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Introduction to State Health Policy: A Seminar for New State Legislators

Slide Presentation by Martha King

On April 2, 2005, Martha King made a presentation in a seminar entitled Introduction to State Health Policy.

This is the text version of Ms. King's slide presentation. Select to access the PowerPoint® Slides (3.7 MB).

Hot Issues in Health Care: Focus on Medicaid and SCHIP

Martha King
National Conference of State Legislatures, NCSL
Health Program Director

Slide 1

Medicaid "Experts"

A cartoon shows a hiker visiting a guru atop a mountain. The guru says: While I can explain the mystery of life, I don't dare try to explain how the Medicaid system works.

Slide 2

Medicaid Made Simple

A diagram titled Medicaid Made Simple shows a cluster of words, arrows, dotted lines, and boxes in a system very difficult to decipher.

Slide 3

Medicaid: Why Should You Care?

  • 22 percent of average State's total budget.
  • Largest financing source for low-income: 43 percent of Federal allocations to States.
  • Pays half of U.S. nursing home costs.
  • Covers 31 percent of U.S. population 85 plus.
  • Funds about 35 percent of U.S. births.
  • Subsidizes care for the uninsured.
  • Subsidizes graduate medical education.

Slide 4

Distribution of the Average State's Budget for Health Services, 2001

A pie chart of the budget for health services indicates 69.2 percent Medicaid, 8.3 percent State Employee Benefits, 5.6 percent Community-based Services, 6.3 percent Population Health, and 7.8 percent Other.

Source: Milbank Memorial Fund, National Association of State Budget Officers and the Reforming States Group, 2000 to 2001 State Health Care Expenditure Report; New York: Milbank Memorial Fund, April 2003:

Slide 5

Medicaid dominates the health debate

  • In 1985, Medicaid accounted for 8 percent of State budgets, total spending.
  • In 2005, Medicaid accounts for 22 percent; 16.5 percent of State general funds.
  • Two-thirds of spending is for optional people and services.
  • 42 percent of spending is for Medicare-covered recipients.
  • 35 percent of spending is for long-term care services.

Slide 6

State Budgets and Health Costs

According to a chart, State revenues were 1 percent in 2001, negative 6.8 percent in 2002, and 3.4 percent in 2004; the figure is not yet known for 2005. Medicaid revenues are given as 12 percent in 2001 and 2002, 9.5 percent in 2004, and 11.5 percent in 2005.

Slide 7

Medicaid's Role in the Health System, 2000

On a bar graph, the x-axis lists Medicaid roles and the y-axis shows percentages. Below the x-axis, Total National Spending is given for each role.

  • Total Personal Health Care accounts for 16.7 percent or 1.13 trillion dollars.
  • Hospital Care, 17.0 percent or 412 billion dollars.
  • Professional Services, 11.1 percent or 422 billion dollars.
  • Nursing Home Care, 48.2 percent or 92 billion dollars.
  • Prescription Drugs, 17.2 percent or 122 billion dollars.

Source: Heffler S, et al. 2002. Based on National Health Care Expenditure Data, Centers for Medicare and Medicaid Services, Office of the Actuary.

Slide 8

Medicaid at a Glance

  • Federal/State program, 55 variations.
  • Optional: large financial incentive.

Federal government pays 50 to 80 percent of services, dollar-for-dollar match

Slide 9

Medicaid at a Glance

Three programs in one:

  • A health insurance program for low-income parents, mostly mothers, and children.
  • A funding source to provide services to people with significant disabilities.
  • A long-term care program for the elderly.

Quote: Medicaid makes Medicare work

Slide 10

Medicaid Perceptions

One view: A black hole
An artistic rendering of a black hole is shown.

Another view: A cash cow
A crude drawing of a cow behind a large dollar sign is shown.

Slide 11

People and Services

Entitlement: all who qualify are eligible

  • People:
    • Mandatory "categories"; for example, children and pregnant women to 133 percent of poverty, SSI recipients.
    • Optional; for example, additional children and pregnant women; "medically needy."
  • Services:
    • Mandatory; for example, hospital, nursing facility, physician, rural health clinics.
    • Optional; for example, prescription drugs, hospice.

Slide 12

Who's Not Covered?

Everybody else

  • Anyone not in a "category"
    • 45 million uninsured Americans.
    • Adults without children or SSI eligibility.
    • Parents who makes more than about 40 percent of poverty.
    • Elderly or people with disabilities who don't meet SSI or other criteria.
    • High medical users who don't meet criteria.
    • Et cetera.

Slide 13

Beneficiaries and Expenditures, 2002, U.S. Average

  • A pie chart labeled Enrollees 51 Million indicates 50 percent children, 25 percent adults, 9 percent elderly, and 16 percent blind and disabled.
  • A pie chart labeled Expenditures* 210 Billion Dollars indicates 43 percent blind and disabled, 27 percent elderly, 18 percent children, and 12 percent adults.

Source: Kaiser Commission on the Future of Medicaid and the Uninsured, January 2004.

* Excludes disproportionate share hospital payments, vaccines for children, and administrative costs.

Slide 14

Medicaid Expenditures per Enrollee by Acute and Long-term Care, 2002

On a bar graph, the x-axis lists demographics and the y-axis shows dollar amounts. Expenditures per enrollee were:

  • Children, 1,475 dollars.
  • Adults, 1,948 dollars.
  • Blind and disabled people, 11,486 dollars.
  • Elderly people, 12,764 dollars.

Stacked bars indicate that expenditures for blind and disabled people were about half long-term care and half acute care, while expenditures for elderly people were about three-fourths long-term care and one-fourth acute care.

Source: Kaiser Commission on Medicaid and the Uninsured, January 2004

Slide 15

"Waiver" Options

  • Comprehensive health reform 1115 waivers; for example, Delaware, Hawaii, Massachusetts, Minnesota, Oregon, Tennessee.
  • New twist: Utah's 1115 waiver.
  • Primary and preventive services only for adults to 150 percent of poverty.
  • Specialized 1115 waivers
    • Pharmacy Plus: low-income senior prescription drug benefit, only, up to 200 percent poverty; Illinois, South Carolina, Wisconsin approved.
    • Discount-only waiver: extend Medicaid drug price reductions to other populations; Maine operating; court challenges.
    • Family planning services: extend post-partum time for family planning, and primary care.

Slide 16

Medicaid: New Flexibility

HIFA: Health Insurance Flexibility and Accountability initiative; six approved

  • Special 1115 demonstration waiver.
  • Purpose: to expand health insurance coverage to the uninsured.
  • Targeted to people below 200 percent of poverty.

Slide 17

Medicaid Expansions: Pros and Cons

  • Pros:
    • Federal share, 50 to 80 percent.
    • Existing administration slash provider network.
    • New flexibility and options.
    • "Better than nothing" for uninsured.
  • Cons:
    • Financing constraints: economy and budgets.
    • Federal mandates, although getting better.
    • Potential "maintenance.
    • of effort" requirements.
    • Political philosophy re less government role.

Slide 18

Cost-Saving Strategies

Most typical cuts

  • Cut "optional" groups; Colorado has limited options.
  • Cut or restrict optional services, for example, prescription drugs, hospice care, rehabilitative services, case management, et cetera.
  • Freeze or cut provider reimbursements.
  • Eliminate the entire Medicaid program.
  • Caveats:
    • Unintended consequences.
    • "Penny-wise and pound foolish."
    • Cuts often shift burden: needs don't disappear.

Slide 19

Only so much to cut

People, Providers, Services

Image: A turnip with drops of blood coming out

Slide 20

A cartoon shows three researchers looking at a diagram on a blackboard. In it, a box labeled State Mental Hospitals has a splitting arrow labeled Patients pointing to boxes labeled Jail, Homeless Shelters, Private Hospitals, Nursing Homes, and Dumpsters. One researcher exclaims: We have a plan that will save even more money.

Slide 21

Cost-Saving Strategies

Other reform options

  • Evaluate and understand program and options.
  • Study and reform long-term care.
  • Emphasize prevention.
  • Reduce prescription drugs costs.
  • Take advantage of Federal flexibility.
  • Reduce fraud and abuse.
  • Use electronic records.
  • Identify any services eligible for Federal match.
  • Make Medicaid the "payer of last resort."

Slide 22

Evaluation Slash Oversight Slash Consultation

A cartoon shows three scraggly-looking men at a bar. One says: Are you just pissing and moaning, or can you verify what you're saying with data?

Slide 23

Evaluation Slash Oversight Slash Consultation

  • Medicaid oversight committees
    • Massachusetts House created a Medicaid committee.
    • Wyoming's subcommittee on Medicaid cost control and content.
    • Oregon Senate special committee on the Oregon Health Plan.
    • Kentucky Medicaid Managed Care Oversight Committee:
  • Legislative audits: South Carolina's Legislative Audit Council recommended 22.9 million dollars in savings
    • Preferred drug list estimated 12.8 million dollars.
    • Medicaid enrollment fee estimated 1.4 million dollars.

Slide 24

Evaluation Slash Oversight Slash Consultation

  • External evaluation and consultants
    • Idaho's Office of Performance Evaluations 2000 report, Idaho's Medicaid Program: The Department of Health and Welfare Has Many Opportunities for Cost Savings:
    • Washington State Institute for Public Policy,
    • Washington commissioned a Lewin Group study:
  • Additional resources:

Slide 25

Understanding the Costs

Elderly and people with disabilities

  • Qualify based on both income and disability.
  • Medicaid has become the nation's long-term care "program of last resort": pays for 60 percent of nursing home residents.
  • Medicaid serves as the nation's "high risk pool" for low-income people with serious disabilities and chronic conditions.
  • What other options exist?

Slide 26

Focus on Long-term Care

  • 80 percent of long-term care provided by informal caregivers
    • Does or should the State provide assistance?
    • Can the State prevent or delay nursing home placements?
  • Personal care option: assistance with bathing, dressing, feeding, housekeeping, shopping, et cetera.
  • Long-term care insurance: does or should the State promote?
  • Federal law encourages community care.
  • Doubling of residential and assisted living options in last decade.

Slide 27

Long-term Care

  • Institutional versus community-based care (Source: Harrington and Kitchener, NCSL Annual Meeting, 2003)
    • 25 percent versus 75 percent of long-term care recipients.
    • 70 percent versus 30 percent of long-term care spending.
  • Screening programs.
  • Prevention initiatives; for example, disease management, Meals on Wheels, et cetera.
  • Asset transfers slash estate recovery.
  • Family education and contributions?
  • End-of-life planning?

Slide 28

Transitioning to community care

A map is titled Medicaid Long-term Care Spending for Community-based Care, fiscal year 2001. States are colored according to what percentage of their Medicaid long-term spending supports community-based care.

  • Alaska, California, Colorado, Maine, Minnesota, New Hampshire, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wyoming had 40 percent or more.
  • Connecticut, Idaho, Kansas, Massachusetts, Montana, New York, North Carolina, Oklahoma, South Carolina, Utah, West Virginia, and Wisconsin had 30 to 39 percent.
  • Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Iowa, Kentucky, Maryland, Michigan, Missouri, Nebraska, Nevada, North Dakota, South Dakota, Texas, and Virginia had 20 to 29 percent.
  • The District of Columbia, Illinois, Indiana, Louisiana, Mississippi, New Jersey, Ohio, Pennsylvania, and Tennessee had less than 20 percent.
  • Arizona operates a managed long-term care program, and comparative data were not available in this study.

Note: U.S. Territories were not included in this study.

Source: The Med-stat Group, 2002

Slide 29

Case Study: Maine

  • Target nursing home admissions.
  • Medicare as first payer.
  • Legislative approval for nursing home capacity changes.
  • Stricter controls on asset transfer.
  • Expanded access to State and Medicaid-funded home care services.

Slide 30

1995 Me-Care program

  • Universal long-term care pre-admissions screening.
  • Assessment costs equal 1 percent of long-term care spending.
  • "Case-mix" reimbursement for nursing homes.
  • Nursing homes certify more Medicare beds.
  • Change in nursing facility reimbursement.

Slide 31

Maine's Cost Savings

  • Increased Medicare's share of long-term care: Medicaid's share dropped 18 percent between 1995 and 2002.
  • 44 percent decline in Medicaid length of stay.
  • 26 percent decline in total nursing home days.
  • Number of nursing-home beds: 10,207, 1994; 7,708, 2002.
  • Percentage of long-term care clients in nursing homes: 1995, 50 percent; 2001, 33 percent.
  • 12 percent decline in per-person spending.

Slide 32

For More Information

Maine Resources:

  • Maine's HCBS System:
  • Pre-admission screening program:
  • State and Medicaid long-term care expenditures:
  • Long-term care status report, December 2002:

Slide 33

Case Study: Minnesota

  • Pre-admission screening for nursing home care.
  • Community development grants nursing home alternatives.
  • Community services expansions.
  • Closure of excess nursing home beds.
  • Moratorium on new nursing home construction.

Slide 34

Minnesota Cost Savings

  • Eliminated 1,089 nursing home beds between August 2001 and January 2003.
  • Reduced nursing home beds per 1,000 elderly from 68 in 2000 to 64 in 2002.
  • Decreased nursing home spending as percentage of public long-term care spending from 86 percent in 2000 to 73 percent in 2002.
  • Minnesota's Long-term Care Task Force:

Slide 35

Case Study: Wisconsin

  • 1995 Family Care Pilot Program: integrates county-level long-term care services through case management and managed long-term care.
  • Single entry point for long-term care services: assessment, consultation, case management, individual service plans.
  • Pre-admission counseling for long-term care facilities.
  • Savings:
    • Long-term care spending decreased by an average of 198 dollars per person per month,.
    • 9.6 percent less per Family Care enrollee than a similar population in a fee-for-service environment.
  • Family Care Program:

Slide 36

Long-term care: Other Ideas

  • Arizona, Texas, and Arizona: managed long-term care and integrated acute/long-term care programs.
  • Oregon: expanded home and community services; reduced nursing home beds 1981 to 95, Medicaid money fell by 8.6 percent; nationwide increase of 19 percent.
  • National Family Caregiver Program: funds to Area Agencies on Aging; 86 percent of participants say "enables home care for longer."
  • Bush Administration Systems Change Grants and Independence-Plus initiative: Demo for family or individual directed community services.
  • Aging in Place initiatives; for example, Georgia and New Hampshire.

Slide 37

Chronic Illness and Disabilities

How much could be prevented or reduced?

  • Access to insurance Medicaid Ticket to Work Buy-in:
  • Access to preventive and primary care.
  • Prenatal care and counseling.
  • Focus on wellness or health education.
  • Smoking, estimated 12 percent of costs for Medicaid in 1999.
  • Obesity, estimated 21 billion dollars in obesity-related conditions.
  • Disease management slash "care management."

Slide 38

Disease Management

  • Top 1 percent of people account for 30 percent of health spending.
  • Top 10 percent of people for 70 percent of spending.
  • Bottom 50 percent of people for 3 percent of spending.

Source: Scott Leitz, Economist, Minnesota Department of Health

  • "Disease management" targets people with chronic illness and provides more intensive services
    • Common targets: asthma, HIV and Aids, cardiac diseases, diabetes, hemophilia, depression.
    • Leaders: Florida, Maryland, Mississippi, North Carolina.
  • "Care Management" focuses on people, not disease
    • For example, Lahey Clinic in Massachusetts: 50 percent of enrollees had 5 or more conditions.

Slide 39

Disease Management

  • Cost savings?
    • Not a panacea, could help with longer-term costs.
    • Emergency room visits for patients reduced.
    • Hospital costs reduced overall for participants.
  • Resources:
    • Contracting for Chronic Disease Management: The Florida Experience:

Slide 40

Preventive and Primary Care

Appropriate preventive and acute care for Medicaid enrollees

  • Plan slash provider accountability.
  • Outreach slash Treatment.
  • Screening slash education.
  • Immunizations.
  • "Medical home" for kids; avoid emergency room use; North Carolina Pilot Project.

Slide 41

High-value Preventive Services, for adults: Partnership for Prevention

  • Tobacco cessation counseling.
  • Vision screening age 65 plus.
  • Cervical cancer screening.
  • Colorectal cancer screening.
  • Hypertension screening.
  • Influenza vaccination.
  • Chlamydia screening.
  • Cholesterol screening.
  • Problem drinking screening and counseling.
  • Pneumococcal vaccination age 65 plus.

Slide 42

Prescription Drug Savings

  • Prescriptions account for 12 percent of Medicaid costs; U.S.
  • Rapidly rising costs: 17.3 percent in 2001; estimated 12.9 percent in 2004.
  • Valuable cost-saving tool: Prevent hospital and nursing home costs.
  • Most common cost containment strategies:
    • Prior authorization.
    • Preferred drug lists: 30 plus States.
    • Supplemental rebates: 14 plus States.
    • Use of generics.
  • Caveat: Don't be "penny wise and pound foolish."

Slide 43

Medicaid Preferred Drug Lists

A map of the United States, including Territories, uses colors to indicate preferred drug lists or PDL's.

  • Alabama, Alaska, California, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Ohio, Oklahoma, Oregon, Tennessee, Texas, Vermont, Virginia, Washington, and West Virginia have Medicaid PDL's operating.
  • Colorado, Connecticut, Hawaii, Iowa, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, Pennsylvania, South Carolina, and Wisconsin have Medicaid PDL's enacted in law or regulation pending.
  • New York, North Carolina, Utah, and Wyoming have Medicaid PDL plans that are not final and thus may be delayed or blocked.
  • American Samoa, Arizona, Arkansas, Delaware, Guam, Nebraska, New Jersey, North Dakota, Puerto Rico, Rhode Island, South Dakota, and the Virgin Islands are uncolored, implying no Medicaid PDL whatsoever.

Data compiled by NCSL, updated December 31, 2004. Operational status may vary and is for general information only.

Slide 44

Prescription Drug Savings

Other cost containment strategies:

  • Step therapy or "fail first."
  • Disease management.
  • Monthly caps and limits.
  • Adjust dispensing fees and ingredient reimbursement.
  • Enrollee co-payments.
  • Fraud and abuse investigations.
  • Pharmaceutical managers or administrators.
  • Multi-State bulk purchasing.

Slide 45

New Medicare Prescription Benefit

  • Medicaid has subsidized Medicare.
  • Estimated 80 to 85 percent of Medicaid prescription costs are for elderly and people with disabilities, many of whom are covered by Medicare.
  • January 2006:
    • Medicare will cover outpatient prescriptions for Medicare and Medicaid "dually eligible."
    • States will pay under claw-back provision; 90 percent of 2003 drug costs in 2006 and 2007.

Slide 46

New Federal Flexibility

  • Most reforms intended to expand coverage.
  • 1115 Waivers.
  • HIFA Waiver: a new 1115 type.
  • Premium assistance programs.
  • Modified benefit packages.

Slide 47

Employer Premium Assistance Programs and Health Insurance Premium Payment Programs

  • Public insurance subsidizes employer coverage for low-income working beneficiaries: Medicaid or SCHIP.
  • 15 States have programs, different in intent and scope.
  • Can be done through Medicaid or SCHIP.
  • Savings significant in States with eligibility to families above 100 percent of poverty.
  • Visit for a list of the States and some details of the programs.

Slide 48

Case Study: Utah's Primary Care Network; 1115 Waiver program

  • First State to offer a very basic benefit package, limited to preventive and primary care, to an expansion population: adults up to 150 percent.
  • Reduced benefits and increased cost sharing to some mandatory Medicaid clients, TANF parents, to help finance the program.
  • Lessons for other States:
    • Does investment in primary care reduce uncompensated care money?
    • Will people be interested in a very limited benefit package over time? So far, enrollment steady over time with the number at 18,910 as of January 8, 2005.

Slide 49

Utah's Primary Care Network Benefits

  • Primary and preventive care by physicians and mid-level professionals enrolled in the network.
  • Adult immunizations.
  • Urgent care and emergency room visits when appropriate.
  • Lab, x-ray, medical equipment, medical supplies, oxygen, ambulance.
  • Basic dental, hearing tests, vision screening but not glasses.
  • Prescription drugs: limit of four per month.

Slide 50

Other State Medicaid Proposals

Florida and South Carolina

  • Revamp to resemble private managed care plans.
  • Assign a "premium" per person; risk adjusted.
  • Cap the premium.
  • Give Medicaid recipients HSA's.
  • Focus on prevention: reward it.

Slide 51

Reducing Medicaid Fraud and Abuse

  • Billing for services not rendered.
  • Billing for unnecessary services.
  • Substitutions of generic drugs.
  • Kickbacks.
  • Double billing.
  • Other unauthorized billing such as charging a customer for service covered by Medicaid.

Slide 52

Case Study: Florida

  • Florida: 1996 enacted two laws to strengthen anti-fraud and abuse activities.
  • Identifies providers with aberrant billing patterns.
  • Conducts provider investigations.
  • Recommends administrative sanctions.
  • Permits Florida's Medicaid Fraud Control Unit to become law enforcement officers.
  • Florida AG's Office reports the Medicaid Fraud Control Unit recovered 17.5 million dollars in cash and made 158 arrests in 2001.

Slide 53

Case Study: Texas

  • 1995 Medicaid Fraud and Prevention Act.
  • AG's office investigates and prosecutes Medicaid fraud.
  • Provider exclusion lists.
  • Inpatient screening criteria.
  • Medicaid fraud training to health care professionals.
  • Medicaid fraud and abuse reports.
  • In the second fiscal quarter of 2003, 1,435 fraud cases identified and 14.5 million dollars was recovered.
  • Recently, two pharmaceutical companies paid 45 million dollars to settle fraud charges: accused of falsely reporting inflated prices.

Slide 54

Electronic Billing, Data Collection and Eligibility Determination

Arkansas saved about 30 million dollars in 17 months:

  • Drop in emergency room use.
  • Reduced claims processing time.
  • Virtually eliminated collection expense.
  • Lessened claim denials.
  • Increased efficiency in data analysis and report production.
  • Arkansas Medicaid:

Slide 55

Combination Initiatives

For example, Oregon

  • Government's roles:
    • Insure the uninsured up to the poverty level.
    • Provide subsidies for some others.
  • Employers' role: Cover employees with incomes above poverty via play-or-pay requirement.
  • Other: Prioritize publicly funded health services.

Slide 56

Opportunities and Challenges

  • What are your goals?
    • Universal coverage.
    • Universal access.
    • Healthy population.
    • More personal responsibility.
  • What is the appropriate role of government?
  • What is the appropriate role of the private sector?
  • What is the appropriate role of Individuals?
  • Are you getting what you pay for?
    • Services.
    • Quality.
    • Health status improvements.
  • How can you control, not shift, costs?

Slide 57

SCHIP: State Children's Health Insurance Program

  • Non-Medicaid insurance option.
  • More flexibility than Medicaid expansion.
  • Higher Federal matching rate.
  • Cover kids under 200 percent of poverty.
  • Waivers possible.

Slide 58

Fiscal year 2006 Proposed Health Budget

President's fiscal year 2006 Budget Proposal for Selected Health Programs:

Slide 59


  • CMS revised baseline for annual Medicaid growth rate over next 10 years, from 7.8 percent to 7.6 percent.
  • Result: 73 billion-dollar reduction in spending.
  • With fiscal year 2006 budget proposals, the baseline for growth would be 7.3 percent.

Slide 60

Proposed Administrative Changes

  • Payment Reforms.
  • Program Administration.
  • Prescription Drug Program Reforms.

Current as of October 2005

Internet Citation:

Hot Issues in Health Care: Focus on Medicaid and SCHIP. Text version of a slide presentation at Introduction to State Health Policy: A Seminar for New State Legislators. Agency for Healthcare Research and Quality, Rockville, MD.

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