Is the Medicaid Commission a flop?

Imagine opening night of a long-awaited Broadway musical. The theater is packed with an audience hopeful for a first glimpse at a long-running hit. As the lights dim, however, the public-address system announces that one of the show's biggest stars has decided not to perform. And as the curtain rises and the music begins, it becomes clear that the orchestra and the singers have been provided two different musical scores.

That's similar to the impression that many observers received of the first meetings of the congressionally mandated Medicaid Commission. Since February, when a bipartisan group of U.S. senators introduced legislation for a commission to address the many issues affecting Medicaid, the long-term care industry has been hopeful that Washington might at last listen to its concerns. This hope blossomed when the commission was grudgingly approved by the Bush administration and its 23 members appointed. The nursing home industry is indeed represented among the required four members chosen who each is "a health care provider that provides a disproportionate share of care to recipients of benefits under Medicaid ..." In addition, long-term residents are represented among the required four commission members who each is "an advocate for populations who are served by Medicaid."

But the effectiveness of the long-term care members of the Medicaid Commission is not guaranteed because Medicaid encompasses far more than long-term care. The elderly and disabled requiring nursing home care amount to less than 20% of all Medicaid recipients. Originally a federally assisted state program primarily to cover indigent hospital care, Medicaid has grown to be the primary insurance for approximately one-sixth of all U.S. residents. In 2004, it paid for:

* more than one-third of all births recorded in the United States;

* healthcare for roughly one-fourth of all children in the United States;

* 60% of all public mental healthcare for people with severe mental illnesses; and

* healthcare for 55% of all individuals living with HIV/AIDS.

Most importantly, Medicaid accounts for 40 cents of every dollar transferred from the federal government to states and as much as 30% of the budgets of some state governments.

The commission envisioned by Congress was given a very broad agenda and a very tight time frame. It was charged with making recommendations for a clearer division of the federal and state roles and responsibilities under Medicaid, as well as the interaction of Medicaid with Medicare and other federal health programs. It also was charged with developing proposals to improve health quality, coordinate services and providers, and implement managed care protections for Medicaid enrollees with special healthcare needs. As if this weren't enough, the commission also was expected to address patient enrollment and payment policies for various providers. Finally, the commission members have been asked to identify issues that either threaten or improve the long-term financial condition of Medicaid, including demographic changes, federal and state revenue options, and private-sector health coverage.

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The congressional resolution that established the Medicaid Commission requires that the 23 members complete their work within 14 months. Each of the commission's recommendations on changes in Medicaid policy must be accompanied by an analysis of the effect of the recommendation on federal and state expenditures, provider payment rates, patient access to covered items and services, and patient out-of-pocket expenses. This is clearly a task for a well-funded team of healthcare economists rather than a small panel consisting of provider and patient advocates and government officials, and even then there is no assurance that any of the recommendations would be adopted by Congress. Nevertheless, there has been hope that the broad representation on the commission and the help with research methodology provided by experts employed by the Congressional Research Service will produce a set of innovative ideas that can address many of Medicaid's problems.

Some of these hopes were dampened when the Bush administration insisted that the first order of business of the new commission is to make recommendations on how to cut $10 billion from the federal share of Medicaid over the next five years. Although federal cuts were not mentioned in the congressional resolution and are not required by any law, Secretary of Health and Human Services Mike Leavitt insisted that the commission complete its budget-cutting recommendations by September 1--fewer than 40 days after its first meeting. (Readers will by now be able to judge whether that deadline was met.)

Several of the "consumer advocates" on the commission are crying foul about the change in their responsibilities. They signed onto the commission to shape an agenda that would improve the system's operation for Medicaid patients rather than sacrifice the interests of the states, the patients, and the providers for the sake of reducing the federal deficit. According to Families USA, an advocacy organization for low-income and uninsured families with children, the September 1 deadline showed "why the commission is, and should be, viewed as a rubber stamp for the Administration's attempts to slash America's health safety net.... This pace makes rational deliberation impossible. The commission can only meet this deadline if it simply ratifies predetermined outcomes."

State governors have an even larger gripe about the commission. In selecting the commission membership, Congress provided only two seats for the chief executives of the entities that actually operate the Medicaid program, as well as two seats for sitting members of state legislatures. In effect, the officials who are directly responsible for paying the costs of Medicaid--with the help of shrinking federal grants--are outnumbered on the commission by the representatives of healthcare providers, patient advocates, and former members of Congress. The state officials are concerned that their lack of proportionate representation means that the commission might not focus adequately on the inability of states to pay their share of Medicaid.

As mentioned in previous columns, the states face massive problems in raising sufficient funds to keep up with the growth in Medicaid costs. State revenues are limited. State governments are under strong pressure to reduce sales taxes and state income taxes, and they are finding relatively small returns from trying to fund programs from tobacco and alcohol taxes, gambling revenue, and fees for such services as professional licensure. Next year, the states are being asked to return hundreds of millions of dollars to the federal government to pay for a portion of Medicare Part D pharmaceutical benefits, and the Bush administration is demanding billions in additional "savings" on federal Medicaid grants to the states.

The governors have reacted in two ways. Michigan Gov. Jennifer M. Granholm (D) has suggested that governors should not participate on the commission for now. Her suggestion was endorsed by Gov. Haley Barbour (R) of Mississippi, and eventually adopted as policy by the National Governors Association (NGA). Since the NGA was assigned the responsibility by Congress of appointing gubernatorial representatives on the Medicaid Commission, the "nonparticipation" policy has resulted in a virtual boycott of the commission by the governors.

On July 15, the governors also voted to support a Medicaid reform package drafted by the NGA. Its principal features include higher out-of-pocket costs for low-income patients served by Medicaid, significant changes in state purchasing of prescription drugs, and moving to a five-year "look back" at asset transfers to determine eligibility for Medicaid-funded long-term care. Sen. Charles E. Grassley (R-Iowa), chair of the Senate committee responsible for enacting major Medicaid changes, reportedly has promised to hold hearings on the NGA proposals before the Medicaid Commission makes its final recommendations.

The imposition of an arbitrary goal of $10 billion in Medicaid cuts and the appearance of a competing NGA reform package do not guarantee that the commission will be a flop. These could merely be signs of "opening night" jitters. Judging from the rumblings of Washington critics making notes in the audience, though, the Medicaid Commission will have to perform all out to justify its strong advance billing.

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