No Medicaid Expansion without Reform

medicaid

Virginia’s Medicaid program, though one of the most frugal in the country, still has waste and inefficiency.

John M. O’Bannon III, R-Henrico, is a neurologist, and his medical practice provides care to indigent patients with little hope of paying their bills, but he is also a Republican delegate to the General Assembly. When he contemplates an expansion of Medicaid, a top priority of incoming Governor Terry McAuliffe, he is very concerned about the fiscal impact on Virginia.

“Medicaid is the fastest growing part of the state budget,” O’Bannon told Bacon’s Rebellion. The program, which is roughly half funded by the federal government and half by the state, gobbles up 40% of all new dollars in the General Fund budget submitted by outgoing Governor Bob McDonnell. “It’s crowding out education and public safety. We have a trajectory that’s unsustainable.”

O’Bannon is not dogmatically opposed to expanding Medicaid, as allowed for under the Affordable Care Act (Obamacare). But he belongs to the camp that says Medicaid must be reformed to bring down its cost structure before the state takes on the commitment in four years of covering 10% of the expense of extending the program to another 250,000 to 400,000 poor and near-poor Virginians.

If there’s a major point that has been lost in the debate over Virginia Medicaid expansion, it’s the linkage of Medicaid expansion to reform. The question is not, “Do we expand Medicaid, yes or no?” The question is, “Does Virginia use this once-in-a-generation opportunity to extract major concessions from the federal government in how Medicaid is administered before agreeing to expand the program?”

The Centers for Medicare & Medicaid Services (CMS) are negotiating with the states over how to implement the expansion, in some cases granting waivers for major reforms, says O’Bannon. Oregon is moving to a public health model, installing a totally new primary care system to take patients out of expensive emergency-room settings. Michigan is adopting a system that encourages Medicaid patients to take on more personal responsibility by making co-payments and getting more screenings. Arkansas is restructuring Medicaid to put more chronically ill patients on the program while subsidizing a shift of healthy poor patients to the health care exchanges. It’s classic laboratory-of-Democracy stuff, said O’Bannon, and Virginia can learn from the successes and failures in other states.

Meanwhile, Virginia has its own reforms that it wants to implement. One would be to change incentives to enroll so-called dual patients (who qualify for both Medicare and Medicaid) in managed care programs. Another would incentivize the use of nurse practitioners to head off infections that send nursing-home patients to the hospital. Others have criticized the Medicaid reimbursement of patient transportation costs on the grounds that the money could be spent more effectively in other ways.

There may be a lot of sound and fury in the General Assembly session as McAuliffe and like-minded legislators push for expansion, but O’Bannon doesn’t expect anything to come of it. Virginia is locked into a path that will be very difficult to dislodge it from. The decision whether or not to expand Medicaid currently rests with the Medicaid Innovation and Reform Commission (MIRC). Only if three out of five House and three out of five Senate members agree that Virginia’s demands for reform have been met can MIRC authorize the reforms and expansion. As currently constituted, three of the five Senate members and four of the five House members (including O’Bannon) are Republican.

Discussions with various interested parties are ongoing, and he’s open to talking to the other side, O’Bannon said. But he added: “Unless you can show us that this really will be a more efficient system and there won’t be a large outlying [fiscal] risk, you aren’t likely to see anything any time soon.”

In theory, the General Assembly can enact legislation to overturn the provisions of MIRC, but O’Bannon doesn’t see the Republican-dominated legislature doing that. There also has been discussion of winning over Republicans by packaging Medicaid expansion with elimination of the business-license tax, but he believes that any “grand bargain” would have too many moving parts to work out.

Medicaid expansion is the one opportunity that Virginia foes of Obamacare get to weigh in. “It’s a proxy for how people feel about Obamacare,” O’Bannon says, and he doesn’t see many Republicans capitulating. But he’s a pragmatist. Medicaid expansion would pump a lot of federal money into Virginia’s health care system and provide coverage for people who don’t now have it. If the state and the feds can come to terms over serious reform, he’ll vote for expansion. Absent reform, he’s opposed. “I’m not interested in just grabbing the money and running.”

8 Responses to No Medicaid Expansion without Reform

  1. some background info:

    Background
     Virginia’s Medicaid program provides payment for health care for people in particular categories. Currently, Medicaid in Virginia typically covers: pregnant women with household incomes up to 133% of the Federal Poverty Level (FPL), children (up to age 18) up to 133% of FPL, older adults up to 80% of FPL, some people with disabilities up to 80% of FPL, and parents up to 24% of FPL. 133% of FPL translates to $14,856 per year for individuals or $30,657 per year for families of four.

     Costs are shared between the federal government and the states, and states are permitted to set their own income and asset eligibility criteria within federal guidelines – the federal match rate for Virginia’s Medicaid program is 50%; for its children’s health program (FAMIS) the match rate is 65%.

     Virginia’s current eligibility requirements are so strict that although it is the 11th largest state in terms of population and 7th in per capita personal income, Virginia ranked 43rd in Medicaid enrollment as a proportion of the state’s population and 47th in per capita Medicaid spending.

     In FY 2012, 996,835 Virginians were enrolled in Medicaid (17% were adults, 57.2% children, 17.8% people with disabilities, and 8% older adults), and the state spent approximately $7 billion

     The federal government will pay 100% of the cost through 2016, decreasing incrementally to 90% for 2020 and subsequent years.

     Some of the cost of providing care to individuals with behavioral health needs could be shifted to Medicaid, providing coverage to approximately 22,000 people and potentially saving the Commonwealth $12 million per year.

     The 2012-14 biennium budget includes $209 million GF for indigent health care costs at VCU Health System and UVA Medical Center – these costs to the state could be saved if such patients were Medicaid eligible.

     Over $1 billion was spent on indigent care in Virginia in the last decade, with $112 million spent in FY 2012 – annual savings could range from 50% to 80% of current spending ($56 million to $90 million annually).

     The state Department of Corrections could save $15.2 million annually due to expanded eligibility for individuals whose care was previously paid for by the state.
    Providing insurance coverage to uninsured Virginians could lower health care costs for all Virginians.

     Commercial insurance enrollees already pay a “hidden tax” to cover uncompensated care provided for uninsured Virginians. With fewer uninsured, “hidden tax” currently borne by other commercial payers should shrink (potentially $17 million to $24 million annually).

  2. And how much will health care bills and insurance premiums be reduced if coverage is expanded and uncompensated care costs be reduced? What will ensure this happens? Why shouldn’t we believe that, somewhere between now and then, the bulk of the money will be absorbed by the health care and insurance industries?

    I assume we can agree that having Uncle Sam pay instead of the Commonwealth is fiscal magic. The money comes from taxpayers. Do taxpayers and insurance premium payers pay less and how is that proved? Those are the questions that no one will answer.

  3. the money DOES come from taxpayers and when the state rejects it you have to pay TWICE – one to the Feds who you are making – keep it , then to Virginia to pay for the fastest growing and 2nd largest part of the Va budget.

    It’s like we want to be stupid. Even other GOP governors decide to take the money … because – as I outlined above – that money displaces things in the current budget – separate and apart from the expansion/inclusion of new folks.

    and Virginia has the ability to structure the benefits and eligibility…

    the rejection is purely political and a huge gaping self-inflicted budget wound all for the sake of appeasing the hard right.

    No one can accurately predict exactly what the outcomes will be on this. Just as with SS and Medicare – there are unintended consequences and that is not something just connected to Democratic legislation.

    Remember the “donut hole” for Medicare Part D or the “doc fix” legislation that had to be passed every year or the alternative minimum tax?

    how about the flood insurance program ? or the Social Security Disability program?

    want to look at non-entitlement spending for unintended consequences. how about crop subsidies or ethanol subsidies? Non-govt? New Coke, Edsel, …. etc, etc.

    everything …TMT .. EVERYTHING needs to be incrementally improved whether it’s entitlements, other govt or the private sector.

    want to talk to Blackberry or Blockbuster Video about unintended consequences?

    the right seems to think that if the govt has flawed legislation that it proves the govt is corrupt, incompetent, immoral, dumb, fill in your own bad trait….

    SS and Medicare have been through dozens of changes.. and will go through more changes..

    so will a lot of other legislation that has nothing to do with entitlements.

    I don’t make excuses for any of it. I see it as inevitable and normal just as you and I .. do… screw up… it’s the human condition and govt and entitlements.. … I know this seems totally far fetched… but they are flawed also.. because they are part of the human condition also.

    basically you’re defending subsidies you already get and are opposed to others getting them.. not just the poor but people who work for a living but can’t get insurance. You’re opposed to those people getting equivalent subsidies that you benefit from… that’s not “political” .. it’s something else.. and it’s not so nice but it is “normal”.

  4. There are actually 3 separate and distinct issues with ObamaCare that get conflated in the discussions.

    1. – very large pool health care exchanges for people who can afford to buy insurance but can’t get it because they don’t have employer-provided or they have a pre-existing condition, etc.

    2. MedicAid Expansion – for people who cannot afford insurance in the Exchanges.

    3. the specification of minimum standard policies for all insurance no matter whether it is employer-provided, health care exchanges, MedicAid or open/free market policies.

    these specifications require no out-of-pocket screening tests like colonoscopies , birth control, diabetes screening, etc.

    the specification also prevent companies from denying pre-existing conditions or lifetime maxes on coverage.

    the way they intended to “pay” for the additional coverage was to use the power of very large pools – and a good example of one that works that way right now is the FEHB – the Federal Govt health care plan but also plans of very large employers with very large pools can also provide that high level of coverage for lower costs.

    But smaller pools – even individual plans on the open market or smaller employers cannot provide that extra coverage without increases in rates.

    They do not “cancel” your policy. With insurance (except for life insurance) , every year the company you have insurance with , in effect, cancels last years policy and offers you a replacement policy but that policy is often not exactly like the old one.. it has changes in it and the costs for it often change.

    When the FEHB policies (about 15-20) expire and new policies are provided, the govt requires each company to tell you what has changed up front -in clear language and they also allow you to compare all the new policies to see if other policies are now better for you.

    There is no fear of losing insurance as the companies that participate in the FEHB cannot deny insurance, cannot charge you more than others in the same class and cannot put lifetime limits on you.

    the Healthcare exchanges were designed to operate very similarly and the increased coverage was going to be mitigated by much larger pools.

    so in the private insurance market, people are NOT “losing” their policies. They are being replaced – as they always are every year but if the pool is small, the costs are going to be higher but because of the law, they no longer can deny you coverage or discriminate against you for your existing conditions, etc.

    So the “lie” is NOT that people lose their policies – the law now protects them from losing their policies but the costs of those policies for smaller pools is going to be more costly.

    The folks that wrote ObamaCare purposely wrote it to force insurance companies to build larger pools… and they knew that companies with smaller pools would be forced to go to bigger pools…

    the pool “problem” was already a huge problem before ObamaCare for small businesses… because the insurance companies CHOSE to have a separate pool for each company rather than a large pool for all small employers.

    it was a simple profit-motive that drove them in that direction.

    they could have operated larger pools… but chose not to.

    Virginia itself could do what the Feds have done with FEHB – with it’s state and local employees but instead virtually every school district in Va has it’s own insurance pool instead of a state-wide pool for all Va teachers that would have covered more, prevented denial of insurance and lifetime maxes and less expensive.

    Virginia COULD ALSO do this for the MedicAid Expansion. They could create a state-wide pool for the uninsured where the State pays the premiums but for a larger pool and premiums are means-tested so that it’s not “free” care if people make money but not enough to buy Exchange insurance.

    Virginia had and has a LOT of flexibility for both the health care exchanges and the expansion – just like other states like Kentucky, Massachusetts, Vermont, and Ohio have done.

    Virginia has responsibility for it’s own citizens but instead of carrying out that responsibility they’ve basically held their own citizens hostage in their opposition to the health care law.

    Virginia has the opportunity to not only provide more health care to more people but to reduce their own costs for health care by incentivizing people who are used to relying on ERs and charity care at Hospitals to start thinking more about seeing a doctor on a regular basis and doing the recommended screening tests …detecting disease faster and earlier – and treating/managing it for less.

  5. The thing that folks should recognize is that the status quo (assuming no ObamaCare) was awful to start with and gets worse unless some reform occurs.

    In the absence of ObamaCare – more and more people would lose their insurance as they change jobs and develop pre-existing conditions and their potential future employers either won’t offer insurance or will offer less and less real insurance with large out of pocket and lifetime limits OR they will not hire new people because in a smaller pool, one guy with an expensive condition can increase premiums on the other workers.

    The free market is entirely efficient about insurance.

    If you are a risk – the insurance market does not want you and they will just shed you or raise your rates and limit your coverage until you no longer can afford it.

    Many folks who have insurance, think that’s not their problem and in a world without EMTALA they’d be entirely right. Those that had insurance would be fine and those without would be without options. About 150 countries in the world operate exactly this way. You buy insurance and you do not pay for others.

    But with EMTLA, the law requires hospitals to treat those who are not insured.
    In the OECD world – about 50 countries – the US is unique with respect to EMTALA. In all other OECD countries this is ONE insurance pool and everyone pays into it.

    And, it’s not just EMTALA and the ER in the US. If they need medical care, they have to be treated. If they need bypass surgery or an MRI … the hospital must admit them and provide a standard of care that is the same whether the patient is insured or not.

    EMTALA is what defines our health care system in this country – and if you think about it – for the uninsured – it is two things we think it is not:

    1. – universal health care – EMTALA
    2. – single payer – those who are insured – pay

    TMT keeps pretending that ObamaCare is going to force us to pay instead of choosing to not paying.

    but we pay. It’s obvious that we do but we still have “deniers” just like with GW.

    Our politics on these issues has taken a weird turn – where we basically deny what we don’t like.. we just pretend it’s not so and that then becomes a political position.

  6. Just remember all that stuff when the Feds decide they want out of the employer provided healthcare model and gov. workers find them selves in the exchange pools.

    Permissions to states are a mere law change away from mandatory compliance. What happens then when Virginia has no say what so ever on Medicaid eligibility, asset levels or illusionary long range savings?

    This is just another version of the Peace Dividend scam that will vanish into the thin air of deficit printing.

  7. I don’t think the Feds necessarily need to get out of the employer-provided if they provide those without employer-provided an equivalent comparable benefit.

    if you could write off ALL of your healthcare expenditures on page 2 of the 1040 like you can for other things why not?

    just let everyone write off their health care costs.. either through tax-free employer-provided or get it all back at tax time if you pay totally out of pocket.

    Of course, then the cost of health care would directly affect govt revenues, eh?

    In terms of the Feds changing the game.. well yes… they always have that option… on …everything…

    they can do away with mortgage deductions or limit them or make people with flood insurance pay more costs or the people with Medicare pay more… of cut their benefits… or change SS to a chained-cpi .. etc.

    Any and all of the above – and other stuff could easily form a legitimate alternative “replace” for the opposition.

    right now – we basically subsidize a health care system that is grotesquely unfair and wasteful to boot.

    People are divided into haves and have-nots… not because of anything they did wrong but because they changed jobs and the new employer did not offer good insurance or they ended up working for themselves or for a small business and could not afford insurance or even if they could – could not get it because they had a chronic condition OR they are in their 50’s and insurers just don’t want them .. because of their age.

    We have a system where the size of the insurance pools play a huge role in costs and availability of health insurance.

    The govt FEHB has a humongous pool which mitigates costs.

    but it pales in comparison to countries like Canada where the entire country constitutes ONE POOL

    ObamaCare is being portrayed as the young paying for the old …

    it’s a nice sound bite but the “old” in this country get Medicare and don’t buy private market insurance….

    so the “old” they must be talking about are those in their 40’s and 50’s which is a real bite if you think about it.

    the argument is similar to making the young pay into social security or buying auto insurance…. as if in both cases.. the young could wait until they “needed” insurance… and they do this, in part, because they know that if they forgo health insurance. they can still show up at the ER to get guaranteed treatment.

    young folks get old and when they get old they need more health care – and you pay for this – over your life – build up a virtual “fund” when you are young and then drawing from that “fund” when you get older.

    In every single OECD country on the planet, every single person starts paying into healthcare when the start working and it continues for their life.

    some get sick and some do not but no one can predict the future and that’s the essential nature of insurance.

    we have folks who believe that insurance is a waste of money…or they just plain don’t understand the concept of insurance and they are perfectly willingly to not buy it – not only for health care but mortgage insurance, flood insurance, auto insurance, you name it… they don’t need no stinking insurance and when they do suffer a casualty – it’s no problem because someone else will pick up the tab…

    Individual responsibility used to be a Conservative ethic… not that long ago..either..

  8. re: No Expansion without Reform

    “O’Bannon is not dogmatically opposed to expanding Medicaid, as allowed for under the Affordable Care Act (Obamacare). ”

    what reforms would Virginia like to enact that are not allowed by the Feds?

    or are we talking about reforms that Virginia can do but has not? yes we are.

    ” But he belongs to the camp that says Medicaid must be reformed to bring down its cost structure before the state takes on the commitment in four years of covering 10% of the expense of extending the program to another 250,000 to 400,000 poor and near-poor Virginians.”

    so we need to list out the elements that need to be reformed.. right? And the ones that Virginia already has the flexibility to do … and there are some…
    see page 15 of this: http://mirc.virginia.gov/documents/06-17-13/Medicaid%20Overview%20and%20Financing.pdf

    we refuse to do reforms we can until we get the Feds to say “uncle” on others?

    how dumb is that?

    If there’s a major point that has been lost in the debate over Virginia Medicaid expansion, it’s the linkage of Medicaid expansion to reform. The question is not, “Do we expand Medicaid, yes or no?” The question is, “Does Virginia use this once-in-a-generation opportunity to extract major concessions from the federal government in how Medicaid is administered before agreeing to expand the program?”

    Virginia already has reforms it can do without asking the Feds… though and we are holding our own doable reforms hostage to the Feds control over others?

    “The Centers for Medicare & Medicaid Services (CMS) are negotiating with the states over how to implement the expansion, in some cases granting waivers for major reforms, says O’Bannon. ”

    “Oregon is moving to a public health model, installing a totally new primary care system to take patients out of expensive emergency-room settings.”

    why is this something Virginia cannot do?

    “Michigan is adopting a system that encourages Medicaid patients to take on more personal responsibility by making co-payments and getting more screenings. ”

    again.. Virginia seems to be conspicuous in what it’s NOT proposing other than fighting the Feds…

    “Arkansas is restructuring Medicaid to put more chronically ill patients on the program while subsidizing a shift of healthy poor patients to the health care exchanges.”

    so Arkansas is going to use MediAid money to essentially buy regular insurance on the Exchanges for people? That sounds pretty innovative.. and again … one more
    thing that we do not see from Virginia.

    ” It’s classic laboratory-of-Democracy stuff, said O’Bannon, and Virginia can learn from the successes and failures in other states.”

    so Virginia is “waiting” to see what other states do? Jesus…

    “Meanwhile, Virginia has its own reforms that it wants to implement. One would be to change incentives to enroll so-called dual patients (who qualify for both Medicare and Medicaid) in managed care programs.”

    Google “virginia dual eligible reform” to find out… specifics

    “Another would incentivize the use of nurse practitioners to head off infections that send nursing-home patients to the hospital. Others have criticized the Medicaid reimbursement of patient transportation costs on the grounds that the money could be spent more effectively in other ways.”

    we are behind the other states on pursuing opportunities already available to us without Fed wavers.. There is no penalty for going forward with both the reforms we can do now and the ones that need waivers.

    what we need is more than “ideas” that “we could do” – a process that other states already went through a year ago while Virginia was screwing around with Cuccinelli’s right wing agenda and McDonald busy taking gifts..

    We have real people in Virginia with real health care needs and they are the responsibility of the State and it’s taxpayers – and we act like they’re not even as we complain about the 40% of State income taxes that are being sucked up to pay for their needs.

    This is not about the Feds.. that’s an excuse, a canard so the “do nothing” fools can continue to divert focus from their own feckless behaviors to focus on the Feds.. instead of taking responsibility for what we can do without the Feds.

    We have ample opportunities for reform that are already within our authority and our elected essentially do little or nothing… letting hospitals and providers to try to deal with the problem the best they can and letting Virginia citizens be sick and injured with a “let them eat cake” mentality even as the costs are eating us alive.

    Instead of Virginia taking responsibility for a problem that is far larger and a much bigger fiscal threat than their unfunded pension problem.. our elected blather on about their hatred of the Feds and ObamaCare, states rights and restricting abortion and even birth control.

    we have Neanderthals in Richmond.. O’Bannon, to his credit, is not one of them but he is totally outgunned by the do-nothings…

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