The Future of Medicaid, a POPPED Balloon, and Proposals

There are more people on Medicaid than Medicare.

Think about that.  There are more people in America who qualify for Medicaid than Medicare.  Yet, as a nation, we spend more on Medicare than Medicaid.  (I assume because the older population requires more expensive services).  58 million people relied on Medicaid in 2012 as their insurance.

And Medicaid is growing.  There is no question that Medicaid is growing.  When I say Medicaid is growing, I mean the population dependent on Medicaid is growing, the demand for services covered is growing, and the amount of money required to satisfy the demand is growing.  This means that every year we will spend more and more on Medicaid.  Logically, at some point, at its current growth pattern, there will come a point at which we can no longer afford to sustain the Medicaid budget.

If you think of the Medicaid budget as a super, large balloon, imagine trying to inflate the balloon more and more.  At some point, the balloon cannot withstand the amount of air being put into it and it…POPS.

Will Medicaid eventually POP if we keep cramming more people into it, demanding more services, and demanding more money to pay for the increased services?

First, let’s look at the amount of money spent on Medicaid last year.

The Center for Medicare and Medicaid Services (CMS) just released the 2013 Actuarial Report on the Financial Outlook on Medicaid and its report considers the effect of Obamacare.

The CMS report found that total Medicaid outlays in 2012 were $431.9 billion.

The feds put in $250.5 billion or 58%.  States paid $181.4 billion or 42%.  In 2011, the federal government’s percentage of the whole Medicaid expenditure was 64%.

The CMS report also made future projections.

“We estimate that the [Affordable Care] Act will increase the number of Medicaid enrollees by about 18 million in 2022 and that Medicaid costs will grow significantly as a result of these changes starting in 2014.”

The 10 year projection, according to the report, is an increase in expenditures at an annual rate of 7.1%.  By 2022, the expenditures on Medicaid will be $853.6 billion.

Just for some perspective…a billion is a thousand million.

If you sat down to count from one to one billion, you would be counting for 95 years (go ahead…try it!).

If I gave you $1000 per day (not counting interest), how long would it take you to receive one billion dollars?  Answer: 2,737.85 years (2,737 years, 10 months, 7 days).  Now multiply 2,737.85 years by 853.6.

That’s a lot of years!!

In the next ten years, average enrollment is projected to reach 80.9 million in 2022.  It is estimated that, currently, 316 million people live in America.

So the question becomes, how can we reform, change, alter (whatever verb you want to use) Medicaid so that we can ensure that the future of Medicaid is not a POPPED balloon?  While I do not have the answer to this, I do have some ideas.

According to the CMS report, per enrollee spending for health goods and services was estimated to be $6,641 in 2012.  I find this number interesting because, theoretically, each enrollee could use $6,641 to purchase private insurance.

Remember my blog: “A Modest Proposal?” For that blog, I used the number $7777.78 per enrollee to purchase private insurance, which would require an increase in Medicaid spending assuming we give $7,777.78 to each enrollee.  But think of this…the amount would be a known amount.  Not a variable.

My health care, along with health care for my husband, costs $9,000/year.  My cost includes two people.  If I wanted individual insurance it would only have cost $228/month or $2,736/year.

What are other options to decrease the future Medicaid budgets and to avoid the big POP:

  • Decrease Medicaid reimbursements (really? Let’s make LESS providers accept Medicaid);
  • Decrease covered services (I would hope this idea is obviously stupid);
  • Decrease the number of recipients (I believe the ACA shot this one out of the water);
  • Create a hard cap on Medicaid spending and refuse to allow services over the cap regardless of the medical necessity (Again, I would hope this idea is obviously stupid);
  • Decrease administrative costs (this is apparently an impossible feat);
  • Create more difficult standards for medical necessity (I believe the ADA would have something to say about that); or
  • Print more money (Hmmmm…can we say inflation?).

Please, if anyone else has a good idea, let me, or, better yet, your General Assembly, know.

Because without question the future of Medicaid is larger and more expensive than today.  We want to avoid that…

POP!!

About kemanuel

Medicare and Medicaid Regulatory Compliance Litigator

Posted on May 1, 2014, in Affordable Care Act, Agency, Budget, CMS, DHHS, Division of Medical Assistance, Eligibilty, Federal Government, Federal Law, Federal Medical Assistance Percentage, Health Care Providers and Services, HHS, Increase in Medicaid Spending, Legislation, Medicaid, Medicaid Billing, Medicaid Budget, Medicaid Costs, Medicaid Eligibility, Medicaid Expansion, Medicaid Funds, Medicaid Providers, Medicaid Recipients, Medicaid Reform, Medicaid Reimbursements, Medicaid Services, Medicaid Spending, Medicare, Medicare Budget, NC, North Carolina, Obamacare, Privatization, Reduction in Medicaid Payments, Reductions, Tax Dollars, Taxes, Taxpayers and tagged , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. 8 Comments.

  1. “Just for some perspective…a billion is a hundred million.”

    Actually, it is a thousand million.

  2. Surely you are not suggesting that the insurance industry could cover the costs to provide the required medical services to Medicaid recipients at lower cost than the federal/state government mechanism currently in place.

    Two things your cost comparison above does not include are the deductible you are required to pay before you begin to receive benefits or the co-pay you are exposed to after coverage begins. I would guess most Medicaid recipients would not be in the position to pay either easily.

    You also have not mentioned the potential future impact of IPAB, which is expected to control costs through medical service rationing. IPAB might be more of a concern for “shovel ready seniors” than for the typical Medicaid participant.

    We have only begun to “find out what’s in it”, for PPACA and its impacts on Medicare and Medicaid. Restricted networks will limit access and under-reimbursed physicians will further limit access. Ultimately, I expect younger physicians with large student loan balances will find themselves in a modern version of indentured servitude to the federal government, through our very own version of a National Health Service.

    Oh thrill, oh joy!

    • I agree that my analysis didn’t cover deductibles and co-pays. In my other blog “A Modest Proposal,” I seem to remember I did. My theory would that a few insurance companies would have to be convinced that an insurance product could be created in which co-pays and deductibles are not allowed. Therein, may lie the faulty reasoning. But maybe the government could have a pot of money to cover the co-pays and deductibles. I admit, the idea isn’t perfect. But it is an idea.

      • Since it’s Medicaid, the government would be paying everything, whatever “everything” is. Therefore, the expected per participant cost would be: (the deductible) + (the insurance premium / the co-payment percentage). The insurance companies could certainly create an “all-in” product. The question would be whether the government would be willing to pay for it.

  3. Manuel Reinoso, M.D.

    Medicaid enrollment should be temporary, contingent to demonstrable effort by the recipient to get our of “poverty”. As it is, Medicaid benefits entice recipients to remain within poverty levels and entice their offspring to follow the same path. There is also over utilization of services, and minor ailments are seen at provider offices time after time. If there was a co payment for office visits ( 5 dollars?) many of these unnecessary office visits would be weed out

  4. We came from California and my children had Medi-Cal (same as Medicaid here) and they were in a HMO (Kaiser). They had no deductibles or copays. It was almost like having private insurance except they put Medi-Cal on their insurance cards so I felt when I checked them in we were “flagged” to get lesser services. I am already concerned about the lack of participating medicaid doctors, dentists and the wait lists. It can only worse unless changes are made.

  5. James Volk MD

    Nursing home costs are the biggest problem for the Medicaid budget and there are no incentives for families to choose the alternative of in-home care which although expensive is far less expensive. The proposal is a fixed dollar amount for patients deemed nursing home eligible and let families then make a decision to pay the difference for their family member to reside in a nursing home or care for him/her at home and probably be partially compensated for their time and effort. Non-profits or faith groups should be allowed to have charity homes which would provide care at the fixed Medicaid amount free of regulations involving safety, malpractice or quality of care (the good Samaritan law). Will there be abuse of the elderly with these changes? Most likely, but if the system goes bust there would be far more trauma.

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