Medicaid “Reform” and Mental Health

1. Medicaid “Reform” and Mental Health Leighton Ku Senior Fellow Email ku@cbpp.org Presentation at NAMI Conference, June 2005 www.cbpp.org

2. Medicaid as a Safety Net • Before Medicaid enacted in 1965, poor people usually uninsured and relied on charity care. • Today Medicaid serves as a safety net: • For those with disabilities who are largely excluded by private health insurance • For low-income elderly who need help for gaps left by Medicare • For low-income families and children who can’t afford insurance, even if they are working in low-wage jobs.

3. Mental Health Getting Smaller Fraction of Nation’s Overall Health Expenditures… % national health expenditures for mental health Source: T. Mark, et al. Health Affairs, Mar 2005

4. Medicaid Has Financed a Growing Share of Mental Health Services % of total mental health expenditures by source of payment Source: T. Mark, et al. Health Affairs, Mar 2005

5. Almost Half of Medicaid Costs Are for Those with Disabilities Medicaid Enrollment and Expenditures, FY 2004 Adults 11% 26% 18% Children 48% 44% Disabled 16% 26% 10% Aged Source: CBO estimates

6. Medicaid and the Federal Budget • Congressional budget resolution assigns Senate Finance and House Energy & Commerce Committees about $10 billionincuts assumed to come from Medicaid over next five years. Policies to make cuts to be determined by this fall. • Budget cuts federal taxesby $100 billion ($70 billion reconciled) mostly for high income people and increases the deficit. • Medicaid and other cuts will pay for tax cuts for wealthy people, not for deficit reduction.

7. How Will $10 Billion Be Cut? • Congress will decide in September. • New HHS Medicaid Commission will make recommendations for $10 billion cut by Sept. 2005 and longer term recommendations for redesigning Medicaid by Dec. 2006. • National Governors Association has made interim recommendations.

8. Principles to Protect Medicaid • Health coverage and long-term care coverage must continue to be guaranteed for those who qualify for Medicaid. • Financing should continue to be fully shared between the federal government and the states without caps. • Benefits and cost-sharing should reflect the health needs and economic circumstances of the people served by Medicaid.

9. Concepts Likely to Be Discussed • Find some savings outside of Medicaid • Reduce amount paid for prescription drugs • Limit eligibility for nursing homes (limit asset transfers) • Increase cost-sharing or premiums • Bare bones benefits or vary benefits for different groups • Tax credits or health savings accounts

10. Higher Cost-sharing May Be Harmful • Higher copayments, especially for those with chronic health problem lead to less health care use and poorer health. • Out-of-pocket medical expenses for Medicaid recipients already rising twice as fast as their incomes. • Non-disabled Medicaid beneficiaries already spend over 3 times more of their incomes for medical expenses than privately insured. Disabled spend 8 times more.

11. “Flexibility” to Restructure Medicaid • Some propose “restructuring Medicaid” thru federal legislation or federal waivers • Could cap federal Medicaid funds • Could give states more flexibility to cut • One theme is making Medicaid benefits more like private insurance, which could limit access to mental health services

12. Medicaid Cuts at State Levels • Eligibility reductions • Reductions in poverty-related eligibility for aged and disabled. • Higher copayments and premiums • Restrict or eliminate “optional” benefits, e.g. prescription drugs, psychologist or therapist care, dental, home health services, case management services • Restrictions on access to range of medications

13. Other State Medicaid Issues • Expansion of managed care for those with disabilities, including those with severe mental illness or emotional disturbances • Coordination of mental, physical and long-term care often an issue in managed care • Could limit treatment options • Restrictions in definitions of “medical necessity”

14. Potential Consequence of Medicaid Cuts • Increase number of people without access to mental health services or medications. • Increase strain on other state and local mental health service programs • Decrease access to newer or more effective treatments • Mental health problems could worsen, increasing number who are homeless or incarcerated or who require institutionalization

15. What You Can Do • Help federal and state policy makers understand important role Medicaid plays in lives of those with mental illness and their families • Point out personal and public consequences of higher cost-sharing or benefit reductions, which can have implications beyond Medicaid budget • Maintain support for Medicaid’s entitlement status