• Medicaid! – There’s no magic in block granting

    The solution offered by Gov. Romney and Rep. Ryan to fix Medicaid is block granting. To summarize:

    The fiscal-year 2013 budget recently passed by the House of Representatives would reduce federal Medicaid spending by $750 billion over the next decade, even if the Affordable Care Act (ACA) is repealed or struck down. It would do so by changing the program from an open-ended program for eligible individuals using matching funds from both the federal and state governments to a block grant of a fixed sum given to states, and the states decide how to allocate the money. The idea is that states can “innovate” at a local level to find ways to deliver needed benefits at reduced cost.

    Let’s be clear, though. The savings don’t come from any known interventions. They come from drastically reducing the amount of money the federal government plans to give to the states in the future. That’s how they say they will save money. How much less money will the states be given? Tons:

    Make no mistake about it, under the block grant plan in the budget proposal approved by the House, states must innovate. Even if the ACA’s Medicaid expansion were eliminated, the House budget would reduce federal Medicaid spending by $163 billion in 2022. That’s a 34% reduction 10 years from now.

    How can states possibly account for that difference? Where’s the magic in innovation? If states refuse to cut benefits and spend the same per enrollee, then even if the Medicaid expansion of the ACA never takes place, an additional 19 million people need to be dropped from the 2021 Medicaid rolls to meet budget cuts. That’s about one-third of all people on Medicaid. If states cut benefits or somehow slow spending to that of GDP growth, they still need to remove 13.8 million people from Medicaid in 2021, in addition to forgetting the ACA Medicaid expansion. If states act to protect the elderly and blind or disabled persons by holding their spending/benefit reduction to 10% (which is still a large cut), then 27 million people, most of them children and pregnant women, need to be dropped from Medicaid in 2021 even if ACA’s Medicaid expansion never occurs.

    Of course, you could choose not to cut people. You could just cut reimbursement by the same amount. But (1) Medicaid reimbursement is already very low, and (2) the campaign has made it clear that reducing payments (like through the IPAB) is unacceptable.

    There are just over 60 million people covered by Medicaid right now. These changes are very, very large. That’s what happens when you spend so much less.

    So what’s the plan?



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    • The price quantity relationship is a bitch isn’t it. Fix the budget (either Federal or state) and you can lower price and maybe cover increased quantity or reduce the quantity of people/services covered and hold prices constant (which equals a price increase to some folks) but you can’t increase both price and quantity without exceeding the fixed budget.. Unless the magic health fairy suddenly sprinkles magic health dust on the poor and disabled and the US has a outbreak of HEALTH.

      But GOP States believe that Medicaid Managed Care will save dollars. Medicaid managed Care must be the magic health fairy in drag…..

    • Under law, the capitation rates paid by states to Medicaid health plans don’t need to be less than the fee-for-service equivalent. They must only be “actuarially sound.”

      For this reason the States should proceed with caution. For all its faults, fee-for-service (FFS) was at least transparent. A doctor had to submit a claim to be paid and when he did an electronic record of the service was created. Under capitation. States are losing information about their expenditures to an impenetrable black box. Talk to any payer utilizing managed care and they will complain about the quality of enccounter data, the electronic records of capitated services. It is wildly uneven across plans and frequently incomplete. As Austin pointed out (“The Hidden Costs of Publicly Financed Private Health Insurance”, Kaiser Health News, April 2010), “The hidden data imposes a hidden cost on taxpayers. Though it can’t be fully quantified, there is a likely cost in the form of inflated payments. Insurance companies know far more about their costs and enrollee characteristics than regulators or academics. The information asymmetry plays to their advantage and can only drive up taxpayer costs. Unless plans are compelled to provide data, their advantage is likely to continue as the public begins paying a substantial sum to subsidize exchange-based coverage in every state.”

      Also consider that a rapidly increasing number of Medicaid beneficiaries are receiving care in the Federally Qualified Health Center (FQHC) setting. Under the Prospective Payment System created for them by Congress, these clinics receive a fixed payment per visit regardless of whether the beneficiary is in an HMO or not. If an FQHC clinic treats a Medicaid managed care beneficiary it receives s small monthly capitation payment from the HMO, but also what is known as a fee-for-service “wrap-around” payment to cover the remaining amount of the PPS rate. So a state may pay an HMO a capitation rate, to in part to pay for beneficiarys’ primary care, and also pay a substantial amount through FFS wrap-around payments in addition to that for the same service.

    • they could put hits out on ppl….wouldn’t be surprised…they will just continue to die in poor conditions…their voices aren’t loud enough for anyone w/ any compassion and power to hear and act on…but i’m an optimist….it will get better one day! before i die i hope…