What others say: Expanding a broken system

  • Monday, July 27, 2015 5:45pm
  • Opinion

Now that Gov. Bill Walker has done an end-run around the legislative branch to expand Medicaid, it’s worth a look at how growing the program is going in other states.

Here’s a roundup of Associated Press headlines from the last week:

“Surge in Medicaid enrollment will squeeze Michigan budget”

“Maryland Medicaid expansion much higher than forecast”

“New Hampshire among states with surging Medicaid enrollment”

“ND Medicaid expansion costs higher than previously forecast”

“California’s Medicaid enrollment surpasses projections”

“In Illinois, Medicaid expansion sign-ups double predictions”

“New Mexico among states where Medicaid enrollment surges”

“Nevada expects to spend more on Medicaid than planned”

“Oregon underestimated Medicaid expansion price tag”

As part of a special report, the AP found that more than a dozen states — nearly half of the 30 who have expanded Medicaid — have seen enrollment and costs swell beyond their original projections.

To be sure, the idea of insuring those of lesser means is a noble one. The hard question that hasn’t been answered is how the state is going to pay for it. To hear Walker tell it, there is no downside. The experience of other states so far tells a different story.

For a state facing billions in deficits that stand to erase our savings account within the next few fiscal years, it’s a heck of a coin flip to grow the largest cost in the budget without any reform outside of hiring a consultant or any spending offsets such as a provider tax as in Utah’s current Medicaid expansion proposal.

Walker recently vetoed $200 million in oil exploration tax credits, capping this year’s expenditures at $500 million, declaring the current system “unsustainable” and vowing to start a discussion about reforming the program.

The state Medicaid program — to say nothing of the total U.S. population on Medicaid that now encompasses 1 in 5 Americans, or about 70 million people, at a cost of some $450 billion per year — is the very definition of unsustainable.

Just this year, Walker’s own budget proposal included a $20 million cut in Medicaid spending for existing enrollees; the Legislature added another $30 million in cuts. Those cuts generated a corresponding loss of federal matching funds for a total reduction of $100 million.

In short, the state is already cutting a program that Walker has now expanded.

Those cuts led the state to eliminate inflation-adjusted increases in Medicaid reimbursements to providers who have already been hammered by the malfunctioning payment system administered by Xerox. There is also an existing enrollment backlog of people eligible under the old criteria who will not be 100 percent paid for by the federal government.

Well aware of the existing criticism about adding people to a broken payment system, Walker and his Health and Social Services Commissioner Valerie Davidson said Xerox is making improvements and now paying about 90 percent of claims correctly.

Nine out of 10 may sound good, but in fact it’s pretty terrible for a system that pays out $1.5 billion per year. According an affidavit detailing the state’s complaint against Xerox filed by Director of Health Care Services Margaret Brodie in February, the error rate under the legacy Medicaid payment system was 0.47 percent in 2008 compared to a national average of 2.62 percent.

In February, Brodie wrote that the state estimate for the Xerox error rate was somewhere between 6 percent and 12.4 percent. If the top end of the error rate was 12.4 percent, getting it to less than 10 is a somewhat marginal improvement at best.

This matters because the state has to reimburse the federal government for erroneous Medicaid payments. Take 10 percent of $1.5 billion and we’re not talking chump change here.

One thing in particular that stood out at Walker’s pep rally July 16 was the appearance of the Department of Corrections commissioner touting the savings to the system from Medicaid expansion.

According to the University of Alaska Anchorage, the state prison population grew by 30 percent from 2004 to 2013 and now stands at more than 5,000 people. That’s compared to the state’s population growth of about 12 percent in the same time.

As of 2013, only a tiny fraction of those under correctional supervision — just 295, or less than 6 percent — were on some form of electronic monitoring.

Reducing the prison population and reforming sentencing to reduce recidivism and get more people out of the system and into the workforce would be a far better path than simply finding someone else to foot the bill.

Frankly, this aspect of expansion is the most troubling in that it exemplifies the fundamental failure to choose reforms instead of more federal dollars.

— Alaska Journal of Commerce, July 23

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