Op-Ed

Medicaid Proposals Offer Roadmap for Reform
Published in the Albuquerque Journal January 9, 2003
By Sen. Dede Feldman and Rep. Roger Madalena

In years past, US Supreme Court Justices have described the Medicaid program, our nation’s healthcare safety net for the poor and disabled, as an “ unintelligible morass”, even as a “Serbian bog from which those who administer the program are unable to extricate themselves.”

These descriptions rang only too true for the 30 hard-working members of the legislature’s Medicaid Reform Committee who met around the state for 20 days this year to recommend changes to the program to contain costs in the long run and address this year’s need for an additional $80 million. Composed of doctors, hospital, clinic & HMO administrators, as well as health care advocates and legislators, the committee confronted several complex Medicaid budget dilemmas. In the end, we came up with a plan that, if implemented, can save the state at least $42 million in the short run while laying the foundation for a sustainable Medicaid program for years to come.

Medicaid is a huge program in New Mexico, with huge human and economic impacts on our state. Almost 400,000 New Mexicans—one in five—are enrolled in the entitlement program, which provides care for the elderly in nursing homes and people with disabilities, as well as for over 160,000 children. The program is financed mainly by the federal government, which pays between 75- 82% of the cost. It’s a great deal for New Mexico, and the program has expanded over the past few years, growing to cover more children, personal care attendants and the opportunity to buy into the program for people with disabilities who want to work. But with continued medical inflation and, especially, an explosion in pharmaceutical costs, the state is having trouble coming up with its share ($ 380 million this year).
Like Pacman, Medicaid is eating up an ever- increasing percentage of the general fund, diverting dollars from education, human services, water and environmental programs. And the worst is yet to come, with the first of the baby boomers in need of expensive long-term care within the decade. Efforts to stem the cost of the program, including the institution of Medicaid managed care in 1997, have been only partially successful.

What to Do?

At first, the solution seemed obvious. To save money, simply cut the number of eligible beneficiaries, provide fewer services, or pay providers less for providing services.

But gradually the wisdom of H.L. Menken, presented to the committee early on by a national health care consultant, began to sink in. He said, ”Explanations exist: they have existed for all times, for there is always an easy solution to every human problem—neat, plausible and wrong.”

New Mexico’s health care system, we found out, is one fabric, with each thread attached to another. It is a tangled web with huge gaps—gaps in the number of people with insurance of any kind, gaps in the number of doctors and other providers, gaps in funding for hospitals and providers who must make up the difference themselves when reimbursements do not pay for their expensive services and facilities.
To fill these gaps—costs are shifted back and forth. What happens in one part of the system affects another. When you squeeze the Medicaid bubble in one direction it pops up in another part of the health care system.

If sick people are no longer covered by Medicaid, or are discouraged from seeking care early on by costly premiums or co-pays, they end up in emergency rooms or nursing homes, where care is more expensive. The bill is still paid for by the public—in taxes to support county indigent funds, or in pricier premiums sparked by the increased costs to the insurance companies. The result is also more people without insurance-- in a state already branded as the state with the highest number of uninsured.

If providers are paid less, our severe shortage of health care professionals will be exacerbated. Health care facilities and community programs, where some personnel are already paid a pittance, could choose not to treat Medicaid patients, or, if they are dependent on these may close, leaving those most vulnerable without any care at all.

The problem is magnified because every dollar for Medicaid cut from the general fund means a total cut of $3-4, given our generous federal match. So, even small reductions will have a big economic impact on communities where health care institutions provide employment for many.

Committee Recommendations

To address these budget dilemmas, the committee recommended an omnibus bill to enact dozens of immediate changes in the program including better management of long term care, efforts to control the high cost of prescription drugs, and efforts to get more federal dollars for existing programs. We focused on disease and case management, outreach, education and primary care. These kinds of initiatives help insure a healthy population, or at least a population whose chronic illnesses do not become catastrophic. The idea is to change behavior so that people have regular checkups, take their medications, watch their diet, exercise—and stay out of emergency rooms and nursing homes.

The bill also includes incentives for Medicaid recipients to become more cost conscious, such as sliding-scale premiums or co-pays on more expensive prescriptions and emergency room visits. Altogether, the changes recommended in this bill may garner as much as $20.5 million in savings. The committee also recommended removal of the premium tax exemption for Medicaid managed care organizations which could yield another $22 million when matched by the federal government—a provision that was not, incidentally, opposed by the HMOs. These measures may not be the silver bullet that cures our all our Medicaid ills, but together they constitute some very shiny pieces of shrapnel we could use right now.
Meanwhile, to ensure a sustainable program over the long haul, the committee recommended a package of studies, cost-benefit analyses, pilot programs and federal waiver applications. These reform initiatives include a feasibility study of the replacement of the current managed care model with a statewide primary care case management model, and a look at the cost effectiveness of “carving out” the pharmacy program and non-emergency transportation from the Salud contracts for administration by other entities. It also includes possible waiver applications for innovative, but reduced benefit packages and the possible use of county indigent funds for a federal match, with redistribution back to the counties.

The committee recommendations also included some tax proposals, including two for increased cigarette and alcohol taxes. And while some may call this a case of tax and spend, the committee saw this as a case of tax and recover. The recovery comes from recouping the costs of treating tobacco and alcohol-related diseases in the 20% of our population covered by Medicaid. The cancers and cardiopulmonary diseases caused by tobacco currently count for 14% of all Medicaid expenditures, according to the Center for Disease Control, and the cost of alcohol abuse to our state as a whole is even more.

The committee also suggested earmarking some tobacco and gambling funds as a stopgap measure to secure funds for the program. But, ultimately, these Medicaid budget dilemmas must be addressed by the federal government, as all states now are now suffering with the reduced revenues and increased expenses incurred as the economy falters and more people qualify for the country’s most basic safety net program—Medicaid.

Sen. Dede Feldman (D-Bernalillo) and Rep. Roger Madalena (D- Bernalillo, Cibola & Sandoval) were Co-chairs of the legislature’s Medicaid Reform Committee.

For more information on Medicaid reform go to the legislative web site at www.legis.state.nm.us.