medicaid in 2007: current trends and implications for
TRANSCRIPT
Medicaid in 2007:Current Trends and Implications for
Medicaid Funding in Education
Vernon K. Smith, Ph.D.for
National Alliance for Medicaid in Education5th Annual Conference
MinneapolisSeptember 26, 2007
Smith 1
Outline for Presentation
• What Medicaid has become in 2007– Spending and enrollment– State Medicaid policy directions
• Strategies to slow spending growth• Expanding coverage
• Outlook for the future– State and Federal spending trends– Federal policy directions
• Implications of current trends for Medicaid funding for Education
Smith 2
“Medicaid…
…has always been under-appreciated, particularly for the role that it plays in the lives of so many Americans.”
– John Iglehart, Editor, Health Affairs
Smith 3
Medicaid Nationally in 2007: A State – Federal Partnership$340 billion for over 62 million individuals,
the largest health program in America …• 30 million children
– including 1.5 million deliveries and infants
• 16 million adults in families• 10 million persons with disabilities• 6 million persons age 65 or older
Medicaid accounts for 44% of federal funds to states, the largest single component
Sources: CBO March 2007 Medicaid Baseline; HMA projections of 2007 total spending. All data for federal fiscal year 2007. NASBO, State Expenditure Report, 2006.
Smith 4
Medicaid is the “Financial Glue”of the U.S. Health Care Safety Net
– Mental health, public health and schools• over half of publicly financed mental health care• Significant funding in schools
– Community Health Centers• Medicaid averages 40% of CHC revenues
– Hospitals that serve the uninsured• special Medicaid “DSH” payments $16 billion in 2007
– Medicare• 7 million low-income elderly and disabled are “dual
eligibles”– i.e., on both Medicaid and Medicare• “Duals” account for about 40% of Medicaid spending
Smith 5
9%
13% 10%
44%
17%17%
Total PersonalHealth Care
Hospital Care ProfessionalServices
Nursing HomeCare
PrescriptionDrugs
Note: Data for 2005.SOURCE: Aaron Catlin, et.al., “National Health Spending in 2005,” Health Affairs, January/February 2007. Based on National Health Care Expenditure Data for 2005, CMS, Office of the Actuary, 2007. Part D allocation by Health Management Associates.
After Part D2006
Medicaid is 1/6 of U.S. Health Spending (and 2.7% of GDP)
19% Before Part D2005
Smith 6
The State Medicaid Challenge: Spending Increases When Tax Revenue Drops
Annual Percentage Changes 1996-2006
3.7%3.2%5.3% 6.6% 5.2% 5.1% 2.0%
-7.8% 3.2%
5.3%
3.0%
6.1% 7.1%8.2%
12.4%
7.4%
2.8%2.7%
10.3%8.3%
6.3%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
State Tax Revenue Medicaid Spending Growth
NOTE: State Tax Revenue data is adjusted for inflation and legislative changes. Preliminary estimate for 2006.
SOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks, Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal
Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006..kff.org/Medicaid/7569.cfm
With Clawback
Smith 7
U.S. Medicaid Spending: Growth Now at Near-Record Lows
Due to:• Low growth in number of persons
enrolled • Slower growth in health care costs
– Particularly for prescription drugs• State cost containment actions
– Cumulative effect of strategies adopted in recent years
Smith 8
0
10
20
30
40
50
60
1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Medicaid Enrollment, with Key Events 1965-2007
Millions of Medicaid Beneficiaries during year
SOURCE: Kaiser Commission on Medicaid and the Uninsured analysis of data from the Centers for Medicare and Medicaid Services, 2004. 2005-2007 HMA based on CBO March 2007 Medicaid Baseline.
MedicaidEnacted(1965)
SSIEnacted(1972)
Medicaid Eligibility Expansions Women and Children (1984-1990)
Section 1115 Waivers ExpandMedicaid Eligibility (1991-1993)
Medicaid & Welfare De-linked,
Robust Economy
(1996)
SCHIPEnacted(1997)
62 Million Beneficiaries in 2007
Recession and State
Fiscal Crises(2001-2004)
Smith 9
U.S. Medicaid Enrollment: Percentage Changes FY1992 - FY2006
7.1%
5.1%
3.4%
-3.3%-2.4%
0.6%
3.2%
8.1%
9.9%
5.7%
4.1%3.2%
1.6%
-0.6%
10.2%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Annual growth rate:
SOURCES: Eileen R. Ellis, Vernon K. Smith and David M. Rousseau, Medicaid Enrollment in 50 States, June 2005 Update – Preliminary Data, Kaiser Commission on Medicaid and the Uninsured, June 2006. 2006 data provided by state officials to Health Management Associates for Kaiser Commission on Medicaid and the Uninsured, 2006. For 1992-1997 data are from CMS for federal fiscal years. 1998-2006 are June-June state fiscal years.
Smith 10
12.0%
18.0%
14.0%
8.5%
0.8%
7.7%
9.2%
6.1%
11.2%*
5.3%*
8.2%*
10.9%*
12.9%*
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
* Estimate is statistically different from previous year p<0.05.† Estimate is statistically different from previous year at p<0.1.Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, 2006; Premium increases for a family of four; Consumer Price Index (U.S. City Average of Annual Inflation (April to April), 1988-2005; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), 1988-2007.
13.9%†
2.6%
3.7%
Inflation
Earnings
Health Insurance Premiums
Increases in Health Insurance Premiums, Earnings and Inflation, 1988-2007
Smith 11
Annual Health Insurance Premium Costs Increased 88% from 2000 to 2007
$4,819
$8,824
$1,619
$3,281
$0 $2,500 $5,000 $7,500 $10,000 $12,500
2000
2007
Employer ContributionWorker Contribution
Family premiums increased 88%, while worker’s earnings increased 20%.
$6,438
$12,106
Note: Family health coverage for a family of four.
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000 and 2007.
Smith 12
Number of Uninsured in U.S.Continues to Increase
39.8 42.0 43.4 43.5 44.8 47.0
0
10
20
30
40
50
2001 2002 2003 2004 2005 2006
In Millions
SOURCE: U.S. Census, August 28, 2007.
Smith 13
Growth in the Uninsured Is Related to Growth in Medicaid
• Total uninsured– 15.8% in 2006, up from 15.2% in 2005– up 2.2 million in 2006 to 47 million– Most uninsured (60%) are working full or part time
• The share of full-time workers uninsured increased from 17.2% in 2005 to 17.9% in 2006
• Uninsured children– up 600,000 in 2006 to 8.7 million, following a 400,000
increase in 2005– Only two years of growth in uninsured children since
SCHIP enacted– 11.7% of all children were uninsured, including 19% of
children in poverty – level families
SOURCE: U.S. Census, August 28, 2007.
Smith 14
Increase in Uninsured Reflects Employer Response to Rising cost of Coverage
• Percentage of all firms offering health benefits– 2000: 69% – 2007: 60%
• “Employers are really feeling the pinch here and as much as possible, they’re trying to limit these increases and push them onto the employees. That means a lot of people drop their coverage.”
– Douglas Besharov, American Enterprise Institute, quoted in The New York Times, August 29, 2007.
• “While the employer-based system slowly unravels, the public system isn’t quite stepping up to the plate to pick up the slack, and therein lies the problem.”
– Jared Bernstein, Economic Policy Institute, quoted in The New York Times, August 29, 2007.
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2007; New York Times, August 29, 2007.
Smith 15
Fiscal Pressures Forced Every State to Take Medicaid Cost Containment Actions
FY 2003 – FY 2007
4650
25
18 1713
10
48 50
21 19 1814
8
26
1015
912
17
59
3
26
10
20
50
43
78
46
18
29 27
43
ControllingDrug Costs
Reducing/FreezingProvider
Payments
Reducing/RestrictingEligibility
ReducingBenefits
IncreasingCopayments
DiseaseManagement
Long-TermCare
2003 2004 2005 2006 Adopted for 2007
NOTE: Adopted actions are not always implemented. SOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks, Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and
the Uninsured, October 2006. www.kff.org/Medicaid/7569.cfm
Number of States, by Year
Smith 16
Medicaid is Constantly Changing: Over 2/3 of States Offered New Proposals in 2007
• Governors in 34 states offered plans to reduce the number of uninsured children, parents, adults, aged and disabled in their state through
– Medicaid expansions– SCHIP expansions– Targeted DRA waivers– Health reform through major Section 1115 waivers– Market-based approaches– Improving quality through prevention and better
management of chronic conditions
Source: NASBO, The Fiscal Survey of States, June 2007.
Smith 17
Improving State Revenues Decreased Likelihood of Medicaid Rate Cuts, 2004 - 2007
21
10
6
0
SOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks,Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006.
www.kff.org/Medicaid/7569.cfm
FY 2004 FY 2005 FY 2006 FY 2007
Number of States Cutting Medicaid Rates for Inpatient Hospitals,Doctors, Nursing Facilities or Managed Care Organizations
Smith 18
In 2006 and 2007, States Increasingly Turned to Program and Quality Improvement
1214
17
2628
21
Disease Management Quality Initiatives Program Integrity
2006 Adopted for 2007
SOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks,Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006.
www.kff.org/Medicaid/7569.cfm
Number of States in
Smith 19
Almost 2/3 of U.S. Medicaid Enrollees Are Now in Some Form of Managed Care
65636361595756565448
2940
010203040506070
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Percent of Medicaid Enrollees in U.S. in Managed Care
Source: CMS, Medicaid Managed Care Reports, 1996-2005
Smith 20
FY 2007 State Policy Directions Show Commitment to Medicaid Managed Care
• Enhancements to quality measurement, monitoring and improvement
• Shifts to mandatory enrollment • Extensions to additional geographic
areas, usually rural• Expansions to additional populations,
usually the disabled and dual eligiblesSOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks, Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006. www.kff.org/Medicaid/7569.cfm
Smith 21
Enrollees Expenditures
Children = 19%
Elderly = 22%
Disabled = 46%
Adults = 13%Children = 48%
Elderly = 9%
Disabled = 17%
Adults = 26%
2007 U.S. Total = 62.2 million U.S. Total = $305 billion in 2007*
Elderly and Disabled Account for 68% of Medicaid Spending, 2007
*Expenditure distribution based on spending for medical services only and excludes DSH, supplemental provider payments, vaccines for children and administration.SOURCE: Health Management Associates estimates based on CBO Medicaid Baseline, March 2007.
26% 68%
Smith 22
In 2006, the Deficit Reduction Act Provided New Medicaid Options to States
• New Flexibility Options– Benefits or Cost Sharing– New HSA-like “Health Opportunity
Accounts”• New Long Term Care Options
– Focus on encouraging LTC insurance and greater patient control over care
SOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks, Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006. www.kff.org/Medicaid/7569.cfm
Smith 23
A Few States Have Adopted Options Created by the DRA in 2006
• Benefit Flexibility: WV, KY, ID, KS
• Cost Sharing Flexibility: KY
• Targeted disease management: VA, WA
• Health Opportunity Acct: SC
• HCBS State Plan Option: IA
• Cash & Counseling, LTC Partnership : SeveralSOURCE: Vernon Smith, Kathleen Gifford, Eileen Ellis, Amy Wiles, Robin Rudowitz, Molly O’Malley and Caryn Marks, Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007, Kaiser Commission on Medicaid and the Uninsured, October 2006. www.kff.org/Medicaid/7569.cfm; and CMS reports, 2007.
Smith 24
In 2006, Two States Leveraged Medicaid to Move toward Broader, Near-Universal Health Coverage
• Massachusetts Health Plan – Universal coverage, with individual and employer
mandates / assessments– Subsidies for low-income individuals– Health insurance “Connector”– Strong quality component
• Vermont – Catamount Health Plan– Near-universal coverage, with Premium
Assistance for low-income uninsured– New individual product for uninsured – Employer assessment– Chronic care management initiative
Smith 25
In 2007, Over 2/3 of All States Offered New Proposals
• Governors in 34 states offered plans to reduce the number of uninsured children, parents, adults, aged and disabled in their state through
– Medicaid expansions– SCHIP expansions– DRA waivers– Comprehensive Section 1115 waivers– Market-based approaches– Improving quality through prevention and better
management of chronic conditions
Source: NASBO, The Fiscal Survey of States, June 2007.
Smith 26
One Example: 2007 Indiana Plan
• Subsidized private insurance with HSA-like feature– Eligibility up to 200 percent of the FPL– Premiums 2 to 5 percent of income,– $500 in preventive care; a $1,100 health savings account;
up to $300,000 of annual coverage from a private insurer• Medicaid eligibility expanded for for children and
pregnant women • Other provisions
– children to age 24 can stay on parents' health insurance – insurance pool created for small businesses– tax incentives to encourage employers to offer insurance
• Financing: cigarette tax increased by .44 to $0.995
Smith 27
Another example: Pennsylvania
• Comprehensive, 47-point health plan: “Prescription for Pennsylvania”
• Coverage for all children• “…affordable health insurance to all
adults, with payments based on income.”• Focus on personal responsibility and
quality • No mandates.
Smith 28
California …The Boldest Proposal Yet
Proposed to cover 6.5 million uninsured through• Expanded Medicaid coverage for all children• Mandates for Employers (with 10 or more
employees) and individuals• Assessments on providers
– 2% for doctors, 4% for hospitals
“California will be the first state, I guarantee you, where we will have universal health coverage, where we will insure everybody.”
--Gov. Arnold Schwarzenegger, speaking to the California Medical Association, May 2, 2007
Smith 29
An Emerging View: Medicaid is Part of the Overall Health System
“Medicaid is one purchaser in a larger health care market … the most effective way to control Medicaid spending growth is to pursue strategies to control overall health care spending growth.”
--Richard Kronick and David Rousseau, “Is Medicaid Sustainable? Spending Projections for the Program’s Second Forty Years,”Health Affairs – Web Exclusive, February 23, 2007.
Smith 30
To slow the growth in costs in the long run, slow the demand for treatment
Chronic disease is the number one cause of death and disability in the U.S.
– accounts for 70 percent of all deaths and more than 75 percent of health care spending
“We should be moving into an era now… that puts much more emphasis on keeping people well and not just paying for costly complications after they happen.”--Mark McClellan, former CMS Administrator,
July 17, 2007.
Smith 31
A Key Example: Obesity is linked to Disease Prevalence and Health Care Spending
• Total diabetes prevalence increased 53% over the past 20 years
• “All the increase in diabetes is linked to the doubling of obesity prevalence among adults.”
• 27% of the increase in all health care spending is accounted for by the increase in obesity prevalence.
Source: Kenneth Thorpe, 2006
Smith 32
States Are Focusing on Improving Health Care Quality
• Studies show chronically ill Americans receive the recommended treatment on average only 56% of the time; examples
– Congestive heart failure…64% get recommended treatment– Depression ……………….58%– Asthma ……………………54%– Diabetes ………………….45%
• States are focused on disease management and other care management approaches to improve care
• States increasingly are using reimbursement systems to reward higher performance
SOURCE: EA McGlynn, SM Asch, J. Adams, et al, "The Quality of Health Care Delivered to Adultsin the United States." New England Journal of Medicine, June 26, 2003. And: Vernon Smith, et al, Low Medicaid Spending Growth Amid Rebounding State Revenues, Kaiser Commission on Medicaid and the Uninsured, October 2006
Smith 33
60
62
6466
68
70
72
74
7678
80
82
-500
500
1,500
2,500
3,500
4,500
5,500
Life Expectancy Per Capita Spending
Pressure Is Growing to Improve U.S. Health System: U.S. Has the Highest Cost … but Lower Life Expectancy
Life
Exp
ecta
ncy
Per C
apita
$Sp
endi
ng
Source: The Commonwealth Fund, based on OECD 2002 Data (Except Brazil and China), 2006.
$Per Capita
Smith 34
0
10
20
30
40
50
60
70
80
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Millions of Medicaid Beneficiaries during year
SOURCE: Historical enrollment from Kaiser Commission on Medicaid and the Uninsured analysis of data from the Centers for Medicare and Medicaid Services. 2005-2017: HMA calculations based on CBO March 2007 Medicaid Baseline.
2007:
62 Million
2017:73 Million
Outlook for Medicaid Enrollment:Projected to Grow, but More Slowly
199735 Million
1987:23 Million
1977:23 Million
Projection
<1% +51% +78% +17%
Smith 35
Growth in Medicaid Enrollees Projected 2007 - 2017
1.0%
1.5%
2.5% 2.6%
0%
1%
2%
3%
Children Adults Disabled Aged
Medicaid Growth by Category of Eligibility
Source: Calculations by Health Management Associates based on CMS historical data and Congressional Budget Office Projections through 2017, March 2007 Medicaid Baseline.
Smith 36
The Outlook for Medicaid Costs: Increases Similar to Overall Health Spending
“Medicaid spending as a share of national health spending will average 16.6 percent from 2006 to 2025 – roughly unchanged from the 16.5 percent in 2005.”
Even after accounting for “… the anticipated decline in employer-sponsored health insurance and the long term care needs of the baby boomers…”
--Richard Kronick and David Rousseau, “Is Medicaid Sustainable? Spending Projections for the Program’s Second Forty Years,” Health Affairs – Web Exclusive, February 23, 2007.
Smith 37
Medicaid Spending Projections
Average annual Medicaid spending growth: • Ten-year forecast
– CMS: 8% – CBO: 8%
• 9% for long term care
Sources: Source: John Poisal, et al., “Health Spending Projections Through 2016: Modest Changes Obscure Part D’s Impact,” Health Affairs, 21 February 2007; CBO, Medicaid Baseline 2007.
Smith 38
Medicaid Has Increased as a Share of State Budgets: 1985 – 2010 Projected
14%
19%
8%
13%
20% 20%23%
18%14%
25%
0%
5%
10%
15%
20%
25%
30%
1985 1990 1995 2000 2005 2010(Projected)
General Fund Total Funds
Source: National Association of State Budget Officers, State Expenditure Reports, 2005 and earlier reports; 2010 percentages projected by HMA.
GF GFGF
Total Medicaid Spending as % of State Budgets
Smith 39
Medicaid Total Spending Projected to Double to Over $700 Billion in Ten Years: 2007 - 2017
314 340 362 390421
455492
533577
625677
736
0
100200
300
400
500600
700
800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Health Management Associates estimates based on data from CBO and CMS, 2007.
All funds: Federal, State and Local
Smith 40Congressional Budget Office, January 24, 2007
The CBO message for federal policy makers:Medicaid spending contributes tothe federaldeficit, and must becontrolled.
The cover for the annual CBO analysis of the federal budget highlights the fact that projected Medicaid and Medicare spending growth will exceed GDP growth over the next decade.
Smith 41
Federal Officials Increasingly Convey a Sense of Urgency
• “The nation’s long-term fiscal balance will be determined primarily by the future rate of health care cost growth.”
– Testimony of Peter R. Orszag, Director, Congressional Budget Office, before Committee on the Budget, U.S. Senate, June 21, 2007.
Smith 42
State Officials Express Concern
“It is not a good time to be dependent on the federal – state partnership”
--Matt Salo, National Governors Association, August 2007.
Smith 43
Federal Policies are Aimed to Impact Federal Medicaid Spending
• Opposition to Congressional proposals for SCHIP reauthorization
• New regulations limiting what qualifies as Medicaid spending
Smith 44
Current Strategies to Restrain FederalMedicaid Spending
• Just in 2007, Federal proposals would cut spending by about $20 billion over next five years
– New, more intense audits, reviews, requirements, oversight and scrutiny
– Reduced use of Medicaid special financing
– Restrictions on specific services
Smith 45
2007 Federal StrategiesIssued March-August, 2007 (Page 1)
• Provider taxes limited: effective 1/2008• Graduate Medical Education: makes GME
not allowable effective 7/2008• Public providers: more restrictive cost
limits• Pharmacy pricing: new limits from DRA• Tamper-resistant Rx pads: New Medicaid
requirement in Iraq War supplemental
Smith 46
2007 Federal StrategiesIssued March-August, 2007 (Page 2)
• Rehabilitation services option: defines habilatative and rehab services
• School-based administrative claiming: Eliminates activities of school employees and contractors
• Non-emergency transportation: Limits funding for school transportation for children with IEP or IFSP
• These three account for $1 billion in FY 2008 and $6 billion over five years
Smith 47
Summary and Conclusion
• Medicaid is the largest health program in America and one of the most significant programs administered by states.
• States are now using Medicaid to – Help finance strategies to reduce the uninsured– Improve quality of care– Improve the health of beneficiaries that could
help slow Medicaid costs & overall health costs• States face increasing challenges relating
to their ability to sustain program fiscally and federal actions to limit federal spending