Ga. Medicaid program needs a big dose of reality

Benita Dodd's picture

Much like the tale of the blind men and the elephant, proposals to reform Medicaid are influenced by the perspective: Taxpayers see lighter paychecks; beneficiaries see increased coverage; state budget writers see a spiraling commitment. Liberals see a need for a bigger program to cover more people and conservatives see an opportunity to do better with less government. Still, all are aware of this elephant in the room.

Without a doubt, the entitlement program for qualified low-income elderly, disabled, children and families is consuming an increasing portion of the state budget.

That was one reason that former Gov. Sonny Perdue implemented a managed care program for Georgia to cover low-income Medicaid and PeachCare beneficiaries. Three HMO-like organizations receive more than $2.6 billion for the more than 1 million covered.

The requirements of ObamaCare are set to bring a huge increase in Medicaid beneficiaries – up to 600,000, by some estimates – so the state is rethinking the program’s structure. Evidence suggests flexibility is the key to quality and affordability.

Medicaid is funded by both federal and state dollars. Eligibility levels vary for the 1.4 million adult low-income Georgia residents covered by Medicaid and 200,000 children who receive coverage for dental and medical care under PeachCare because their parents earn too much to qualify for Medicaid. Federal dollars typically account for 65 percent of Medicaid spending in Georgia. In other words, for every 35 cents Georgia spends, the feds pitch in 65 cents.

Around the nation, the federal match has proven a perverse incentive for states to spend more to get more, expanding eligibility levels and increasing enrollment. But Washington’s gift comes with strings attached, dictating how and where the money is spent. The inflexibility limits a state’s ability to innovate and thwarts the opportunity to tailor the program to enable beneficiaries to receive improved care and taxpayers to receive better bang for their buck.

The costs and the demand for services will spiral with the expected increase in the Medicaid rolls if ObamaCare were to pass muster with the courts. Beneficiaries of this entitlement will see access to care shrink while taxpayers will pay more to fund poorer quality care for a growing number of patients.

A Kaiser Family Foundation study released May 10 warned that Georgia would be one of eight states to lose more than 40 percent of their federal funding for Medicaid over the next decade under the a U.S. House Republicans’ plan to repeal the 2010 federal health law and convert Medicaid into a block grant program. The researchers predict the planned federal cuts would mean fewer people covered and increased state spending.

Given the waste, fraud, abuse, overregulation, bureaucracy and inflexibility the federal role engenders, excluding the feds is more likely to help the states.

A 2009 Heritage Foundation study found that if Georgia continued the Medicaid program with just state dollars, it would save the state $2.2 billion from 2013-2019.

Continuing to fund Medicaid at unacceptable levels – it consumes more than 16 percent of Georgia’s budget already – will bankrupt states, which unlike the federal government, must actually balance their budgets.

Hope springs from an unlikely quarter: the otherwise liberal bastion of Rhode Island, which has blazed a trail in Medicaid reform since receiving a global waiver in 2009. In exchange for relaxed federal rules, the state received a block grant totaling $12.075 billion to work with through 2013.

This “budget certainty” also became a spending cap that motivated cost containment measures. Flexibility allowed Rhode Island to cut spending and improve quality.

In the first 18 months, Medicaid’s rate of spending growth shrank from more than 8 percent to 3 percent – without reducing patient eligibility. Healthy behavior is being incentivized and inappropriate use of services discouraged, with incentives including a premium assistance holiday, a gift card, a bonus payment or a health club membership.

In an article in “Health Reform Report,” Rhode Island’s Secretary of Health and Human Services explained the goals that led to success: “rebalance and reduce institutional bias; mandate care coordination and implement a primary care medical home for all recipients; institute competitive and value-based purchasing approaches and ensure all payers and recipients contribute an appropriate and fair share; obtain federal matching funds to support the continuation of state-funded programs that delay high-cost institutional care; and focus on program integrity to combat waste, fraud and abuse.”

“We’ve seen savings because control of the program is now held by local politicians who are more accountable to the taxpayers,” said Bill Felkner, director of policy at Rhode Island’s Ocean State Policy Research Institute, which produced a Medicaid study, “Doing Long Term Care Right.”

“The federal government continues to dictate who receives the benefits, but at least state control of the services provided can lead to greater efficiencies.”

Through fiscal year 2011, the waiver saved the state about $100 million. And Rhode Island is on track to only spend approximately $9.3 billion of the allotted $12.075 billion. A growing number of governors are asking the feds for what Rhode Island got. So should Georgia. A healthy Georgia won’t come from a federal regimen but from a state-specific solution.

[Benita M. Dodd is vice president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians.]