MCHB 2006 Federal/State Partnership Meeting
The Nuts and Bolts of the Deficit Reduction Act (DRA)
October 15-18, 2006
JOY JOHNSON-WILSON: I'm not doing a PowerPoint so you can rest your eyes. I'm often considered the wet blanket at these kind of meetings, but I'm the reality check.
KAY JOHNSON: The important facts start now.
JOY JOHNSON-WILSON: And let me first say that often, the National Governors Association or sometimes NCSL is given full credit for the DRA. Let me just say it's loosely based on some things that we said we'd like, but we never said we wanted to do Medicaid reform in a budget reconciliation bill. In fact, we said exactly the opposite; that we said that if you're going to do Medicaid reform, it should be part of a larger look at healthcare reform in
And I'd say the other important thing is DRA is a really big bill. And while we're focusing today on the eligibility and benefits for women and kids, there are many other topics within deficit reduction that state legislators are going to be focused on. Number one, long-term care. Very large section on long-term care. Some of them are going to require legislative changes this year regarding treatment of annuities and trust and various financing mechanisms that people use to shelter income. And it's not in the health committees, because health committees don't do that. So some of the people that are going to be affected by DRA and need to be taking action don't know what's happening yet. But they will soon enough.
We got some long-term care options to move towards more home and community-based care, clearly an area of great interest to legislators because that's where the money is. That's where we spend the bulk of our Medicaid dollars. And unless we figure out something to do there, there won't be money for women and kids. So we've got to work on that. Some of those--oops, sorry.
KAY JOHNSON: I'm just going to move that for you. I burned my hand on that.
JOY JOHNSON-WILSON: Oh.
KAY JOHNSON: I'm telling her, I burned my hand on this so I'm moving it.
JOY JOHNSON-WILSON: Whoops. So some of those things are going to require investments, in other words, new state money. And states are going to have to figure out whether they want to spend their money there or in some of the other areas. So, again, there's a great push for states to take some action on the long-term care area, and we've got limited money. So, again, that's an area where states are focused.
We have fraud and abuse. And the targeted case management comes under the fraud and abuse section of the bill. Now, this is one of those mixed blessing things. Where targeted case management saves Medicaid, my colleagues on Human Services got bopped. And at the state level, it doesn't matter because basically, if Medicaid's not going to pay for it and get the match, we've got to find another way to finance that. The service needs to be done. And so, actually, we lose money on that one even though it's considered a Medicaid savings. Very important, targeted case management. We lobbied very hard against that provision. We lobbied very hard to get a different effective date. We lost on both counts and we know that it's going to be a major cost that will show up in this year and in the out years as we try to adjust on how we're going to do that. And I have to say that just like they made the change in targeted case management, we're staring down changes in rehabilitative services that will make the whole targeted case management pale in comparison. The cost associated with changing the definition of rehab services is huge, and affects women and kids, and a lot of other people. And we are expecting that that will continue to show up both legislatively and administratively. So, big issue for you to look out.
School health and special ed, again, these are areas where the administration is focusing and the focus is--and Dennis Smith, bless his heart, he firmly believes that Medicaid should only pay for medical services. And that if other services are being paid for, whoever is benefiting from that should pay. And so, you get into the school setting, you get into these other settings, and he's like, "Medicaid is paying for things that it shouldn't be paying for," and he wants it changed. And he firmly believes that and it's reflected in policy. And it's something that we have to be very concerned about because it does affect Medicaid financing to a huge degree.
The Federal government in the DRA--and this has nothing to do with kids you would you say--has put a lot of money into auditors to come to all of our states to visit and stay a while and audit the hell out of us. And when they do that, some of those marvelous programs we have will no longer exist. And we will then again have to reconfigure and figure out how we're going to revamp our programming to work in the new world order. It's not that we're against audits, we'd like some firm rules so we know what we're doing, and rules are moving. And so it makes it difficult for states to figure out where the platform is, and what you can do and you can't do. In addition to the auditors coming in, we have the perm program about eligibility. So they'll be looking to make sure that we're conducting eligibility the way it should be done. So in other words, we're getting audited a lot and it's going to change the face of the Medicaid program.
And these are things that are kind of below the radar screen, but as I always tell people, rumor has it that we have a lot of money up the states now. We're rolling in dough. We're a little better off than we were before, but most states in terms of their reserve funds, rainy day, whatever you want to call it, are well below what is considered financially advisable in terms of having a cushion. And we expect that next year the federal budget is not going to be kind to us, no longer an election year, and we still have a war going on. And we have a sizable deficit. Domestic spending usually gets ratcheted down. So we're expecting we're going to get hit with some budget cuts and we don't think our reserves are going to carry that for us.
But that being said, there's a lot of discussion about the amount of money states get with the federal match. We forget, though, that the state has to put a dollar down to get the match. And I say that this is very much like trying to convince your new young employee to buy into the pension plan. "We match you 10 percent." And they say, "Well, you know, that's kind of attractive, but I don't have any money for the pension plan." And so they don't have the dollar to put down to be matched, and many of our states are in that position where the federal match is attractive, but it only works if you've got a dollar to put down. And we are challenged to get that dollar. I have to say, CMS has done a very good job of tightening up what we can use to raise our matching funds at the state level and so doing nothing more than that, if we can't find the dollar to put on the table, it stymies the growth of the program. And I think that's being reflected partially. The slowing in growth of the Medicaid program is a fact that we're having trouble raising matching funds.
The other thing is, we're a little gun-shy about expanding the program after the recession. And we're looking out and we're seeing that even with the rosiest of economic assumptions, the program is not sustainable in the long term, and we're talking five to 10 years. So, with that as the backdrop, that's what colors legislators as they're trying to decide what to do about Medicaid. The other thing that we have to remember is this is not your mama's Medicaid program. This is not welfare. And in some states, 300 percent of poverty covers 90 percent of the people in the state.
And so, this whole notion of who's in and who's out, and then how you maintain an employer-based program becomes very challenging. And how do you maintain the special features of Medicaid which provides services that are not provided in private insurance when you go up the income scale and are competing then with the private sector which doesn't provide those things? And how do you balance that? Those are the challenges for state legislators. And they have to keep people interested in supporting the program with taxpayer dollars. So, when you've got somebody who's working poor and just not quite income eligible for Medicaid and they're looking at, "I'm buying my employer-based insurance which doesn't cover very much, and people over here are similarly situated, are getting the full panel of medical benefits. Why is that so? And how does that work?" Those are some of the policy questions that color the state legislators' actions. And I would say, take a look at the Ten-Care situation. I think they went up to, at one point, 354 percent of poverty. In Tennessee that covered almost everybody. And many of the small employers in that state said, "Why have coverage when we can have our people in Ten-Care?" Which was marvelous. It was marvelous coverage. But Tennessee doesn't have income tax. They had no way of supporting that program with taxpayer dollars. And as you see, it imploded.
These are the challenges that states have. They have to figure out how to balance those things out, finance the program, and be equitable and fair to their constituents. So that, I'd say, for every advocate, for every group, go forth and do good things, but do it in the context of understanding that you're in a long line of other people who have compelling arguments about why they should bump you out of line. And that's the challenge for state legislators. They have to listen to everybody and then try and figure out how to do the best they can with the resources that are available. And with that, I have to say I do not envy their job because it's a really tough job. And like last year, who knew that states were going to have to put state dollars to cover Medicare Part D? But we did it, we took care of people. And states do. They're not out trying to short people or hurt people, but they do have to balance all those interests and try to find that middle ground, which usually makes nobody happy. It's a thankless job and I have great props for all the people that continue to do that job, and try to weigh all those different things, and provide the services to people in a way that makes sense and improves their situation.
And so, what I say to you is that DRA is primarily a bill of options. And if you don't like them, lobby against them. If you want them refined, come with a plan. But you can't just whine about it.
FEMALE SPEAKER: Here, here.
JOY JOHNSON-WILSON: And so, I'm going to stop there and take questions.