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Medicaid apparently will be an important component in President-elect Obama’s economic recovery package. In mid-December Mr. Obama declared, “It’s [health reform] not something we can put off because we are in an emergency. This is part of the emergency; Medicaid is a focal point for economic recovery; it is a powerful tool targeted to help economically distressed families and states.

By James D. Chesney

Medicaid apparently will be an important component in President-elect Obama’s economic recovery package. In mid-December Mr. Obama declared, “It’s [health reform] not something we can put off because we are in an emergency. This is part of the emergency”  Medicaid is a focal point for economic recovery; it is a powerful tool targeted to help economically distressed families and states.

Helping Families

Medicaid is a federal state partnership that provides health insurance targeted to poor women, children, elderly and disabled people. Obama’s recovery package would apparently add unemployed to the list of categories covered by Medicaid. Currently, retirees and laid off workers are eligible to continue their employer based health insurance at their own expense once employment ceases.  Under the recovery plan proposal, Medicaid would be used to help cover health insurance for unemployed families. As unemployment rises, so do the number of uninsured. Nationally each percentage point increase in unemployment means another one million more uninsured people. Since Michigan leads the nation with a 9.6 percent unemployment rate, any effort to provide health insurance to unemployed families is critically important. The magnitude of this policy initiative is clear on the 4.5 million American currently collecting jobless benefits, including 473,000 Michiganders.  Medicaid is a powerful tool because helping financially vulnerable families is one of the best way to stimulate the economy and create jobs.

Helping States

State governments are in fiscal crisis. Forty-four states project budget deficits that go as high as California’s 13% percent.  The Center for Budget and Policy Priorities (CBPP) estimates that with the current recession state budget short falls will balloon from an estimated $79 billion in 2010 to 180 billion by 2011.

State budget short falls are not simply an economic issue. Many states have coped with their budget problems by cutting health care to vulnerable citizens. Some examples from the CBPP report:

• Rhode Island eliminated health coverage for 1,000 low-income parents;
• South Carolina is limiting coverage for many services, such as psychological counseling, physicians visits, and routine physicals; and
• California and Utah are reducing the types of services covered by their Medicaid programs. Additionally, the governor in California has proposed cuts that, when fully phased in, would cause more than 400,000 adults to be denied health coverage.
• Florida has frozen reimbursements to nursing homes and relaxed staffing standards,
• Nevada is making it harder for beneficiaries to qualify for nursing home care, and
• Arizona eliminated temporary health insurance for people with serious medical problems.

Medicaid is a very good tool for economic recovery. Medicaid is jointly funded by the state and federal governments. Federal government sets minimum eligibility and coverage standards and states are responsible for administering the program and may provide additional eligibility and coverage. State Medicaid plans are in place and operating in every state in the country. Medicaid is a useful economic recovery tool because the federal government can allocate more funds to state program and be assured that the funds will have an immediate impact on poor families. Medicaid’s target population represents a sector of the population that is highly vulnerable to a recession’s adverse impacts.

In order for Medicaid to help vulnerable families the Obama administration should:

1.    Cover recently unemployed families under Medicaid,
2.    Set the eligibility at 250 percent  Federal Poverty Level (FPL) ,
3.    Provide 100% federal match for this newly eligible population.

All three elements are critical to the success of Medicaid as an economic recovery tool. In the past year 4.1 million people have lost their employer based health insurance coverage.  Not all of these people would be eligible for the Medicaid expansion. Since health care bills can quickly send families into economic collapse, it is vital that coverage be extended to the vulnerable unemployed families. In order to ensure that vulnerable families are protected, it is important to extend eligibility to unemployed families with incomes at 250 percent FPL. In Detroit the median income ($29,109) is 165 percent of FPL. Without a spouse to reduce the expense of child care, a Wayne County family would need 259 percent of the FPL to have a sustainable income.   Finally, since states are in fiscal crisis, they are not able to bear any cost for the proposed Medicaid expansion. In order to work the program for unemployed families must be 100% federally funded.

President Obama’s chief of staff-designate is widely quoted as saying that this economic crisis is an opportunity to enact important policy changes. Medicaid is a good starting point.

Please send comments or questions to jchesney@policyinitaitivesconsultinggroup.com.

REFERENCES
1.  Kevin Slack Necessary Medicine? NYT December 14, 2008
2.  Richard Richtmyer Jobless Systems Swamped Associated Press January 7,2009
3.  Chad Stone Assistance to Hard-Pressed Families is one of the Best Ways to Protect and Create Jobs Center for Budget and Policy Priorities January 9,2009 www.cbpp.org/1-9-09bud.pdf
4  Elizabeth McNichol and Iris Lav State Budget Troubles Worsen Center for Budget and Policy Priorities. December 23, 2008 www.cbpp.org/9-8-08sfp.htm
5  Nicholas Johnson, Elizabeth Hudgins and Jeremy Koulish FACING DEFICITS, MOST STATES ARE IMPOSING CUTS THAT HURT VULNERABLE RESIDENTS Center of Budget and Policy Priorities December 23,2008  www.cbpp.org/3-13-08sfp.htm

Average medical expenditures per person are lower under public programs such as Medicaid or the State Children’s Health Insurance Program (SCHIP) than under private insurance, according to new research published by Health Affairs. The new research, by Leighton Ku of George Washington University and Matthew Broaddus of the Center on Budget and Policy Priorities, is consistent with previous work by researchers at the Urban Institute, according to the Center on budget and Policy Priorities.

There are two main reasons why overall medical expenditures per person are lower under Medicaid and SCHIP than under private insurance. First, the average cost that insurers pay per beneficiary is lower under public programs than under private insurance, probably because these programs reimburse health care providers at lower rates and have lower administrative costs. Second, the average out-of-pocket costs that individuals incur are substantially lower under public programs than private insurance because Medicaid and SCHIP limit cost-sharing for low income beneficiaries, the Center noted in its report.

Key findings of the study include:

• Adults enrolled in Medicaid tend to be in poorer health – and require more health care – than low-income adults.
• Adults enrolled in Medicaid are more likely than low-income adults with private coverage to be female, minority, and poor – three groups with higher medical costs.
• If one fails to adjust for these health and demographic differences, medical expenditures are higher for Medicaid beneficiaries than for those in private practice.
• After controlling for these health and demographic factors, medical expenditures are substantially higher under private insurance than under Medicaid.
• Medical costs paid by insurance are higher under private coverage than under Medicaid.
• Out-of-pocket costs are substantially higher under private coverage than under Medicaid.
• Covering the uninsured through Medicaid would generally be less costly – in terms of total medical expenditures, costs paid by insurance, and out-of-pocket costs per individual – than covering them through private insurance.
• To access the actual article, “Public and Private Insurance: Stacking Up the Costs,” visit
• http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.4.w318

For years, we have read and heard about emergency room overcrowding and the non-emergent use of emergency departments by the uninsured and underinsured with nowhere else to go.

The people living in the Near East Side of Detroit, within the service area of Detroit Riverview Hospital, faced that dilemma on a large scale last year when the hospital was closed. 70,000 residents were left to decide where to go for their medical care.

During the past year, a collaboration of hospital, health center, and community organizations, known as the East Side Planning Team, has developed a way of filling the void left by Detroit Riverview’s closure and through a new approach to care – a medical home. In a sense, many people in our society are medically homeless – they don’t have a place to go for medical care so they use the emergency department. About 15,000 of the residents of the Near East Side don’t have physicians and are likely to use hospital emergency facilities for primary or chronic care. And too often, they will wait until the need is urgent.

Using the definition developed by the Commonwealth Fund, a medical home is a physician’s office or health center that provides a range of “patient-centered” comprehensive health care. These are places committed to the individual’s total well-being, emphasizing preventive care and total care for chronic conditions. Diagnostic tests and other health services such as dental and mental health services are provided in a central location, still close to the medical home.

For the largely African American, lower-income population of the Near East Side, the medical home also offers an opportunity to alleviate racial disparities in access and quality, when compared with white, suburban population, according to the Commonwealth Fund. In addition to preventive care, people with chronic conditions who have medical homes are better prepared to manage their health and not use the emergency department.

The East Side Planning Team also announced five other recommendations for the Near East Side:

• Strengthen existing health care safety net providers.
• Expand primary care capacity to include at least 20 new providers at existing health centers and in new ones.
• Organize the system of care into a “hub and spoke” model of service delivery that would ensure comprehensive primary and urgent care services are available in the hub location while primary medical care in the medical home is accessible in spoke locations. The St. John Riverview campus will become the “hub” for the integrated system of care.
• Implement an emergency facility diversion strategy.  With the help of hospitals and public service advertising, people will be encouraged to call the United Way 2-1-1 to secure a primary care provider rather than go to an emergency room.
• Create connectivity within the hub and spoke system through technology. Funding will be secured to ensure that all safety net providers have electronic health records and other records to track, manage, and support patient care, including e-prescribing.

We believe that within five years, we will have a system of care on the Near East Side, with its foundation being a medical home. It will diminish the costly inappropriate use of hospital emergency rooms, improve the health status of chronically ill people, and will help everyone take better care of themselves.

The Bush Administration has proposed sweeping new Medicaid regulations that will shift costs for this federal state program on to Michigan.  The proposed regulations will cost the Michigan Medicaid program $3.9 billion. A cut of this magnitude would severely cripple Medicaid and would balloon a budget deficit already predicted to be $472 million.

The Administration’s seven proposed regulations reduce funding for safety net providers by placing cost limits on government providers, eliminating Medicaid’s graduate medical education (GME) payments, restricting provider taxes.  Four of the proposed changes in Medicaid would reduce the scope of services available to Medicaid recipients (restriction of rehabilitation services, elimination of transportation services for school-based services, restriction of hospital based outpatient services, and restriction of case management services)

The House of Representatives, with Michigan’s Congressman John Dingell in the lead, has passed legislation to postpone these onerous regulations. The Senate needs to take action to follow the house lead to block these regulations from talking effect. The Health Authority Board supports efforts to block the proposed regulations.

Community health advocates are urging Nancy Pelosi, U.S. House of Representatives Speaker, to keep the regulatory moratorium on seven Medicaid regulations in the supplemental spending bill soon to be debated in the House. Last week, House leaders reached a tentative deal with Senate leaders under which three of the Centers for Medicare and Medicaid Services Medicaid regulations – targeted case management, provider taxes, and outpatient clinics – would be removed from the Medicaid moratorium package in the supplemental appropriations bill. Four other Medicaid rule moratoria would remain in the supplemental bill.

Please call your congressman or Speaker Pelosi to register your opinion. You can email Pelosi at AmericanVoices@mail.house.gov or call the Capitol switchboard toll free at 866-240-9281.