The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

Coauthored by Rachel Gielau

On July 30th, 1965, President Johnson signed Medicaid into law. Its mission, then and now, is access to quality, affordable health care. For 46 years, Medicaid has been a lifeline to millions of America’s most vulnerable people, including low-income seniors, people with disabilities, children and their parents, and pregnant women. Today, the public health insurance program is the second largest health insurer in the United States, providing quality coverage and peace of mind to one out of five Americans.

Unfortunately, in the midst of the budget battles being fought in Washington Medicaid is under attack. Right-wing proposals like the U.S. House-passed Republican budget plan calls for debilitating cuts that would end the Medicaid program as we know it, slashing the program by about one-third and shifting costs onto states, beneficiaries and providers.

But individuals and families in Illinois depend on Medicaid!

• For 46 years, Medicaid has been the foundation of health coverage for Illinois’ most vulnerable populations. Today, more than 2.5 million Illinoisans (60 percent are children; 20 percent are elderly, blind, or disabled adults) rely on Medicaid.  
• Children depend on Medicaid! Almost 1.5 million children, or 43 percent of all kids in Illinois, rely on Medicaid for their well-child doctor visits and other health care needs. For most low-income children, Medicaid is the only source of affordable coverage available. 
• Medicaid is a lifeline! For more than 559,000 Illinois seniors and people with disabilities Medicaid provides affordable long-term and specialty care. Access to these services helps avoid the use of institutionalized care, keeping costs down and families together.

And we know that Medicaid works!

• Medicaid makes Illinoisans healthier! Medicaid has been proven to increase access to affordable health care for low-income people, which improves the health and financial stability for families everywhere.
• Because of Medicaid, low-income children in Illinois are able to get a healthy start in life. Medicaid helps Illinois children be better students and develop healthy living habits early in life. With access to well-child care, our children get the primary care they need to avoid absences from school and prevent costly chronic health conditions later in life.
• The success of public health insurance programs like Medicaid and the Children’s Health Insurance Program (CHIP—called All Kids in Illinois) has kept uninsured rates for children from spiking due to the economic recession.  
• Medicaid is more cost-effective than private health insurance! Medicaid spending per enrollee has increased at a slower rate than that of private insurance. Also, Medicaid spends less per enrollee than private insurance does. In fact, “Medicaid costs 27% less for children and 20% less for adults than private insurance.”
• Medicaid stimulates the economy and supports jobs in Illinois. Every dollar spent on Medicaid in Illinois generates matching federal funds that come back to the state, increasing economic activity and creating jobs. In 2009, Medicaid funding brought an additional $46 billion in business activity, $15.8 billion in wages, and support for 385,742 jobs to local economies in Illinois.
• While America and Illinois can take pride in Medicaid as it turns 46, the program needs and is getting 21st Century improvements.   Primary care case management, medical homes, electronic medical records, disease management, coordinated care and other initiatives aimed at improving the quality of care for Medicaid patients and controlling costs are all in effect or on the drawing board in Illinois and elsewhere. 

Medicaid just marked its 46th birthday. We think it has improved with age. And as we sing at the end of the birthday song, “Happy birthday to you—and many more.”

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Two minor features of the Illinois Medicaid Reform law that passed last January required approval from the federal Medicaid agency, Centers for Medicare and Medicaid Services (CMS), before they could be implemented. They were to be effective on July 1, but on June 24, CMS denied permission for Illinois to implement the changes. The proposed changes would have called upon applicants for the program to provide pay stubs for a whole month’s income instead of just one paystub (the current policy), and it would have required cumulative paper evidence of Illinois residence in addition to the applicant’s sworn statement under penalty of perjury (the current policy). Current policy also calls for rigorous electronic monitoring of both income and residence and full authority to demand additional proofs if any questions arise. 

While there is anecdotal evidence that there are instances of beneficiaries receiving Medicaid coverage based on incorrect income or residence information, there was never any evidence that significant savings would be gained by implementing the proposed changes. Indeed, there was never any evidence that savings, if any, would exceed the undeniable cost of administering the new policies. Implementation would have demanded new document-processing capacities, changes in notices and computer settings, and more staff.

In fact, the Illinois General Assembly, perhaps forgetting that it had previously mandated these new staff and operations-intensive Medicaid policies, slashed funding for staff and operations in the recently enacted budget. That budget decision would have made successful implementation of these new policies very difficult, if not impossible. The CMS denial of permission to implement the changes relieves Illinois Medicaid officials of having to launch a futile and distracting attempt to implement with no resources.

For several reasons, the proposed policies are counter to the smart trends in Medicaid policy indicated by research, best practices, experience in the leading states, and policy directions in the reform law. It is not cost-effective to administer the program through staff-heavy, old fashioned welfare bureaucracy. There are excellent electronic tools that accomplish good accountability and fraud prevention. Indeed, this is one of the main reforms in the Illinois Medicaid Reform law and a much more promising direction than the old-fashioned measures that CMS prohibited.

What policies like those CMS prohibited accomplish in terms of “savings” is mostly the denial or delay of coverage to eligible people, through red tape, understaffing, and mistakes. This blocks a major cost-saving theme of both the federal and state reforms–primary care, prevention, and early diagnosis. Those are the types of care facilitated by insurance coverage. Without coverage, people must wait for care until their conditions are acute, and they must go to the emergency room or be hospitalized. That is a bad health outcome, and it costs money. Senator Kirk has been quoted claiming that CMS’s action will cost Illinois $800 million over six years. That is clearly not the case. CMS’s action is likely to save Illinois money.

 Finally, this is not a story of “Washington bureaucrats”. CMS was not making a judgment call, but carrying out the will of Congress. In the health reform law, Congress placed a high value on stability in the Medicaid program during the reform process, and provided that states may not cut back the eligibility and services features of their Medicaid programs during reform (which will see a massive infusion of federal funds for Medicaid in the coming years).

The two provisions that Congress blocked in this instance were very minor details in the Illinois Medicaid reform law. The three major themes of that law–care coordination, long-term care rebalancing, and expansion of information technology to improve and streamline the eligibility process and prevent fraud–are proceeding steadily towards implementation.

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On June 17, Dr. Karin Rhodes and her colleague Joanna Bisgaier of the University of Pennsylvania released a report on access to subspecialty doctors by children covered by Medicaid in Cook County, Illinois. The authors also published an article about the study underlying the report in the New England Journal of Medicine . 

Dr. Rhodes undertook and was paid for the study pursuant to a contract with the Illinois Department of Healthcare and Family Services, the state’s Medicaid agency. The study was part of the department’s compliance with a 2005 consent decree in the case of Memisovski v. Maram, which followed a 2004 federal district court ruling that the state was not in compliance with Medicaid Act requirements that children receive recommended levels of preventive care and treatment of diagnosed conditions, and that they receive care at least to the same extent as children covered by other forms of insurance. 

Following the consent decree in Memisovski, Illiniois has undertaken very significant reforms of the primary and preventive care system for children on Medicaid. It improved the rates paid for office visits to primary care doctors and dentists, and it held the processing time for those services to a reasonable level, even during the recession (when all other state bills were being delayed for many months). It launched a statewide “medical home” initiative designed to match children up with primary care doctors, which has had considerable success. Other strategies to improve primary care have been launched, and the overall effort continues.

The consent decree was less specific with respect to access to specialty care to diagnose conditions or especially to treat diagnosed conditions. It provided that the department undertake a study to examine the extent of access problems, and it left the remedies for any such problems to be determined after the study was completed. However, Illinois was not idle on this front. It enacted a round of rate increases for some pediatric specialists, and it included children in a disease management program for people with chronic illness. 

The study released last Friday, however, shows that there is a very serious problem with access to specialty care for children covered by Medicaid and other public insurance, particularly as compared to children covered by other forms of insurance (mostly employer-based private insurance). Using a “secret shopper” methodology, the investigators posed as parents seeking care for a child, saying in one call that the child’s coverage was Medicaid and in the next call that the same child’s coverage was Blue Cross Blue Shield PPO (which dominates the market in Illinois). The Medicaid-covered children had very significant disadvantages for almost all sub-specialties in both the ability to get an appointment and in the waiting time for the appointment if it was granted. The one exception was psychiatric care, where there was a severe access problem regardless of type of insurance. 

At the time of the original court order and consent decree, Illinois authorities were dealing with an inherited problem resulting from decades of underfunding and neglect of access issues in the state’s Medicaid program. They have been working to comply with the decree and improve the program, in spite of the grinding recession-driven budget crisis in the state. Representatives of the children in the case look forward to working in cooperation with state authorities to find and implement solutions to these newly documented problems with specialty access. 

Meanwhile, the study has resulted in media coverage, and some commentators are attempting to use it to bolster current attempts by conservatives to cut spending on Medicaid or relieve states of the duty to comply with Medicaid’s federal rules guaranteeing children access to all needed care. Medicaid is not “broke”; it is underfunded. The underfunding causes it to fall short on its ability to deliver the kinds of quality health care that, over the long term, would save money by supporting healthier people. And Medicaid is not “broken”; it is falling short of its full potential. It provides plenty of essential health care to millions of children, working adults, people with disabilities and seniors. Cutting them off of Medicaid would hurt them immeasurably. And starving the program of funds would only exacerbate the problems with access and the efforts to expand the health care workforce needed to provide adequate care to all beneficiaries. Just because there are flaws in the program does not mean the program must end for millions of beneficiaries. If we scrapped every governmental program that has flaws that need fixing, where would the armed forces, roads, or schools be? Medicaid is essential, but it can and should improve, especially on this issue of access to needed care.   

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Experts from the National Senior Citizens' Law Center exposed the flimsiness of this argument in a blog for the American Constitution Society yesterday.

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States can relax a little about the impact health care reform will have on their budgets, particularly the large expansion of Medicaid. States have been made skittish about their state budgets because of structural deficits and recession-driven shortfalls. Thus, even the fact that the Medicaid expansion will be 100% federally funded for the first few years, and ultimately 90% federally funded from 2020 onward, has not been completely comforting. The states are nervous about predictions that some analysts have made that the implementation of national health reform will add difficult levels of new spending to their budgets. This has the potential to dampen states’ willingness and confidence to embark on aggressive implementation efforts. 

But the predictions of dire impact on state budgets are not accurate. At least three studies now estimate that health care reform will have a positive impact on state budgets, reducing spending in an array of areas to more than offset the marginal increase in state funds spent on Medicaid.

First, there is a very recent report issued by the Urban Institute (commissioned by First Focus), “Net Effect of the Affordable Care Act on State Budgets.” The report compares the increased costs states will experience due to the expansion of Medicaid coverage for low-income adults in 2014 with the savings states will realize from the law. The report takes into account savings that will come when states move people currently covered by Medicaid at income levels above 133% of the poverty level into the private insurance exchange, where the subsidies for premiums and co-pays are entirely federally financed. In Illinois, the FamilyCare program currently covers adults up to 185% of the poverty level with a 50% federal match. The Urban Institute’s report also takes into account the savings states will realize when new Medicaid beneficiaries no longer use uncompensated health care (mostly emergency room care) and state-funded mental health services.

The study does not take into account significant scheduled increases in the federal matching rate for Children’s Health Insurance or a variety of other health care cost savings that will be brought about under the reform law, but nevertheless it finds that state savings under the Affordable Care Act will exceed state costs by between $40.6 and $131.9 billion during 2014-19.

The Urban Institute study is consistent with earlier findings by the Council of Economic Advisers (CEA) and the Lewin Group that, on balance, states will realize significant net budgetary gains from the legislation. The contrary analyses, among other flaws, recognize or describe only state costs and not potential state gains.

The CEA report profiled 16 states, finding that each would experience net fiscal gains from the Affordable Care Act, totaling between $3 billion and $4 billion a year for all 16 states combined. The states were Arkansas, California, Florida, Idaho, Indiana, Iowa, Maine, Michigan, Minnesota, Nebraska, Montana, North Carolina, Oregon, Pennsylvania, Vermont and Wyoming.

The Lewin report found that, on balance, the Affordable Care Act will save states $106.8 billion during 2010-19, including $100.6 billion in 2014-19.

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Every time you see a healthy, happy child this fall, there’s a good chance we’ve got Congress to thank for it. If you’ve never heard of the Federal Medical Assistance Percentage (FMAP), doesn’t worry – almost no one has. But FMAP – the share of Medicaid costs covered by the federal government – is a lifeline for the 1.6 Illinois children who depend upon Medicaid for the health care they need to grow and thrive. FMAP helps seniors, people with disabilities, and parents stay healthy, too. This week, as part of its response to the recession, Congress extended a temporary FMAP increase that will provide $545 million dollars to help Illinois avoid drastic cuts that would have put children’s health at risk and cost state employees and local health care providers their jobs. And these funds will generate additional economic activity in Illinois. Every $1 million in federal funds generates $1.7 million in business activity on average, 17.1 new jobs, and $600,000 in wages and salaries.

Keeping kids covered is a win for our state. Kids get the checkups and preventive care they need to stay healthy, so they miss less school and so problems like nearsightedness and hearing trouble don’t hold them back. Parents get the peace of mind of knowing that a playground mishap or flu outbreak won’t drive the family deeper into debt. And we all get more value from every health dollar, by focusing on prevention instead of letting today’s minor problems become tomorrow’s costly burdens.

Among our leaders in Washington, Senators Durbin and Burris along with the entire Democratic Congressional delegation voted to keep Illinois kids healthy by keeping FMAP strong. Every late summer picnic, every high school football game, and every afternoon at the park – everywhere we see happy, healthy kids is a reminder to thank our leaders for standing up for families struggling through the recession and putting the health of Illinois children first.

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Throughout the debate on health care reform, the focus on changes for older Americans was largely prescription drugs and closing the drug coverage "doughnut hole." These changes are extremely important for many senior citizens who hit their drug coverage limit and are forced to pay high out-of-pocket costs. In fact, there is a $250 payment to seniors who reach the doughnut hole--a down payment until the eventual full elimination of the doughnut hole that will happen later this year.

However, the new law also includes several other provisions that will greatly assist older Americans, particularly low-income senior citizens, which the National Senior Citizens Law Center details in several recent reports.

• For older Americans who rely on long-term services, the new law will create financial incentives for states to shift Medicaid spending toward community-based services, including a six-percentage point increase in federal Medicaid reimbursement for community-based care initiatives.
• The law establishes several pilot programs to study and improve coordination of care for Americans who receive coverage through both Medicare and Medicaid, otherwise known as "dual eligibles."
• The law strengthens medical assistance programs to ensure beneficiaries promptly receive covered services.
  
• The law eliminated co-payments for prescription drugs for individuals receiving long-term care services in the home and in an institutional setting. Under current law, individuals living in an institutional setting do not have co-payments, while those receiving services in the home do have co-payments.
  
• For Americans who are too young to qualify for Medicare but who retire early, a temporary "reinsurance" program will reduce the cost burden on employers.
  

According to the National Senior Citizen Law Center, the most significant new provision in the new law is the extension of coverage for 32 million Americans, which includes millions of people aged 50-64, through a Medicaid expansion, new state-based Exchanges with subsidies for low- and middle-income Americans, and regulation of the worst practices of insurance companies. Finally, millions of low-income older Americans will have access to the care that they need, and important improvements will be made to programs that contribute to the health and well-being of older Americans.

Check out the NSCLC reports for details on how reform benefits older Americans!

Carrie Gilbert co-authored this post.

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On March 21, the House of Representatives passed historic health insurance reform legislation. The House passed the reform bill previously passed by the Senate, which now becomes law upon the President’s signature (expected as early as March 23).  The House also passed a package of changes to the Senate bill that have been negotiated with the Senate, and which the Senate is expected to pass very soon (using the “reconciliation” procedure that requires a simple majority vote).

The package of reforms is a major step forward to provide Americans more security, more choices, and better cost control for their health care.  See the impact in your legislative district.

This is the end of the worst practices of the insurance industry—no more denials due to pre-existing conditions or dropping coverage for people who get sick, or hidden ceilings on your coverage.

We will all get the same insurance choices that Members of Congress have. What is good for them will be good for everyone.

We have kept what is good in our health system and added oversight of insurance practices, control of insurance rate increases, choice of plan and doctor, more competition, and expanded prevention.

Medicare will be strengthened—reform will cut waste and fraud in Medicare, improve solvency and close the gap in prescription drug coverage for seniors.

There will be access to affordable health care for 3.6 million small businesses and 32 million Americans who have been left out – until now.

The first order of business is to thank your House member, if he or she voted “yes”.  Here is the roll call.  This is VERY important – these are leaders who deserve thanks and support.

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Medicaid is a vital safety net for Illinois residents who cannot afford increasingly expensive private health insurance and fills the gap in employer-provided insurance for the growing ranks of the unemployed and their families. But a recent report by Heather O’Donnell, of the Center for Tax and Budget Accountability (CTBA), Medicaid Plays a Critical Role in Illinois’ Economy, reveals the tremendous additional impact that Medicaid dollars have in bolstering our economy. The report shows that Medicaid not only provided health care coverage to 2.6 million Illinoisans (over half of whom were children) in 2008, it also supported “wages, employment, business income, consumer spending, state tax revenue, and overall economic output.”

The Medicaid program is financed by both the state and federal government. In fiscal year 2008, 53% of the total funding for Medicaid came from the federal government. Under the federal American Recovery and Reinvestment Act (ARRA), states receive increased federal funding through December 2010 to help during the recession. The CTBA report explains that, with this enhanced federal share, if Illinois cuts Medicaid spending by $10 million, it will actually lose $16.2 million in federal matching funds.  

But that would only be the beginning of the impact of such a cut. Medicaid spending reimburses health care providers, and then providers pay employees’ wages. The employees then purchase goods and services in the local economy. According to the CTBA report, Illinois’s 2009 state and federal Medicaid spending resulted in approximately $46 billion in additional business activity and supported about 385,742 jobs. This would mean that a cut of just $10 million in state Medicaid spending would result in an estimated loss of more than $80.4 million in business activity and $27.6 million in lost wages across Illinois.  

This positive ripple effect of Medicaid spending means cuts to Medicaid programs would hurt the Illinois economy, increase unemployment, and prolong the recession. Cuts to Medicaid would not only deprive people of health coverage and health care, but also exacerbate the financial strain felt by businesses and workers and cause Illinois’ economy to further deteriorate. 

 

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The Illinois General Assembly meets this week to attempt to resolve the budget.  Failure carries with it incalculable costs that prolong the recession and hit every legislative district. 

The impending cuts directly impact hundreds of thousands of children, seniors, people who are sick and hurt, the unemployed, and workers.  The costs to them are staggering, but there are other costs:

• The state will get sued repeatedly.  Some of the cuts would violate federal or state laws.  Some would violate existing court orders and consent decrees.  The Attorney General’s office must defend all these cases, but it has its own shrunken budget and would be swamped.
•  Proposed cuts violate the condition in the federal stimulus law that states not cut Medicaid.  This will cost us billions in federal stimulus funds.    
• The state would also lose massive sums of federal matching funds and block grant dollars across a range of programs.
• These lost federal funds come out of the Illinois economy – it is money not spent on goods and services in our state.
• The Department of Human Services estimates that the cuts to its budget would cause a loss of 170,000 jobs outside of state government.  These are entrepreneurs, independent caregivers, and employees of non-profit or for-profit businesses that provide or support the programs in various ways.
• Legislators have spent their careers building important programs that will be gutted or eliminated by this process.  Time, talent, and hard-won accomplishment would be wasted. 

The General Assembly’s budget would prolong the recession and hurt the state, not just those who need the programs.  We need to fund the government and not bring about all of the above incalculable costs.

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States across the country are wrestling with budget crises.  In that context attention always turns to Medicaid, just because it is a large budget line, and it is therefore an attractive mark for anti-tax advocates who do not really have viable alternatives to taxes but like to speak vaguely about cutting spending.  The Illinois budget mess offers a lesson in why these folks have the germ of a good idea but are missing the most promising way to achieve it.

Most knowledgeable people concede that there is no way out of the huge Illinois budget deficit but to raise revenues.  Of course, many of those same people do not support raising the necessary revenues.  The opponents disingenuously cry out that Illinois must never increase revenues until it has made “cuts” to the spending side.  Tellingly, they have been unwilling or unable to specify exactly where they would cut the billions needed to balance the budget without increased revenues.  Accountability is not their strong suit.

But there is nevertheless an interesting modest overlap between this “cuts” position of the opponents of revenue increases, and the position of the proponents. Led by the Governor, the proponents are committed to making reductions in state spending, as part of the overall budget package that includes the revenue increases.  Greater efficiency is always a good and desired goal, and it is even more important in such difficult times. Moreover, revenue increases are more palatable, more fair, if state government is making efficiency improvements at the same time.  

So both sides are focusing on ideas for cuts.  One of the centers of attention for this kind of brainstorming is all of the state’s publicly supported health care coverages, popularly lumped together under the term “Medicaid”.  The programs cover children, low income working parents, people with disabilities, and the elderly. The opponents of revenues, citing old and sloppily done consultants’ reports, say that Illinois could be saving $1 billion or more on Medicaid, mostly by imposing hardcore HMO-style managed care, insisting that people use generic instead of costly brand name drugs, and caring for more people in the community instead of nursing homes. The proponents of revenues, citing actual experience in Illinois that shows the state is already realizing significant savings from care management, generic drugs, and community based care, say that they are willing to try any reasonable new ideas, but estimate savings in the tens of millions. The fact is that Illinois is already among the lowest in per person Medicaid expenditures.

Both sides are missing the most likely source of significant Medicaid savings that will neither limit coverage nor impair care. It is not a Springfield initiative, but a Washington DC initiative that will get this done. As should be obvious, Medicaid is just one part of the larger health care system, most of which is in the private sector. Medicaid suffers from the same system-wide phenomena that are driving the dizzying upward spiral of health care costs for all of us – profiteering across the board, inefficiencies, lack of focus on prevention, loss of consumer choice and control, and so forth. It is this increase in cost, decrease in control, and loss of peace of mind that is driving the anger in the American people that in turn is driving the move towards comprehensive reform being led by President Obama. 

These problems in the larger health care system fuel the trend in Medicaid spending. Thankfully, every year Medicaid spending (known as Medicaid “liabilities”) grows at a rate that is smaller than the overall consumer price index for medical related goods and services. Medicaid is a more efficient system. Yet Medicaid costs are necessarily directly related to the larger health system market. When health care costs go up generally, they also go up for Medicaid.

All those folks in Springfield looking for ways to spend less on Medicaid should realize that they are looking in the wrong town. The action on this is in Washington, where the battle over comprehensive reform is playing out right now. Just a couple of days ago, President Obama asked Congress to produce ideas for overall health system reforms to bring down the cost of care, or at least the rate of growth of the cost of care. He noted that in so doing, they would also be helping to produce $200-300 billion in savings for Medicare and Medicaid. 

For those truly interested in controlling the growth in Medicaid spending, the most promising course is to help make sure that the drive for national comprehensive health care reform is successful this year.  Meanwhile, the Springfield folks should tend to the knitting and vote for the revenues needed to fund state government.

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