Medicaid Empire: Why New York Spends so much on Health Care for the Poor and Near Poor and How the System Can Be Reformed

Studies | Health

No. 284
Monday, March 20, 2006
by John C. Goodman, Michael Bond, Devon M. Herrick, Joe Barnett, and Pamela Villarreal


Notes

  1. "The Fiscal Survey of States," National Governors Association and National Association of State Budget Officers, June 2005.
  2. Medicare is funded by the federal government through a combination of payroll taxes, premiums paid by beneficiaries and transfers from general revenues. Federal expenditures on Medicaid have about doubled in the last 10 years, rising from $89 billion dollars in 1995 to $176 billion in 2004. See "Budget of the United States Government, Fiscal Year 2006," Historical Tables, Office of Management and Budget, February 23, 2005, pages 133-134.
  3. Medicaid and other health expenses already account for about 22 percent of state spending. See "The Fiscal Survey of States," National Governors Association and National Association of State Budget Officers, June 2005.
  4. Vernon Smith et al., "The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005, Results from a 50-State Survey," Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation, October 2004.
  5. Enrollment is expected to grow an average of about 4 percent annually through 2006. See "The Fiscal Survey of States," National Governors Association and National Association of State Budget Officers, June 2005.
  6. Estimates of eligibility for public health care programs vary. One study found that just over half (51.4 percent) of eligible, nonelderly adults were enrolled in Medicaid in 1997. Of the remaining adults who were Medicaid eligible, 21.6 percent had private coverage while 27 percent were uninsured. Another study found that about seven million uninsured children eligible for either SCHIP or Medicaid are not enrolled. See Amy Davidoff, Bowen Garrett and Alshadye Yemane, "Medicaid-Eligible Adults Who Are Not Enrolled: Who Are They and Do They Get the Care They Need?" Urban Institute, Series A, No. A-48, October 2001. Of those children eligible for Medicaid or SCHIP, one-third are eligible for SCHIP while two-thirds are eligible for Medicaid. Eight percent of uninsured, low-income children are illegal aliens and, as such, not eligible for either Medicaid or SCHIP. See Lisa Dubay, Jennifer Haley and Genevieve Kenney, "Children's Eligibility for Medicaid and SCHIP: A View from 2000," Urban Institute, Series B, No. B-41, March 2002. Also see "The Uninsured in America ," Blue Cross Blue Shield Association, February 27, 2003.
  7. Statement of Raymond C. Scheppach, Executive Director, National Governors Association, before the Medicaid Commission on Short-Term Medicaid Reform, August 17, 2005.
  8. "Changes in Participation in Means-Tested Programs," Congressional Budget Office, Economic and Budget Issue Brief, April 2005. Available here; "Change in Number of AFDC/TANF Recipients," U.S. Department of Health and Human Services, Office of Family Assistance. Available http://www.acf.hhs.gov/programs/ofa/annualreport6/chapter01/0111a.htm.
  9. "Medicaid: An Overview of Spending on 'Mandatory' vs. 'Optional' Populations and Services," Kaiser Commission on Medicaid and the Uninsured, June 2005.
  10. Based on 2002 estimates from "Medicaid Expenditures for Dual Eligibles (full and partial) by State, 2002," Kaiser Commission on Medicaid and the Uninsured. Available here. Access verified January 4, 2006. See also John Holahan and Brian Bruen, "Medicaid Spending: What Factors Contributed to the Growth Between 2000 and 2002?" Kaiser Commission on Medicaid and the Uninsured, September 2003.
  11. Potential medical providers, including physicians and clinics, were called by surveyors who posed variously as Medicaid, uninsured or insured patients seeking an appointment for a specific condition with a set of symptoms. The conditions described by the callers are considered medically urgent. Attempted access was considered successful when the caller was able to schedule an appointment within seven days. The surveys were conducted in major, geographically-dispersed urban areas. Brent R. Asplin et al., "Insurance Status and Access to Urgent Ambulatory Care Follow-up Appointments," Journal of the American Medical Association , Vol. 294, No. 10, September 14, 2005, pages 1,248-1,254.
  12. Richard Pérez-Peña, "At Clinic, Hurdles to Clear Before Medicaid Care," New York Times , October 17, 2005.
  13. Richard Pérez-Peña, "Trying to Get, and Keep, Care Under Medicaid," New York Times , October 18, 2005.
  14. Allison Sherrym, "Doctors say Colorado Hospital is Refusing Poor Patients," Denver Post , October 22, 2003.
  15. Heath Foster, "Low-Income Patients Left Waiting for Care," Seattle Post-Intelligencer Reporter , January 26, 2004.
  16. Table, "Medicaid Managed Care Enrollment as of June 30, 2004," Centers for Medicare and Medicaid Services.
  17. See "Medicaid Managed Care Penetration Rates by State," in "2004 Medicaid Managed Care Enrollment Report," Centers for Medicare and Medicaid Services , June 30, 2004 , . Access verified November 15, 2005.
  18. Presumably, plans are able to pay more because of other cost-reducing efficiencies.
  19. Outside of New York City , Medicaid uses traditional managed care organizations. See Richard Pérez-Peña, "Trying to Get, and Keep, Care Under Medicaid."
  20. However, these plans cannot use the techniques private plans use to control utilization and costs — such as requiring preauthorization of services, and patient copays and deductibles.
  21. See Ronald E. Bachman, "Giving Patients More Control," National Center for Policy Analysis, Brief Analysis No. 399, June 17, 2002; and Greg Scandlen, "Defined Contribution Health Insurance," National Center for Policy Analysis, Policy Backgrounder No. 154, October 26, 2002.
  22. Kaiser Commission on Medicaid and the Uninsured.
  23. Examples of long-term care optional benefits include Intermediate Care Facilities - Mental Retardation (ICF-MR), inpatient and nursing facilities for individuals over age 65 in an institution for mental disease, home health care, case management, respiratory care for ventilator-dependent individuals, personal care, private duty nursing, hospice, Programs of All-Inclusive Care for the Elderly (PACE) and home- and community-based services. Similar optional services must be provided to children shown to need them. See Kaiser Commission on Medicaid and the Uninsured, June 2001. See "Medicaid 'Mandatory' and 'Optional' Eligibility and Benefits," Kaiser Commission on Medicaid and the Uninsured, Policy Brief No. 2256, July 2001. Also see John Holahan, "Restructuring Medicaid Financing: Implications for the NGA Proposal," Kaiser Commission on Medicaid and the Uninsured, Policy Brief No. 2257, June 2001.
  24. "HIFA: Will it Solve the Problem of the Uninsured?" National Health Law Program, HIFA Talking Points, February 28, 2002.
  25. For a discussion on factors that influence state Medicaid spending see Robert J. Buchanan, Joseph C. Cappelleri and Robert L. Ohsfeldt, "The Social Environment and Medicaid Expenditures: Factors Influencing the Level of State Medicaid Expenditures," Public Administration Review , Vol. 51, No. 1, January/February 1991, pages 67-73.
  26. Regression analysis by Pamela Villarreal, an NCPA graduate student fellow, based on U.S. Census data and Medicaid data from the Kaiser Family Foundation.
  27. For a description of how the Medicaid federal match is calculated see "Medicaid Formula: Differences in Funding Ability among States Often Are Widened," General Accountability Office, Report No. GAO-03-620, August 11, 2003, Appendix I: Legislative History and Description of the Matching Formula.
  28. Ibid, page 4.
  29. Leslie G. Aronovitz, "Medicaid Fraud and Abuse: Stronger Action Needed to Remove Excluded Providers from Federal Health Programs," U.S. General Accounting Office, GAO/HEHS-97-63, March 1997.
  30. Maurice Passley, Bonita Brodt and Tim Jones, "Medicaid: System in Chaos," a series in nine parts, Chicago Tribune , October 31-November 9, 1993.
  31. Clifford J. Levy and Michael Luo, "New York Medicaid Fraud may Reach into Billions," New York Times , July 18, 2005.
  32. See "Supplemental Security Income: Action Needed on Long-Standing Problems Affecting Program Integrity," Report to the Commissioner of Social Security, U.S. General Accounting Office, GAO Report HEHS-98-158, September 1998.
  33. "Medicaid's architects envisioned a program that would provide poor people with mainstream medical care in a fashion similar to that of private insurance. As the decades have passed, that vision has largely faded…poor people continue to rely on providers that make up the nation's medical safety net: public and some not-for-profit hospitals and clinics [that] by virtue of their location or social calling provide a disproportionate amount of care to the poor." John K. Iglehart, "The American Health System-Medicaid," New England Journal of Medicine , Feb. 4, 1999, pages 403-408.
  34. Medicaid spending per recipient varied from $4,425 to $2,101; a difference of about $2,300 . Adding spending on free care for the uninsured to Medicaid spending reduced the variation in health care spending to less than $1,200. NCPA analysis of health regions in Texas . See John C. Goodman, "Minority Report of the Texas Blue Ribbon Task Force on the Uninsured," in Sen. Chris Harris (Chairman) and the Members of the Texas Blue Ribbon Task Force on the Uninsured, "Texas Blue Ribbon Task Force on the Uninsured," Report to the 77th Legislature, State of Texas, February 2001, page 42.
  35. Janet Currie and Jonathan Gruber, "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," Quarterly Journal of Economics, May 1996, pages 431-466.
  36. "Learning from SCHIP and Learning from SCHIP II," Agency for Health Care Policy Research, June 1998.
  37. See Janet Currie and Jonathan Gruber, "Saving Babies: The Efficacy and Cost of Recent Expansions of Medicaid Eligibility for Pregnant Women," Journal of Political Economy , December 1996, pages 1,263-1,296.
  38. See Janet Currie and Jonathan Gruber, "Health Insurance Eligibility, Utilization of Medical Care, and Child Health," National Bureau of Economic Research, NBER Working Paper No. 5052, March 1995.
  39. Laura-Mae Baldwin et al., "The Effect of Expanding Medicaid Prenatal Services on Birth Outcomes," American Journal of Public Health , Vol. 88, No. 11, November 1998, pages 1,623-1,629.
  40. "Increased Access to Medicaid Had Little Effect on Pregnancy Care or Outcome," National Program Project Report, January 2001. Results for project: Effect of Expanding Medicaid Coverage on Health Outcomes, Robert Wood Johnson Foundation. Available here. Access verified August 26, 2005.
  41. Michael F. Cannon, "Medicaid's Unseen Costs," Cato Institute, Policy Analysis No. 548, August 18, 2005.
  42. Jonathan Gruber and Aaron Yelowitz, "Public Health Insurance and Private Savings," Journal of Political Economy, Vol. 107, No. 6, part 1, December 1999, page 1,259. Cited in Michael F. Cannon, "Medicaid's Unseen Costs." Cannon also notes that substituting consumption for asset accumulation (such as purchasing a car for transportation to work) decreases the likelihood of escaping poverty.
  43. For instance, it was widely assumed that the 1996 welfare reforms, which limited the eligibility of immigrants for Medicaid, would increase the uninsured rate of that population. Instead, the immigrant uninsured rate fell slightly as more immigrants purchased private insurance. See George Borjas, "Welfare Reform, Labor Supply, and Health Insurance in the Immigrant Population," Journal of Health Economics , Vol. 22, No. 6, November 2003, pages 933-958.
  44. However, the loss of private insurance is likely to cause a small, offsetting increase in government revenues as employers substitute taxable wages for previously untaxed health benefits.
  45. David M. Cutler and Jonathan Gruber, "Does Public Insurance Crowd Out Private Insurance?" Quarterly Journal of Economics , Vol. 111, No. 2, May 1996, pages 391- 430. Also see Tanya T. Alteras, "Understanding the Dynamics of 'Crowd-out': Defining Public/Private Coverage Substitution for Policy and Research," Academy for Health Services Research and Health Policy, prepared for the Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization Program, June 2001, pages 14–15; and RAND Health, "State Efforts to Insure the Uninsured: An Unfinished Story," RAND, Research Highlights, 2005.
  46. Ibid. Cutler and Gruber found that most of the reduction came from workers deciding to drop private coverage (particularly for dependents) rather than because their employers stopped insurance coverage.
  47. Peter J. Cunningham and Michael H. Park, "Recent Trends in Children's Health Insurance: No Gains for Low-Income Children," Center for Studying Health System Change, Issue Brief No. 29, April 2000; and Community Tracking Survey.
  48. David M. Cutler and Jonathan Gruber, "Does Public Insurance Crowd Out Private Insurance?"
  49. Ibid. Based on NCPA calculations comparing the years 1997 and 2003.
  50. Bradley C. Strunk and James D. Rescholsky, "Trends in U.S. Health Insurance Coverage, 2001-2003," Center for Studying Health System Change , Tracking Report No. 9, August 2004.
  51. Data from New York State Budget. Accessed July 2005. Population figures from the U.S. Census Bureau, Department of Commerce.
  52. Since Medicaid enrollees join and drop off the rolls during the year, average Medicaid enrollment is lower than total enrollment. Spending per full-time equivalent enrollee was $6,580 in 2003. Authors' calculations using June 30, 2004, enrollment data, from the Centers for Medicare and Medicaid Services, and "Medicaid Spending 2004," Kaiser Family Foundation, available at StateHealthFacts.org.
  53. NCPA analysis by Pamela Villarreal, based on the American Chamber of Commerce Research Association (ACCRA) cost of living index for the 2nd quarter of 2004 and figures for Medicaid spending. ACCRA compiles a quarterly cost of living index based on comparative survey data from various metropolitan and micropolitan areas. The index measures the cost of living based on a "basket of goods," such as housing, groceries, health care and utilities, and are weighted according to government survey data on expenditure patterns.
  54. Denise Soffel, "Federal Medicaid Reform: What's at Risk for New York ," Community Service Society, Policy Brief No.11, June 2003.
  55. "March 2005 Medicaid Eligibility," Department of Health, New York State , March 2005.
  56. Data from Centers for Medicare and Medicaid Services; accessed December 2005. Population figures from the Census Bureau, U.S. Department of Commerce.
  57. "Confronting the Tradeoffs in Medicaid Cost Containment," Citizens Budget Commission, February 2004. Access verified December 22, 2005.
  58. " New York : Distribution of Medicaid Spending on Long-term Care, FY2003," Kaiser Family Foundation, 2004, available at StateHealthFacts.org.
  59. "Medicaid Watch '05," Public Policy Institute of New York State , Issue No. 5, March 28, 2005.
  60. "Quantitative Analysis of New York State Medicaid Spending," Health Economics and Outcomes Research Institute, Greater New York Hospital Association, October 24, 2003.
  61. Nursing homes in New York state are reimbursed per patient per day based on historical costs. "Confronting the Tradeoffs in Medicaid Cost Containment," Citizens Budget Commission, February 2004.
  62. Ibid.
  63. Robyn I. Stone, "Long-Term Care for the Elderly with Disabilities: Current Policy, Emerging Trends, and Implications for the Twenty-First Century," Milbank Memorial Fund, August 2000.
  64. "Quantitative Analysis of New York State Medicaid Spending," Health Economics and Outcomes Research Institute, Greater New York Hospital Association, October 24, 2003.
  65. Allen J. LeBlanc, M. Christine Tonner and Charlene Harrington, "State Medicaid Programs Offering Personal Care Services," Health Care Financing Review , Vol. 22, No. 4, Summer 2001, page 155. Also see "Confronting the Tradeoffs in Medicaid Cost Containment," Citizens Budget Commission, February 2004.
  66. Clifford J. Levy and Michael Luo, "New York Medicaid Fraud may Reach into Billions," New York Times , July 18, 2005.
  67. Ibid.
  68. New York State Department of Health and Mississippi Envision.
  69. Direct Research, LLC, "Medicare Physician Payment Rates Compared to Rates Paid by the Average Private Insurer, 1999-2001," Medicare Payment Advisory Commission, No. 03-6, August 2003.
  70. " Kansas Medicaid Facts," American Academy of Pediatrics, July 2005.
  71. See Stephen Zuckerman et al., "Changes In Medicaid Physician Fees, 1998– 2003: Implications for Physician Participation," Health Affairs , Web Exclusive, June 23, 2004.
  72. Ibid.
  73. 73 Richard Pérez-Peña, "At Clinic, Hurdles to Clear Before Medicaid Care," New York Times , October 17, 2005.
  74. Stephen Zuckerman et al., "Changes In Medicaid Physician Fees, 1998–2003: Implications for Physician Participation," Health Affairs , Web Exclusive, June 23, 2004. Also see Richard Pérez-Peña, "At Clinic, Hurdles to Clear Before Medicaid Care," New York Times , October 17, 2005.
  75. Laurence C. Baker and Anne Beeson Royalty, "Medicaid Policy, Physician Behavior, and Health Care for the Low-Income Population," Journal of Human Resources , Vol. 35, No. 3, Summer 2000, pages 480 – 502.
  76. "Medicaid Watch '05," Public Policy Institute of New York State , Issue No. 4, March 24, 2005.
  77. Richard Pérez-Peña, "Hospital Business in New York Braces for a Crisis," New York Times , April 11, 2005.
  78. "Medicaid Watch '05," Public Policy Institute of New York State , Issue No. 4, March 24, 2005.
  79. Authors' analysis of Medicaid spending on inpatient care based on Kaiser Family Foundation data available at www.StateHealthFacts.org.
  80. Ibid.
  81. A panel modeled after the federal military base closure commission has been established to recommend hospitals and nursing homes for closure, consolidation or merger, and is due to report December 1, 2006. Raymond Hernandez and Al Baker, "Close Hospitals, Pataki Says in Medicaid Cost Proposal," New York Times , March 17, 2005. See the Commission on Health Care Facilities in the 21st Century. Available at http://www.gnyha.org/pubinfo/chcf/CHCF_Origin_Mission.pdf. Access verified March 15, 2006.
  82. Richard Pérez-Peña, "Hospital Business in New York Braces for a Crisis," New York Times , April 11, 2005.
  83. Steven Malanga, "How Politics Crippled N.Y. Health Care," New York Post , July 16, 2001. Also see Steven Malanga "Health-Care Demagoguery," Manhattan Institute, City Journal , Spring 2003.
  84. John Rodat, "After Eight Years of Waiting?" SignalHealth, April 13, 2005.
  85. Kathryn Haslanger, "Medicaid Managed Care in New York : A Work in Progress," United Hospital Fund, 2003.
  86. The discounts were whittled down somewhat in later years by hospital mergers. See Jack Zwanziger and Cathleen Mooney, "Has Competition Lowered Hospital Prices?" Inquiry , Vol. 42, No. 1, Spring 2005, pages 73 – 85.
  87. Kathryn Haslanger, "Medicaid Managed Care in New York : A Work in Progress," United Hospital Fund, 2003.
  88. Richard Pérez-Peña, "For Medicaid Clients, New Hurdle Looms," New York Times , November 21, 2005.
  89. "Medicaid Drug Expenditures per Enrollee (2002)," National MSIS Tables, FY 2002, Centers for Medicare and Medicaid Services.
  90. Michael Luo, "Under New York Medicaid Drug Costs Run Free," New York Times , November 23, 2005.
  91. "Medicaid Drug Expenditures per Enrollee (2002)," National MSIS Tables, FY 2002, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services, 2002.
  92. See Devon M. Herrick, "Shopping for Drugs: 2004," National Center for Policy Analysis, Policy Report No. 270, October 2004.
  93. Office of Inspector General, "Variation in State Medicaid Drug Prices," U.S. Department of Health and Human Services, Report OEI-05-02-00681, September 2004.
  94. New York also spends millions for other proton pump inhibitors when Prilosec is about 80 percent less expensive. See Michael Luo, "Under New York Medicaid Drug Costs Run Free," New York Times , November 23, 2005.
  95. Kaiser Commission on Medicaid and the Uninsured, "The Continuing Medicaid Budget Challenge," October 2004.
  96. Clifford J. Levy and Michael Luo, " New York Medicaid Fraud May Reach into Billions," New York Times , July 18, 2005.
  97. Linda Gorman, "Medicaid Drug Formularies," Independence Institute, Issue Paper 2-3003, April 2002.
  98. Frank Lichtenberg, "Benefits and Costs of Newer Drugs: An Update," National Bureau of Economic Research, Working Paper No. 8996, June 2002.
  99. Counties in a few states, such as Iowa and North Carolina , bear part of the cost of Medicaid, but the county and city contribution in New York is apparently the highest of any state.
  100. From 1993 to 2003, New York counties' Medicaid funding increased an average of 8.6 percent per year. See Governor's Office, "Governor Pataki, NYS Association of Counties Announce Savings to Central New York County Taxpayers under Historic New Medicaid Cap," Press Release, New York State , August 24, 2005.
  101. "2003 State Expenditure Report," National Association of State Budget Officers, 2003.
  102. Richard Pérez-Peña and Michael Luo, "As New York Medicaid Grows, Swelling Costs Take Local Toll," New York Times , December 23, 2005.
  103. Ibid.
  104. Albany County has a counter on its Web site that adds up the amount local taxpayers send to the state for Medicaid. As of November 16, 2005, the total was $60,131,169.23 — or $130 every minute. The total projected amount for the entire year was $68,661,118. See AlbanyCounty.com. Access verified November 16, 2005.
  105. "How High is the Upstate Tax Burden — and Why?" Public Policy Institute of New York , August 2004.
  106. County Medicaid Costs, New York State Office of the State Comptroller, 2005. Available here. Access verified November 17, 2005.
  107. Editorial, "Mad as Hell," New York Sun , March 8, 2005.
  108. Leslie G. Aronovitz, "Medicaid Fraud and Abuse: Stronger Action Needed to Remove Excluded Providers from Federal Health Programs," U.S. General Accounting Office, GAO/HEHS-97-63, March 1997.
  109. Clifford J. Levy and Michael Luo, "New York Medicaid Fraud may Reach into Billions," New York Times , July 18, 2005.
  110. Ibid.
  111. Office of New York State Attorney General Eliot Spitzer, "Medicaid Fraud Unit Created in Wake of 1970's Nursing Home Scandal Commemorates 25th Anniversary at Brooklyn Marriott," Department of Law, Press Release, April 11, 2000.
  112. Ibid.
  113. Michael Luo and Clifford J. Levy, "As Medicaid Balloons, Watchdog Force Shrinks," New York Times , July 19, 2005.
  114. Ibid.
  115. Richard Pérez-Peña, "A County Finds $13 Million in Questionable Medicaid Billing," New York Times , January 6, 2006.
  116. Clifford J. Levy and Michael Luo, "New York Medicaid Fraud may Reach into Billions," New York Times , July 18, 2005.
  117. Richard Pérez-Peña, "A County Finds $13 Million in Questionable Medicaid Billing," New York Times , January 6, 2006.
  118. Rockland County only looked at pharmacies and general practitioners whose billings accounted for the top 10 percent of among their peers.
  119. Richard Pérez-Peña, "A County Finds $13 Million in Questionable Medicaid Billing," New York Times , January 6, 2006.
  120. Conrad F. Meier, "New York Health Insurance: 'Consumers Are Outraged,'" Heartland Institute, Health Care News , Part 3 in a series, April 1, 2004.
  121. "Health Care Mandates Increase Number of Uninsured," Buckeye Institute, January 1, 1999. Also see William S. Custer, "Health Insurance Coverage and the Uninsured," Georgia State University , Center for Risk Management and Insurance Research, December 10, 1998.
  122. James Doyle, " New York City 's $4 Billion Medicaid Bill: What Is Driving the Rise in Costs?" Inside the Budget , New York City Independent Budget Office, No. 114, May 7, 2003.
  123. Jennifer Steinhauer, "New York, Which Made Medicaid Big, Looks to Cut It Back, New York Times , March 3, 2003.
  124. Ibid. In January of 2002 the Workforce Recruitment and Retention Act amended the Health Care Reform Act to fund workers' training and boost wages.
  125. For background on health care unions in New York, see Steven Malanga, "Health-Care Ills," Manhattan Institute, City Journal , Winter 2005; Steven Malanga, "Health-Care Demagoguery," Manhattan Institute, City Journal , Spring 2003; Steven Malanga, "Medicaid Madness," Manhattan Institute, City Journal , Autumn 2003.
  126. "Medicaid in New York State ," United Hospital Fund, 2003.
  127. Steven Malanga, "How Politics Crippled N.Y. Health Care," New York Post , July 16, 2001.
  128. Editorial, "Mad as Hell," New York Sun , March 8, 2005.
  129. See, for example, Edwin Rubenstein , "Emergency Surgery for Medicaid," Manhattan Institute, City Journal , Spring 1991.
  130. Texas Comptroller of Public Accounts, "Chapter 6: Health and Human Services," Challenging the Status Quo Toward Smaller, Smarter Government, Texas Performance Review, Vol. 2, March 1999.
  131. James C. Robinson and C.S. Phibbs, "An Evaluation of Medicaid Selective Contracting in California," Journal of Health Economics , Vol. 8, No. 4, 1989, pages 437-55.
  132. Jack Zwanziger, Glenn A. Melnick and Anil Bamezai, "The Effect of Selective Contracting on Hospital Costs and Revenues," Health Services Research , October 2000.
  133. See " New York State Health Care Reform Act (HCRA)," New York State Department of Health. Available here. Access verified January 17, 2006.
  134. The Medicaid program in New York State still uses a system of Diagnosis Related Groups (DRGs), Service Intensity Weights (SIWs), Trimpoints and Average Length of Stays (ALOS) to calculate Medicaid hospital payments. See "Hospital Inpatient DRGs, SIWs, Trimpoints, ALOS," New York State Department of Health.
  135. "Analysis and Description of the Governor's 2005-2006 State Budget and Health Care Reform Act Proposals," Healthcare Association of New York State , January 21, 2005. Gov. Pataki's proposal to selectively contract for certain services has not been implemented. The most recent regulations still use the old system of DRGs, SIWs and Trimpoints. Text available http://cumc.columbia.edu/dept/gc/issues/docs/01-20-05budgetattachmenttoElertFINAL.doc.
  136. Ibid.
  137. John C. Fortney, "VA Community-Based Outpatient Clinics: Access and Utilization Performance Measures," Medical Care , Vol. 40, No. 7, July 2002, pages 561 - 69.
  138. "Avoidable Hospitalizations in Pennsylvania ," Pennsylvania Health Care Cost Containment Council, Research Brief, Issue No. 3, November 2004.
  139. Pharmaceutical Care Management Association.
  140. Assembly Bill 2766, Senate Bill 2894 and Assembly Bill 6934 are similar in that they would prevent insurers from requiring prescription drugs be purchased through a mail-order pharmacy. This is referred to as the "employee's mail order pharmacy bill of rights."
  141. Some scientists would say it is pharmacologically the same. See Sylvester J. Schieber, "Why Coordination of Health Care Spending and Savings Accounts is Important," 2004, unpublished.
  142. Prices for Clarinex and Claritin are for 30 doses from Walgreens.com. The price for the generic version of Claritin (Loratadine) is for Costco.com. All prices surveyed October 7, 2005.
  143. Price surveyed in May 2003.
  144. Price surveyed January 27, 2006.
  145. If approved, the OTC dose of Orlistat will be half that of the prescription version. A 60 mg dose has about 85 percent of the effectiveness of the 120 mg prescription dose, however. Many private insurers do not cover the cost of Orlistat. Many state Medicaid program may not cover it as well. See Christopher Snowbeck, "Glaxo Seeks Approval to Sell Obesity Drug Over the Counter," Pittsburgh Post-Gazette , January 23, 2006.
  146. Jeffrey S. Crowley, "An Overview of the Independence Plus Initiative to Promote Consumer-Direction of Services in Medicaid," Kaiser Commission on Medicaid and the Uninsured, Henry J. Kaiser Family Foundation, Issue Paper, November 2003.
  147. To facilitate the process of applying for these waivers, the Bush Administration has created a template waiver called Independence Plus. See Karen Tritz, "Long-Term Care: Consumer-Directed Services Under Medicaid," CRS Report for Congress, Congressional Research Service, Library of Congress, January 21, 2005.
  148. Leslie Foster, Randall Brown, Barbara Phillips, Jennifer Schore and Barbara Lepidus Carlson, "Does Consumer Direction Affect the Quality of Medicaid Personal Assistance in Arkansas ?" Mathematica Policy Research, March 2003.
  149. James Frogue, "The Future of Medicaid: Consumer-Directed Care," Heritage Foundation, Backgrounder No. 1618, January 10, 2003.
  150. Michael L. Millenson, Demanding Medical Excellence: Doctors and Accountability in the Information Age (University of Chicago Press: Chicago, 1997). An example of the possible magnitude of savings is shown by a study reported in Employee Benefit News, which estimates that the cost of poor quality health care services is $1,350 per employee. If even a fraction of that amount can be saved per Medicaid recipient, hundreds of millions or billions of dollars in taxes can be saved. See Craig Gunsauley, "Estimate: 30 percent of Health Spending is Wasted," Employee Benefit News , August 1, 2002.
  151. A ground-breaking hospital study in the 1960s showed that treatment caused complications in one out of five patients, and about 7 percent of the complications were fatal. At the time, as many as eight out of 10 medical practices had not been scientifically validated. See Elihu Schimmel, "The Hazards of Hospitalization," Annals of Internal Medicine , January 1964, pages 100-10.
  152. Committee on Quality of Health Care in America , Institute of Medicine , Linda T. Kohn, Janet M. Corrigan and Molla S. Donaldson, eds., To Err Is Human: Building a Safer Health System (Washington, D.C.: National Academy Press, 1999).
  153. Betsy McCaughey, "Unnecessary Deaths: The Human and Financial Costs of Hospital Infections," Committee to Reduce Infection Deaths and the National Center for Policy Analysis, December 2005.
  154. Ibid.
  155. Brian Abery, Rhonda Cady and Erin Simunds, "Health Care Coordination for Persons with Disabilities: Its Meaning and Importance," Institute on Community Integration University of Minnesota , Impact , Vol. 18 , No. 1, 2005. Available here. Access verified February 2005.
  156. Salynn Boyles, "Too Many Elderly Are Taking Dangerous Drugs," WebMD Medical News, August 9, 2004; Lesley H. Curtis, et al., " Inappropriate Prescribing for Elderly Americans in a Large Outpatient Population ," Archives of Internal Medicine , Vol. 164, No. 15, August 9/23, 2004.
  157. Christopher Tedeschi, "Pill Overkill," USC Health & Medicine , Summer 1996.
  158. Description of MainNET, Muskie School of Public Service , University of Southern Maine . Available here.
  159. According to the Disease Management Association of America, "disease management is a system of coordinated healthcare interventions and communications for populations with conditions in which patient self-care efforts are significant." See "DMAA Definition of Disease Managment."
  160. See "Take Control - Q&A to Having a Self Management Plan," AsthmaAssistant.com. For instance, an asthma self-management plan could stipulate that if a patient's "peak airflow" falls to 80 percent of their personal best peak airflow, they should increase medications at a pre-established rate and schedule a physician appointment. Patients should go to the emergency room if their peak airflow falls below 50 percent.
  161. Susan L. Norris, Michael M. Engelgau and K. M. Venkat Narayan, "Effectiveness of Self-Management Training in Type 2 Diabetes," Diabetes Care , March 2001.
  162. Teresa Pearson, "Getting the Most From Health-Care Visits," Diabetes Self-Management , March/April 2001.
  163. Patti Bazel Beil and Laura Hieronymus, "Money-Saving Tips: Supplies, Nutrition, and Exercise," Diabetes Self-Management , March/April 1999.
  164. Ibid.
  165. "Economic and Health Costs of Diabetes," Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, Healthcare Cost and Utilization Project Highlights, No. 1, AHRQ Pub. No. 05-0034, January 2005.
  166. Tjard R. Schermer et al., "Randomized Controlled Economic Evaluation of Asthma Self-Management in Primary Health Care," American Journal of Respiratory and Critical Care Medicine Vol. 166, No. 8, August 2002, pages 1,062-1,072. For an evaluation of direct medical treatment costs for asthma, see Michael T. Halpern et al., "Asthma: Resource Use and Costs for Inhaled Corticosteroid vs. Leukotriene Modifier Treatment — a Meta-Analysis," Journal of Family Practice , May 23, 2005.
  167. "Asthma Overview," Asthma and Allergy Foundations of America . Available here.
  168. Li Yan Wang, Yuna Zhong and Lani Wheeler, "Direct and Indirect Costs of Asthma in School-age Children," Preventing Chronic Disease , Vol. 2, No. 1, January 2005.
  169. Ibid. Implementation costs were mostly incurred in year one and amounted to about $200.
  170. Susan Konig, " Florida Medicaid Plan Receives Federal Approval," Heartland Institute, Health Care News, January 1, 2006.
  171. See "Medicaid Managed Care: Four States' Experiences with Mental Health Carve-Out Programs," U.S. General Accounting Office, September 1999.
  172. The National Academy of Sciences recommends that all federal health programs begin paying for quality care rather than for services rendered. See Janet M. Corrigan, Jill Eden and Barbara M. Smith, eds., Leadership by Example: Coordinating Government Roles in Improving Health Care Quality (National Academies Press: Washington , D.C. , 2002).
  173. Eric Henley, "Pay-for-Performance: What Can You Expect?" Journal of Family Practice , July 2005.
  174. John W. Rodat, "Pay for Performance — What's Going On?" Signal Health , December 15, 2005. Access verified January 17, 2006.
  175. Clifford J. Levy and Michael Luo, "New York Medicaid Fraud may Reach into Billions," New York Times , July 18, 2005.
  176. This database is referred to as a Medicaid provider information exchange. See Sarah F. Jaggar, "Medicare and Medicaid: Opportunities to Save Program Dollars by Reducing Fraud and Abuse," U.S. General Accounting Office, GAO/T-HEHS-95-110, March 22, 1995.
  177. Communication from Jim McDermott of Salient Corporation. To learn more about their software, http://www.salient.com/Medicaid.pdf. Access verified January 12, 2006.
  178. See Press Release, "Governor Pataki, NYS Association of Counties Announce Savings to Central New York County Taxpayers under Historic New Medicaid Cap," Governor's Office, New York State , August 24, 2005.
  179. "How High is the Upstate Tax Burden — and Why?" Public Policy Institute of New York State , August 2004.
  180. "Risk Pools: State Health Insurance High-Risk Pools," Communicating for Agriculture and the Self-Employed, Available here. Access verified February 2, 3006.
  181. See Victoria Craig Bunce and J.P. Wieske, "Health Insurance Mandates In The States 2004," Council for Affordable Health Insurance, July 2004.
  182. John C. Goodman and Gerald L. Musgrave, "Freedom of Choice in Health Insurance," National Center for Policy Analysis, Policy Report No. 134, 1988; and Gail A. Jensen and Michael Morrisey, "Mandated Benefit Laws and Employer-Sponsored Health Insurance," Health Insurance Association of America, January 25, 1999.
  183. Victoria Craig Bunce and J.P. Wieske, "Health Insurance Mandates in the States: 2004," Council for Affordable Health Insurance, July 2004.
  184. For a critical review, see Edwin Park and Judith Solomon, "Health Opportunity Accounts For Low-Income Medicaid Beneficiaries: a Risky Approach," Center for Budget and Policy Priorities, November 1, 2005.
  185. Rep. Mike Rogers, "The Truth about Medicaid Reform: Puts America's Most Vulnerable Families on Road to Self-Sufficiency," letter, U.S. House of Representatives, November 7, 2005. Bill text available here .
  186. One limitation is that participants lose access to the funds once their income surpasses 200 percent of the federal poverty level.
  187. See Tracy Edge, " Sanford 's Bold Move Necessary to Avoid a Crisis," August 17, 2005. Available http://www.scgovernor.com/interior.asp?sitecontentid=7&newsid=614. Access verified August 26, 2005.
  188. For a discussion on giving Medicaid enrollees choice, see Irene Fraser, Elizabeth Chait and Cindy Brach, "Promoting Choice: Lessons from Managed Medicaid," Health Affairs, Vol. 17, No. 5, September/October 1998.
  189. A. E. Benjamin and Rani E. Snyder, "Consumer Choice in Long-Term Care," To Improve Health and Health Care, Volume V: The Robert Wood Johnson Anthology ( Hoboken , New Jersey : Jossey-Bass, 2003) Chapter 5.
  190. Michael Bond, "Reforming Medicaid in Kansas : A Market-Based Approach," Flint Hills Institute of Public Policy, forthcoming.
  191. For example, see eBenX (http://www.ebenx.com/) and DxCG (http://www.dxcg.com/), Web sites that sell software to risk-adjust insurance premiums.
  192. This is discussed in detail in John C. Goodman, "Characteristics Of An Ideal Health Care System," National Center for Policy Analysis, Policy Report No. 242, April 2001.
  193. Michael Bond, "Reforming Medicaid in Kansas : A Market-Based Approach," Flint Hills Institute of Public Policy, forthcoming.
  194. Ibid.
  195. Robert Pear, " U.S. Gives Florida a Sweeping Right to Curb Medicaid," New York Times , October 20, 2005.
  196. Michael Bond, "Medicaid Pilot Takes Flight," Journal of the James Madison Institute , Summer 2005, pages 8-10.
  197. Information obtained from "Governor Bush Signs Landmark Medicaid Reform Legislation," EmpoweredCare.com, June 3, 2005. Accessed August 10, 2005.
  198. Shawna Orzechowski and Peter Sepielli, "Net Worth and Asset Ownership of Households: 1998 and 2000," U.S. Census Bureau, Current Population Reports, P70-88, May 2003, page 11, Table F.
  199. Congress is considering legislation that would increase the "look-back" period up to five years. In late 2005, both the House of Representatives and the U.S. Senate passed budget reconciliation bills that included provisions designed to reduce the growth of Medicaid spending. Under the House bill, the clock would not start ticking until the applicant applied for Medicaid long-term care coverage rather than the date of the actual transfer. The waiting period to sign up for Medicaid after an asset transfer would be the amount of the money transferred divided by the annual cost of nursing home care in the state multiplied by 12 months. For example, under current law if $20,000 was transferred less than three years prior, in a state where a year of nursing home care costs $60,000, the waiting period before eligibility for coverage would be four months ($20,000/$60,000 = .333 years). However, the waiting period would officially begin not when the senior applied for Medicaid, but much earlier — four months after the actual date the funds were transferred. As a result, the four months waiting period might have lapsed a year or two earlier. Under current law, seniors could conceivably give away sufficient funds to cover up to two years or more worth of care without having to wait for Medicaid eligibility.

    Suppose a senior gave $20,000 to a granddaughter for college tuition four years prior to needing long-term care. Under the current law, the $20,000 would not be included in assets when qualifying for Medicaid. However, the transfer would fall within the five year period resulting in a waiting period of four months. Under the proposed House bill, the waiting period would begin not at date of transfer four years prior, but on the date of applying for Medicaid. For an analysis of both Senate and House bills, see Victoria Wachino et al., "Medicaid Provisions of House Reconciliation Both Harmful and Unnecessary," Center for Budget and Policy Priorities, December 9, 2005.

  200. See Ronald Lipman, "Trust Helps Person Qualify for Medicaid Nursing Care," Houston Chronicle , August 11, 2002.
  201. GAO "Medicaid: Transfers of Assets by Elderly Individuals to Obtain Long-Term Care Coverage," United States Government Accountability Office, September 2005.
  202. Occasionally, a facility can transfer a patient if it can find a Medicaid-qualified nursing home that will accept the patient. However, most facilities need at least some private pay clients to offset Medicaid's low reimbursement rate. For that reason, it is generally somewhat difficult to transfer patients once they qualify for Medicaid.
  203. Enid Kassner, "Medicaid and Long-Term Services and Supports for Older People Fact Sheet," AARP Public Policy Institute, February 2005.
  204. For a pamphlet comparing the annual cost of home care and nursing home care across the country see U.S. Office of Personnel Management.
  205. Ibid.
  206. Marc Page Freiman, "A New Look at U.S. Expenditures for Long-Term Care and Independent Living Services, Settings, and Technologies for the Year 2000," AARP, AARP Public Policy Institute, March 2005.
  207. See "Medicaid Long-Term Care: Successful State Efforts to Expand Home Services While Limiting Costs," U.S. General Accounting Office, August 1994.
  208. Ohio Commission to Reform Medicaid, "Transforming Ohio Medicaid: Improving Health Quality and Value," State of Ohio , January 2005.
  209. Mark R. Meiners, Director, Partnership for Long-Term Care, Center for Health Policy, Research and Ethics, George Mason University.
  210. Adrianna Takada and Patrick Breen, The New York State Partnership for Long-Term Care, State of New York Department of Health, Quarterly Update , Special Edition, Vol. 12, No. 1-2, January 1, 2004, to June 30, 2004.
  211. Data are United States for 1999. Average length of stay for current residents was significantly longer than for discharged – about 892 days. See A. Jones, "The National Nursing Home Survey: 1999 Summary," Vital and Health Statistics, Series 13, No. 152, National Center for Health Statistics, June 2002.
  212. Claims include those for nursing home care, assisted living and home care services. See Dawn Helwig, Milliman USA , April 2005. Also see discussion in Susan B. Garland, "Long-Term-Care Insurance: How Much Is too Much?" New York Times , July 24, 2005.
  213. For more information about reverse mortgages see "Independent Information on Reverse Mortgages," National Center for Home Equity Conversion.
  214. "Use Your Home To Stay At Home: Program Study Shows That Reverse Mortgages Can Help Many With Long-Term Care Expenses," National Council on the Aging, Press Release and Fact Sheet, April 15, 2004.
  215. For a pamphlet on the annual cost of home care and nursing home care across the country, see U.S. Office of Personnel Management.
  216. Stephen A. Moses, "How to Save Medicaid $20 Billion Per Year and Improve the Program in the Process," Center for Long-Term Care Financing, 2005.
  217. A life settlement is similar to a viatical settlement but does not require terminal illness to qualify. Policy owners can sell a life insurance policy for an amount much higher than the cash surrender value. See "Viatical Settlements," Medicare.gov, March 31, 2005. Access verified January 25, 2006.
  218. Viatical Settlements: A Guide for People With Terminal Illness," Federal Trade Commission, May 1998. Access verified January 2006.
  219. John C. Goodman and Devon M. Herrick, "Reforming Medicaid: More Flexibility For The States," National Center For Policy Analysis, Brief Analysis No. 515, May 13, 2005.
  220. This section is based on Matthew Pakula, "The Legal Responsibility of Adult Children to Care for Indigent Parents," National Center for Policy Analysis, Brief Analysis No. 521, July 12, 2005.
  221. Jeanne M. Lambrew, "Making Medicaid a Block Grant Program: An Analysis of the Implications of Past Proposals ," Milbank Quarterly , Vol. 83, No. 1, January 26, 2005.
  222. Vernon K. Smith and Greg Moody, "Medicaid 2005: Principles and Proposals for Reform," National Governors Association, February 2005.
  223. The President's proposed a block grant that was budget-neutral for 2004. This would essentially lock into place each state's 2004 payment for acute care.
  224. Jeanne M. Lambrew, "Making Medicaid a Block Grant Program: An Analysis of the Implications of Past Proposals ," Milbank Quarterly , Vol. 83, No. 1, January 26, 2005.
  225. "Budget Options 2005," Congressional Budget Office, Section 550 Health, 550-08--Mandatory Convert Medicaid Disproportionate Share Hospital Payments into a Block Grant (Section 13 of 22), February 15, 2005.
  226. James C. Robinson, "Renewed Emphasis on Consumer Cost Sharing In Health Insurance Benefit Design," Health Affairs , Web Exclusive, March 20, 2002. Access verified August 16, 2005. See also Jason S. Lee and Laura Tollen, "How Low Can You Go? The Impact of Reduced Benefits and Increased Cost Sharing," Health Affairs , Web Exclusive, June 19, 2002. Access verified August 16, 2005.
  227. Utah received a waiver in 2002 that allowed it to increase cost sharing through enrollment fees and copayments. Oregon received a waiver to impose nominal premiums of $6 to $20 per month. For a discussion see Marilyn Werber Serafini, "Balancing Act," National Journal , August 13, 2005.
  228. For a discussion on a health plan where cost-sharing varies by type of condition, see Shaun Matisonn, "Medical Savings Accounts and Prescription Drugs: Evidence from South Africa ," National Center for Policy Analysis, Policy Report No. 254, August 2002.
  229. Mark R. Meiners, Director, Partnership for Long-Term Care, University of Maryland.
  230. “The Deficit Reduction Omnibus Reconciliation Act of 2005” allows expansion of Long Term Care Partnership Programs to all states.
  231. "Medical and Dental Expenses," IRS Publication 502, 2004.

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