While a significant overhaul of Medicaid is long overdue, the recent proposals fail to address one of the program's fundamental problems: the trifurcated nature of the program struggles to serve three very different needs.
The recently proposed rule could have included one of the many existing ideas to address this structural problem and strengthen Medicaid for future generations.
Medicaid was not the focus on of the ACA, but the law made major changes to Medicaid and has sent enrollment increasing. Last month, CMS released a proposed rule to make major changes to Medicaid, the first major change in 12 years. The proposed new rules affect a sweeping range of program goals, improvements in manage Medicaid operations, and alignment with other areas of healthcare insurance operations.
This major reform would have been the perfect time to address a long-term structural defect in the program, whose consequences are increasingly acute: the use of a single government program to address three very different goals and three different populations.
For most Americans, Medicaid is known as insurance for low-income families, typically with children. But there are two other groups insured by Medicaid: low-income disabled people who are not on Medicare and long-term nursing home care for the elderly poor.
While all of these do involve a means test, they are three very distinct populations with very different goals and problems to address. Too often, Medicaid has to take a program wide, least common denominator approach to policy or activities, because it cannot easily address policy for just one of these three sets.
Why is this a problem?
Consider the low-income disabled. They are 15 percent of the overall population of Medicaid but account for about half of the money spent. They need specialized services, different benefits and robust efforts to ensure that there is neither too many nor too few services delivered.
Within this 15 percent of the disabled Medicaid population is a subset that is especially expensive. Overall, five percent of Medicaid patients account for over half of Medicaid spending. Even within the disabled population, quality improvement and cost management are needed on a focused subset that accounts for the most significant part of the spending. Just as CMS has created a program focusing on dual-eligibles, where these high risk and high cost patients receive targeted efforts to improve quality and cost, a program focused on the disabled Medicaid population would be able to have a significant, targeted impact.
The elderly are another unique subset of current Medicaid programs. While nine percent of the Medicaid population are elderly, they account for 21 percent of Medicaid spending. Overall, Medicaid pays for almost half of all post-acute institutional and long term facility care in the entire U.S.
Among the remaining population (low-income families), children are a predominant part of the program. In December 2014, 29.1 million children were insured by Children Health Insurance Program--discussed below--and Medicaid. Consider a commercial health plan with 29.1 million children, but mixed in with a small number of other members who had extremely different and far more expensive clinical needs (the disabled and the elderly), and one can see why the aggregation of all these populations into a single program is a problem.
Children make up half of the Medicaid population but only account for 21 percent of the spend. This is not because insuring children is cheap, but rather it speaks more to what it costs to cover the other two populations.
This is squarely a public health issue. One out of every three American children is insured by Medicaid; when looking at children of color, it is an even higher rate. Their care is being funded by a system that struggles to afford the care needed by the disabled and the elderly, who are consuming far greater resources per person. For a variety of reasons relating to reimbursement rates and other factors, it can be difficult for Medicaid to get access to providers. If the non-elderly, non-disabled families in Medicaid (including children) were a separate program, it could focus on the better access and services needed specifically for the enormous portion of our children it insures. Instead, these children have to try to get services from providers who often have to limit their involvement in Medicaid. The children compete for funds that are all-to-easily consumed by the small number of disabled and elderly that are lumped into the same program.
Alternatives
It has been proposed that the able-bodied families in Medicaid (including their children) should be moved into the ACA-created subsidized commercial plans. This would also shift the Medicaid funding currently used for this population into the existing exchange-based subsidies, essentially allowing current Medicaid patients to get "free" insurance through the public exchanges. Such a change would combine three somewhat redundant current programs (Medicaid for the able-bodied, CHIP and Silver qualified health plans) into one existing program, reducing a significant administrative cost and combining very similar enrollees into a common insurance area that should deliver better access to care.
The remaining high cost patients could be put into one or two new Medicaid programs that focus on their specific needs.
Or, perhaps the low-income elderly nursing home care (really, all of the dual-eligibles) could be moved into Medicare only, where they probably belong. Medicare could offer additional services (or even purchase commercial supplemental insurance) for the low-income.
These are two of many ideas, but there is already a precedent for operating multiple programs. CHIP (which is alongside but separate from Medicaid) is an example of how more focused programs could operate in this same space. But, I am not suggesting that we should replicate bureaucracy by creating three new Medicaid programs from the current one.
Instead, imagine that Medicaid (as an insurer) was to have three insurance products, one for each of the three populations. Commercial insurance companies (including managed Medicaid companies) are very accustomed to operating multiple products like this very efficiently. With separate products, each population could have its own benefit structure, provider network and provider contracting rates. Care management, behavioral health outreach, long term shared services and other initiatives could be targeted on each product to maximum effect.
This does invite a series of policy arguments, such as: with limited resources, should we offer better benefits and provider rates for poor children than we do to the disabled? Under the current system, such policy choices are being made today as unintended consequences of the least common denominator approach to using a single set of rules to address three different populations in a single program.
The recently proposed rule could have included one of these or the many other proposals as part of the forthcoming Medicaid reform. Hopefully, it will not take another 12 years before this problem is structurally addressed.
Jay Sultan is principal strategy advisor at Edifecs.