HRSA/MCHB 2005 FEDERAL/STATE PARTNERSHIP MEETING

PUBLIC HEALTH ACROSS THE LIFESPAN

Nuts and Bolts on Medicaid Reform

MATT SALO: Thank you, Kay. I noticed sort of an interesting, almost perfect synergy with the panel where we’re talking about the past, the present, and the future of Medicaid reform. Where we had the past, Kay talked about the past. Neva Kaye is going to talk about the future. So I think your only failure is not finding someone talking about the present whose middle name is Kay. But I will try nonetheless to do as best as I can despite the lack of feng shui here. At least I can’t be part of it; at least that you can know that I’m the nut when it comes to the nuts and bolts of Medicaid reform.

I will, I think, I’m not going to use slides or a formal presentation, but I will sort of try to take my 15 minutes to be both hopefully illuminating about what’s happening right now, but also a little more controversial and hopefully that can stir up a healthy amount of discussion and debate afterwards.

Kay talked a little bit about the past and we’re very concerned. We think we know the past. We are very concerned about the future and so therefore, we, and when I say we, I mean the governors and the National Governors Association, have been doing a lot of work trying to put together some ideas on Medicaid reform so that we can keep the Medicaid program alive and sustainable and viable and relevant in the future. And I think there are significant enough concerns about that that make Medicaid reform a necessity and not something that we should put in quotation marks, or something that we should say, this is bad people doing bad things. And I think it’s important to keep that perspective and I think it’s also very important not to sort of view the current system. And when I say the current system, I mean not just the Medicaid program, but sort of the health care system at large. I think it’s, we do ourselves a grave disservice if we sort of fool ourselves into thinking that it is either A: perfect of B: sustainable at the current rate. And I would argue very strongly that it is neither and that we do need to get very serious in this country about making some changes to these things, to the health care system and to Medicaid.

Having said that, I don’t want to say, as I think some people do, I don’t want to say that Medicaid is the problem. And I don’t think governors think Medicaid is the problem. Medicaid has been the solution to a lot of other problems. And if you look at the recent history of the program, you will see that Medicaid is sort of the little Dutch boy trying to plug holes in the dyke. And every time water starts shooting out, Medicaid is there to plug that hole and to reassure the nation, don’t worry everything’s going to be okay. And that’s why you have a Medicaid program that is so hard to define. The Medicaid program is not just 56 different programs across the states, territories, and the district. But it is many different programs in any given state. It is being asked to be a real health care safety net for people who are very ill, disabled, or have very high health care needs.

It is also being used to serve as a health insurance product for working America that can’t afford or don’t have access to employer sponsored care. Medicaid is the major payer of long term care in this country. Not Medicare, Medicaid. Medicaid provides services so that people with disabilities can return to work. Medicaid provides prescription drugs for seniors, at least for another month and a half or so. And you can go on with this list. Medicaid is half of all mental health spending in this country. Half of all HIV/AIDS spending in this country. Ninety percent of all HIV/AIDS spending for kids. We can go on and on. Medicaid does a lot of things for a lot of different people and I think that really speaks to the lack of a vision and the lack of a real solution nationally as to what kind of health care system we have.

And so I think there are a lot of things we need to do in this country to fix that. I don’t think they’re Medicaid’s fault, but they are going to be a very long term vision in terms of change. I will cover them really briefly, and then I will talk about what I think can be done, what needs to be done, and what can be done in the short term.

But broadly, fixing the healthcare system and fixing Medicaid is going to require three major efforts. One of which is to address the high cost of health care, period. Health care costs a lot of money in this country and we probably spend too much on getting too little. We have the highest per capita expenditures in health care in the world. And yet if you look at health care outcomes, we rank up there somewhere near Namibia. It’s frankly, it’s shameful. We waste a lot of money on health care in this country. And if we start, if we can start making the move towards simple things like electronic medical records, electronic prescribing, getting doctors and pharmacists and nursing homes and hospitals and the patients all connected in one seamless system, we can improve health care and we can save an enormous amount of money.

Second issue, I alluded to before, is long-term care. Yes, everybody knows that the bulk of people who are in Medicaid are women and kids, relatively healthy people. But it’s that small number of the elderly and people with disabilities and primarily their long-term care costs that drive the bulk of the Medicaid spending. Medicaid pays for around 50 percent of all the long term care dollars in this country. And if you look at the demographics, the aging of the baby boom population, especially with the rapid growth in the over 85 population, that should scare you. And I don’t think there’s any amount of partnering that you can do with AARP, because this is a tsunami that is coming. And we do not have any kind of vision or perspective on what long-term care should be like in this country. Because right now, it’s sort of, people assume Medicare will be there, people assume I’m not going to need long term care, but at the end of the day, Medicaid is going to be there and that is something that is not sustainable.

And the third issue is around basic coverage. And this, you know, even though, yes, women, kids, working families, are relatively inexpensive in the grand scheme of things. But if you look at the past five years, the Medicaid case load has grown 40 percent. This is a program that’s been around for 40 years and it has grown by 40 percent over the past five. That is around 15 million people who have come on to the rolls in Medicaid in that time. And yes, by and large, these are kids, pregnant women, working families, relatively inexpensive. But 15 million relatively inexpensive people adds up to a lot when it comes to try to figure out how is the state going to finance this program. And the larger problem here is that the trends in this country, and you can look at it just in the headlines today, General Motors, is that employers are walking away from health care coverage. And it’s going to start with retirees, it starts with retirees and dependants and it’s going to move on to actual workers themselves.

And there are a lot of reasons for this. We had a recession, people lost their jobs, people lost their health care, they came on to Medicaid. That’s how the Medicaid program is supposed to work, and cyclically that’s how it has worked. But in the past, what has happened on the rebound of that as the economy’s gotten better, as people get jobs, people get health insurance and they come off Medicaid. That has not happened this time and it’s not going to. Because there are some seismic changes in how the U.S. Economy is working now. We are no longer a manufacturing goods based economy. We are an information technology services based economy. And the growth in the economy and the jobs created in this economy are jobs traditionally that do not provide health insurance or they’re in jobs that are in small businesses. And we all know that small businesses have in trying to afford the enormous cost of health care.

And as I mentioned with General Motors, even the traditional big manufacturing sectors of the economy are finding they’re having to compete globally with Germany, with Japan, with countries that have nationalized health care systems and that don’t have to build in as the automakers will tell you, more dollars per car for health care than for steel.

These are really big problems. These are not Medicaid’s fault. We need to address those. The Medicaid problem will get better. But those problems are not going to get fixed this year. They will probably not get fixed in five years. This is a long-term problem. And so, and unfortunately, as governors, when you have to balance your budget every single year, you don’t have the luxury of just saying oh we’ll wait until congress fixes this 10 years from now. You’ve got to figure out something to do now. And so we’ve put together a package, a bipartisan consensus package of Medicaid reforms that do not fix the Medicaid program, but can help give states the tools they need to hold on to the coverage that they’ve got. And, you know, trust me, we’ve heard from everybody. From nursing homes to hospitals to pharmacists to AARP, to the children’s advocates, we’ve heard from everyone saying oh, this is terrible. X, Y, or Z will hurt us. And I think the problem is in thinking that the current baseline is a defensible one or a sustainable one. Because what a lot of people fail to take into consideration here is Medicaid has got 55 million people on the roles right now. We’re spending 330 billion dollars a year on this. And we have 45 million people who are uninsured, who have no health care whatsoever. No insurance whatsoever. And unless something is done to try to make the program, as it is, more affordable, more sustainable, the only options left at the state level are things you’re really not going to like. I mean, people come and say, well, we don’t really like this proposal, it could limit access, or it hits our bottom line here. If there aren’t more tools in the Medicaid program to try to sustain what we’ve got, we’re going to have a country full of Tennessees, where people, the three hundred thousand people who no longer have any kind of health care coverage at all, are probably wishing they could have had a slightly higher co-pay and health insurance.

So I think it’s important to keep in mind the bigger picture perspective here. And to keep in mind that ultimately, governors are not the opponents of Medicaid. The Medicaid program is a state option and the Medicaid program and its 330 billion dollars a year, probably two-thirds of that spending is somehow optional. And if governors were opposed to the program, didn’t like the program, simply wanted to cut people off, or hurt benefits, or whatever, you could eliminate two-thirds of the program tomorrow. And you wouldn’t need Congress to do anything, and you wouldn’t need a waiver.

But that’s not what people want to do. People want to maintain the coverage expansions that they’ve fought hard to get and don’t want to have to end up cutting more people off the rolls than they have to already.

So we’re looking at a number of things. We’re encouraged that the House and the Senate have endorsed a large number of them, but we’re looking at things basically in four areas and I’ll try to go through them fairly quickly, but all this stuff is, stuff’s been public for a while. We can get more into Q and A afterwards.

The first issue is around prescription drugs. And this has a fair amount of bipartisan support. Medicaid programs pays too much. It’s not a beneficiary issue. We are paying too much, whether at the pharmacy level, or from the manufacturers. We have been victims of a pricing system where the price we pay for drugs is very much like the manufacturer’s suggested retail price for a car. It’s a number, you can point to it, you can put it in a book, you can charge somebody that, or you can charge somebody that with a big discount, but it’s meaningless because it’s a made up number and that’s where we are right now. The Medicaid drug pricing system is probably the most opaque pricing system in the health care system. It’s crazy. We can fix that and we can save a lot of money.

Second issue is around long-term care. And we have got to start the conversation with this country that we cannot, as a nation, expect to rely solely on Medicaid for all of our long-term care needs. So we need to do things like strengthen long term care insurance in the insurance industry. We need to provide incentives into the tax policy for people to get coverage that way. We need to provide incentives for family care giving, respite care, that type of thing. But we also need to get aggressive around people who are abusing the system. Medicaid is a safety net. Medicaid is not an asset protection program. Medicaid should not be a vehicle by which you can get your long-term care and pass your house down to your kids. Or send your grandkids to college and donate lots of money to charity. Those are all wonderful things. But first things have to come first. And if Medicaid becomes the middle class or the lower, or the upper class asset protection program, I can guarantee you it will not be there for the kids who need it in the future.

Somewhat more controversially, we are also looking at things around cost sharing, but we think this is an important component of a modern health care system, especially around two major areas. One of which is inappropriate use of the emergency room. There’s not a huge number of people doing this, but there are enough. And if the current system of cost sharing and Medicaid, which essentially says you can’t charge more than three dollars for anything, and if you do charge it, you can’t enforce it, isn’t very conducive to keeping people out of an emergency room. Granted, we also have to make sure there are options, there are alternatives, there are primary care sites that are available to folks, but that isn’t necessary.

And then also around prescription drugs. If we know that there are therapeutically equivalent pharmaceutical drugs that are available to people, we need to find ways to incentivize people to choose the lowest cost and not just the brand new one that’s on TV all the time.

And then, finally, benefits packages. And again, I think people tend to have, and I’m sure this will generate a lot of discussion here, people tend to have this vision of EPSTD as a perfect standard. Perfect in its design and sustainable in its future. And I would argue with you that I don’t know if either of those are true. Does EPSTD guarantee better health care outcomes for everybody in the program? I don’t think it does. Does it guarantee better health care outcomes in a way such that we can try to provide some kind of health care coverage for people who have nothing? Clearly not. And I think if people continue to look at this as if we’re not going, we’ve drawn our line in the sand. Here is something, here is the EPSTD gold standard, we’ve got it for some people and we’re not going to budge off that at the expense of anything else. Then I think you really not only have drawn a line in the sand, but buried your head in it. And there have got to be ways to figure out how to get quality health care, and I know I’m running out of time, to as many people as possible. And I think demonstrably, the bulk of people in Medicaid are kids, but I would argue that the bulk of them are not special needs, very high intensive care disabled kids. And a large number of them, especially recently, as the working poor have started to come out of the program, look no different than you or I, are in working families, are relatively healthy, but just don’t have access to employer sponsored care. And if there is a way to provide with an SCHIP benefit package, is that so wrong? Is SCHIP so bad; is it really a two-tiered system? And I think if you say I clearly say no, I think the SCHIP is a pretty successful, pretty popular, pretty effective program. But if you say yes, then I fear that we’re just going to be clashing heads and the people who are going to suffer are the 45 million people who have nothing. And the optional kids who are in Medicaid who may get cut off.

So, I’m losing my voice and I’m also out of time. So I’ll stop there and we’ll go to Neva and then we’ll follow up with Q and A.