Category Archives: Increase in Medicaid Spending
Medicaid Expansion Set To Take Effect In North Carolina Today!
The AP (11/30, Schoenbaum) reports that “hundreds of thousands of adults in North Carolina” are set to receive Medicaid benefits, “a development that boosters say will aid hospitals and local economies in addition to the long-term uninsured.” As of Friday, “more than 600,000 North Carolinians are ultimately expected to qualify, with roughly half to be automatically enrolled.” The AP notes that “a 2022 report from the National Center for Health Statistics estimated North Carolina’s uninsured population at 17.6%, significantly above the national average of 12.6%.”
Cardinal Sues State to Keep Paying CEO $635,000 – With Our Tax Dollars!
On September 18, Cardinal filed a Petition at the Office of Administrative Hearings (OAH) challenging the State’s authority to set executive compensation limits. In other words, Cardinal is suing the State of NC to keep paying Toppings $635,000.00 with our tax dollars. See below:
On Tuesday (October 10, 2017) legislators blasted Cardinal Healthcare and strongly urged DHHS Secretary Mandy Cohen to terminate its contract with Cardinal. The legislators challenged the impressive and questionably-needed administrative costs of the managed care organizations (MCOs), including exorbitant salaries, office parties, and private jets. Cardinal’s CEO Richard Topping, who became CEO in July 2015, was compensated at $635,000.00 this year. His total compensation was over $1.2 million in 2016 and 2017 (for a government job; i.e., our tax dollars. So we all may own a portion of his home). See blog. and blog. The State Auditor also reported excessive spending and mismanagement of funds. Let’s keep in mind, people, these funds are earmarked to provide medically necessary services to our most needy population suffering from mental illness, substance abuse, and developmentally disabilities. But Toppings wants a Porsche. (Disclaimer – my opinion).
And if we weren’t enraged enough about the obscene salary of Cardinal’s CEO, Cardinal decided to spend more tax dollars…on attorneys’ fees to litigate maintaining its CEO’s salary. When I heard this, I hoped that Cardinal, with our tax dollars, paid an internal general counsel, who would litigate the case. I mean, an in-house counsel gets a salary, so it wouldn’t cost the taxpayers extra money (over and beyond his/her salary) to sue the State. But, no. I was woefully disappointed. Cardinal hired one of the biggest law firms in the State of NC – Womble Carlyle – the only firm downtown Raleigh with its signage on the outside of the skyscraper. I am sure that costs a pretty penny. Please understand – this is nothing against Womble Carlyle. It is a reputable firm with solid lawyers, which is why Cardinal hired them. But they ain’t cheap.
BACKGROUND
Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. IT IS NOT A PRIVATE COMPANY, LIKE BCBS. Cardinal is responsible for managing, coordinating, facilitating and monitoring the provision of mental health, developmental disabilities, and substance abuse services in 20 counties across North Carolina. Cardinal is the largest of the state’s seven LME/MCOs, serving more than 850,000 members. Cardinal has contracted with DHHS to operate the managed behavioral healthcare services under the Medicaid waiver through a network of licensed practitioners and provider agencies. State law explicitly states Cardinal’s core mission as a government
entity.
CARDINAL’S FUNDING
Cardinal’s most significant funding is provided by Medicaid (85%). Funding from Medicaid totaled $567 million and $587 million for state fiscal years 2015 and 2016, respectively. Medicaid is a combination of federal and state tax dollars. If you pay taxes, you are paying for Toppings’ salary and the attorneys’ fees to keep that salary.
North Carolina General Statute 122C-123.1 states: “Any funds or part thereof of an area authority that are transferred by the area authority to any entity including a firm, partnership, corporation, company, association, joint stock association, agency, or nonprofit private foundation shall be subject to reimbursement by the area authority to the State when expenditures of the area authority are disallowed pursuant to a State or federal audit.” (Emphasis Added).
Our State Auditor, in its audit of Cardinal, already found that Cardinal’s spending of its funds is disallowed:
Not only has the State Auditor called Cardinal out for excessive salaries, in a letter, dated August 10, 2017, the Office of State Human Resources told Cardinal that “Based on the information you submitted, the salary of your Area Director/CEO is above this new rate and, therefore, out of compliance. Please work to adjust the Area Director/CEO salary accordingly and notify us of how you have remedied this situation. In the future, please ensure that any salary adjustment complies with the
provisions of G.S. 122C-121- the Mental Health, Developmental Disabilities, and Substance Abuse Act of 1985.” (emphasis added). In other words – follow the law! What did Cardinal do? Sued the Office of State Human Resources.
Concurrently, Cardinal is terminating provider contracts in its closed network (which keeps Cardinal from having to pay those providers), decreasing and denying behavioral health care services to Medicaid recipients (which keeps Cardinal from having to pay for those services). — And now, paying attorneys to litigate in court to keep the CEO’s salary of $635,000.00. Because of my blog, I receive emails from parents who are distraught because Cardinal is decreasing or terminating their child’s services. Just look at some of the comments people have written on my blog. Because of my job, I see firsthand the providers that are getting terminated or struck with alleged overpayments by Cardinal (and all the MCOs).
My questions are – if Cardinal has enough money to pay its CEO $635,000.00, why doesn’t Cardinal increase reimbursement rates to providers? Provide more services to those in need? Isn’t that exactly why it exists? Oh, and, let’s not forget Cardinal’s savings account. The State Auditor found that “For FY 2015 and 2016, Cardinal accumulated approximately $30 million and $40 million, respectively, in Medicaid savings.” Cardinal, and all the MCOs, sit in a position that these government entities could actually improve mental health in NC. They certainly have the funds to do so.
According to a blog follower, Cardinal pays lower reimbursement rates than other MCOs:
Psychiatric Diagnostic Eval. (Non-Medical) 90791
Cardinal MCO Pays $94.04
Partners MCO Pays 185.90
Medicare Pays 129.60
SC Medicaid Pays 153.94
Psychotherapy 60 minutes (in-home) 90837
Cardinal MCO Pays $74.57
Partners MCO Pays 112.00
Medicare Pays 125.93
SC Medicaid Pays 111.90
According to the Petition, Cardinal’s argument is that it is not a government entity. That its employees, including Toppings, does not receive state government benefits and are not part of the state retirement program. It also states in its Petition that Cardinal hires external consultants (with our tax dollars) to conduct a market compensation study every two years. (cough!). Cardinal complains, in the Petition, that “If forced to reduce its CEO’s salary to a level well below market rate for the leader of an organization of Cardinal Innovations’ size and complexity, Cardinal Innovations would be likely to immediately lose its current CEO and would be at a significant market disadvantage when trying to replace its current CEO with one of similar experience and expertise in the industry, as is necessary to lead Cardinal Innovations. This would result in immediate and irreparable harm to Cardinal Innovations and reduce the organization’s ability to fulfill its mission.” Wow – Toppings must be unbelievable…a prodigy…the picture of utopia…
The State has informed Cardinal that a salary is more appropriate at $194,471.00 with the possibility of a 5% exception up to $204,195.00.
In its Petition, Cardinal calls the statutorily required salary cap “an irrationally low salary range.” If I take out 50% for taxes, which is high, Toppings is paid $26,458.33 per month. In comparison, the Medicaid recipients he serves get the following per month (at the most):
Disgusted? Angry? Contact your local representative. Don’t know who your representative is? Click here. I wonder how the IRS would react if I protested by refusing to pay taxes… Don’t worry. I’m not going to go all Martha Stewart on you.
NC State Auditor Finds Cardinal Expenditures Unreasonable!!(Finally) #Wastedtaxdollars
The NC State Auditor Beth Wood released an audit report on Cardinal Innovations yesterday, May 17, 2017. Here are the key findings. For the full report click here.
BACKGROUND
Cardinal is a Local Management Entity/Managed Care Organization (LME/MCO) created by North Carolina General Statute 122C. Cardinal is responsible for managing, coordinating, facilitating and monitoring the provision of mental health, developmental disabilities, and substance abuse services in 20 counties across North Carolina. Cardinal is the largest of the state’s seven LME/MCOs, serving more than 850,000 members. Cardinal has contracted with DHHS to operate the managed behavioral healthcare services under the Medicaid waiver through a network of licensed practitioners and provider agencies.
KEY FINDINGS
• Cardinal spent money exploring strategic opportunities outside of its core mission
• $1.2 million in CEO salaries paid without proper authorization
• Cardinal’s unreasonable spending could erode public trust
KEY RECOMMENDATIONS
• Cardinal should consult and collaborate with members of the General Assembly before taking any actions outside of its statutory boundaries
• The Office of State Human Resources should immediately begin reviewing and approving Cardinal CEO salary adjustments
• The Department of Health and Human Services should determine whether any Cardinal CEO salary expenditures should be disallowed and request reimbursement as appropriate
• Cardinal should implement procedures consistent with other LME/MCOs, state laws, and federal reimbursement policy to ensure its spending is appropriate for a local government entity
My favorite? Recoup CEO salaries. Maybe we should extrapolate.
North Carolina Medicaid Reform Update – Round and Round She Goes
Given how long the Medicaid reform discussions have been going on at the legislature, you may be glazed over by now. Give me the memo when they pass something, right? Fair enough, let’s keep it brief. Where do things stand right now?
Last Wednesday, the Senate staked out its position in the ongoing debate between the House and the McCrory administration.
The Senate’s newest proposal is an unusual mix of different systems and new ideas. Not willing to commit to one model for the whole Medicaid program, the latest version of the bill includes something new called Provider Led Entities, or “PLEs.” PLEs are yet the latest in the alphabet soup of different alternatives to straight fee-for-service billing for Medicare/Medicaid. You’ve all heard of HMOs, PPOs, MCOs, and ACOs. PLEs appear to be similar to ACOs, but perhaps for political reasons the Senate bill sponsors saw the need to call the idea something different. See Knicole Emanuel’s blog.
In any event, as the name suggests, such organizations would be provider-led and would be operated through a capitated system for managing the costs of the Medicaid program. The Senate bill would result in up to twelve PLEs being awarded contracts on a regional basis.
PLEs are not the only addition to the Medicaid alphabet soup that the Senate is proposing in its version of HB 372. The Senate has also renewed its interest in taking Medicaid out of the hands of the N.C. Department of Health and Human Services entirely and creating a new state agency, the Department of Medicaid (“DOM”).
(One wonders whether the continual interest in creating a new Department of Medicaid independent of the N.C. Department of Health and Human Services had anything to do with embattled DHHS Secretary Wos stepping down recently.)
The Senate also proposes creating a Joint Legislative Oversight Committee on Medicaid (“LOC on Medicaid”).
But creating the DOM and using new PLEs to handle the provision of Medicaid services is not the whole story. Perhaps unwilling to jump entirely into a new delivery system managed by a wholly new state agency, the Senate bill would keep LME/MCOs for mental health services in place for at least another five years. Private contractor MCOs would also operate alongside the PLEs. The North Carolina Medicaid Choice coalition, a group which represents commercial MCOs in connection with the Medicaid reform process, is pleased.
One very interesting item that the Senate has included in its proposed legislation is the following requirement: “Small providers shall have an equal opportunity to participate in the provider networks established by commercial insurers and PLEs, and commercial insurers and PLEs shall apply economic and quality standards equally regardless of provider size or ownership.” You can thank Senator Joel Ford of Mecklenburg County for having sponsored this amendment to the Senate version of House Bill 372.
By pulling the Medicaid reform proposal out of the budget bill, the matter appears headed for further negotiation between the House and the Senate to see if the two can agree this year, unlike last year.
By legislative standards, that counts as forward progress… Here come the legislative discussion committees to hash it out more between the two chambers. We will keep a close eye on the proposals as they continue to evolve.
By Robert Shaw
MCO CEO Compensated $400,000 Plus Bonuses with Our Tax Dollars!
On July 1, 2014, Cardinal Innovations, one of NC’s managed care organizations (MCOs) granted its former CEO, Ms. Pam Shipman, a 53% salary increase, raising her salary to $400,000/year. In addition to the raise, Cardinal issued Ms. Shipman a $65,000 bonus based on 2013-2014 performance.
$400,000 a year, plus bonuses. Apparently, I got into the wrong career; the public sector seems to pay substantially more.
Then in July 2015, according to the article in the Charlotte Observer, Cardinals paid Ms. Shipman an additional $424,975, as severance. Within one year, Ms. Shipman was paid by Cardinal a whopping $889,975. Almost one million dollars!!!! To manage 16 counties’ behavioral health care services for Medicaid recipients.
For comparison purposes, the President of the United States earns $400,000/year (to run the entire country). Does the CEO of Cardinal equate to the President of the United States? Like the President, the CEO of Cardinal, along with all the other MCOs’ CEOs, are compensated with tax dollars.
Remember that the entire purpose of the MCO system is to decrease the risk of Medicaid budget overspending by placing the financial risk of overspending on the MCO instead of the State. In theory, the MCOs would be apt to conservatively spend funds and more carefully monitor the behavioral health care services provided to consumers within its catchment area to ensure medically necessity and not wasteful, unnecessary services.
Also, in theory, if the mission of the MCOs were to provide top-quality, medically necessary, behavioral health care services for all Medicaid recipients in need within its catchment area, as the MCOs often tout, then, theoretically, the MCOs would decrease administrative costs in order to provide higher quality, beefier services, increase reimbursement rates to incentivize health care providers to accept Medicaid, and maybe, even, not build a brand, new, stand-alone facility with top-notch technology and a cafeteria that looks how I would imagine Googles’ to look.
Here is how Cardinal’s building was described in 2010:
This new three-story, 79,000-square-foot facility is divided into two separate structures joined by a connecting bridge. The 69,000-square-foot building houses the regional headquarters and includes Class A office space with conference rooms on each floor and a fully equipped corporate board room. This building also houses a consumer gallery and a staff cafe offering an outdoor dining area on a cantilevered balcony overlooking a landscaped ravine. The 10,000-square-foot connecting building houses a corporate training center. Computer access flooring is installed throughout the facility and is supported by a large server room to maintain redundancy of information flow.
The MCOs are not private companies. They do not sell products or services. Our tax dollars comprise the MCOs’ budget. Here is a breakdown of Cardinal’s budgetary sources from last year.
The so-called “revenues” are not revenues; they are tax dollars…our tax dollars.
78.1% of Cardinal’s budget, in 2014, came from our Medicaid budget. The remaining 21.7% came from state, federal, and county tax dollars, leaving .2% in the “other” category.
Because Cardinal’s budget is created with tax dollars, Cardinal is a public company working for all of us, tax paying, NC, residents.
When we hear that Tim Cook, Apple’s CEO, received $9.22 million in compensation last year, we only contributed to his salary if we bought Apple products. If I never bought an Apple product, then his extraordinarily high salary is irrelevant to me. If I did buy an Apple product, then my purchase was a voluntary choice to increase Apple’s profits, or revenues.
When we hear that Cardinal Innovations paid $424,975 to ousted CEO, Pam Shipman, over and above her normal salary of $400,000 a year, we all contributed to Shipman’s compensation involuntarily. Similarly, the new CEO, Richard Toppings, received a raise when he became CEO to increase his salary to $400,000 a year. Again, we contributed to his salary.
A private company must answer to its Board of Directors. But an MCO, such as Cardinal, must answer to tax payers.
I work very hard, and I expect that my dollars be used intelligently and for the betterment of society as a whole. Isn’t that the purpose of taxes? I do not pay taxes in order for Cardinal to pay its CEO $400,000.
For better or for worse, a large percentage of our tax dollars, here in NC, go to the Medicaid budget. I would venture that most people would agree that, as a society, we have a moral responsibility to ensure that our most vulnerable population…our poorest citizens…have adequate health care. No one should be denied medical coverage and our physicians cannot be expected to dole out charity beyond their means.
Hence, Medicaid.
We know that Medicaid recipients have a difficult time finding physicians who will accept Medicaid. We know that a Medicaid card is inferior to a private payor card and limits provider choice and allowable services. We know that certain services for which our private insurances pay, simply, are not covered by Medicaid. Why should a Medicaid-insured person receive sub-par medical services or have more difficulty finding willing providers, while privately insured persons receive high quality medical care with little effort? See blog or blog.
Part of the trouble with Medicaid is the low reimbursements given to health care providers. Health-care consulting firm Merritt Hawkins conducted a study of Medicaid acceptance rates which found that just 45.7 percent of physicians are now accepting Medicaid patients in the U.S.’s largest 15 cities and the numbers worsen when you look at sub-specialties.
The reimbursement rates are so low for health care providers; the Medicaid services are inadequate, at best; and people in need of care have difficulty finding Medicaid physicians. Yet the CEO of Cardinal Innovations is compensated $400,000 per year.
Cardinal has 635 employees. Its five, top-paid executives are compensated $284,000-$400,000 with bonuses ranging $56,500-$122,000.
Richard Topping, Cardinal’s new CEO, told the Charlotte Observer that “it doesn’t cut into Medicaid services.”
He was also quoted as saying, “It’s a lot of money. It is. You’ve just got to look at the size and the scope and the scale.”
In contrast, Governor McCrory is compensated approximately $128,000. Is McCrory’s “size, scope, and scale” smaller than the CEO’s of Cardinal? Is the CEO of Cardinal “size and scope and scale,” more akin to the President of the US?
“We are a public entity that acts like a private company for a public purpose,” Toppings says. Each MCO’s Board of Directors approve salaries and bonuses.
Cardinal is not the only MCO in NC compensating its CEO very well. However, according to the Charlotte Observer, Cardinal’s CEO’s compensation takes the cake.
Smokey Mountain Center (SMC) pays its Chief Medical Officer Craig Martin $284,000 with a $6,789 longevity bonus.
Four years ago, before the initial 11 MCOs, the administrative cost of the MCOs was nonexistent (except for the pilot program, Piedmont Behavioral Health, which is Cardinal now). Implementing the MCO system increased administrative costs, without question. But by how much? How much additional administrative costs are acceptable?
Is it acceptable to pay $400,000+ for a CEO of a public entity with our tax dollars?
NC Medicaid Reimbursement Rates for Primary Care Physicians Slashed; Is a Potential NC Lawsuit Looming?
Here is my follow-up from yesterday’s blog post, “NC Docs Face Retroactive Medicaid Rate Cut.”
Nearly one-third of physicians say they will not accept new Medicaid patients, according to a new study. Is this shocking in light of the end of the ACA enhanced payments for primary physicians, NC’s implementation of a 3% reimbursement rate cut for primary care physicians, and the additional 1% reimbursement rate cut? No, this is not shocking. It merely makes economic sense.
Want more physicians to accept Medicaid? Increase reimbursement rates!
Here, in NC, the Medicaid reimbursement rates for primary care physicians and pediatricians have spiraled downward from a trifecta resulting in an epically, low parlay. They say things happen in threes…
(1) With the implementation of the Affordable Care Act (ACA), the Medicaid reimbursement rate for certain primary care services increased to reimburse 100% of Medicare Cost Share for services paid in 2013 and 2014. This enhanced payment stopped on January 1, 2015.
(2) Concurrently on January 1, 2015, Medicaid reimbursement rates for evaluation and management and vaccination services were decreased by 3% due to enactments in the 2013 NC General Assembly session.
(3) Concurrently on January 1, 2015, Medicaid reimbursement rates for evaluation and management and vaccination services were decreased by 1% due to enactments in the 2014 NC General Assembly session.
The effect of the trifecta of Medicaid reimbursement rates for certain procedure codes for primary care physicians can be seen below.
As a result, a physician currently receiving 100% of the Medicare rates will see a 16% to 24% reduction in certain E&M and vaccine procedure codes for Medicaid services rendered after January 1, 2015.
Are physicians (and all other types of health care providers) powerless against the slashing and gnashing of Medicaid reimbursement rates due to budgetary concerns?
No! You are NOT powerless! Be informed!!
Section 30(A) of the Medicaid Act states that:
“A state plan for medical assistance must –
Provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b(i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”
Notice those three key goals:
- Quality of care
- Sufficient to enlist enough providers
- So that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area
Courts across the country have held that low Medicaid reimbursement rates which are set due to budgetary factors and fail to consider federally mandated factors, such as access to care or cost of care, are in violation of federal law. Courts have further held that Medicaid reimbursement rates cannot be set based solely on budgetary reasons.
For example, U.S. District Court Judge Adalberto Jordan held in a 2014 Florida case that:
“I conclude that while reimbursement rates are not the only factor determining whether providers participate in Medicaid, they are by far the most important factor, and that a sufficient increase in reimbursement rates will lead to a substantial increase in provider participation and a corresponding increase to access to care.”
“Given the record, I conclude that plaintiffs have shown that achieving adequate provider enrollment in Medicaid – and for those providers to meaningfully open their practices to Medicaid children – requires compensation to be set at least at the Medicare level.
Judge Jordan is not alone. Over the past two decades, similar cases have been filed in California, Illinois, Massachusetts, Oklahoma, Texas, and D.C. [Notice: Not in NC]. These lawsuits demanding higher reimbursement rates have largely succeeded.
There is also a pending Supreme Court case that I blogged about here.
Increasing the Medicaid reimbursement rates is vital for Medicaid recipients and access to care. Low reimbursement rates cause physicians to cease accepting Medicaid patients. Therefore, these lawsuits demanding increased reimbursement rates benefit both the Medicaid recipients and the physicians providing the services.
According to the above-mentioned study, in 2011, “96 percent of physicians accepted new patients in 2011, rates varied by payment source: 31 percent of physicians were unwilling to accept any new Medicaid patients; 17 percent would not accept new Medicare patients; and 18 percent of physicians would not accept new privately insured patients.”
It also found this obvious fact: “Higher state Medicaid-to-Medicare fee ratios were correlated with greater acceptance of new Medicaid patients.”
Ever heard the phrase: “You get what you pay for.”?
A few months ago, my husband brought home a box of wine. Yes, a box of wine. Surely you have noticed those boxes of wine at Harris Teeter. I tried a sip. It was ok. I’m no wine connoisseur. But I woke the next morning with a terrible headache after only consuming a couple of glasses of wine. I’m not sure whether the cheaper boxed wine has a higher level of tannins, or what, but I do not get headaches off of 2 glasses of wine when the wine bottle is, at least, $10. You get what you pay for.
The same is true in service industries. Want a cheap lawyer? You get what you pay for. Want a cheap contractor? You get what you pay for.
So why do we expect physicians to provide the same quality of care in order to receive $10 versus $60? Because physicians took the Hippocratic Oath? Because physicians have an ethical duty to treat patients equally?
While it is correct that physicians take the Hippocratic Oath and have an ethical duty to their clients, it’s for these exact reasons that many doctors simply refuse to accept Medicaid. It costs the doctor the same office rental, nurse salaries, and time devoted to patients to treat a person with Blue Cross Blue Shield as it does a person on Medicaid. However, the compensation is vastly different.
Why? Why the different rates if the cost of care is equal?
Budgetary reasons.
Unlike private insurance, Medicaid is paid with tax dollars. Each year, the General Assembly determines our Medicaid budget. Reducing Medicaid reimbursement rates, by even 1%, can affect the national Medicaid budget by billions of dollars.
But, remember, rates cannot be set for merely budgetary reasons…
Is a potential lawsuit looming in NC’s not so distant future???
Medicaid Expansion, Polarization, and Diving Head-First Into the Unknown
I have always believed in the concept to think first, act second. I rarely react; I try to act. In politics, generally, this mantra is not followed. If a public poll states that the public is in favor of X, then the leaders need to consider X. If it is an election year, then the politicians will do X.
I’m reminded of an awful book I read a couple of years ago. I can’t remember the name of it, but it began with a young teen-age couple at a lake. The boyfriend dives off of a dock into the lake and dies because his head hit a rock underneath the water. (I do not suggest reading the book). But I remember thinking… “How tragic,” then… “Why in the world would this guy dive head-first into a lake without knowing the depth or pitfalls? This was a preventable death.”
This is a perfect example of why we should think first, act second.
However, in politics, the polarization of the two parties, Republican and Democrat, sometimes causes politicians to RE-act according to the party lines. Nowhere is this polarization more prevalent than the concept of Medicaid expansion. See my blog: “To Expand, Or Not To Expand, A Nationwide Draw?” It seems that if a state has a Republican governor, without question, that state will refuse to expand (I know there are few exceptions, but there are few). If a state elected a Democratic governor, then the state has elected to expand Medicaid.
Are these issues so black and white? Or have we become so politically polarized that true intellect and research no longer matters? Doesn’t that actual state of the state matter in deciding to expand?
For example, according to a 50-state survey by USA Today, North Dakota is the best run state. North Dakota has zero budget deficit, and an unemployment rate of 3.1%, the lowest of all 50 states. North Dakota has opted to expand Medicaid.
On the other hand, according to the same study, North Carolina has an unemployment rate of 9.5%, which is the 4th highest in the nation. What does high unemployment mean? A large number of Medicaid recipients.
North Dakota has approximately 82,762 Medicaid recipients, according to the Kaiser Foundation for FYE 2010. Conversely, North Carolina, for the same year, had 1,813,298 Medicaid recipients.
So my question is: Can, or should, a state with 1.8 million Medicaid recipients adopt the same Medicaid eligibility rules as a state with 82,000 Medicaid recipients?
And how can we know the consequences of expansion prior to deciding to expand? Because, after all, shouldn’t we think first, act second? Who wants to dive into an unknown lake?
But issues that apparently no one had contemplated are cropping up…
States across America are seeing unexpected Medicaid costs increase. According to the Associated Press, prior to Medicaid expansion there were millions of Americans who were eligible for Medicaid but who, for whatever reason, had never signed up. Now that there has been so much publicity about health care, those former un-insured but Medicaid-eligible people are signing up in droves.
In California, State officials say about 300,000 more already-eligible Californians are expected to enroll than was estimated last fall. See article.
Rhode Island has enrolled 5000-6000 more than its officials expected. In Washington State, people who were previously eligible represent about one-third of new Medicaid enrollments, roughly 165,000 out of a total of nearly 483,000.
While the Feds are picking up the costs for Medicaid recipients now eligible because of the expansion (at least for a few years), state budgets have to cover these new Medicaid recipients signing up who had been eligible in the past.
For states blue or red, the burden of these unanticipated increased costs will be on the shoulders of the states (with federal contribution).
Going back to the extremely polarized view of Medicaid expansion (Democrats expanding and Republicans not expanding)…maybe it’s not all black and white. Maybe we should shed our elephant or donkey skins and actually research our own states. How many Medicaid recipients do we have? What does our budget cover now?
Maybe we should research the consequences before diving in the lake.
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…
