Reforming Medicaid for People with Disabilities

Covered Families with Children (CFC) is a fairly homogenous group of Medicaid beneficiaries. It is also a fairly healthy group. This is one reason why states have had considerable success in moving this group into private, managed care programs. It is also the reason why we anticipate success in moving this group into other private sector insurance, including employer plans. People with disabilities pose a harder problem because their problems range from schizophrenia to mental retardation to blindness. Further, this has been an area of exploding costs. [See Figure II.]

"To care for people with disabilites, we need to contract with the private sector."

Contracting with the Private Sector. The many different health needs of these groups make it unlikely that a private insurer will insure the whole group, as a group. The state of Florida has had some success in finding private sector entities who will contract to care for people with specific types of disabilities. States need to explore such opportunities. For example, disparate providers could serve the mentally ill, the physically disabled, the drug addicted and so forth. The comparative advantage of these various providers would serve to reduce costs and possibly increase the quality of service.57

Empowering Patients. As noted above, several states have had some success with "Cash and Counseling," which gives beneficiaries control over some of the health care dollars and allows them tdiscretion in using those dollars. More such empowering programs are needed.

"Care for the people with disabilities has experienced the fastest growth."

Monitoring Eligibility. A large number of people with disabilities access Medicaid benefits by qualifying for federal Supplemental Security Income (SSI). This program has a history of being riddled with fraud and abuse.58 It is not difficult to understand why. Since coverage often is related to medical conditions that are fairly easy to fabricate or exaggerate, individuals and parents have incentives to misrepresent their medical conditions. Unlike the poor and near poor, whose income and assets can be documented, these recipients can "game" the system to obtain coverage.

Most states could better determine who qualifies for Medicaid disability coverage by separating it from SSI coverage. States can provide additional resources to the appropriate screening bureau or create a panel to judge whether individuals are truly disabled. Savings from removing the unqualified from the rolls would serve as the funding source.

Tailoring Benefit Packages. Given varying degrees of disability, the benefits package could be constrained so as to pay only those health costs related to the disability, depending on the severity of the health problem, and could offer premium support on a sliding scale.