governors in February that the MOE rules aren’t as rigid as some have interpreted them – they apply to eligibility and enrollment, they don’t mean that states can’t tinker with parts of their programs, particularly regarding the optional populations they serve and benefits they offer. (The federal government sets minimum or mandatory requirements, states can and do add optional ones.) Nor do states have to renew all their waiver programs under MOE. (Details in the Sebelius letter linked above.)

What to ask

Is your state contemplating any of the steps that Sebelius says are permitted even with MOE in place?

And will this COST the state more than it saves – remember that Washington on average pays 57 cents of every dollar of Medicaid (it varies from state to state, from about 50 to 75.) If your state stops spending X of its dollars on one Medicaid group, it loses Y dollars coming into the state from DC.

Remember there is some Affordable Care Act politics in the background here: Repealing MOE and shrinking Medicaid ties in with some of the larger political goals of those who want to undermine the ACA and coverage expansion in general.

Scenario III

Medicaid is a big big big part of the coverage expansion anticipated for 2014. It’s not likely to be so seamless though. A lot of people are worried about whether there will be enough doctors to take low Medicaid payments and will accept the influx of new patients. (Primary care gets a temporary bump up in payments, to Medicare levels, but it’s not permanent and not for all providers.) There is concern about more emergency room crowding. And there are a lot of mechanics questions about enrollment, determining eligibility, income levels, subsidies etc.

The Robert Wood Johnson Foundation, the Kaiser Foundation, and the Urban Institute have done some good work on these questions.

What to ask

As your state contemplates whether to set up an insurance exchange, and what it should look like, start asking questions about the mechanics of outreach and enrollment.

The federal government is picking up most of the cost of the newly eligible (100 percent in 2014-16, then phasing down to 95 and the 90 percent). The standard matching formulas will apply to people who are currently eligible, but not yet enrolled.

More resources

All of this is pretty broad brush strokes – here is some background to help you sort through it:

• House Republican Budget Plan: State-by-State Impact of Changes in Medicaid Financing: This is a good two-page overview from May 2011, from Kaiser Family Foundation with Urban Institute Data

• Federal Core Requirements and State Options in Medicaid: Current Policies and Key Issues: This is a much longer and more detailed overview of Medicaid, but it does a good job of explaining the difference between a state’s mandatory requirements and optional coverage – and that’s going to be a big issue for states whether or not the MOE requirement is formally repealed or HHS just keeps opening the door to flexibility.

• Republican Governors Association letter on block grants and state flexibility

• CBO on Medicaid blog grants

• CBO’s director’s blog on block grants

• Medicaid explained: How would block grants work? By Christine Vestal, Stateline, April 18, 2011

• Health-Care Law Expands Flawed Medicaid Program, By Brian Blase, The Heritage Foundation, March 21, 2011

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