Monitoring Medicaid in a Time of Budget Cuts

The Forum for State Health Policy Leadership

Monitoring Medicaid in a Time of Budget Cuts
Kala Ladenheim
October 2004

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Acknowledgements

This project was made possible by the generous support of the Kaiser Commission on Medicaid and the Uninsured. The author would like to express her warm appreciation and thanks to Julie Hudman, Vikki Wachino and Barbara Lyons of the Kaiser Commission on Medicaid and the Uninsured for their support and guidance, thoughtful comments and suggestions and encouragement throughout the project, as well as to colleagues at the National Conference of State Legislatures for their helpful responses. A special thank you goes to the legislators and legislative staff who offered examples, insights and recommendations to share with their colleagues.

Monitoring the Effect of Medicaid Program Changes that States Have Made in Response to Budget Pressures

Executive Summary

This paper offers a framework for legislators who want to monitor non-fiscal effects of recent Medicaid changes. Squeezed between climbing Medicaid costs and revenue shortfalls, state budget-makers have restructured prescription drug benefits, frozen provider reimbursement levels, and reluctantly modified eligibility and covered services. States have systems in place to track program spending. But how can legislators tell whether less spending signals greater efficiency or neglected needs?

Legislators are not done with policymaking when a bill is enacted into law. Routine legislative oversight is part of the policymaking cycle. Legislative oversight asks whether statutory objectives are being met, identifies new policy opportunities, and spots problems--concerns raised during policymaking and unanticipated consequences--in a timely fashion. Oversight should be cost-effective, timely, and oriented to problem solving.

What We Heard from the States

Legislative oversight takes a number of forms, including interacting with constituents and the press, tasking oversight boards, scheduling studies, imposing reporting requirements, and receiving legislative audits. Authority varies by states, but most state legislatures use policy research or audit staff.
Legislative staff would like more tools and resources to measure the effects of Medicaid changes. They suggested designating funds for gathering and analyzing programs, reported on success using outside researchers, and requested a toolbox of information on data sources and approaches to this research.
Monitoring the effects of program cuts can be politically challenging. After a difficult policy decision has been made, legislatures may be reluctant to revisit an issue.
The appropriate level of legislative oversight is constantly negotiated. Relationships with the executive branch range from partnering to providing competing analyses. Collaboration with the executive branch should begin before statutes are enacted.
The ability to track effects is fragmented: within the legislature, between executive and legislative branches, and among administrative agencies. The legislature may be able to bring fragments together.

A Framework for Legislative Oversight

Concerns about the effect of Medicaid changes and opportunities to measure the effects of new policies will vary from state to state. This report offers a framework for monitoring policy changes using existing resources, with examples of existing state activities. Each state will want to adapt the framework based on the details of its own Medicaid program, concerns raised during the debate, and its own data-gathering practices. In preparing to track the result of Medicaid changes, we recommend that legislators consider three things.

What could happen? Effects to be measured. For example, the Utah Legislature asked for a projection of the effects of cuts, to include “ … the human toll of loss of services by individuals and families, and the degree to which cost-shifting to other, more expensive services occurs in the health and human services sector.”¹
How could you tell? Indicators of effects. After instituting a prior authorization program, Virginia’s legislature asked the department to measure “ … the number of service denials, the number of prior authorization requests submitted, the number of requests approved and denied, the number of appeals from prior authorization denials, the outcome of those appeals, and all associated administrative costs.”
Where will you get the information? Measuring the indicators. We found that this was done in a variety of ways, including through statutorily mandated data-gathering and reporting, requests for special studies, and requests that existing groups monitor specific effects. Legislators also track the effects of legislation when they hear from constituents.

Approaches to Legislative Oversight

Constituent service. Calls, letters and complaints alerting lawmakers to problems are the first line of legislative oversight. Town meetings and community events can be venues for extended discussions during which lawmakers learn details of concerns about programs.
Consulting with interested parties. Legislators often seek to balance the information they get about a program by seeking opinions from a range of interested parties. Organized letter-writing campaigns may alert legislators to groups that wish to be consulted. Consultations range from conversations with trusted insiders to informally constituted advisory groups convened around an issue. After tough compromises, interested parties sometimes are invited to monitor effects and report untoward effects.
Formal oversight boards. Policy bodies may be created in conjunction with major programs. By statute or regulation, advisory boards monitor ongoing operations for many programs related to vulnerable populations and may be tasked to add oversight related to new initiatives such as federal waivers. The make-up, staffing, resources and authority of such boards vary with the program, funder requirements, state customs, and the purpose of the entity.
Reporting requirements. Reports may be required from the implementing agency, conducted by staff of the committee of jurisdiction, or carried out by a central legislative research and review body or audit committee staff at the behest of lawmakers.
Routine reports. Medicaid programs and other executive branch agencies collect a variety of data, including information about enrollment, utilization and expenditures. Resources may be needed to carry out unique analyses of these data. In addition to quantitative data, ombudsmen and consumer offices collect qualitative program information that can flesh out issues in implementation and alert legislators to emerging problems.
Legislative audit committees and legislative policy research offices. In 44 states, legislative bodies carry out operational, program and compliance audits to determine (respectively) whether a program is efficient, effective, and in compliance with the legislative intent. Audits may be routinely required or specially requested.² Committees that are grappling with controversial legislation sometimes enact a change with a short sunset period, coupled with an audit requirement. For example, several states coupled annual reviews of changes in their state insurance market with gradual narrowing of rating bands when they carried out insurance reforms.

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