SOMETHING OLD, SOMETHING NEW FROM THE MEDICAID COMMISSION

Volume 28, Issue 482 January 8, 2007

Christina Kent

The Bush administration’s Medicaid Commission’s final report (released Dec. 29, 2006) contains a number of recommendations that states have been pushing for, or have already been putting into place. For example, it calls for tax subsidies for the purchase of private long-term care insurance, greater use of health information technology and expansion of home- and community-based long-term care.

But the report also contains a number of almost radical new provisions, including:

Commissioners proposed a study of policy options for using alternative insurance models—such as a social insurance program—for the provision of long-term care. At a time when many say the private sector and competition is the best way to hold down costs and improve quality, a social insurance program would be highly controversial.

Noting that Medicaid’s “core purpose” is to serve needy low-income individuals, the commission recommends a national strategy to meet the needs of people at the bottom of the economic ladder before reaching up to those with greater resources. The commission proposed that a new “scaled match” funding formula be studied. The federal government would reimburse states at a higher matching rate for adding lower-income persons to the program; that rate would decrease as states expanded Medicaid to higher income individuals. The recommendation is intended to enable states to reach low-income single adults who don’t qualify for any other insurance programs. The potential drawback is that it could stymie states’ ongoing efforts to expand Medicaid to higher-income persons.

Another proposal would give states the option of creating Medicaid Advantage plans for “dual eligibles.” Modeled on Medicare Advantage managed-care plans, the plans selected by states would provide core Medicaid and Medicare services, and patients would have the ability to opt out. The federal government would pay for Medicare services, but through a risk-adjusted, capitated system. States would help pay for Medicaid services—both levels of government would share in any savings. The recommendation is designed to eliminate one of the biggest problems in caring for dual eligibles—that is, coordinating Medicare and Medicaid’s separate funding streams and the benefit packages they cover.

The report is “an important talking piece to Medicaid reform,” commented Joy Wilson, NCSL’s director of health policy and a non-voting member of the commission. There was no serious discussion of the federal government assuming more of the costs of Medicaid services, she added.

But the commission strongly supported state flexibility by saying the Center for Medicaid & Medicaid Services should establish a National Health Care Innovations Program for the implementation of state-led, system-wide demonstrations. The federal government would provide financial and technical support.

States also should have significantly more freedom in the design of benefit packages, including the authority to establish separate eligibility criteria for acute and preventive medical care and for long-term care services, commissioners said. They proposed giving states the right to replicate demonstrations that have operated successfully for at least two years in other states under an abbreviated waiver process. The public would be able to comment on state proposals.

The commission also strongly recommended the all Medicaid enrollees be given a “medical home” in a coordinated system of care. In the area of health information technology, the commission said all beneficiaries should have an electronic health record by 2012 (adding that the federal government should provide some financial support to achieve this.)

Wilson found it encouraging that commissioners spent a significant amount of time discussing options for long-term care (which consumes roughly one-third of Medicaid spending). For example, one of the biggest problems in long-term care is housing. “A lot of people in nursing homes simply have no where else to live,” Wilson said. Commissioners discussed possible remedies, such as allowing people to use the equity in their home (and not just reverse equity mortgages) to pay for long-term are without the family’s losing the house when a state seeks to recover Medicaid costs. “We’re somewhat limited in where we can go, but at least we’re talking about it,” Wilson said.

She also found it encouraging that commissioners noted that the public needs to be educated about the different services that Medicare and Medicaid provide. Many individuals think that Medicare, for example, will pay for long-term care when in fact the program’s long-term care benefits are stringent.

The commission report discussed in this story was the second one ordered by Department of Health and Human Services Secretary Michael Leavitt. The first commission (created in 2005) recommended ways to achieve $10 billion in Medicaid savings, many of which were enacted in the 2005 Deficit Reduction Act. The second one was to suggest ways to achieve long-term changes to better serve beneficiaries.

Opinions on the commission’s report varied. To read some of them, go to: the Galen Institute, the Center for Budget Policy and Priorities and Laura Hermer, professor at the University of Houston Law Center.