healthsignals new york

Did the Feds just send New York a warning?

What's the relationship between this New York Times story, these GAO report summaries, particularly here (here's the full report) and a related summary here (PDF), and this NYS Health Department RFP?

Well, since everyone else is talking about it

Well, we've had our fun with Medicaid and Viagra. But I just know that if I don't repeat what everyone else is pointing to today that everybody will think I'm just out of it, namely that New York's State Comptroller, Alan Hevesi, has discovered that not only is Medicaid paying for Viagra and similar drugs, it's doing so for sexual offenders. There's been lots of news coverage, of course. As of this writing, there were already a few hundred links on Google News including the NY Daily News Free Viagra for Pervs, Newsday's Feds try to deny Viagra to sex offenders on Medicaid, and even the UK's Times, US government gives free Viagra to paedophiles.

Great catch, Alan. For you non-New Yorkers, he's a smart guy who, despite his properly serious public demeanor, is probably privately shaking his head on this one.

Couple of observations:

• Hevesi rather deftly tossed this issue to the Feds and they're the ones "scrambling" in most of the news coverage. I wouldn't want to be in Leavitt's office today.
• Hevesi's auditors found the problem by matching the Medicaid claims data they have with the listings of Level 3 Sex Offenders listed on the Division of Criminal Justice Services (DCJS) Sex Offender Registry. Linking Medicaid data with data from other sources is one of the things that's explicitly forbidden by the Department of Health for others who wish to use the Medicaid data.
• Apart from the taxpayer's money that's being used to pay for the drugs, how aware are the physicians who are prescribing of the backgrounds of these patients? If the physicians don't know, should they be and how might they be made aware? Physicians' first ethical obligations are to their patients. How does or should that influence the decision to prescribe in these cases? Are there any instances in which there is a medical justification for the prescription despite or even because of the patient's legal history?
• You just know that somebody is going to take this the next step and suggest that felons, or at least these felons should not be entitled to Medicaid. Let's not go there right now. Just deal with the issue at hand.

Now back to our regularly scheduled programming.

Medicaid cap followup 3

The Medicaid cap is not just a financial change, it portends an operational change. This is personally symbolized by the return to government service of Brian Wing.

Brian's the former Commissioner of Social Services and then after re-organization, OTDA. He left a while back to work in the private sector.

Brian's returned and has joined the Health Department, specifically the Office of Medicaid Management and his charge is to figure out how to move the Medicaid functions currently administered by localities to the State. This is the administrative/operational change that needs to accompany the cap on local financial responsibility.

That's a change long overdue. The first policy paper I ever had published, Barriers to Medicaid Reform, emphasized the dispersion of policy and administrative responsibility for Medicaid between different State agencies and different levels of government. That was in 1976. Well, we're finally making progress.

Brian's job will not be fun and it's won't be headlines sexy. But it will be important. Best wishes and welcome back.

Medicaid cap followup 2

Newsday has been running a series on Medicaid and I'll try to do a summary later, but this article (editorial?), calling for tightened local controls misses the point of the new Medicaid cap.

But New York City and the suburban counties do have some control over the cost of nonmedical home care and transportation to treatment sites. And, especially in the city and Nassau, they must do a better job at shaving expenses

With the cap in place, such small scale efforts won't make any difference.

Not to argue against local vigilance, but even under the old rules this argument is off base. Take a look at the attached graphic. Historically the big expenses have been fee-for-service hospital inpatient care and nursing home care. Even a small percentage increase generates big expenditure increases.

But the dramatic increases have come from pharmaceuticals and other supplies and from HMO premiums for Medicaid managed care (including Family Health Plus, which will now be entirely a State funding responsibility).

Transportation? Lost in the data haze.

Non medical home care? We assume Newsday is referring to Personal Care and those costs have been growing along with other home health expenses. But this is symbolic of how diffusion of administrative responsibility has not only weakened financial controls, it's distorted program administration. Counties have had much more influence over who gets home care and how much than they've had over institutional care for identical patients. So naturally, when seeking to control expenses anywhere they could, they've limited access to institutional alternatives, directly undermining the State's policy goals and probably their own long term financial interests.

So the Newsday opinion is out-of-date because they seem not to fully understand the implications of the cap and, even if the rules hadn't changed, offbase because they would have reinforced a distortion embedded in the old system.

Medicaid cap followup 1

Rick warns counties in New York about the similarities between the new cap on their shares of Medicaid costs and the Medicare "clawback." There are a couple of differences, one mechanical and one conceptual.

The mechanical difference is that the New York law requires an annual reconciliation. That involves a calculation of what the counties would have paid under the old system. If it's less than the cap, the State is supposed to write a check to the county for the difference. The conceptual difference is that the "clawback" is intended to offset a financial side effect of legislation whose primary purpose is not about the relationship between different levels of government, in this case providing pharmaceutical coverage for Medicare beneficiaries. In contrast, New York's new Medicaid cap is entirely about changing the financial relationship between different levels of government.

Not that, in a financial pinch, New York wouldn't change the rules again but there is a difference. Rick is right though. Remain vigilant. There are many ways in which to play this system. Does anyone doubt that the Department of Health is currently cranking out rate appeals so that the payments can be made this year in order to inflate the base upon which the cap is calculated?

Hope for slower Medicaid growth?

Why did I raise the possibility that Medicaid expenditure growth in New York might slow a bit? Take a look at the trendline. Note that while expenditures actually fell in the last quarter of 2001, the big spike began shortly afterward, after 9/11, when the eligibility standards were loosened considerably.

But note also, that that in 2004 the trendline began to flatten out a bit. There are hints of a "s-curve."

Additionally, from 2000 to 2004 the number of enrollees grew dramatically rising from 2.7 million to over 4 million. (Much of that growth was in Family Health Plus.) The rate of growth was virtually identical in New York City and the rest of the state. At some point, we should expect the pool of potential clients to be exhausted.

Mind you, for now I'd bet against the possibility. But it's worth further exploration.

This will make a difference

Unless it gets cold feet or weasels out of its promise to localities, New York has fundamentally changed both the financing structure of its Medicaid program and its budgetary and program dynamics. It's not obvious yet, but as this change takes effect, it will become increasingly important and evident. This change, a cap on the local share of Medicaid costs will:

• Provide financial relief to counties and New York City. That part is obvious.
• Change State budget dynamics by requiring that the State itself be financially responsible for an increasingly larger share of cost growth.
• Move toward aligning policy, financial, and operational responsibility for the nation's largest Medicaid program.

The cap works like this. This calendar year, 2005, will be used as a base year for Medicaid spending. In 2006, the local share will be the base year (2005) plus an increment of 3.5 percent. In 2007, the local share will increase by an additional increment of 3.25 percent for a total of the base plus 6.75 percent. In 2008, the local share will increase by an additional increment of 3.0 percent for a total of the base plus 9.75 percent or, if the locality chooses, a fixed percentage of local sales tax revenues based. Each year thereafter, the increment will be 3.0 percent. (See the attached table.) The subtlety here is that the local share increases are not compounded.

In 2008, the State will fold the local share into the State budget process and localities will simply make a payment to the State based on the formula. Localities will be engaged in a form of "reverse revenue sharing," whose only relationship to Medicaid spending will be historical.

There are also some insurance provisions for localities. If the Federal share is increased, localities will share in the savings as well as the State. In the unlikely event that Medicaid expenditures fall and the local share under today's rules would have been less than under the cap, localities will reimbursed for the difference.

While basing a financial formula on data which can still be manipulated is risky, the fundamental nature of the change is unmistakable. The local share will be fixed regardless of how quickly Medicaid costs increase.

Since its inception, New York has required its "local social services districts," counties and New York City to share in the program costs of Medicaid. Only North Carolina has had a similar financing structure and now having seen the change in New York, there's talk of change there too. For most services, the local districts pay half of the non-Federal share of the costs. There are exceptions, especially for the costs of long term care, so local governments now pay over $7 billion per year toward the costs of Medicaid while having very little influence on the program's cost.

For State policy makers this financing arrangement has meant that it was easier to spend and politically harder to restrain program cost growth. After all, when taking the Federal and local shares into account, the State budget only had to come up with about a third of the actual costs.

But now this will change. Let's start with next year.

Assume base year local expenses of just over $7.2 billion, about 20 percent of the total. Also assume an overall growth rate of 6.62 percent. It's a relatively modest rate, but it's the same as the overall growth rate from 2003 to 2004. On a calendar year basis, the State will be responsible for over $225 million in 2006 that it otherwise would have left in the laps of local officials. If growth continues at that 6.62 percent, the State assumes responsibility for an additional:

• $500 million in 2007
• $828 million in 2008
• $1.2 billion in 2009
• $1.6 billion in 2010

If the growth rate is eight percent, the State picks up responsibility for an additional:

• $330 million in 2006
• $725 million in 2007
• $1.2 billion in 2008
• $1.7 billion in 2009
• $2.3 billion in 2010

Those figures are on top of the increase what would have been the State's share under the old system. This is a prescription for increasing financial pressure.

Now it's possible that Medicaid cost growth will slow naturally in the next few years. I'll return to that in another post. But clearly the State will be hard pressed to allow rapid growth.

And even more clearly, in New York the cost to the State of Medicaid growth has just gotten much more expensive.

Hiding assets?

Since hiding or sheltering assets in order to become Medicaid eligible has been much talked about of late, it's worth pointing to a new report by Ellen O'Brien of the Georgetown University Long Term Care Financing Project. The project is funded by the Robert Wood Johnson Foundation.

The report, Medicaid's Coverage of Nursing Home Costs: Asset Shelter for the Wealthy or Essential Safety Net? (PDF) emphasizes the "little evidence that nursing home residents transfer assets to gain eligibility for Medicaid."

I've long suspected that the scope of the problem does not match the rhetoric around it. And this report is suggestive that that's the case. However, some of the data cited are rather old (the 1989 National Long Term Care Survey) and the 1985 National Nursing Home Survey. And, if there's really no payoff what are all those lawyers advertising for?  (Go do a Google search on "Medicaid asset trust" or something similar) and note the number of hits.

Other data suggest that some elderly people transfer assets to avoid taxation, but recent changes in the inheritance laws will likely reduce the incentives to do so. But those same data also suggest that while wealthy people in declining health give gifts to avoid taxation, but the less wealthy people hold on to their assets as a precaution.

A 1993 study estimated the maximum potential Medicaid savings in nursing home costs was three percent. But that estimate included those who might have transferred assets, but who did not enter a nursing home. Savings estimates associated with state Medicaid waiver applications have  been relatively small, the largest being 1.4 percent.

As they say, "absence of evidence is not evidence of absence." This report is helpful and it sets a balanced tone, but by no means does it end the argument.

 

Are the upcoming Federal Medicaid cuts that big a deal?

Had eight hours in the car yesterday and along with listening to a mystery, I thought a bit more about the upcoming Federal Medicaid cuts of $10 billion. If one can get past the observations that financially the Federal government is out of control and that pervasively Bush's and Congressional priorities favor the wealthy over everyone else, the Medicaid cut number is not that big a deal.

Nationally, the Medicaid cuts would total $10 billion over five years. If New York kept its Medicaid spending flat for five years (an unlikely prospect, right?), all by itself it would spend $450 billion about half of which would be Federal funds. Robert Samuelson points out that with projected national five-year Medicaid spending of over a trillion, the proposed cut is no more than one percent. Symbolically meaningful perhaps, but not much else.

Of course, small numbers don't mean that the policy choices won't be stupid.

Medicaid news

Over five years, the Congressional Budget resolution requires $10 billion in Medicaid cuts.  And the National Governor's Association and the National Conference of State Legislators are working away developing proposals to meet the $10 billion goal without taking it out of the hides of the states.

Newsday thinks New York should be one of the states that cuts Medicaid costs. They got most of it right, especially the emphasis on institutional focus of policy and care in New York. There were a couple of exceptions:

• Most everybody these days is blaming middle and upper class folks who dump their assets or put them in trust in order to become eligible for Medicaid financed nursing home care. Yet, I can't recall a single article or paper that presents any data on the scope of this problem. They also call for incentives for private long term care insurance. Hey, I thought we'd already done it, but this is a notion that I've always thought was low leverage. So I'm not surprised that whatever incentives we have tried haven't made much of a dent. This coverage is too expensive. Don't ever expect it to make much difference. More importantly, for all the rhetoric, the centerpiece of New York's long-term care policy is nursing homes. Keep people out and even if they require assistance, they will burn up their assets at a much slower pace and Medicaid's cost will be lower.
  
• Local share. Newsday notes that "it's good that the state is finally planning to cap the local share, but it must do so in a way that doesn't penalize poorer counties." Nice sentiment, but isn't this a done deal? Seems to me that there would be some real risk for localities if the new cap were re-opened. They might wind up with less than they already got.

Well, we'll see what all those folks have to offer. Whatever it is, it's not likely to be pleasant. That's especially so in New York because of the new cap on on the local share of Medicaid costs. We'll cover that extensively later in the week.