The Senate Proposal Would Cripple Medicaid; Here’s What Congress Should Do Instead

The Senate has postponed a vote on its plan to repeal and replace the Affordable Care Act until after the August recess. This is a good thing. It’s pretty clear that the plan would do more harm than good in destabilizing health insurance markets and reducing access to health care.

According to the CBO, the bill would reduce the federal deficit by $321 billion, but does so by reducing insurance coverage for 22 million people over the next 10 years. It makes no effort to reduce overall health care costs. Instead, “savings” are achieved by shifting costs to individuals and states, without any meaningful reforms that would help them manage those costs.

The law is projected to have the greatest impact on the state-federal Medicaid program. Medicaid is the health insurance program for low income families, the disabled and the elderly. It is the largest funder of preventive health, pregnancy/births, long-term care, drug recovery and mental health treatment services in the country. The program currently covers over 80 million individuals, of which 34 million are children, 7.3 million are low-income elderly and 11 million are disabled. It is administered by States, in compliance with federal guidelines, and the federal government reimburses 50–90% of state Medicaid expenditures.

The Senate proposal would cap federal funding levels for Medicaid on a per person basis and link those levels to the rate of inflation. In exchange, it would give states greater flexibility in managing their programs. Since health care inflation has historically been much higher than overall inflation, this proposal would not to keep up with the anticipate cost growth for Medicaid. In addition, the promised “flexibility” would not be in areas states most need in order to realize meaningful savings. The result would be to starve the program of resources over time, eliminating a medical safety net for millions of people.

There must be a better way. If the goal is to reduce long-term cost growth in the Medicaid program, here are three things Congress should do instead.

Give States Greater Authority to Manage Prescription Drug Costs

Prescription drugs represent one of the fastest growing line items in Medicaid budgets and states are currently limited in their ability to effectively manage their pharmaceutical drug spend. State Medicaid programs are required to cover all FDA approved drugs and lack transparency in drug pricing, which limits their ability to negotiate drug prices. Congress has an opportunity to help states achieve costs savings by requiring better transparency in drug prices for public programs, providing authority for new purchasing and reimbursement strategies for state Medicaid prescription drug benefits, and limiting states’ exposure to high-cost prescription drugs by allowing flexibility to exclude some FDA-approved drugs from coverage.

Improve Cost-Saving Long-Term Care Options

The senior and disabled populations are the largest expense in state Medicaid budgets. Medicaid currently pays for nearly 40 percent of the nation’s long-term care expenses, and that is expected to rise by nearly 50 percent by 2026. While the projected growth in the older adult population is a serious concern for state and federal policymakers, the answer is not to cripple the program that provides the primary safety net for those in need of long-term services and supports. The federal government should take significant, proactive steps to help manage the rising costs of long-term care. Two specific actions would be to expand home and community based services as an alternative to nursing home care, and to encourage more wide-spread adoption of long-term care insurance.

· Home & Community Based Services

Nursing homes are the default long-term care placement for most Medicaid beneficiaries. These homes provide the most intensive and expensive level of care, yet people who could be cared for in less expensive settings are often placed in nursing homes because of a lack of community-based long-term care options and the inflexibility of Medicaid funding. There is a great need to restructure and strengthen the systems that can allow individuals to age-in-place. Congress could achieve considerable long-term cost savings in the Medicaid program by expanding Medicaid funding options for assisted living and home care.

· Long Term Care Insurance

Long-Term Care Insurance (LTCI) can be purchased by middle and upper income individuals to cover future long-term care costs. Private LTCI can help individuals avoid having to spend down all of their assets in order to qualify for long-term care services under Medicaid. It also has significant potential to reduce the expected growth in Medicaid long-term care costs. However, relatively few Americans purchase long-term care insurance policies due to the high cost, uncertainty within the market, and perception that they can rely on family caregivers or Medicaid if they need long-term care in the future.

There are several recommendations Congress could explore to strengthen the long-term care insurance market. The federal government could be more aggressive in providing financial help or other incentives to purchase these policies, such as making LTCI premiums fully tax deductible. Policymakers have also explored ways to incorporate LTC services into Medicare supplement plans.

Support & Utilize Cost Effectiveness Research

When you shop for a new car or phone there is usually lots of information by which to compare options and make an informed decision. When it comes to choosing the right medicine or the best health-care treatment, clear and dependable information can be very hard to find. Even when such information is available, for instance that treatment A achieves better outcomes than treatment B, Medicare and Medicaid are prohibited from using that information to make coverage and reimbursement decisions. As a result, hundreds of millions to billions of dollars are spent on treatments that may not be the most cost effective.

Comparative effectiveness research is designed to inform health care decisions by providing evidence on the effectiveness, benefits and harms of different treatment options. Congress should increase support for this research and for the development of better analytical tools to translate this information for doctors, patients and policy-makers. Empowering health care stakeholders with actionable information has the potential to improve health outcomes, address the rising costs of healthcare and obtain better value for healthcare expenditures.

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