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I attended a Medicaid conference in Washington, D.C. on June 27 and 28. The non-partisan Council of State Governments organized the conference for state legislators to address ongoing growth in Medicaid costs and expected changes in Medicaid programs.
This is the first of two columns on Medicaid. This column discusses the current program. The next column will discuss Medicaid’s future in New Mexico. The June 28 PPACA decision by the Supreme Court makes these issues even more timely and important.
Why does Medicaid matter to New Mexicans? Health care is the fastest growing part of New Mexico’s budget (almost double the growth of any other major item in ten years) and Medicaid funding is the largest component of that item. New Mexico will spend almost 20 percent of FY2013 general fund dollars on Medicaid.
The federal government created the Medicaid program in the 1960s primarily to provide medical care for poor children. Since that time the program has expanded to provide medical care for more patients than any other medical care funding source except private insurance. Average national monthly enrollment is now 56 million people at a yearly cost of $459 billion. It has also become increasingly complex as different populations have been added to the eligibility rolls with different funding formulas, provider reimbursements, and program goals.
Medicaid’s basic structure is a state administered/federally supported partnership. The Federal Government pays between 50 percent and 77 percent of Medicaid costs and establishes basic enrollee eligibility and services. States can expand both eligibility and services within limits. The state cost share is based on the poverty level and New Mexico receives one of the higher federal match rates — over 70 percent.
Major national Medicaid issues are also New Mexico’s: (1) program complexity, (2) cost of caring for aging populations, (3) cost of care for subgroups, and (4) the impact of PPACA.
As far back as 1978, a memo to Joseph Califano, the U.S. Cabinet Secretary responsible for Medicaid complained, “The structure of Medicaid produces serious problems…..and Medicaid is complex and difficult to administer.” It hasn’t gotten better. In 2010, New Mexico had 39 different population/program groups covering approximately 480,000 enrollees with a myriad of regulations and funding rules for different groups.
Second, most Medicaid spending is now spent to care for the elderly, including such items as nursing home payments, payments for services not covered by Medicare, and long term home care. As baby boomers age Medicaid costs pressures will grow.
Third, Medicaid costs are disproportionate. Nationally, 50 percent of enrollees account for 5% of Medicaid costs—these are mostly children who were the original target for Medicaid benefits. 1 percent of enrollees account for 25 percent of costs (approximately $115 billion), and 5% account for 54 percent of costs ($248 billion).
Finally, Medicaid benefits are tremendously important to underserved populations. National studies have documented benefits of Medicaid-funded health care for the elderly, the disabled, and children — and also, importantly, for the financial survival of health care providers in underserved areas.
The next column will discuss Medicaid’s future in New Mexico and the impact of the PPAC — both good news and challenges.
Jim Hall is the state representative for District 43.