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Medicaid

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  1. Medicaid Professor Vivian Ho Health Economics Fall 2009

  2. Topics • Coverage and Financing • Current Challenges • Restraining costs • Improving health

  3. 1972 17,606 1975 22,007 1985 21,814 1988 22,907 1989 23,511 1990 25,255 1995 36,282 1998 40,096 2001 45,766 2005 57,300 $ 6,300 12,242 37,508 48,710 54,500 64,859 120,141 142,318 186,905 298,200 Medicaid Trends # of Recipients (m) Total Cost ($m) Year

  4. % of % of Average recipients payments payment Kids(<21) 47.2% 17.1% $1,729 Adults 21.7% 11.8% $2,585 Age 65+ 7.6% 23.0% $14,402 Perm 14.2% 43.4% $14,536 Disability Medicaid Recipients, 2005 http://www.cms.hhs.gov/MedicareMedicaidStatSupp/ (2008 Edition)

  5. Medicaid Financing • Joint financing by federal and state governments • States w/ lowest per capita income receive larger federal subsidies • CA, NY receive about 50% federal funding • MS, WV receive 76% and 72.99% federal funding respectively

  6. Minimum requirements for federal matching funds: • Must cover Temporary Assistance for Needy Families (TANF) and Supplemental Security Income (SSI) beneficiaries • Must provide inpatient and outpatient hospital services, and physician services

  7. State Variations • States have wide latitude in setting eligibility and medical benefits • Access and costs vary by state • Mean Medicaid fee for an office visit, new patient, 30 minutes in 2003: $54.87 (Zuckerman et al 2004) • $31.46 for established patient, 15 minutes • But wide variation across states (see Exhibit 2) • Fees well below Medicare fees in many states

  8. State Variations • Do differences in the Medicaid program across states make a difference? • See Zuckerman et al, Table 4

  9. SCHIP • State Children’s Health Insurance Program • Part of 1997 BBA • Gave federal funding to states to reduce # of uninsured children • States have considerable latitude in programs • Expand Medicaid • Develop separate children’s health insurance program • Both • SCHIP enrollment >7m in 2007. • Income eligibility levels vary from 300% of federal poverty level in Connecticut, to 133% in Wyoming

  10. Medicaid & the Nursing Home Market • Individuals who meet certain low-income and disability requirements qualify for nursing home care covered by Medicaid • Medicaid reimburses nursing homes on a fixed price basis (e.g. price per day)

  11. Medicaid & the Nursing Home Market • How can the Medicaid program set prices in order to insure adequate access, but also restrain costs? • Keep in mind that nursing homes can choose to serve private pay or Medicaid patients

  12. Medicaid & the Nursing Home Market • We assume that most nursing homes have a local monopoly • i.e. Most nursing homes face a downward sloping demand curve • A nursing home with monopoly power which serves only private-pay patients will set price where MR=MC

  13. Medicaid & Nursing Homes $ MC P0 ATC Demand MR Q0 NH patient days

  14. Medicaid & the Nursing Home Market • Now, assume instead that there are no private patients, and the gov’t must set a reimbursement level for care provided to Medicaid patients • If the gov’t wants care provided at the lowest possible cost per day, it will choose a price equal to the minimum of the average total cost curve

  15. Medicaid & Nursing Homes $ MC ATC MRM PM Demand MR Q3 NH patient days

  16. Medicaid & the Nursing Home Market • Now, consider the graph when a nursing home can serve private pay patients and/or Medicaid patients • The demand curve for private pay patients indicates that some are willing to pay more than PM for nursing home care

  17. Medicaid & Nursing Homes The nursing home will now view its MR curve as the line ABMRM $ MC A ATC MRM PM B Demand MR Q3 NH patient days

  18. Medicaid & the Nursing Home Market • For all private pay patients “up to” point B on the MR curve, the nursing home knows that its MR will be greater than the Medicaid reimbursement rate • Thus, for private pay patients, the nursing home no longer prices at MR=MC. Instead, it serves the number of private pay patients “at” point B

  19. Medicaid & Nursing Homes The nursing home will care for Q1 private pay patients and Q3-Q1 Medicaid patients. $ MC A P0 ATC MRM PM B Demand MR Q1 Q3 NH patient days

  20. Medicaid & the Nursing Home Market • Policy challenge: Medicaid can increase access to nursing homes by raising PM • However, raising the reimbursement rate will lead to higher expenditures • Some patients who might have been willing to pay out-of-pocket without Medicaid now may get Medicaid coverage • Gov’t attempts to subsidize care for low-income individuals can lead to “crowd-out” of private care

  21. Does Medicaid “work?” • In late 1980’s, income ceilings for Medicaid coverage were raised • Pregnancy care for women with incomes <133% of poverty • Children <6 covered if family income <133% of poverty • Children <9 covered if family income <100% of poverty

  22. Did health insurance coverage for the poor increase, or did it “crowd out” private insurance? • Some low income people may have dropped private insurance to go on Medicaid • Did health status among the poor improve?

  23. 1987-1992: Medicaid coverage of children rose (15%21%), but private insurance coverage fell (77%69%) • But private insurance may have fallen for other reasons (e.g. 1990-91 recession) • States could increase eligibility beyond federal minimums • Compare increases in Medicaid coverage and falls in private insurance across states

  24. Results • The Medicaid expansion increased coverage for 1.5 million children • But decreased private insurance by .6 million • Similar results for women of childbearing age • The expansions lowered infant mortality by 8.5%; child mortality by 5.1% • Cost per life saved: $1-1.6m

  25. Was the expansion worth it? • Should Medicaid be “better targeted?” • In 2002, Medicaid surpassed Medicare as nation’s largest health insurance program • Could we have gotten the same result cheaper?

  26. Current challenges to Medicaid • Rising Medicaid costs have strained state budgets during recessions • Problematic, because most state governments required by law to balance their budgets • Many states have made Medicaid program changes

  27. 1) Modest reductions in funding • Lower physician, nursing home reimbursement rates • Limits on prescription drug use • Noncoverage of optical, dental care 2) Expansion of Medicaid managed care 3) Cost shifting to the federal government • States shifting all state-run health programs into Medicaid, in order to receive matching funds

  28. Medicaid and Managed Care • States vary widely in financing and delivery arrangements for managed care plans • Low-intensity: primary care case management (PCCM) • Gatekeeper bears no risk for cost overruns • High-intensity: mandatory enrollment in fully capitated plans

  29. Impact of Medicaid managed care • Medicaid managed care grew rapidly in mid 1990s due to attractive business opportunities • “Foot in the door” for providing state employee health care coverage • Insurers didn’t have to pay commercial rates to providers, could also transfer risk • HMO industry was making high profits at this time

  30. Impact of Medicaid managed care • In early 2000’s, HMO profits disappeared • Mirrors problems w/ health care costs in private sector and Medicare • Still have 2-fold variation in capitation rates across states • Difficult to monitor quality • TennCare had significant differences in LBW babies and death in 1st 60 days across its Medicaid managed care programs

  31. Future challenges to Medicaid • HMOs have enrolled AFDC beneficiaries, but not the higher cost elderly, or chronically disabled • High-cost populations may require carve-out programs

  32. Eligibility, Marketing, and Enrollment • Intermittent eligibility as enrollees cycle in and out of welfare • High turnover forces HMOs to market aggressively, to maintain revenues (costs up to 1 month’s capitation per member)

  33. Traditional providers may not be able to compete with commercial HMOs • Community health centers, urban hospital outpatient programs, indigenous community-based physicians have provided much care to Medicaid beneficiaries • Subsidized in past due to high level of uncompensated care • If forced to close, creates access problems for persons w/o coverage

  34. Wrap-up • Funding the Medicaid program provides health benefits, but sometimes at significant costs • Future decisions on Medicaid should be made within the context of wider welfare reform