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May
9

Medicaid, Round Five

While state legislatures and governors are moving to make significant changes in Medicaid programs, a coalition including AARP, pharmaceutical manufacturers, labor unions, pediatricians and lobbying groups are preparing to do battle for their constituents. The impetus behind this nation-wide movement is the agreement between the Bush Administration and Congress on a $10 billion cut in Federal contributions to Medicaid programs (state governments pay somewhat less than half of the costs of Medicaid, with the Federal government picking up the rest). With that historical decision now law, states have to figure out how best to implement the cuts.
Perhaps most telling, there appears to be consensus from politicians of all stripes that something has to be done. And, given the influence that states have over Medicaid decisions, we will likely see a broad array of possible solutions advanced by legislators. Options include:
— requirements for beneficiaries to share in costs through co-pays and deductibles
— cuts in reimbursement for certain providers, notably nursing homes
— “stripped-down” benefit packages, with different benefits for children, the disabled, elderly poor, and working poor
— negotiations with pharmaceutical manufacturers to reduce drug costs
— change Federal funding for long-term care to a “block grant”, whereby states receive a set amount of money and can make their own decisions as to how to allocate those funds.
This is a good thing. There is no question the US needs to address the exploding costs of Medicaid, and states are excellent “labs” to test various approaches. There is also no question this will be painful for some, with recipients, pharmas, nursing homes, and hospitals among the likely victims. But, we have no choice. Medicaid has grown significantly in recent years, primarily driven by increases in enrollment. Many of the new enrollees are the working poor; individuals who work for employers that do not offer health insurance or cannot afford the employee contribution towards the premium.
What does this mean for you?
This is getting as tiresome for me as it is for you, but prepare for cost-shifting as pharmas and providers seek to recoup lost income by increasing charges and utilization for commercial payers. Especially vulnerable are liability and auto insurers, as their “managed care” programs are in the dark ages.


Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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