[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
CHALLENGES FACING THE MEDICAID PROGRAM IN THE 21ST CENTURY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
OCTOBER 8, 2003
__________
Serial No. 108-58
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
U.S. GOVERNMENT PRINTING OFFICE
89-961 WASHINGTON : 2004
_______________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800,
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: stop SSOP, Washington,
DC 20402-0001
------------------------------
COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania RICK BOUCHER, Virginia
CHRISTOPHER COX, California EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina SHERROD BROWN, Ohio
Vice Chairman BART GORDON, Tennessee
ED WHITFIELD, Kentucky PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois BART STUPAK, Michigan
HEATHER WILSON, New Mexico ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING, GENE GREEN, Texas
Mississippi KAREN McCARTHY, Missouri
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California THOMAS H. ALLEN, Maine
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
Dan R. Brouillette, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Health
MICHAEL BILIRAKIS, Florida, Chairman
JOE BARTON, Texas SHERROD BROWN, Ohio
FRED UPTON, Michigan Ranking Member
JAMES C. GREENWOOD, Pennsylvania HENRY A. WAXMAN, California
NATHAN DEAL, Georgia RALPH M. HALL, Texas
RICHARD BURR, North Carolina EDOLPHUS TOWNS, New York
ED WHITFIELD, Kentucky FRANK PALLONE, Jr., New Jersey
CHARLIE NORWOOD, Georgia ANNA G. ESHOO, California
Vice Chairman BART STUPAK, Michigan
BARBARA CUBIN, Wyoming ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico GENE GREEN, Texas
JOHN B. SHADEGG, Arizona TED STRICKLAND, Ohio
CHARLES W. ``CHIP'' PICKERING, LOIS CAPPS, California
Mississippi BART GORDON, Tennessee
STEVE BUYER, Indiana DIANA DeGETTE, Colorado
JOSEPH R. PITTS, Pennsylvania CHRISTOPHER JOHN, Louisiana
ERNIE FLETCHER, Kentucky JOHN D. DINGELL, Michigan,
MIKE FERGUSON, New Jersey (Ex Officio)
MIKE ROGERS, Michigan
W.J. ``BILLY'' TAUZIN, Louisiana
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Eckardt, Hon. Adelaide, Representative, Maryland State House. 62
Rowland, Diane, Executive Vice President, Health Policy,
Kaiser Family Foundation................................... 67
Scully, Hon. Thomas A., Administrator, Centers for Medicare
and Medicaid Service, accompanied by Dennis Smith.......... 15
Material submitted for the record by:
Alzheimer's Association, prepared statement of............... 212
American College of Obstetricians and Gynecologists, prepared
statement of............................................... 223
American Health Care Association, prepared statement of...... 213
Association of American Medical Colleges, prepared statement
of......................................................... 234
Consortium for Citizens with Disabiities, prepared statement
of......................................................... 229
Eckardt, Hon. Adelaide, Representative, Maryland State House,
letter dated November 10, 2003, enclosing response for the
record..................................................... 211
National Association of Community Health Centers, Inc.,
prepared statement of...................................... 216
National Association of Public Hospitals and Health Systems,
prepared statement of...................................... 236
National Association of Children's Hospitals, prepared
statement of............................................... 242
National Citizen's Coalition for Nursing Home Reform,
prepared statement of...................................... 245
Rowland, Diane, Executive Vice President, Health Policy,
Kaiser Family Foundation, response for the record.......... 212
Scully, Hon. Thomas A., Administrator, Centers for Medicare
and Medicaid Service, response for the record.............. 247
Voice of the Retarded, prepared statement of................. 220
(iii)
CHALLENGES FACING THE MEDICAID PROGRAM IN THE 21ST CENTURY
----------
WEDNESDAY, OCTOBER 8, 2003
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2123, Rayburn House Office Building, Hon. Michael
Bilirakis (chairman) presiding.
Members present: Representatives Bilirakis, Greenwood,
Deal, Norwood, Wilson, Buyer, Brown, Waxman, Pallone, Stupak,
Green, Strickland, Capps, DeGette, John, and Dingell (ex
officio).
Staff present: Patrick Morrisey, deputy staff director;
Chuck Clapton, majority counsel; Jeremy Allen, health policy
coordinator; Eugenia Edwards, legislative clerk; David Nelson,
minority counsel; Bridgett Taylor, minority professional staff
member; Amy Hall, minority professional staff member; and
Jessica McNiece, staff assistant.
Mr. Bilirakis. Good morning. I now call this hearing of the
Health Subcommittee to order. I would like to begin by thanking
our witnesses for taking the time, one of whom is not here yet,
but he is on his way from downtown, by thanking our witnesses
for taking the time to join us and provide their perspective on
the myriad of changes facing the Medicaid program at this
beginning of the 21st century. This is the third hearing we
have held in Congress on Medicaid and I look forward to a
vibrant discussion this morning, and I am sure it is going to
be vibrant.
Medicaid is a critical component of our Nation's health
care safety net. Approximately 40 million low income children,
elderly adults and people with diabetes rely on Medicaid, which
is jointly financed by the Federal Government and the States.
The title of this morning's hearing is Challenges Facing the
Medicaid Program in the 21st Century, and I think that is a
very appropriate title, especially when you consider that the
Congressional Budget Office estimates that Federal spending on
Medicaid will more than double over the next 10 years and
consume an ever larger share of our GDP.
As we grapple with these realities, it is incumbent on us
to carefully review how the program is working and whether
there are opportunities to better focus our Federal investment
than Medicaid. I like to think that is the gist of this series
of hearings. However, I think we should remember that a
comprehensive review of Medicaid should also reveal a number of
opportunities for modernizing this program. We should think
critically about how we can provide States with the flexibility
they need to design Medicaid programs that best meets the needs
of their populations, while at the same time ensuring that
Federal funds are targeted and used in the most effective
manner possible. In terms of today's hearing, I am interested
to hear our panelists' views on the open-ended funding stream
available to States under Medicaid's financing structure and
what incentives are inherent under such a system.
As many of you know I had strong reservations about
providing States with temporary increases in their Federal
medical assistance percentages, FMAP, as we did under the Jobs
and Growth Tax Relief Reconciliation Act of 2003. While I
supported providing targeted limit assistance to the States, I
did not support increasing the Federal Government's share of
the responsibility for a State's Medicaid program, especially
since many States dramatically expanded their Medicaid programs
during the 1990's. I have concerns with a system that
encouraged many States to expand their Medicaid program during
the 1990's and then draw down increased Federal funds, and then
come to the Federal Government for additional funds when the
economy was not as strong.
As we look toward developing strategies for reforming
Medicaid, I also think that it is critical that we recognize
that every senior citizen in America is entitled to coverage
under Medicare and are, therefore, in my opinion, entitled to
access any new prescription drug benefit that Congress might
add to the program. H.R. 1, the Medicare Prescription Drug
Modernization Act of 2003, recognized this and would allow
every Medicare beneficiary, including the so-called, very
important dual eligibles access to the new prescription drug
benefit.
Again, I would like to thank our witnesses for joining us
today and we all look forward to your testimony and we are
going to go through our opening statements here and hopefully
by then our first witness, Mr. Scully will be here. If not, we
might have to recess for a few minutes until he gets here. But
he was called to the White House very suddenly this morning as
I understand it and he is on his way now.
I now yield to the gentleman from Ohio, Mr. Brown.
Mr. Brown. I thank the chairman very much and appreciate
his good work and genuine caring about people who have less
advantage in this society. There are desperately poor people in
America, and they can't afford health care and they can't
afford long term care services. That is not Medicaid's
challenge. It is the challenge of a caring society. I use the
phrase ``caring society'' because President Bush used that
phrase during his State of the Union address when he called
Medicare the ``binding commitment of a caring society.''
Do we have that same binding commitment to Medicaid?
Medicaid doesn't fritter away tax dollars. It operates with
less overhead than private insurance. Its costs are growing
more slowly than private insurance, and for good or for worse,
it pays providers less than private insurance.
By any measure, that is a bare-bones system. Medicaid is
not rife with fraud and abuse. There are strict controls on
asset transfers. This and previous administrations have cracked
down on other abuses. Medicaid is supposed to serve the truly
poor and it does. If we want to deny care to senior citizens,
to disabled individuals, to children who are living in poverty,
let's have a hearing about that.
But let's not imply that Medicaid is creating a funding
crisis in this country. People in need and our willingness or
unwillingness to assist those people is at issue here, not
Medicaid. Medicaid spending growth isn't a sudden phenomenon.
The President and the Congress knew about the increase on
demands on Medicaid before we drained $3 trillion from the
Federal Treasury and $16 billion from State budgets so we could
give tax cuts for the most privileged people in our society.
In Ohio, you have to be--my home State, you have to be 64
percent of poverty to qualify for Medicaid. 64 percent. Is Ohio
contemplating cuts in Medicaid eligibility and services? You
bet it is. We toss off $3 trillion in Federal revenues, $16
billion in State revenues, again, to give tax cuts to the most
privileged in our society, then we warn the Nation that
Medicaid is headed toward a funding crisis. Our population is
aging. Prescription and other costs are growing. We face
budget, daunting budgets deficits. There are 43.6 million
uninsured, and Medicaid is the insurer of last resort. Those
realities aren't Medicaid's challenge or Medicaid's fault. They
are our challenge, and in many cases, they are our fault.
Our challenge, not Medicaid's challenge, but ours is to
finance Medicaid sufficiently so it can continue to serve
people in need and confront the external factors, growing long-
term care needs, rising drug costs, eroding health coverage and
$3 trillion worth of irresponsible tax cuts. Those are the
external factors we should confront directly. Before enacting
those tax cuts, did we make sure that the lost revenue wouldn't
affect our ability to protect the most vulnerable in society?
Quite the opposite.
The administration tax cut proposal, $3 trillion, again
going to the most privileged people in our society, was coupled
with a program to block grant Medicaid, the program for the
least privileged in our society, cutting off funding for
optional populations and services. Think about that, 55 percent
of seniors on Medicaid are optional. Should we kick these
people off Medicaid? I want to read you a letter from one of my
constituents, it is a fairly long letter in the last couple of
minutes of my opening statement.
``I am printing this. I do not write good. My wife has
Alzheimers. My wife is getting lousy care because they tell me
you idiots of politicians, I don't care if you're Republican or
Democrat, voted to cut these nursing homes. I go every day to
my wife. One nursing home the light cord would not work so you
could not call to the bathroom so you lay there in your body
waste till someone does check which is hours away.
Shame on you people and shame on you who voted the cut. I
hope your family experiences this some way and see how you like
it. I have used up my Medicare 21 days. Insurance kicks in for
130 days. I pay $600 every 2 months for my wife. When that's
gone they tell me I have to go to Medicaid which they will have
to take everything away from us but our home and our old car.
We were working people. My wife was an RN all her life. She
took care of old people. I was an over-the-road bus driver. We
are not rich. They will steal everything we worked all our
lives for. I hope somehow you will have to suffer like this and
watch your wife lay in body waste.
Mad? You're damn right I'm mad. What a line of bull you
give the people to get elected and turn around and shaft them.
Every year, Medical Mutual raise my wife's rate, always 2 weeks
before Christmas. Last year they raised it $80. The year before
$105, taking it up to $600 every 2 months. Soon they will have
all my Social Security check. She gets $840 a month. If we have
to go to Medicaid they tell me they take all of her $840 and
give her $40 back. I doubt you will ever see this. Your aide
will shred this and I hope your aide has to watch his family
lay in their body waste like I do for what you rotten
politicians have done. And I served my country in World War II.
What a joke.''
The biggest challenge, Mr. Chairman, facing Medicaid is
that we are losing sight of what it means to be a caring
society. In the next couple of weeks, we are going to vote $87
billion the President asked for in Iraq, and now I understand
Republican leadership has proposed another round of tax cuts.
Thank you.
Mr. Bilirakis. I thank the gentleman.
Mrs. Wilson. No. Dr. Norwood.
Mr. Norwood. Thank you Mr. Chairman, and I thank you for
calling this very important hearing today. I would also like to
thank our witnesses, especially Mr. Scully, the esteemed
administrator for CMS if he gets here, for being able to
address this critical issue surrounding Medicaid and its
implementation. Mr. Chairman, I think it is a good time and the
correct time that we need to take a step back and take a look
at the fundamental structure of Medicaid.
There are several issues that concern me with the current
structure and the implementation of Medicaid. First, the cost
of Medicaid already has exceeded all expectations and is only
expected to grow exponentially as we continue to move forward.
As our population gets older, and our care becomes more
technologically focused and capable, the cost of health care is
going to continue to rise. And I hope our witnesses will
discuss possible strategies to contain expenses in the future.
Part of what we have done over the last 38 years is that we
continually, as a Congress, increase the, or expand the
categories in Medicaid, and we continually add more individuals
on to the Medicaid lists for folks that are entitled, and we
wonder why we have spent so much money, and we continually, the
first step, is say well gosh, we are paying the health care
provider too much, which was pointed out by Mr. Brown, is
already below cost in many areas.
So I would like for us to just take a real serious look
about why this cost has continued to grow particularly over the
last 38 years. And I am concerned about the impact Medicaid has
on our States. In Georgia, we are paying 20 cents of every tax
dollar into this program. Medicaid leaves wide discretions to
the States to craft individually tailored workable plans that
address the needs of each State's own citizens within the
Federal guidelines.
While this is a laudable principle, it has also spurred the
history of State abuse that has plagued the Medicaid system.
Today's Medicaid structure provides many perverse incentives
for States to engage in questionable and very worrisome
behaviors about the increase in funding. And of course, States
need to increase their funding because of the budgetary
difficulties they face. Current budget crisis put States in the
position of having to decide between roads, books for schools,
health care for children and the poor or long-term care for
seniors. I have said here before and I think we ought to have
some serious consideration about moving long-term care which is
about generally our senior citizens out from under Medicare and
place that under--out from under Medicaid and place that under
Medicare.
Mr. Chairman, I thank you for the hearing and Mr. Scully,
we are delighted to have you today. And I look forward to your
testimony.
Mr. Bilirakis. The Chair thanks the gentleman.
Mr. Green for an opening statement, 3 minutes.
Mr. Green. Thank you, Mr. Chairman. And to follow up my
colleague from Georgia, I think that is an outstanding idea if
we would move it under Medicare, except I would hope we would
cover more days than we do now under Medicaid for our poor
seniors in nursing homes. Again, I want to welcome Mr. Scully,
and Mr. Chairman, thank you for having this third in a series
of hearings on the challenges facing the Medicaid program. The
Medicaid program provides a critical safety net for 44 million
low income Americans in the populations covered under the
Medicaid the elderly disabled and children, some of our
countries most vulnerable citizens. And as we know the health
care cost for high risk populations such as these are
expensive. Medicaid costs have been increasing dramatically in
recent years, including a whopping 14 percent in fiscal year
2002. This is certainly a cause for concern, especially since
Medicaid costs tend to go up during economic downturns, and we
are certainly experiencing a protracted economic downturn.
Although I am weary of proposals that would block grant the
program or substantially alter benefits, the benefits provided
under Medicaid are vital, physician services, inpatient,
outpatient hospital care, early periodic and screening
diagnostic and treatment for children under 21, nursing home
care and others that make life or death differences in
beneficiaries' lives. And I've heard some critics talk about
Medicaid, call it a Cadillac benefits program. But there is
nothing extravagant about the benefits I have just listed. In
fact, in the State of Texas, we don't do anything under social
services that would be called extravagant, and we are even
cutting back from there.
Reforming Medicaid or providing more flexibility means
slicing into services that save people's lives. And Mr. Scully,
I have a concern, I guess, in--our workforce commission in
Texas is talking about voting on a Medicaid plan that would
actually remove families from Medicaid if their children are
truant from school. And my concern is if you can't get your
child in school, you don't have health care. And it seems like
that would be violation of our Federal rules, but what I am
using that as an example is block granting, something like
that, and they would use the Medicaid program not for the basic
tenet of health care, but to use it to force people to do some
other things.
Of course, I want children to go to school. But in Texas,
we take away fishing licenses if you don't pay child support,
which is pretty important, hunting licenses and even your
driver's license. Maybe we ought to do that under Medicaid
before we take away their health care. I know we will hear a
lot today about flexibility and personal responsibility.
I would like to remind my colleagues we are talking about
real people with real needs. As you heard my colleague from
Ohio in his letter, I actually talked to a constituent last
night who said his wife was receiving Medicaid in Texas in our
district and she--and they are cutting her home health care
benefits. And he said I don't know what else I can do. He said
I am on Medicare and disabled and I can't do it. And I said
well, the State of Texas actually cut Medicaid coverage for
home health care on September 1 and so since--you are probably
just getting the notice of it. But we are going to try and see
if hopefully they fell through a crack. But again, Mr.
Chairman, I thank you for the time today and I will put my
total statement in the record.
Mr. Bilirakis. Thank you sir.
And by the way, I guess the opening statement of all member
of the subcommittee will be made a part of the record. Mrs.
Wilson, 3 minutes.
Mrs. Wilson. Thank you, Mr. Chairman. And thank you very
much for holding this hearing today. I look forward to hearing
the testimony. Medicaid is now the largest Federal health care
program in the country. It is a $280 billion program with about
48 million covered lives. It is 7 percent of our Federal
budget, and in most States it is between 15 and 20 percent of a
State's budget. It has a huge impact on our--the health of our
Nation as well as the funding of health care. We spent a lot of
time in this committee over the last 5 years looking at
Medicare. And I think that Medicaid is the next major health
care challenge that this committee should undertake.
Mr. Chairman, you and Chairman Tauzin set up a Medicaid
task force about 4 months ago and we have been meeting to
examine a lot of the challenges facing Medicaid and we have
listened to lots of people. People from the administration,
doctors, people who run health care clinics and community
health centers, people whose children are participants in
Medicaid and there are some things that are beginning to
emerge. And all of them are concerned about the future of
Medicaid. We know that disabled adults want more control over
their own care and who provides it, without having to wait for
the State to come up with some innovative exception to the
Medicaid rules.
We know that Medicaid does a poor job of managing chronic
diseases like diabetes and asthma and heart disease. As one
doctor said to me, the system only gets paid if people are
sick. It is not set up to improve the health of poor people. I
visit a wound care clinic in Albuquerque and the RN there,
Barbara List, said to me why is it so easy for me to admit an
indigent patient to the hospital to have their foot amputated
and so hard for me to get a compression stocking to prevent the
foot from having to be amputated in the first place?
We did a poor job in managing chronic disease and we know
that Medicaid does virtually nothing to prevent disease or to
reduce the risk of onset of disease. We know that under the
pressure of expanding enrollment and increased costs, States
have adopted some questionable financial schemes to maximize
Federal dollars and that State agencies and hospitals, and
doctors' offices follow the money stream rather than focusing
on what is best for their patients.
And I know that because I used to be the cabinet secretary
for children, youth and families in the State of New Mexico,
and we often did things that didn't necessarily benefit the
patients who are relying upon the care. Mr. Chairman, we have
tremendous challenges facing Medicaid in this country, and I
hope that the testimony today will begin to focus on some of
those challenges, so that Medicaid can improve the health of
those who depend upon it, rather than just paying the claims of
the people who file the paperwork. Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentlelady. Mr. Dingell
for an opening statement.
Mr. Dingell. Mr. Chairman, thank you. I commend you for
holding this hearing. It is one which needs to be held. The
subject of challenges facing the Medicaid program in the 21st
century is an important one. One of the biggest problems that I
see is the Office of Management and Budget, and quite honestly,
some of the witnesses who will be testifying here before us
today, because it seems attempts are being offered to shift
much of the burden to the States in the form of block grants in
a way which will adversely impact the well-being of those who
are the beneficiaries of that program.
As all know, Medicaid is the largest source of health
coverage in the Nation. It provides coverage to millions of
families with children, 8 million people with disabilities. It
is the largest source of coverage for people needing long term
care. In other words, Medicaid provides health insurance to
people who are uninsured or are uninsurable. Medicaid serves as
a vital health care safety net for the least advantaged of our
citizens, particularly during times of massive layoffs caused
by a flawed trickle down economic plan.
Does it have flaws? Absolutely. Are these flaws
correctable? Absolutely. In fact, flaws in the program have
been subject to bipartisan corrections on a number of occasions
over the past 20 years. Unfortunately, the administrations
irresponsible tax cuts and failed economic policies have led to
a fiscal crisis within the States. This has put additional
pressure on Medicaid at the time that the Federal Government is
trying to shift the burden of Medicaid to the States through
the block grant mechanism. Medicaid roles have increased by
about 4 million people since this administration took office.
In response, the administration has determined to
substitute block grants for need-based Federal funding, thus
putting the States at risk for raising Medicaid costs due to
economic downturns or unforeseen cost increases. The people who
will suffer are, of course, those who are the beneficiaries of
it. I would note that this administration seems very much
determined to move a lot of people in the low income brackets
from Medicare to Medicaid, thus imposing further burdens upon
that group.
A block grant may reduce some opportunities for gaming the
system, but it will create others and I intend to ask the
witnesses today to please tell us what recommendations they
have made to the Congress for eliminating opportunities to game
the system by the States and others, and also what actions they
have taken administratively to bring these problems to a halt.
I think the answer will indicate that nothing has been done by
the administration with regard to this matter. Shelling out
Federal dollars under a block grant system with no
accountability of the recipient is not an answer. It simply
indicates to me that those who are hurting now will hurt more.
Moreover the burden for caring for vulnerable American
families would be shifted to the shoulders of the States and
their residents at a time when they can least afford to handle
the additional responsibilities. It is unfortunate that fraud,
waste, and abuse are not indicated on the basis of the
Republicans' desire to end Medicaid as we know it, as millions
of people have depended upon that program. I have long fought
efforts by the States to game the Medicaid system, and I will
continue to do so. I would note that under my chairmanship, we
brought to a halt the raids upon DSH funds and the unseemly
behavior of the States in inflating their claims under
Medicare. That action has not prospered under the leadership of
this administration. But the existence of fraud, waste, and
abuse should not end need-based Federal funding for the most
vulnerable amongst us.
What we should do is to address the problem which exists
with regard to fraud, waste, and abuse and not come up here and
seek the lazy man's way out. We can properly and vigorously
address fraud, waste, and abuse, but I do not believe that it
is a moral matter to do so at the expense of those in the
Medicaid program, something which has been one of the shining
glories of the Medicaid program in that it has provided a
safety net for the most needy amongst us. Thank you, Mr.
Chairman.
Mr. Bilirakis. The Chair thanks the gentleman.
Mr. Buyer for an opening statement.
Mr. Buyer. I retain my time and waive.
Mr. Bilirakis. Mr. Waxman for an opening statement.
Mr. Waxman. Yes. Thank you very much Mr. Chairman. Today
the subcommittee is holding a hearing titled Challenges Facing
the Medicaid Program in the 21st Century. In my view, this
hearing might be more appropriately titled Challenges Facing
the Health Care System in the 21st Century and how the Medicaid
program has stepped forward to provide coverage for persons
that the rest of the system fails. That title might focus our
attention on what the real problem is. It might be popular with
this administration and the majority in this Congress to be
critical of Medicaid and define it as a broken program.
I believe it is more accurate to describe it as a program
which has been uniquely successful in providing services to
millions of needy Americans with complex and difficult health
care problems. Medicaid is now a program that is the single
largest public program providing health care coverage, covering
51 million Americans, significantly more than Medicare. It is a
program that provides coverage for one out of five children. It
is a program that covers 40 percent of the births in this
country. Providing prenatal care and well baby care. And it is
a program that supplements Medicare in uniquely important ways.
It provides cost sharing for Medicare premiums. It makes
Medicare affordable for low income seniors and disabled
beneficiaries. It provides critical support supplements for
services that Medicare doesn't cover, like prescription drugs,
eyeglasses and hearing aids, and it provides long-term care
services both in nursing homes and in home and community-based
settings.
It is indeed the only program that has tackled this
difficult problem. It is a critical program in providing
services for the disabled. Indeed with the continuing
development of technology and support services that allows
severely disabled people to live productive lives, Medicaid has
been unique in providing coverage for the range of services and
supports that are necessary and expensive, and I should add,
typically not provided by traditional private insurance plans.
Our witnesses today will do a better job than I can of
elaborating on the populations and services that Medicaid
covers and the critical role it plays, but I want to focus on
the thread that runs through this picture. Medicaid is the
program that serves the hardest to reach the cases that are
most expensive and difficult, the services that are often
otherwise not available when we are talking about people with
AIDS, low income pregnant women who can't afford the basic
costs of delivering their babies, or persons with physical and
mental disabilities that need constant and continuing support.
Whether we are talking about aged people without family or
resources needing long-term care services or persons needing
expensive prescription drugs to treat multiple health care
problems, in all of these cases it is Medicaid that has been
the program that fills in the gaps of our health care system.
Mr. Chairman, I have additional comments I would like to
put into the record with my opening statement.
Mr. Bilirakis. Without objection.
Mr. Waxman. But in the interest of time I want to say that
the way to deal with problems is not to bash Medicaid for being
successful at what we have asked it to do. We need to be better
partners to the States in helping them to continue to meet the
demands that have been placed on this program.
[The prepared statement of Hon. Henry A. Waxman follows:]
Prepared Statement of Hon. Henry A. Waxman, a Representative in
Congress from the State of California
Today this Subcommittee holds a hearing titled ``Challenges Facing
the Medicaid Program in the 21st Century.''
In my view, this hearing might be more appropriately titled
``Challenges Facing the Health Care System in the 21st Century, and How
the Medicaid Program Has Stepped Forward to Provide Coverage for
Persons that the Rest of the System Fails.'' That title might focus our
attention on what the real problem is.
It might be popular with this Administration and the majority in
this Congress to be critical of Medicaid and define it as a broken
program. I believe it is more accurate to describe it as a program
which has been uniquely successful in providing services to millions of
needy Americans with complex and difficult health care problems.
Medicaid is now a program that is the single largest public program
providing health care coverage--covering 51 million Americans,
significantly more than Medicare.
It is a program that provides coverage for 1 out of 5 children. In
every State of the Union children below poverty are covered by
Medicaid.
It is a program that covers 40 percent of the births in this
country--providing prenatal care and well baby care assuring children a
healthy start in life.
Medicaid is a program that supplements Medicare in uniquely
important ways. With its payment of Medicare premiums and cost-sharing,
it makes Medicare affordable for low-income seniors and disabled
beneficiaries. It provides critically important supplementary services
that Medicare doesn't cover, like prescription drugs, eye glasses, and
hearing aids.
And it provides long-term care services--both in nursing homes and
in home and community-based settings. It is indeed the only program
that has tackled this difficult problem.
It is a critical program in providing services for the disabled.
Indeed, with the continuing development of technology and support
services that allow severely disabled people to live productive lives,
Medicaid has been unique in providing coverage for the range of
services and supports that are necessary, necessary and expensive. And,
I should add, typically not provided by traditional private insurance
plans.
Our witnesses today will do a better job that I can of elaborating
on the populations and services that Medicaid covers, and the critical
role in plays.
But I want to focus on the thread that runs through this picture:
Medicaid is the program that serves the hardest to reach, the cases
that are most expensive and difficult, the services that often are
otherwise not available. Whether we are talking about people with AIDS,
or low-income pregnant women who can't afford the costs of delivering
their babies, or persons with physical and mental disabilities that
need constant and continuing support, whether we are talking about aged
people, without family or resources, needing long-term care services,
or persons needing expensive prescription drugs to treat multiple
health care problems--in all of these cases it is Medicaid that has
been the program that fills in the gaps in our health care system.
Is the cost of Medicaid increasing? Of course. It pays for people
who are sick and disabled and who use the most expensive services. It
pays for prescription drugs where inflation has been the highest. And
it serves an increasing number of people.
When we face a recession and see people losing their employment-
based coverage, it provides coverage for more people instead of less.
We may have more than 43.6 million uninsured in this country, but the
figure would be considerably higher without the safety net of Medicaid.
The financial burden of Medicaid is difficult to sustain. As we
look to the future and the continuing challenges that Medicaid faces,
we need to recognize that the Federal government has an obligation to
provide greater help to the States in meeting the cost of the program.
The answer is not to find a way to limit the Federal obligation--to put
a lid on it so our budget looks good. The answer is to find the best
way to provide greater assistance.
We can start by helping with the costs of the dual eligibles,
people covered by both Medicare and Medicaid. But we must do more.
The way to deal with this problem is not to bash Medicaid for being
successful at what we have asked it to do. We need to be a better
partner to the States in helping them to continue to meet the demands
that we have placed on this program.
The needs of the people who depend on Medicaid require no less.
Mr. Bilirakis. The Chair thanks the gentleman.
Mr. Deal for an opening statement, 3 minutes.
Mr. Deal. I will reserve my time, Mr. Chairman.
Mr. Bilirakis. All right, sir. Ms. Capps for an opening
statement.
Ms. Capps. Thank you, Mr. Chairman. I appreciate this
opportunity to discuss the challenges facing Medicaid in the
21st century. I welcome Mr. Scully to this hearing and to the
other witnesses as well. I want to reference a letter that my
colleague from Ohio quoted from, one of his constituents and I
hope that Mr. Scully has a chance to read that letter. It
struck me as a nurse. I think each of us have had contacts with
our constituents with similar stories to this. I wondered if
your constituent, Mr. Brown, realizes that the biggest
challenge that Medicaid faces is the Bush Administration's
proposal to dismantle it.
At a time when unemployment is so high, when the economy is
in such dismal shape, when more and more people are losing
their jobs and thereby their health insurance, this
administration wants to arbitrarily cap Medicaid funding and
change it to a block grant. It is an attempt to take advantage
of the States fiscal problems to pass an ill-considered
ideological proposal that will actually do more harm to
millions of Americans.
This administration is trying to entice States into this
program with a short-term boost in funding and the false
promise of flexibility. But this is a siren song that many
State Governors are already resisting, and I would urge the
Nation's Governors to lash themselves to their masts, fill
their ears with wax and resist this call so they do not crash
their constituents on the rocks of the Bush Medicaid block
grant plan. Right now, Medicaid guarantees health care to 42
million Americans who are struggling to take care of their
families and to make ends meet.
Taking away that guarantee will pull the rug out from under
working people who are just trying to survive in such a weak
economy. Medicaid is not broken. In fact, it is working exactly
the way it is designed to. As more and more Americans lose
their jobs and their health insurance, Medicaid is there to
help them. As more and more Americans find they cannot afford
the growing expensive health care Medicare is there. It is the
way it is supposed to operate.
The program helps to soften the impact of a slowing economy
and it is a major means to speed the recovery to follow. But
the block grant proposal would mean that in any given year,
there would be an upper limit on what the Federal Government
would pay. If that does not match the needs of Medicare
beneficiaries, too bad. This means that States might be forced
to help cut--forced to cut help to seniors in nursing homes,
cuts to the disabled, support for pregnant women or to parents
without insurance. This is not how to help the uninsured.
This is not how to revive a flagging economy. This
administration does not seem concerned with either of these
goals. All that seems to matter is that this is a means whereby
to cut back on Medicaid, the program, so that more and more tax
cuts will be available.
Mr. Chairman, I don't support the President's proposal, and
I hope that this committee will not endorse it. In this
hearing, and in those in the future, I truly hope that we can
look at other solutions to the Medicaid funding challenges and
carefully consider the consequences of this administration's
proposal. I yield back.
Mr. Bilirakis. The Chair thanks the gentlelady. Mr. Stupak
for an opening statement, 3 minutes.
Mr. Stupak. Thank you, Mr. Chairman. It is long past time
for this Medicaid hearing to take place. The Medicaid crisis
has reached a fever pitch in this country, and our States and
our low income families are hurting. All 50 of our States are
struggling to provide health coverage for low income families
at a time when enrollment is increasing due to a sluggish
economy and escalating health care costs. A recent Kaiser
Family Foundation report pointed out that over the past 3
years, 50 States have been forced to make cuts in Medicaid to
control drug costs. 50 States have reduced or frozen provider
payments; 34 have reduced or restricted eligibility; 35 have
reduced benefits; and 32 have increased copayments.
In Michigan where I am from, Governor Granholm has
inherited a financial mess, and she has been doing everything
she can to keep Medicaid program afloat, but it is a monumental
task. Even after cuts to hospitals over the past 2 years, the
State will cut another $110 million from hospital Medicaid
payments in this fiscal year. The Federal Government must step
in and provide more funding. It is as simple as that.
The administration block grant proposals are a cynical
attempt to cap or reduce funding and will leave our States at
the mercy of soaring health care and pharmaceutical drug costs.
The Medicaid debate today is a matter of priorities. As this
Republican-led Congress spends trillions of dollars to provide
tax breaks to wealthy Americans and billions to pay to rebuild
Iraq and provide Iraqis with universal health service, while
leaving our most vulnerable citizens without health care. Let's
redirect these priorities and take care of the ones who need it
the most. Let's shore up the Medicaid program today, not
tomorrow.
Mr. Chairman, I look forward to hearing testimony of our
very distinguished panel, and I yield back the balance of my
time.
Mr. Bilirakis. Mr. Pallone, for an opening statement.
Mr. Pallone. Thank you, Mr. Chairman. I want to use this
morning's hearing to stress the importance of preserving
Medicaid, and the way to do it is to reject the
administration's proposal to block grant this program that is,
in fact, the largest source of insurance in the United States
today. In this hearing today, we will hear that by block
granting Medicaid States will have flexibility necessary for
expanding access to health care. But let's be clear.
In reality, this is a proposal that simply blackmails the
States. The block grant proposal caps the Federal share of
Medicaid dollars so the States cannot receive adequate funding
as their Medicaid needs rise. By shifting fiscal responsibility
to States, the Medicaid block grant encourages States to limit
their liability by capping enrollment, cutting benefits, and
increasing cost sharing for millions of low income people. In
addition, any short-term relief that States receive up front
under the block grant will have to be paid back at the end of
the 10-year budget window. And if that's not a bribe, then I
don't know what is.
By undermining access to care for the poor, the sick and
the disabled, the President's proposal weakens the health care
safety net and adds to the widening credibility gap that is
putting him and Republicans that support his proposal further
out of touch with the American people.
And Mr. Chairman, it seems that given the current
atmosphere of erosion of employer-sponsored coverage and the
dwindling economy, we need to strengthen and not undermine the
Medicaid program. Supporting an increase in the Federal
Medicaid contribution, the FMAP will shore up State Medicaid
programs with an immediate increase in funding to offset
reduced State revenues that are placing severe strains on State
budgets nationwide, including my home State of New Jersey.
Now, if States are always amenable to flexibility and the
FMAP is the type of Medicaid relief that States desire, not a
budget neutral block grant. Mr. Chairman I just want to
reiterate that I think the Medicaid, well, obviously the
Medicaid program is an entitlement to the poor, the sick, and
the disabled, and States cannot and should not be allowed to
pick up and choose who they will and will not cover, which is
exactly the type of flexibility that will be provided with this
block grant.
Choosing to cutoff benefits to an optional population
sounds easy and sounds justifiable. However, we must keep in
mind when examining Medicaid, that optional looks like five out
of six elderly nursing home residents, or a family at 60
percent of the Federal poverty level, and this is not
population whose health benefits can be considered optional.
Now, you know last week the Census Bureau came out with a
report that the number of uninsured rose dramatically and that
we are now looking at a figure of 43.6 million uninsured
Americans, and I am referencing this report, because were it
not for the Medicaid program, an additional 4 million Americans
would be added to the already overwhelming number of uninsured.
And these 4 million people are comprised of working families
with children who have unfortunately lost their jobs due to our
economy, and as a result, have lost their employer-sponsored
health coverage.
So again, we are in a crisis with regard to health care and
access to health care. And for us to do anything but shore up
the Medicaid program is a mistake. And the block grant is
certainly not the way to go. Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentleman.
I am hopeful that we will be able to get to Mr. Scully
before too very much longer. But certainly I don't want to
cutoff opening statements. I would appreciate it if we can keep
them as brief as we can. Mr. Strickland.
Mr. Strickland. Mr. Chairman, I want to reserve my time.
But before I do that, I want to thank Mr. Scully for some help
he gave me recently with Todd Children's Hospital in
Youngstown, Ohio. Thank you.
Mr. Bilirakis. The Chair thanks the gentleman. Mr. John.
Mr. John. Pass.
Mr. Bilirakis. Pass. Ms. DeGette.
Ms. DeGette. I will reserve my time also.
[Additional statement submitted for the record follows:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Thank you, Chairman Bilirakis, for holding this important hearing
today. I also want to thank C-M-S Administrator Scully, Maryland
Delegate Adelaide Eckardt, and Ms. Diane Rowland for taking the time to
testify before the Health Subcommittee about the challenges facing the
Medicaid program, and ways to respond to these challenges.
The Medicaid program serves a vital role for providing health care
services for our nation's most vulnerable populations--including low-
income children, seniors and people with disabilities. At the same
time, Medicaid also faces serious challenges, due in part to certain
structural flaws in the program. I believe that we owe it to the
beneficiaries who depend on this program, as well as the taxpayers who
pay for it, to examine these challenges and evaluate how we can improve
this vital program.
One of the biggest challenges currently facing the Medicaid program
is how federal rules often limit states' ability to provide the best
care to the most needy beneficiaries. Under these rules, each state is
required to offer the entire package of Medicaid benefit to all
eligible beneficiaries. These rules create a one size fits all
entitlement that does not make policy or fiscal sense.
The rules prohibit states from reaping any fiscal savings from
tailoring the benefit package to meet the specific needs of certain
eligibility categories, like private sector plans have been able to do.
In contrast, Medicaid offers a broad benefits package that many
beneficiaries typically will not fully need, and sometimes ignores the
benefits of offering particular benefits to cover specific patient
populations. States need more flexibility to tailor benefit packages to
best suit the needs of their covered populations.
The State Children's Health Insurance Program (SCHIP) is an
excellent example of how states can achieve great results when they
have a greater degree of control in how they design their benefit
package and provide coverage for eligible children. SCHIP provides
grants to states to expand health insurance coverage for low-income
uninsured children. States have broader flexibility to design and
implement SCHIP programs--as opposed to Medicaid--resulting in more
diversity across states. This program is viewed as highly successful
and has helped millions of children gain access to needed health
insurance. We should look at SCHIP as one example for how we could
begin to improve Medicaid.
The contrast between SCHIP and traditional Medicaid also highlights
another critical challenge facing the Medicaid program. SCHIP funding
is based upon state specific capped allotments, rather than the open-
ended entitlement structure used by Medicaid. This open-ended nature of
Medicaid funding has helped contribute to the explosive growth in
Medicaid spending in recent years. During times of budget surplus,
states have had significant incentives to expand their programs, using
generous federal match rates to provide new benefits and cover new
populations. In times of budget shortfalls, states are forced to either
trim back these new benefits, or come looking for additional Federal
funding.
If Medicaid continues on its projected course, with growth rates in
the double digits, states will simply not be able to bear the cost of
the Medicaid program. They will have to further cut services, limit
eligibility, or look to other budget priorities for savings. This is a
serious challenge that both the States and the Federal government must
take steps to address.
Let me also be clear: we are not planning to do any additional
``temporary'' increase in the Federal Medicaid matching rate to get
states through any further short-term budget crises. We did that
earlier this year and pledged that the assistance would only be truly
temporary. I intend to hold the supporters of this policy to their word
and ensure that the assistance remains only temporary.
An additional challenge facing the Medicaid program is the lack of
a coordinated Medicare benefit. Currently Medicare does not provide a
prescription drug benefit for its beneficiaries. Approximately 6
million Medicare beneficiaries, who are also eligible for Medicaid,
must depend on the state programs to provide them with their
prescription drugs. These dually eligible individuals often suffer from
chronic illnesses, and thus are big consumers of prescription drugs
within the existing Medicaid benefit. It is absolutely crucial that any
legislation enacted this year to create a new drug benefit be created
within the existing Medicare program, for all Medicare-eligible
beneficiaries. This action would help states focus their limited
Medicaid resources on their neediest populations and would also allow
for improved coordination of care for beneficiaries.
There are serious challenges facing Medicaid today, and the program
is clearly at a crossroads. If we are not willing to make some major
changes in the current program, the long-term prospects will not be
bright. States need more flexibility to respond to the unique needs of
their Medicaid populations. We hope that some of the suggestions our
witnesses offer today will help the Committee as we plan to move
forward with Medicaid reform. We need to look for innovative solutions
to the problems facing Medicaid. I believe that Medicaid beneficiaries
and America's taxpayers deserve nothing less.
Mr. Bilirakis. The Chair appreciates your cooperation. We
will just move right on to the first panel which consists of
the Honorable Tom Scully, the administrator of CMS Centers for
Medicare and Medicaid service. Tom, you have 10 minutes. Use
that as you will, sir.
STATEMENT OF HON. THOMAS A. SCULLY, ADMINISTRATOR, CENTERS FOR
MEDICARE AND MEDICAID SERVICE, ACCOMPANIED BY DENNIS SMITH
Mr. Scully. Thank you Mr. Chairman. I will go as fast as I
can. And Mr. Brown, thank you for having me today. Thank you
for having us here this morning and thank you for No. 1, being
flexible. I had to go to a meeting at the White House this
morning. Obviously came in a few minutes late and I apologize
for that, and thank you also for allowing me to bring Dennis
Smith, who runs the Medicaid program. We work a lot together,
but he's far more knowledgeable than I am so I appreciate the
committee's willingness to have Dennis come with me today, and
obviously I will let him answer all the tough questions and I
will take the easy ones.
Let me just start off by saying that I think Medicare, as a
number of you pointed out, including Congresswoman Wilson, has
been the focus of a lot of congressional attention this year. I
spent a lot of time on it, including my meeting this morning.
But Medicaid is obviously a bigger program, much more
complicated, arguably much more in need of reform. And I would
be anxious and hope Congress would be interested in engaging on
any basis whether it is the administration's bill or any other
on looking at the underlying Medicaid program. Medicaiid is
much more complicated than Medicare. It is really 57 small
programs between the different States and the territories.
Every one of them is different.
Every arrangement is different. Every State program is
different. It is a very, very complicated program. It is a
wonderful program, as many of you have said. Medicaid covers 48
to 50 million people. And it does a lot of wonderful things.
But it is a very complicated program that has gotten too little
attention, in my opinion, from the Federal Government,
including my agency. I have 4,800 full-time employees in my
agency, and probably another 5,500 contract employees. We have
about 500 people that work on Medicaid. Another 500 do survey
and certification, but about 500 people actually work on
Medicaid. We have 62 financial managers around the country that
work on Medicaid.
So in many ways, given the amount of attention that has
been given to this, by HCFA/CMS and by many people over the
years, it is not too surprising we have ended up with a
complicated, tangled amalgam of State programs.
So I would welcome a lot more attention to Medicaid, and I
think that Medicaid, by virtue of the fact that it is actually
run by the States and we are a relatively passive paying
partner, has gotten far less focus than it probably deserves on
the Federal policy level.
Let me just start quickly by going through the structure,
which I am sure most of you understand. Many people think that
Medicaid is a women and children's program. In fact, 73 percent
of the enrollees in Medicaid are women and children. But there
is a chart attached to my testimony which shows that only about
27 percent of the funding goes to women and children. A large
percentage of the funding goes to the blind and disabled, which
is obviously an important population to serve and obviously not
something that probably can or will be changed very much.
But that's about 18 percent of the Medicaid population.
Yet, it is about 45 percent of the funding. One of the things
that has put a lot of pressure on the States in recent years
that a lot of people also don't understand and which I think
Mr. Brown alluded to, is that almost 70 percent of people in
nursing homes are on Medicaid. That puts an enormous amount of
pressure on the States. This represents only about 9.5 percent
of the beneficiaries, but 27 percent of the funding.
There are a number of studies out there that have shown
that as many as 50 percent of the people that are going into
nursing homes on Medicaid are not truly poor, that they
transfer their assets to some of their family members.
Eventually most of them do become poor and in fact do need
Medicaid. But in many cases in many States you could make an
argument that higher income people in some of these cases
should use their own assets for at least the first few months
if not years before they go on Medicaid. Yet there are very
elaborate arrangements in many States to avoid that.
That puts an enormous amount of pressure on States, and if
we are truly trying to help blind, disabled, truly poor women
and children, and the truly poor that need nursing homes, I
think, this is a source that a lot of people should focus more
attention on to make sure that the people that are on Medicaid
going to nursing homes are truly poor. There has been very
little attention given to asset transfer issues.
One thing the administration is working on with HUD, is a
small existing program in HUD for reverse mortgages. We have
spent a lot of time working with the National Council on Aging,
the AARP, and others, to find a way to enhance that program.
Eighty percent of seniors have a paid-off home with an average
asset value of $107,000. Yet very few of them think that it as
an asset to be used to buy long-term care insurance; to pay for
home health care.
Most seniors don't want to be in a nursing home. Most of
them want to stay at home and they go to a nursing home as a
last resort. Yet they have very little financial ability to
find a way to finance that. We think we need to find clever
ways, and we think we have some interesting ways to actually
use their existing assets in their home to allow people to stay
at home longer, then go to assisted living instead of nursing
homes. And if they are not truly poor, we need to find ways
without putting pressure on them to use their home as an asset,
which is the No. 1 asset most seniors have.
Seniors have $1.5 trillion tied up in assets in paid off
mortgages. One hundred percent paid off mortgages on their
homes. Yet they rarely think of that as an asset they can use
to help pay for their long term care. And I think it is
something that the States and CMS should both look at and spend
more time focusing on.
Secretary Thompson, Dennis Smith and I are spending a lot
of time on that right now.
Let me just switch to talk about the focus of this hearing
is. I have said repeatedly, but frequently misquoted, that if I
were a Medicaid director in a State, I might very much do what
they have been doing. I don't blame them. If the Federal
Government sets up dumb rules in Medicaid and States use them
to maximize the reimbursement, yes you can't necessarily blame
them, but we need to police it better and do a better job of
making sure that we treat everybody exactly the same. A number
of you mentioned that Medicaid next year is going to be a $304
billion program, which will make it the largest Federal health
care program.
But, out of the $304 billion, probably about $25 billion of
that is attributable to intergovernmental transfers or taxes.
We estimate that $304 billion is spent, but we really don't
know how much of this might be attributable to inappropriate
financing schemes. Our best guess is that about $25 billion of
that is phantom matches that aren't actually put up by the
States. So there's $25 billion of mythical care that really
isn't given. That is a huge problem.
We really believe we need to turn this back into the State-
Federal partnership the program was intended to be. In the last
20 years, I have spent a lot of time with many of you,
including Mr. Waxman, trying to find ways to make sure this
program actually works as a Federal-State partnership. I think
that is critical. I think we should be able to look every
Governor in the eye whether he is a Democrat or Republican and
say they are getting exactly the same deal.
I attached a chart to my testimony this morning, and I
think you will see that if you look at the statutory match
rates which are based on poverty, Mississippi, being the
poorest State in the country, has the highest statutory match
rate. In at least 25 States, there is no real connection
between what their match rate is and what the Federal
Government is paying. Again, I don't necessarily blame a State
budget director or a Medicaid director for doing that. But over
the years, we have allowed it to happen and we have actually
had very inequitable distribution among the States about what
their actual match rates are. We have made a big effort to try
to fix that.
Medicaid is the fastest growing program in the government.
When I went into the first Bush Administration in 1989,
Medicaid was a $60 billion a year program. This year it is $304
billion. It has grown 37\1/2\ percent, since I have been at
CMS. That is pretty rapid growth. We have no problem with rapid
growth, and I will get to that in a minute. We don't have any
desire to spend less on Medicaid. But we want to spend more
wisely.
We need to deal with long-term care costs. We need to deal
with spend-downs for Medicaid. We need to deal with the
problems we have State-by-State on extremely high spending on
prescription drugs when it is not necessarily appropriate. We
are very focused on trying to fix the program and make it work
better. And a lot of that comes back to addressing financing
problems. So let me just switch back to that for a moment.
If you look at the three big branches of financing
gamesmanship that have gone on in the last 15 years, from 1988
to 1993, most of the States were trying to maximize
disproportionate share hospital payments. We did limit that in
the earlier 1990's, and it has worked fairly relatively
effectively. The next transition beyond that, and this is
illustrated in attached examples in the testimony was
intergovernmental transfers. They exploded in the mid 1990's,
and we have, to some degree, put a limit on them.
To me, the most disturbing development, which happened in
the last 4 or 5 years, is upper payment limits. And the reason
it disturbs me more than anything else is that in the earlier
two sets of games, theoretically we were spending more money on
health care. With upper payments limits, States, in effect,
have been able to cash out the State match, and get more
Federal dollars without putting up any more money. And the most
disturbing trend is the case where Medicaid is actually
spending less money on health care because it is not with the
Federal Government. The States are actually drawing down more
Federal money and still putting up State money, and they are
actually cashing out State money and displacing the Federal
money, and we end up spending less on health care, which is
clearly not the goal.
So I would argue we have done a lot in the last couple of
years to slow down the States. I wouldn't expect them to be
happy, but I do think that I can honestly tell any Governor
from either party that in the last 3 years, to the extent we
possibly could under the law, we have been able to look them in
the eye and say they are getting exactly the same deal, and
that we treat them exactly the same way. I will give one
example. Regarding Missouri, which you can see in your charts.
Two years ago we had a very large problem building in the
Medicaid program. The normal course would have been to litigate
it for 15 years.
Instead, we spent about a year and a half with a Democratic
Governor, and their State's Secretary of Health working out a
much more transparent financing schedule for Missouri. We
settled most of the differences. All of them actually. We have
what I think is a very clear model as a partnership where
Missouri submits to us everything they are doing on Medicaid at
the beginning of the year. We understand what they are doing.
We understand their taxes. We understand their financing. We
spend a lot more time working with them. As a result, they
happen to have a very good Medicaid program.
We spent a lot more time working with them and trying to
make Medicaid a better program, and a lot less time trying to
figure out who can maximize their match rates, which is what
happens in too many States, unfortunately.
So our goal here is to get back to the point where we spend
a lot of time working on Medicaid, making Medicaid a better
program and less time trying to figure out who can find the
most clever accountants to maximize the reimbursement. I think
that is a goal that probably all of us share. Let me just
finally wrap up on the administration's proposal.
The administration's proposal, just to be very clear, is
not a block grant. Our interest is not to save money. Our
interest is to give the States a lot more flexibility.
Secretary Thompson was a Governor. Obviously, he was not a big
advocate of the current Medicaid structure in Wisconsin when he
was a Governor. He, Dennis Smith and I spent a lot of time on
this. What we were trying to do is give the States more
flexibility without saving any money. It is not a block grant.
It is limited only to optional beneficiaries. The Federal
Government would still be required to cover all mandatory
beneficiaries. The focus is to give States more budget
certainty and to give us more budget certainty, while giving
the States a lot more flexibility.
I was involved in negotiating the first TennCare waiver in
1990 in the first Bush Administration. I was involved in doing
it again in the past year. I was involved with Senator, then
Congressman Wyden on this committee, when the first Oregon
waivers went through.
We did a large waiver with Illinois last year. No State has
to seek waivers. Even under the President's proposal, no State
has to change a thing. What we are trying to do is give the
Governors the maximum flexibility to come in and get a straight
deal from us as far as how they can deal with their optional
populations with far more flexibility, far more money in the
baseline. They would get more money for flexibility and less
hassle and a much more straightforward relationship with the
Federal Government. And the bottom line is that nobody was
required to do it. Any State that didn't want to didn't have to
participate.
So I certainly understand people's concern. I think you
know we are really interested in making the Medicaid program
work better and we are not proposing a block grant. We are
proposing giving the States greater flexibility and we would be
very, very interested in seeing and working with the committee
and with the Senate Finance Committee on trying to find ways to
make the Medicaid program work better in the long term as a
more efficient partnership that is going to continue to serve
many, many millions of people. Thank you, Mr. Chairman.
[The prepared statement of Hon. Thomas Scully follows:]
Prepared Statement of Hon. Thomas Scully, Administrator, Centers for
Medicare and Medicaid Services
Chairman Bilirakis, Ranking Member Brown, distinguished Committee
members, thank you for inviting me to discuss the challenges facing the
Medicaid program in the 21st Century, and for allowing Dennis Smith,
the Federal Medicaid director, to appear with me today. The Medicaid
program faces many challenges. With more than 40 million Americans
lacking health insurance, CMS has been pursuing a wide range of
initiatives to expand insurance coverage, including working
aggressively to improve the Medicaid waiver process. Through waivers
and State plan amendments (SPAs), Medicaid eligibility expanded by more
than 2.27 million people between January 2001 and September 2003. In
addition, we are focused on outreach so that potentially eligible
individuals know about the Medicaid program, and as in the Medicare
program, we are working to ensure that Medicaid beneficiaries receive
quality care. While all of these areas present challenges to the
Medicaid program, today I am here to focus on Medicaid finances,
perhaps the most immediately pressing challenge to the program.
Medicaid spending continues to rise each year--and this is no small
concern. When I first went to work at OMB in 1989 during the first Bush
Administration, total Federal and State Medicaid spending was $61.2
billion. By the time I departed in 1993, total Medicaid spending had
grown to approximately $132 billion. Today, total Medicaid spending for
2004 is projected to be $304 billion--that's nearly a tripling in
spending over 10 years and five-fold increase since 1989. Moreover,
Medicaid--not Medicare--is now the largest government health program in
the United States. In FY 2002, total Federal-State Medicaid outlays
($259 billion) exceeded Medicare outlays ($257 billion) for the first
time. This trend is continuing, with Medicaid outlays exceeding
Medicare by about $4 billion in FY 2003 ($281 billion versus $277
billion), and estimated to exceed it by approximately $26 billion in FY
2004 ($304 billion versus $289 billion). In addition, in May, Congress
approved a temporary infusion of additional Federal funds as part of
the Jobs and Growth Tax Relief Reconciliation Act of 2003. Under the
new law, States will get a temporary increase in the percentage rate
for Federal Medicaid matching funds (FMAP) for five calendar quarters,
beginning April 1, 2003, and ending June 30, 2004. Thus, total Federal
spending for Medicaid over the next ten years is estimated at $2.6
trillion. Combined Federal and State spending on Medicaid in this
period is estimated at $4.5 trillion.
While some of this growth is due to expanded coverage and
eligibility--positive growth for the program because so many more
uninsured Americans are getting health care services--much of the
increase in Medicaid spending over the past 10 years can be attributed
to the ever-increasing costs of providing long-term care. The Medicaid
program primarily serves three groups of beneficiaries. Women and
children comprise about 73 percent of enrollees but utilize just 27
percent of the Medicaid funding. The elderly and people with
disabilities are the other two major groups that comprise just 27
percent of the Medicaid population, though the cost of their care
consumes about 70 percent of Medicaid spending. In fact, almost 70
percent of nursing home beds are now Medicaid-financed, and State and
Federal governments pay roughly 60 percent of all long-term care costs
nationally.
Since Medicaid expenditures are a large and growing proportion of
most State budgets, the Medicaid program is an area to which States
turn to reduce costs. To reduce costs, States are feeling pressure to
drop optional Medicaid benefits or to reduce optional populations.
States also find other creative revenue enhancing mechanisms, including
utilizing a variety of legal and regulatory loopholes to enhance the
Federal funds they receive to provide health care for their citizens.
Intergovernmental transfers (IGTs) are a prime example of such
loopholes. While it is completely legal for States to share costs with
counties and other local government bodies to recoup Medicaid
expenditures, IGTs are only supposed to provide the statutorily
determined match rate for a State. However, States often find ways to
use IGTs to avoid paying the statutory match rate and effectively shift
a larger portion of Medicaid costs to the Federal government. The
Federal government should only match real expenditures for the Medicaid
population at the real matching rates, but in recent years, IGTs have
been used to draw billions in Federal funds with no true State or local
spending.
As Federal and State Medicaid spending continues to grow rapidly,
it is increasingly important for CMS to ensure that taxpayer dollars
are serving their intended statutory purpose of improving health care
quality and access for Medicaid beneficiaries. There are many
opportunities for improving the fiscal integrity and management of the
Medicaid program. I would like to discuss some of the problems we have
seen, and some strategies that might refocus the program away from
financing gamesmanship and back to delivering health care to America's
vulnerable populations.
background
Medicaid is a partnership between the Federal government and the
States. While the Federal government provides financial support to the
States and is responsible for overseeing the Medicaid program, each
State essentially designs and runs its own program. States have great
flexibility in administering their programs, and the Federal government
pays States a portion of their costs by matching certain spending
levels, with statutory matching rates currently ranging between 50 and
77 percent. This creates a natural tension in which States strive to
maximize Federal matching dollars. The Federal government has a
responsibility to ensure that funds are matched appropriately. However,
through various financing and funding mechanisms, including the use of
donations and taxes, the Disproportionate Share Hospital (DSH) program,
and Upper Payment Limits (UPL), many States manage to inappropriately
draw down more Federal Medicaid dollars with fewer State dollars,
resulting in an effective FMAP that is higher than the statutorily
determined matching rates, creating inequities among States. CMS has
begun to close these loopholes and ensure that States receive
appropriate matching rates, but it is a long, complicated and
politically unpleasant battle.
To prevent inappropriate funding mechanisms now, and in the future,
it is important that we understand the various types of loopholes that
States have exploited in the past and continue to exploit today. We
must remain vigilant in closing and avoiding all of these loopholes.
President Bush, Secretary Thompson, and I take this very seriously. We
want to continue to work with you to correct current inappropriate
State funding mechanisms to ensure the fiscal integrity of the Medicaid
program and to ensure that Federal dollars are used to pay for Medicaid
covered services for Medicaid-eligible individuals.
inappropriate funding mechanisms
As I mentioned, over the last two decades States have developed
innovative ways of enhancing Federal matching dollars. In 1985 the
Centers for Medicare & Medicaid Services (CMS), formerly the Health
Care Financing Administration (HCFA), changed the regulations governing
the way the Federal government provides matching funds to States when
they received private donations to help cover administrative costs.
This rule change was merely intended to reduce record keeping and
provide States more flexibility for accepting philanthropic donations.
Additionally, regulations at the time allowed States to impose
special taxes on specific provider groups. These regulations led States
to impose taxes and receive donations from providers that led to new
ways to finance States' share of Medicaid expenditures. In 1986,
Congress was concerned that States were not reimbursing
Disproportionate Share Hospitals (DSH) for their uncompensated care
costs. Legislation was passed that eliminated any limit on DSH
payments. The combination of new revenue sources from donations and
taxes and the ability to pay unlimited reimbursement to
Disproportionate Share Hospitals (DSH) led to a significant increase in
the Medicaid expenditures claimed by States. Once these exploding
loopholes began to be limited, States pursued the Upper Payment Limit
(UPL) loophole more aggressively. These scenarios, which I will
describe in greater detail, provided opportunities for States to
creatively draw additional Federal matching funds.
Provider Donations and Provider-Specific Taxes
An early maximization strategy States employed to enhance Federal
Medicaid matching funds without using additional State resources was
the use of provider donations and taxes. Typically, a State would
either arrange for providers to ``donate'' funds to the Medicaid
program, or it would establish special ``taxes'' on certain provider
groups. Once these funds were collected from the affected providers,
they were then repaid to those providers through increased Federal
Medicaid payments, largely in the form of DSH payments. Since States
had a great deal of flexibility in how they made DSH payments, they
were able to raise DSH rates to compensate providers for the costs
associated with the donations or taxes. As the DSH payments were
raised, the effective level of Federal matching funds increased
correspondingly. In the end, the providers were repaid their donations
or taxes, and the State was left with the Federal matching funds to
either return to the provider or to keep for whatever use it decided.
The only party that incurred any new cost was the Federal government.
It was a no risk, no cost, free money mechanism for dozens of States.
I spent a considerable amount of time on this issue while I was at
the Office of Management and Budget in the first Bush Administration. I
can tell you that the widespread use of these financing mechanisms
contributed to extraordinary increases in Federal Medicaid expenditures
in the late 1980s and early 1990s. For example, in 1989 we found that
three States were drawing a combined total of $23 million from Federal
funds through provider taxes and donations. This number increased to
eight States drawing an additional $300 million in 1990, and by 1991
more than half of the States were drawing an incredible $12 billion.
In 1991, Congress passed the ``Medicaid Voluntary Contribution and
Provider-Specific Tax Amendments of 1991,'' the first piece of stand-
alone Medicaid legislation in the program's history. This law set out
strict conditions that States must meet in order to use taxes levied on
health care providers as part of their State dollars eligible for
Federal Medicaid matching funds. The law said the taxes must be:
Broad based, or applied to all members of a definable group. For
example, they must apply to all hospitals, not just psychiatric
hospitals;
Uniform, with all providers within the group being taxed at the same
rate; and
Not part of a ``hold harmless'' agreement where the funds are
returned to the providers either directly or indirectly.
The law also eliminated Federal Medicaid matching payments for
provider donations, except in very limited circumstances. After
significant consultation with the States, CMS published a final
regulation implementing this law in 1993. The rule laid out a process
for States to request waivers of certain provisions for tax programs
that are not broad based or uniform. The ``hold harmless'' provision,
however, cannot be waived. In an effort to improve State compliance
with the law, in 1995 CMS issued detailed regulatory guidelines
explaining the Donations and Tax rules.
In 1997, CMS notified States that if legislation explicitly ending
the use of impermissible taxes and resolving outstanding State
liabilities was not passed, CMS would have no choice but to ask the
Department of Justice to pursue enforcement measures to resolve States'
liabilities. Also in 1997, the Balanced Budget Act (BBA) banned States
from using Federal Medicaid matching funds for purchases unrelated to
health care, such as building roads and bridges. In 1998, CMS proposed
legislation to allow the Secretary to work out compromises with States
regarding large unallowable funds States received, rather than having
to refer these cases to the Justice Department. Although this proposal
never became law, due to the other restrictions I discussed, it appears
that today States generally have stopped attempting to exploit this
particular loophole.
Disproportionate Share Hospitals
Another financing mechanism commonly used by States has its roots
in the early 1980's. In 1981, Congress recognized that some hospitals
were treating a large number of uninsured patients thereby increasing
their uncompensated care costs (UCC). As a result, these hospitals were
taking in far less revenue per patient and experiencing difficulty
remaining open. With the passage of the Omnibus Budget Reconciliation
Act (OBRA) of 1981, Congress allowed States to pay more to hospitals
treating a disproportionate share of uncompensated care cases as a way
to encourage these hospitals to continue treating needy patients.
Although this program concept clearly represented a good idea, the
States were slow to embrace it.
A major change to the DSH law took effect in OBRA 1986, which
prohibited the Federal government from putting any limit on payments
made to hospitals that serve a disproportionate number of low-income
patients with special needs. Then, in OBRA 1987, Congress created DSH
payment rules and qualifications in law, specifically defining
Disproportionate Share Hospitals and requiring States to pay additional
funds to certain qualifying hospitals. OBRA 1993 further restricted
State use of DSH revenues by limiting the amount that States could pay
to specific hospitals to 100 percent of their uncompensated care costs,
further limiting abusive DSH practices.
As OBRA 1993 took effect, States began looking for new ways to
maximize Federal funds. One way States financed their share of Medicaid
expenses was through IGTs. States have always been allowed to shift
funds among the different levels of government to reduce administrative
burdens. For instance, a County can transfer funds to the State, and
States can use this money as their share of Medicaid expenditures.
However, States provided DSH payments to public facilities that
exceeded their Medicaid costs, receiving more Federal matching funds in
the process, and these facilities could then refund some of the money
to the State through IGTs (see attached chart 1). To end this practice,
the Balanced Budget Act of 1997 mandated State-specific caps on the
total level of Federal matching payments to State DSH hospitals.
Upper Payment Limits
As Congress mandated limits on DSH payments and restricted States'
ability to use donations and taxes, States began exploring other
creative ways to enhance their Federal Medicaid funding, such as
maximizing their ``Upper Payment Limit'' calculations. In 1987 Congress
had established Upper Payment Limits for State owned or operated
inpatient facilities, in an effort to remove the inherent incentive for
States to overpay themselves. However, under the revised rules, States
still were allowed to exceed these UPLs for certain publicly owned
providers. By calculating the maximum amount that Medicare would have
paid to each Medicaid facility--the Upper Payment Limit--States were
able to obtain extra Federal matching funds. Under this scenario,
States could calculate the upper limit for both public and private
hospitals and nursing homes in the aggregate, rather than separating
public from private. This gave them the flexibility to pay public
hospitals and nursing homes more than private facilities. As a result,
public hospitals could then return money to the State. The State, in
turn, could use these funds to obtain more Federal matching dollars.
The State could then return a portion of its share of the money to the
public facilities, and keep the Federal share for its own use (see
attached charts 2 and 3).
The Agency saw the first indications that States were using Upper
Payment Limits in publicly owned providers to raise revenues in the
early 1990s, although the dollar amounts and the number of States were
limited. At that time, aggressive consultants began advising States to
use Upper Payment Limits as a way to increase Federal Medicaid revenues
flowing to the States. In 1999, at CMS' request, the Health and Human
Services Office of the Inspector General performed audits in six States
that confirmed the abusive nature of these payment arrangements. To
close this loophole, CMS published three regulations establishing
Federal upper payment limits (UPL) that limited the ability of States
to increase their share of the Federal payments under Medicaid without
actually spending State funds. Generally, the new UPL rules prevent
States from paying each type of hospital and nursing home in Medicaid
more than 100 percent of what Medicare would pay for similar services.
The final regulation, which took effect May 15, 2002, included
provisions for a gradual phase out of excess Federal funds drawn down
by States using these funding schemes. There are three phase-down
periods: two, five and eight years, and States are assigned to each
depending upon the length of time they had operated the funding
schemes. The longer a State relied on the excess funds, the longer they
have to phase out the use of those funds.
In early 2002, CMS notified 24 States determined by CMS to be
qualified for a transition period under the upper payment limit (UPL)
regulations. CMS provided the States with its preliminary determination
regarding the length of each State's transition period and requested
that each State submit the necessary UPL calculations to support its
preliminary findings. CMS is presently evaluating the UPL calculations
provided by each of the 24 States and the associated Medicaid spending,
both of which are necessary to make final UPL calculations. The first
transition period of the two-year phase out ended on September 30,
2002.
cms oversight activities
CMS has a strong interest in strengthening financial oversight and
ensuring payment accuracy and fiscal integrity. Federal matching funds
must be a match for real State expenditures, not a match of phantom
dollars. At the Federal level, our primary role is to exercise proper
oversight and review of State financial practices and to provide
guidance and support for States' efforts to ensure program and fiscal
integrity. While we have made substantial progress in helping States
identify and reduce improper payments, we are now turning our attention
to strengthening Medicaid Federal financial management activities.
We have taken some initial steps to improve our financial
management processes, but we know that more work can and must be done.
As part of the President's FY 2003 Budget, we have dedicated $10
million from the Health Care Fraud and Abuse Control (HCFAC) account to
develop a comprehensive Medicaid program integrity plan. The FY 2004
Budget proposes to allocate $20 million from HCFAC for this initiative.
We are increasing attention to, and emphasizing the importance of
Medicaid financial management at all levels of our Agency and across
all of our regions. This effort involves improving Federal oversight
capabilities of State Medicaid financial practices, and focusing
attention on program areas of greatest risk, so that our resources are
targeted appropriately. The following are examples of improvements and
progress we have made as part of our Medicaid financial management and
program integrity redesign.
Creating National Reimbursement Teams
In an effort to improve national consistency in the issuance and
application of Medicaid reimbursement policy, we have put together a
team of Central and Regional Office staff, the National Institutional
Reimbursement Team (NIRT), who are responsible for reviewing all
institutional reimbursement State plan amendments, providing technical
assistance to the States, and developing Medicaid institutional
reimbursement regulations and policy. For example, the team is
currently using a standard set of questions that must be answered by
States before a State plan amendment will be approved and will help
ensure that the payment methodology is clear. Questions include issues
such as, ``Do providers retain all of the Medicaid payments including
the Federal and State share (including normal per diem, DRG, DSH,
supplemental, and enhanced payments) or is any portion of the payments
returned to the State, local governmental entity, or any other
intermediary organization?'' As a result of this effort, we will better
know what we are paying for and how we are paying for it. The team's
work will help ensure consistency in the application and review of our
Medicaid policies. We also have established a Non-Institutional
Provider Team (NIPT), which functions similarly to the NIRT, but for
non-institutional providers, namely physicians. The NIRT and the NIPT
have been working together on UPL transitions for those States with
both inpatient and outpatient UPL phase-outs.
Upfront Reviews of State Funding Sources and Expenditures
We will be redirecting and adding resources this year with the goal
of changing the emphasis of the Financial Management (FM) review of
State Medicaid/SCHIP programs from an after-the-fact review to an
upfront and proactive review. Our new emphasis would be primarily to
review the non-Federal share amounts and related expenditures prior to
the beginning of the fiscal year so that any problems or issues can be
resolved before any claims are submitted. This process would provide an
approval of the State's operating plan for the upcoming year, with the
goal of eliminating the need for CMS to intervene and disallow Federal
Medicaid funding after it has already been spent by the State and to
identify any unallowable funding schemes or expenditures before they
actually happen. Now is the best time to start this effort--while
States are currently developing budget plans for next year. That way,
we can examine spending before States are locked into a budget, and
avoid disallowances that disrupt the State budget cycle.
Making Federal Matching Payments Only When State Plan Amendments Are
Approved
In the past, States have been allowed to draw down Federal matching
payments for State plan amendments that were submitted, but not yet
approved. This allowed States to assume a financial risk if their plan
amendment was subsequently disapproved. Since Federal matching payments
were readily available while their State plan amendments were being
considered, States had little incentive to ensure their plan amendments
were approved. In fact, some State plan amendments were pending for
years while the States continued to draw down Federal matching
payments. In January 2001, we issued a State Medicaid Director letter
informing the States that we would no longer make Federal matching
payments until State plan amendments were approved, thus removing the
previous incentive for States to keep plan amendments pending. For our
part, we have changed our policy so that we will either approve or
disapprove plan amendments within 90 days.
Partnership with State and Federal Oversight Agencies
Another key element of our new financial management strategy is to
strengthen our working relationships and our exchanges of information
with several State entities. Every State has one or more audit entities
responsible for ensuring that State expenditures, including those in
the Medicaid and State Children's Health Insurance Programs, are
properly made and documented. Furthermore, every Medicaid Agency has a
surveillance and utilization review staff to pinpoint and pursue
questionable provider claims and Agency payments. Finally, as you know,
virtually all States operate a Medicaid Fraud Control Unit, typically
housed in the Attorney General's office, to pursue instances of
suspected Medicaid fraud. By better cultivating our relationships with
State agencies that perform these types of functions, we believe we can
continue to enhance our oversight of the Medicaid program nationwide.
In addition, over the last several years, at the Federal level, we have
developed a close collaboration with the Department of Health and Human
Services' Office of the Inspector General. We intend to continue this
relationship.
future action
CMS has several efforts underway to improve Medicaid's financial
oversight and management. For example, both the General Accounting
Office and this Committee's Oversight and Investigation Subcommittee
have begun investigations into potential waste, fraud, and abuse in
Medicaid State plans. Additionally, the Medicare reform legislation
currently in conference, also addresses Medicaid with the inclusion of
a provision that would require a State, as a condition of receiving DSH
payments, to submit an annual report that:
Identifies each DSH hospital that received a payment adjustment under
this section for the preceding fiscal year and the amount of
the payment adjustment made to such hospital for the preceding
year;
Includes such other information as the Secretary determines necessary
to ensure the appropriateness of the payment adjustments made
under this section for the preceding fiscal year.
These are all temporary solutions, and Medicaid financing needs
fundamental structural reforms that will return the program to a
Federal and state partnership. The Administration has demonstrated its
commitment to increasing states' flexibility in administering their
Medicaid programs. The HIFA, Independence Plus and Pharmacy Plus waiver
initiatives have given states significantly more flexibility to expand
eligibility and to tailor their programs to meet the needs of their
beneficiaries.
However, reform of the financing structure of Medicaid is needed if
we are serious about reducing waste, fraud and abuse. Because state
governments are facing budget pressures, they will seek creative
Medicaid financing strategies. The financial incentives in the program
exacerbate this problem. Under the current Federal-state matching
mechanism, if a state cuts one dollar of its own spending, then the
state forfeits between one and two dollars in federal funds. Under
current law, states may eliminate coverage of optional populations and
drop optional benefits. They are doing so. In the past year, over two-
thirds of states have reduced services or eligibility and most states
are currently considering other benefit or eligibility cutbacks. This
puts the health coverage of thousands of Americans at risk because when
states can no longer afford to pay their share of the costs, they may
lose the Federal funding as well.
We want to give states another option so that they can manage their
health care budgets, while preventing further service and benefit cuts
and while actually expanding coverage for low income Americans. Our
proposal builds on the success of the State Children's Health Insurance
Program (SCHIP) and the Health Insurance Flexibility and Accountability
(HIFA) demonstrations in increasing coverage while providing
flexibility and reducing the administrative burden on states.
Under this proposal, states would have the option of electing to
continue the current Medicaid program or to choose an alternative
global financing option. States electing this alternative would have to
continue providing current mandatory services for mandatory
populations. For optional populations and optional services, the
increased flexibility of these allotments would allow each State to
innovatively tailor its provision of health benefit packages for its
low-income residents. For example, states could provide premium
assistance to help families buy employer-based insurance. States could
create innovative service delivery models for special needs populations
including persons with HIV/AIDS, the mentally ill, and persons with
chronic conditions without having to apply for a waiver. Another
important part of the new plan would permit States to encourage the use
of home and community-based care without needing a waiver, thereby
preventing or delaying institutional care. The Administration has been
engaged in discussions with the governors aimed at creating a proposal
that both accomplishes the desirable goal of reform and addresses some
of the major concerns in Medicaid.
An additional avenue for addressing Medicaid funding challenges is
to encourage consumers to buy long-term care insurance. For example,
the President has proposed to expand the four State programs on Long
Term Care Partnerships, as well as two important tax relief measures
for care givers and those who purchase long term care insurance.
conclusion
Through complex, creative financing schemes States have
artificially maximized Federal Medicaid matching funds. This practice
is simply unacceptable. The Medicaid program must be a Federal-State
partnership, not an exercise in financing gamesmanship. We must
continue to ensure that beneficiaries receive the high quality care
they deserve, and that we are appropriately matching State Medicaid
funds. The last two decades have demonstrated that States can be
extremely resourceful in creating innovative funding mechanisms that do
not comply with the intent of the Medicaid program, which requires
States to certify that they have the appropriate funding to pay their
matching Medicaid share. We all need to work harder to ensure States
are able to help pay for high quality health care for their residents
through appropriate means, but we need to be vigilant in order to
prevent further loopholes before they become set in law or regulation.
We appreciate your support in these efforts and the opportunity to
discuss this important topic with you today. We are happy to answer
your questions.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Bilirakis. Thank you very much Mr. Scully.
In your testimony, I guess particularly in your written
testimony, you focused more on how some States have used a
variety of schemes to obtain billions of additional Federal
Medicaid dollars. You know, if all that additional Medicaid
dollars, Federal Medicaid dollars were used for health purposes
for those people in the States, I don't know that that would
upset me too very much. But I guess what would really upset me
would be if some of those dollars were being used for purposes
other than health care. Can you maybe respond to that? How much
would you say, and I don't mean in terms of dollars, but
percentages or whatever the case may be, do you feel of those
dollars are used for purposes other than health care?
Mr. Scully. I would say that is very hard to say, Mr.
Chairman. I think a rough estimate. I think we have done a lot
better in the last 2 years about, you know, it used to be that
when the State applied with a State plan for more Medicaid
money we used to approve it and then generally, and I mentioned
this in my testimony, the tradition had been to approve it when
States had spent it and then we'd try to get it back later,
which obviously never works. We have, in the last couple of
years, got to the point of saying we are not going to give any
States the money until they explain where it is going and it is
spent on health care and not on building roads.
There are lot of examples in the early 1990's, I won't pick
on any States, where some States got billions of dollars for
the Medicaid program and didn't use it for health care. I think
we have minimized that to some degree. But the money is very
fungible. And in many cases, especially through upper payment
limits and intergovernmental transfers, the States, in fact,
take quite a bit of money off the top and don't use it for
health care, which is extremely troubling to us. I don't think
we have a problem matching real State expenditures and carrying
more people on health care. The concern we have is two-fold.
There is an awful lot of Federal dollars being drawn down when
States aren't putting up any money at all.
And second, giving everybody the same deal. I mean there is
nobody here from Alabama, so I will pick on them, although we
have been working cooperatively with them, the poorest State in
the country is Mississippi. They have, I think, a 77 percent
match rate.
Alabama next door has a statutory match rate of about 70
percent and in recent years, they have gotten as high as 93
percent. So to me, it is a matter of, you know, the poorest
States should get the best deal, and everybody should work on
the same sets of rules, and if States have been clever enough
to draw down money inappropriately and we haven't called them
on it, which in the past we hadn't always done it, is not a
fair deal under the statute. And I think that that is the
primary issue.
Mr. Bilirakis. I know the same thing has been taking place
over the years regarding dish money too. Can you give us some
examples if you know, I know you have been at this for a long,
long time, and you are certainly familiar with some of the
excesses and some of the fraud that has taken place. But can
you give us some examples of how some of their money has been
used in the past aside than for health care?
Mr. Scully. Well, once again, it is, I mean, I would say it
is fraud. On the other hand, I would say that as I said
repeatedly, if you are a State budget director, or you are a
State Medicaid director, and you can get away with it. I think
many of them tried to do it.
Mr. Bilirakis. I would suggest that fraud is probably not
as strong a word as should be used in a case like that.
Mr. Scully. Yeah, I believe some of this behavior has been
outrageous. But I think part of it is the agency has to crack
down. We have been doing that. It has not been fun. It is not
politically pleasant. And I think we have been doing equitably
among all States. But I think it has to be done. Yeah, I can
give you examples of lots of things. But, you know, I would
start off with the tax in my home State of Pennsylvania years
ago. What happened was every nursing home in the State paid a
tax for one tenth of a second, sent it to a bank in Harrisburg.
The State raised $500 million, put it up and got an immediate
match of $500 million from the Federal Government and
transferred it back to the nursing homes. That was the original
way donations and taxes worked.
There are many ways intergovernmental transfers work, but
intergovernmental transfers, for example, generally State
hospital would transfer its entire budget to the State for a
split second. That would be put up as a Federal match, would be
transferred back to the public hospital.
Obviously there is no State money involved. It is all--it
is all a wire transfer and there is no money put up. There are
many ways to do intergovernmental transfers and that is one.
Disproportionate share of hospital payments I will pick on just
to pick one particular State in the upper Midwest, they
actually had--were paying a particular public hospital 870
percent of their actual rates.
So, for example, if you had a hip replacement that cost
$10,000, the State would allow itself to be billed $87,000 by
the hospital so the Federal Government would then match its
percentage of that. In that particular State it was about 60
percent. So you can imagine the State then picked up on a
Federal match for that procedure roughly $50,000. They only
paid the hospital 10. So the State put up nothing, got $40,000
in cash. Paid the hospital 10 and the only person left unhappy
is the Federal Government.
So the upper payment limits basically allowed States to
come up with outrageously high reimbursements that were far
more than anybody would pay.
That is a quick example of all three mechanisms. There are
many, many different ways to do it. There has been almost no
limit on the legal cleverness of various----
Mr. Bilirakis. Not to condone anything like that, but
certainly if that money at least was used for health care it
would be--not to be condoned, but certainly something we would
understand and maybe sometimes look the other way. But when it
is used for roads and for infrastructure and for purposes other
than what it was intended for, that is what really gripes me.
My time is up. I would now yield to Mr. Brown. Thank you,
sir.
Mr. Brown. Thank you.
Mr. Scully, welcome. I am glad you are here.
As you know, the number of Medicaid enrollees in the U.S.
between 1996 and 2000 stayed at around 33 million. In 2001,
that number jumped to 36 million. Today, it has climbed to 40
million, 40 million in the next year. Given the state of the
economy, that would seem to be a good thing. After all, even
with the safety net, the percentage of uninsured Americans, we
learned last week, rose from 14.6 to 15.2 percent of the
population, now 43 point something million uninsured Americans.
Do you see the increase in Medicaid spending as a positive
phenomenon?
Mr. Scully. I think it is a positive phenomenon in a lot of
States. Especially that started 4 or 5 years ago when they had
surpluses, were expanding SCHIP, and they were using the money,
they were expanding through waivers and other mechanisms to
cover more people. We encouraged that.
We have covered, I think, 2.27 million more people under
Medicaid since we have been at CMS. I think that is a good
development. For instance, in Illinois, we just covered 340,000
people up to 200 percent of poverty on a waiver of prescription
drugs. So in the States that had the financing, they were
trying to expand coverage, and we were all for it. I think it
was great.
The problem obviously now is the States are feeling a
contraction, and they are starting to reduce their coverage,
and that has us concerned, obviously. Our concern is, when the
spending is going up, it is very easy for States to expand
coverage when they are doing it 100 percent Federal dollars and
no State dollars. Our interest is making sure that the
expansions are partnerships and that, obviously, when the
States contract, Congress appropriate quite a bit of money in
the tax bill to the States to get them through, hopefully, the
next year and a half. That may help. But our concern now is to
try to find a way to sustain the expansions we have.
Mr. Brown. Mrs. Capps in her opening statement talked--and
I think I am reading somewhat between the lines and somewhat
directly what you said--that Medicaid has been a success
because--in some sense measured in part that we are spending
more money because we are taking care of more people in
recessionary times.
If we agree that an adequate safety net is a minimum
requirement of a just society, that a program like Medicare
works that way, I am not sure I understand why capping funding
would be expected to maintain or improve that safety net. In
other words, given that the 2001, 2002 explosion of Medicaid
applicants from the 33 million constant for 4 years up to 36
million and then to 40 million, given that that correlates with
the rise in unemployment, the loss of 2.5 million or so jobs in
the last couple of years, how do States handle recession with
capped funding? How are we going to be able to sustain that
safety net?
Mr. Scully. We didn't look at it as a cap, first. It is
totally voluntary, so no State has to do it.
Second--and I think if Secretary Thompson were sitting here
he would tell you that every one of his Governor colleagues
would be back here in 2 years kicking themselves for not doing
this--the reason is because the current Medicaid baseline, when
we proposed this in the spring, Medicaid was growing at about
11.5 percent a year. Most States were still looking at rapid
growth in Medicaid. What they were going to get from this--and
we were negotiating with them whether it was a 3-year, 5-year,
10-year baseline. They were going to get budget certainty to
lock in the Federal spending at a 10 percent plus a year
inflated level.
Now they are going to come back--because the States on
their own accord are cutting their spending, you are going to
find that current Medicaid spending baselines have dropped down
to 4, 5, 6 percent.
We essentially were telling the States, we are worried
about some of these games. We are worried about budget
certainty. We are going to give you a 10 percent a year
inflated baseline and total flexibility. We were talking about
3 years, 5 years, 10 years with the Governors and lock that in.
And they are going to come back 6 months later and say that 10
percent baseline no longer exists because they have been forced
themselves to cut it back to 3 or 4 percent a year growth. So
it was totally voluntary.
I can tell you, from Secretary Thompson's point of view as
a Governor, he said to many of his colleagues, you guys are
nuts not to come in and lock in 10, 11 percent a year growth
for 5, 10 years and run your program more flexibly.
What we get out of it was budget certainty. We didn't have
to worry about upper payment limits or intergovernmental
transfers. What the States got out of it was locking in a
baseline that was based on the growth projections of 2 years
ago which are clearly coming down. For most States, we believe
it would have been a terrific deal for them. If they didn't
think it was, they didn't have to do it.
Mr. Brown. But a cap means less money to them, ultimately.
Mr. Scully. No, a cap--we were going to build in a 10-year
baseline and were discussing with the Governors, before they
decided they weren't interested this year, 5-year numbers, 3-
year numbers, 10-year numbers. We were going build in a current
baseline with current beneficiary growth plus medical inflation
on a per capita basis, give them exactly what they were going
to get, projected over the next 10 years, and it was from an
artificially high baseline.
What we would have gotten out of that is we wouldn't have
had to worry about all these different mechanisms that have
over the years turned out to have artificial inflation. What
the States would have gotten out of it was a lot more
flexibility with a lot more money. If they came back today for
the same deal, every State would be looking at a much smaller
pot of money than they would have had 6 months ago because they
have been forced to reduce their spending.
Mr. Brown. Are you implying that the States wring out waste
and inefficiencies better than you have and better than Dennis
has?
Mr. Scully. No, I am implying that if you give the State--
let's say hypothetically Ohio, and I should know their Medicaid
budget, but I don't. But let's say we have a $20 billion
program in Ohio. It is $12 billion Federal and $8 billion
State. The States are spending an awful lot of time trying to
figure out how to not spend their $8 billion and get more out
of our $12 billion. Whereas, if we just gave them a static
amount of money, they would run their program better with a lot
more flexibility and they would spend less time trying to worry
about how to game the match.
We were going to lock that $20 billion in at an
artificially high baseline, because they used to have an 11
percent growth rate. I believe the Medicaid growth rate with
the new numbers that come out in the budget is probably going
to be 6 or 7 percent. We have been trying to find ways to make
the financing work better; and, State by State, this was a
voluntary effort. Any State could have said no or said yes.
If the Governor wanted to come in and lock in a baseline
and say I want--this is essentially what Tennessee has done
since 1990. Tennessee has come in on an annual, purely
capitated basis. They have to cover all their beneficiaries,
but we give them a waiver, and they have much more flexibility
in their program when we negotiate the bulk number. But it is
purely voluntary on Tennessee's part. But this is the way
Tennessee has worked since 1990.
I am not advocating Tennessee's program, but I think they
would argue it has given them a lot of flexibility.
Mr. Bilirakis. Mrs. Wilson.
Mrs. Wilson. Thank you, Mr. Chairman.
Tom, thank you for your testimony. You have quite a bit of
information on the financing and eligibility and so forth. But
I wonder what kind of data and information do you have on how
Medicaid has affected the health status of patients? Does CMS
gather that data? Can you tell us about how Medicaid has
improved control of blood sugar levels for diabetics, for
example, or how immunization rates have been improved by
Medicaid?
Mr. Scully. I think we have done quite a bit of
immunization and preventive care. But it is obviously a State-
by-State program.
I have spent a lot of time, for instance, in Mississippi.
The Mississippi Delta probably has the most acute diabetes
problem in the country. We have tried to find ways to have
Mississippi manage it better. We have done everything
imaginable in the last 5 years. I am not sure we have made much
of a dent in it.
Your question is it very much varies State by State. Some
States do a great job in disease management. Some do virtually
nothing. I am not sure--one of the things that we think we
would get out of waivers is to give the States the ability to
do quite a bit more of that.
Mrs. Wilson. How do we know, funding this huge health care
program, whether we are helping anybody or not? We all know it
increases coverage and so on, but how would we say we have a
broader goal of improving the health status of folks who depend
on it in preventing the onset of disease if we don't have the
data?
Mr. Smith. If I may add, we are working with the States on
some specific performance indicators that are based on children
and adults; and we are looking at things like improvements for
children who have asthma. There are a number of different
indicators, performance indicators that we are building into
the system. The SCHIP law itself, the States have to report on
performance.
But I would say we do--and we have some States on a State-
by-State basis that have been reporting different types of
outcomes. Missouri, for example, even goes down to how it has
reduced the number of days a child has missed from school.
It is very uneven. Some States do a lot more than others
do.
We also have a national performance-based initiative that
we are working with the States on to tell us more. Oftentimes,
immunization rates, for example, it is hard to peg down because
people move in and out of Medicaid. So if you are looking only
at immunizations that Medicaid has paid for, you are probably
not seeing the entire picture because a child has moved on and
off of the program.
I think Massachusetts did an extensive tracking system and
again pretty much found out just tracking Medicaid does not
give you an accurate picture of the overall health care because
people move on and off of the program. But we are trying to
improve that.
Mrs. Wilson. Does CMS, the Federal Government, pay for 100
percent of the information systems in order to gather this data
and find out whether we are helping people, improve people's
health status, or is that a shared priority as well?
Mr. Scully. It depends on the program. Some of the matches
are at the State match. A bunch of them are at 90/10,
technology matches, and there are some we actually pay almost
100 percent of.
Mr. Smith. 90/10 for new Medicaid Management Information
Systems, the MMIS systems. In terms of if you are making
improvements into your system, much of that would be matchable
as high as 90 percent. The regular match rate, just the ongoing
administrative rate, though, is a regular match rate. There is
an administrative match rate of either 50 percent or 75
percent.
Mrs. Wilson. How many of the 57 programs would you assess
have an exceptional tracking program for health indicators?
Mr. Smith. For health indicators, that is not the way the
information systems have really been used at this point.
Mrs. Wilson. So it is still about payments, it is not about
health?
Mr. Smith. You are absolutely correct.
Mr. Scully. There is no standardized format for the States
to use as far as tracking diabetes patients or any other
chronic diseases.
Part of the problem, as Dennis said, is a lot of people--
the transition in and out of Medicaid is pretty rapid as well
so it is not a static group of patients like Medicare is
generally.
Mrs. Wilson. Thank you, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentlelady.
Mr. Dingell to inquire.
Mr. Dingell. Mr. Scully, there is nothing in your testimony
about what you are doing to fix the problems in nursing homes
raised by recent GAO studies. Also, there is nothing in here
about how you would make it easier for people to get enrolled
in the Medicaid program so you can get services. What are you
doing in both of these instances, please?
Mr. Scully. I think we have expanded--encouraged the States
to do a lot to enroll new beneficiaries. I mentioned I think
there are 2.27 million new Medicaid beneficiaries in the last
2\1/2\ years. I think we have pretty aggressively encouraged
the States to do more outreach, both in Medicaid and in SCHIP.
Obviously, under the current economic environment, States are
probably slowing that down a little bit, which is a concern to
us. But I think we have been pretty aggressive in the outreach
for new beneficiaries on this.
Mr. Dingell, I am not sure which--GAO sends me a lot of
studies on nursing homes. I am not sure which one--on nursing
home quality?
Mr. Dingell. I am sorry?
Mr. Scully. I am sorry. Your question was about a GAO study
on nursing homes. Which one?
Mr. Dingell. What are you doing to bring these new
beneficiaries into the program?
Mr. Scully. To enroll new beneficiaries? I think we have
done a lot of SCHIP and Medicaid outreach State by State. I
think the numbers show that there has been a pretty significant
expansion in the population the last couple of years. On the
nursing home issue, I have been probably the most rabid
advocate of nursing home quality.
Mr. Dingell. I note, for example, you tell us that 2.27
million people were added to the Medicaid rolls between 2001
and 2003 who were previously uninsured. How many of these were
not previously covered under Medicaid and SCHIP?
Mr. Scully. I think those were almost all new.
Mr. Smith. Mr. Dingell, those are new people.
Mr. Dingell. Those are really new people who had never been
covered under Medicaid before?
Mr. Smith. They were not previously eligible under the
rules that the State had been working under at the time.
Mr. Dingell. Were they covered or not?
Mr. Smith. They were not covered by Medicaid when the State
submitted those expansions, whether through an income disregard
or a waiver. Those were people who were not previously
eligible.
Mr. Scully. Those were not just the people that may have
been expanded by an economic downturn. Those are the people
that were covered by virtue of the fact that we gave States
waivers to expand their coverage.
Mr. Dingell. They then were covered under waivers under
previous circumstances?
Mr. Scully. There was an increase in the base level
population of the people that came on because of economic
changes.
Mr. Dingell. I want the broad numbers of new people
covered, not covered because you changed a person who was under
a waiver to a person who was regularly covered.
Mr. Scully. Those are people that could never have been
covered under current law but for the waiver, so we expanded it
by 2.27 million people by virtue of giving waivers.
Mr. Dingell. I have 2 minutes and 18 seconds, and I note
that the record now indicates that you have a lot of these
people who have been moved from waivers to permanent coverage,
but your indication to me is they have not gotten additional
coverage. I will submit to you a letter requesting the answer
to this particular question so that we can get this more
clearly.
The Clinton Administration published a final regulation
that would have prohibited approval of any new State UPL plans.
HCFA told States that no new plans would be approved. This
administration came into office, the administration reversed
that position and allowed new States in under the wire. It has
approved their UPL proposals. What were those States and why
were they approved and why were others not approved?
Mr. Scully. I will ask Dennis. He probably knows the
details. But the answer, I think, is there was a transitional
issue with three or four States.
Mr. Dingell. Two were approved, Virginia and Wisconsin. Why
were they approved?
Mr. Scully. Because of the timing of the law, I believe it
was.
Mr. Dingell. Pardon?
Mr. Smith. Mr. Dingell, if I may, at the time that rule was
promulgated, we believed that more States in fact would have
been eligible.
Mr. Dingell. But only two came in. Why were those two
States approved and why were others not approved?
Mr. Smith. I will be happy to follow up with you.
Mr. Scully. In fairness to Dennis, because Dennis, as you
probably know, was the former Medicaid director in----
Mr. Dingell. Would you submit to the committee, please, the
answer to those questions dealing specifically with each of the
States?
Mr. Scully. Yes.
Mr. Dingell. We were told that we should restructure
Medicaid because States have abused the system. Aren't we best
served to abate the abuses, stop the abuses and be on guard
against future problems, rather than changing the system? Isn't
that the way we should proceed?
Mr. Scully. Yes, and I think we have pretty aggressively,
and I think most of the States would tell you that----
Mr. Dingell. No, that I note to you goes rather less than
converting Medicaid to a block grant system which is what this
administration is now proposing. Block grants are quite
different than a system of shared responsibility and shared
expenses. Why are we going this route to address the problems
of abuses?
Mr. Scully. We have been very aggressive. I don't think any
State Medicaid director would tell you we haven't been
extremely aggressive in trying to make them play by the rules.
I think, as I said previously, we don't believe it is a block
grant. We believe it is a simplified version of a waiver, much
like Oregon and Tennessee and other States have worked under
for years; and any State that doesn't want to do it doesn't
have to. We believe we are trying to improve the State-Federal
partnership, not block grant.
Mr. Dingell. I heard my time is up. Thank you, Mr.
Chairman.
Mr. Bilirakis. Thank you, Mr. Chairman.
Mr. Scully. Mr. Bilirakis, could I just for 1 second add,
just for Dennis, the two States you mentioned, I should
remember the details. I was the one that made the decision on
Virginia and Wisconsin. GAO spent a lot of time looking into
this because of Virginia where Dennis used to work and
Wisconsin where my boss used to work. I made both of those
calls personally, I was very involved in it, GAO did a very
detailed investigation, and I believe they were convinced I did
the right thing.
Mr. Bilirakis. I also was somewhat confused regarding your
answer that Mr. Dingell referred to that the record now shows
regarding the 2.27 million that he referred to. Those were
completely new beneficiaries, is that right? They had not
previously received or were eligible for Medicaid?
Mr. Scully. They are additional new beneficiaries that came
in. Those 2.27 million are people that, under the current State
laws, had we not given the waivers, could not have gotten
coverage. By virtue of us giving a waiver--they were additional
people that would not have been covered but for the waivers.
Mr. Smith. Those were specific expansion numbers based on a
State plan amendment that the State submitted to us for new
coverage. So we have tried very hard to count them correctly so
they--that does not reflect people who came in, they were
previously eligible but then they came in.
Mr. Bilirakis. But the bottom line is they were purely new
beneficiaries?
Mr. Scully. But, as Mr. Brown noted, the other population
of Medicaid beneficiaries has also grown as more people have
gotten on the Medicaid rolls due to poverty thresholds and
other things.
Mr. Waxman. Mr. Chairman, would you yield on this point
just so we can get a clarification?
Mr. Bilirakis. Very briefly.
Mr. Waxman. I think it would be helpful for us if we get in
the record what the populations are. Because it is my
understanding that many of these people could have been put
into the Medicaid program through a State plan. They didn't
need a waiver to add that population. So we ought to find out
exactly how many were added because of the waiver and how many
would have been added had the State decided to cover them under
their ability to submit their plan.
Mr. Smith. Mr. Waxman, you are correct, and that number
does reflect both waivers and State plan amendments. But the
point was that they were new people that the State opted to
cover on their own.
Mr. Waxman. And the State could have opted to cover them on
their own without a waiver?
Mr. Smith. Yes, sir.
Mr. Waxman. So we need to have the differentiation of the
populations.
We will submit a question in writing, Mr. Chairman; and we
would love to get a response.
Mr. Smith. But they were all new people, regardless of
whether they were under a waiver or a plan amendment.
Mr. Bilirakis. Mr. Buyer is recognized to inquire. Mr.
Buyer, 8 minutes.
Mr. Buyer. Thank you.
All of us, we represent our districts, we represent our
States, and we try to look at a system of the totality. But
there are also then numbers, and in particular there are
Senators that then will try to do their own little rifle shots
to protect their own little hospitals based on their own
circumstance.
So you here are trying to manage an overall system while
you feel the political pressures of individuals who may be even
in power positions to do XY with regard to their own little
hospital. That is a given in the political environment. You
here are providing some testimony on what to do to best help a
system and, at the same time, in the U.S. Senate in the
Medicare bill, S. 1, Senators put in some rifle shots with
regard to how to assist specific hospitals. And I don't
question they are having difficulty. I want to ask you, do you
think this is an appropriate way to assist public hospitals
with large uncompensated care costs and has Congress done this
for other hospitals? And do you have any concerns about
establishing this type of precedent?
Mr. Scully. Yes, we do, obviously. I am guessing the one
you are referring to in the Senate is the one that just happens
to be in a Midwestern State.
Mr. Buyer. Yes.
Mr. Scully. I think Indiana. Obviously, people concerned
about individual hospitals are concerned about that provision
as essentially it draws down a huge amount of additional
Federal dollars for one hospital without putting up any
additional State dollars. Obviously, there are many hospitals
that we have a number of programs, Medicare disproportionate
share, Medicaid disproportionate share, other cross subsidies.
We have $32 billion of total cross subsidies that take care of
indigent care both in Medicare and Medicaid at hospitals. To
single out one particular hospital to--I believe they are
talking about statutorily raising the upper payment limit to
175 percent of Medicare, we think is obviously not good policy,
and we are opposed to that particular provision. We don't like
rifle shots generally, but that particular----
Mr. Buyer. This is in reference to Wishard Hospital in
Indianapolis. Are there others out there in this bill that we
don't know about or is this the only one in S. 1?
Mr. Scully. It is the only one I am aware of. I am spending
most of my life on this bill right now.
Mr. Buyer. The difficulty here is for these hospitals--not
just whether it is Wishard but other public hospitals--are the
high level of uncompensated care, is the uninsured. Here in
Indiana we have a Governor that cut the Medicaid by 10 percent
and then we have an escalation in the uncompensated care and
people are less apt to--why seek individual responsibility or
why take my health care offered by the employer? I can turn it
down and take the cash instead and just go get care at Wishard.
I don't know what has happened to responsibility in the system
if all we are going to say is, well, let's just let the
government fund these types of things. What is your sense?
Mr. Scully. I should correct--apparently, I have been
corrected. There is a psychiatric hospital in Michigan that
also has a rifle shot in the Senate bill. I think we spent an
awful lot of time in this bill working on Medicare
disproportionate share, indirect medical education and other
things that are supposed to take care of inner city hospitals'
indigent care needs; and to pick out one particular one and
give it a turbocharged advantage is not a good----
Mr. Buyer. Let me be clear here. So then the administration
opposes the rifle shot with regard to Wishard and the one in
Michigan and you prefer making these substantive changes to
help an overall system for the country?
Mr. Scully. Absolutely.
Mr. Buyer. Let me ask about the--you keep using or the
words are thrown out about financing schemes. Obviously, these
States have been seeking some type of advice here by some
consultants or associations on how to game the system. You made
reference to that in your testimony.
Mr. Scully. And then they bill us usually for 70 or 80
percent of the cost to the consultant. That is even better.
Mr. Buyer. So tell us, obviously, people can do--this is
sort of--this is dancing on the edge here. They can stay within
the law and give their advice, but what are you doing with
regard to working with outside groups to prevent the gaming of
the system?
Mr. Scully. Dennis was a Medicaid director for many years
in Virginia. I have been working on this through two
administrations. It is like deja vu all over again. I had spent
a lot of my time from 1989 to 1993 working on the same issues.
I think we have been trying to be straight with the State
Medicaid directors. As I have said repeatedly, if I were a
State Medicaid director, I am not sure if the law allows that
some people shouldn't push the edge of the envelope.
We have been trying to be very clear about the rules. We
have been ratcheting down on them pretty drastically. The
primary thing we have done is told the States that when they
apply for a new service or new expansion for upper payment
limit or anything else, they are not going to get the money
until they explain it to us.
What had happened in the past in many cases is we give them
the money--and I went through this with Nancy and with Paula,
who is a good friend. They faced the problem in the past. I am
sure Tim would tell you this. You give the States the money and
then go back later and say we would like our $2 billion back or
our $500 million back and all of a sudden you are on the front
page of the newspaper telling that State, instead of them
overbilling you, you are now trying to re-collect from the
State for money that they have already spent.
The primary mechanism we have used is basically say you
have got to get--we're not going to give you any money until we
understand the financing and until we agree with it and it is a
legitimate service and legitimate match and the money is being
spent on health care.
Mr. Buyer. Why would we reimburse States if we would pay
individuals to scheme against the Federal Government?
Mr. Scully. I think the primary reason is for many years it
was not widely understood, the Medicaid program was
understaffed, and it was generally a partnership where the
Federal Government trusted the States for sending in legitimate
bills and we sent in our matches and the consultants in the
States were way ahead of us.
Mr. Buyer. Is this something whereby it is within your
discretion or is this something that Congress needs to change
the law?
Mr. Scully. It is painfully within my discretion,
generally. Congress could change the law, but it does not fund
having--obviously, when the States are having the budget
pressures they have, the primary source of any State budget
director is to call up his Medicaid director and say, can we
get a few hundred million dollars out of Medicaid? Generally,
over the years, they have. But we started saying no, and
particularly in this environment it is difficult.
Mr. Buyer. Are you willing to tell the State Medicaid
directors that you will not reimburse for their outside
consultants?
Mr. Smith. Actually, we already have provided guidance to
the States that--often, these are relied upon as contingency
fee contracts; and we have told the States, if those are for
Medicaid maximization, we would not pay and they would not be
allowable in that respect.
Mr. Scully. They can still bill us for the fees, but if
somebody happens to get $500 million for their State, they used
to be able to get a percentage of that. We obviously----
Mr. Smith. There are a number of specific----
Mr. Buyer. You obviously have--you can finish the sentence.
You have stopped that?
Mr. Scully. We have stopped that, yes, to the extent we
understand it. The money is very fungible and extremely hard to
track.
Mr. Smith. There are a number of specific areas where we
have seen a lot of this in the past on school-based
administrative services, for example, so we have provided--we
have made final a claiming guide on administrative costs. They
pop up in several different specific areas. As we find them, we
do provide specific guidance to the States and tried to be very
clear about what is allowed and what is not, but a lot of it is
traced back to finding the flow of the dollars.
Mr. Buyer. All right. Thank you. I yield back.
Mr. Bilirakis. Mr. Waxman to inquire.
Mr. Waxman. Thank you very much, Mr. Chairman.
Mr. Scully, I am pleased to see you. Your presentation
about Medicaid seems to be a complaint that the open-ended
matching funds inevitably result in States trying to maximize
use of Federal dollars. That is not all bad, because what the
Federal Government did in the Medicaid program was to use
Federal dollars to encourage them to do things that they
wouldn't otherwise be able to do or wouldn't be able to choose
to do on their own.
For example, we adopted recently an increased match for
States to provide breast and cervical cancer treatment
services. We specifically designed that to encourage States to
use that money, and we used a carrot of Federal matching funds
to achieve that coverage. In fact, that is what most of
Medicaid does. It encourages the States by using a carrot to
cover the optional services and optional populations which is
most of the Medicaid spending. We designed the program to
encourage the States to use the matching funds to take up these
options.
No one is going to defend games being played when funds are
being used for other purposes, but the vast majority of the
funds Medicaid gets from the Federal Government is for very
legitimate purposes, some of those optional services and
optional populations that would be under a block grant, whether
they be the breast and cervical cancer program, the
prescription drugs, home- and community-based services,
programs for disabled people, particularly the working
disabled, the coverage of kids over 100 percent of poverty,
most people in nursing homes, eyeglasses and hearing AIDS for
adults.
So if you look at the Medicaid program as simply a program
for States to get funds in an open-ended way and we are going
to close it, if we close the amount of money they can get they
are not going to cover some of those services, in my opinion.
You have raised the DSH problem and you have raised the UPL
problem. The DSH system now exists in statute. The Congress
said exactly how much money it wants to spend on DSH in each
State. The UPL regs are closing down the abuses in the system.
So let's put those things aside and look at the problems of the
Medicaid program.
Seventy percent of the costs of the Medicaid program are to
serve lower income people who are elderly or disabled. The
largest and fastest-growing Medicaid services are for those
people in nursing homes and for prescription drugs. Where will
these people turn to for long-term care and pharmaceuticals if
Medicaid is not able to serve them?
Mr. Scully. Mr. Waxman, I agree with you. There are a lot
of things we try to incentivize in the Medicaid program. We
have done a lot of them over the years. I think that is exactly
right. We have incentivized technology in 90 percent, some new
coverages at 90 percent. The problem is when it is a 100
percent Federal match, and that has happened in many cases. I
think we have tried to minimize that. We have capped DSH. We
have limited UPL.
Mr. Waxman. I am not asking you what you can do to limit
it. If you limit it, if you leave the program as it is, if you
limited the program and you couldn't cover long-term care in
nursing homes and prescription drugs, where are these people
going to go?
Mr. Scully. What we have looked at is--I believe what we
have done is totally voluntary for any State. What Oregon
decided to do, I think they have done a fairly good job. Some
people don't like the TennCare model, but I think Tennessee has
covered an awful lot of uninsured people.
Mr. Waxman. Many States are turning to strict limits on the
number of prescriptions a Medicaid beneficiary can get a month
for drugs. Many of them are allowing only three drugs per month
with no exceptions. Many elderly and disabled people need more
than three prescriptions per month. What can these people do if
Medicaid won't pay for the drugs if they need it for such
chronic conditions as diabetes, heart disease or even HIV?
Even with open-ended funding they are cutting back on these
programs. Charity hospitals don't provide outpatient drugs. It
seems to me that they are going to be having to go to the drug
companies for assistance programs, if that is possible. I think
they are going to run into big trouble.
Mr. Scully. As I said, this is totally voluntary for any
State. But I think, on the contrary, States have covered new
populations. There are plenty of places where, if you are at 35
percent of poverty and if you are not in a category that is
eligible, you can't get any coverage. In a State like Illinois,
we covered 340,000 seniors up to 200 percent of poverty with
new drugs. On the contrary, I think we have given States
flexibility to cover more people.
Mr. Waxman. They have more flexibility if they get those
matching funds, in my view. That is why they have been able to
cover a lot of these populations that are optional to them. But
if we limit the amount of matching funds the States get, then
seems to me we limit their flexibility. We have a disagreement
about this, but I believe we limit their flexibility to how to
cut back on services for people; and the services that are most
expensive are services for very, very vulnerable people who
have nowhere else--my point is they have nowhere else to turn.
Governor Schwarzenegger in California is going to face this
problem, and he is not going to buy in if he has any sense to
the idea that he is going to get a little bit more money up
front and then have the choice to get that money now but get
the State stuck in a situation where they are going to have a
limit on Federal dollars, especially when States end up with
the brunt of a poor economy, which has happened under the
economy that is suffering under the Bush Administration's
economic policies.
Mr. Scully. I was about to say something nice.
Mr. Waxman, I would just say I appreciate--your comments on
this have been very reasonable this morning. We would like to
work with you and get by the rhetoric of block grants because
that is not what it is to make the program work better. As you
know, I spent a lot of last winter working with Governor Davis
to come up with an extremely flexible waiver.
Mr. Waxman. A lot of good it did him.
Mr. Scully. I think the L.A. County public hospitals will
tell you it did a lot of good for them. I think it took a lot
of burden off L.A. County and southern California. We spent a
lot of time working with them on their waiver to give them a
lot more flexible use of their money or they would have had a
lot of problems.
I think the issue is--I understand this is politically
sensitive. We would like to find a way to make the States work
as reasonably and as flexible as they can. We have done a lot
of work with California and let them do a lot of creative
things on their waivers that I think has provided a lot better
health care for California.
Mr. Bilirakis. Mr. Deal to inquire for 8 minutes.
Mr. Deal. Thank you, Mr. Chairman.
Mr. Scully, during your statement and also in opening
statements by members here, references have been made to the
SCHIP program. I think we all generally recognize this has been
a fairly successful program in providing health coverage for
low-income children. As I understand that program, it has a
capped annual expenditure back to the States.
I have two questions. First of all, is this a similar model
to what was being proposed for Medicaid in general, that being
an annual capped program; and, second, has it been successful
in eliminating some of the gamesmanship that the States have
tried to play in a noncapped approach?
Mr. Scully. I guess yes and no. SCHIP is a supplemental
program beyond the Medicaid program. It does have a lot more
flexibility than Medicaid. There is much more budget certainty
for us in the Federal Government. So to that extent, the fact
that it is a model for giving the States greater flexibility to
use a clearer pot of funds, that is the case.
But, clearly, we were not trying to cap the Medicaid
program and come up with--obviously, no State had to do this.
We were only looking at the optional populations the States
could have dropped tomorrow to give them more flexibility. The
mandatory populations in Medicaid would have had to have been
covered exactly as they are today.
I guess the argument, and maybe Dennis can clarify, is that
I think it probably includes some of the better aspects of
SCHIP, but obviously Medicaid is an entitlement program. People
that are categorically entitled to the Medicaid program would
continue to be categorically entitled to the Medicaid program.
Mr. Smith. If I can add--and SCHIP was very much the model
that we were looking at and pursuing. People I believe would
say that SCHIP has been wildly successful. But you touch on
another point in that there are caps in Medicaid today. There
are eligibility caps there. If you don't meet--even at 35
percent of poverty, if you are an uninsured adult male, you
aren't going to qualify for the Medicaid program. So there are
eligibility caps in Medicaid today. The QI-1 program for low-
income seniors is a capped funding program. The caps are not
all that foreign.
As Mr. Scully referenced, States dealing with 1115 waivers
are negotiating capped Federal liabilities. So they are not all
that foreign to the Medicaid program as in fact these types of
financing arrangements between the States and Federal
Government have grown in the last several years.
Mr. Scully. I would like to just clarify this as somehow I
think it is perceived as a block grant or some type of way to
save Federal spending. This was Secretary Thompson's idea. He
was a Governor, and I think he was one of the more creative
Governors on welfare and Medicaid. He came back and said, if I
were a Governor still, what deal would I want, and he was the
one that was pushing this. I think he is incredibly frustrated
that his fellow former Governors have not understood more about
what he is trying to do.
Mr. Deal. Let me ask you about another area that has
attracted a lot of attention recently, and that is the issue of
dual eligibles, a significant portion of the population now and
projected to be an even significantly larger portion of the
population in the future. What is the administration's position
with regard to these dual eligibles as it relates to long-term
care and prescription drug benefits?
Mr. Scully. Obviously, we are in the middle of doing the
negotiations right now. We are determined not to take sides
between the House and Senate, certainly not in public, anyway.
I guess the long-term care issue is a little different, but
I think the prescription drug issue in Medicare is complicated.
I think the one thing we have said publicly is that the
President is determined to spend every marginal new dollar
covering a new person, and we believe the money in the Medicare
benefit should go to cover predominantly low-income seniors
with a new drug benefit and should not go to basically pay for
an existing senior who has an existing drug benefit.
So one of our concerns whether you look at either bill is
just spending money to buy out existing coverage whereas we
should be covering a lot more people. We have said, I guess,
publicly, the Senate--there is no question the Senate drug
benefit covers a lot more people, low-income people than the
House benefit does. Some would argue the Senate benefit may
have a little too generous coverage. We think we need to find
the right mix. But our concern is covering as many new low-
income Americans as we possibly can with a drug benefit. I
don't believe we are talking at this point about making any
changes in long-term care.
Mr. Smith. Mr. Deal, to sort of put it in perspective of
the other spending on duals, prescription drugs are only 15
percent of the Medicaid expenditures on duals. Once you start
moving into other areas, you are talking about considerably
even greater sums.
Mr. Deal. I yield back, Mr. Chairman.
Mr. Bilirakis. The Chair thanks the gentleman.
Mrs. Capps to inquire.
Mrs. Capps. Mr. Scully, recently, Surgeon General Carmona
argued for the United States taking a more aggressive role in
preventing violence through proven public health strategies. We
spend in this country close to $6 billion annually on domestic
violence. I am urging you--this is a little plug for some
legislation I have to ensure that providers in our health
programs include screening for domestic violence and follow-up
services for women, and I hope that is some legislation you can
support. It is not unrelated to our topic at hand.
But I want to continue this discussion of lump sum payments
capped that would be the proposal by the administration for
Medicaid. The administration predicted economic growth for
fiscal year 2002. Instead, we saw more job losses and, more
importantly, rising numbers of uninsured; and so we have also
seen Medicaid having a rapid expansion. Doesn't it seem likely
that from time to time estimates of what a State will need or
States will need for Medicaid would be inaccurate? I would like
you to kind of, I guess, continue some of Mr. Waxman's
questioning about what happens to States when such an estimate
discrepancy occurs, what happens if the States, as is the case
today in almost every State, are already themselves in budget
deficits and cannot afford to pick up excess costs?
Mr. Scully. That is one of the primary reasons that we
proposed our plan to begin with. All this is negotiable. As I
have said, with Tennessee and any other State that we negotiate
a waiver with, we negotiate the per capita amounts, we
negotiate the inflation, we negotiate the assumptions about how
fast beneficiaries are going to grow.
I did that with Governor Davis last winter in California.
We negotiated a whole new waiver for the California system. I
think it was $1.9 billion. We had to make lots of assumptions
about growth rates.
One of the things that we thought--that Secretary Thompson
thought was a benefit to the States when we did this last
winter was that we were looking at projected growth rates State
by State in Medicaid that were probably artificially high. We
knew they were coming down, and we were willing to let the
Governors lock those in for a few years which would have been
beneficial to them. They didn't have to do it if they didn't
want to. I think most of them are realizing now that they may
have not made the correct judgment on that call.
One of their biggest concerns we started with was we had
talked about locking it in for 10 years. The Governors came
back and said, that's too long. How about 5 years? How about 3
years? We had just started talking to them about making those
kind of midcourse adjustments when they decided, I think, due
to the rhetoric of this is a block grant, which it is not, that
it wasn't a safe thing for them to do this year. I think when
you look at it purely on the merits, it was a no-brainer for
them.
Mrs. Capps. Let me just ask you, though, if the States had
locked into estimates based on predictions that we would have
economic growth that were made last year and then we have seen
in many States a very sharp downturn in employment and rising
needs, then what?
Mr. Scully. Actually, that benefits them. Because a lot of
them were looking at predictions of Medicaid growth, because
they had the money, of 10, 11, 12 percent. We would have locked
that in. And because they have been forced to voluntarily drop
their optionals, they are now looking at having 2, 3, 4 percent
growth rates. We were essentially going to let them lock in
their prior growth rates for the Federal spending that didn't
exist anymore. That exact trend actually would have helped
them.
Mrs. Capps. I guess maybe I need this to be clarified more.
You are expecting them to expand during economic good times?
Mr. Scully. They had expanded in the late 1990's, in the
last couple years. Let's say, California, just for example.
Mrs. Capps. That is true. What if it were capped at last
year and California now faces the situation we are in?
Mr. Scully. They would have been in great shape. Because
what has happened State by State is that California--most of
California's program is under waivers, by the way. A lot of
this already is happening in California.
Let's pick California. California's program runs about $33
billion this year, I think, roughly. Let's say we have taken
that $33 billion and inflated it at 12, 13 percent a year,
because that was what we projected last year. California and
every other State--I guarantee you in the next 6 months,
California is going to have to come in and drop optional
benefits to save money. Their growth rate, which used to be
projected at 13 percent, which would have been locked in, we
would have written them a check for that, they now drop to zero
or 2 percent. They are going to lose the Federal match. All the
Federal money will be gone, whereas they would have had it
locked in.
Mrs. Capps. I guess I am thinking of those people, when
they are dropped, what happens to them?
Mr. Scully. We don't want them to be dropped. That is what
we were trying to avoid. California would have locked in an
artificial--even though they would not have spent the money,
they would have locked in the Federal money for 3, 5, 10 years
at an artificial growth rate of 10 percent. We would have
gotten the certainly of not having to argue about this
gamesmanship every year, and they would have gotten the Federal
money even if they didn't have their own. We would have locked
it in.
Now what happens, because we only match real spending, is
California comes in and has to make decisions about dropping
optional beneficiaries. If California's spending rate drops to
zero or 1 or 2 percent, they are only going to get matched for
those dollars. They are going to get less Federal money.
Mrs. Capps. I guess my question is maybe even more basic or
simple. What happens if the demand for Medicaid exceeds the
locked growth rate?
Mr. Scully. If the demand--it is just like it does in
Tennessee. Theoretically, the State has to eat the difference.
But if you look at the Tennessee experience, which is by far
the most--that is the one I have had the longest experience
with. I just spent a lot of time renegotiating TennCare with
the new Democratic Governor in Tennessee. I would think that it
would be very hard to find anybody in Tennessee in either party
that doesn't think that it was a very good deal. We have
adjusted it a number of times when they had good arguments.
Mrs. Capps. They wouldn't lose their care?
Mr. Scully. It hasn't happened in Tennessee.
Mr. Bilirakis. Mr. Greenwood to inquire.
Mr. Greenwood. Thank you, Mr. Chairman.
Mr. Scully, you and I are both from Pennsylvania. You made
the reference earlier to Pennsylvania's scheme with regard to
nursing homes. It is my understanding that at this moment
moving through the Pennsylvania legislature is a bill that they
are calling the granny tax, wherein they tax nursing home beds.
The nursing home providers pay that tax to the State, the State
then uses it to match--would use it under this legislation to
match Federal funds, thereby increasing the per diem to the
nursing homes. Given what Pennsylvania has been through now,
what would make Pennsylvania and its new Governor Rendell think
that they could get away with that?
Mr. Scully. I hope they don't think they can.
Mr. Greenwood. They must. They are moving a bill through.
Mr. Scully. I did a teleconference with the State Senate
committee overseeing this about 3 weeks ago in Pennsylvania.
They asked me that question. I basically said--under the
parameters, I said we would turn it down and not match it.
There is a provision in the bill which a number of Members
were involved in, including you, I believe, that essentially
you can have provider taxes if they are broad-based and
redistributive. That means there would be winners and losers.
For example, if you wanted to tax every nursing home in
Pennsylvania, you would have to make sure they aren't all held
harmless and get all the money back because then it is not
really a tax. So if you want to tax every nursing home in
Pennsylvania at 5 percent and guarantee they are going to get
every penny back, it is not a legitimate tax. If you tax them
all at 5 percent and they have different levels of indigent
care, some get back 2 percent, some get back 8 percent, then
that is a redistributive tax, works like a tax and we will
match it. But we won't match it if it is just a hold harmless
tax because the money is just there. If they send it off to the
State, raise the money and get it all back and they are all
guaranteed to be held harmless, we will not match that and we
will take a long look at it, if that is the way Pennsylvania's
tax works.
That was largely the discussion I had with Missouri.
Missouri restructured their tax structure on their providers so
that there were winners and losers, and we actually do match
their taxes. They used to be hold harmless taxes, and we did
not match those. It depends on how Pennsylvania's is
structured.
Mr. Greenwood. It isn't a policy that even allows for a tax
to be explicitly or specifically on the health care providers.
It would seem to me, as a matter of policy, if you want to tax
the people of Pennsylvania, all of whom are eligible for
nursing home care, and then use those tax revenues to match
Medicaid dollars, that is a fair and widely distributed tax as
a policy, even though, given the caveat that you have just
explained, that there is no guarantee that they would get it
back. It still strikes me as a relatively phony taxing scheme.
Mr. Scully. I am with you, but I lost that fight 12 years
ago in the first Bush Administration when these provider taxes
came up. I personally think all provider taxes are bogus, that
is my own personal opinion, but Congress when we were trying to
slow this down in the early 1990's passed a law and said you
can have provider taxes but they have to create winners and
losers and be broad based and redistributive. I personally
think it should be general revenues. But current law says that
if the taxes are broad based and redistributive, and there are
even more complicated rules than that. You can use provider
taxes, but they have to create winners and losers.
Mr. Greenwood. I believe the new Medicaid director in
Pennsylvania is one who was in the Medicaid department in
Pennsylvania, left and became a private consultant to States to
create these schemes and now is back running the Medicaid
program under Governor Rendell. A great system.
Mr. Scully. I promise I won't do that.
Mr. Greenwood. One of your graphs that shows the growth
rates of various components of the Medicaid program shows, I
believe, expenditures on the disabled increasing very rapidly.
In 1993, it was about $50 billion a year expended. It is now
over $100 billion. Why has that been what seems to be the
fastest-growing component?
Mr. Scully. It is. Some of that maybe has not been publicly
debated but, and Dennis may jump in here, probably a good
social policy. I would guess the bulk of that or a lot of it is
the fact that we have done a lot of home- and community-based
waivers so that we have deinstitutionalized a lot of disabled
people. So there are more people eligible for benefits. States
have covered more, and that is probably a good thing, but it
has clearly caused an enormous demand increase on the Medicaid
program from the disabled population.
Mr. Greenwood. Does it reflect any change in the
eligibility by the States--who determines what the eligibility
is to be called disabled?
Mr. Smith. In some respects, States have expanded beyond
who they are required to cover under Federal law. It is a
combination of population expansions and the growth in home-
and community-based waivers in particular, which again we think
is a good thing.
Again, as we are talking about the future of Medicaid and
how to change the program, we think that respect of changing
the dynamics in where people are served for their long-term
care needs has a great deal of promise to focus the dollars
more clearly on the individual rather than what we often find
are provider-driven services and coverage. We think giving
people more control over their own services has a great deal to
offer, improving services and holding down the rates of growth.
Mr. Scully. There has been a lot like Arkansas as a cash
and carry. There are a number of States that have done those
type of things.
The answer to your question, Social Security makes the core
determination, SSDI, of who is disabled statutorily under
Medicaid, but many States have expanded that as an optional
benefit beyond that to other categories, and we have encouraged
that to places where it has provided much less
institutionalized care generally.
Mr. Greenwood. Thank you.
Mrs. Wilson [presiding]. Thank you.
The gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Madam chairman.
Mr. Scully, I am going to ask my staff to give you a copy
of the letter we sent last week that was signed by a number of
Members from Texas on the issue of Medicaid coverage for TANF
recipients in Texas for a child who skips a class. Because I
know tomorrow, I think, the State workforce commission is
actually going to make a decision on that.
I appreciate what CMS is doing to ensure States are in
compliance with Federal law and not restricting benefits to an
individual if their teenager skips a class.
You state in your testimony the elderly and people with
disabilities comprise just 27 percent of the Medicaid
population and note the cost of their care consumes about 70
percent of Medicaid spending. You also state that almost 70
percent of the nursing home beds are now Medicaid financed and
State and Federal Governments pay roughly 60 percent of all the
long-term costs nationally. I am concerned that increased
flexibility and benefit design or eligibility requirements
might throw these individuals who are no doubt among the
frailest and most vulnerable into the streets. Managed care
doesn't appear to work for this population, particularly in a
nursing home setting. So I am curious as to how flexibility
would do something about that 70 percent of the Medicaid
spending. I didn't realize those percentages were that high, in
all honesty.
Mr. Scully. First, I would say a lot of people don't
realize in Medicare--the percentage of managed care in the
Medicare population is probably 11 percent. I think we have a
little more than 5 million people in managed care. Dennis
probably knows the exact number. We actually have something
like 27 million people in Medicaid managed care. It is growing
very rapidly, and many States are going in that direction.
I actually think you can make a good argument that it has
been a very good, positive trend for care in the Medicaid
program, but when you get in the nursing home setting, it is
totally different. I think very little nursing homes, almost
none that I know of State by State, has managed care.
The most disturbing trend in the nursing home setting that
I see, and this gets back to Medicare, is I believe the average
per day Medicaid reimbursement, it obviously varies greatly by
State, is about $115 a day, whereas in Medicare we pay as much
as $325 a day. I think the average is about $280. You get 70
percent of the people in the nursing homes in this country in
Medicaid and, depending on the State, there is a huge cross-
subsidy for Medicare and Medicaid. We only cover about 12
percent of the beneficiaries in Medicare, but we basically
massively overpay in Medicare which we know because the States
chronically underpay in Medicaid.
As the population grows of people in nursing homes on
Medicaid, the ability to cross-subsidize, which probably isn't
a good idea anyway in Medicare, it is a huge public policy
problem. We are consciously cross-subsidizing Medicaid in
nursing homes, but the nursing home rates, depending on the
States, are generally chronically low and cause huge problems.
So you have very little managed care in Medicare, but you have
got a huge nursing home problem in Medicaid.
Mr. Green. And Medicaid pays the full monthly, the 30 days,
whereas Medicare just has that benefit for once a year.
Mr. Scully. No, we pay for the first 60 days post-
hospitalization.
What happens is, if the patient gets out, if you are a
senior and you get out of the hospital, we pay for the first 60
days. If you are there longer than that generally, and there
are many other rules around it, you switch to Medicaid after a
certain period of time. If you are chronically in a nursing
home for good, that is where most of the Medicaid patients--
most of the nursing home patients are eventually paid for by
Medicaid.
Mr. Green. Again, with those high percentages that are
taken care of, or the 70 percent cost of the care consumes the
70 percent of the Medicaid spending, my next question is, could
you point to an option where States might be able to use
Medicaid funds as a type of premium support model for
individuals who can use their Medicaid coverage to buy into
their employer-sponsored plan or to purchase health insurance
in the private market?
Again, looking at the percentages that you talk about, 70
percent of Medicaid spending is for that elderly and frail--so
we would only be talking about 30 percent that could actually
possibly be in the private sector; and you take out disabled,
we are talking about such a small number of people. I find it
hard to believe that Medicaid spending on a monthly basis--if I
had the option, I could go find an individual policy with the
Medicaid expenditures, for example, in Texas that you could
find an individual policy knowing what I would be quoted for an
individual policy in my 50's.
Mr. Scully. You could buy a terrific individual policy. In
many States, it depends on where you are, the Medicaid spending
per capita is enormous; and one of the reasons--you are right.
We believe we need to take pressure off the long-term care
sector.
I mentioned reverse mortgages and other things, but if you
look at the per capita spending in Medicaid, obviously there is
a core population of low-income people that need a full
Medicaid benefit, but in many cases the per capita Medicaid
spending is, in many cases, $6,000, $7,000, $8,000 a person, in
some cases higher. One of our concerns is if you give States
flexibility like Tennessee has had that they will take some of
the relatively higher income people in the State--we obviously
have a significant problem with the uninsured--and start using
some of those resources to buy a basic Blue Cross plan or to
buy other private insurance.
Because one of the problems you have with State Medicaid
plans in my opinion is State legislatures. Every benefit in the
universe is covered for every specialist in the world when you
get in the State legislatures, mandating benefits State by
State and especially--it may be appropriate in low-income
populations, but as you get relatively higher up in the income
stream we have found States like Tennessee, when they can buy
people policies that are private policies without all these
mandates, that they can cover a lot more ground for a lot more
people.
Mr. Green. Again, I know, having served in the legislature
and seen those mandates, and granted there is an argument for
it, but oftentimes you also have problems with having a plan
that has no benefits or very limited benefits that people
aren't accustomed to.
But getting back to the issue in the private market----
Mrs. Wilson. Mr. Green, I think you are out of time. If you
have got a quick question here----
Mr. Green. Obviously I didn't realize I was out of time.
Thank you, Madam chairman.
Mrs. Wilson. Thank you.
Mr. Stupak is recognized for 5 minutes.
Mr. Stupak. Thank you; and, Mr. Scully, thanks for being
here.
When I was reading your written testimony, you spent about
16 pages with charts and that, showing some of the tactics that
the States used to maximize their Federal contribution. Just
listening to the testimony here, let me ask a question this
way. Do you see any irony in your argument that we can't trust
the States with financing Medicaid so we should give them
nearly complete control over access, quality and data about the
health of their recipients? It is almost like you are saying,
we can't trust them, but yet you are willing to block-grant it
to them.
Mr. Scully. No, the money is fungible. The Federal problem
with the Medicaid program--and I don't mean to beat up the
States too much. I mean, the fact is--Tim and others have been
through this--there is no way to--the money is fungible when
you are in a matching program. It has almost been too easy for
the States to do this.
I guess our experience in places like Tennessee or Illinois
and other places, when you actually come up with a matching
program, if you took the $33 billion in California and said,
our expectation is to spend $18 billion or $20 billion and you
spend $13, whatever the rate is, it is a lot easier to monitor.
The States are not putting up real money. In the States that
choose to do it, and this is purely optional by State, it would
be a much easier ability to both fiscally manage it and to give
the States more flexibility. We think it was a much better deal
for the States.
Obviously, even if our proposal had passed, any 1 of the 50
Governors didn't want to do it didn't have to do it, or the
State legislature. It was purely voluntary.
So I guess I do think that the fact is an enormous amount
of effort--and I skipped 8 years in the middle, but I can tell
you between 1989 and now, my now 7 years in the government in
that period, I spent a huge amount of my time, both when I was
in the White House and OMB, on this program trying to work with
the States, State by State, to figure out who is going to
maximize revenue, who is going to get what match, and not
enough time trying to figure out how to provide better
benefits. And so I personally think it is the right set of
incentives.
Mr. Stupak. But it sort of seems like you trust the States
with the patients but not with the cash.
Mr. Scully. No. I think we trust the States to do it. It is
just human nature. If you are in a budget squeeze as a State
Medicaid director or State budget officer, and you can figure
out a way to draw down Federal money without putting up State
money, you are going to do it. And if we don't tell them they
can't, they are going to do it.
So it is not that we can't trust them. They are doing what
they are incentivized to do, and we provide a lot of the wrong
incentives. I would rather provide incentives to say you know
what you are going to get from us. We know what you are going
to put in. Let's focus on providing better care.
Mr. Stupak. But even if you did your cap program that you
want to do with that 10 percent increase and all that to take
up for growth, it really wouldn't have made any changes in the
last 3 years. As I said in my opening statement, just about
every State has had to reduce benefits. The prescription drug
cost has skyrocketed out of control. Thirty-five States have
had to reduce benefits. Even if they got that extra 10 percent,
the States would still be faced with the same situation,
wouldn't they?
Mr. Scully. I actually think most--if any State looked at
what they could have gotten last spring versus what they are
likely to get next year, it is hard for me to imagine a State
that would have had a much better deal. It is hard for me to
imagine for a State budget office that wouldn't see that. And
we had a lot of pressure on the State.
One of the things that I think, which we haven't gotten
into, it is very frustrating to me, I won't pick on--I picked
on some drug companies about this. It drives me crazy to see
what the States are spending on prescription drugs in some
cases. You know, we have got a lot of wonderful drugs that poor
people need. We have also got a lot of drugs that have generic
equivalents or have come off patent, and we spend a huge amount
of money in Medicaid buying drugs because they run on TV ads,
and low-income people have a 1 and $3 copayment, and they go
out and buy $80-a-month prescriptions with a $3 copayment
because they just saw it on television even though the drug is
identical to the one that is generic or just came off patent.
Mr. Stupak. Well, if you are talking about prescription
drugs, then you wouldn't agree with the provisions in the
House-passed bill, Medicare prescription drug plan, where the
Secretary of HHS can't negotiate drug prices. There is a bar
against it in the bill. They said the Secretary of Health and
Human Services shall not negotiate drug prices. So if you want
to bring down the price of drugs and use the purchasing powers
of whether it be the States or the Federal Government, you
would be barred against it from the legislation.
Mr. Scully. Well, that is a very--this could take a couple
of hours. I will take 30 seconds. I was one of the inventors of
Medicaid drug rebates in the 1990 legislation, I think. I am
not sure it works perfectly, but the volume of States' drug
spending then was about 8 percent of the market, and that was
enough, arguably, to give the States the ability to centralize
their purchasing power.
If I started buying--if Secretary of HHS started
negotiating drugs through Medicare, I would be buying well over
50 percent of the volume of all the United States. It just
doesn't work.
What we basically did in our program is we essentially have
tried to split the country up into drug purchasing plans so
that we would be buying in volume for seniors, but we would be
doing it locally through the market, rather than--you wouldn't
have a market if Secretary Thompson and I sat out there for 60
percent of the drug spending and just decided to negotiate
prices. We would be fixing prices, not negotiating prices. We
would be the market.
Mr. Stupak. Yeah, but you still have----
Mr. Scully. It doesn't work.
Mr. Stupak. Yeah, but the bill still doesn't allow the
Federal Government to buy at any kind of reduced rate.
Mr. Scully. What we try to do in the bill is split the
country--in our proposal is split the country up into 10
regions for PPOs and for prescription drug purchasing plans,
get 41 million seniors buying in bulk and put them in huge
groups to buy in bulk. But if I bought for all 41 million
seniors, I would be the market. What we are trying to do is
coordinate--the same thing with the prescription drug discount
card, which I have been advocating from the first day I walked
in the door, is the goal is to get seniors organized into huge
purchasing pools to have the leverage----
Mr. Stupak. But even your senior discount card, I remember
asking a question, did not encourage the use of generics. In
fact, I asked you the question on the 80 percent discount. I
forget the one drug it was, the one for stomach concerns.
Mrs. Wilson. Mr. Scully, if you could answer this question
and then----
Mr. Stupak. Even the prescription drug plan has----
Mrs. Wilson. Your time has expired.
Mr. Stupak. The Bush card never encouraged any kind of
generics. I really think that the whole situation, whether it
is the House-passed Medicaid plan that we have where Tommy
Thompson can't negotiate or the one that the President put
forward that you came and talked about before this committee,
neither one of them did anything to drive down the price. In
fact, you actually protected the price of drugs, and basically
you left the prices to the poor seniors to try to pay for.
Mr. Scully. I think what you see--and let me finish
quickly. You notice we got sued in your original drug card and
didn't do very well. We now in this bill will have clear
statutory authority to do it, and I think you will see in the
regulation that they will be very helpful toward generics.
Mrs. Wilson. Thank you.
Mr. Strickland has 8 minutes.
Mr. Brown. Mr. Strickland, could you yield 30 seconds to me
to start?
Mr. Strickland. I will happy to yield more than 30 seconds
to my friend.
Mr. Brown. I thank the gentleman.
Mr. Scully, I am unclear on something you said in response
to Mr. Stupak on the purchase of what you said, expensive
drugs. My understanding is that Medicaid can buy--if there are
two generics, two or more generics that Medicaid can buy, that
you can order the purchase to be paid for the cheapest of the
three, or at least of the two generics; isn't that correct?
Mr. Scully. That is correct with generics. What I was--I
think I was referring to something else. I don't want to pick
on particular drugs, but, you know, there are some drugs where
there is a generic equivalent now, and there is still a name
brand that is slightly different, extended time, and we pay $80
a month for that prescription, the beneficiary pays a $3
copayment, where there is a generic that might cost, you know,
$16 a month. And the fact is we are spending an awful lot of
Medicaid dollars on those types of drugs. And to give you an
example, which I probably am not going to get invited to their
Christmas party, but my most common complaint, and this is
Nexium versus Prilosec, which are extremely similar, and we are
spending $300 million last quarter on----
Mr. Strickland. Reclaiming my time. Thank you.
Mr. Scully, it seems as if we may be talking past each
other, because is it my understanding that you are saying that
your proposal is not a block grant, and it seems as if everyone
on this side is saying it is a block grant. Is it a
definitional problem, or is there a substantive difference
between a block grant and what you are proposing be done?
Mr. Scully. No, there is a huge difference, and I was--
there were block grants for Medicaid proposed 15 years ago,
where basically you take the State's Medicaid allocation, give
to the State, and let them run the program themselves. This is
totally different. The mandatory beneficiaries in the program
were required to be covered so the States would have to match
it. We would have to cover it. It is only for the optional
populations.
Mr. Strickland. So would it be a block grant for the
optional populations? Is that what you are saying?
Mr. Scully. It would be a negotiated per capita payment
amount that the States could voluntarily do. So no State would
have to--it is essentially TennCare. If you look at what
TennCare did, what Oregon did, it is a simplified bulk waiver
for your optionals, which it is just a simplified way for
Tennessee to do what they have already done with a lot less
hassle.
Mr. Strickland. So if I think I heard you correctly, you
said it is capped per person?
Mr. Scully. The calculation is a per capita spending on all
three of the various populations.
Mr. Strickland. So how does that differ from a block grant?
Mr. Scully. Well, the block grant proposals were, first of
all, 20 years ago where the entire population--where they were
static populations, didn't grow. In this case it is a per
capita amount, so if you happen to have a recession, and the
number of people grew in Medicaid, your State gets more money
per person. The block grants generally said if we are giving
you $10 billion now, we will index to that inflation.
Mr. Strickland. But the requirements associated with those
resources would be the same type of requirements or lack of
requirements that would be associated with a block grant; is
that correct?
Mr. Scully. I really don't think it is. I think the--again,
if you look at most of California's population in the Medicaid
managed care plans, they are already in exactly this type of
per capita spending cap. So the States have already come in
State by State and negotiated these arrangements in many cases.
A State like California has done it for about a third of their
program, and we are just trying to simplify it and make it easy
to understand and actually give them a better deal.
So I just--I think, unfortunately, and this just happens,
that the rhetoric kind of overtook the reality, and I think it
has been counterproductive.
Mr. Smith. Mr. Strickland, if you look at other programs
like the Maternal and Child Health Block Grant, Social Services
Block Grants, the SAMHSA Block Grant, those are block grants in
that they are discretionary. They have to be reauthorized,
reappropriated.
Mr. Strickland. If I could just interrupt here. I have here
a document from OMB which indicates that by 2013, there will be
a cut of more than $8 billion. How do you--how do you explain
that? That is, understand, an actual cut in amounting to about
2 percent, but----
Mr. Smith. Well, again, that is 8 percent, $8 billion off
what is already in the baseline. But the baseline is already
growing. Under the administration's proposal, the Federal
Government would have spent $2.7 trillion on Medicaid over the
next 10 years. In our proposal we still would have spent $2.7
trillion because there is growth built into the baseline, the 8
billion that you are referring to----
Mr. Strickland. But excuse me for interrupting, but Mr.
Brown took some of my time, so I have to hurry.
Isn't it accurate to say that the States will be getting
less money as a result of what you are trying do?
Mr. Scully. Well, if you went back and looked at that
projection which was under the arm of giving the States the
option, and we assumed half of them would do it from last
January, and went back and looked at the midsession review
budget which shows real State spending, what you will find is
that $8 billion is swamped many times over because the fact is
the States have to reduce their spending anyway. We are trying
to lock in higher levels. The Medicaid baseline for next year,
if you take that 10 years of numbers, will be way below what
our proposal is.
Mr. Strickland. But, Mr. Scully, you said the baseline
projection included projected growth in the number of people--
--
Mr. Scully. It did.
Mr. Strickland. [continuing] did you not?
Mr. Scully. We made some assumptions about the States when
they got those projections and about what the behavior would
be.
Mr. Strickland. So if you cut $8 billion, you are cutting
$8 billion from what the States would have been expected to
receive.
Mr. Scully. No, because we put it in on the front. What we
basically required was that the States that got more money in
the first 7 years would have to come back with lower rates of
growth in the last 3. And there was almost a rounding error in
$8 billion. When you look at the $2.7 trillion--I guess my
point is if you looked at the $2.7 trillion and that baseline
projection last January, I would bet if you looked at reality
right now, it is probably down to $2.6 or $2.55, because the
fact is the States are being forced to spend less.
Mr. Strickland. I just want to get for the record, though,
according to OMB, it is an $8.285 billion cut. Now, that is
OMB's conclusion.
I want to move on to just----
Mr. Scully. That may be correct.
Mr. Strickland. You know, I have got a minute and 30
seconds. The administration opposed the FMAP Federal increase
in funding for Medicaid for the States; is that correct?
Mr. Scully. Yes.
Mr. Strickland. Now, you have said, and I think others have
said, in fact, the Kaiser Commission indicated that the State
Medicaid directors were strongly in favor of the additional
resources of about $10 billion. Every State surveyed indicated
this was a needed relief. Twenty-one States indicated that FMAP
would provide general relief within their Medicaid programs. An
additional 19 States said the enhanced FMAP was going to be
used to soften or prevent cuts. In Ohio the fiscal relief
provided by FMAP prevented a cut that would have affected
60,000 low-income parents. In Missouri the fiscal relief
avoided cuts to parents and cuts to seniors and people with
disabilities.
How would reducing the long-term Federal commitment to
health care for low-income vulnerable Americans by capping
Federal funding of the program through the administration's
approach help if the economy of States continues to struggle?
This being my point: If that FMAP relief was not there, States
would have cutoff vulnerable people. Will the administration
support continued enhanced funding for future years if the
economies of these States continue to struggle and they simply
are faced with a choice of either cutting off people or the
other option is to getting additional Federal resources; what
will your response be?
Mr. Scully. Well, we will have to wait until it comes up,
but I will say that my major objection to the enhanced match,
which I think was about $10 million in the fall, was--and I put
a chart in my testimony--is there is no correlation between the
FMAP now and the FMAP then. I am not picking on Ohio, but by
our calculation Ohio's real FMAP is 4.5 percent higher than the
statutory FMAP. And if you want to pick on a State like
Mississippi, which is the poorest, that hasn't been quite as
clever, I mean, spending more money on it, my argument last
winter was you are going to split the money in the pot and put
$10 billion in, you ought to give it to the people that haven't
fudged. Why should we be handing it out to everybody whether
they have played under the rules of the program or not? And we
have essentially handed the money out across the board. And my
argument would have been let's look at the real FMAP and see
what they are getting.
Mr. Strickland. So is Ohio fudging?
Mr. Scully. Ohio is on the margins of being----
Mr. Strickland. Is Ohio fudging?
Mr. Scully. [continuing] on relatively good behavior.
Mr. Strickland. If Ohio is fudging, I invite you to come in
and solve the problem.
Mr. Scully. I have spent a lot of time talking to them, and
they have been very straightforward with us, but the fact is
that over the years there are about 27 States that have
successfully enhanced their match. Ohio is probably not in the
world champion category.
Mr. Strickland. You just said Ohio was fudging, and I want
to get to the bottom of that.
Mrs. Wilson. Okay. Thank you, Mr. Strickland.
Ms. DeGette is recognized for 8 minutes.
Ms. DeGette. Thank you, Madam Chairman.
Mr. Scully, I share your concern and repulsion for people,
States or institutions who are gaming the system, but I share
some of the skepticism of some of my colleagues about this as a
solution, and I think we should try to work together to try to
find ways to stop this kind of behavior. You may not have the
answer today to some of the questions I would like to ask, but
I would like you to supplement it if you can in writing.
You were talking about--one thing you talked about was
senior citizens gaming the system by transferring assets, and
we certainly have heard about that anecdotally over the years.
I am wondering if you are aware of any studies or evidence to
see how extensive this is.
Mr. Scully. There are a number of studies. I looked at some
last night. There were a couple--I think it was Colorado
actually has and Connecticut has a fairly extensive one. And
this has been debated in a lot of State legislatures with great
pain about what the look-back should be, what the asset level
transfer should be, how much is excluded from your assets. But
it is a fact, as a former lawyer, there is a significant bar in
this country with regard to transferring assets.
Ms. DeGette. Do you know how extensive it is?
Mr. Scully. Very extensive.
Ms. DeGette. I know a lot of States like Colorado have
enacted legislation to try to make it more and more difficult
to do this, so that is why I like--I mean, I think people
recognize it is a problem and----
Mr. Scully. I guess my solution to this, just to be clear,
is not necessarily to ratchet down this to make it tougher. You
could have a good argument about what this should be. My--one
of the suggestions that Secretary Thompson and I are working on
is that a lot of these people that are transferring assets to
their kids--for example, my mother is not wealthy.
Ms. DeGette. I am sorry. I only have a few minutes.
Mr. Scully. Okay. I will answer it after you are----
Ms. DeGette. Thanks. And something else, and this is an
issue I work on a lot, you probably know, is the
disproportionate share of hospitals. And you were talking about
hospitals gaming the system by putting in huge amounts of bills
to the State for operations that should cost less, and I was
really puzzled by that. And the reason was, as you might know,
Ed Whitfield and I have been working for a number of years on
trying to fix DSH reimbursements, and what I am wondering if
there is not some incidence of safety net hospitals putting in
these types of reimbursement requests just because they are so
desperate to get funds.
And let me just give you a little background. One analysis
recently found that hospitals lost over $9 billion on Medicaid
and uninsured patients in 2001 even with DSH funding. And if
you look at the recent statistics, DSH funding has gone down
since 1998 from $10.3 billion to $8.7 billion nationally, and
yet the number of uninsured, as we have just seen, is
increasing.
I will tell you, the DSH hospitals in my district, I don't
think they are trying to game the system. I think they are
trying to get some reimbursements for all of the uninsured
people that they are trying to treat, and I think Ed would say
the same thing if he was here.
Mr. Scully. If we could find a way to make sure they kept
the money, that would be great, but what happens was I used to
run a hospital association for 7 years, and what happens in
many cases, the hospitals transfer the money to the State. They
put it up for DSH. They get the match back, and the hospitals
either get nothing back or a small percentage, and the State
keeps the rest for other purposes. So if we can find a way to
make sure it is actually going to indigent care, I would be all
for it.
Ms. DeGette. Well, do you think we should just eliminate
DSH funding?
Mr. Scully. No. I was involved in capping. What happened--
--
Ms. DeGette. Well, what could we do to give the hospitals
the money they actually need?
Mr. Scully. Well, make sure they actually get the money,
and it doesn't get----
Ms. DeGette. Well, how are you going to do that if you
block grant all the money to States----
Mr. Scully. Well, we wouldn't block grant----
Ms. DeGette. [continuing] and make this optional?
Mr. Scully. I would be happy to work with you on trying to
make sure that the money actually goes to the hospitals because
that is where it is supposed to go. When I first discovered the
Medicaid DSH program was in evidence in 1989, it was $200
million in West Virginia and Alabama. By 1991, it was $13
billion, $12.5 billion. And we have capped it, and we have
limited it, and it is actually pretty flat.
Ms. DeGette. But that is going down. DSH reimbursements
have gone down, but the number of uninsured have gone up, and
the people at the DSH hospitals in Colorado tell me--their
problem isn't getting the money back from the State. Their
problem is the caps we have put on it through the 1997 BBA.
Mr. Scully. Well, I believe that if you actually went to
the hospitals and said to them--and they are scared to death of
this question----
Ms. DeGette. I do go the hospitals. I do ask them that, and
I also asked the hospital association that.
Mr. Scully. I been to every hospital in your district, I
believe, and I think you are right.
Ms. DeGette. Did you ask them that question?
Mr. Scully. Believe me, I am intensely familiar with this
question, and I would be happy to ask that question, but I can
almost guarantee you would find that none of them get every
dollar back that they put in.
Ms. DeGette. Let me talk to you for a minute about the
States' situation, because in your written testimony and today
in your verbal testimony, you said that one of the big problems
is States use this Medicaid money and then divert State funds
off to other purposes like highways and stadiums. And I think
that was probably true in the 1990's. But I have a State right
now where last spring the legislature faced a $900 million
deficit, and they cut--what they did then was cut $61 million
for medical programs for the poor, including Medicaid. I am
going to guarantee you they weren't saying, ha, ha, let's take
our Federal dollars and then put our State dollars somewhere
else. They don't have the money. And I think this is true in
all 50 States because according to a Kaiser report, all 50
States executed cost-containment plans in fiscal year 2003.
And so my question is instead of a complicated proposal
that we would call a block grant proposal, you would call
something else, to try to cap Federal money in the States,
wouldn't it be better for us to try to work with States on
waivers and other kinds of ways where they could really give
relief to poor people and seniors and not have to worry about
it rather than this brand new scheme?
Mr. Scully. Well, I would argue we haven't tried to cap it.
We have had a 37 percent increase in Federal spending on
Medicaid since I have been in job. So it is not like--we have
expanded coverage, we have encouraged more enrollment, we have
done everything to expand the program. What we are asking from
the States is that they actually match with matching real
dollars, and I don't think that is an unreasonable request. And
I know for a fact that Colorado is not one of the--I think you
can look at my chart. Colorado has not been one of the States
that has maximized reimbursement. They have actually generally
played very much by the rules.
Ms. DeGette. Well, we are all fiscally conservative out
there. But the point is in a place like Colorado, I think under
a scheme like this, they may actually suffer in reimbursement;
certainly some of the reimbursements for SCHIP and other
discretionary programs, but the State does not have that money,
or for DSH. They don't have the extra money.
Mr. Scully. This is purely voluntary. If Colorado looked
and said this is not a good deal for us, and we don't want to
do it, they don't have to do it. Even if our proposal passed as
it was, we assumed half the States would say this is a good
deal and take it. If they don't think it is a good deal, they
don't have to do it.
Ms. DeGette. And then I guess this is one problem a lot of
us on this side have is then you get into a real patchwork of
50 different States saying 50 different things.
Mr. Scully. It can't get to be more a patchwork than it is
now.
Ms. DeGette. Well, I think I might disagree with you on
that, because at least under current law, there is some
guaranteed benefits, and I am not sure that that would happen
under your proposal.
Mr. Scully. Every guaranteed benefit, if you are a
mandatory beneficiary under the current law, all this is
optional coverage. No State could have dropped one single
beneficiary that they are required to cover now. That was part
of the proposal, the mandatories had to be covered and had to
be matched. Any one of these two we are talking about any State
could drop tomorrow if they wanted to. We are trying to give
them the flexibility not to drop them and have more flexibility
in how they covered them, and if they didn't want to do it,
they didn't have to.
So I just think that in fairness--and I understand, you
know, I used to be a Senate staffer. I probably would have come
up with the same talking points. But in fairness, this is not a
block grant, never was, and has been largely misrepresented,
and we would be happy to start from scratch and talk about ways
to fix the Medicaid program.
Ms. DeGette. I would like to spend some time talking
particularly about DSH because I think it is being unfairly
characterized, and it really is the safety net that is keeping
sick people who are not even on Medicaid alive. And I think we
need to really figure out a way to make that system work.
Thank you, Madam Chairman.
Mr. Scully. Thanks.
Mrs. Wilson. Thank you very much, and thank you both very
much for joining us this morning. We very much appreciate your
being here, and we look forward to continuing this dialog.
Mrs. Wilson. I would at this point like to introduce and
ask to come forward the second panel that will be testifying
today. Delegate Adelaide Eckardt from the Maryland State House,
and Dr. Diane Rowland, the Executive Vice President of Health
Policy for the Kaiser Family Foundation.
Mr. Brown. Madam Chair, could I ask unanimous consent to
offer these letters from various groups in the record about the
whole issue of block granting and caps and all of that?
Mrs. Wilson. Without objection.
Thank you. Thank you both very much for joining us today.
We have--your entire statements will be put into the record.
And I would ask you each to summarize your remarks and share
with us the high points of your remarks, and then we will open
it up for questions.
STATEMENTS OF HON. ADELAIDE ECKARDT, REPRESENTATIVE, MARYLAND
STATE HOUSE; AND DIANE ROWLAND, EXECUTIVE VICE PRESIDENT,
HEALTH POLICY, KAISER FAMILY FOUNDATION
Ms. Eckardt. Good afternoon. I am Delegate Addie Eckardt
from the Eastern Shore of Maryland, and I am here today to
share with you my thoughts on Medicaid reform.
I would like to start by saying we really are in the best
and worst of times. We are very fortunate because we do have a
Medicare program, and we do have a Medicaid program. The
Medicaid program, I would say, has been very successful in
attempting to provide health insurance, health coverage for
those most vulnerable citizens in our constituency and our
States. But I would suggest to you, and I am going to kind of
cut to the chase, that there are a couple of things that we
need to keep in mind as we proceed.
I believe, Mrs. Wilson, you suggested that we need to look
at the elements of wellness, of personal responsibility, of
caring for families as we proceed, and I am going to underline
a number of the strategies to facilitate reform that have
already been stated.
First of all, I believe that there does have to be
continued flexibility for the States both to give them a better
way to deal with eligibility and with the benefit structure.
And I am going to use one of the examples that happened to us
in Maryland. We had a program a number of years back called
Kids Count, which we attempted to use some Medicaid funds to be
able, along with State funds, to provide some health care for
kids, but we did that before the SCHIP program. When the SCHIP
program came along, then we kind of were penalized because we
thought we could just roll our Kids Count program into the
SCHIP program, and because there were certain requirements for
both eligibility and benefits, we weren't able to do that. And
we thought that may have been a more cost-effective way, while
providing an essential benefit package to more kids.
What happened is that we had to go back and look at a
number of different options and waivers to be able to then do
the SCHIP program. We expanded that program to go way above the
Federal poverty level to above 300 percent a number of years
back. And, in fact, we were so diligent with our enrollment
that we funded--I projected funding for about 60,000 children,
and we wound up having over 100,000, which left us with a
little bit of a shortfall.
This past year in our legislative session, we went back to
revisit how we looked at that program, and, in fact, we did
limit the enrollment for the high end for those people at 300
percent of poverty while we left open the lower-end program,
which was for those people below the Federal poverty level,
which we thought was important.
The reason I am sharing that with you is that I think
there--because we need that additional flexibility because we
have found that even as we expanded the program, we weren't
enrolling all of those people who are most vulnerable and most
poor. And I suggest that we might use the SCHIP program in
thinking about our seniors.
Maybe we need an SCHIP program to include our dually
eligible population, which is presented as, you know, another
dilemma because of the high cost of the increasing cost of
long-term care. If we could look at the dual-eligible and maybe
get some pilot programs, as you have done a lot of the
demonstration waivers, both with funding from Medicare and from
Medicaid, to be able to then institute a truly managed care
program--and I say managed care in quotes because I don't mean
a managed cost program. You are exactly right when you talk
about a lot of our health care delivery system is based on what
is reimbursed, not what is in the best interest of the
populations that we serve--in States I believe are truly
genuine in their attempt to provide the best care, the most
cost-effective care to our most vulnerable populations. And I
think they, in fact would be able to do that.
I think we also need to take a look at the life span. If
you are talking about kids and you are talking about senior
care, you have everybody else in between. We fund low-income
pregnant moms and kids, but there is no provision for low-
income dads. And so you get a very difficult situation,
particularly when it comes to things like dental care and other
kinds of care.
We would like to treat the family as a whole, and we have
tried to figure out in Maryland where is the best place to do
that and how is the best way to do that. So even though we are
putting a lot of energy into the SCHIP program, which I think
is good, and it is almost like a front-loaded program, we need
to put our dollars there right now and make sure we have
efficient programs in the States, giving the States the
flexibility, because my premise is that over the long haul,
those individuals in those programs will value medical care.
We have instituted some copays and some premiums at a
nominal level, because my experience, my 30 years experience in
working in psychiatric and mental health care, is that when
people are able to pay a little bit, then they take some
personal responsibility and some ownership. If you look at our
federally qualified health centers, they will tell you that if
individuals pay a little bit on a copay when they come into the
center, they think twice about calling the center and walking
in for every cold, every sniffle, every concern that they have
with their kids or with their families.
So I think we do have to institute measures along the way
to help people, A, value health and wellness and be able to
maintain an element of self-sufficiency as they move forward
and not to erode the existing private health insurance market.
So all of these things have to be taken into consideration when
you move forward and take the Federal program and figure out
how you provide the most--the best resources or resources to
the State so that they can get out of the patchwork quilt
business.
One other way I think we need to move forward is to provide
tax deductions for long-term care insurance. I would like to
see, personally, tax deductions for any health insurance
because I think that again builds those incentives, but long-
term care insurance would be a place to start.
The other thing that has been talked a lot today has been
the way that folks divert their financial resources when you
have to go into a nursing home, and that is a very prevalent
practice, and it is spread by word of mouth, and it is spread
sometimes by well-meaning organizations. And I think why that
happens is because many people find that the kind of care that
they need, because they wait too long, is through the Medicaid
system and through the Medicaid reimbursement.
My mom had a stroke a number of years ago. She was healthy
most of her life. So I agree with the fact that most of the
health care dollars are spent in the last year or two of an
individual's life. She had a stroke. She had some financial
resources, but she had a stroke in one State. She was sent to
another State for health care. And then it became like an
assembly line. Whoever pays for what is what she got, not what
she needed. And I would say to you that ultimately we brought
her back to Maryland. She did have the financial resources, so
we were able to provide a degree of care for her, but it was
not what I would have desired. It was choppy, it was
insensitive, it was disrespectful, I think, of her, and of the
family, and we were left on our own.
And I am a health care provider, and I hear the story over
and over again. I have worked diligently for over 30 years to
be able to make a contribution to health care so that all of
our citizens have access to health care, and I will continue to
champion that. So I would urge you, and I would suggest, that
now is a good time to look at reform. It is good to look and
take an evaluation of the programs that we have because you
have a very daunting task. Are the States in budget crisis?
Yes, they are. But I think, again, this is a good time to look
at that because I believe States are going to be very conscious
about how they deliver health care to their citizens, because
it will be too costly if we don't do otherwise. Thank you.
[The prepared statement of Hon. Addie Eckhardt follows:]
Prepared Statement of Hon. Addie Eckardt, Delegate, Maryland State
House
Medicaid the government program that pays for the costs of
providing health care coverage to 44 million low-income individuals
continues to be a significant program across the country. Over the
years efforts continue to provide for the most vulnerable citizens.
States and the Federal Government fund the program jointly, with the
respective percentages for each state determined by the use of the FMAP
(Federal Medical Assistance Percentage) formula that is based on the
state per capita income. In the fiscal year (FY) 2001, total Medicaid
expenditures totaled $228 billion, with the federal share equaling
approximately 57 percent of the total. The federal share of the
Medicaid expenditures currently represents 7 percent of all Federal
outlays, while the state share of Medicaid spending accounts for
between 15 and 20 percent of states' total expenditures.
Medicaid covers health care expenses for four primary low-income
populations: 1) children, 2) parents of children and pregnant women, 3)
the aged, and 4) the blind and disabled. Approximately three quarters
of the current Medicaid population consists of children and other
adults, with the remaining quarter consisting of the aged and disabled
persons. The aged and the disabled, however, consume two-thirds of all
Medicaid expenditures, principally through their use of long-term care,
pharmaceuticals and related services. Statutory mandates require that
states cover certain populations, e.g. children under age 5 with family
incomes below 133 percent of the Federal Poverty Level (FPL), while
states may elect to cover other ``optional'' populations, such as
children age 6-19 with family incomes at or below 100 percent of FPL.
Medicaid covers two distinct types of health care services: those
that are statutorily mandated and those that are optional. Statutorily
mandated services include inpatient and outpatient hospital care,
physician services, early and periodic screening, diagnostic and
treatment services and immunizations. Optional services include
outpatient prescription drugs, dental care and vision for adults. About
two-thirds of all Medicaid expenditures are attributable to services
for optional populations and benefits.
According to a report by the Kaiser Commission on Medicaid and the
Uninsured, States are beginning what is for some the fourth consecutive
year of fiscal stress. State tax revenues declined significantly in
2002 and remained at that low level throughout 2003. As they completed
their 2003 fiscal year and developed budgets for the fiscal year 2004,
states faced total budget shortfalls of at least $70 billion. To close
these large budget gaps, states reduced planned spending and some began
to raise taxes and fees. After the beginning of fiscal year 2003,
states reduced budgeted spending levels for the year, and many states
proposed to reduce fiscal 2004 spending.
These fiscal conditions place significant pressure on Medicaid, the
state/federal program that funds health and long term coverage for 51
million low-income Americans. Medicaid is generally the states' second
largest budgeted item. At the same time that the state revenues have
fallen, spending on the Medicaid program has been increasing
significantly, reflecting increasing health care costs and the growing
number of people living in poverty as a result of the weak economy.
States have been implementing many new measures to control their
budgets in the face of the declining revenues. The Kaiser Foundations'
report outlines their conclusions all of which, I believe, reflect a
need to reform Medicaid at the Federal level. I am here today to share
with you my thoughts for your consideration as you review the Medicaid
program, the increasing numbers of uninsured and underinsured, and our
declining revenues.
The Medicaid program serves an important role in the provision of
health care for some of the sickest and most vulnerable citizens in
this country. It has been very successful improving care to individuals
who would otherwise be without health care. For instance, in Maryland
all children below the federal poverty level have access to care,
including for the first time ever access to Treatment for Substance
Abuse and Mental Health. This has resulted in a proliferation of
providers for those services. Also in Maryland in our enthusiasm to
provide coverage for as many kids as possible we enrolled more than we
anticipated and funded. When we, on the budget committee attempted to
freeze the enrollment of the program until the funding levels equaled
the service demands, we were accused of limiting services. It is
important to me that a program work efficiently before expansion
occurs. Probably some advocates may characterize any effort to reform
and improve Medicaid as an attempt to dismantle the program. This is
simply not the case. In fact, as a health care provider/RN, I am
committed to ensuring that Medicaid beneficiaries continue to receive
access to high quality care and I believe that we can improve the kind
of care they receive and how it is provided.
reform measures
There are many challenges currently facing the Medicaid program.
One of the primary problems is that the current rules limit the states'
ability to provide the best care to the most needy citizens. The
current Medicaid structure attempts to impose one set of rules and
provide one standard set of benefits to a varied and diverse Medicaid
population state by state. Moms and kids, the elderly, and the disabled
all have different needs and would benefit from very different coverage
packages. States need flexibility to determine eligibility and tailor
different benefit packages to best meet the needs of these populations,
rather than having to adhere to the fixed prescriptive formulas for
eligibility and benefits.
Until recently states have not been allowed to design
individualized packages without losing the federal monies. We in the
states have appreciated the increased flexibility given in the SCHIP
program, which gives states a greater degree of autonomy and control in
how they design their benefit structure and provide coverage for
children. States can tailor their programs consistent with
beneficiaries' needs and existing government structures. States are
under tremendous fiscal constraints, but cannot afford to drastically
limit benefits because of the increasing pressure on our hospitals for
treatment when other measures fail. If health care is not offered early
through community based services and as we face the increasing numbers
of citizens needing long-term care, our costs will continue to soar.
The emphasis will continue to be on the more expensive inpatient care.
The pressure will also continue to remain on the use of Medicare
dollars. Many of our most vulnerable citizens need comprehensive
coordinated services that can be provided in the community. Careful and
thoughtful attention is important, as states design effective programs
using the available Medicaid funds.
Flexibility also needs to be considered as we find solutions for
the dually eligible Medicare-Medicaid beneficiaries. In Maryland within
the Medicaid program 80 percent of the health care dollars are spent by
20 percent of the beneficiaries. Long-term care costs are increasing
with the increasing numbers of seniors. Can we think about allowing
states to use monies from both programs to institute managed care for
this population. The coordination of care would improve and many states
would welcome the opportunity to develop pilot projects. What have we
got to loose. Most states want to provide quality care to families and
flexibility is the key.
Another challenge facing Medicaid is how to deal with the culture
of dependence that entitlement programs can sometimes breed. My state
of Maryland has had tremendous success in interrupting the cycle of
dependence in our Welfare to Work program. We have been able to work
with individuals as they enter the workforce and assume productive
roles in society. We also are taking advantage of the federal programs
to allow those disabled individuals who are working to increase their
earnings and not loose their healthcare benefits.
The culture of dependence in Medicaid can lead to over utilization
of services. It can inhibit more and more individuals from taking
personal responsibility for obtaining their own health insurance, when
it is available. When we increase the availability of free health care
to higher income groups, we fail the poorest citizens and provide
disincentives for employer sponsored coverage.
Another problem is that of individuals inappropriately attempting
to gain Medicaid coverage for expensive services such as nursing home
care and prescription drugs. A veritable cottage industry has developed
to coach individuals in ways to shift and/or hide their assets in ways
that will allow them to qualify for Medicaid. This type of abuse
undermines the public trust in these programs and most importantly
takes dollars away from the care of those persons who need it most and
for whom Medicaid was intended to protect. Strong measures need to be
taken to prevent this practice.
Prescription coverage is essential as we face the long-term care
and increasing senior population. Without a Medicare Prescription
coverage option, Medicaid foots the costs of those citizens who make
difficult choices when the options include whether or not to buy food,
fuel or medication. If the medication prescribed is difficult to obtain
due to cost, citizens do not follow their plan of care and again the
result is the utilization of hospital care. It is absolutely critical
that we create a new drug benefit within the Medicare program to
provide this assistance to our most vulnerable low-income citizens.
Prescription drugs are the fastest growing expense within our states
Medicaid budget, and individuals who are dually eligible are some of
our biggest consumers of these drugs within the existing Medicaid
benefit. Creating a new Medicare drug benefit will also allow for
better coordination of care for Medicare services, which can lead to
better clinical outcomes for these people.
In summary I have attempted to share with you my thoughts regarding
Medicaid reform. I have reviewed the current Medicaid programs and some
of the current information that the Kaiser Commission has presented
about the States' response to their increasing fiscal crisis and
increasing numbers of uninsured. As the county slowly comes out of our
economic decline, now is the time to do something and reform Medicaid
to prepare for the future. States have been doing the best with what
they have patching their public health care system with whatever they
can find to provide for the most vulnerable citizens. It is the right
thing to do.
There are simply several ideas to keep in mind. Give states more
flexibility--there are too many restrictions for managed care in the
types of organizations and in regard to quality and access. Give states
increasing flexibility with eligibility and benefits. Provide a way to
limit the practice of hiding assets so that individuals have to utilize
Medicaid. Encourage the use and tax relief for long-term care
insurance. Develop pilot programs using Medicare and Medicaid funding
to allow states to offer a managed care program for these individuals.
Or better yet let the states develop plans and fund them on their
creativity and ability to make the best use of the dollars for their
populations. Provide incentives for states that promote health and
personal responsibility and significant positive health outcomes.
Remember that government closest to the people is the most effective
and most responsive. Let the states decide whether they want to cover
fewer people with more coverage or whether to cover more with fewer
benefits.
I appreciate the opportunity to come before you today and on such
short notice. It is important to me that we spend taxpayer's money
wisely but together figure out a way to provide affordable quality
health care to our constituents. I look forward to working with you.
Mrs. Wilson. Thank you very much.
Dr. Rowland.
STATEMENT OF DIANE ROWLAND
Ms. Rowland. Thank you. It is a pleasure to be with you
today and to talk about the Medicaid program and the role that
it plays.
Medicaid is, in fact, the linchpin program that addresses
the health and long-term care needs of this Nation's low-income
disabled and elderly populations, and children and families. It
is, in fact, the glue that fills the many cracks in our
fragmented health care system, and as we have heard so often
today, it shares many of the ills that face our overall health
care system.
Its most widely acknowledged role is as the source of
health insurance coverage for 38 million low-income children
and parents, and it has kept millions of poor children and
their parents from adding to our growing uninsured population.
As the census numbers that came out last week reveal, in the
absence of Medicaid, we would have had an increase of 4 million
instead of just 2.4 million to our uninsured population.
However, for Medicaid it is the coverage of the health and
long-term care services of the 8 million people with
disabilities and 5 million low-income elderly that dominate the
spending. And Medicaid is also the program that enables the
Medicare program, in fact, to work for 7 million of Medicare's
sickest and most poor beneficiaries, one-quarter of whom are in
nursing homes. These dual-eligibles account for 14 percent of
Medicaid beneficiaries and 42 percent of all Medicaid spending.
Spending for them on prescription drug coverage alone
represents 6 percent of total Medicaid spending and nearly half
of all Medicaid spending on prescription drugs.
The structure of our Medicare program provides States with
the ability and the flexibility to broaden coverage beyond
Federal requirements and to expand as need arises. About 65
percent of all programs--spending in the program is, in fact,
at State option, and of that optional spending, 83 percent goes
to care for the aged and disabled population, with the bulk
being for long-term care and prescription drug coverage.
However, I would note that despite the rhetoric, Medicaid
is actually a low-cost program given the population it covers.
When we do adjustments for the health status of the population
to compare Medicaid to private insurance, we see that spending
per capita is actually lower in the Medicaid program than for
the privately insured. Medicaid spends more overall because it
covers a sicker population, not because it offers a broader
benefit package. And despite the creative financing discussions
that we have had earlier, the overwhelming share of Medicaid's
dollars still actually go to pay for the care of our poorest
citizens. And there is a growing cost of care for the elderly
and disabled because of their greater health care needs.
When we look at spending increases, we have heard a lot
today about enrollment expansions, but, in fact, of the
increase in Medicaid spending from 2000 to 2002 of $50 billion,
60 percent of that was for the care of elderly and disabled
individuals. So it is not our expansions to children that are
the major culprit.
But nonetheless, Medicaid spending has risen in recent
years with the downturn in the economy and rising health care
costs. However, the good news, or the bad news if Mr. Scully's
numbers were right, is that in fiscal 2003, the rate of growth
in Medicaid spending fell by nearly a quarter to 9.3 percent, a
marked contrast to the 13.9 percent increase we saw in private
insurance premiums in that year.
As the States grapple, in fact, with their severe revenue
shortcomings, there is a growing pressure to restrain Medicaid
spending. Although it is the decline in State revenues and not
the increase in Medicaid spending that is the major contributor
to State budget shortfalls, nonetheless as a major budget item
Medicaid is also being looked at for savings. Over the past 3
years, in fact, 34 States have had to reduce eligibility or
even more restrict their health care benefits for those being
covered. The fiscal relief offered by the Congress has made a
difference and moderated many of these cuts, but as you know,
this relief will expire at the end of 2004.
The strategy States have undertaken appear to have been
successful in reducing the rate of Medicaid spending growth,
but they also raise real questions about how the program will
be able to meet the health care needs of low-income people
whose numbers are growing. There are no easy answers to
reducing the cost of providing care to over 50 million
Americans who now depends on Medicaid. They are low-income
children, but they are also persons with chronic mental illness
and retardation, those with HIV/AIDS, poor Medicare
beneficiaries, and those with severe physical and mental
disabilities. The cost of caring for this population is high,
reflective of their serious health problems, not excessive or
unwarranted spending by the program.
Program costs grow in response to downturns in the economy,
the needs of an aging population and emerging public health
crises and emergencies, and Medicaid's financing structure
allows the program to respond. As we look to reform this
program, we should be looking at finding ways to support and
maintain essential coverage, to make sure that the coverage
provided is meeting the health care needs of the population
served, and to make sure that we are getting the kinds of
health outcomes from those dollars that are warranted. Assuring
that financing is adequate to meet the needs of America's most
vulnerable and addressing our growing uninsured population
ought to be among our Nation's highest priorities and a real
commitment of our resources.
Thank you, and I welcome your questions.
[The prepared statement of Diane Rowland follows:]
Prepared Statement of Diane Rowland, Executive Vice President, The
Henry J. Kaiser Family Foundation, Executive Director, Kaiser
Commission on Medicaid and the Uninsured
Mr. Chairman and members of the Committee, thank you for inviting
me to appear before the Committee today to discuss the issues and
challenges facing Medicaid in providing health and long-term care
coverage for the low-income population. I am Diane Rowland, Executive
Vice-President of the Henry J. Kaiser Family Foundation and Executive
Director of the Kaiser Commission on Medicaid and the Uninsured.
The Kaiser Commission on Medicaid and the Uninsured is a 16 member,
bi-partisan national panel established by the Kaiser Family Foundation
in 1991 to serve as a source of information and analysis on the
Medicaid program and health and long-term care coverage of the low-
income population. I am pleased to be here today to share the work of
the Commission.
Medicaid Today
Since its enactment in 1965 as companion legislation to Medicare,
Medicaid has operated as a federal and state partnership to meet the
health needs of the nation's most vulnerable populations. It has
evolved from a program providing federal financing to states for health
coverage of their welfare population to a program that now provides
health and long-term coverage to 51 million low-income Americans at an
annual cost to the federal and state governments of $205 billion in
2002. It is now the nation's largest health care program.
In our fragmented health care system, Medicaid is the linchpin
program that addresses the health and long-term care needs of this
nation's low-income disabled and elderly populations and families and
children. Medicaid has a broad reach--it is the source of health
insurance coverage for 1 in 5 American children and over a third of all
Hispanic and African-American children, but it also provides health and
long-term care coverage for 60 percent of nursing home residents, 44
percent of people living with HIV/AIDS, 20 percent of people with
severe disabilities and 15 percent of Medicare beneficiaries (Figure
1).
In meeting these needs, Medicaid accounts for nearly one of every
five dollars of health care spending, nearly one of every two dollars
spent on long-term care and over half of public mental health spending.
Medicaid assists, on average, over one in ten state residents and is
the largest source of federal support to states and a major engine for
state economies, supporting millions of jobs across the country (Figure
2).
Medicaid's most widely acknowledged role is as the source of health
insurance coverage for 38 million low-income children and parents. By
providing fundamental health insurance protection, Medicaid keeps
millions of poor children and their parents from adding to our growing
uninsured population. With the enactment of the State Children's Health
Insurance Program (SCHIP) in 1997 and the Medicaid expansions over the
last decade, Medicaid and SCHIP now have the potential to reach all
low-income children. Although more needs to be done to broaden outreach
and facilitate enrollment to achieve full participation by all eligible
uninsured children, the latest census numbers show that public coverage
through Medicaid and SCHIP helped to offset the decline in employer
coverage. While the number of uninsured grew by 2.4 million in 2002,
Medicaid coverage kept another 1.6 million from being added to the
uninsured and maintained coverage for children.
It is not, however, Medicaid's role as a health insurer of low-
income families that provides Medicaid's most unique or costly
undertaking. Medicaid's role in assisting 8 million low-income people
with disabilities and 5 million low-income elderly people with both
medical care and long-term care services dominates Medicaid spending.
Although children account for half of all Medicaid beneficiaries, they
account for only a small share of spending. Together children and their
parents represent three-quarters of all beneficiaries and 30 percent of
all spending, while the elderly and disabled account for a quarter of
beneficiaries and 70 percent of spending (Figure 3). In 2002, per
capita expenditures per child were $1,500 compared to $11,800 per
disabled beneficiary and $13,100 per elderly Medicaid beneficiary.
Higher utilization of acute care services coupled with long-term care
spending for the elderly and disabled account for the difference
(Figure 4).
For low-income Medicare beneficiaries Medicaid coverage is
particularly important. Although Medicare provides basic medical
coverage, the required cost-sharing and gaps in benefits, most notably
lack of prescription drug or long-term care coverage, leave many holes
to be filled by Medicaid. The 7 million individuals with both Medicaid
and Medicare--the ``dual eligibles''--are among Medicare's poorest and
sickest beneficiaries. In addition to having low-incomes, these dual
eligibles are also more likely than other Medicare beneficiaries to be
in poor health, suffer from chronic diseases, and have limitations on
their activities of daily living leading to long-term care needs
(Figure 5). As a result, the dual eligible population accounts for 14
percent of Medicaid beneficiaries, but for 42 percent of all Medicaid
spending (Figure 6). Spending on prescription drug coverage alone for
the dual eligible population represents 6 percent of total Medicaid
spending--$13.4 billion in 2002--and represents approximately half of
all Medicaid spending on prescription drugs.
The structure of Medicaid provides states with federal matching
funds for coverage of mandatory populations and services, but also
enables states to obtain federal matching funds for a wide range of
optional services and broader population coverage. Most notably, states
are required to cover all children under the poverty level and most
aged and disabled recipients of cash assistance under the Supplementary
Security Income (SSI) program and have the option to cover children at
higher income levels, their parents, and other low-income elderly and
people with disabilities in the community and in nursing homes.
However, coverage of non-disabled childless adults is not an optional
category for coverage. With regard to benefits, states must cover basic
physician, laboratory, and hospital services, but many benefits,
including prescription drug coverage and community-based long-term care
are covered at state option.
Although the configuration varies from state to state, about 65
percent of all program spending is at state option. However, in meeting
the health and long-term care needs of the low-income population, the
legislative language of ``State Option'' hardly applies to the
population's need for the services covered--83 percent of optional
spending is for the aged and disabled population and the bulk is for
long-term care and prescription drug coverage (Figure 7). Without these
``optional'' services and the broadened coverage at state option of the
aged and people with disabilities, millions of America's poorest and
sickest people would be without essential health and long-term care
services.
Moreover, despite its comprehensive coverage of services and
limited cost-sharing, Medicaid is in reality a low-cost program when
compared with other health care spending. Among children, per capita
expenditures for those in Medicaid are significantly lower than for
their privately insured counterparts (Figure 8). While per capita
expenditures for adults in Medicaid are higher than the corresponding
amounts for low-income adults who have private coverage, this is due to
the much poorer health status of the adult population enrolled in
Medicaid. When adults with disabilities are excluded from the analysis
of both Medicaid and private insurance, per capita expenditures are
significantly lower for Medicaid adults than for the privately insured.
Medicaid spends more because it covers a sicker population.
Although Medicaid is a substantial investment of federal and state
dollars, it also provides an effective return on that investment in
terms of improving access to care for our low-income population.
Medicaid does a particularly good job in helping low-income populations
close the gap in access to care and in connecting people to the health
system. Uninsured children and adults are less likely to obtain medical
care and more likely to postpone needed care and lack a regular source
of care than those with Medicaid coverage (Figure 9). Among the elderly
and disabled with Medicare coverage, Medicaid supplements Medicare
coverage and provides access comparable to those with private
supplemental insurance and notably better than that experienced by the
population covered with Medicare only (Figure 10).
Medicaid Spending
These roles make Medicaid both a complex and costly program.
Medicaid is complex because it is not a single program, but an array of
services and programs under a single name, structured and operated
somewhat differently in each of the 50 states and the District of
Columbia. It is a costly program because health care, and especially
long-term care, in America is expensive and Medicaid covers those with
among the most substantial health care needs--including those with
severe disabilities and chronic health problems requiring on-going
care.
Medicaid spending is determined by the number of people covered,
the cost of their medical and long-term services and the amount of
services used. During the early 90s, Medicaid spending growth was
particularly high, largely due to the use of provider taxes and
donations and other financing mechanisms used by states to gain
additional federal matching funds (Figure 11). Once these practices
were curbed, Medicaid spending growth returned to levels more
consistent with private spending and reflective of expanding coverage.
A notable drop occurred in the period surrounding welfare reform,
largely due to individuals losing Medicaid coverage during the welfare
reform transition. This was also a time when cost increases for the
private health insurance were at an all-time low (Figure 12). In recent
years, Medicaid spending has increased as enrollment has grown and the
cost of medical care has risen for both the public and private sectors.
Over the 2000-2002 period, Medicaid expenditures for services grew
by 12.9 percent overall--a rate comparable to the increases seen for
private health insurance premiums. Although Medicaid is historically a
low-paying purchaser of health care services, there is continual
pressure on the program to keep pace with payment rates in the private
sector in order to maintain access to care for Medicaid beneficiaries.
As a result, the spiraling costs for health care also impact Medicaid.
Just as for private insurance, prescription drugs costs had the highest
rate of growth among Medicaid services, increasing 18.8 percent from
2000 to 2002 (Figure 13). However, after several years of rapidly
accelerating Medicaid spending growth, in FY 2003 the rate of growth in
Medicaid spending fell by nearly a quarter, to 9.3 percent. This rate
of growth, which is still substantial, stands in marked contrast to
growth trends for employer-sponsored health insurance, which continue
to increase and reached 13.9 percent that year.
The rapid Medicaid spending growth has been driven, in part, by
enrollment increases resulting from the loss of income and private
insurance coverage during the current economic downturn, together with
continued increases in hospital and prescription drug costs that have
affected the entire health care sector. Yet, Medicaid spending
increases on a per capita basis remained substantially lower than
increases in per capita spending in the private sector--from 2000 to
2002, Medicaid per capita spending increased on average 8.6 percent
compared to over 12 percent increases in private insurance premiums per
person. Moreover, Medicaid enrollment growth also helped to soften the
recession's effects, stemming further increases in the number of
uninsured. However, the increased enrollment of low-income children and
parents is not the major driver of Medicaid spending increases--it is
the cost of care for the elderly and disabled who depend on Medicaid to
fill Medicare's gaps and provide assistance with both acute and long-
term care needs. The elderly and individuals with disabilities
accounted for almost 60 percent of the $50 billion growth in Medicaid
spending from 2000 to 2002 due to their extensive need for health
service and their use of costly long-term care coverage (Figure 14).
The State Fiscal Challenge
At the same time as these pressure push Medicaid spending up,
states are facing extremely challenging fiscal conditions, and have
been for several years. State tax revenues declined significantly in
2002 and remained at that low level throughout 2003 (Figure 15). The
recent falloff in state tax revenue is large even by the standards of
recent history---the decline in state tax revenue is twice as big as it
was in either of the two most recent recessions. Moreover, it is this
revenue falloff, not the recent increase in Medicaid spending, that has
been by far the major contributor to state budget shortfalls, which
reached more than $70 billion this year.
As states have grappled with the challenge of balancing their
budgets in the face of declining revenues, most have devoted
significant attention to implementing new measures to control their
Medicaid spending growth. For fiscal year 2003, every state and the
District of Columbia has put in place some Medicaid cost containment
mechanism. Over the past three years, 34 states have reduced
eligibility and even more have restricted health care benefits (Figure
16). These strategies appear to have been successful in reducing the
rate of Medicaid spending growth, but they also raise real questions
about how the program will be able to meet the health care needs of
low-income people, whose numbers are growing.
The outlook for state budgets in FY 2004 and 2005 remains
challenging. The state revenue picture remains depressed. Spending
pressures continue to build. States have exhausted a lot of one-time
measures they have used to balance their budgets. Medicaid expenditure
assumptions in FY 2004 appear optimistic, and Medicaid budget
shortfalls are likely in a majority of states. Finally, the federal
fiscal relief Congress provided in June, which helped states avoid
making additional and deeper changes to their Medicaid programs this
year, expires at the end of fiscal year 2004. This, along with present
expectations of low revenue growth, will leave states with significant
gaps in their budgets for FY 2005. As states enter another year of
Medicaid cost containment, they will continue to struggle to balance
the health needs of their low-income citizens with the need to close
what are for many states gaping holes in their overall state budgets.
Looking Ahead
Medicaid's role in providing health and long-term services to our
nation's most vulnerable people and its widening safety net
responsibilities have brought notable improvements in coverage of low-
income families and assistance to the elderly and individuals with
disabilities. As the primary source of financing and coverage for the
low-income population, Medicaid has been a critical force in moderating
the growth in America's uninsured population over the last three
decades. Without Medicaid, millions of our nation's poorest children
would be without health insurance. And, Medicaid continues to provide
coverage beyond that of private insurance or Medicare to the most
vulnerable and frail in our society--acute and long-term care services
for persons with chronic mental illness and retardation; medical and
long-term care services and drug therapy for those with AIDS;
assistance with Medicare's premiums and cost-sharing and prescription
drug coverage for poor Medicare beneficiaries; and home-based and
institutional care for those with severe physical and mental
disabilities that require long-term care. In the absence of Medicaid,
it is hard to envision how these enormous societal needs would be met.
Yet, one of the most daunting challenges facing Medicaid's future
is how to meet the growing need for health and long-term care coverage
within the constraints of federal and state financing. The fiscal
situation in the states, coupled with the growing federal deficit,
makes assuring adequate financing and meaningful coverage for low-
income families, the elderly, and people with disabilities a growing
challenge. Yet, it is a challenge we must meet with responsible
proposals that assure that the most frail and vulnerable among us are
protected and able to obtain the health and long-term care services
they need.
There are no easy answers to reducing the cost of providing care to
the over 50 million Americans who now depend on Medicaid for health and
long-term care assistance--the poorest, oldest, frailest, and most
disabled of our population. The cost of caring for this population is
high, reflective of their serious health problems, not excessive
spending by the program. Program costs grow in response to downturns in
the economy, the needs of an aging population and emerging public
health crises and emergencies. Efforts at reform should be directed at
finding ways to support and maintain the coverage the program offers
while balancing the responsibilities for coverage and financing between
the federal and state governments. Assuring that financing is adequate
to meet the needs of America's most vulnerable and addressing our
growing uninsured population ought to be among our nation's highest
priorities.
Thank you for the opportunity to testify today. I welcome your
questions.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mrs. Wilson. Thank you both very much. I think I will start
out here with a few questions.
Addy, how would your mom's care have been different--if we
gave you a magic wand and you could change the Medicaid system,
how would you change it so that your mom's experience would be
different?
Ms. Eckardt. I am very biased.
Mrs. Wilson. Bias is okay.
Ms. Eckardt. I am biased in that. I would have liked to
have somebody who had managed her care, somebody who truly--who
had managed her care, not managed, as again I said, the cost.
The insurance companies--and again, she was partly on the
insurance company, and that was a problem. It is a problem
across State lines because States differ. We could not have had
her--she was from--living in Delaware. We thought she was in a
facility where there was managed care in that facility, and
that wasn't true. We thought it was assisted living, and that
really wasn't true because I didn't realize that what it
constitutes, assisted living, in one State is not assisted
living in another State.
So, I mean, there are some the things that we have tried to
deal with in Maryland with the community services waiver, long-
term care and community services waiver. She went to
Pennsylvania, and, of course, then their reimbursement differs
for hospital care. So they wanted her out of there as soon as
possible, and she couldn't go back to where she was. We wound
up bringing her back to Maryland thinking, well, when her
resources run out, we know Medicaid will pick it up. Well, that
is when I learned how people deal with spending down because I
was--everybody tells you, they have been there, and they now
how to divert the money so that you can wind up qualifying for
the medical assistance component.
I would have liked somebody to have worked with her to
really facilitate the prescription end of it for the--because
for the first time she had to take like 12 different
medications, and it was costing us like--would have cost about
$800 a month or more. So that eats up resources right then and
there.
And the physicians didn't talk to each other. And I thought
from my nursing experience, nurses are good ones to be able to
get people to talk together who usually don't talk to each
other, and that may have facilitated her care.
If she had had a little bit more time for rehab, that would
have made a difference because I think she came out
prematurely, and I--of course, what happens then, people get--
if they are not managed well, they wind up getting heart
attacks, and then they go the hospital, and then they get more
expensive hospital care. And I thought a lot of that was
unnecessary. And that is the same story I hear from lots of
constituents.
Mrs. Wilson. Okay. Dr. Rowland, in your testimony you
talked about Medicaid, and in particular that Medicaid spends
less for children than the comparable private insurance plans.
And I think the words that you use, in the written testimony
anyway, it is an effective return on investment in terms of
improving access to care for our low-income population. Do you
have data or does the Kaiser Family Foundation have data on not
just improving access to care, but does it improve health
outcomes compared to those with private insurance?
Ms. Rowland. There is very limited data, obviously, on the
improvement in health outcomes because we don't tend to track
Medicaid populations over time. That requires really a
longitudinal study. There are some limited studies that have
shown, obviously, that those who are uninsured have poorer
health outcomes than those with insurance, and Medicaid is
included in the insured population. But the length of time for
health insurance purposes that people are on the Medicaid
program has generally been too short to pick up some of the
health outcomes that you are talking about.
In addition, there is really virtually no data collected at
the State level on the Medicaid program or on the outcomes for
the population.
Mrs. Wilson. In your experience with Kaiser, and I know you
work with a lot of States in looking at the different health
care programs, are there States who do have good--who are
models for looking at improving health status as opposed to
just paying for the bills as they come in and managing the
claims?
Ms. Rowland. We think that many of the States have really
tried through their use of managed care to provide for a better
medical home for many of the Medicaid children that are
enrolled in the program, but when we look at the patterns of
care in Medicaid, the real programs that seem to have some of
the most effective outcomes are more of our pace programs where
we are really looking at coordinated care for very frail
elderly people, and we see there some advantages. But overall,
I would say that most States have been trying through their
children's programs to provide better access to immunizations
and better access to broader coverage, but have not necessarily
yet seen the benefits of that in terms of long-range outcomes.
Mrs. Wilson. Thank you.
Mr. Stupak is recognized for 5 minutes.
Mr. Stupak. Thank you.
Dr. Rowland, I have a two-part question, if I may. And I
know you sat through it, and I used some of your statistics
there about what has been happening over the past 3 years in
the Medicaid population with 50 States having taken action to
control the drug costs, 50 States have reduced or frozen
provider payments, 34 have reduced or restricted eligibility,
and 32 States have increased copayments. These numbers indicate
that the State actions are having a far-reaching impact on
health coverage for low-income families at a time when
enrollment is increasing, as you said in your testimony, due in
part to our sluggish economy.
If we continue on this current economic decline, is it
likely that we will see improvement in people's ability to
access certain health care services, or is it more realistic to
believe that low-income family pieces will continue to face
barriers and restrictions while trying to obtain certain health
care services?
Ms. Rowland. No. I think that we are clearly seeing--we are
clearly seeing that as the States have tried to grapple with
their revenue decline, which is their major contributor to
their economic financing problems, that they have will to turn
first to rainy day funds, into other sources of funds to try
and maintain their Medicaid coverage. But we are now getting to
the point where with the fiscal relief last year, some cuts
have been moderated, but all States are saying that by 2005
fiscal year they will be facing severe constraints in their
Medicaid program.
I think we will see a continued erosion in some of the
coverage for especially parents, so that the parents of low-
income children are going to see real rollbacks in their kind
of coverage. And we are also seeing, obviously, in the Medicaid
programs coverage of prescription drugs, that that population
heavily dependent on them are the elderly and the disabled, and
there, even there, the benefits are beginning to be tighter.
I think the good news is that States have really valued the
kind of coverage they have been providing through the Medicaid
program, tried to keep from rolling it back wherever they
could, and have taken all the easy cuts to date, and so now
what we are going to have to see is, without some additional
financing assistance, of some real rollback in the kind of
coverage that has been available.
Mr. Stupak. Well, most of the States, as I am sure you are
aware, and I know they mentioned California earlier in the
earlier testimony today, most of them have to balance their
budget, unlike the Federal Government. So you have to look for
ways to balance the budget and those expenses, which Medicaid
is a big expense for the States, that is where they start
cutting. In Michigan they have cut about 7 percent of the
hospital reimbursements last year, and they are looking to take
$110 million out of Medicaid reimbursements to the hospitals in
Michigan, and I don't know how they are going to do it.
Ms. Rowland. The other piece is that a Medicaid cut for a
State is a double-edged sword, because to save a dollar of
State money, they have to cut $2 or more out of the program. So
it really then begins to deplete the economic value because
Medicaid is also a source of much jobs and much income
generation in the economy of these States.
Mr. Stupak. We all had some discussions on this side of the
aisle, at least with Mr. Scully, about this block granting that
they would like to do, which really would relinquish more
responsibility and accountability to the individual States, and
in this current economic crisis, I am sure the impact or the
ability for low-income families to obtain health care that they
need will really be greater.
If we block grant, are we not giving more responsibility
and accountability to the individual States at a time when they
are under economic difficulties to even try to provide basic
services under Medicaid?
Ms. Rowland. Well, certainly, any way in which you cap the
financing on the program limits the ability of States to
continue to raise the program's profile in times of economic
emergencies or other hazards, so that when you put a limit on
the program, you may be giving greater flexibility in terms of
who can be covered and what the benefits are, but you are
really limiting the flexibility to respond to emergencies,
changes in the States' coverage, changes in the economy.
And what we have currently seen with the Medicaid program
is that the downturn in our economy has moved many people from
middle-income groups into the lower-income groups where they
now qualify for the Medicaid program, and it is, in fact, the
matching formula of Medicaid that at least has allowed States
to have the Federal funds to go along with that. And I think
when you put a limit on the program, you can't be sure what the
conditions will be in the future that will change that, so it
could, in fact, be restrictive.
I know in conversations with the State of Ohio, they have
told us that they would have done worse under the
administration's proposal than under their current Medicaid
spending even though they are under strict fiscal constraints.
Mr. Stupak. Do you have some thoughts on how we should
revamp the system so as to provide the most care to the most
people and insure that this vital care is not eliminated by
State budget deficits or other competing priorities? Do you
have some thoughts on it?
Ms. Rowland. Well, certainly, I think that looking at the
coverage of the dual-eligible population and the costs incurred
by that population and what the appropriate level of Federal
financing for the dual-eligibles versus State financing is,
picking up the cost of their Medicare premiums and removing
that from the State budgets, perhaps even going as far as to
help relieve the $7 billion annually that States now spend on
the Medicare dual-eligibles for their drug benefits would be a
start at really realigning some of the fiscal responsibilities.
As we look at the program, we have heard talk of swaps in
the past. The swaps disadvantaged many of the States. What I
think we really need to look at is where the Federal share
should be greater, and where the States can maintain the
coverage, and how to do that balance. But putting a cap on the
funding doesn't seem to me to address the fundamental need to
really secure financing for the most vulnerable in our society.
Mrs. Wilson. Thank you.
Mr. Stupak. Thank you.
Mrs. Wilson. Mr. Brown for 5 minutes.
Mr. Brown. I thank the Chair. I apologize for having to
leave to cast a vote in another committee. I apologize. I
didn't get to hear Mr. Stupak's questions, all the questions
and answers.
Implicit in much of the earlier testimony, Dr. Rowland, is
that Medicaid spending is out of control. We have got to rein
in Medicaid spending. And surely it is difficult for State
budget writers, obviously. But a couple of questions.
What is the estimated--what--how--what level are
administrative costs with Medicaid?
Ms. Rowland. It is somewhere under 4 percent; usually about
3.5 to 4 percent.
Mr. Brown. And what would you estimate the overhead costs
for a private insurance?
Ms. Rowland. Private insurance usually runs between a 10
and 20 percent, more likely around 15 percent, overhead cost.
Mr. Brown. Is that differential recent, or has that been
for some time?
Ms. Rowland. It has been historically there. Private
insurance obviously has more marketing costs, a lot of other
attributes that they build in.
Mr. Brown. I think one of the myths that we deal with
around here that we try to bat down from time to time is that
these public health programs, public programs for health care,
Medicare and Medicaid, are actually more efficient than the
private sector and by many measurements, when the assumption
too many people here make, it is the exactly opposite.
Ms. Rowland. Well, actually, as my statement also shows and
some of the research we have done, because private insurers
tend to pay higher rates to providers than the Medicaid
program, if you were to take a Medicaid beneficiary and put
them in private insurance, it would probably cost you more per
beneficiary than what Medicaid is currently paying. The real
differential in Medicaid payment rates or per capita spending
is that most people on the Medicaid program who are adults are
either disabled or pregnant individuals who by their very
nature have higher health expenditures.
Mr. Brown. Okay. On the first panel, Mr. Scully made some
points about mandated benefits driving up costs and how
Medicaid should have more flexibility to tailor benefits to
need. Are there--a couple of questions. Do all Medicaid
beneficiaries use all Medicaid benefits? I mean, I--and are
there any studies indicating mandated benefits aren't medically
necessary?
Ms. Rowland. Well, just as in your private insurance plan,
you have a range of benefits that are covered. I am sure in any
given year you don't use all of those benefits, and within the
Medicaid program we would hope and we see that the individuals
who need long-term care services use them, but a 5-year old
child does not need long-term care, does not use long-term care
benefits under Medicaid, so that in reality what we are talking
about here is that States need to do a very good job of
utilization control, and the managed care plans need to make
sure that the services they are providing are the medically
necessary ones. But individuals should not be using benefits
even though they are covered that are not medically necessary
for them.
Mr. Brown. So as in all insurance there is a range of
benefits that Medicaid offers. People use some of those
benefits at different times in their lives. And the ones that
are offered are not medically necessary for certain parts of
the population at certain times. And when you enroll in
Medicaid, you obviously don't know which of those benefits you
are going to need at some point in the next year or 2 years or
5 years, correct?
Ms. Rowland. Correct. And Medicaid covers a very diverse
population, and especially for the individuals with
disabilities on the program, a broad range of benefits there
exceeds that of any private insurance plan. But that is why
most of those people have to turn to Medicaid for their
coverage.
Mr. Brown. So this whole term that Mr. Scully used as a
flexibility to tailor benefits to need just doesn't really
wash.
Ms. Rowland. I believe the States currently have the
ability to tailor benefits to need because that is how you
provide medical care services.
Mr. Brown. Delegate Eckardt, one question for you. You have
consistently in your career, my understanding is, championed
payments for nurse midwives, nurse practitioners, other skilled
nursing professions. You yourself were a psychiatric nurse. If
reductions in Medicaid funds from the Federal Government,
reductions in State tax receipts occasioned by the recession
force cuts in Medicaid, how much of the cut should come from
provider payments; and in answering that, if you would, how
much room is left to cut reimbursements before providers simply
refuse to treat Medicaid patients?
Ms. Eckardt. That is a very good question. I hadn't thought
long about the reimbursement end of it, because I think there
is reimbursement--in Maryland there is reimbursement for an
array of providers. And I think that providing that gives the
kind of choice within the Medicaid program--like in our
children's health care, we have an array of choices, and, for
instance, in our wellness centers in a lot of our schools, we
have a variety of providers, and those providers are
reimbursed. And I dare say that you need to look at that in
conjunction with outcomes, clinical outcomes, and if we can, in
fact, demonstrate through our school-based health centers and
our wellness programs and our schools that kids are staying in
school, that they are healthy, that they are graduating from
high school, then I think those provider reimbursements are
adequate.
And I think that we are going to be looking in Maryland, we
are looking at program by program as opposed to just reducing
reimbursement to providers.
Mrs. Wilson. Thank you.
Mr. Strickland is recognized for 5 minutes.
Mr. Strickland. Thank you.
Dr. Rowland, I don't want to beat a dead horse, but when
Mr. Scully was here, we talked at some length about what a
block grant is or isn't, and Mr. Scully, it seemed to me, was
contending that what he was proposing was not a block grant.
But when I look at the OMB table that I think you probably have
access to, it shows that, as I pointed out to Mr. Scully, in
2013 there will be an $8.285 billion cutoff of the baseline.
Mr. Scully did indicate that the baseline includes the
projected growth in the program for the numbers of people that
will be added. So if you have an $8.285 billion cut, doesn't
that necessarily mean that people will be cutoff and lose
benefits? If we stay in this recession especially there may be
even more people cutoff. Isn't that what a block grant does?
You have increased need and a limited amount of money, a set
amount of money, that people are necessarily going to lose
benefits?
Ms. Rowland. In the administration's original proposal,
they talked about an allotment, an allotment that would be a
little more generous in the early years and then would decrease
in the later years and did not want to call that a block grant.
But in general when we think even about the SCHIP program, we
talk about a program in which there is a fixed Federal
allotment of dollars. Once you have spent that amount of
dollars, there is no more Federal dollars to be given, even if
the population needs continue to grow and you end up having to
cap enrollment or reduce benefits or do other things to live
within the budget. That we have called and would continue to
call a block grant. That seemed very similar to what was being
proposed by the administration, although some of Mr. Scully's
language here today was quite different in terms of talking
about a per capita cap instead of an overall block grant. So I
am not sure that the administration hasn't changed their
position.
In a typical block grant, you fix the amount of Federal
financing that goes up over time. You may use some factors to
increase it, such as a growth factor or a cost of living
adjustment or whatever, but it tends to be a fixed amount, it
is a predictable amount. If for some reason the needs--the
economy falls and more people fall into low-income categories
and more people go on to the program, there are no more Federal
dollars to expand to match that as there are under the current
Medicaid program, so you would expect the States then to have
to reduce their spending.
Moreover, of course, one of the attractivenesses to the
States in terms of flexibility in a block grant is that they
would have less accountability for how they spend their
dollars. So it would be harder to tell whether any of the
groups, especially those optional groups, would continue to
receive coverage under a block grant.
Mr. Strickland. Thank you. I just wanted to make it clear
that, regardless of what we call it, the effect it seems to me
would be the same effect that you would expect from a block
grant as we have historically defined a block grant program to
be.
I just wanted to ask you quickly about the dual-eligibles
and the proposal that at least was in the Senate Medicare
prescription drug reform bill. What are the implications or
what would be the implications to the Medicaid program and to
the individual States if the provision in the Senate regarding
dual-eligibles were to be enacted into law, in your judgment?
Ms. Rowland. I think leaving the dual-eligible population
that is covered by Medicaid out of a Medicare drug benefit is,
first of all, the first time there would be differential
treatment; and leaving the poor out of the coverage under
Medicare would be a real exception to the overall policy of
Medicare. But I think it would also mean that there would be a
lot of difficult coordination issues at the State level between
those who would qualify under Medicare for the low-income
subsidies but they are not on Medicaid so they don't get the
Medicaid coverage but Medicaid beneficiaries would be on the
side in the Medicaid program.
We also know that the drug benefit under the Medicaid
program is an optional benefit, and it does vary across the
States, so I think that the dual-eligible population would not
have an equal benefit to the extent that the Medicare benefit
would be provided to the rest of Medicare beneficiaries.
Clearly, the cost implications for the States of having to
maintain coverage of the dual-eligibles under the current
fiscal crisis that they are facing means that many States may
have to look at cutting back on this population at the very
time as other beneficiaries in Medicare are just gaining drug
coverage. So I would say that the best strategy for making
coverages equitable is to put the entire population in the
Medicare program that is entitled to Medicare and then have
Medicaid be really the wraparound for those with serious
illnesses and drug costs that go beyond the limits of the
Medicare program.
Mr. Strickland. Dr. Eckardt, would you have a comment
regarding the dual-eligible provisions that are in the Senate
bill and its potential impact upon the States?
Ms. Eckardt. I have to admit honestly I am not real
familiar with that, but I can tell you that I have been an
advocate of using Medicare dollars for prescription relief for
our most vulnerable population, and I think certainly the dual-
eligible are our most vulnerable citizens.
Mrs. Wilson. Mr. Strickland, I think you are plumb out of
time.
Mr. Strickland. I am sorry. I want to thank the witnesses
for their helpful information. Thank you, Madam Chair.
Mrs. Wilson. Mr. Waxman is recognized for 5 minutes.
Mr. Waxman. Thank you very much, Madam chairman.
Ms. Rowland, in your testimony you painted a very
compelling picture of the contributions the Medicaid program
has made in providing health care coverage to populations that
would otherwise be likely to be uninsured or have their
specific health needs unmet. I would like your opinion on two
related issues. Is the fact that Medicaid is a matching program
where the Federal Government has an open-ended commitment to
bear its share of the cost of providing services to this
population a positive thing in terms of helping the program
meet the needs of these vulnerable people?
Ms. Rowland. I think if you look back at the history of the
program over its many years you see that the matching rate
system and the fact that there were Federal dollars to
stimulate State investments has proven to be a very successful
strategy. We see that there are both mandated populations
covered by Medicaid but that many States use the availability
of the matching funds to expand coverage beyond the mandates,
and without the Federal matching funds I don't think States
would have been able to respond to some of the economic
downturns that we have had. They may not have been able to
respond as fully as they would like because the matching
doesn't come in a countercyclical way early enough. But they
have been able to keep the program and maintain it over its
history, and they have grown it in ways as we have societal
needs that we have asked the States to pick up through
Medicaid.
One perfect example is the coverage of people with HIV/
AIDS. When that epidemic came out, there was no health
insurance coverage provided through the private insurer.
Medicaid was really able to step in. It is today the provider
of--44 percent of all of the people with HIV/AIDS receive their
care through Medicaid. If the program was a block grant or a
capped program, I don't see any way that a new epidemic like
that could have had the resources committed to it because they
would have had to compete within the block for the existing
funds.
Mr. Waxman. In other words, asking my question another way,
if we put the cap on the amount of Federal dollars available to
help the States finance these services, you would think that
that wouldn't help the States do a better job and it would put
them in a more difficult position during economic downturns or
adding to the rolls while reducing the States' economic base
which would occur when you have these unanticipated health
emergencies?
Ms. Rowland. In my view, the crisis that we face now is how
to pay for and finance and how to divide the financing between
the Federal Government and the States for long-term care or
care of our most vulnerable citizens. There are lots of ways
that I think we can improve the way in which that care is
delivered both for those on Medicaid but, frankly, for all of
us in our health care system because we know our health care
system has lots of inequities and lots of cracks in the way
care is delivered. But I don't think putting a cap on financing
is going to create a whole incentive to create a better world
for all of us to receive our health care, and I think it is
just going to squeeze down on the available resources for the
poorest and the most vulnerable.
Mr. Waxman. The Kaiser Commission recently released a study
that I believe was done for you by the Rockefeller Institute
that indicated that the decline in revenues available to the
States was a much more significant factor in putting pressure
on State Medicaid budgets than increases in program
expenditures. As I understand it, many States have pegged their
tax system to the Federal system so that when we vote to reduce
taxes we have the automatic effect of reducing State revenues.
State revenues also decline when we are in a recession. That is
exactly the time when more people are in need of Medicaid.
Could you elaborate a little on that study for the benefit of
members of the subcommittee?
Ms. Rowland. The Rockefeller Institute has done a study
looking at the finances of the States and at the tax pressures
that support State efforts. What they have found is that the
$70 billion of deficit that the States have recently incurred
is largely due to the fact that they have had a significant
drop-off, the first time in over two decades, in their State
revenue collections, largely due to the downturn in the economy
and partially due to the effect of tax cuts eroding some of the
other revenues they would obtain and that Medicaid contributed
about $7 billion of that in terms of their cost increases. So,
by and large, the overall problem we are facing at the States
is a revenue-based problem, but that does affect the Medicaid
program because it is still a substantial share of State
spending.
Mr. Waxman. Madam Chair, I would like to ask unanimous
consent to put the report on this issue in the record.
Mrs. Wilson. Without objection.
Mr. Waxman. Last, the Medicaid Commission has done work
documenting the changes States have made in their Medicaid
program in response to their declining fiscal situation. Could
you tell us maybe for the record which of the people served by
the Medicaid program have been most adversely affected by the
cutbacks and can you generalize about that, giving us some
examples?
Ms. Rowland. Certainly, and I would be glad to make the
recent report that has the survey findings available for the
record, too, if you would like.
Mr. Waxman. I will ask unanimous consent to put that in.
Mrs. Wilson. Without objection, we will include that in the
record.
[The information referred to follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Ms. Rowland. For the most part, we see that the struggle
for State revenues and for Medicaid financing is having its
greatest impact on primarily the parents of young children.
Many of the States, including New Jersey is one example, have
had to roll back their coverage in that area. All States are
struggling with how to restrain the cost of prescription drugs
and how to better purchase those pharmaceuticals, but they are
beginning to institute some curbs on the prescription drug
utilization. That tends to affect the elderly and disabled
population because they account for about 80 percent of all the
prescription drug use in the States.
We are seeing, obviously, provider payment reductions going
on across the board in most States, which is one of the first
places States turn to try to trim spending. That is affecting
nursing home payment rates, managed care payment rates and
other hospitals and other providers.
I think we are going to see some erosion of managed care
coverage in the States as some of the plans decide to pull out
of the Medicaid market just as we saw them pull out of the
Medicare market in the past as they see frozen or reduced
payment rates, and we are clearly seeing changes in how
prescription drugs are being used in the States.
Mrs. Wilson. Thank you.
I want to thank both of the witnesses today and thank all
of you who have joined us for some of your morning.
We will hold the record open for testimony and other
statements, including Members' statements.
I also wanted to let folks know we are close to finalizing
the date and subject for our next hearing on Medicaid, which is
likely to be on the coordination of care and on the management
of chronic disease, to take a look at the challenges facing
Medicaid with respect to those two issues.
I thank all of you again. This hearing stands adjourned.
[Whereupon, at 1:10 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Maryland House of Delegates
Annapolis, MD
November 10, 2003
The Honorable John Dingell and Sherrod Brown
The Committee on Energy and Commerce
Health Subcommittee
2125 Rayburn House Office Building
Washington, DC 20515
Dear Congressman Dingell and Brown: This correspondence is in
response to your inquiry regarding Medicaid reform and the culture of
dependence that has been created by the current system. You requested
specific examples that keep families on Medicaid when they have had
comparable and affordable coverage in the private market. Let me share
a few quick thoughts with you.
First of all, the Medicaid system we have developed is growing. In
our attempt to make healthcare affordable, accessible, and available,
we have created a situation that is both positive and negative. We
probably have more children, moms, some dads, the disabled and seniors
receiving health care via Medicaid than ever before. Income levels have
been expanded when previously only those at certain poverty levels were
eligible. Several years ago Maryland participated in the waiver to
offer health care to children and pregnant moms through the Children's
Health plan. During the debate there was concern that as we increased
the income levels for eligibility, we did not create a situation in
which those mothers and children currently enrolled in a health care
plan thru private insurance dropped their existing coverage to then
obtain free coverage with the CHIPS program as the CHIPS program would
be much less expensive than private insurance. For instance, state
employees who would make up to 200% FPL would be, technically speaking,
eligible for the CHIPS coverage. To avoid this situation, anyone who
had existing employer-sponsored health coverage was not eligible. As a
result, there were many state employees who were paying much more for
their coverage than those on the CHIPS program; even though they had
the same income. This seems to me to be inequitable and becomes a
disincentive for citizens.
As the cost of healthcare/coverage continues to rise, increasing
numbers of employers are finding it harder to continue to provide
health insurance for their employees. Co-pays and the employee
contribution of premiums are increasing and both employers and
employees find themselves in a difficult situation. For those
individuals who have taken advantage of the CHIPS program and who are
working off of welfare, it becomes harder and harder to find health
insurance affordable or even available through the workplace other than
Medicaid. Therefore, there is no incentive to take those jobs with
employer sponsored coverage. As long as individuals do not incur the
costs of health care there is no incentive to seek jobs with employer-
sponsored coverage.
Another situation has occurred over the years. Those individuals
struggling with severe mental illness or with multiple disabilities who
are receiving disability may want to work. Because of the earnings
limitation requirement, they do not work for fear of losing disability
health benefits. I know several who did exceed their earnings
limitation and received fines with the payback to the extent that it
was so overwhelming that relapse occurred. One young woman told me that
it is to hard and discouraging to break out of the cycle--it is easier
to be sick. The Federal program will be help for these individuals as
we implement a pilot in Maryland.
I hope my thoughts are helpful. If I can be of further assistance
please call my office 1-410-221-6561.
Sincerely,
Addie C. Eckardt
Maryland State Representative
______
Response for the Record from Diane Rowland, Sc.D., Executive Vice
President, Health Policy, Kaiser Family Foundation
Representative Towns' Question. ``Can you share with the Committee
some specific examples of how the `culture of dependence' has kept
families on Medicaid when and where they have had comparable and
affordable insurance coverage in the private market?''
Diane Rowland's Answer. The population Medicaid covers are many of
the poorest and most vulnerable Americans.
With employer-sponsored insurance premiums experiencing annual
double-digit growth; the average family premium costing over $9,000, of
which the employee pays on average $2,400 annually; and premiums on the
individual market being even higher, private health insurance coverage
is financially out of reach for families whose incomes are low enough
to qualify for Medicaid. Further, data show that low-wage workers are
not likely to be offered health insurance through their employer.
Therefore, low-income families on Medicaid generally do not have access
to affordable comprehensive coverage in the private marketplace.
The 13 million elderly and disabled individuals who rely on
Medicaid are even less likely to have an opportunity to secure coverage
through private plans. They often have severe chronic conditions that
make them largely uninsurable through the private market. Medicaid thus
serves as the insurer of last resort for many of these individuals who
otherwise would simply go without any coverage.
In addition, for the low-income elderly, long-term care coverage is
not available or affordable at their age. Even for Medicare
beneficiaries, Medicaid currently helps with drugs for which private
plans are not available or prohibitive in cost.
______
Prepared Statement of the Alzheimer's Association
Decisions about Medicaid policy are among the most important
decisions Members of Congress make that affect the lives of Alzheimer
families. Medicaid is the single largest public payer for long term
care services in the United States, and a last resort for persons with
Alzheimer's who have no other way to pay for the help they need. Many
Medicare beneficiaries with Alzheimer's also receive Medicaid to help
pay for long term care, prescription drugs and other medical care.
Medicaid is a critical program for people with Alzheimer's because
it helps to cover the cost of nursing home care for persons who are
poor or who ``spend down'' their resources on long term care. It also
covers home and community based services for low income persons
requiring nursing facility levels of care. Medicaid is the only
``safety net'' for long term care.
Medicaid also provides basic protections that Congress has
carefully written into the law--including nursing home quality
standards and protections against spousal impoverishment. These are
also essential elements of the current Medicaid program.
Medicaid is close to the breaking point in many states--called upon
to do too much, for too many people, with too little money. It is not
so different for Alzheimer families, and when Alzheimer families reach
their breaking point, Medicaid is the only place they can turn for
needed assistance.
The following stories about Alzheimer families illustrate why the
Medicaid program is so critical to the people we represent:
Mavis Gilpin
Mavis Gilpin is 86 and she lives with her daughter, Yvonne Ager,
age 61, in Georgia. She has lived with her daughter for about 10 years.
Since her mother's diagnosis of Alzheimer's Ms. Ager states that her
``life has been a disaster,'' especially now that her mother is
invalid. Her mother requires 24-hour supervision. Ms. Ager is unable to
cope with full-time employment because of her caregiving
responsibilities. Prior to her mother qualifying for Medicaid, Ms. Ager
had to take personal loans to pay for medical bills.
Ms. Ager says the services provided by Medicaid are ``priceless and
appreciated.'' Her mother receives medical and pharmaceutical benefits,
as well as a home health aide. Ms. Ager stated that any reduction in
her mother's Medicaid services would be ``disastrous.'' She is unable
to transfer her mom without assistance. If the home health aide
services were reduced or stopped, her mother's basic care would be
compromised. Ms. Ager believes that the Medicaid prescription drug
benefit has helped to keep her mom out of both the doctor's office and
the hospital.
Margaret and George Isaac
Margaret Isaac is 65 and provides care for her husband, George, who
is 72 and diagnosed with Alzheimer's disease. He was diagnosed in 1999.
Although he is still at home, over the years, Mrs. Isaac has watched
the disease rob her husband of everything, and has seen her own
caregiving responsibilities increase. Today, George ``doesn't
understand anything more or less'' when she speaks with him. Mrs. Isaac
assists him daily with his self-care and toileting. He requires
constant supervision because of his cognitive impairment and confusion.
The Isaacs rely on the monetary and program services provided by
Medicaid. SOURCE, a Medicaid program in Georgia, sends a caseworker to
their home. Mr. Isaac is able to attend adult day care, and receive
home care and light housekeeping as part of his Medicaid services. The
Isaacs also rely on Medicaid for their transportation to medical
appointments and his participation in the adult day program. Mrs. Isaac
believes that without the assistance from Medicaid that they ``wouldn't
be able to afford to do anything''. They are in the process of selling
their home and moving into HUD housing.
There are many more stories of Alzheimer families who have
exhausted their resources and turned to Medicaid as a last resort. And
until researchers find a way to prevent or delay the onset of this
disease, there will be many more such families in the future. A recent
study published in the Archives of Neurology predicts the prevalence of
Alzheimer's disease will increase 27% by 2020, an astonishing 70% by
2030, and nearly 300% by 2050, unless science finds a way to slow the
progression of the disease or prevent it.
As the Committee works to improve the Medicaid program, the
Alzheimer's Association urges you to maintain the Medicaid long term
care safety net that is so important to people with Alzheimer's and
their families.
______
Prepared Statement of the American Health Care Association
The American Health Care Association is a non-profit federation of
state long term care associations, together representing nearly 12,000
non-profit and for-profit nursing facility, assisted living,
developmentally-disabled and sub acute care providers that care for 1.5
million elderly and individuals with disabilities nationwide.
As the nation's largest publicly funded health care program,
Medicaid now accounts for 16 percent of federal spending on health
care. The program provides health and long term care coverage to 51
million low-income Americans, and fills in Medicare coverage gaps--
primarily to meet seniors' prescription drug and long-term care needs.
In 1989, Medicaid became the largest payer of long-term care. In 2001,
of the $98.9 billion spent on nursing home care, Medicaid accounts for
$47 billion of those dollars. Approximately two-thirds of nursing home
patients rely on Medicaid to fund their care.
Unfortunately, however, a ``perfect storm'' is brewing that
threatens the financial viability of Medicaid and the long term care
our less fortunate frail, elderly and disabled depend upon. Demographic
changes will soon bring 77 million baby boomers and their need for care
and services into a system policy experts representing all points of
view argue will not be able to handle the exponential increase in
demand for care.
From 2010 to 2030, the number of baby boomers age 65 to 84 will
grow by an estimated 81 percent while the population aged 85 and older
will grow by 49 percent. As large numbers of the imminent tidal wave of
baby boomers begins to require long term care, the Medicaid program
will not be prepared to financially sustain the needs of this cohort--
especially if they rely mainly upon Medicaid to pay for their long term
care. In addition, the life spans of individuals with MR/DD have
increased dramatically and while the extra years are welcome and
wonderful, the additional expense of this costly population is not
addressed under the current Medicaid budgets.
Seniors are often forced to rely on Medicaid for coverage of
nursing home care because Medicare provides only a very limited long-
term care benefit. Medicare's coverage of skilled nursing facility
services is limited to 100 days following a three-day hospital stay.
The average beneficiary stays 23 days in the nursing home and then
returns home while others have needs requiring skilled nursing care
beyond their 100 day Medicare benefit. Others may lose their Medicare
eligibility due to a change in their acuity--yet still require facility
care. These Medicare beneficiaries are then responsible for the costs
of their care, which can exceed $50,000 annually. Many apply for
Medicaid benefits at this time.
Because Medicaid is a means-tested entitlement program, they must
meet Medicaid's resource requirements. Often this group has more
resources than Medicaid allows, and must qualify for coverage by
``spending down,''--thus impoverishing themselves to the point where
they finally ``qualify'' for Medicaid coverage. In a typical U.S.
nursing home, 67 percent of patients now rely on Medicaid for their
care.
Prior to 1997, states were required to pay rates that were ``. . .
reasonable and adequate to meet the costs which must be incurred by
efficiently and economically operated facilities in order to provide
care and services in conformity with applicable state and federal laws
. . .'' as required by the so-called Boren Amendment. States were
successful in repealing Boren by arguing they should have maximum
flexibility to design coverage parameters and set provider
reimbursement rates. Yet, if government has the responsibility to set
care standards, then it logically must have the obligation to pay for
them. This places long-term care providers in an impossible conundrum:
they are held accountable to federal standards while the state sets the
provider reimbursement rate. As is increasingly the case, states simply
do not keep up with the costs required to meet federal standards--and
the problem becomes worse annually.
At the same time, governors and state legislators face growing
political pressures to expand their programs and cover more uninsured
populations--especially during challenging economic times. States will
also continue to face increasing costs in their Medicaid budgets as
more people require nursing home care and as states expand home and
community-based care options. States have struggled and will continue
to struggle to identify more dollars for their Medicaid programs. In
many states, governors, state legislatures and state Medicaid agencies
have worked with the long-term care profession to pursue Medicaid
maximization proposals. The American Health Care Association (AHCA)
believes strongly that there must be adequate dollars for quality care.
In some states, economic times have been grave enough that states have
faced a tough choice between resorting to cuts to eligibility,
reimbursement rates or benefits and therefore, placing care for seniors
and people with disabilities in danger or pursuing such programs as
upper payment limits involving intergovernmental transfers. AHCA
recognizes that if it were not for states pursuing all possible funding
avenues, long term care in many states would have seen more desperate
cuts and seniors and people with disabilities may have lost their
access to care.
States Will Continue to Face Medicaid Funding Challenges
At a time when our nation should be preparing for the coming
retirement tidal wave, states are, instead, struggling to fund services
for current beneficiaries. The most recent Kaiser Commission survey
found that for many states, FY2004 marked the third consecutive year
they were forced to take new actions to reduce spending growth in their
Medicaid programs. This has resulted in provider reimbursement freezes
and new coverage limitations on vulnerable populations.
In May, Congress passed and the President signed legislation that
provided $20 billion in temporary fiscal relief to the states. Of that
amount, $10 billion was earmarked for state Medicaid programs. AHCA
strongly supports this legislation as temporary relief as states are
continuing to see Medicaid cost growth and populations increase.
According to Kaiser, states have also exhausted many one-time
measures they have used to balance their budgets, and Medicaid budget
shortfalls are likely in a majority of states for FY 2004. Continued
expectations of low revenue growth as the economy remains sluggish
combined with the growth in demand for Medicaid services means that
states will continue to look for ways to cut programs, and limit
coverage and benefits.
Kaiser Report Does Not Reflect True Picture of Rate Adequacy
Results from the Kaiser survey show that reimbursement rates for
nursing home care in fiscal year 2003 were cut or frozen in 17 states.
For FY 2004, 19 states either cut or froze rates for nursing home care;
33 states were able to increase rates for nursing home care in FY 2003;
29 states were able to do so in FY 2004. It is important to note,
however, that the increase or decrease of reimbursement rates is not a
true barometer of whether Medicaid is effectively and efficiently
paying for quality nursing home care; the key is determining whether
reimbursement rates are keeping up with the real costs in the health
care marketplace to provide those services.
To identify and specifically quantify the shortfall between the
Medicaid reimbursement rates and allowable costs of nursing homes in
individual states, AHCA has engaged BDO Seidman, LLP, the independent
public policy research firm. For the third consecutive year, BDO has
reviewed the extent to which reimbursement rates have kept pace with
the costs to provide care. Using a database of Medicaid rates and cost
report information, comparisons of Medicaid rates and allowable costs
from 2001 (the most recent audited or desk-reviewed cost report data
available) were derived for 34 states--representing 70 percent of all
Medicaid patient days in the country.
While preliminary, indications are consistent with past studies and
show that nationwide, the average shortfall in Medicaid reimbursement
has grown to $10.39 per day for every Medicaid patient. In 2001, un-
reimbursed Medicaid-allowable costs exceeded $2.5 billion for these 34
states, and exceeded $3.7 billion when the results are extrapolated to
all 50 states. Rate increases in fiscal 2003 were, in many states, far
less than the higher costs of providing quality care. In still other
states, rates were either frozen or reduced--falling even farther below
costs. The picture in fiscal 2004 does not improve.
The Necessity of Long Term Care Financing Reform
AHCA praises the Bush Administration and the House Energy and
Commerce Committee for recognizing that the Medicaid program needs
reform, and for initiating a much-needed policy discussion. We are
concerned, however, that the Administration's Medicaid Modernization
Proposal alters the program to the detriment of our most vulnerable
senior population and Americans with disabilities.
The Administration's proposal establishes an annual funding
allotment--in effect, a cap--to fund services for optional Medicaid
populations. As an estimated 85 percent of Medicaid beneficiaries in
nursing homes have optional Medicaid eligibility, they would be
directly threatened by a plan that locks-in existing under funding and
further forces states to ratchet down services and benefits. All
residents of ICFs/MR, our most vulnerable Americans, would be under
threat as the ICF/MR program is only an optional program under
Medicaid. It is neither fair nor good public policy to force states to
make care decisions based on economics--not what is best for the
patient.
The real need is to reform the long-term care financing system in a
manner that brings about necessary funding stability and that ensures
the supply of care meets a certain, growing demand. This nation's
current system for financing long term care consists of an unstable
patchwork of federal and state programs, with little private insurance
participation and few meaningful incentives for individuals to take
personal responsibility for their own long term care planning.
While no available policy option can reduce the growing need for
long-term care services and public spending, relative to current law,
there are decisions that can be made regarding how public and private
resources can be more effectively utilized.
We are encouraged Congress and the Administration are exploring
legislation that will provide an ``above-the-line'' deduction (S. 1335
and H.R. 2096) of the premium costs for long-term care insurance.
Research shows this deduction will encourage the purchase of private
long term care insurance--from about 10% today to about 25% in five
years--and help reduce government spending on Medicaid long term care
services. AHCA supports enactment of the above-the-line deduction
The costs of implementing an above-the-line deduction, though, can
be quite high. At a time when government's discretionary dollars are
tight, AHCA would propose an incremental expansion of tax incentives
for private long term care insurance beginning with the introduction
and passage of a refundable tax credit targeted toward low-income
individuals. This refundable tax credit offers the greatest potential
for achieving savings to the Medicaid program because it could be
targeted at those individuals who are most likely to become dependent
on Medicaid for their long term care needs. Because the refundable tax
credit is progressive ( meaning that it can provide increased premium
support when an individual's income declines because of retirement,
disability or loss of employment ( it has the effect of creating a
``financial safety-net'' to prevent the lapsing of those policies
purchased under existing law without a substantial increase in current
government spending. By ensuring that those policies purchased under
current law remain in force, the ``financial safety-net'' created by
the refundable tax credit, further enhances consumer choice and the
individual's ability to control where and how their care needs will be
met in the future.
Conclusion
As their exists a substantial federal and profession-wide effort to
improve the quality of care in our nation's nursing homes and homes for
persons with MR/DD, AHCA believes quality improvement is an ongoing,
permanent mission that necessarily requires adequate, reliable
investment from the federal and state government.
AHCA supports Medicaid reform that maximizes patient choice in the
health care marketplace while concurrently providing and paying for
high quality care. The status quo of subjecting seniors to a process
forcing them to impoverish themselves to ``qualify'' for nursing home
care is not sustainable; neither is it good public policy.
We look forward to working with this Committee, and this
Administration, to continue improving the quality of care in America's
long term care facilities, and to maintain a collaborative dialogue
that puts the special care needs of our frail, elderly and disabled
always first.
______
Prepared Statement of The National Association of Community Health
Centers
The National Association of Community Health Centers (NACHC)
appreciates the opportunity to submit the following statement for the
record on the important relationship between community health centers
and the Medicaid program. NACHC is the advocate voice for our nation's
over 1000 Community, Migrant, and Homeless Health Centers and Public
Housing Primary Care Centers, and the patients and communities served
by them.
For almost 40 years, health centers, alongside public hospitals,
public health departments and free clinics, have been providing high
quality, cost-effective, primary and preventive health care to millions
of people living in medically underserved communities regardless of
their ability to pay.
The reality is that community health centers play a critical role
in building bridges to better care and serve as an intricate part of
the health care safety net, in place to catch those who fall through
the cracks. In fact, today, health centers serve as the family doctor
and health care home for 14 million Americans in over 4,000 urban and
rural communities across the country.
One in nine Medicaid recipients, one in six low-income children,
one in eight uninsured individuals, and one in ten rural Americans
benefit from health centers (known in Medicaid law as Federal Qualified
Health Centers, or FQHCs). Among the millions of people served by
health centers:
40% depend on coverage through Medicaid or SCHIP, the State
Children's Health Insurance program;
40% lack health insurance coverage; and
86% are living in families with incomes at or below 200% of the
Federal Poverty Level (FPL).
As critical as they are for the health care they provide, health
centers are much more to their communities:
They are a major source of jobs and meaningful employment--most of
the 60,000+ employees of health centers are community
residents--and in many of their neighborhoods or towns, they
are often the largest employer.
They are engines of economic development for their communities,
spending nearly $6 billion a year, with combined payrolls
exceeding $4 billion, and they generate more than $20 billion
in economic output for low-income communities across America.
Health centers also serve as critical ``anchors'' in their
communities, helping to attract or retain other businesses,
including other physicians, pharmacies or diagnostic services--
even local hospitals, but also other local businesses, and
playing a pivotal role in sustaining a sense of community,
giving residents a feeling of pride and helping to revitalize
communities.
Additionally, many health centers are involved in special
initiatives to monitor and address community-specific health problems,
such as diabetes, asthma and cancer management, boosting infant
immunization rates, keeping patients' blood pressure under control, and
reducing the number of low birth-weight babies.
As testament of the success and commitment of health centers in
improving access to affordable, quality health care to our nation's
medically underserved, Congress has shown broad bipartisan support for
a multi-year initiative to expand the health center program to meet an
ever-growing need across the country. In fact, over the past 5 years,
Congress has increased federal investment for health centers by almost
$700 million.
Beyond this, for each of the past three years, President Bush (who
pledged to grow this program during his campaign for office) has
requested and received the largest increases in funding over the
program's entire history. This combined effort on the part of the
Congress and Administration has enabled health centers to reach out and
serve more than 3 million new people, and it will eventually increase
or expand health center access points by 1,200 over five years as well
as eventually double the number of people served. In addition, when
Congress established the Medicaid prospective payment system for health
centers in 2000, it reaffirmed the importance and need of health
centers as safety net providers.
All told, however, for the vital mission of community health
centers to be sustained, and for the President's initiative to be
ultimately successful, Congress must recognize, understand and preserve
the unique interrelationship between these centers and Medicaid as it
considers reforming the joint federal-state program for the poor.
the importance of health centers and medicaid
Health centers are a major provider of primary and preventive care
services to nearly 5 million Medicaid recipients. In fact, Medicaid is
currently the single largest beneficiary of health center services, as
well as health centers' single largest source of financing. Keenly
recognizing the importance of health center services to Medicaid
beneficiaries, Congress in 1989 required that the services of a FQHC be
a guaranteed Medicaid benefit offered to beneficiaries in every State
Medicaid program. Most important, Congress recognized and acknowledged
that Medicaid reimbursement to FQHCs must be sufficient to assure that
health centers were paid their full reasonable costs for serving
Medicaid patients (so that they would not have to use their Public
Health Service Act grant funds to subsidize low Medicaid payments). Two
years ago, under the leadership of Congressmen Richard Burr and
Edolphus Towns, and with the support of the overwhelming majority of
the Energy and Commerce Committee, Congress reaffirmed the continued
importance of adequate Medicaid reimbursement to health centers by
creating a prospective payment system (PPS) for FQHCs that (1) assures
continued access to care for Medicaid patients, (2) protects Federal
grant funds to provide care for the uninsured, and (3) gives state
Medicaid agencies greater flexibility in designing their Medicaid
programs and predictability in the cost of payments to health centers.
medicaid as a significant source of insurance
Health center patients are more much more likely than the general
US population to have Medicaid or be uninsured. Nationally, 11% of the
population has Medicaid and another 15% is uninsured. In 2002, 36% of
all health center users had Medicaid while 39% were uninsured. This
disproportion stems from the fact that health center users are
overwhelmingly at less than 200% of poverty; two-thirds of users are
under 100% FPL. To be sure, Medicaid coverage and uninsurance varies by
age group. Children under age 20 are much more likely to have Medicaid
and less likely to be uninsured than adults age 20 and over. This is
due to eligibility rules that are more favorable to children. In fact,
over half or 54.6% of all health center children have Medicaid while
less than a quarter or 23.4% of adults are covered under the program.
medicaid as an important source of revenue
By ensuring adequate Medicaid reimbursement to FQHCs, the Congress
clearly recognized the potential impact of low Medicaid payments on
health centers' ability to care for uninsured patients. In the 14 years
since enactment of this payment system, health centers have increased
their capacity for uninsured care by 2.5 million people--double the
number of uninsured patients served in 1990, a rate of growth that is
more than twice that for the nation's uninsured population. Currently,
Medicaid represents 35% of total revenue for health centers--the
largest of any single source and noticeably higher than the second
largest source, federal grants revenue (25%). Indeed, Medicaid makes up
63% of all patient-related revenue, significantly larger than any other
insurance source.
health center participation in medicaid
Health centers are unique in the health care system because, as
part of their grant requirements, they must be located in areas of high
need and be open to all patients seeking care. This explains Medicaid's
other role with regard to health centers: just as health centers rely
on Medicaid revenues, Medicaid beneficiaries rely on health centers for
their care. To illustrate this point, consider that although more than
a third of all health center patients have Medicaid, Medicaid
represents only 9% of private, office-based physician visits. It is
also important to consider that only half of physicians are willing to
accept all new Medicaid patients, and the proportion of private
physicians willing to provide charity care has declined, according to
one recent study. Thus, health centers are a significant provider of
primary care to Medicaid beneficiaries, and tend to provide specialty
care and enabling services that go beyond the care provided at office-
based physician settings. In fact, according to a recent report by the
Kaiser Family Foundation, the number of Medicaid patients served by
health centers nearly tripled, from 1.3 million to 3.6million persons
in the years between 1980 and 2001, compared to 50 percent growth in
total Medicaid enrollment in this period. Moreover, 99% of patients
reported in 2001 that they were satisfied with the care they receive at
health centers.
delivering medicaid savings through quality care
Health centers deliver savings to all payers, especially Medicaid.
They control health care costs by providing primary and preventive
services, reducing the need for more costly hospital care down the
road. According to one recent study, communities served by health
centers had 5.8 fewer preventable hospitalizations per 1,000 people
over three years than other medically underserved communities not
served by a health center. Another study found that Medicaid
beneficiaries who seek care at health centers were 22 percent less
likely to be hospitalized for potentially avoidable conditions than
beneficiaries who obtained care elsewhere. Moreover, these patients
were 16 percent more likely to have outpatient visits for such
conditions. Several studies over the years have found that health
centers save the Medicaid program at least 30 percent in annual
spending for health center beneficiaries due to reduced specialty care
referrals and fewer hospital admissions. Based on that data, it is
estimated that health centers already save almost $3 billion annually
in combined federal and state Medicaid expenditures--$1.8 billion in
federal spending alone. That amount is greater than the total of all
Medicaid payments to health centers last year.
growing demand and diminishing resources
Current budget shortfalls threaten state and local financial
support of health centers, even though their cost of care is among the
lowest of all providers. Reductions in Medicaid eligibility, benefits,
and other areas potentially jeopardize the ability of health centers to
continue to provide care to all patients, including Medicaid patients.
Initiatives from the Bush Administration and Congress to boost health
center funding cannot compensate for reductions in state Medicaid
programs or in direct State health center grant support. A recent
state-by-state survey revealed that at least 20 states have enacted or
are considering significant cuts in dedicated state funding for Health
Centers. The sum of those cuts exceeds $40 million annually, or nearly
14% of all state funding Health Centers received last year. Loss of
support in any form exacerbates the already strained financial
condition of health centers, and will result in their inability to
serve new patients or even many of their current patients. Compounding
this problem is an increased patient load--nearly 800,000 new uninsured
patients in the last three years have turned to health centers for
care.
challenges for the future
Medicaid plays an important role at health centers by providing
patients access to comprehensive services beyond those available at
health centers. Time and time again, these centers have demonstrated
their ability to provide effective care--reducing infant mortality,
decreasing hospital admissions and lengths of stay. However, as the
health care needs of low-income individuals continue to grow, so do the
challenges to health centers in sustaining their ability to provide
quality care to Medicaid beneficiaries and other patients.
As Congress moves forward on considering ways in which to reform
Medicaid, it is critical that it keep in mind the important role health
centers play in their communities and the unique relationship between
these centers and the Medicaid program. Indeed, as the Kaiser Family
Foundation points out, ``[t]he fundamental interrelationship between
Medicaid and health centers . . . suggests, by extension, that dynamics
in one domain are bound to have important impacts in the other.'' It is
therefore imperative that lawmakers working on Medicaid reform consider
the following significant issues for FQHCs:
The Burden of Medicaid Cutbacks on FQHCs
To further increase the accessibility of primary and preventive
health services for low-income people living in medically underserved
areas, Congress created the Medicaid prospective payment system for
FQHCs. By creating this system, Congress helped to provide stability
and assure access to FQHCs by ensuring that grant dollars intended for
providing care to the uninsured were protected.
Yet according to reports filed by health centers for 2001, 19
states cut their Medicaid payments for care provided to enrolled
individuals by an average of about 9 percent from the previous year.
Overall, Medicaid payments to health centers grew by less than 1
percent per Medicaid patient, well below the 4.6% growth in the cost of
care for each patient served, producing a net loss of more than $60
million for the year. Beyond this, there has already been great shift
of discretion to the states in the operation of their Medicaid programs
through HHS' issuance of Section 1115 waivers--under which State
Medicaid agencies are permitted to reduce benefits, increase cost
sharing requirements, and adjust reimbursement rules.
Health centers have already experienced the impact of this
increased state flexibility in some 15 states during the 1990s. In most
cases, the ability of health centers to care for both their Medicaid
and their uninsured patients was impacted negatively when their
Medicaid payments were reduced to in some case significantly below the
cost of providing care. In many of those states, other providers
decided not to participate or limited their care to only a few Medicaid
patients, leaving health centers as one of the few remaining sources of
primary and preventive care to this population. Given this experience,
health centers urge Congress to keep in mind the important role that
safety net providers have in their communities as they move forward on
considering Medicaid reform proposals, and to assure that the current
federal FQHC Medicaid payment system is not eroded in the process.
The Safety Net for the Safety Net
Potential cutbacks in State Medicaid payments to health centers are
only a portion of the issue. Cutbacks in Medicaid eligibility levels or
benefits, caps in enrollment, or forgone expansion plans also have
presented significant difficulties for FQHCs. These actions are
occurring at the same time as employers have been forced to either
shift more of the rising cost of health insurance onto their workers or
to drop the coverage altogether, and as other health care providers
have begun cutting back on the uncompensated or charity care they
provide. The result is that health centers are serving an ever-
increasing number of uninsured individuals who previously were covered
under Medicaid or through their employers. While these and other
dramatic changes in the health care system have put a tremendous strain
on the overall health center program, health centers remained committed
to providing access to care for everyone that walks through their
doors, regardless of their health status, insurance coverage, or
ability to pay for services. Put simply, health centers provide care
for those whom other providers cannot or will not serve.
As Congress begins to consider possible reforms to Medicaid, we
urge that any flexibility extended to states to alter their Medicaid
and SCHIP programs:
Include the resources and standards to assure that such flexibility
is used to expand the number of people receiving health
insurance coverage under those programs without reducing the
scope of essential services that are covered today, and
Clearly recognize the key role of health centers and other core
safety net providers who care for significant numbers of
Medicaid and SCHIP recipients and those who remain uninsured,
and ensure that these providers are adequately paid for the
reasonable costs of health care they provide to enrollees.
Failure to address these principles could inevitably increase the
number of the uninsured as well as impact the very safety net providers
whose mission is to serve them.
Reaching out to Those Who are Eligible but not Enrolled Today
Even as the numbers of uninsured Americans rises to unprecedented
levels, millions of those individuals are eligible for coverage under
the Medicaid and SCHIP programs, yet remain unenrolled. In greatest
part, this is due a lack of action in the part of several States to use
all available tools available to improve enrollment. For example, in
1990, Congress amended the Medicaid statute to require that, as a
condition of program participation, States provide for the initial
receipt and processing of applications for low-income pregnant women,
infants, and children at outreach locations other than welfare or
government offices, including FQHCs and Disproportionate Share (DSH)
Hospitals. Congress specifically named FQHCs as required outstationing
sites because ``they are, by definition, providers that serve large
substantial numbers of low-income women, infants, and children.''
1 Some States were quick to implement the provisions of the
new law and have been in full compliance with its requirements.
However, many more States have not complied with the Federal Medicaid
outstationing law either in whole or part. Indeed, two separate
evaluations of state outstationed enrollment programs during the 1990s
found that only 57 to 61 percent of all FQHCs operated outstationed
programs.2 Health centers reported that the availability of
State support was the most important factor in their decision to set up
or expand outstationing activities. Of those FQHCs with enrollment
workers, more than one-quarter found it necessary to pay for the
position themselves, with no funding assistance from the State.
---------------------------------------------------------------------------
\1\ House Report No. 101-881, at 104
\2\ Sara Rosenbaum et al, ``Initial Findings from a Nationwide
Study of Outstationed Medicaid Enrollment Programs at Federally
Qualified Health Centers.'' Center for Health Services Research and
Policy, George Washington University Medical Center, February 1998; and
U.S. Department of Health and Human Services, Office of the Inspector
General. ``Federally Funded Health Centers and Low Income Children's
Health Care: Improving SCHIP enrollment and Adapting to Managed Care.''
December 2000. (OEI-06-98-00321).
---------------------------------------------------------------------------
Recent Center's for Medicare and Medicaid Services' guidance to
State Medicaid programs has clarified the States' responsibilities to
place outstationed Medicaid enrollment workers at each DSH hospital and
each FQHC participating in the State's Medicaid program. CMS also makes
clear that ``[s]taffing and resource limitations do not relieve States
of the obligation to comply with and pay for the outstationing
requirements of the law and regulations.'' However, more than 3 years
after that this guidance, a survey of states by NACHC revealed that
only 7 States are fully compliant with the law's requirements; these
States have placed outstationed enrollment workers at all FQHC sites
and pay all costs associated with the outstationing. Another 20 States
are partially compliant, placing workers at some FQHC sites and paying
at least some of the costs. But 22 States remain completely non-
compliant, placing no State workers at any FQHC sites and failing to
cover the costs of health center workers who are performing the
outstationing functions.
Overall, many States continue to not recognize that outstationing
at FQHCs and DSH hospitals is a mandatory part of the Medicaid
eligibility process. As a result, millions of individuals eligible to
receive coverage under Medicaid regrettably remain unenrolled.
Accordingly, we urge the Congress to take the necessary steps to ensure
that people who currently qualify for coverage under either the
Medicaid or SCHIP programs have all available opportunities to enroll
in, and receive the benefits of, that coverage.
We thank the Committee for holding this important hearing, and we
look forward to working with Members to assure the enactment of reforms
consistent with positions outlined in this statement.
______
Prepared Statement of Voice of the Retarded
opposition to block granting the medicaid program: what is really
``optional?''
Voice of the Retarded, an advocacy organization representing
thousands of families of individuals with mental retardation
nationwide, is opposed to any Medicaid proposal that would ``block
grant'' or otherwise ``cap'' services and funding for Medicaid eligible
individuals.
Block grant proposals to reform Medicaid places the availability of
all optional services at great risk. It does not add any permanent new
money to the program. Over time it will limit the program, resulting in
the denial of eligibility for those most in need. Of great concern is
the notion that the Medicaid program should be a capped block grant
that will be incapable of helping our most vulnerable citizens,
including people with mental retardation, in current and future
economic crises. Arbitrary growth limits to achieve predictable
Medicaid costs would destroy its ability to help in the times when it
is most needed. These reform principles, if enacted, would permanently
undermine the integrity of the Medicaid program.
Medicaid is the primary and largest public source of funding for
long term services and supports for over 7 million people with
disabilities, including people with mental retardation. 200,000 more
people with mental retardation and developmental disabilities are on
waiting lists for services.
Most Medicaid services for people with mental retardation are
considered ``optional.'' This list of services includes such basic
acute health care benefits as prescribed drugs, clinic services, dental
care, physical therapy, prosthetic devices, and specified medical and
remedial care. Longterm care ``optional'' benefits include home and
communitybased services (HCBS) waiver, personal attendant care, case
management, and Intermediate Care Facilities for the Mentally Retarded
(ICFs/MR).
``What the Medicaid program calls `optional' services are, in
reality, mandatory disability services for the children and adults who
need them.'' (Consortium for Citizens with Disabilities, February 14,
2003 letter to President Bush). Policymakers must consider quality of
life. Most people now living in ICFs/MR, for example, experience severe
and profound mental retardation with complex medical conditions and/or
behavioral challenges. Without the essential skilled care they now
receive they might perish. These ``lifeline'' services are not
considered ``optional'' by recipients and must not be curtailed.
Solutions
The significant challenges of individuals with mental retardation
and developmental disabilities accessing quality medical, dental and
other health care services in the community is well-documented in the
media, in publicly funded studies, research by Special Olympics (http:/
/www.specialolympics.org/healthy--athletes/THE--HEALTH--STATUS.htm) and
in scholarly publications, including the recent report of the Surgeon
General, ``Closing the Gap: A National Blueprint to Improve the Health
of Persons with Mental Retardation'' (February 2002) (http://
www.surgeongeneral.gov/topics/mentalretardation).
In response to this crisis, and in the context of Medicaid reform,
VOR urges Congress and the Administration to consider the establishment
of university-based Community Resource Centers (CRCs). This is a cost-
effective system which utilizes the existing service infrastructure to
expand the delivery of health care services and supports to Medicaid
eligible individuals with disabilities who receive home and community-
based residential services.
University-based CRCs provide desperately needed quality medical,
dental, and other therapeutic services to Americans with mental
retardation and developmental disability living in communities, who
have significant difficulty obtaining these services. CRCs also
function as universitybased centers of education, training, and
research for medical and dental students, residents, externs, fellows,
and professionals.
The CRC model, already implemented in several states, establishes
developmental medicine and dentistry training fellowships in mainstream
medical and dental schools, utilizing preexisting, communitybased
primary care clinics, Intermediate Care Facilities (ICFs) and other
private service delivery systems (such as the Special Olympics Healthy
Athletes program) as education and training sites.
As Congress and the Administration consider Medicaid reform, there
will be pressure to eliminate ICFs/MR in a misguided attempt to
``broaden'' choice and reduce costs. Eliminating ICFs/MR will not save
costs nor increase quality outcomes, and is counter to real choice. A
peer-reviewed study, published in Mental Retardation (April, 2003),
found that transitioning people from large Intermediate Care Facilities
for the Mentally Retarded (ICFs/MR) to community based programs was not
an effective strategy for reducing overall costs. Peer reviewed
studies, the Surgeon General, state audit reports, and media
investigative series have all documented systemic problems relating to
the ability to provide safe and high quality care to people with
profound mental retardation who are also medically-fragile.
Furthermore, eliminating ICFs/MR would remove an important existing
infrastructure that, as explained above, can be utilized to allow for
more successful and happy community-based placements.
Eliminating ICF/MR options is also counter to the landmark Olmstead
decision which clearly establishes the right of individuals with mental
retardation and their families to choose a setting that best meets
individual needs, whether in the community or an ICF/MR. ``We emphasize
that nothing in the ADA or its implementing regulations condones
termination of institutional settings for persons unable to handle or
benefit from community settings . . . nor is there any federal
requirement that community-based treatment be imposed on patients who
do not desire it.'' Olmstead v. L.C., 119 S. Ct. 2176, 2187 (1999).
Thank you in advance for respecting choice and embracing the need
for a full array of Medicaid services and supports. VOR looks forward
to working with Congress to protect and strengthen the Medicaid
program.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
-