PRIORITY ISSUE: Medicaid Reform

Status: The state legislature finished action on the state's Medicaid budget on March 31, 2005. Among the actions taken were: Medicaid Cap The legislature approved a cap on the local share of medicaid costs beginning in 2006. Under this plan, the state would be responsible for any growth in the plan exceeding 3.5% in 2006; 3.25% in 2007 and 3% in the following years. A "Preferred Drug Program" for medicaid was adopted along with a statewide disease state management program. Health Facilities Commission The legislature and the Governor agreed-to a new "Commission on Health Care Facilities in the Twenty-First Century" to "undertake a rational, independent review of health care capacity and resources in the state and to ensure that the regional and local supply of general hospital and nursing home facilities is best configured to appropriately respond to community needs for quality, affordable and accessible care, with meaningful efficiencies in delivery and financing that promote infrastructure stability." There will be a series of boards: 1) a commission of eighteen statewide members appointed by the Governor and legislative leaders; 2) six regional members of the commission for six regions of the state, appointed by the Governor and legislative leaders; and 3) regional advisory committees for the six regions, the number of members to be decided by the Commission. "On or before December 1, 2006, the Commission shall transmit to the Governor and legislature a report containing its recommendations." Health Care Quality Demonstration Programs There are two demonstration programs that were created as part of S.3668, the Medicaid and HCRA bill. Both demonstration programs are supported by The Business Council.

Total (all funds) spending on Medicaid will exceed $44.5 billion in 2005-06. Over the last five years Medicaid spending was responsible for 35.5% of the total increase in all funds spending; education was next at 9.8%.

Medicaid costs are now the biggest driver of state spending increases. The inability to control these costs is limiting the state's ability to meet other pressing needs while burdening taxpayers at the state and local levels.

At the county level, Medicaid costs have forced counties to significantly increase real property and sales taxes. Five counties are approaching their constitutional tax limit. 

Despite its high costs, providers and payers are frustrated by a system whose fragmented structure serves neither the recipient nor the taxpayer well.

Business Council Priorities

It is time to adopt fundamental reforms which will improve health outcomes and reduce costs. Among the reforms which will aid patients and taxpayers alike are the following:

• Providing for coordinated care for that portion of the medicaid population not currently in managed care.  Many of the individuals in this category have conditions which are most in need of, and which would benefit most from, well designed coordinated care plans.  The 18% of the Medicaid population not in managed care represent 48% of the cost of the program.
• Expanding the disease state management demonstration program enacted as part of the 2004 budget into a statewide program. The benefits of disease state management are well recognized and utilized by leading health plans and systems. The state needs to move aggressively to encourage a vastly expanded program of disease state management.
• Rightsizing the long term institutional care capacity in this state by providing for expanded, lower cost settings while converting or downsizing higher cost settings. The long term care community has long argued that the state's current policies have resulted in having fewer lower cost options available for caring for the elderly.
• Adopting the "Santulli" plan for providing a local county option on the design of benefits offered under Medicaid. Local governments should have the option to tailor the plan to meet the needs of their Medicaid population. 

These proposals offer the potential for significant savings and significant improvement in the care provided Medicaid recipients. Others have proposed or will be proposing reforms which we also should be considering. Our list of reforms does not purport to represent the full compendium of changes which should be considered and supported. Rather, they focus on four key recommendations which we believe should be part of any comprehensive reform package.

If adopted, the state would be in a position to cap or to assume the local cost of Medicaid - a position we support if cost containment reforms are enacted and savings at the local level are returned to the taxpayer.