Medicaid: cutting costs v. preserving access

As nearly every state around the nation grapples with budget problems, the growing cost of Medicaid is creating headaches and headlines for state and federal lawmakers. It's especially a challenge in times when more people are struggling to find private insurance and turning to Medicaid as a safety net for their families.

Medicaid is a health care program for low-income residents funded with a combination of state and federal dollars. There are about 1 million Washingtonians enrolled in Medicaid, receiving a variety of programs and services from maternity care to dental services for people with disabilities to health care for kids.

The federal government has issued new regulations to try to address the difficult balance between containing Medicaid costs and preserving adequate access for the medical services people need.

And it's those costs that are driving states to consider legally risky cost-cutting moves. The New York Times reported today:

Faced with huge financial problems, many states have frozen or reduced Medicaid payments to health care providers, and governors of both parties have proposed additional cuts this year. Medicaid recipients and health care providers have sued state officials to block such cuts, and one case, from California, is pending in the United States Supreme Court.

Ways & Means Chair Ross Hunter recently noted on his blog that we face the same challenge in Washington. He points to two reasons for rising costs - rising costs and rising numbers of people seeking Medicaid services.

Hunter cites information from the governor's budget office saying average medical cost inflation since 2000 in Washington is about 3.7 percent with predicted medicaid cost growth far higher - around 6.5 percent. Hunter says shrinking that growth to 3.7 percent "would be a major win, and an effective reduction of billions of dollars in the budget."

One of the ways we can do that, says Hunter, is by moving away from the fee for service model currently in place.

We would pay a “capitated” rate per month for each client to the clinics, not pay them per visit. They would have incentives to drive down the number of visits with better care, where today they have a financial incentive to get people to come back over and over. This will require a federal Medicaid waiver and we’re working on it.

But the problem isn't always how much you pay, but what you pay for. In some cases there are less expensive ways to achieve the same health goals. For example, Washington state is a national leader in encouraging people to use generic drugs in lieu of name-brand drugs, when the less-expensive generic version is just as effective.

House budget-writers are looking at other possible cost-savings. Medicaid, for example, pays for half the births in the state of Washington and there are enormous variances in the number of caesarean sections performed in different hospitals - a far more expensive procedure that isn't always medically necessarily. The same is true early induction of labor. Budget-writers are asking health leaders to look into how we can address those variances while still providing the right kind of care for mothers.

So will Washington make a move like California? We've reported before that such a tactic is difficult, as evidenced by the pending lawsuit.

You can visit here for more information on recent budget-related changes made to Medicaid, as well as information on the current budget proposals related to Medicaid and other health care programs here (starting on page 11). Washington has already taken some actions to reduce Medicaid costs, largely by tightening eligibility requirements for certain programs and eliminating certain services.