Recently in Medicaid Category

Powerful Republicans are pushing the twin ideas of capping the federal contribution to Medicaid and eliminating federal regulation of the program. These changes would do profound damage to the Medicaid benefit for long-term care, whether it is provided at home or in nursing facilites.

This plan would turn Medicaid from a federal entitlement into a block grant. Over time, states would be responsible for paying a growing share of the program costs but in exchange would have broad flexibility over who to cover and what benefits they'd receive. In such an environment, chances are good that fewer aged and disabled would be eligible for benefits and they'd receive less assistance than they do today. At the same time, providers such as nursing homes and home health agencies would likely get lower Medicaid payments even though the program reimbursements are already at dangerously low levels.  

Today, the federal government pays about 57 percent of Medicaid costs (the actual amount varies from state to state and ranges from 50 percent to about 80 percent). While the elderly and disabled account for only 25 percent of the 50 million Medicaid enrollees, the program spends two out of every three of its dollars on this population. More than one-third of the total Medicaid budget, or $125 billion, went to long-term care supports and services alone in 2009, according to a new study by the Kaiser Family Foundation.

Under the current arrangement, the federal government pays its share no matter how quickly Medicaid costs rise. Thus, because Medicaid rose by 7.7 percent in 2009 (mostly because the recession drove many newly-unemployed into the program), the federal contribution increased to keep up. In fact, Washington's share actually grew even more thanks to the much-reviled 2009 stimulus law.

By contrast, under a block grant the federal share would increase only up to a cap, say equal to the growth rate of the economy plus one percent. In 2009, this would have resulted in no increase in federal payments for the program. As a result, states would have had to scale back their Medicaid programs, including their long-term care services.

Over time, the federal contribution would fall significantly, leaving the states with more and more responsibility for the program and less and less assistance to pay the bills. Governors who support a block grant insist it would drive greater efficiencies.And it might, for instance, make it easier for states to expand their home and community based long-term care programs. 

But it is also likely to generate major cuts in both benefits and reimbursements. In addition, without minimum federal standards, the differences among state long-term care benefits, already dramatic, would only grow.As a result, residents of one state may receive much better long-term care than residents of a neighboring jurisdiction.  

Despite these risks, GOP governors came to Cngress today to demand the changes. Mississippi Governor Haley Barbour, who is mulling a presidential bid--told a congressional committee that states should not have to "kow-tow" to the federal government and insisted the program be turned into a block grant. Mississippi, as it happens, recieves a greater federal Medicaid payment than any other state.

Even more troubling, these Medicaid cuts would come on top of what are likely to be freezes or cuts in non-Medicaid benefits for the frail elderly, such as nutrition, energy assistance,and housing.  

My guess is that much of this call for a Medicaid block grant is political posturing. It is hard to believe that many governors would turn their backs on hundreds of billions of dollars in federal aid at a time when they are struggling to balance thier budgets. I suspect what Barbour and his colleagues really want is the money with less regulation. But given federal budget pressures, their GOP friends on Capitol Hill may give them both.        

As Medicaid budget pressures grow, more states are turning long-term care over to private managed care companies. USA Today reports that six states now require both frail elderly and younger adults with disabilities to enroll in insurance-run Medicaid managed care plans. Another 10 states are planning to either create or expand these programs, according to the story.

The reason, of course: money. States pay the insurance plans a fixed amount to care for these patients. And the private insurers say they can provide quality care for less cost through their use of care coordinators and by keeping many people at home. 

Tennessee, for instance, pays private insurers an average of $4,400 per patient per month to provide Medicaid long-term care services. Under this system, if the insurer can provide care for less, it makes a profit. If its costs are higher, the insurer is at risk for the difference. This is a big incentive to create a care plan built around home care, which for many beneficiaries can be far less costly than a skilled nursing facility.

USA Today reported that one Tennessee insurer, Amerigroup, spent about $3,000 per month to care for one patient at home. The cost for this patient in a nursing facility would have been almost $4,600 per month and a money-loser for the insurer.     

Medicaid managed care isn't new. States have been using it for acute care beneficiaires (mostly low income mothers and kids) for years. But long-term care patients are a very different challenge.

One one hand, more than any other population, the frail elderly need to have their care coordinated. They have complex medical needs, often suffer from multiple chronic diseases, and frequently take many medications. If a mix of care managers, personal assistance, nursing, and other services and supports can help them get the care they need at home for less money, that is great.

This flat fee, or capitated, payment model works well with programs such as hospice and PACE, for instance.   

On the other hand, many insurance companies badly damaged their reputations in the 1980s and '90s with managed care plans that seemed more intent on maximizing profits than care. It will be important to put protections in place to be sure that the frail elderly, who are often unable to advocate for themselves, are getting the care they require.

The other problem with Medicaid managed care is that these beneficiaries often receive their physician and hospital care through Medicare, not Medicaid. Because these two programs are so poorly coordinated, seniors who transition from, say, home to hospital to rehab and back to home may not get proper care as they cross settings.

This lack of coordination between Medicare and Medicaid also creates some perverse and dangerous incentives. If, for instance, a Mediciad managed care patient winds up in the hospital as a result of poor care, neither Medicaid nor the managed care firm is on the hook. The bill, instead, is paid by Medicare.

If managed care is going to work well, there will have to be much closer delivery and financial relationships between these two payers, as there is with successful programs such as PACE or through provider-based managed care mechanisms such as Accountable Care Organizations.           

Prepare yourself for big new cuts in government support for elder care.  

In his State of the Union address last evening, President Obama called for a five-year freeze on a narrow slice of the federal budget. Unfortunately, programs subject to the freeze would include many that are critically important to the frail elderly and younger people with disabilities--especially those living in the community.

This is only the beginning of what will be a very difficult period. Yet it is an opportunity for communities to pull together to provide services that government may no longer offer.

The freeze would not include Medicare or Medicaid, although Medicaid long-term care benefits are already being cut at the state level. However, it is very likely that programs such as meals-on-wheels, adult day care, transportation, housing, aging and disability resource centers, and Area Agencies on Aging would all be hit by this freeze.

It is not clear exactly how the freeze would work. It could be an across-the-board cut in all so-called domestic discetionary programs. These are programs that are subject to annual congressional review, but exclude entitlements such as Medicare, Medicaid, and Social Security. Alternatively, Congress could pick and choose which programs to cut, as long as the total amount of all domestic non-entitlement spending did not rise from year to year.

Either way, a freeze will inevitably result in fewer services since demand for this assistance is growing as the population ages and the cost of services rises.

Congressional Republicans are already criticizing Obama's plan as too weak and vow to cut even more deeply into these programs. Some would return spending to 2008 levels, others to 2006 funding. However it finally works out, there is little doubt that many of the long-term care supports and services that seniors now rely upon are in line for major cuts.

With a national debt of $14 trillion and annual deficits of more than $1 trillion, there is no doubt that government spending is going to be trimmed--perhaps quite substantially.It is also likely that sooner or later, federal payments for Medicaid services will also be slashed. One can hope that an eventual budget deal will eventually include tax increases as well, which would help soften the spending blow. But in the current political environment, that is not likely--at least until after the next presidential election.

So what do families and advocates do? I believe we need to begin to look for community, non-government solutions. If transportation services are cut, we should pull together to create volunteer ride programs. Senior villages are one way to build such an infrastructure. So are more informal groups organized around neighborhoods, churches, synagogues, or fraternal organizations.

If budgets for government-funded resource centers are slashed, we should support private non-profits that pick up the slack.(Full disclosure: I serve on the board of one of these--the Jewish Council for the Aging of Greater Washington--and as an adviser to another--Caring from a Distance). 

As needs grow and government services shrink, we all face a huge challenge. But it is also an opportunity to rethink our obligations to, not only our own parents, but to our neighbors and friends. I hope we will be creative enough to take up this challenge.    

The news for critical long-term care services and supports provided by the states--either through Medicaid or other funding--keeps getting worse. The toxic combination of a still-slow economy, huge structural budget pressures on all levels of government, and growing demands for aging and disability services is leading to ongoing cuts in both critical benefits to individuals and payments to providers.

The latest evidence comes from two new reports. Following an extensive survey of state officials, AARP reports that 31 states cut their non-Medicaid long-term care services programs in Fiscal Year 2010 and at least 28 expect to slash them in the coming budget year. These essential programs include home-delivered meals, transportation, adult day care, housing, and foster care.

At the same time, a report by the American Health Care Association--which represents mostly for-profit nursing homes-- concludes that skilled nursing facilites are losing increasing amounts of money on their Medicaid long-term care beds. It concludes that nursing facilities are paid $17 per day less for long-term care than it costs them to provide these services. It is easy to criticize these results as self-serving, but the general trend is hard to dispute. And it could result in dramatic cuts in these long-term care resources. While this may not be a short-term problem in communities with an oversupply of nursing homes, this trend may already be curbing services in low-income areas. 

The AARP study reported that only a handful of states cut Medicaid benefits last year, but that was because the federal government, as part of its stimulus effort, increased its share of program payments. In addition, states that took the extra federal money were barred from cutting Medicaid benefits--although they could trim or freeze provider payments. Normally, the federal government pays about 60 percent of the cost of Medicaid while the states pay the rest (the amount varies from state to state).

However, this additional federal Medicaid funding is already winding down, and will disappear completely on July 1. Even more troubling, AARP found many states built the higher federal payments into this year's budgets, a decison that will force even deeper cuts in state programs as those dollars dry up. Just this week, lawmakers in Texas and Ohio proposed major cuts in Medicaid.  

AARP also asked state officials whether they intended to pursue additional federal funding for home and community based services that's been promised under the 2010 health reform law. Despite their serious financial shortfalls and the growing interest among policy analysts and advocates in expanding community services, state officials were remarkably cautious about whether they'd embrace these initiatives.

I'll have more to say about these studies soon, but they are both worth reading.       

In the decade between 1999 and 2008, almost 3,000 nursing homes closed while the number of skilled nursing facility beds shrunk by nearly 100,000, or about 5 percent, according to a new study in the Archives of Internal Medicine. In a nation with more nursing homes than McDonald's, and at a time when long-term care can be provided in other settings, that may not be a bad thing. These days, many frail elderly receive care at home or in assisted living facilities, settings they often prefer to skilled nursing facilities.

But the Archives study by Zhanlian Feng and coauthors also raised some serious concerns. The report concluded that many of these closures occured in minority and low-income communities, the same areas where other care alternatives may be unavailable.

Other studies have shown that relatively few assisted living facilities--which are overwhelmingly private pay--are located in these neighborhoods. In addition, while data are scarce, it appears that many low-income and minority serniors may have limited access to high-quality home care. In other words, for one segment of the population, good care may increasingly be unavailable. 

A study published last year in Health Affairs, David Stevenson and David Grabowski of the Harvard Medical School found that larger assisted living facilities (those with 25 beds or more) were far more likely to be located in higher income counties than in poor jurisdictions. 

As a result, low-income seniors who are unable to live at home--perhaps because there may be no one to care for them or because their home may not be suitable for someone with disabilities--have very few options. Many may move to small board-and-care homes--often a room they rent in a local home where assistance is provided by an unlicensed caregiver. Others may get no care at all.  

From the perspctive of the long-term care industry, the Archives paper reflects another troubling trend. Most long-term care in SNFs is paid by Medicaid, and reimbursements for these patients are often lower than the cost of providing care. By contrast, Medicare, which pays for post-acute and rehabilitation services, is far more generous. Medicare typically pays $500 or more per day for these services while Medicaid may pay just $125 for a long-term care bed (these payments vary by state and Medicare payments are adjusted to reflect patient needs).

The result: Growing industry consolidation and an increasing shift away from long-term care and towards more lucrative post-acute services. These choices make perfect economic sense. And they are often praised by advocates for the elderly, who argue that aging services should be provided in the community. However, for some seniors, including some with dementia or those with no family members to help provide care, nursing homes or assisted living facilities may be their only alternatives. Sadly, for many, those options are increasingly unavailable.           

Last year, the Minnesota Citizen's League asked me to help with a very ambitious project: The group wanted to find ways to improve our broken system of long-term care financing. Earlier this month, the non-profit, non-partisan League came up with its recommendations. I don't agree with them all, but among their far-reaching proposals are some ideas that I hope have legs. 

The League's white paper, called "Moving Beyond Medicaid: Long-Term Care for the Elderly as a Life Quality and Fiscal Imperative" makes three basic recommendations--all aimed at increasing the role of personal responsibility for long-term care while maintaining a safety net for the most needy.

The group would restructure Medicaid, encourage innovative financial products to help families pay for long-term care, and begin a broad education campaign through civic organizations and employers.Their goal is for half of Minnesotans to have some financial planning in place for long-term care by 2015. 

Here is a brief summary of each proposal:

Medicaid: The state/federal insurance program would remain a safety net for the very poor, but middle-class families would be expected to self-finance some of their long-term care costs. While Medicaid would supplement coverage, families would either rely on savings, private long-term care insurance, or home equity to pay their share. They could also buy coverage through the the CLASS Act, the new voluntary national long-term care insurance program that was included in the 2010 health reform law.

New Financing Tools: These include a program to offer prizes to low- and middle-income households who open new savings accounts, a design modeled on an existing program in Michigan. My favorite idea, however, is a new hybrid home equity/reverse mortage product that would provide a low-fee way for people to tap into the equity in their homes for long-term care needs. Today, reverse mortgages can serve that purpose but their fees are too high.

In the League model, Minnesota could create a new low-cost product. I've written about a similar model where the state itself could lend money to those who need long-term care and, get, in return, a lien on the recipient's home. After the person getting care and their spouse died, the loan would be repaid with interest. Such a design would give people broad flexibility in designing their own care, an advantage not available with Medicaid.           

Education: Finally, the League, which has close ties to the local business community, urged companies to play a larger role in encourgaing workers to plan for their long-term care needs.It calls on business to encourage workers to increase both savings and consider home equity or insurance projects to prepare for care in old age. 

This would be a major change. Today, only one in seven workers has access to long-term care insurance through their workplace, according to the SCAN Foundation. And while the CLASS Act is built on workers buying government long-term care insurance through their job, there is little evidence that employers will be willing to offer the coverage as part of their benefit packages.  

The League has built a sturdy foundation for long-term care reform--education, better savings vehicles, and a broad reform of Medicaid. Minnesota's state-funded long-term care program is, like most states, under tremendous financial pressure these days. I hope the state gives some of the League suggestions a try.       

The co-chairs of President Obama's bipartisan deficit commision have proposed a far-reaching plan to reduce the nation's massive deficit. It includes big changes for both current and future seniors. Among them: higher Social Security taxes and reforms in the design of benefits, reduced payments to Medicare providers and greater cost sharing by Medicare beneficiaries, and, perhaps most dramatic, a fundamental change in federal payments for Medicaid long-term care.

The chairs, Erskine Bowles--who was chief of staff to President Clinton, and Alan Simpson--a former Republican senator from Wyoming--released their draft plan today. Their proposal still must win the support of 14 of the 18 members of the bipartisan commission, which will be an uphill battle. If the group can reach a consensus, the panel's plan would be presented to Congress in early December.

The Bowles-Simpson plan makes cuts throughout government, including defense and most domestic spending programs. It also includes $750 billion in tax increases over 10 years. While much of what the co-chairs proposed will be hugely controversial, their plan shows what it will take to put the nation back on a firm fiscal footing.

In such an environment, long-term care services can't expect to be immune from cuts. Their biggest proposed change: capping the federal contribution for Medicaid long-term care.

Today, the federal government must automatically pay its share of the cost of these services, no matter how fast they rise. The feds contribute an average of about 60 percent of the cost of Medicaid, although the share varies from state to state. Bowles and Simpson would, for the first time, place a ceiling on the federal match for this joint state/federal program, reducing the federal contribution by about $90 billion from 2012 to 2020.

This would place a tremendous increased burden on states and likely result in both lower payments to nursing homes and home health agencies, and tougher eligibility standards and lower benefits for frail seniors and younger people with disabilities.

No doubt these proposals are harsh, but, like them or not, changes such as these are inevitable. They are a big reason why we must find a way to replace Medicaid long-term care with an insurance program.        

Kudos to President Obama for making a "recess appointment" of Don Berwick to run the Centers for Medicare and Medicaid Services (CMS).

Berwick may be the ideal choice for the job. He is the right candidate at exactly the right time. The new health law makes possible broad reforms in the way we deliver health and long-term care. But it by no means guarantees these changes will be implemented. It will take a tough, commited head of CMS to break through the politics, inertia, and special interests to make the possible real.

As head of the private Insitute for Health Care Improvement (IHI), Berwick was a tireless advocate for high quality, cost-effective medical care. Under his leadership, IHI pressed hospitals to improve routine procedures aimed at saving lives. These included tasks such as routine handwashing and monitoring of mediciations as patients transfer from one care setting to another. Easy to support these ideas, but Berwick was convincing hospitals to actually implement them.  

Berwick has been an outspoken critic of our fragmented health system for years, pushing instead for more coordinated care. He has argued that as much as half of all health spending is wasted.  

At a time when politicians decry the high cost of health care but are afraid to make the decisions to manage these expenses, Berwick will be in a position to do something about them. As the biggest payers of health care, Medicaid and, especially, Medicare will be well-positioned to drive needed reforms.

Despite his credentials, and even though CMS has been without a permanent head for four years, Berwick's nomination was being blocked by Senate Republicans. In an effort to turn his choice into yet another partisan battle over health reform, they blasted Berwick as "Dr. Death" who would end care for elderly patients.

To listen to the GOP, Berwick would implement the fantastical death panels that health reform critics invented last summer. Their claim is absurd and irresponsible, to say nothing of offensive.  

Berwick will shake things up. He will surely struggle to manage the massive CMS bureaucracy where Medicare and Medicaid officials rarely even talk to one another. And his recess apointment will last only until the end of 2011. But if anyone can begin the process of making today's medicine more cost-effective while improving patient care, it is Berwick.   

Medicaid long-term care is well on its way to destroying state budgets, according to a new study by the international consulting firm Deloitte LLC. By 2030, according to estimates by the firm's Center for Health Solutions, Medicaid long-term care benefits for both home and nursing facility care will absorb a staggering 18 percent of total state budgets if current trends continue. Overall state Medicaid spending will almost double by 2030 and the total program, including acute care benefits for young mothers and children, will swallow nearly 35 percent of state revenues. That would make it by far the biggest single state program, eclipsing even education.

This outcome is, honestly, impossible. Long before states face these costs, they will slash the program, either by cutting benefits, limiting eligibility, or both. We can already see this happening in the current recession, where state home and community programs are being cut and nursing home payments frozen or trimmed.

As the report notes, states are facing "a catastrophic fiscal left hook" from Medicaid. On one hand, the new health law requires them to provide Medicaid medical coverage for 14 million near-poor Americans. While the federal government promises to cover all of those extra costs until 2016, states will be on their own after that. At the same time, a rapidly growing and long-lived aging population that will suffer increased chronic disease and demand more long-term care under Medicaid.

What will states do about this? The Deloitte report suggests more efficient delivery focused on better care coordination for those receiving both Medicare and Medicaid, more home care services, and further incentives to encourage middle-class people to buy private long-term care insurance. But the real solution, I fear, will be global budgets where total Medicaid spending is capped at a certain level.  

The Deloitte study is more evidence that, in the long run, we need to get Medicaid out of the long-term care business. And to do that, we need to build on the just-passed CLASS Act and make long-term care an insurance program, not a welfare program. Trying to preserve the broken Medicaid system will only bankrupt states even as it provides families with the wrong care, at the wrong time, and in the wrong place.     

For the first time since President Bush's ill-fated effort to privatize Social Security five years ago, the future of the nation's flagship retirement program is back on the policy agenda. For example, Social Security will almost certainly be an issue for President Obama's deficit reduction commission. 

Unfortunately, we may be headed for the same non-productive shouting match we had over the Bush plan in 2005. Critics of the current system tell us Social Secrity is "broke" and faces trillions of dollars in unfunded liabilities. Supporters argue the program is untouchable.

I'd like to make the case for a middle-ground. Largely as result of profound demographic changes (we are living longer and having fewer children), the Social Security system needs to be reformed. It does not need to be blown up. But it does need to be updated.  

Social Security is in no way broke. But over the long-run it will be paying more in benefits than it collects in taxes. The result is, without changes in the system, government will be able to pay only about three-quarters of promised benefits to future retirees. 

This is an unhealthy situation and, on top of much greater financial stresses of both Medicare and Medicaid (which pays the largest share of long-term care costs in the U.S.), it jeopardizes the secure retirement of future generations.

It is important to keep in mind that the debate over Social Security is about benefits for future retirees, not current seniors. There is no chance that reforms will reduce promised Social Security benefits for those already retired or, indeed, even for those 55 or older. Whatever changes we make will be phased in slowly over many years. 

So what to do? My choice is a mix of modest Social Security payroll tax increases and benefit changes. I'd raise the cap on wages subject to the tax. I would gradually increase the early retirement age of 62. After all,as the nature of work changes and we remain healthy well into our 60s, many of us can and should work longer. I'd also adjust the inflation index to which benefits are tied.

I'd also consider other changes in the design of the program, perhaps even reducing benefits somewhat for younger retirees (especially those over a certain income) while raising them for those over 80 or 85 and for low-income workers and widows.

Finally, government needs to encourage younger generations to save more for their own old age. This means boosting participation in retirement plans. The CLASS Act, a new national voluntary long-term care insurance program included in the health reform law, will also help people prepare for the risk of needing personal assistance in old age.

There are many ways to address these issues, but the goal should be clear: At a time of budget contraints, Social Security benefits should be targeted to those who need them the most, even as we all do more to prepare ourselves for what we all hope will be a long old age.