UPDATE
Special Report

Does this Medicaid move really help?

News in May that the President's tax cut would yield $10 billion in new Medicaid funds was greeted with understandable glee in cash-strapped states from Connecticut to California. The money, available immediately for this year and in October for fiscal year 2004, will keep programs across the country from drowning in a sea of red ink. But the federal aid is a short-term fix—not a permanent solution to Medicaid's nagging problems.

Given its current spending growth, the program may be unsustainable without some major changes. That fact has spawned a long line of reform proposals—the latest from the administration itself.

What would the Bush plan mean to you and your low-income patients?

Expanded flexibility for the states

Details of the plan have yet to be worked out—but two key points should be noted.

On the funding side, participating states would receive an estimated $12.7 billion in extra federal aid for both Medicaid and the State Children's Health Insurance Program (SCHIP) over seven years, beginning in fiscal 2004. The combined funding would be distributed in two lump sums—one targeted to acute care and the other to long-term care. Each state's share of the overall pie would be based on its health care expenditures in fiscal year 2002. Starting in 2011 and for the next two years, states would receive less money than under current law, making the plan budget neutral over 10 years.

The plan also gives states "expanded flexibility" in determining eligibility and benefits for "nonmandatory" groups—those people states aren't required to cover under current federal law. States could, for example, provide "premium assistance to help families buy employer-based insurance" or create "innovative service delivery models for special-needs populations," according to HHS Secretary Tommy Thompson. All this could be done without the need to apply for a waiver first, as is now required.

Doctors worried about patients and pay

Reactions to the plan have been mixed. Governors in both parties have reportedly given the administration high marks for encouraging flexibility, which they desperately want to deal with runaway Medicaid costs. At the same time, they worry that the proposed funding mechanism, with its built in caps, would straightjacket them from dealing with unforeseen costs. The National Governors Association—which is working with Congress and the administration to hammer out differences—has thus far withheld its endorsement.

Doctors have also raised concerns. One is the possible loss of coverage for nonmandatory groups. "We hope the flexibility [for states] being proposed doesn't reduce the minimum level of coverage," says FP Marcelino Oliva, chair of the American Osteopathic Association's Council on Federal Health Programs.

Children may be especially vulnerable under the plan, argues the American Academy of Pediatrics. "Any child over 6 years old whose family makes more than 100 percent of the federal poverty level could be denied coverage by their state," says neonatologist Richard Bucciarelli, chair of the AAP's Subcommittee on Access to Health Care.

A second doctor concern has to do with pay: Will reform help address traditionally low Medicaid reimbursement rates? Bucciarelli says reform must be truly effective, but he worries that any early increases in pay could be rescinded as states brace for reduced funding up the road.

That worry is shared by others. "[The plan] temporarily puts off the grim reaper," says James C. Martin, president of the American Academy of Family Physicians, who sees "a catastrophe looming" if doctors' fees for treating low-income patients don't move closer to their actual costs.

These are difficult issues—and any legislation will have to take them into account. Meanwhile, the short-term federal relief announced in May has bought the states some breathing room. We should use this time to study the issue more closely, says Bucciarelli. "We don't need to have any kind of Medicaid reform in 2003."

—Wayne J. Guglielmo, Senior Editor

Wayne Guglielmo. Special Report: Does this Medicaid move really help?.

Medical Economics

Jul. 25, 2003;80:19.