Medicaid: Guide to the Issues 2020

Principles:

  • Government should be willing to spend what it is already spending, but in a more rational manner. Hundreds of millions of dollars are spent annually in Georgia on uncompensated care for the uninsured. Uninsured Georgians do get sick; one way or another, we all pay for their care in a way that is terribly inefficient.
  • Money should follow people. While it is important to support the institutions and providers that make up Georgia’s safety net, solutions should be people-centered, not institution-centered.
  • Innovation requires flexibility and choices. Micromanaging every last detail is a recipe for the status quo.

 

Facts:

The accompanying table shows the average enrollment and cost per Georgia enrollee for the overall Medicaid program and each major enrollee group. (Most recent data as of publication; spending includes state and federal dollars.)

FY 2019 Medicaid Statistics (State and Federal Dollars)

 Total MedicaidAged/Blind/DisabledLow Income
Cost$10,298,036,876$5,941,517,693$4,356,519,184
Average Enrollment1,985,175532,8811,430,046
Annual cost per Enrollee$5,184$11,148$3,048

Between 2000 and 2019, total Medicaid enrollment in Georgia doubled, going from 947,000 recipients to more than 1.9 million recipients. That represents an increase from 12% of the state population to over 18%. Total spending grew from $3.5 billion to $10.3 billion, not including $304 million spent on 140,786 children enrolled in the PeachCare for Kids program in FY 2019.

Recommendations:

  • Create a patient-centered approach to the uninsured
  • Expand access to primary care
  • Expand scope of practice
  • Encourage innovation

Overview

Medicaid Expansion: Why Georgia Should Pursue an Alternative

The federal Patient Protection and Affordable Care Act (ACA) expanded Medicaid to all individuals under age 65 with incomes up to 138% of the federal poverty level (FPL). The U.S. Supreme Court later ruled that states are not mandated to expand Medicaid coverage. As of September 2020, Georgia and 11 other states had chosen not to expand Medicaid.

The citizens affected by this decision in the so-called coverage gap are low-income, able-bodied adults who are not eligible for Medicaid and whose income is below 100% of the federal poverty level; they are therefore ineligible for subsidies in the federal exchange. Approximately 255,000 Georgians are in this category.

Medicaid finances are expected to be even further strained in coming years. As the Kaiser Family Foundation observed:

The coronavirus pandemic has generated both a public health crisis and an economic crisis, with major implications for Medicaid, a countercyclical program. During economic downturns, more people enroll in Medicaid, increasing program spending at the same time state tax revenues may be falling. To help support states as enrollment in Medicaid grows and ensure existing enrollees maintain continuous coverage, the Families First Coronavirus Response Act (FFCRA) authorized a 6.2 percentage point increase in the federal match rate (“FMAP”).

The rise in unemployment due to the pandemic and the resulting economic uncertainty will lead to even higher numbers of eligible Medicaid beneficiaries than what research has previously projected.

The discussion revolves around how best to ensure access to healthcare for these individuals. Expanding Medicaid to provide access to care presents several concerns, including uncertainty of funding and costs, the effectiveness of Medicaid and the impact on existing Medicaid recipients.

Uncertainty of federal funding

The federal government promised to pick up 100% of the cost initially for the newly eligible Medicaid recipients. The rate fell to 95% in 2017, 94% in 2018, 93% in 2019, and 90% for 2020 and beyond. This compares to a 67% match for Georgia’s existing Medicaid population. As entitlement spending and interest on the national debt continue to grow in the near future, the federal government will come under increased pressure to reduce funding. Medicaid spending will be a very large target.

Perverse incentives

Even if the federal government keeps its promise to cover 90% of the cost, the difference in matching rates creates perverse incentives for policymakers. Reducing spending on able-bodied adults creates $1 of state savings for every $10 of spending cuts, while reducing spending for low-income mothers creates $1 of savings for every $3 of spending cuts. This puts budget writers in a difficult position during the inevitable next recession.

Conversely, new spending on any (newly eligible) expansion population would bring $9 for every state dollar as opposed to spending targeted at the more vulnerable populations in the existing Medicaid population.

Medicaid is already crowding out other state priorities

Georgia has struggled to fund existing Medicaid recipients. The state implemented a provider fee in 2010 to raise $689 million to fill a Medicaid funding shortfall. This legislation, intended to sunset in 2013, was renewed again until 2017; in 2019, the Legislature extended the sunset of the fee to 2025. As in other states, the growing cost of the existing Medicaid program (including a “woodwork effect” as more qualified individuals sign up because publicity increases awareness) is diverting money from other important state priorities such as public safety, education, and infrastructure maintenance and improvements.

Negative impact on access for existing vulnerable populations

In Georgia, 70% of practicing physicians accept Medicaid patients; just 65% of physicians accept new Medicaid patients. While these state percentages are in line with the national averages, by comparison 91% of general practice physicians nationwide accept new patients that are privately insured.

With fewer physicians willing to participate in Medicaid due to the lower cost of reimbursement, these patients are left with fewer options for primary care. Adding 255,000 more recipients to the program will further strain the system and could negatively impact existing Medicaid recipients: the elderly, the disabled, pregnant women and children.

Increased emergency room use

Excessive use of expensive emergency room care is one reason often cited for the need for Medicaid expansion. But an extensive study in Oregon showed Medicaid recipients utilized the emergency room 40% more than the uninsured. A majority of the visits were for non-emergency care. A follow-up study found “expanded coverage is unlikely to drive substantial substitution of office visits for ED use.

Very little, if any, improvement in health status

The Oregon study showed no statistically significant improvement in physical health outcomes for Medicaid recipients versus the uninsured. The study showed better diagnosis and treatment for depression, but Forbes’ Avik Roy notes that this could be accomplished at a fraction of the cost of Medicaid coverage.

A separate survey focused on Medicaid expansion in Arkansas and Kentucky also found no statistically significant change in mental or physical health.

Medicaid expansion would triple government spending, produce scant improvement in health outcomes and increase emergency room usage.

Crowd out

As much as a third of the newly insured could be individuals who already have private insurance. According to the Census Bureau, 225,000 Georgia adults under age 65 with income below 100% of the FPL are currently covered by private insurance.

These individuals (or their employers) would be tempted to drop their private insurance in favor of “free” Medicaid coverage. That is one reason the uninsured rate declined less than expected in many Medicaid expansion states.

Lack of cost-effectiveness

By one estimate, the average uninsured individual consumes an average of $1,719 in health care over the course of a year that he or she does not pay for, much of which is covered by taxpayers. The Georgia Department of Community Health estimated in April 2012 that new Medicaid enrollees would cost almost $6,000 per person in 2016.

In June 2016, the White House estimated 389,000 new individuals would be insured if the state expands Medicaid at a cost of $2.85 billion, or more than $7,300 per newly insured individual. (Compare this with the earlier estimate that about 255,000 Georgians fall into the “coverage gap.”) If the estimates are accurate, Medicaid expansion would triple government spending, produce scant improvement in health outcomes, increase emergency room usage and cover more people than necessary.

Giving individuals Medicaid eligibility without access to primary care is like giving them an ATM card with no money in the account.

Access to primary care

One of the central problems with Medicaid is the low reimbursement rates that limit the number of doctors willing to see new patients, causing Medicaid recipients to use hospital emergency rooms, the most expensive place possible, for non-emergency health care needs. Giving individuals Medicaid eligibility without access to primary care is like giving them an ATM card with no money in the account.

One Alternative That Already Has Been Proposed

In 2018, then-candidate Brian Kemp promised to pursue a Medicaid “waiver” as an alternative to expansion. Waivers are as old as the 1965 statute creating Medicaid. They allow states to tailor the program to their specific needs and populations, and over the years most states have had at least one waiver approved by the federal government. One type, the 1115 waiver, is known as a “demonstration waiver” because it allows states to try innovative ideas on a smaller population that, if successful, might be expanded to a larger number of people.

The Kemp administration spent 2019 investigating and designing an 1115 waiver proposal, in tandem with a complementary waiver proposal under the Affordable Care Act, or Obamacare. The administration submitted a Medicaid waiver proposal in December 2019, and as of September 2020 the Trump administration was still vetting it.

The Kemp plan would create a new program called Georgia Pathways that would allow Georgians under 100% of the federal poverty level who do not already qualify for Medicaid to apply for the program. These newly eligible persons typically are adults without dependents who are “able bodied,” i.e. they do not have a disability preventing them from working. To be eligible, a person would also have to engage in 80 hours per month of work or other qualified activities, such as job training or approved volunteer service.

For those recipients who have a job and are offered insurance coverage by their employer, the plan would pick up the employee’s share of the insurance premium rather than enrolling them in a traditional Medicaid plan, if that option is deemed financially advantageous for the state. Besides possibly saving taxpayer dollars, this approach offers some continuity for recipients: In the event their income rises above the eligibility threshold, they could keep their coverage and not have to move from one plan to another. This approach also helps acclimatize low-income workers to private insurance plans and features such as co-pays and deductibles. The program would be capped based on total cost to the state.

The Kemp administration estimates the program would cost about $128 million in the first year, and about $203 million in the second year. The federal government would pay the normal match rate of about 67%, leaving the state to pick up the rest. Once fully implemented, the state projects about 50,000 Georgians would gain insurance through the plan. Importantly, these would not be the same 50,000 at any given time: Unlike traditional Medicaid, whose all-or-nothing design discourages recipients to earn more money lest they lose eligibility and thus their coverage, the 1115 proposal makes for a more seamless transition from Medicaid eligibility for many workers. This should encourage people to continue earning more and to move out of the program, making way for new recipients. By doing so, it stands to help a lot more of the estimated 408,000 eligible Georgians over time than merely the number enrolled at any given time.

 

Finding a Way Forward for the Uninsured and Georgia’s Safety Net

Even with this thoughtful waiver proposal, and its complementary piece on the private market side, Georgia will continue to need to pursue policy innovations regarding health insurance coverage, particularly for low-income residents.

Georgia, like many states, faces a host of healthcare challenges: access to care, too many people without health insurance, failing rural hospitals and unsustainable spending crowding out other priorities – for governments and for families.

The debate over how best to address these challenges has Georgia seemingly stuck between two options: Expand a government program (Medicaid) with its own long list of challenges, or do nothing. It is a false choice to believe those are the only options. Beyond the waiver proposals, Georgia has an opportunity to put forth a better solution.

Georgia, like many states, faces a host of healthcare challenges: access to care, too many people without health insurance, failing rural hospitals and unsustainable spending crowding out other priorities -- for governments and for families.

What if Georgia were to become even more of a leader in creating innovative ways to provide better health for more people at lower cost?

What if Georgia could convert the funds spent subsidizing the care for the uninsured after-the-fact into vouchers or refundable tax credits? Low-income individuals could use the funds to buy in to an employer’s plan, purchase private insurance and fund a Health Savings Account. The value of the funds could be adjusted by age, geography and health status, providing purchasing power for older and sicker individuals and creating an opportunity for cost savings by keeping them healthy.

What if these low-income individuals can’t find insurance at a price they can afford or if they choose not to sign up? These unused funds should follow the people to where they get their care: the safety-net providers in each community. Under such a system, instead of seeing low-income, uninsured patients or patients with Medicaid’s low reimbursement rates, rural hospitals and clinics would be seeing patients with private insurance coverage or receiving funds to cover the cost of the care. Even if no one signed up for insurance in the first year, needed funding would immediately flow to safety-net providers. (Any leftover funds could be used for one-time public health projects.) Eventually, these newly empowered low-income individuals would create the customer demand for new ways to provide access to affordable healthcare.

Georgia is an ideal state to allow the powers of disruptive innovation to attack our healthcare challenges. Georgia is a leader in telehealth, whose use expanded enormously during the COVID-19 pandemic, and health information technology, combined with a robust legislative and regulatory environment for the further expansion of telemedicine. At almost any technology incubator in Georgia, one is likely to find a startup company focused on using technology to improve care to people with chronic diseases. Combining these assets in unique ways could make Georgia a leader in solving the nation’s healthcare problems.

This alternative would cost less than what the federal government was willing to spend on Medicaid expansion, so Georgia would be in a good position to limit the cost to state taxpayers.


Recommendations:

Create a patient-centered approach to the uninsured

Uninsured, low-income adults would be offered premium assistance (individual amounts risk-adjusted based on age, geography and health status) to enroll in a plan that meets minimum standards for primary care and catastrophic coverage. If no plans are available at this price or the individual chooses not to sign up, a mechanism can be set up to ensure federal funds reach safety-net providers who end up providing the care for these individuals.

Critical components:

  • Access to primary care (the biggest challenge with Medicaid) through a Direct Primary Care arrangement, where possible.
  • Catastrophic insurance coverage to protect individuals and taxpayers.
  • Personal responsibility: Individuals would contribute to the premium, up to a maximum percentage of their income.
  • Engagement: Rewards and incentives focused on those with chronic disease. Compliant individuals may have their deductibles lowered or eliminated.
    Safety net provision: If an individual doesn’t “sign up” the funding will be available to safety-net providers.
  • Commercial availability: Poor have access to the same private plans as everyone else.
  • “Braided” payments: In addition to the government subsidy and the required individual contribution, funds can be supplemented by employers, charitable or religious organizations and/or friends and family.

Benefits:

  • Improved access to physicians means better, more timely care, reducing ER use.
  • Uses existing funds more effectively.
  • Access to care and treatment for unexpected, expensive conditions such as cancer.
  • Stabilizes rural hospitals.
  • Requires personal responsibility and involvement.
  • Showcases market solutions and encourages innovation; if this works for Georgia’s poor it could revolutionize healthcare for the nation.

Expand access to primary care

Charity Care: Regardless of Georgia’s decision on Medicaid expansion, hundreds of thousands of Georgians will remain uninsured. One immediate way to help the uninsured (and save money) is to provide access to primary care clinics instead of expensive and unnecessary trips to emergency rooms. Thanks to leadership and private support, Georgia is a national leader in charity care. Leveraging this great asset should be the first step to helping the indigent and uninsured.

One immediate way to help the uninsured (and save money) is to provide access to primary care clinics instead of expensive and unnecessary trips to emergency rooms.

Direct Primary Care (DPC) is an approach that has grown increasingly popular across the nation. Sometimes referred to as ‘retainer practices,’ DPC practices generally do not accept health insurance, instead serving patients in exchange for a recurring monthly fee – usually $50 to $80 – for a defined set of clinical services,” according to the California Healthcare Foundation. Along with personalized healthcare, DPC practices offer longer hours and telehealth appointments (phone or video), important to low-income individuals who may be unwilling or unable to skip a work shift to visit a physician.

Writing in Forbes magazine, David Chase explains how DPC could be used for low-income individuals:

The issue of using DPC for the poor is from my point of view a no- brainer. Why use the most expensive inflationary system available (by which I mean the insurance system, whether public or private) to take care of those with the least money and most in need of basic services? The structure that makes sense to me is to create a thriving marketplace in direct primary care, competing on price, access and quality – and working exclusively for our patients. Then add a fixed monthly stipend for primary care for every Medicaid patient in the United States – a stipend that covers the lowest priced/highest functioning primary care available. This could be a voucher or credit card account for each Medicaid patient. The allowance could only be spent on primary care and the patients could buy up to higher priced practices if they saw value worth purchasing. That would convert the Medicaid patient from being a low-paying, high-utilizing patient to a valued customer who can pay cash for care at a reasonable price. This makes all kinds of sense economically:

    • No government management system to control or manage care – it manages itself with the patient at the helm
    • Converting dependent impoverished citizens into patients with economic clout and respectful treatment
    • Eliminating the cost overhead of insurance billing on both the physician and the government side
    • No more barriers to basic care for Medicaid patients – they can use all they need
    • Eliminating the fee-for-service incentive disaster that produces massive overutilization and huge downstream expenses
    • Financially stabilizing the primary care world with consistent monthly fee payments to cover our fixed costs while allowing those docs with better ideas or higher prices to go for the upscale patients or those wanting better artwork and longer visits
    • Free up primary care docs to further improve their quality, access and patient-centered services – not their billing savvy

One of the drawbacks of participation in DPC is that physicians are not allowed to treat Medicare patients: Federal laws prohibit charging rates lower than Medicare rates. Unless this federal mandate is waived, it would preclude many rural doctors from participation.

Retail Clinics: Many healthcare institutions have established after-hours clinics. In addition, the private sector has responded with retail clinics that are often found in grocery stores or other retail settings. These clinics are staffed by nurse practitioners and offer convenient, low-cost primary care services. Walmart launched its standalone healthcare “Super Centers” in Georgia in 2019.

Expand scope of practice

Allowing for a reasonable expansion of the scope of practice of advanced practice nurses and other medical personnel could help enhance critical access to care and address shortages of physicians and dentists in many areas of Georgia.

In its 2018 annual report, the Georgia Board of Health Care Workforce found that nine Georgia counties did not have any practicing physicians, 60 counties lacked a pediatrician, and 76 did not have an OB/GYN. Increasing opportunity for advanced practice nurses to practice medicine to the full extent of their training will help address these shortages.

Encourage innovation

In 2014, Georgia instituted the Rural Hospital Stabilization Committee (RHSC) to address the systemic challenges around rural hospitals and the communities they serve. The overarching goals were defined as “increase market share, reduce potentially preventable readmissions, reduce non-emergency care and ‘super-users’ served in the emergency department and increase access to primary care.”

Notably, of the 52 projects funded by the Rural Hospital Stabilization Grant during its initial three years, 13 were centered on telehealth. School-based telehealth clinics were the most popular among these. The primary goal was to increase immediate access to healthcare for children, but these projects also acknowledged the economic cost that comes when a parent is forced to take off work to bring their child to a physician.

Today, telehealth companies are also making use of their equipment in schools to expand healthcare access to the parents of students and to teachers. Creating additional opportunities for the working poor to benefit from innovative options for convenient care such as telehealth, mobile health, direct pay options and DPC services echoes studies showing that for the working poor, a lack of time may be even more important than lack of money.

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