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Assessing The New Federal Medicaid Block Grant
Proposal Cindy Mann
Research Professor Health Policy Institute Georgetown University
Washington DC
Community Service Society of New York and The Brookings Institution Center on Urban and Metropolitan Policy
June 13, 2003
Key Features of the President’s Proposal
Capped federal payments to states based on a pre-set formula - State payments based on Medicaid (including DSH) and
SCHIP payments in 2002 No required state matching payments/ “maintenance of effort”
system instead
Much greater flexibility re: how money is spent
Risk #1: Costs above capped payments no longer shared between states and
federal government
105
115
125
135
145
1999 2000 2001 2002
CBO 1998Actual
CBO Federal Medicaid Spending Projections, 1999-2002
Variance in actual 2002 expenditures vs. projections is $17 billion or 12% of all 2002 federal payments.
Source: Congressional Budget Office historical budget tables, previous editions of its Economic and Budget Outlook.
(billions of dollars)
Can “Adjusters” To a Cap Provide Protection?
• What factors would be considered? What factors would not be considered?
• Are there data? • Would /could adjustments be timely? • Adjusters themselves would be capped
Risk #2: Capped Funding Inevitably Results In Relative “Winners and Losers”
Among States
Variations in Base Payments ( Medicaid Expenditures Per Low-income Individual FY 2002)
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000
DC
New York
Rhode Islan
Alaska
Maine
Utah
Texas
Florida
Colorado
Nevada
US Avg.
Acute CareLong-Term Care
Sources: Urban Institute estimates based on data from CMS (Form 64). Population counts from the March Current Population Surveys, 2001, 2002; Holahan J, Weil A. "Block Grants Are the Wrong Prescription for Medicaid." Urban Institute, May 2003. “Low-income” includes all persons with incomes below 200% of the federal poverty line.
Variations in Historical Growth Rate
• Capped payments to states apparently would grow based on state historical growth rates (negotiated within capped federal funding)
• NY has had relatively low expenditure growth rates
– 40 out of 51 states in Medicaid expenditure growth between 1991 – 2001
– 48 out of 51 between 1998-2001
• But historical growth is not always a good indicator of future needs
(Some) Other Risk Factors for NY
• Number of elderly projected to grow in NY, although at slower pace than nation as a whole
• NY has had higher-than-average growth in number of
people with disabilities qualifying for SSI (1996 – 2001)
• NY ranked 3rd in incidence of AIDS patients and 2nd in number of new AIDS cases relative to population (2001)
Risk #3: States could withdraw a significant portion of their funding
Current Law
Federal dollars lost if NY reduces Medicaid spending by $125 million
Federal Dollars
Lost (millions)
$125
Match Rate
State Funds Saved
(millions)
50% $125
Proposal
Federal Dollars
Lost (millions)
$0
State Funds Saved
(millions)
$125
Federal dollars lost if NY reduces Medicaid spending by $125 million (assuming state meets “MOE”)
Matching System Creates Incentives to Maintain Investment in Optional Coverage
Risk #4: With less funding, what will be the impact of new flexibility?
Flexibility to Save $$? Block Grants Are a “Zero Sum” Game
If savings are to be achieved from spending on “optional” populations, disabled or elderly coverage will need to be cut or parents or children coverage will need to be cut deeply
Medicaid Spending for Optional Groups, US 1998
Disabled $23.1
Elderly $33.7
Parents $6.6
Children $4.9
Source: Urban Institute estimates, based on data from federal fiscal year 1998 HCFA 2082 and HCFA-64 reports, 2001.
Total = $68.3 billion
$7,687
$18,730
$1,795
$3,585
$19,522
$3,799
$9,732
$1,225
$1,665
$10,362
Total
Blind/Disabled
Children
Adults
Aged
USNY
Per-Person Medicaid Expenditures by Eligibility Categories
NY Compared to US, FY 2000
Source: Georgetown Health Policy Institute analysis based on CMS MSIS 2000 data.
Current Law
Federal dollars gained if NY invests new state dollars
Match Rate
New State Investment (millions)
50% $125
Additional Federal Funds
(millions)
$125
Proposal
Additional Federal Funds
(millions)
New State Investment (millions)
$125 $0
Federal dollars gained if NY invests new state dollars (assuming NY is spending its full federal allotment)
Flexibility to Improve? Matching System Creates Incentives to Invest in
Optional Coverage
Risk #5: Long term implications?
Block Grant Funding Has Not Fared Well at the Federal Level
• SCHIP funding comes up for reauthorization in 2007; will funds be maintained or increased if the program has been collapsed?
• How will Medicaid block grant reauthorization fare in 2013
with expected deepening federal deficits?
Is This Reform?
What Are the Problems that Need to Be Solved and What are the Sources of those Problems?
7.0%
4.7%
Growth
Premiums Medicaid
5.5%
2.9%
5.6%
6.4%
Children Adults Blind/Disabled Elderly
Medicaid Costs Per Beneficiary Have Grown More Slowly than Private Sector
Medicaid Per-Person Costs vs. Private Healthcare Premium Costs, Average Annual Growth for U.S., 1996-2002
Source: Georgetown Health Policy Institute’s Analysis based on KPMG, 1996; Kaiser/HRET Survey of Employer-Sponsored Health Benefits: 2000, 2002, CBO Medicaid Baselines 1997-2003.
Medicaid Is Doing Double Duty Filling in Gaps for Low-Income Medicare
Beneficiaries
Spending on Medicare
Beneficiaries 35%
Spending on All Other
Beneficiaries 65%
Source: Secretary’s Advisory Committee on Regulatory Reforms, June 2002. Data for 1999.
What Problems Are We Trying To Solve?
• Should flexibility be expanded in some areas? – Must consideration of flexibility be linked with a cap on federal funding?
• What is the value of federal standards?
• What problems need to be addressed outside of Medicaid?
• Are new resources needed so that Medicaid can do its job? State?
Federal?
• What about covering the uninsured?
Medicaid and SCHIP Have Made A Big Difference for New Yorkers
Private Insurance Gap and Uninsurance Rates for Low-Income Non-Elderly, March 1998-2000 CPS
67.6% 66.2% 64.4%
33.9%
40.3%
45.7%
NY CA TX
Coverage gapwithoutconsideration ofMedicaid andSCHIPUninsurance rateconsideringprivate andpublic coverage
Source: Holahan J. “Variations among States in Health Insurance Coverage and Medical Expenditures,” The Urban Institute, June 2002.
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