HRSA/MCHB 2005 FEDERAL/STATE PARTNERSHIP MEETING
PUBLIC HEALTH ACROSS THE LIFESPAN
The Future of Medicaid: How Will it Continue to Serve Children and Pregnant Women?
JOHN FOLKEMER: Good morning. I'm glad I could finally make it here with you. Somehow any time I come to Washington I also misjudge the traffic, and I'm either here 45 minutes early or half an hour late, so I'm very poor at that. I also have to be a little more careful how I write up my biography so it doesn't all get quoted directly. So I'll be a little more succinct, I think, in the future. I'm very happy to be able to come and talk to you a little bit this morning about this subject. I have to admit I'm a little bit intimidated by the subject, to think that I actually would be able to talk about the future of Medicaid and what's going to happen with children and pregnant women. I'm certainly not presumptuous enough to think that I can predict what is going to happen.
So what I'm going to do is talk a little more about the pass and present, what has gone so, what is going on now, and maybe that will give us some clues as to what might be happening in the future for Medicaid.
I don't have any slides or Power Point, but then there's only two things I'm going to say, so I think it will be pretty easy important you to follow along, even without a visual prompt.
The first point I want to make is that in a sense Medicaid has been a victim of its own success, and I think it's important to keep that in mind. If you look at the recent interest in Medicaid reform, different proposals that you have heard about today and yesterday, I believe, the different waivers that are coming in from the states, and actually probably the reason for this particular session and the title which sort of implies that there might be a threat to Medicaid coverage for children and pregnant women.
I think we need to maybe start by looking back a little bit at what happened. Obviously the Medicaid program today has fair exceeded anybody's dreams in terms of how comprehensive and expansive it has become when it was started 40 years ago. To digress a little bit, just to give you a brief history of how we got here and the Medicaid program, this will be a very abridged and grossly simplistic history of the Medicaid program, if you will indulge me.
I think what you see as you look over 40 years is really sort of a juxtapositioning and a back and forth between trying to expand the program and trying to control the costs of the program.
If you go back to 1965, for those of you who are familiar with that, you'll recall that Medicare and Medicaid were enacted. Medicaid really was an afterthought. It was sort of a last minute add on. Medicare was really a big deal for the elderly. That's what all the debate was about. Only ten pages of the entire legislation was devoted to Title 19, the Medicaid program. Everybody assumed it was going to be a fairly small program. In fact, there was even a provision originally in the bill, which I found very interesting, in Section 1903E said that the federal government would deny federal dollars to any state, quote, unless the state makes a satisfactory showing that it is making efforts in the direction of broadening the scope of the care and services made available under the plan and in the direction of liberalizing the eligibility requirements for medical assistance with a view toward furnishing by July 1st of 1975 comprehensive care and services to substantially all the individuals who meet the plans eligibility standards.
So the thought back in 1965 was that this was just going to keep growing and growing and that was the intent, and that was actually the law of the land. And then shortly after it was enacted in the next few years things that were added were the EPSDT program, which I know you're familiar with, the Freedom of Choice provisions that allowed choice of any provider, expansion of the aged, blind and disabled with the SSI program, so a number of exceptions.
But by the time we got to the '70s, just a few years after the enactment of Medicaid already there were financial pressures beginning to build on the states and the federal government, and you saw a lot of actions.
Number one, that quote I gave you that was originally in the law, that was just taken out of the law, so congress said give up on that, we're not even going to try to do it anymore.
'70s also saw a lot of legislation about things like fraud and abuse, increase in fraud and abuse activities, utilization controls particularly on hospital and nursing home services, third party liability recoveries to try to get money back from insurance or tort or states, eligibility tightening and quality control to make sure that there weren't errors being made in eligibility. So the '70s really was to a large extent kind of how do we tighten up this program and make it more efficient.
Then in the early '80s with the Regan Administration, you saw the enactment of some waiver provisions that would allow states to get waivers so that they could do things differently than what the law said they had to do. The intent of these waivers, although obviously not always the practice, was that they were supposed to control cost and reduce costs. They did this by changing delivery systems, by maybe providing different kinds of services than were otherwise provided.
For the first time a state could require people to go into manage care organizations that had never been allowed before, they could limit the providers that they could get services from, they could do selective contracting, so a number of things were done in order to control costs that way.
Then of course the latter half of the '80s and through 1990 was when we had the hey day of the expansion of coverage for the children and the pregnant women with a series of laws, first allowing states to cover more pregnant women and children and then later on mandating that all states had to cover them up to a certain floor.
The '90s mostly saw a tightening again of the program. There were a series of measures that were put into place to keep the states from continuing to do some of their, let's say, creative financing arrangements that they had developed, which had the effect of really shifting a lot of the costs inappropriately to the federal government. So congress passed a number of laws to stop provider taxes and donations, abuse of the disproportionate share hospital provisions, upper payment limits, things like that.
1993 really kicked off one of the most important eras in the Medicaid program. With the new Clinton Administration states were allowed to have what are called 1115 demonstration authority to do very different things with their populations. Statewide reform is kind of the term that was frequently used for that. That allowed states to limit services, to limit freedom of choice, to encourage more manage care enrollment. The idea was to try to limit the dollars and control dollars and save money.
The other piece of that, though, which was picked up on, was that states were allowed to use that savings in order to expand services, so they could expand to populations that otherwise weren't covered under Medicaid, such as non‑disabled childless adults. So you saw both of those things happening, as long as the state could demonstrate that it wasn't costing any more money than it would have cost if the waiver had never been granted.
Then 1997 of course was a big year for a couple of things. Number one, for the first time there were provisions that allowed states to mandatorily put people into manage care without having to get a waiver. Now, this didn't apply to all the populations, but for most of the population state could put people in manage care without a waiver.
And then of course the big thing that year was the enactment of the SCHIP program, the State Children's Health Insurance Program that you have heard about. And this really kicked off sort of the second waive of a huge increase in enrollment for children. The first of course was in the late '80s and early '90s, and after the SCHIP there was another big increase.
And that brings us to where we are today. I'd just like to give you a few indicators. I mentioned that the program has grown so much and gotten to such a large extent that there's a lot of pressure now, while you are hearing about Medicaid reform and waivers and everything.
Today we're approaching 50 million Americans who are on the Medicaid program or the SCHIP program, and that just in the last four years, since 2000, there's been a growth of about 25 percent or 10 to 12 million in that. So the programs are continuing to grow very rapidly. The costs have well exceeded 300 billion dollars a year, and a year or two ago Medicaid actually surpassed Medicare as the largest public health program ‑‑ I guess the largest health in the United States.
Since the SCHIP program was enacted, a number of uninsured low income kids has dropped by more than a third, so a significant impact was made there. 80 percent of states now cover children up to at least 200 percent of the poverty level, about half a dozen cover them to 300 percent of the poverty level, so there has been a significant improvement there. One‑sixth of the entire population in the United States is on Medicaid, more than one in four children are on either Medicaid or the SCHIP program, and 37 percent of all deliveries are paid for by Medicaid.
Now, the impact of this financially is that obviously the program is getting more and more expensive and most or a big part of that is borne by the states. I think right now approximately 20 to 25 percent of entire state budgets are for their Medicaid programs. It's been rapidly growing as a percentage over the years, it's squeezing out other type programs, and this is certainly what is getting the states concerned about how they can control those costs.
Now, so I think this gives us some feel for the financial pressures on the states and the federal government to figure out how to deal with the Medicaid program, how you control the growth, what you are going to do. Actually I just notice a recent survey in fiscal year 2005 every single state had some kind of cost containment they put into effect, either relating to provider reimbursement, eligibility benefits, levels or whatever.
You have already heard, I think, about different reform efforts of the administration, of the Medicaid Reform Commission, the National Governors Association, et cetera.
Which finally brings me to my second point, which is with all due respect to what you have heard about these reform efforts, don't get overly hung up or focused on these reforms that are going on now at the federal level. I think in a way this is sort of a reverse of the old adage that we could be missing the trees for the forest; that while we are looking at or looking for the forest of national Medicaid reform we are missing the trees of state‑by‑state reform that have been going on for maybe a dozen years and are continuing to go on now. So these trees of state‑by‑state reform are growing up right around you, right now, you better watch out and pay attention to them. I did the mention that ever since '93, states have been able to use this 1115 demonstration authority to do things differently. The number and variety of different kinds of reform proposals that the states have enacted or are coming in with and discussing with us is accelerating. Even in the last year or two we have had more proposals coming in, more creative proposals than ever before.
Today, or at least as of June, 40 states had some kind of 1115 demonstration, and half of those had what are considered to be statewide reform, comprehensive reform waivers. There are more waivers now that are under review in our department, and we just see this as continuing.
Some of the major things, the major elements that states are coming in and talking to us about and trying to get approved are manage care of course. That's been growing very rapidly.
In 1993, there's really a minimal percentage of Medicaid population and manage care. Today it's over 60 percent. So manage care is the predominant way that Medicaid is being provided in the states today. So states are looking at putting more people into manage care. They are looking at changing the benefit packages. And that's going both ways. In some cases it's expanding the benefit packages for certain people and other cases it's reducing the benefit packages for people.
Another element that a lot of states are interested in is sort of in the area of increasing beneficiary responsibility, and this is in several different ways. Certainly cost sharing. We heard a little bit about cost sharing. Consumer direction, where the individual has more choice in how the services are provided and who provides it to them. Financial incentives for such as medical savings account, health savings account, several states have now come in and are looking to somehow build that into their proposals. Certainly buying into private health insurance, if there is employer sponsoring insurance available to the family, how do you try to take advantage of that and buy people into that.
And there's still population expansions. It's interesting because states generally are coming in with two concerns: number one, it's costing them too many money. How do they control the cost? But secondly the states are coming in and saying the number of uninsureds is increasing, and what can we do about that? The same time Medicaid and SCHIP have been growing rapidly the number of people with commercial insurance has been dropping; so more and more it's the public sector picking up the healthcare for these people.
As I said, these are all really state initiatives, and you need to keep that in mind. These are ideas that are coming from the states. The states are coming and asking permission to do all these different kind of reforms, and we try to work with them to do whatever we can.
You should be aware that the secretary, the federal government, HHS has a great deal of authority to grant waivers under this 1115 authority. There really are not a whole lot of things that the secretary cannot legally waive, so that's why I'm telling you you need to pay a lot of attention to what your states are asking for here.
Frequently what happens is it's a policy call at our level, what things that we could waive will we waive or will we not waive. And, for instance, the secretary has made it pretty clear that when he's talking about mandatory eligibles, the people that the state has to cover and mandatory services, he doesn't want to grant much leeway there, so he wants to kind of hold the line there. It's more on the optional services, the expanded populations, that's where we are much more flexible in the kinds of things we will allow states to do.
And I think you also ought to keep in mind as you are looking at what these reform, national reform proposals are, if you look at them, in most cases, at least for the big ones, what they are proposing is allowing states more flexibility to design their programs. It isn't so much mandating things that have to be done, it's allowing states additional flexibility even beyond what they might have now. So again that's why I say pay attention to what's happening there at the state level.
I guess it's about time to conclude. I said at the beginning I was not presumptuous enough to try to guess what the future will bring. Well, now I'll try to be presumptuous enough to at least give you some general idea. I don't ‑‑ in terms of children and pregnant women, if I were to guess, I would say I don't see much change in the who or what. I don't see much change in who is covered and I don't see much change coming in what services and benefits they are entitled to.
I do see changes in the how and where. I would see changes coming in how they get the services and what kind of delivery systems they get it, where they go to get those services; so I would think there could be some changes there.
So I will leave you with just one final thought, which is that the impetus for and the crucial decisions about Medicaid reform have been, are being, and most likely will continue to be made on the state level. Thank you.