Medicaid, the States and Health Care Reform

Abstract

Health care reform in the US is relying extensively on Medicaid for achieving universal health coverage. This article addresses the question of whether Medicaid is an appropriate foundation for reducing the ranks of the uninsured, given its dependence on economic conditions and the vulnerability of state budgets, along with the ever-changing preferences of governors and legislators. This article assesses the effects of the ebb and flow of Medicaid policy-making on at‐risk populations and what this implies for the Affordable Care Act. By establishing a nationwide income floor at 133% of the Federal Poverty Level, the legislation eliminates eligibility inequities across the states. However, it is argued that when state budgets are strained, as they undoubtedly will be when the reform bill is fully implemented, local officials will downsize benefit packages, raise co-payments, mandate more managed care, and reduce provider payments, negatively affecting the availability, scope, and quality of services.

Notes

¹ For an excellent history of the subject see David Harvey, A Brief History of Neoliberalism (New York: Oxford University Press, 2005).

² Paul Pierson and Theda Skocpol, “American Politics in the Long Run,” in Paul Pierson and Theda Skocpol (eds), The Transformation of American Politics: Activist Government and the Rise of Conservatism (Princeton, NJ: Princeton University Press, 2007), pp. 3–16.

³ See, for example, Alfred Saad-Filho and Deborah Johnston (eds), Neoliberalism: A Critical Reader (London: Pluto Press, 2005); Jago Dodson, “The Roll of the State: Government, Neoliberalism and Housing Assistance in Four Advanced Economies,” Housing, Theory and Society 23:4 (2006), pp. 224–243.

⁴ Public Law 111-148 (ACA) and H.R. 4872 (Reconciliation Act).

⁵ For a comprehensive analysis of Medicaid that includes other problematic aspects of the program, see Laura Katz Olson, The Politics of Medicaid (New York: Columbia University Press, 2010).

⁶ This article uses the terms Medicaid, low-income health program and welfare medicine interchangeably.

⁷ The issue is not only the limited number of medical schools—presently at 132 traditional ones and twenty-five osteopathic schools—but, just as importantly, the lack of sufficient residencies, totaling twenty-five thousand nationally. “Diagnosis for the Doctor Deficit,” Philadelphia Inquirer, April 12, 2010, A1, p. 8.

⁸ Under ACA, DSH allotments will be cut $0.5 billion in 2014; $0.6 billion in 2015 and 2016; $1.8 billion in 2017; $5 billion in 2018; $5.6 billion in 2019; and $4 billion in 2020.

⁹ Under ACA, eligibility also will be easier because Medicaid and Health Insurance Exchange subsidies must be coordinated in a single application form. States also have to provide online applications.

¹⁰ Alison Knezevich, “Health Care CHIP, Medicaid are More at Hand, Churches Helping Uninsured Kids,” The Charleston Gazette (West Virginia), April 30, 2010, p. 5.

¹¹ Section 1115 (of the Social Security Act) waivers allow states to disregard certain Medicaid regulations as part of any experimental, pilot, or demonstration project that promotes the program's overall goals. Section 1915(b) waivers permit states to put aside Medicaid's “freedom-of-choice” requirement, thereby allowing them to implement managed care or other limits to an individual's choice of provider. Under Section 1915c waivers states can put aside certain statutory regulations, such as letting them target certain subgroups or geographic areas and set limits on the number of participants. To implement waivers, the states have to receive permission from the Department of Health and Human Services.

¹² Stan Dorn, Bowen Garret, John Holahan, and Ainee Welling, Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses (Menlo Park, CA: Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured, April 2006), < http://www.kff.org>.

¹³ Jonathan Engel, Poor People's Medicine: Medicaid and American Charity Care Since 1965 (Durham, NC: Duke University Press, 2006); Ronald J. Angel, Laura Lein, and Jane Henrici, Poor Families in America's Health Care Crisis (New York: Cambridge University Press, 2006).

¹⁴ Initially, the program was labeled SCHIP but it is now referred to as CHIP. The states had a large amount of latitude in their use of CHIP money: they could establish a separate program, with fewer benefits and services, or affix CHIP to their ongoing welfare medicine plan; they also were allowed to impose premiums, deductibles, and co-pays (limited to 5% of total household income). Despite a reauthorization battle between Congress and President G.W. Bush, who vetoed the legislation twice, in 2009 President Barack Obama signed the Children's Health Insurance Program Reauthorization Act (CHIPRA). It provided thirty-three billion dollars through 2013 with the expectation of insuring four million additional children. The act also increased the federal matching rate to the states by 23%, along with offering them performance bonuses if they met certain targets for increasing enrollments.

¹⁵ Premiums could be imposed on households with income more than 150% of the FPL. Total cost sharing had to be kept at less than 5% of family earnings for children as well as for other groups that the states were federally required to cover. Moreover, for the first time in the program's history, not only could states end Medicaid coverage for families who did not pay their premium, but the legislation empowered providers to deny services to anyone who failed to fund their share of the costs. A few states took advantage of this provision.

¹⁶ Fred Thomas and Courtney Burke, “Federalism by Waiver: Medicaid and the Transformation of LTC,” Publius 39:1 (2009), pp. 22–46.

¹⁷ James Fossett and Courtney Burke, Medicaid and State Budgets in FY 2004: Why Medicaid is Hard to Cut (Albany, NY: Federalism Research Group, Rockefeller Institute of Government, July 2004).

¹⁸ See, for example, Lisa Dubay, Christina Moylan, and Thomas Oliver, “Advancing Toward Universal Coverage: Are States Able to Take the Lead?,” Journal of Health Care Law and Policy 7:1 (2004), pp. 1–41; Donna Ross, Laura Cox, and Caryn Marks, Resuming the Path to Health Coverage for Children and Parents: A 50-State Update on Eligibility Rules, Enrollment and Renewal Procedures, and Cost-Sharing Practices in Medicaid and SCHIP in 2006 (Menlo Park, CA: Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured, April 2007), < http://www.kff.org>; David G. Smith, Entitlement Politics: Medicare and Medicaid 1995–2001 (New York: De Gruyter, 2002).

¹⁹ In 2001 and 2002 spending on Medicaid increased an average of 10% and 12%, respectively, but dropped to 1.3% in 2006 and 3.8% in 2007. Vernon K. Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz, and Laura Snyder, Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends, Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2010 and 2011 (Menlo Park, CA: The Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured, September 2010), < http://kff.org>.

²⁰ Health Policy Tracking Service, What the States Said, Did, and Plan to Do (Eagan, MN: Thompson Corporation, October 2, 2005); Ross, Cox, and Marks, Resuming the Path to Health Coverage; National Association of State Budget Offices (NASBO) and the National Governors Association (NGA), The Fiscal Survey of States (Washington, DC: US Government Printing Office, December 2007).

²¹ See, for example, Michael Hendryx, Carol Irvin, James Mulligan, Sally Richardson, Johanna Beanet, and Margo Rosenbach, Evaluation of Mountain Health Choices: Implementation Challenges and Recommendations (Charleston, WV: Institute for Health Policy Research at West Virginia University and Mathematica Policy Research, March 2009); Joan Alker, West Virginia's Medicaid Redesign: What Is the Impact on Children? (Washington, DC: Health Policy Institute, Center for Children and Families, Georgetown University, August 2008); Pat Redmond, Judith Solomon, and Mark Lin, Can Incentives for Healthy Behavior Improve Health and Hold Down Medicaid Costs? (Washington, DC: Center on Budget and Policy Priorities, June 1, 2007), pp. 4–5.

²² Nonetheless, over 60% of the states have implemented tax increases and other revenue enhancements, a few of them appreciably, since the 2008 recession. Moreover, most of the states have largely exhausted their “rainy day” reserves. Nicholas Johnson, Phil Oliff, and Erica Williams, An Update on State Budget Cuts (Washington, DC: Center on Budget and Policy Priorities, August 4, 2010).

²³ Rachel Klein, Jennifer Sullivan, and Rebecca Bruno, A Painful Recession: States Cut Health Care Safety Net Programs (Washington, DC: Families USA Foundation, December 2008). According to Smith et al., in FY 2010 the budget gaps across the states totaled $194 billion, and most of them are facing shortfalls amounting to at least $260 billion in FY 2011. Smith et al., Hoping for Economic Recovery.

²⁴ Klein et al., A Painful Recession.

²⁵ Smith et al., Hoping for Economic Recovery.

²⁶ The American Recovery and Reinvestment Act (ARRA) of 2009 increased the federal share of Medicaid expenditures, through an enhanced FMAP, from October 2008 through December 2010.

²⁷ Stephen Zuckerman, Joshua McFeeters, Peter Cunningham, and Len Nichols, “Changes in Medicaid Physician Fees, 1998–2003: Implications for Physician Participation,” Health Affairs, June 23, 2004, pp. 374–384; Stephen Zuckerman, Aimee Williams, and Karen Stockley, “Trends in Medicaid Physician Fees, 2003–2008,” Journal of Health Affairs 28:3 (2009), pp. 510–519.

²⁸ Stephen Zuckerman, Joshua McFeeters, Peter Cunningham, and Len Nichols, “Changes in Medicaid Physician Fees, 1998–2003: Implications for Physician Participation,” Health Affairs, June 23, 2004, pp. 374–384; Stephen Zuckerman, Aimee Williams, and Karen Stockley, “Trends in Medicaid Physician Fees, 2003–2008,” Journal of Health Affairs 28:3 (2009), pp. 510–519

²⁹ Vernon Smith, Kathleen Gifford, Eileen Ellis, and Amy Wiles, “Low Medicaid Spending Growth amid Rebounding State Revenue: Results from a 50-State Medicaid Budget Survey Fiscal Years 2006 and 2007,” Executive Summary, October, Menlo, CA.

³⁰ For example, for public hospitals, Medicaid accounts for 27% of their total patient services and 33% of their net revenues. Moreover, they represent 2% of acute care hospitals but account for 19% of uncompensated care across the nation. Of the total outpatient visits to government safety net providers, state and local hospitals represent 35% and community health centers, 65%. Obaid S. Zaman, Linda Cummings, and Sari Siegel Speiler, America's Public Hospitals and Health Systems, 2008 Results of the Annual NAPH Hospital Characteristics Survey (Washington, DC: National Association of Public Hospitals and Health Systems, February 2010).

³¹ Engel, Poor People's Medicine.

³² In 2010, twenty states lowered fees for physicians (sometimes targeting specialists); thirty-three for hospitals; twenty-five for nursing homes; and thirteen for dentists. In FY 2011, twelve states are planning to freeze or cut rates for physicians; thirty-seven for hospitals; twenty-nine for nursing homes; and seven for dentists. Smith et al., Hoping for Economic Recovery.

³³ For instance, in FY 2010, eighteen states increased hospital reimbursements and twenty-two raised their payments to MCOs. Very few places boosted payments to physicians that year. Ibid.

³⁴ By 2011, thirty-four states had implemented hospital provider taxes and thirty-eight had implemented them for nursing homes. Ibid.

³⁵ Thompson and Burke, “Federalism by Waiver,” pp. 22–46.

³⁶ Thompson and Burke, “Federalism by Waiver,” pp. 22–46

³⁷ In comparison, roughly 24% and 19% of Medicare and commercial plan clients, respectively, are enrolled in managed care, the latter down from 25% in 2004. Smith et al., Hoping for Economic Recovery.

³⁸ Joan Alker and Jack Hoadley, “Waving Cautionary Flags: Initial Reactions from Doctors and Patients to Florida's Medicaid Changes,” Briefing no. 2, commissioned by the Jessie Ball du Pont Fund (Washington, DC: Health Policy Institute, Georgetown University, May 2007).

³⁹ John S. O'Shea, “More Medicaid Means Less Quality Health Care,” No. 1402 (Washington, DC: Center for Health Policy Studies, the Heritage Foundation, March 21, 2007).

⁴⁰ See, for example, Michael T. Halpern et al., “Association of Insurance Status and Ethnicity with Cancer Stage at Diagnosis for 12 Cancer Sites: A Retrospective Analysis,” Lancet Oncol 9:3 (2008), pp. 222–231.

⁴¹ Henry A. Giroux, Against the Terror of Neo-liberalism: Politics Beyond the Age of Greed (Boulder, CO: Paradigm Publishers, 2008).

⁴² Henry A. Giroux, Against the Terror of Neo-liberalism: Politics Beyond the Age of Greed (Boulder, CO: Paradigm Publishers, 2008); Paul Pierson, “The Rise and Reconfiguration of Activist Government,” in Paul Pierson and Theda Skocpol (eds), The Transformation of American Politics (Princeton, NJ: Princeton University Press, 2007), pp. 19–38; Suzanne Mettler, “The Transformed Welfare State and the Redistribution of Political Voice,” in Pierson and Skocpol, The Transformation of American Politics, pp. 191–222; and Jacob S. Hacker and Paul Pierson, “Tax Politics and the Struggle Over Activist Government,” in Pierson and Skocpol, The Transformation of American Politics, pp. 256–280.