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EXECUTIVE OFFICE OF THE PRESIDENT
LRM NO: 1899
OFFICE OF MANAGEMENT AND BUDGET
URGENT
Washington, D.C. 20503-0001
FILE NO: 1109
7/7/95
LEGISLATIVE REFERRAL MEMORANDUM
Total Page(s): 23
TO:
Legislative Liaison Officer - See Distribution below:
FROM:
Janet FORSGREN
(for) Janet R. Forsgren
Assistant Director for Legislative Reference
OMB CONTACT:
Robert PELLICCI 395-4871
Legislative Assistant's line (for simple responses): 395-7362
SUBJECT: HHS Proposed Testimony on Medicald Program
DEADLINE: 2:00pm Monday, July 10,1995
In accordance with OMB Circular A-19, OMB requests the views of your agency on the above subject before
advising on its relationship to the program of the President.
Please advise us if this item will affect direct spending or receipts for purposes of the
"Pay-As-You-Go" provisions of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS:
DISTRIBUTION LIST:
AGENCIES:
EOP:
-Executive Office of the President - EOP Review Only. See Distribution
Nancy-Ann Min
NEC
Barry Clendenin
Mark Miller
Allison Eydt
Chris Jennings
Jennifer Klein
Diana Fortuna
Jim Murr
Janet Forsgren
ELLEN BALIS
CHUCK KONIESBERG
JANET mueGUIA
URGENT
MOLLY BROSTROM
P.O11 800°N 22:12
$6.90 701
RESPONSE TO
LRM NO: 1899
LEGISLATIVE REFERRAL MEMORANDUM
FILE NO: 1109
If your response to this request for views is simple (e.g., concur/no comment), we prefer that you respond by e-mail or
by faxing us this response sheet.
If the response is simple and you prefer to call, please call the branch-wide line shown below (NOT the analyst's line)
to leave a message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be connected to voice mail If the analyst does not answer); or
(2) sending us a memo or letter.
Please include the LRM number shown above, and the subject shown below.
TO: Robert PELLICCI 395-4871
Office of Management and Budget
Fax Number: 395-6148
Branch-Wide Line (to reach legislative assistant): 395-7362
FROM:
(Date)
(Name)
(Agency)
(Telephone)
SUBJECT: HHS Proposed Testimony on Medicaid Program
The following is the response of our agency to your request for views on the above-captioned subject:
Concur
No Objection
No Comment
See proposed edits on pages
Other:
FAX RETURN of
pages, attached to this response sheet
22:17 No.008 P.02
$6.90 701
819-6-0:I
Testimony of
Bruce C. Viadeck
Administrator
Health Care Fluancing Administration
Before the
Committee on Finance
U.S. Senate
July 12, 1995
800° °N 22:18
$6.90 706
Mr. Chairman and Members of the Committee:
I welcome the opportunity to be here this morning to discuss State flexibility under the
current Medicaid program and this Administration's efforts in expanding and assisting
States in using that flexibility. The Medicaid program was conceived as a Federal/State
partnership, and this Administration has made major strides in strengthening the
relationship. Nonetheless, we recognize the need for additional work to build on this
partnership
Introduction
Before beginning our discussion about State flexibility, I would like to highlight some
essential facts about the Medicaid program.
First, Medicaid's spending growth has moderated. A widespread myth bolds that
Medicaid is growing out of control, far faster than other parts of the health care scotor.
Chart 1 shows the contrary. In fact, the growth in Medicaid spending on a per person
basis Das not exceeded the grovth in private health insurance since the period between
1989 and 1992. At that time, States used provider taxes combined with disproportionate
share hospital payments as a means of increasing Federal matching funds.
Second, the lion's share of Medicaid spending is devoted to the aged and disabled. As
chart 2 indicates, the aged and disabled represent 30 percent of Medicaid recipients and
account for 70 percent of the spending.
P.04 800' ON 22:18 $6.90 701
Third, Medicaid is a critical safely net for a wide variety of populations with very diverse
health needs. State Medicaid programs cover prenatal care for low and moderate-
income pregnant women, health care for children, and long-term care for low-income
senior citizens. They also provide 8 variety of rehabilitative and adaptive services for
persons with disabilities, chronic care for individuals with special needs, and
supplemental coverage for low-income Medicare beneficiaries. For many of these
populations, whose disabling conditions or medical costs prectude them from purchasing
insurance, Medicaid is the only system of care.
Chart 3 shows how Medicaid coverage increased between 1989 and 1994 while employer-
based insurance deolined. Medicaid brings an important stability to the health care
marketplace by offsetting losses in private insurance coverage. Although different
populations are involved, Medicaid coverage increases have leveled the overall percent
of uninsured and thereby maintained an essential balance in the cost shift to the private
sector.
State Flexibility Under Current Law
Medicaid was enacted in 1965 to provide access to coverage for low-income Americans.
Medicaid represented a consolidation of several Federal grant programs administered by
the States. The nation's most vulnerable populations " low-income sonior citizens,
individuals with disabilities, and children -- are Medicaid eligible in every State.
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819-6-0:0I
JUL-07-1995 06:12 FROM
IU
Nevertheless, the current Medicaid program is actually 56 different programs The
States have tailored their programs to meet the varying specific needs of their individual
populations. The diversity across States' Medicaid programs is a direct result of the
Inherent flexibility of the program.
The States' Medicaid programs are dynamic. In partnership with HCFA, States are
continuing to find innovative ways to improve health care delivery. enhance access-and
control rising health care costs.
Elexibility in Coverage
Tue original Medicale statute only required States' Medicaid programs to provide a set
of five core benefits, including inpatient hospital services, outpatient services, physician
services. laboratory and x-ray services, and skilled nursing home services. Statescould
also cover any of ten optional benefits.
Over the past 30 yeals, Congress has added seven cervices to the list of required benefits
and has expanded the list of optional benefits that States may offer to include 30
services.
States use their flexibility to cover optional services to customize their Medicaid
programs to serve the special needs of their vulnerable populations. For example, Utah
provides 28 optional benefits to its Medicaid beneficiaries while Delaware offers 15
3
JUL 06'95 22:19 No .008 P.06
optional benefits. A few benefits, such as prescription drugs and clinic services, are
offered by almost all the States: On average, the States cover about 24 optional benefits.
Only 44 percent of Medicaid spending in 1993 was for mandatory services provided to
mandatorily eligible individuals. Chart 1 shows that over 50 percent of the total
Medicaid spending was for optional services and populations elected by the States.
Flexibility in Determining Eligibility
States have significant flexibility in determining who is eligible for their Medicaid
programs. The largest portion of the caseload are those on the Aid to Families with
Dependent Children (AFDC) program. The eligibility standards for this program are
directly determined by States.
States may also extend Medicaid coverage to Iow-income families above the Federal
minimum guidelines and to individuals with large medical expenses. The States use this
flexibility to make their institutionalized aged and disabled populations eligible for
Medicaid.
Medicaid statute requires States to cover pregnant women and children under age 6 up
to 133 percent of the Federal poverty guideline In addition, States must also phase-in
coverage for all other children over use six born after September 30, 1983. Thirty-three
States use Medicaid flexibility to expand coverage for pregnant women and children with
family incomes beyond the Federal minimum guidelines. Twenty-seven of those States
4
20'd 800' ON 22:19
$6.90 701
cover pregnant women and infents to at least 185 percent of the Federal poverty
guidellnes.
In addition, States have further flexibility to liberalize financial eligibility criteria for
certain high-priority populations under the authority of section 1902(r)(2) of the Social
Security Act. Under this provision. States are able to apply more liberal financial
eligibility standards by disregarding certain income and/or assets.
Several States have used the authority of section 1902(f)(Z) as a means of expanding
eligibility for children beyond 185 percent of the Federal poverty level and accelerating
the phase-in coverage for children below the poverty level. For example, both Delaware
and West Virginia have used the 1902(r)(2) authority to cover all children under age 19
up to the Federal poverty level.
Flexibility in Service Delivery and Financing
States have additional flexibility to design their Medicaid programs through various
program and research waivers.
Managed Care Programs
Under freedom-of-choice waivers, States can establish primary care case management
programs, require Medicaid beneficiaries to choose among managed care plans, and
selectively contract with hospitals, nursing facilities, or other providers. States use this
5
80°d 800° °N 22:20
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flexibility to target coordinated and comprehensive managed care systems to their high-
risk populations and to purchase services in a cost-effective mannel.
States are taking full advantage of the flexibility to design managed care programs for
their Medicaid populations. Thirty-nine States now operate 75 managed care programs
covering 8 million Medicaid eligible individuals.
States have also developed managed care programs to target a number of specific
priorities. For example, the Kansas Primary Cure Network (PCN), which was
established in 1984, was one of the first managed care programs to provide physician
case management to beneficiaries. Under this program, the State assigns each Medicaid
beneficiary in the seven most populous counties to a physician case manager. The case
manager is responsible for managing all of the recipient's health care. Over 30 percent
of the State's Medicaid eligibles are now enrolled in this PCN program. HCFA reviews
have shown the program to be cost effective as well as providing better access to services
for the participating Medicaid beneficiarios.
Similarly, Florida has developed MediPass, an extensive primary care case management
program. The State pays MediPass primary care providers a $3 per member per month
case management fee to coordinate care for their MediPass enrollees. These providers
manage many of their patients' health needs, including specialty referrals, but continue
to be paid on a fee-for-service basis for the health care services they provide.
6
60'd 800' ON 22:20 $6.90 706
JUL-07-1995 06:14 FROM
Utah has developed a ground-breaking prepaid mental health program for Medicaid
beneficiaries. The State contracts with three community mental health centers 10
provide inpatient and outpatient psychiatric and related physician services. The first year
results indicate that contractors were able to reduce utilization of inpatient psychiatric
services while increasing the percentage of eligibles served in their catchment areas.
Home and Community Based Services Programs
Home and community based services waivers give States the ability to establish home
and community based care programs that provide services to beneficiaries in the
community setting rather than in nursing homes and hospitals. Home and community
based services programs allow States to manage care provided to the elderly and
disabled populations in au efficient manner while increasing the consumer's satisfaction
with the services provided.
States have made extensive use of this authority as well. Over 205 programs are now
upcrating. Every state is currently corving developmentally disabled and aged individuals
under a home and community based services program. States are also serving people
with HIV/AIDS, those with traumatic head injury, and medically fragile children.
HCFA is actively involved in encouraging and assisting States in using this flexibility.
Recently, Alaska officials requested HCFA assistance in developing their home and
community based services program. Our staff went to Alaska and helped the State
7
JUL 06'95 22:21 No .008 P.10
design four home and community based services programs to meet the unique needs of
its citizens. The programs were quickly reviewed and approved. Other States are also
increasingly seeing HCFA as a partner in the development of their programs.
Service Delivery and Financing Demonstrations
Medicaid's research and demonstration authority, section 1115, gives States much
broader opportunities to develop and test new and innovative ideas. Statcs can use this
authority to develop sub-state and statewide demonstrations of new approaches to health
care financing and delivery.
This Administration has approved ten statewide section 1115 demonstrations. Several
additional States have submitted proposals that are currently being reviewed. No
previous Administration had been willing to give States a comparable degree of flexibility
as the Clinton Administration. We have actively encouraged States to develop
innovative reform demonstrations Including managed care approaches working with the
private sector and public health providers.
One of the first acts of this Administration was to approve the Oregon Reform
Demonstration. The Oregon request, which was the first approval of a statewide
demonstration in 10 years, had been denied by the previous Administration.
Since that polat, innovative reform proposals have been approved in Hawaii. Tennessee
8
22:21 No.008 P.11
$6.90 701
8719-6-:0I
Rhode Island Kentucky. Florida Ohio. Massachusetts Minnesota, and Delaware.
These States are experimenting with new ways of financing and delivering essential
health care. For example, Delaware has created seamless coverage for those below the
Federal poverty level. Rhode Island is testing the effectiveness of extending family
planning benefits and contracting with an FQHC-based managed care system.
In addition, the Administration has approved twenty-three smaller, more largeted section
1115 demonstrations. Some of these demonstrations provide preventive services to
children, test extended family planning services, and establish alternative delivery
systems.
For example, under the Lowa Drug Utilization Review Program. the State conducts
on-line prospective drug utilization review. There are 250 pharmacies participating in
the project either as randomized control or experimental entities.
Further, the multi-State Nursing Home Case-Mix and Quality Demonstration which is
operating in Kansas Maine, Mississippi New York South Dakota. and Texas. will test a
combined Medicare and Medicaid nursing home payment and quality monitoring system.
This system will significantly enhance the quality assurance process in nursing [acilities.
9
JUL 06'95 22:22 No .008 P.12
ID:202-395-6148
JUL-07-1995 06:15 FROM
Flexibility in Program Administration
States have considerable flexibility in catablishing provider participation criteria.
Certification requirements for institutions such as hospitals and intermediate care
facilities for the mentally retarded, physician qualification requirements, and
requirements for other providers are determined primarily by the States.
Similarly, States have latitude in setting provider payment rates. Although the Boren
Amendment and Medicare accounting principles provide general lower and upper
bounds with respect to payments for hospitals and nursing homes. States have significant
flexibility to establish payment rates for these providers. States have still greater
flexibility for other classes of providers
Another area in which States have flexibility is targeted case management. States use
the Medicaid program to coordinate not only medical services but a range of social,
educational, housing, or other services for Medicaid beneficiaries. States have the ability
to use case management for as many segments of the Medicaid population as they
believe would benefit from such coordination.
For example, States have established programs w coordinate the service necds of
mentally retarded individuals, the mentally ill, individuals with HIV/AIDs, high-risk
pregnant women, and at-risk children. In each case, the State is afforded the flexibility
to define the level of service coordination provided, the target group, provider
10
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JUL-07-1995 06:16 FROM
TO
93956148 P.13
qualifications, level of payment, and any limits on the scope of services. This has
enabled States to develop individualized plans of care for their most vuluerable citizens
that weave together a tapestry of support from the diverse threads of Federal, State,
local, and private resources.
With HCFA cooperation and assistance, many States are collaborating with various
health-related and community organizations to design and implement programs that
meet M comprehensive range of health needs of children. Because children's health is
frequently affected by a number of socioeconomic conditions such as poverty, substance
abuse, and fragmented health resources, no single agency or program can address all of
their needs. Increasingly, communities are using public/private arrangements to develop
integrated services networks. These networks disseminate information and serve as
referral links botween women and children in the community and the State's Medicaid,
Maternal & Child Health, Women Infants & Children, and primary care programs.
Further, States have pursued a wide range of administrative and programmatic
innovations. HCFA has encouraged and supported State program improvements,
including:
Introducing magnetic-strip cards to provide immediate access to
information about eligibility and third-party liability; and
-
Implementing automated drug utilization review to control fraud and
improve the quality of pharmacy services.
11
Did 800' ON 22:22
$6.90 701
Improving the Medicaid Program
As you know, the President recently suggested a number of ideas for enhancing the
Fcderal-State partnership and controlling Medicaid costs. The President proposes is
combination of policies to expand State flexibility and reduce the growth of Federal
Medicaid spending. This combination includes expanding managed case, reducing and
better targeting Federal payments for hospitals that serve a high proportion of low-
income people, and limiting the growth in Federal Medicaid payments to States for each
beneficiary. 1 believe these strategies represent the right approach to improving the
Medicaid program.
We believe the best strategy for improving the Federal-State Medicaid partnership is 10
pursue changes that protect beneficiaries yet give States additional program flexibility
and cost-control mechanisms. This improvement can best occur within the current
Federal-State partnership. The Medicaid program can and does provide flexibility for
States, but the program's structure also ensures an important degree of continuity across
States. This continuity is particularly important in program eligibility .. low-income
senior citizens, individuals with disabilities, and chikdren are Medicaid eligible in every
State. Under the current Federal-State relationship, States also draw on Federal
expertise and assistance to achieve program goals.
The President's proposal seeks $54 billion in Medicaid program savings over seven years.
We want to work with this Committee and the Governors to determine how we CALL best
12
St'd 800' ON 22:22 $6.90 701
achieve these savings. We are interested in significant changes. For example, we want
to give States more flexibility to pursue certain widely used managed care models by
replacing current watver requirements with new statutory authority that would make
these types of Medicaid managed care n program option that States could elect without
extensive Federal review.
We are also interested in building upon our work with the National Governors'
Association (NGA). For example, we worked with the NGA to encourage States to
expand their home and community-based services programs. We believe that State
flexibility in these programs could be further enhanced. IICFA supports the NGA
recommendations to repeal requirements for payment rates to obstetrkians/pediatrician
and to replace the HMO eprollment provisions called the "75/25 rule" (which requires
HMOs to maintain at least 25 percent private enrollment) with more outcome-based
quality assurance methods. We support provisions that would allow managed care
entities to better serve rural areas. We are also evaluating new strategies for
guarantecing 000000 to high-quality services that are more refined than the current Boren
Amendment.
We recognize that the growth in Medicaid should be contained. However, WE do not
want w do this in a way that risks Medicaid enrollees losing coverage. Instead, the
President has proposed per capita limits on Federal Medicaid spending, which will
provide an additional incentive for States to control program spending but will not force
13
P.16 800 ON 22:22
$6.90 701
them to restrict Medicaid eligibility. Under per capita spending limits, Medicaid
enrollment CRU continue to expand and contract with economic conditions and individual
needs. With enhanced flexibility, States will be able to manage within these limits, while
Medicaid beneficiaries -- including senior citizens, disabled people and children -- will
retain their health care coverage.
Comparison to Other Proposals
We believe the reductions required in the conference agreement on the budget
resolution would damage this critical safety-net program and harm the States,
beneficiaries and providers. These impacts would be driven by the dimensions of the
spending cut, its likely influence on State spending, and projected cuts in Medicaid
enrollment
The magnitude of the spending cut -- $182 billion over seven years - is too big to be
absorbed through efficiencies alone. Simply limiting overall Foderal matching payments
will not make health-related costs disappear. Neither wholesale use of managed care
nor any other programmatic change will provide sufficient savings to maintain current
coverage levels.
In addition, enrollment growth would absorb most of the lower growth rates permitted
under the conference agreement. As Chart 5 demonstrates, The Congressional Budget
Office's (CBO) projections of Medicaid enrollment growth alone edge very close to the
14
22:24 No .008 P.17
$6.90 701
proposed spending limits in the budget resolution. As you know, medical inflation
imports public health case spending as well as private spending. Inflation, added to
CBO'x anticipated enrollment growth, will drive projected program costs well beyond the
spending limits envisioned under the budget resolution. Given the many fiscal legal and
politival prossures al. work on States It will be virtually impossible for States to maintain
coverage of essential medical services for current Medicaid beneficiaries under the
budger resolution.
The President's plan and the budget resolution are fundamentally different We rely on
per capita limits to allow for changes in enrollment, while the budget resolution outs
spending to the point that any unexpected change in enrollment would shift considerable
cost to the States or force a reduction is coverage. We fear that States way be forced to
reduce coverage. thereby adding to the number of uniusured at an alarming rate. The
States and Congress can realize meaningful savings and additional flexibility without
completely dismantling the Medicaid program.
Conclusion
The Medicaid program affords States a considerable amount of flexibility in the design
of their individual programs. The Clinton Administration has worked with States to
further increase flexibility and permit States' use of innuvative means of service delivery
and cost containment.
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$6.90 701
Chart I
Annual Percent Increase in Medicaid Expenditures
JUL 06'95 22:25 No No.008 P.19
per Enrollee vs. Private Health Insurance
1976-2005
20
FROM 81:90 5661-20-701
15
Growth Rate
10
ID:202-395-6148
5
a
0
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Private Medicaid
'Provitte health expenditures 1x1 INNED person & Medicand Expenditions per resipient
or's aniacces
Source HCFAOAC1
PM ASSISC
Chart 2
JUL 06'95 22:25 No No.008 P.20
Percent Distribution of Medicaid and
Vendor Payments by Basis of Ellgibility
100
2%
1%
Other
Children Under 21
80
69%
Aged. Blind, and
Disabled AFDC Adults
60
AFDC Adults
ID:202-395-6148
Percent of Total
(Unknown Represents
27%
0.4% of Recipients and
40
0.25% of Vendor Payments)
20
22%
13%
0
Recipients
Vendor Payments
Fiscal Year 1993
HIH A5619A
Chart_ 3
JUL 06'95 22:26 No. No.008 P.21
Medicaid is a Critical Safety Net
1989
1994
Employer
Employer
66.0%
59.0%
ID:202-395-6148
Uninsured
Uninsured
16.0%
16.0%
Other
Other
11.0%
Medicaid
Villaw
Medicaid
9.0%
9.0%
14.0%
Vellons
SOURCE: HCFA, Office of the Actuary and Urbar. Institute, 1995.
Chart 4
JUL 06'95 22:26 No .008 P.22
Total Expenditures for Mandatory and Optional
Medicaid Services and Populations: FY 1993
(Dollars in Millions)
Mandatory People
47,885
23,681
71,566
Optional People
12,052
26,358
38,409
TOTAL
59,936
50,039
109,975
As A Percent of Total
ID:202-395-6148
Mandatory People
43.5%
21.5%
65.1%
Optional People
11.0%
24.0%
34.9%
TOTAL
54.5%
45.5%
100.0%
Excludes DSH. collections and adjustments
P.23
chart 5
Medicaid Population and Inflation Growth
JUL 06'95 22:27 No No.008
CBO Projected Annual Increases 1996-2002 for All Beneficiaries
12%
10%
Percentage Increase
8%
6%
4%
ID:202-395-6148
2%
0%
1996
1997
1998
1999
2000
2001
2002
Population
CPI
MCPI
Conference
Aspeciat
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HUMAN SERVICES STATEMENT OF USA
BRUCE C. VLADECK, Ph. D.
ADMINISTRATOR
HEALTH
HEALTH CARE FINANCING ADMINSTRATION
BEFORE THE
SUBCOMMITTEE ON HEALTH AND ENVIRONMENT
HOUSE COMMITTEE ON COMMERCE
JUNE 21, 1995
DEPART
HCFA
MEDICARE MEDICAID
I I ! 1
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Mr. Chairman and Members of the Committee:
I welcome the opportunity to be here this morning to discuss the
history, accomplishments and future direction of the Modicaid
program. This Administration has been working to strengthen
Medicaid's inherent partnership between the Federal government
and the States. We know we need to continue building on this
partnership to make necessary improvements to the Medicaid
program.
Introduction
Medicaid provides health coverage for 36.1 million Americans --
children, senior citizens, individuals with disabilities and
others -- through a partnership between the Federal government
and the States which provides States with substantial flexibility
over eligibility, benefits and delivery systems.
Recently, States have also been seeking additional flexibility in
the Medicaid program. We have responded by using our
demonstration authority to enable States to pursue a number of
innovative approaches to covering additional populations and
redesigning Medicaid delivery systems. Just last week, the
President also proposed important new reforms that will control
Medicaid cost increases and provide States with additional
programmatic flexibility.
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Except for the period between 1989 and 1992, the Medicaid program
has grown less rapidly than the private sector on a per capita
basis (Chart 1). The unsustainable growth rates during this time
were caused by several factors, including a national recession,
States' use of statutory loopholes to leverage Federal dollars,
and increased provider payments. In response, the Executive
Branch worked with Congress and the States to bring program costs
under control while maintaining the Medicaid program as an
important source -- often the only source -- of coverage for low-
income Americans. Our new cost containment proposals continue
this commitment.
Medicaid is a Critical Safety Net
Medicaid is the primary source of coverage for a wide variety of
Americans with diverse health care needs. It covers preventive
care for low and moderate-income pregnant women and children and
long term care for low-income senior citizens. It also provides
a variety of rehabilitative and adaptive services for persons
with disabilities, chronic care for individuals with special
needs, and supplemental coverage for low-income Medicare
beneficiaries.
Generally, Medicaid acute-care coverage mirrors the employer-
based coverage available to most Americans, but Medicaid also
provides long term care benefits for senior citizens and
individuals with disabilities that are rarely available or
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affordable through other sources. - Because Medicaid covers these
services, the program ultimately helps a large number of working
American families care for their chronically ill family members.
For example, 61 percent of all nursing home residents rely on
Medicaid to help pay for their care. Many beneficiaries have
complex health needs or need long term care and therefore are
very expensive to care for. In 1993, spending on all services
for elderly and disabled individuals constituted approximately 70
percent of all Medicaid spending, excluding payments to
disproportionate share hospitals (DSH). Approximately half of
these dollars were spent on long term care in nursing homes.
Without Federal Medicaid funding, many of these individuals --
the elderly, chronically ill, disabled and mentally ill -- would
be the sole responsibility of States, local communities and their
families. The remaining thirty percent of Medicaid spending is
dedicated to care for low-income adults and children who use
primarily hospital and physician services (Chart 2).
Americans who qualify for Medicaid are assured of financing for
their essential health services. While eligibility varies from
State to State, certain national standards apply to all States --
notably coverage for low-income pregnant women and children, and
the low-income elderly and disabled. States provide the full
range of services to beneficiaries, from childhood immunizations
to nursing home care. Within these parameters, Medicaid has had
substantial success serving diverse low-income populations. For
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example, Medicaid coverage improves continuity of prenatal care
for low-income pregnant women and increases disabled children's
access to physicians.
Over the past few years, employer-based coverage has declined
while Medicaid coverage has expanded. For example, while
employer coverage fell from 66 to 59 percent of individuals under
age 65 between 1989 and 1994, Medicaid coverage grew from 9 to
14 percent for the same population (Chart 3). Medicaid provides
a safety net for some individuals and families who would
otherwise be uninsured and picks up costs that do not disappear
from the health system just because an individual loses private
health insurance.
Medicaid's Management Successes
HCFA and the States have worked together to develop an efficient
program. Our low Federal and State administrative costs -- 3.7
percent of total program spending in 1993 -- are an example of
our success in minimizing administrative burden. As a result, we
can target program dollars towards beneficiaries and their health
needs. In addition, the Medicaid program has pioneered a number
of innovations that enhance program efficiency, expand access to
services, improve quality of care, and create new delivery
mechanisms that better serve beneficiaries.
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007/018
Using the flexibility inherent in the Medicaid program, States
have developed programs that target their unique needs and have
pursued a wide range of administrative and programmatic
innovations. HCFA has encouraged and supported State program
improvements, including:
-- Replacing institutionalized, nursing home care with
home and community-based services for disabled and
elderly benefíciaries, thus reducing nursing home costs
while improving quality of life for these patients;
-- Introducing magnetic-stripe cards to provide immediate
access to eligibility information, third party
liability and electronic claims filing;
-- Experimenting with new, gatekeeper-oriented forms of
managed care to maximize enrollee choice while also
controlling costs; and
-- Implementing automated drug utilization review to
control fraud and improve the quality of pharmacy
services.
The Federal government continues working to provide substantial
assistance to the States and forge new paths for the Medicaid
program. Some notable examples include:
-- Developing innovative Federal quality assurance
guidelines for Medicaid managed care organizations;
-- Spearheading the effort to define outcomes measures for
Medicaid enrollees to provide greater assurance that
5
06/21/95
11:11
6202 401 7321
HHS ASPE/HP
008/018
managed care enrollees receive high quality health
services;
:
Developing "best practices quidelines" for the States
on significant program innovations, such as: primary
care case management programs; Early, Periodic
Screening, Diagnosis and Treatment (EPSDT)
implementation; and quality-assurance in community-
based programs;
:
Implementing a national drug rebate program -- thus
holding per person drug expenditures to 1988 levels --
and providing States with day-to-day technical
assistance to simplify rebate requests;
:
Strengthening our waiver approval process and
developing streamlined waiver applications -- these
improvements have eased State efforts to expand managed
care enrollment, which now includes over 23 percent of
all Medicaid beneficiaries; and
:
Developing quality standards to protect seniors and
others in nursing homes.
Many of these Federal efforts focus on ensuring Medicaid's fiscal
integrity, protecting beneficiaries and ensuring that public
dollars are well spent on high quality services, all within the
broader context of providing substantial support to State
programs.
6
06/21/95
11:11
202 401 7321
HHS ASPE/HP
009/018
Since 1993, this Administration has taken remarkable steps to
build upon HCFA's history of partnership with the States. We are
working with a number of States to test new, broad-based
approaches to health financing and delivery through Statewide
health reform demonstrations under Section 1115 of the Social
Security Act. This authority gives the Secretary broad latitude
to permit demonstrations that further the goals of the Medicaid
program. Through these programs, States may test the
effectiveness and efficiency of their own ideas. Historically,
States had sought demonstration authority to test relatively
narrow changes, such as changes to the Medicaid benefit package,
payment methodologies or eligibility requirements for a defined
group of beneficiaries or services. Since 1993, States have
begun to develop broad, Statewide reform programs under this
demonstration authority.
To date, this Administration has approved ten Statewide health
reform demonstrations, and we are considering several additional
proposals. These States will experiment with innovative
financing and delivery systems on a broad scale. For example,
Florida intends to develop a revolutionary health alliance system
that will broker private health coverage for low-income and
uninsured Floridians through a community purchasing network,
while Hawaii has achieved insurance coverage for more than 95
percent of its population through a combination of Medicaid
expansions and an employer mandate.
7
06/21/95
11:12
202 401 7321
HHS ASPE/HP
010/018
We continue our efforts to control growth in program spending.
The substantial program growth of the late 1980s and early 1990s
was largely driven by States' use of provider taxes, voluntary
donations and disproportionate share hospital (DSH) payments to
leverage Federal matching dollars. Fortunately, because of our
work and Congress's efforts -- through this Committee and others
-- the worst abuses have been tempered.
Today, we project that year-to-year expenditure growth in the
Medicaid program will average 9.3 percent through 2000. Because
enrollment growth has driven much of the spending increases in
Medicaid, our per capita growth rates are much lower. We
estimate that Medicaid's annual per capita growth will average
5.4 percent through 2000.
Improving the Medicaid Program
As you know, the President recently suggested a number of ideas
for enhancing the Federal-State partnership and controlling
Medicaid costs. I believe these strategies represent the right
approach to improving the Medicaid program.
We believe the best strategy for improving the Federal-State
Medicaid partnership is to pursue changes that protect
beneficiaries yet give States additional program flexibility and
cost-control mechanisms. We believe that this can best be
achieved within the current Federal-State partnership. The
8
06/21/95
11:12
202 401 7321
HHS ASPE/HP
011/018
Medicaid program can and does provide flexibility for States, but
the program's structure also ensures an important degree of
continuity across States. This continuity is particularly
important in program eligibility -- low-income senior citizens,
individuals with disabilities and children are Medicaid-eligible
in every State. Under the current Federal-State relationship,
States also draw on Federal expertise, buying-power and technical
assistance to achieve program goals.
The President's proposal seeks $54 billion in Medicaid program
savings over seven years. We want to work with this Committee
and the Governors to determine how we can best achieve these
savings. We are interested in significant changes. For example,
we want to give States more flexibility to pursue certain widely
used managed care models by replacing current waiver requirements
with new statutory authority that would make these types of
Medicaid managed care models a program option.
We are also interested in building upon our work with the
National Governors' Association (NGA). For example, we worked
with the NGA to encourage States to expand their home and
community-based services programs. We believe that State
flexibility in these programs could be enhanced further.
Finally, we are evaluating new strategies for guaranteeing access
to high-quality services that are more refined than the current
Boren Amendment and other provider payment requirements.
9
06/21/95
11:12
202 401 7321
HHS ASPE/HP
012/018
Beyond increasing State flexibility, we know that Medicaid cost-
containment must be continued. However, we do not want to do
this in a way that risks Medicaid enrollees losing coverage.
Instead, the President has proposed per capita limits on Federal
Medicaid spending, which will provide an additional incentive for
States to control program spending but will not force them to
restrict Medicaid eligibility. Under per capita spending limits,
Medicaid enrollment can continue to expand and contract with
economic conditions and individual needs. With enhanced
flexibility, States will be able to manage within these limits,
while Medicaid beneficiaries -- including senior citizens,
disabled people and children -- will retain their health care
coverage.
Comparison to Other Proposals
We believe the House budget proposal would damage this critical
safety-net program and harm the States, beneficiaries and
providers. These impacts would be driven by the dimensions of
the spending cut, its likely influence on State spending, and
projected cuts in Medicaid enrollment.
The magnitude of the House spending cut -- $187 billion over
seven years -- is too big to absorb through efficiencies alone.
Simply limiting overall Federal matching payments will not make
health-related costs disappear. Neither whole-scale use of
10
06/21/95
11:13
202 401 7321
HHS ASPE/HP
013/018
managed care nor any other programmatic change will provide
sufficient savings to maintain current coverage levels.
In addition, enrollment growth would absorb most of the lower
growth rates permitted under the House proposal. As the attached
chart (Chart 4) demonstrates, Medicaid enrollment growth
projections edge very close to the proposed spending limits on
block grants. As you know, medical inflation influences public
health care spending as well as private spending. Inflation,
added to anticipated enrollment growth, will drive projected
program costs well beyond the spending limits envisioned under
the House proposal. Given the many fiscal, legal and political
pressures at work on States, it will be virtually impossible for
States to maintain coverage of essential medical services for
current Medicaid beneficiaries under the block grant proposal.
To maintain current coverage levels, the House budget proposal
would force States to either absorb a large cost-shift from the
Federal government, causing the proportion of State to Federal
dollars invested in a State's Medicaid program to increase as
States are forced to adjust to lost Federal matching payments.
The Urban Institute concludes that if States chose to fill the
gap, States would, on average, have to increase their spending by
39 percent to make up for the loss of Federal funds. However, in
the current fiscal climate, few States may be able to devote new
State dollars to their Medicaid program.
11
06/21/95
11:13
202 401 7321
HHS ASPE/HP
014/018
There are fundamental differences between the President's plan
and the House budget resolution. We rely on per capita limits to
allow for changes in enrollment, while the House proposal is
based on an aggregate cap and therefore does not provide room for
enrollment growth. In addition, we believe that the States and
Congress can realize meaningful savings and additional
flexibility without resorting to a block grant.
Conclusion
The Medicaid program has a substantial history of success --
together, the Federal government and the States have provided an
essential safety net for children, seniors, nursing home
residents, the disabled, and other vulnerable Americans.
We are committed to maintaining and building upon Medicaid's
successes in order to better serve our beneficiaries. We believe
this can best be achieved by making the changes that we know will
deral government and the States control costs and
for the Americans we serve today.
12
Annual Percent Increase in Medicaid Expenditures
06/21/95
per Enrollee VS. Private Health Insurance
11:13
1976-2005
20
7321 401 20202
15
Growth Rate
10
ASPE/HP SHH
5
0
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Private Medicaid
'Private health expenditures per insured person & Medicaid E xpenditimes per recipient
Source HCFA/OACT
Put AS619C
015/018
Percent Distribution of Medicaid and
06/21/95
Vendor Payments by Basis of Eligibility
11:13
100
2%
49%
16%
1%
Other
Children Under 21
7321 401 20202
80
69%
Aged, Blind, and
Disabled AFDC Adults
60
AFDC Adults
Percent of Total
(Unknown Represents
27%
ASPE/HP SHH
0.4% of Recipients and
40
0.25% of Vendor Payments)
20
22%
13%
0
Recipients
Vendor Payments
Fiscal Year 1993
PBI AS619A
016/018
Medicaid is a Critical Safety Net
96/17/90
Employer Coverage Reduced, Medicaid Coverage Increased
11:14
80%
Employer Coverage
66%
Medicaid Coverage
C202 401 7321
59%
Percent of Coverage of Under 65 Population
60%
40%
ASPE/HP SHH
20%
14%
9%
0%
1989
1994
Source: HCI A. Office 111 the Actor, .11. 101.00 hisblub- PMS
PU4 AS619B
017/018
41
Medicaid Population and Inflation Growth
CBO Projected Annual Increases 1996-2002
All Beneficiaries
12%
06/21/95 11:14 6202 401 7321
10%
Percentage Increase
8%
6%
House Block Grant
HHS ASPE/HP
4%
2%
0%
1996
1997
1998
1999
2000
2001
2002
Population
CPI
MCPI
PU4 AS619D
018/018
JUN 09 '95 10:17AM GWU CHPR
P.
1
facsimile
TRANSMITTAL
to:
Jennifer Klein
fax #: 456-2878
re:
date:
pages:
g
pages, including cover sheet.
From the desk of
Julie Damell
Research Associate
Center for Health Policy Research
The George Washington University
2021 K Street, N.W., Suite 800
Washington, D.C. 20006
202/296.6922
Fax: 202/296.0025
JUN 09 '95 10:17AM GWU CHPR
P.2
ONE HUNDRED FOURTH CON
THOMAS J. BULEY, JR., VIRGINIA CHAIRMAN
CARLOS 1 MOORMEAD. CALIFORNIA,
JOHN D. DINGELL MICHIGAN
VICE CHAIRMAN
HENAY A. WAXMAN, CALIFORNIA
JACK FIELDS. TEXAS
COWARD J. MARKEY, MASSACHUSETTS
U.
house of Representatives
MICHAEL C. OXLEY. OHIO
W.J. "BILLY" TAUZIN, LOUISIANA
MICHAEL BILBAKIS. FLORIDA
RON WYDEN, OREGON
SCHAEFER. COLORADO
RALPH M, HALL, TEXAS
Committee on Commerce
JOE BARTON, TEXAS
JOHN BRYANT, TEXAS
, DENNIS HASTERT. ILLINOIS
RICK SOUCHER, VIRGINIA
UPTON, MICHIGAN
THOMAS J. MANTON. NEW YORK
Room 2125, Rapburn House Office Building
CLIFF STEARNS, FLORIDA
EDOLPHUS TOWNS. NEW YORK
BILL PAXON, NEW YORK
GERRY a. STUDDS. MASSACHUSETTS
PAUL E GILLMOR OMB
FRANK PALLONE, JA., NEW JERSEY
Mashington, DC 20515-6115
SCOTTL KLUG, WISCONSIN
GHERROD BROWN, OHIO
GARY A. FRANKS, CONNECTICUT
BLANCHE LAMBERT LINCOLN. ARKANSAS
JAMES C. GREENWOOD. PENNSYLVANIA
BART GOADON, TENNESSEE
MICHAEL D. CRAPO. IDAHO
EUZABETH FURSE, OREGON
CHRISTOPHER COX. CALIFORNIA
PETER DEUTSCH, FLORIDA
RICHARD BUAR. NORTH CAROLINA
BOBBY L. RUSH, ILLINDIS
BRIAN P. BILBRAY. CALIFORNIA
ANNA G. ESHOO, CALIFORNIA
en WHITFIELD, KENTUCKY
RON KLINE, PENNSYLVANIA
BANSKE, IOWA
BART STUPAK. MICHIGAN
DAN FRISA, NEW YORK
CHARLIE NORWOOD, GEORGIA
RICK WHITE, WASHINGTON
TOM COBUAN, OKLAHOMA
JAMES E. DERDERIAN. CHIEF OF STAFF
SUBCOMMITTEE ON HEALTH AND ENVIRONMENT
DATE:
Thursday, June 8, 1995
TIME:
9:30 a.m. in Room 2322 Rayburn House Office Building
SUBJECT:
Transformation of the Medicaid Program
Testimony will be given by:
The Honorable Jim Edgar
The Honorable Mike Leavitt
Governor
Governor
State of Illinois
State of Utah
The Honorable Don Sundquist
The Honorable Lawton Chiles
Governor
Governor
State of Tennessee
State of Florida
The Honorable John Engler
Governor
State of Michigan
JUN 09 '95 10:17AM GWU CHPR
P.3
Testimony Presented To
Health and Environment Subcommittee
Of the House Commerce Committee
Washington, D.C.
The Honorable Jim Edgar
Governor of Illinois
June 8, 1995
Mr. Chairman and members of this important subcommittee, I
greatly appreciate this opportunity to testify before you. You are
focusing on an issue of tremendous importance to you in the
Congress, to every Governor in this nation and to the people we all
serve.
We must boldly reform the way in which health care is
provided to low-income families and individuals. The Medicaid
system is outdated and out of control. Its skyrocketing price tag has
played havoc with state budgets across this nation for years and
years. And it will play havoc with bringing the federal budget into
balance unless we overhaul it. Not tinker with it. Not adjust it.
Incremental reform has been tried, and it's simply not enough. The
reform must be sweeping, and it must come quickly -- or we will
totally lose our capability to provide health services to the truly
needy, particularly poor children, at a manageable cost.
Medicaid now ranks as the third largest entitlement program
of the federal government. Only Social Security and Medicare top it.
Without sweeping reform, the federal government estimates that
Medicaid's annual cost will soar to $260 billion by the year 2000. In
other words, it will double over the next five to seven years. And the
growth in this program already has been mind-boggling, not to
mention budget-busting.
JUN 09 '95 10:17AM GWU CHPR
-2-
P.4
Consider this. Medicaid accounted for 10 percent of total
spending by state governments in 1987. Today it consumes twice
that. The federal government has micro-managed the program by
heaping mandate after mandate upon the states. It has told us
whom we must serve and dictated how we must provide the service
without regard to cost. In 1966, the first year of Medicaid, Illinois
spent $87 million on the program. This year, we will spend 64 times
that much or nearly $6 billion.
In Illinois, the tab for recent federal mandates alone tops $480
million this year. Because of those mandates and rising health care
costs, we increased spending for Medicaid between 1991 and 1995
more than we were able to boost funding for education, child welfare,
prisons, mental health and law enforcement combined. That's right,
more for Medicaid than for all of those other vital, worthwhile
programs and services combined.
There's something very wrong with this picture. It's not the
picture we wanted. It's the one that was forced upon us as we sought
to balance our state budget while living within our means. I would
have preferred to spend more on education, more on mental health,
more on law enforcement. But we had much more control and far
less federal government interference in setting budgets for education
and other services outside of the Medicaid realm.
JUN 09 '95 10:18AM GWU CHPR
-3-
P.5
The Governor of any large, industrial state could give you
comparable testimony. This is not a partisan matter. Republican
and Democratic governors alike have been grappling with this failed
system. I can't imagine how anyone can defend it. We need to bring
some fiscal sanity to the Medicaid program. And the only way we can
do it is through a total revamp -- a revamp that will allow us to
deliver care to the neediest of our citizens without bankrupting the
states and the federal government.
We need to cure Medicaid of its various financial and
bureaucratic ailments. And this dramatically different Congress can
produce the right medicine. I make this appeal as the Governor of
Illinois and as Chairman of the Medicaid Task Force of the
Republican Governors' Association: Take the bold steps that are
needed. Get the federal government out of the business of
micro-managing Medicaid. Let the states make Medicaid more
cost-effective. Lev us innovate without coming hat-in-hand to
Washington seeking waivers from the Medicaid mandates. It simply
has taken too long to get relief from entrenched, unelected and
unaccountable bureaucrats who fight change. And when reform has
come, it has been piecemeal at best.
Unfortunately, I have experienced first-hand the frustration of
trying to reform Medicaid through the waiver process. Last July I
signed into law legislation to create a managed care program in
Illinois. It was a product of a consensus that few believed could be
reached. Health care providers, advocates for Medicaid clients,
Republicans and Democrats in the Legislature -- all supported the
new law.
JUN 09 '95 10:18AM GWU CHPR
P.6
-4-
Of course, we needed a federal waiver to implement it. We
made the request in September. Since then, the Health Care
Financing Administration has delayed and delayed and delayed. The
bureaucrats ask questions. We rush to respond. And then we wait
and wait. The bureaucrats then ask more questions. More quick
responses. And still more waiting and waiting. But no action.
This stack of papers in front of me is made up of copies of every
single piece of paper required by HCFA concerning our waiver
request. Nine months of waiting. A pile of paperwork. And still no
waiver.
Millions of dollars that could have been saved to federal and
state taxpayers have not been saved. President Clinton felt the
frustration as a Governor. And he has told the governors time and
time again that he wants the waivers to come quickly. We were
listening. But the bureaucrats weren't. They would rather fiddle
and quibble.
Clearly, Medicaid as it exists today is a broken system. And
the cumbersome waiver process is only part of the problem. The
federal government has dictated benefits that are far more generous
than those normally provided to working men and women through
private insurance programs. In fact, we recently made a decision to
forego federal matching funds for some alcoholism and substance
abuse treatment programs because it would be more cost-effective for
us to manage the program under our rules.
JUN 09 '95 18AM GWU CHPR
P.7
-5-
Moreover, under the current Medicaid system, states cannot
limit access to health care providers as a means to negotiate the best
rates possible. In stark contrast, virtually every private insurer
limits the choice of providers under Preferred Provider arrangements
or Managed Care plans. The states should be able to operate like any
large insurer and negotiate the best rates with only the number of
providers necessary to deliver the service. And we should be able to
negotiate those rates free of the threat of lawsuits posed by the Boren
amendment.
The amendment was well-intentioned. It was to provide a
ceiling for provider rates. But the federal courts have interpreted it
as a floor and put states on the defensive, costing them hundreds of
millions of dollars. It is difficult to drive a hard bargain when the
providers believe they can steer the dispute to the federal courts.
We need to repeal the Boren amendment. We need to do that
and much more to reform Medicaid. Clearly, the taxpayers of this
nation cannot afford to pay the skyrocketing cost of a broken system.
And, therefore, it ultimately will fail the needy who rely on it for
benefits. Massive reform has been long overdue. It needs to happen
now. And we, as governors, look forward to working with you to
make it happen.
##
Growth in National Medicaid Spending
State
Federal
Billions of Dollars
$300
ПМЭ WHST:01 S6, 60 NOS
$263
$250
B239
CHPR
$210
$200
$195
$176
9158
$150
9147
8131
3110
$100
401
872
182
854
$49
$50
-341
345
$35
630
$30
$33
$25
$13
817
$19
$20
$16
$4
$4
se
$9
$9
$10
$2
82
$5
$0
1966
1970
1975
1980
1985
1990
1995 proj.
2000 proj.
Fiscal Year
Source: 1966-1994: Congressional Research Service, 1995-2000 CBO projections
P.8
Illinois Medicaid and AFDC Expenditures
6,000
JUN 09 '95 10:19AM GWU CHPR
Medicaid
5,000
4,000
$ in Millions
3,000
2,000
AFDC
1,000
0
FY68
FY69
FY70
FY71
FY72
FY73
FY74
FY75
FY76
FY77
FY78
FY79
FY80
FY81
FY82
FY83
FY84
FY85
FY86
FY87
FY88
FY89
FY90
FY91
FY92
FY93
FY94
FY95
P.9
TESTIMONY
of
Governor Lawton Chiles, Florida
before the
House Commerce Subcommittee
on
Health and the Environment
RESTRUCTURING MEDICAID
June 8, 1995
Remarks of
FLORIDA GOVERNOR LAWTON CHILES
House Commerce Subcommittee on Health and the Environment
June 8, 1995
Good Morning.
I want to thank the Subcommittee for inviting me to testify today.
I especially want to thank the Chairman, Mike Bilirakis. Florida is
fortunate to have Mike as well as Cliff Stearns and Peter Deutsch on this
Subcommittee looking out for our elderly, disabled and kids.
I spent 18 years here as a member of the United States Senate and I
have been involved in my share of budget-balancing fights. I know what it
is like to try to slay the deficit dragon. And, I especially appreciate the
tough job that lies ahead for this Committee as outlined by the budget
resolution.
As you well know, that budget resolution directs you to save $185
billion in the Medicaid program over 7 years. It also says that there will be
$350 billion worth of tax cuts. We should all be mindful of the real choices
we are making as we balance the budget.
On the surface, the concept of block grants sounds fine -- more
flexibility and more power shifted to the states. In fact, I've been talking
about flexibility for the Medicaid program since the beginning of my
administration. I submitted a flexibility proposal to the federal government
in August, 1992, outlining my recommendations for making the Medicaid
program more state friendly.
1
I also submitted and received approval last year for the largest
Medicaid waiver demonstration project in the country. That waiver, when
approved by the state legislature, frees us from cumbersome categorical
restrictions and eligibility requirements. It will allow us to serve more
people with less money. And in so doing, give the state and federal
governments real savings. More importantly, it will reduce the number of
uninsured in my state, keeping health care costs low for businesses,
particularly small businesses with less than 50 employees.
So I watched with great interest as I learned that the Congress was
looking to provide governors with more flexibility to implement their own
solutions to health care problems in their states.
I know that this is only the beginning of the process in designing the
new program, but I must say I am very disturbed by what some of my
friends, a few governors from other states, have been suggesting.
I understand that some of my fellow governors here today think that
this new program should lock-in the inefficiencies of the past program into
a baseline and apply a one-size-fits-all growth rate for each state. It
doesn't make a bit of sense that a state like Michigan or Wisconsin, with
lower population growth than states like Florida, Texas and California,
should receive the same growth rate under the cap. That kind of proposal
would pose a real danger to kids, the disabled and the elderly in Florida and
other growth states.
2
This is serious business. Medicaid is the vital life support system
for our most vulnerable citizens. While most think it's mainly for poor
welfare families, the fact is that two-thirds of Medicaid funds are spent on
the elderly and disabled.
That is why Medicaid costs soar in states like Florida -- the fastest
growing group of Medicaid recipients in Florida are people over 85. And
you all know that long-term care is the costliest of medical care. Middle-
class families in America have become familiar with Medicaid when they
seek care for parents who need home health or nursing home care.
And in the growth states, population increases across-the-board in
the program - among children, the elderly and the disabled - mean
continued pressure on state budgets.
Even under the most conservative scenarios, Florida's Medicaid
program is estimated to grow between 10 - 12% per year over the next
seven years. These increases reflect a growing and aging population.
Some of these characteristics are currently unique to Florida but many
states will be facing them in the future:
Florida has the largest percentage of elderly people in the nation;
The percentage of our uninsured is increasing. More than 20% of our
non-elderly citizens have no health insurance;
We have the second highest poverty rate (nearly 18%) among the
large states; AND
Florida is a destination not only for thousands of migrants from
other countries, but also from other states, particularly during
periods of recessions.
3
Many of these new arrivals require health, economic and other
financial assistance from the state. When you factor in the certainty
of recessions, the pressure on state budgets builds.
Medicaid caseloads, that is the number of people on the program,
typically peak about a year after a recession hits in Florida. In the year
following our last recession, in the early 1990s we saw caseload
increases of more than 25%.
No amount of state flexibility can fully remedy that situation.
Clearly, a proposal that ignores growth factors in the individual
states would be disastrous.
We need to be mindful of who we are affecting with these cuts.
America's needy people - north or south, east or west - are the
children living in poverty.
They are the elderly - many from middle-class homes - the disabled
and poor families.
Their daily struggle would be nearly impossible without some
help the critical safety net of the federal/state partnership.
What would a proposal to cap each state's Medicaid program at the
same rate mean for the needy in our states? If you look at this first chart
[see attached] in the first year of a block grant the differences would be
startling.
4
A needy person in Massachusetts would receive $4,800 - two-and-a-
-half times as much as a needy person in Florida or Illinois - less than
$2,100. And, a needy person in Wisconsin would receive $3,400 - while a
California needy person would receive $2,000. New York's per person in
poverty allocation would be more than double that of Texas'.
That level of inequity will never be acceptable to Florida or to other
growth states.
Again, Florida is willing to absorb a fair share of cuts - but, I cannot
let Florida families be treated with less regard than families in
Massachusetts, Wisconsin or anywhere.
Dollars must follow a path to needy people -- wherever they live.
When they move, the dollars should move, too.
I hope that this subcommittee would not endorse a proposal to let a
state use federal Medicaid dollars for non-health purposes - especially
when some states will be receiving far less than they'll need to meet the
needs of the elderly, disabled, and kids. You'll be sending federal funds for
the Medicaid program to one state that will have the ability to divert those
funds over to other programs while states like Florida, Texas and
California will be cutting thousands off our Medicaid program.
I think you've seen the results of that kind of gimmickry in the
Disproportionate Share program.
5
Shifting new responsibility to the states without a fair, equitable
shifting of resources is NOT any kind of "New Federalism." It is an
unwise attempt to balance the federal budget on the backs of high growth
states- and, even worse, on the backs of children, the elderly, the poor
and the sick. That's just plain wrong.
And that is the issue that should trouble us all - how this proposal
would disproportionately hurt the elderly, disabled and kids who live in
growth states.
I think this next chart [see attached] illustrates that point. Keep in
mind these are conservative estimates. If, and it is a very big IF, states
could, with all the flexibility that has been promised, keep spending
increases per recipient to no more than the inflation rate, we'd see
dramatic reductions in the number of people served for the growth states,
while some states would emerge relatively untouched.
Michigan would have to reduce the number of elderly, disabled,
pregnant women and kids by less than 4% but, Georgia would have to cut
over 15% or 234,000 people off the program.
New Jersey would have to reduce enrollment by a little more than
4%, while North Carolina would have to cut almost 20% off the rolls.
And, Wisconsin would see about a 5% reduction in people served,
while Florida's reduction would be over 15% or more than 430,000 of our
elderly, disabled, kids and pregnant women.
And as I said, these are conservative estimates. I think the
Governor of Wisconsin and Governor Engler (I'll let him speak for himself)
expect to get a windfall out of this.
6
That kind of inequity should not be allowed.
We need to look carefully at how this plan impacts the people in
states like Florida and other growth states. I know this Committee does
not want to endorse a proposal that:
Says the elderly in Florida are not valued as much as the elderly in
Michigan; or that
Says children in Texas are not worth as much as children in Wisconsin;
or that
Tells the poor and the sick in Virginia they won't receive the same level
of care as the poor and the sick in Massachusetts; or that
Says federal support won't accompany the children and families, the
elderly, the poor and the sick who move to Florida, or other growth
states.
I hope you will keep in mind three critical questions as you restructure
the Medicaid program.
1. Does the program treat citizens in each of our states fairly with an
equitable distribution formula, or does it favor some states over
others?
2. Does the program reward those states making a real commitment to
reform and improved management, or does it lock in the
inefficiencies of the past and turn back the clock on reform? AND
3. Does the program set and maintain an appropriate, basic national
standard for the care of children and others in need, or does it establish
a new underclass in America?
7
We need to be careful not to undo much of the gains we've made. I'm
proud of the fact that Florida leads the nation in reforming Medicaid -
We've cut the rate of growth in half and reduced the cost through
managed care of Medicaid;
We've imposed stringent price level controls on providers;
We've encouraged alternatives to expensive long term care; and
We've continued to use conservative standards for eligibility.
These approaches are creating significant savings today.
Florida already has more than 655,000 people or 40% of Medicaid
eligibles enrolled in managed care. By next year we expect to have over
one million of the state's 1.6 million eligibles enrolled. Only six other
states have a higher percentage of their Medicaid recipients enrolled in
managed care.
We also have stringent price level controls on all our providers. The
majority of providers receive no price level increases at all. Physicians,
home health providers, and therapists are all capped at their current levels
of reimbursement.
Similarly, Florida's payment level to hospitals, nursing homes and other
institutions is strictly controlled. For our hospital inpatient services, we
allow only the Medicare-approved rate of inflation.
We've also maintained a tight rein on eligibility. Our AFDC payment
standard is only 31% of the poverty level, ranking us 38th in the nation. We
provide few optional services to the standard program.
We have done much to control costs, eligibility, and benefits. And
we've saved the state and federal government money while doing so.
8
From 1991 to 1992, Florida's average spending per recipient actually
declined 3% while there was a nearly 8% increase nationally. Our cost per
recipient was under $2,400 in 1993, that ranked us 44th in the nation.
But under the approach offered by some of my colleagues, we get
penalized for these cost-savings efforts. Our base year for the block grant
reflects the savings we've generated. States that have done NOTHING
start out at a higher base. And, as they follow Florida with reforms, they'll
get another windfall.
Florida stands ready to share in the cuts -- and we have already gone a
long way to reduce our Medicaid costs. But, I will not stand by and let
other governors, who are looking to catch a windfall, speak for my state
and other growth states.
If they are so intent on having the rest of us sacrifice to balance the
budget, let them participate in the sacrifice, too.
If Medicaid needs to be reduced by 20 percent to meet the goals, let
every state receive the same level of cut.
Now, I think the overall level of cut is too high. And I think we'll have a
disagreement over that. But, if you do need to cut $185 billion out of this
program you should at least do it equitably.
I have a proposal to distribute these cuts fairly. It requires sacrifice for
all states -- including the low-growth states. It's a plan that would apply
the cut fairly to all states.
For years, Congress has been told by the General Accounting Office
that funds in the Medicaid program are not targeted to areas of true need.
9
The dollars, very simply, should go where the needy live. As the
Congress looks at capping the program, it should account for the
differences in population growth, poverty, uninsured rates and the
percentage of elderly and disabled in each state. I am not alone in sharing
that view. Governor Wilson of California, Governor Symington of Arizona
and others have expressed strong concerns about a block grant formula
that does not take these factors into account.
The United States was founded upon the simple but unwavering belief
that "all people are created equal." That basic principle is undermined --
and on the verge of being abandoned -- through a block grant proposal that
values people differently.
Let me end by putting it simply: The debate in Congress should not be
about developing a Michigan block grant, a Massachusetts block grant or
a Florida block grant.
We should be talking, instead, about a true federal-state partnership for
health care
With a true federal-state partnership, a child, or a family in Florida, is
worth as much as a child and a family anywhere else in the USA.
Any proposal leaving Washington must recognize that truth.
I want a program that enables me to address the particular needs and
growth of Florida.
I want a program that allows me to continue the reforms that show
great promise for care -- as well as savings.
A true federal-state partnership for health care is one that has flexibility --
but it also recognizes the federal government's responsibility.
10
Richard Nixon championed this approach as much as Ronald Reagan.
Both argued that the federal government must share the fiscal burden and
ensure equal treatment of those in need.
Florida and other growth states are willing to share the load. But, we
want the federal government to cooperate -- the way a partner should.
Thank you.
###
11
MICHIGAN
NEW JERSEY
WISCONSIN
U.S.AVERAGE
GEORGIA
FLORIDA
VIRGINIA
N. CAROLINA
0%
55,000
46,500
29,800
233,800
432,000
145,100
308,700
PEOPLE
PEOPLE
PEOPLE
PEOPLE
PEOPLE
PEOPLE
PEOPLE
2%
CUT
CUT
CUT
CUT
CUT
CUT
CUT
3.8%
4%
-4.3%
5.1%
6%
PERCENT OF PEOPLE CUT FROM PROGRAM
8%
8.8%
10%
12%
PEOPLE CUT OFF THE
14%
MEDICAID PROGRAM IN
2002 UNDER THE HOUSE
15.4%
15.4%
15.6%
16%
PROPOSAL
18%
SELECTED STATES
19.6%
20%
SOURCE: Kaiser Commission on the Future of Medicaid.
5,000
FEDERAL FUNDS PER PERSON IN
$4,912
$4,797
POVERTY UNDERA MEDICAID BLOCK
4,500
GRANT PROPOSAL WITH AN
4,000
AVERAGE 5% CAP.
3,500
FFY 1996
$3,440
FUNDS PER PERSON
3,000
$2,837
2,500
2,000
$2,186
$2,086
$2,044
$2,004
1,500
1,000
500
0
NEWYORK MASSACHUSETTS WISCONSIN
U.S.AVERAGE
TEXAS
ILLINOIS
FLORIDA
CALIFORNIA
SOURCE: Urban Institute.
JUN 09 '95 10:51AM GWU CHPR
P.1
facsimile
TRANSMITTAL
to:
Jennifer Klein
fax #: 456-2878
re:
date:
pages: 18
pages, including cover sheet.
1 was able to download testimony from Govs.
Chiles, Leavitt, and Engler from
Legi-slate. Missing was Don Sundquists
testimony.
1 called the Commerce Committee. The
next hearing scheduled on Medicaid
is on June 15th at 10:30 a.m. in
2322 RHOB.
From the desk of.
Julie Damell
Research Associate
Center for Health Policy Research
The George Washington University
2021 K Street, N.W., Suite 800
Washington, D.C. 20006
202/296.6922
Fax: 202/296.0025
JUN 09 '95 10:51AM GWU CHPR
P.2
1
LEGI-SLATE Report for the 104th Congress
Fri, June 9, 1995 10:3 1am (EST)
- Thursday, June 8, 1995
House Health & Environment Subcmte Hearing: Governor Lawton Chiles
of Florida - Prepared Remarks
Transcript ID: 1201314 (319 lines)
PREPARED TESTIMONY OF
GOVERNOR LAWTON CHILES,
FLORIDA
BEFORE THE HOUSE COMMERCE SUBCOMMITTEE ON
HEALTH AND THE ENVIRONMENT
RESTRUCTURING MEDICAID
THURSDAY, JUNE 8, 1995
Remarks of
FLORIDA GOVERNOR LAWTON CHILES
House Commerce Subcommittee on Health and the Environment June 8, 1995
Good Morning.
I want to thank the Subcommittee for inviting me to testify today.
I especially want to thank the Chairman, Mike Bilirakis.
Florida is fortunate to have Mike as well as Cliff Stearns and Peter
Deutsch on this Subcommittee looking out for our elderly, disabled and
kids.
I spent 18 years here as a member of the United States Senate
and I have been involved in my share of budget-balancing fights. I
know what it is like to try to slay the deficit dragon. And, I
especially appreciate the tough job that lies ahead for this Committee
as outlined by the budget resolution.
As you well know, that budget resolution directs you to save
$185 billion in the Medicaid program over 7 years. It also says that
there will be $350 billion worth of tax cuts. We should all be mindful
of the real choices we are making as we balance the budget.
On the surface, the concept of block grants sounds fine -- more
JUN 09 '95 10:52AM GWU CHPR
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2
flexibility and more power shifted to the states. In fact, I've been
talking about flexibility for the Medicaid program since the beginning
of my administration. I submitted a flexibility proposal to the
federal government in August, 1992, outlining my recommendations for
making the Medicaid program more state friendly.
I also
submitted and received approval last year for the largest Medicaid
waiver demonstration project in the country. That waiver, when
approved by the state legislature, frees us from cumbersome
categorical restrictions and eligibility requirements. It will allow
us to serve more people with less money. And in so doing, give the
state and federal governments real savings. More importantly, it will
reduce the number of uninsured in my state, keeping health care costs
low for businesses, particularly small businesses with less than 50
employees.
So I watched with great interest as I learned that the Congress
was looking to provide governors with more flexibility to implement
their own solutions to health care problems in their states.
I know that this is only the beginning of the process in
designing the new program, but I must say I am very disturbed by what
some of my friends, a few governors from other states, have been
suggesting.
I understand that some of my fellow governors here today think
that this new program should lock-in the inefficiencies of the past
program into a baseline and apply a one-size-fits-all growth rate for
each state. It doesn't make a bit of sense that a state like Michigan
or Wisconsin, with lower population growth than states like Florida,
Texas and California, should receive the same growth rate under the
cap. That kind of proposal would pose a real danger to kids, the
disabled and the elderly in Florida and other growth states.
This is serious business. Medicaid is the vital life support system
for our most vulnerable citizens. While most think it's mainly for
poor welfare families, the fact is that two-thirds of Medicaid funds
are spent on the elderly and disabled.
That is why Medicaid costs soar in states like Florida -- the
fastest growing group of Medicaid recipients in Florida are people
over 85. And you all know that long-term care is the costliest of
medical care. Middleclass families in America have become familiar
with Medicaid when they seek care for parents who need home health or
nursing home care.
JUN 09 '95 10:52AM GWU CHPR
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3
And in the growth states, population increases across-the-board
in the program - among children, the elderly and the disabled - mean
continued pressure on state budgets.
Even under the most conservative scenarios, Florida's Medicaid
program is estimated to grow between 10 - 12% per year over the next
seven years. These increases reflect a growing and aging population.
Some of these characteristics are currently unique to Florida but many
states will be facing them in the future:
0 Florida has the largest percentage of elderly people in the
nation; The percentage of our uninsured is increasing. More than 20%
of our non-elderly citizens have no health insurance;
o We have the second highest poverty rate (nearly 18%) among the
large states; AND
Florida is a destination not only for thousands of migrants from other
countries, but also from other states, particularly during periods of
recessions. Many of these new arrivals require health, economic and
other financial assistance from the state. When you factor in the
certainty of recessions, the pressure on state budgets builds.
Medicaid caseloads, that is the number of people on the
program, typically peak about a year after a recession hits in
Florida. In the year following our last recession, in the early 1990s
we saw caseload increases of more than 25%.
No amount of state flexibility can fully remedy that situation.
Clearly, a proposal that ignores growth factors in the
individual states would be disastrous.
We need to be mindful of who we are affecting with these cuts.
America's needy people - north or south, east or west - are the
children living in poverty.
They are the elderly . many from middle-class homes - the
disabled and poor families.
Their daily struggle would be nearly impossible without some
help the critical safety net of the federal/state partnership.
What would a proposal to cap each state's Medicaid program at
the same rate mean for the needy in our states? If you look at this
first chart [see attached] in the first year of a block grant the
JUN 09 '95 10 52AM GWU CHPR
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4
differences would be startling.
A needy person in Massachusetts
would receive $4,800 - two-and-a-half times as much as a needy person
in Florida or Illinois - less than $2,100. And, a needy person in
Wisconsin would receive $3,400 . while a California needy person would
receive $2,000. New York's per person in poverty allocation would be
more than double that of Texas'.
That level of inequity will never be acceptable to Florida or
to other growth states.
Again, Florida is willing to absorb a fair share of cuts --
but, I cannot let Florida families be treated with less regard than
families in Massachusetts, Wisconsin or anywhere.
Dollars must follow a path to needy people -- wherever they
live. When they move, the dollars should move, too.
I hope that this subcommittee would not endorse a proposal to
let a state use federal Medicaid dollars for non-health purposes -
especially when some states will be receiving far less than they'll
need to meet the needs of the elderly, disabled, and kids. You'll be
sending federal funds for the Medicaid program to one state that will
have the ability to divert those funds over to other programs while
states like Florida, Texas and California will be cutting thousands
off our Medicaid program.
I think you've seen the results of that kind of gimmickry in
the Disproportionate Share program.
Shifting new responsibility to the states without a fair,
equitable shifting of resources is NOT any kind of "New Federalism.
" It is an unwise attempt to balance the federal budget on the backs
of high growth states- and, even worse, on the backs of children, the
elderly, the poor and the sick. That's just plain wrong.
And that is the issue that should trouble us all how this
proposal would disproportionately hurt the elderly, disabled and kids
who live in growth states.
I think this next chart [see attached] illustrates that point.
Keep in mind these are conservative estimates. If, and it is a very
big IF, states could, with all the flexibility that has been promised,
JUN 09 '95 53AM GWU CHPR
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5
keep spending increases per recipient to no more than the inflation
rate, we'd see dramatic reductions in the number of people served for
the growth states, while some states would emerge relatively
untouched.
Michigan would have to reduce the number of elderly, disabled,
pregnant women and kids by less than 4% but, Georgia would have to cut
over 15% or 234,000 people off the program.
New Jersey would have to reduce enrollment by a little more
than 4%, while North Carolina would have to cut almost 20% off the
rolls.
And, Wisconsin would see about a 5% reduction in people served,
while Florida's reduction would be over 15% or more than 430,000 of
our elderly, disabled, kids and pregnant women.
And as I said, these are conservative estimates. I think the
Governor of Wisconsin and Governor Engler (1'11 let him speak for
himself) expect to get a windfall out of this. That kind of inequity
should not be allowed.
We need to look carefully at how this plan impacts the people
in states like Florida and other growth states. I know this Committee
does not want to endorse a proposal that:
o Says the elderly in Florida are not valued as much as the elderly
in Michigan; or that
Says children in Texas are not worth as much as children in Wisconsin;
or that
o Tells the poor and the sick in Virginia they won't receive the same
level of care as the poor and the sick in Massachusetts; or that
o Says federal support won't accompany the children and families, the
elderly, the poor and the sick who move to Florida, or other growth
states.
I hope you will keep in mind three critical questions as you
restructure the Medicaid program.
1. Does the program treat citizens in each of our states fairly with
an equitable distribution formula, or does it favor some states over
others?
2. Does the program reward those states making a real commitment to
JUN 09 '95 10:53AM GWU CHPR
P.7
6
reform and improved management, or does it lock in the inefficiencies
of the past and turn back the clock on reform? AND
3. Does the program set and maintain an appropriate, basic national
standard for the care of children and others in need, or does it
establish a new underclass in America? We need to be careful not
to undo much of the gains we've made. I'm proud of the fact that
Florida leads the nation in reforming Medicaid -
o We've cut the rate of growth in half and reduced the cost through
managed care of Medicaid;
We've imposed stringent price level controls on providers;
o We've encouraged alternatives to expensive long term care; and
We've continued to use conservative standards for eligibility.
These approaches are creating significant savings today.
Florida already has more than 655,000 people or 40% of Medicaid
eligibles enrolled in managed care. By next year we expect to have
over one million of the state's 1.6 million eligibles enrolled. Only
six other states have a higher percentage of their Medicaid recipients
enrolled in managed care.
We also have stringent price level controls on all our providers.
The majority of providers receive no price level increases at all.
Physicians, home health providers, and therapists are all capped at
their current levels of reimbursement.
Similarly, Florida's payment level to hospitals, nursing homes and
other institutions is strictly controlled. For our hospital inpatient
services, we allow only the Medicare-approved rate of inflation.
We've also maintained a tight rein on eligibility. Our AFDC
payment standard is only 31% of the poverty level, ranking us 38th in
the nation. We provide few optional services to the standard program.
We have done much to control costs, eligibility, and benefits. And
we've saved the state and federal government money while doing so.From
1991 to 1992, Florida's average spending per recipient actually
declined 3% while there was a nearly 8% increase nationally. Our cost
per recipient was under $2,400 in 1993, that ranked us 44th in the
nation.
But under the approach offered by some of my colleagues, we get
penalized for these cost-savings efforts. Our base year for the block
JUN 09 '95 10:54AM GWU CHPR
P.8
7
grant reflects the savings we've generated. States that have done
NOTHING start out at a higher base. And, as they follow Florida with
reforms, they'll get another windfall.
Florida stands ready to share in the cuts -- and we have already
gone a long way to reduce our Medicaid costs. But, I will not stand by
and let other governors, who are looking to catch a windfall, speak
for my state and other growth states.
If they are so intent on having the rest of us sacrifice to
balance the budget, let them participate in the sacrifice, too.
If Medicaid needs to be reduced by 20 percent to meet the goals,
let every state receive the same level of cut.
Now, I think the overall level of cut is too high. And I think
we'll have a disagreement over that. But, if you do need to cut $185
billion out of this program you should at least do it equitably.
I have a proposal to distribute these cuts fairly. It requires
sacrifice for all states -- including the low-growth states. It's a
plan that would apply the cut fairly to all states.
For years, Congress has been told by the General Accounting Office
that funds in the Medicaid program are not targeted to areas of true
need. The dollars, very simply, should go where the needy live. As
the Congress looks at capping the program, it should account for the
differences in population growth, poverty, uninsured rates and the
percentage of elderly and disabled in each state. I am not alone in
sharing that view. Governor Wilson of California, Governor Symington
of Arizona and others have expressed strong concerns about a block
grant formula that does not take these factors into account.
The United States was founded upon the simple but unwavering
belief that "all people are created equal." That basic principle is
undermined -and on the verge of being abandoned - through a block
grant proposal that values people differently,
Let me end by putting it simply: The debate in Congress should not
be about developing a Michigan block grant, a Massachusetts block
grant or a Florida block grant.
We should be talking, instead, about a true federal-state
JUN 09 '95 10:54AM GWU CHPR
P.9
8
partnership for health care
With a true federal-state partnership, a child, or a family in
Florida, is
worth as much as a child and a family anywhere else in the USA. Any
proposal leaving Washington must recognize that truth.
I want a program that enables me to address the particular needs
and growth of Florida.
I want a program that allows me to continue the reforms that show
great promise for Care -- as well as savings.
A true federal-state partnership for health care is one that has
flexibility -but it also recognizes the federal government's
responsibility. Richard Nixon championed this approach as much as
Ronald Reagan. Both argued that the federal government must share the
fiscal burden and ensure equal treatment of those in need.
Florida and other growth states are willing to share the load.
But, we want the federal government to cooperate -- the way a partner
should.
Thank you.
END
JUN 09 '95 10:54AM GWU CHPR
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9
No. 2 of 3
- Thursday, June 8, 1995
House Health & Environment Subcmte Hearing: Gov. John Engler of
Michigan - Prepared Remarks
Transcript ID: 1201322 (148 lines)
PREPARED TESTIMONY OF
JOHN ENGLER,
GOVERNOR
STATE OF MICHIGAN
BEFORE THE HOUSE COMMERCE COMMITTEE
HEALTH AND ENVIRONMENT SUBCOMMITTEE
THURSDAY, JUNE 8, 1995
Michigan Governor John Engler
Testimony Before the U.S. House Commerce Committee's Subcommittee on
Health & Environment
Chairman Michael Bilirakis (R-FL.)
Thursday, June 8, 1995
Thank you, Mr. Chairman.
I am honored to join my colleagues and to have this opportunity
to give you a perspective on Medicaid from Michigan. First, let me say
that we in the Great Lakes State are impressed by efforts of the House
and Senate leadership to rein in federal spending and balance the
budget. It's long overdue and we support that goal.
Runaway spending is not only breaking the federal budget; it is
placing an enormous burden on state budgets. This Congress has shown
great courage in the face of intense opposition from defenders of the
status quo. Every change is subject to attacks and distortion. For
example, when the House correctly sought to give states control over
programs like school lunches - A decision I strongly support opponents
were quick to decry the decision and hold press conferences in school
lunchrooms asserting that school kids would go hungry as a result of
the action of the House. Certainly, opponents of Medicaid reform will
not hesitate to use similar scare tactics. We cannot allow their fog
to obscure the objective.
JUN 09 '95 10:55AM GWU CHPR
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10
Medicaid, today, is the biggest single burden on our budgets -
and I don't think I'm alone in saying that no state can afford it any
more - not in its present form. Considered a milestone when it began
in the heyday of the Great Society, Medicaid costs are now a
millstone. In Michigan, 1 of every 5 dollars in our general fund - 20%
- is required to fund Medicaid. And because past Congresses have
saddled us with a host of mandates, these costs just keep climbing.
And, on top of the mandates, the Health Care Financing Administration
(HCFA) keep changing their rules and that means costs just keep
climbing even higher. Bottom line: This is one very expensive program.
Let me reiterate: I fully support the need to rein in federal
spending. But simply to reduce federal funds, while doing nothing to
relieve states of the burden of unfunded mandates and program
micromanagement, will hurt our ability to provide the poor with
quality health care.
This chart shows just how much direction we already get from
Washington it is quite enough, thank you! It is so much direction, in
fact, that an average frontline worker spends 80% of his/her time
doing paperwork and only 20% solving the family problems that created
the dependency in the first place.
The most recent GAO report
shows that current Medicaid policy is bankrupt - that it's "the sick
man" of the federal budget and in need of emergency treatment. Given
the budget resolutions passed by the House and Senate, it is clear
that the surgery will come this year.
As I see it, you have the opportunity to pursue one of two
strategies. One strategy could be to simply reduce federal funding for
Medicaid and keep all current rules and regulations. The other
strategy would be to fundamentally change the nature of the program by
turning it into a block grant. Either strategy will accomplish your
goal of reducing the federal budget.
But only the block grant strategy holds any hope that our most
vulnerable citizens will continue to receive the health care they
need. One thing is absolutely clear: We cannot stay the course.
Creeping micromanagement has entangled us in a briarpatch of
perverse incentives that are costing taxpayers dearly. One example ,
and this is a direct result of the Boren Amendment: In 1989, Michigan
Medicaid costs in a nursing facility were $35 a day. In 1994, they
were up to $,57 a day. We are paying a lot more money, but our
JUN 09 '95 10:55AM GWU CHPR
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11
patients are not getting a lot more care. I find myself asking: What's
wrong with this picture? Can we do no better than this?
The Medicaid program, as it is now structured, will increase
by at least 10 percent a year - three times faster than the state
revenues that support it and considerably faster than federal
revenues, as well. If current trends continued, Medicaid would grow
from one-fifth of my state budget today, to one-third by the year
2002. The Michigan budget would be strained to the breaking point by
top heavy Medicaid burdens.
I applaud this committee for considering reforms that will
change the financing and structure of Medicaid so that states can take
full responsibility for, and control of, the program. Speaking for
Michigan, I welcome the opportunity to design Medicaid to reflect the
values and priorities in our state, and to provide for our most
vulnerable citizens who need health care services. However, I am aware
that some of the proposals in Congress, aided and abetted by status
quo lobby groups, would continue to tie our hands and micromanage
Medicaid from inside Washington. I think this would be a serious
mistake - for at least two reasons.
First, any provisions that require "set-asides" for specific
populations are unnecessary. No child, no elderly person, no
individual with disabilities is going to be abandoned when Michigan
takes control of its Medicaid program.
Second, any financing
mechanism that continues a federal matching formula is not
acceptable." I repeat: not acceptable. The matching-rate approach will
only keep the current system hobbling along and burden state and
federal budgets with a host of perverse incentives. We can do better.
The type of block grant I am calling for would fix Medicaid and reform
the system.
A Medicaid block grant with no strings attached would give
states flexibility to be innovative while maintaining necessary
services. Flexibility, coupled with growth rates projected in the
budget resolutions, create a win-win situation for both beneficiaries
and taxpayers. Another benefit of flexibility will be the acceleration
of reforms as today's cumbersome waiver process is eliminated.
This committee knows, and I know, that one of the biggest
barriers to getting off welfare is access to health care. In March
1994, I submitted a waiver request to HCFA that would guarantee access
JUN 09 '95 10:56AM GWU CHPR
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12
to health care for anyone who leaves welfare for a job. Over one year
later, I am still waiting for an answer. With block grants, I would
have already implemented this proposal, and more people would now be
independent.
The only condition that should accompany a block grant is that
states use the money to finance health care for low-income citizens.
Then I invite the Congress to judge us by the one criterion that
counts - performance. Michigan, I should point out, already has a
strong track record. Because of our "Healthy Kids" initiative,
Medicaid provides one of every four children in Michigan with health
care coverage.
Even with today's constraints, our managed care system is a
national leader that covers 82 percent of our Medicaid recipients. I'm
proud of our achievements, and excited at the prospect of being able
to do so much more.
Thank You.
END
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No. 3 of 3
- Thursday, June 8, 1995
House Health & Environment Subcrite Hearing: Governor Michael Leavitt
of Utah - Prepared Remarks
Transcript ID: 1201325 (181 lines)
PREPARED STATEMENT OF
GOVERNOR MICHAEL O. LEAVITT
UTAH
BEFORE THE
HOUSE COMMERCE COMMITTEE
SUBCOMMITTEE ON HEALTH AND ENVIRONMENT
U.S. HOUSE OF REPRESENTATIVES
ON STATE PERSPECTIVES ON MEDICAID REFORM
THURSDAY, JUNE 8, 1995
It is a privilege for me to come before this
distinguished body to address two very important questions pertaining
to your Medicaid deliberations. First, what is the best strategy for
maximizing Medicaid's critical role in providing access to health
care? Second, how do we slow the rate of growth in Medicaid
expenditures without simply transferring this unsustainable liability
to the states?
States have been charged with the primary responsibility to administer
Medicaid since its inception in 1965. During the last thirty years, we
have moved responsibly to look for ways to achieve both program and
administrative cost savings, while assuring delivery of quality health
care. While each state has met with varying degrees of success in
achieving this goal, the evidence is quite clear that taken as a
whole, the states have done a good job of serving the country's poor,
unborn, disabled, aged, blind and medically at-risk citizens. This has
been done in the face of heavy federal regulation and federal
restrictions that have severely hampered state efforts.
In Utah specifically, Medicaid serves 1 out of every 8 Utahns each
year. The philosophy of the State has been to foster market place
competition and individual recipient financial responsibility to the
extent permitted by federal law. This has allowed us to achieve one of
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the most efficient and actuarially sound Medicaid systems in the
country. In fact, sound management of Medicaid has contributed in
large measure to the State being consistently selected as one of
America's best managed states by Financial World. Utah has been
employed competitive purchasing of major Medicaid services since 1981.
We first included HMO products in the Medicaid program in 1982. Along
this vein, the State long ago abandoned inflationary cost based
reimbursement systems except where still required by present Medicaid
federal law.
Shortly after taking office in 1993, I joined with my Utah legislative
colleagues in a non-partisan initiative that would span 8 years of
comprehensive, incremental health care reform that would ultimately
make available affordable health care to all Utahns by the year 2000.
This bold yet down to earth strategy is set forth in a document titled
HEALTHPRINT - A BLUEPRINT FOR MARKET BASED REFORM IN UTAH. A major
component of HEALTHPRINT is expansion of Medicaid to more Utahns
living at or near poverty using no more federal dollars than would
actuarially have been spent under the traditional Medicaid program.
Under the current system, the Medicaid piece of HEALTHPRINT would take
the form of an 1115 Waiver. Unfortunately, as a new governor and as a
new student navigating the complex Medicaid federal approval
processes, I have discovered that this country's governors do not have
the authority needed to reinvent how this vital health care program
can best meet the needs of its citizenry with the limited federal and
state dollars that will be available in the future. Increasingly,
federal mandates, court decisions and regulations issued by federal
bureaucrats have tied the states' hands when it comes to tailoring a
Medicaid program that fits within the budgetary and health care
environments of the individual states.
The Medicaid program has evolved into a myriad of sub-programs each
with its own set of individual entitlement rules. Administrative
flexibility and simplicity has given way to unsurpassed administrative
complexity and insensitivity to serving the public efficiently. In
addition, federal administration of the Medicaid program through its
various regional offices is not proceeding quickly enough to recognize
the dramatic changes occurring in our health care markets. As a
consequence, states with aggressive health reform efforts are stymied
by out-of-date federal regulations and waiver application processes
that not only fail to respond to the opportunities presenting
themselves to states today, but establish artificial rules and
conditions for granting waivers that have absolutely no bearing on the
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realities of the market place.
While there are many, many examples of how federal administration of
Medicaid has failed to meet the needs of the states, its citizens and
this country, I would like to recap just a few. First, we have the
outdated Boren requirements that tie state reimbursement systems to
obsolete cost-based methodologies rather than the competitive market
trends evolving so rapidly in most of our markets. This will continue
to cost the states and the federal government billions of dollars each
year.
Next, we have the so called list of "optional" services that each
state can supposedly add or subtract from its benefit package to stay
within budgetary constraints. Unfortunately, federal law and
regulation have restricted states from removing optional services from
so many special sub-populations of Medicaid, that by the time all
these protected eligibility groups are eliminated there is very little
cost savings left to realize.
The current system prohibits states willing to make hard choices. An
example. Currently, a Medicaid recipient has benefits that are 130% of
the average worker in the private sector in our state. After expensive
deliberation and discussion with low income advocates, we decided that
in Utah we would rather have everybody have basic health care than
fewer have the best health plan in the state. We proposed to reduce
the benefit level from 130% of the average private sector plan to
approximately 118%, using the savings to provide coverage to people
who currently have no coverage. What we believe to be a common sense
decision, was not allowed under the existing system. There may be
those of you who still disagree with our decision, but if we are going
to meet our objective of providing access to basic quality health care
to all Utahns, we need the ability to make those hard decisions.
Another example, federal law and regulation has so tightly limited the
use of copayments and other forms of financial responsibility within
the Medicaid population that any strategies to save funds by
sensitizing these participants to the consequences of health care
utilization decisions is lost. Reasonable cost sharing requirements
must be injected into the purchase of health care by a significant
part of the Medicaid population, particularly adults, if we hope to
gain control of this program and assure its continued availability to
future generations.
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In the administrative area, the explicit and expensive requirements
imposed by federal law and regulation on operation of state Medicaid
agencies inhibits redesign of the basic program to transfer greater
responsibility to private health plans where they can be more cost-
efficiently borne, and the basic responsibilities of states redefined
around rate negotiation, health plan enrollment, quality of care
monitoring and reporting, and health data collection and analysis.
There will shortly be no need for states to maintain expensive,
complex Medicaid Management Information Systems. In fact, the State of
Utah is presently operating on a trial basis a single, comprehensive
medical billing system that electronically processes claims from all
provider types. UHIN, the Utah Health Information Network, collects
claims on behalf of all public and private insuring entities in Utah.
UHIN is a non-profit organization that was formed voluntarily to
address the growing concern around duplicate administrative expenses
incurred by multiple insurers. UHIN receives claims either manually or
electronically, processes them for payment against the requirements of
each liable insurer, handles automatically the coordination of
benefits where more than one insurer is involved, applies limitations
and other edits against the services received, and directs a payment
remittance statement back to the provider advising of the action taken
on the claim, and the parties from whom payment will be received. All
organizations that came together to form UHIN committed in the
articles of incorporation to return all administrative savings that
are derived from this public/private venture to the consumer. UHIN is
just one example of how the states are moving aggressively to
implement real health care reform that will stand the test of time.
The time for action is now, and the place for this action is the
individual states.
As Congress looks toward limiting the federal funds available to the
Medicaid program, it is vital the states be given the tools necessary
to craft a program that is not only efficient, but which continues to
provide at-risk populations good quality medical care. In my opinion,
the most important tool the states must have to accomplish this is
flexibility.
Franklin D. Roosevelt said "The future lies with those wise political
leaders who realize that the great public is interested more in
government than in politics". As the nation's governors, each of us
has the first line responsibility to understand our communities needs
and the values based on which those needs must be met. I hope we have
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the courage and the wisdom to give states the needed flexibility to
make critical decisions relative to managing Medicaid within a
mutually acceptable funding agreement. This is the only path I see
that will enable us to both balance the federal budget and preserve
this important program.
Again, it has been my pleasure and privilege to speak to you today,
and at this time I would be very happy to speak to any specific
questions or concerns you may have.
END