More people on US government assistance than ever before

More people in the US than ever before are using government assistance programs. Food stamps, medicare and similar programs expanded to help more people during the economic recession and there are no signs of the rolls shrinking.

From USA Today, writer Richard Wolf breaks down the numbers and looks into what it means for the US economy.

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That's up at least 17% since the recession began in December 2007.

"Virtually every Medicaid director in the country would say that their current enrollment is the highest on record," says Vernon Smith of Health Management Associates, which surveys states for Kaiser Family Foundation.

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they're at their limit," says Dan Hawkins of the National Association of Community Health Centers.

More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.

Caseloads have risen as more people become eligible. The economic stimulus law signed by President Obama last year also boosted benefits.
...

Close to 10 million receive unemployment insurance, nearly four times the number from 2007. Benefits have been extended by Congress eight times beyond the basic 26-week program, enabling the long-term unemployed to get up to 99 weeks of benefits. Caseloads peaked at nearly 12 million in January — "the highest numbers on record," says Christine Riordan of the National Employment Law Project, which advocates for low-wage workers.

A summary of the health care expansion bill

Yesterday was a historic day in the states as the long-awaited, long-debated health care expansion bill was passed. The Associated Press is distributing a summary of what the bill contains.

For the purposes of our blog what is most important is the expansion itself. Now Medicaid will cover people with incomes up to 133 percent of the federal poverty level.

Our snippet of the AP article comes from KPHO in Phoenix.

COST: $940 billion over 10 years, according to the Congressional Budget Office.

HOW MANY COVERED: 32 million uninsured. Major coverage expansion begins in 2014. When fully phased in, 95 percent of eligible Americans would have coverage, compared with 83 percent today.

INSURANCE MANDATE: Almost everyone is required to be insured or else pay a fine. There is an exemption for low-income people. Mandate takes effect in 2014.

INSURANCE MARKET REFORMS: Starting this year, insurers would be forbidden from placing lifetime dollar limits on policies, from denying coverage to children because of pre-existing conditions, and from canceling policies because someone gets sick. Parents would be able to keep older kids on their coverage up to age 26. A new high-risk pool would offer coverage to uninsured people with medical problems until 2014, when the coverage expansion goes into high gear. Major consumer safeguards would also take effect in 2014. Insurers would be prohibited from denying coverage to people with medical problems or charging them more. Insurers could not charge women more.

MEDICAID: Expands the federal-state Medicaid insurance program for the poor to cover people with incomes up to 133 percent of the federal poverty level, $29,327 a year for a family of four. Childless adults would be covered for the first time, starting in 2014. The federal government would pay 100 percent of costs for covering newly eligible individuals through 2016. A special deal that would have given Nebraska 100 percent federal financing for newly eligible Medicaid recipients in perpetuity is eliminated. A different, one-time deal negotiated by Democratic Sen. Mary Landrieu for her state, Louisiana, worth as much as $300 million, remains.
...

PRESCRIPTION DRUGS: Gradually closes the "doughnut hole" coverage gap in the Medicare prescription drug benefit that seniors fall into once they have spent $2,830. Seniors who hit the gap this year will receive a $250 rebate. Beginning in 2011, seniors in the gap receive a discount on brand name drugs, initially 50 percent off. When the gap is completely eliminated in 2020, seniors will still be responsible for 25 percent of the cost of their medications until Medicare's catastrophic coverage kicks in.

Effects of Medicaid cuts being felt in Kansas

The state of Kansas recently made cuts to their Medicaid budget and it's effects are beginning to be felt. The ten percent cuts are not only being felt by the frail and disabled but for those who care for them as well. As Kansas politicians begin to go back to work for 2010, many are debating if the cuts need to be undone.

From the Topeka Capitol Journal Online, writer Barbara Hollingsworth takes a look at the debate.

As big cuts hit Medicaid-funded programs — including agencies serving adults with developmental disabilities, physicians serving Kansans in poverty, and nursing homes caring for the frail and elderly — Kansas lawmakers on Monday will converge on the Capitol for the 2010 legislative session. Even with the drastic cuts aimed at balancing the budget, the Legislature faces a budget shortfall of between $300 and $400 million.

"There are serious questions that even if there was a legislative desire or willingness to reverse those cuts, where would they get the money?" asked Jerry Slaughter, executive director of the Kansas Medical Association. "The state can't print money like the federal government. If you don't have the money, you don't have the money."

The 10 percent cut in Medicaid reimbursement rates was part of $258.9 million in budget adjustments announced in November, although the Medicaid reduction didn't go into effect until this month. In all, the 10 percent cut is aimed at saving the state about $22 million through the end of the fiscal year. However, the loss to Medicaid providers will amount to about $66 million because the program relies heavily on federal matching funds, said Peter Hancock a spokesman for the Kansas Health Policy Authority.

It wasn't a decision that was made lightly, said state budget director Duane Goossen.

"The results from doing this are not positive things," he told the Senate Ways and Means Committee last month. "They are almost entirely negative things."

Slaughter said medical providers are having to reconsider if they will continue to accept new Medicaid patients or if they will stop serving Medicaid patients entirely. If the cuts last longer than a few months, he said he anticipates some practices may begin making decisions about cutbacks this summer. As is, he said, many physicians barely break even when serving Medicaid patients.

States who already having trouble paying for Medicaid

Proposed plans in the U.S. Congress to expand Medicaid have some state governors worried. They fear the proposals could force the states to help pay for the expansion.

State government budgets are already being stretched due to more and more people applying for Medicaid benefits, especially during the recession. Some states are already over budget with their Medicaid programs, and fear an expansion will bust their budgets.

From this story that we found at the Press of Atlantic City, we see some examples of states that having trouble paying for all the people who need insurance.

In New Mexico, 18.4 percent live below the poverty level, well above the national average of 13.3 percent. Medicaid enrollment there has increased nearly 10 percent since mid-2008, and Human Services Secretary Pam Hyde said the program could overspend its budget by $35 million to $40 million this fiscal year.

_ In Michigan, where unemployment hit 15 percent in July, Republicans who control the state Senate propose saving money by trimming 8 percent from the Medicaid reimbursement rates for physicians, hospitals and other health care providers in the state fiscal year that begins Oct. 1.

_ In Georgia, Republican Gov. Sonny Perdue ordered 3 percent funding cuts for Medicaid and public schools and 5 percent cuts for most other state programs because of weak state tax collections in late July, just three weeks into the new fiscal year.

"If we're asked to pick up on state increased costs in health care, it's going to take away from infrastructure, it's going take away from environment, transportation, education, public safety _ all the other things that we as states do," said Perdue, who leads a state where 14.5 percent of residents live below the poverty level, according to the U.S. Census.

In Mississippi, where 21.1 percent of residents live in poverty and 20 percent are enrolled in Medicaid, paying for health care has long been a struggle. Barbour said a mandate to cover more people could lead to tax increases.

Barbour won the Mississippi governorship in 2003 after criticizing a 33 percent growth in Medicaid enrollment in four years under his Democratic predecessor. Enrollment has grown 5 percent since Barbour took office in January 2004. Mississippi saw an unexpected hiccup in Medicaid numbers in March, when enrollment jumped by 21,620. It was the largest single-month increase the program had seen since April 2001.

A breakdown of the compromise Medicaid expansion plan

A bi-partisan coalition of Senators in the Finance Committee will unveil their plan Medicare to insure more people in the U.S. The chairman of the committee Senator Max Baucus, a Montana Democrat will begin to debate the "Backus" health care plan this week.

Today's Atlanta Journal Constitution has a great breakdown of the plan, including how much it costs, who it will be paid for and more. The plan plans on covering 95 percent of Americans at a cost of 900 billion over 10 years. The plan will not cover illegal immigrants, and hopes to have the states pick up some of the cost.

For our snippet on this story, we go to the New York Times Blogs, writer By David M. Herszenhorn tells us some of the particulars of the plan.

The House legislation, as well as a Senate framework released by Mr. Baucus, calls for raising the income eligibility threshold for Medicaid to 133 percent of the federal poverty level — a figure that for 2009 translates to about $14,400 for an individual.

A big change is that childless adults under age 65 who are now typically excluded from Medicaid will be eligible. So will many parents who now often face tighter restrictions.

Currently, states must offer Medicaid to pregnant women and to children under age 6 from families with income under 133 percent of the poverty level. States must also offer coverage to children age 6 to 18 from families with income below the poverty line.

And though many states have set higher thresholds for children, typically at more than 200 percent of poverty, many parents of these children do not have coverage. Only 11 states cover parents earning more than 133 percent of poverty.

Experts estimate that roughly one-third of Americans who currently lack insurance earn less than 133 percent of the poverty limit — a group of 10 million people who might join Medicare under the proposed new rules.

Medicaid Costs Are Growing More Slowly Than Costs For Medicare Or Private Insurance

from The Center on Budget and Policy Priorities

Are Medicaid expenditures growing “out of control”? This paper reports new data showing that Medicaid expenditures did not grow at all in fiscal year 2006 and are expected to grow only modestly in 2007.

There are good reasons to be concerned about projected increases in Medicaid expenditures over the long term, since health care costs continue to rise throughout the U.S. health care system and the U.S. population is aging. The underlying problem, however, is not that Medicaid has unusually high or increasing costs, but that the provision of health care in the United States has become very expensive and that health care costs in the private and public sectors alike have been rising at a rapid clip and are expected to continue doing so for the indefinite future. In recent years, costs per beneficiary have actually been rising at a slower pace in Medicaid than in other health care coverage, including both private health insurance and Medicare. This analysis examines new data on Medicaid expenditure growth, especially in fiscal year 2006, which ended on September 30.

Medicaid Expenditures Grew Less Than Medicare or Private Health Insurance in 2006

New data from the Treasury Department show that federal outlays for Medicaid were lower in fiscal year 2006 than in 2005 even in nominal dollars (i.e., even without adjusting for inflation). Federal Medicaid expenditures were $180.6 billion in 2006, as compared to $181.7 billion in 2007. Federal Medicaid costs declined by 0.6 percent in 2006 and came in well below expectations. (In March, the Congressional Budget Office projected a 4.5 percent increase in federal Medicaid expenditures in 2006.)

In contrast, federal Medicare expenditures rose 16.5 percent in 2006 (see Figure 1).[1] It should be noted, however, that a one-time factor pushed Medicaid expenditures down and Medicare expenditures up in 2006 — the implementation of the Medicare prescription drug benefit in January 2006, which shifted some costs from Medicaid to Medicare.

Starting in January, costs for prescription drugs for people enrolled in both Medicaid and Medicare — the “dual eligibles” — shifted from Medicaid to Medicare. This reduced the amounts that Medicaid spends while increasing what Medicare pays. If we adjust the expenditure estimates for 2006 to net out the effects of this shift, then total federal Medicaid expenditures are seen to have risen by 3.3 percent between fiscal years 2005 and 2006.[2] This is a more accurate measure of the underlying growth of health care costs in Medicaid. Compared to typical growth rates in costs for health care programs or private health insurance, however, this 3.3 percent growth rate is still quite low.

Similarly, the apparent rate of Medicare cost growth in 2006 was exaggerated by the introduction of the Medicare drug benefit in 2006, which produced a one-time surge in cost growth in 2006. If the rise in Medicare drug benefit costs is excluded, the growth in other Medicare expenditures — which better reflects increases in underlying Medicare costs — was 6.5 percent.[3]

Private health insurance expenditures are estimated to grow about 5.5 percent in calendar year 2006.[4] As shown in Figure 2, after adjustments to remove the one-time downward effect on Medicaid costs of the new prescription drug benefit, Medicaid expenditures are seen to have grown in 2006 at about half the rate that costs grew for Medicare and private health insurance.[5]

Costs Grew More Slowly in Medicaid in the Preceding Years, As Well

The relatively low growth of Medicaid expenditures in 2006 is not a new phenomenon. Between 2000 and 2004, Medicaid expenditures per beneficiary grew more slowly than expenditures per beneficiary in Medicare or private health insurance, as Figure 3 shows. (Aggregate Medicaid expenditures rose more quickly between 2000 and 2004 than in 2005 or 2006 because Medicaid enrollment was climbing during the economic downturn and the ensuing, initially weak recovery. In comparison, enrollment in Medicare changed little during that period, and private health coverage declined as employer-based insurance eroded.)

Because states pay a substantial fraction of Medicaid costs, they have strong incentives to hold Medicaid costs down. An analysis by economists at the Urban Institute estimated that it costs Medicaid about 30 percent less to cover an adult than it would cost if the same person were covered by private health insurance.[6] In part, this is because Medicaid’s payment rates to health care providers are typically lower than those paid by Medicare or private health insurers. In addition, state Medicaid programs typically use an array of cost containment approaches, including managed care, disease management, utilization review, prospective payment systems and the substitution of generic prescription drugs for brand name drugs. Many of these cost containment initiatives were pioneered as reforms in state Medicaid programs and have been adopted more aggressively in Medicaid than in Medicare or the private sector.[7]

Why Was Medicaid Expenditure Growth Low in 2006?

Medicaid expenditures rose slowly in fiscal year 2006 in part because the number of enrollees apparently grew slowly in 2006. A survey of Medicaid directors conducted for the Kaiser Commission on Medicaid and the Uninsured suggests that national Medicaid enrollment grew only 1.6 percent in state fiscal year 2006 (which usually ran from July 1, 2005 to June 30, 2006), about one-fourth as much as the average growth rate in enrollment of 6.9 percent per year from 2000 to 2004.[8] This is consistent with recent Census data showing that there was no appreciable growth in Medicaid enrollment last year.[9]

Enrollment may have grown slowly because the number of low-income people financially eligible for Medicaid did not increase. After several years of economic growth, the number of people with incomes below the poverty line stopped rising in 2005. Medicaid enrollment also may have slowed because of eligibility reductions instituted by a handful of states — including Missouri, Tennessee, Mississippi, Florida and Ohio — and the accumulated impact of actions in a broader number of states where certain procedures that tend to impede Medicaid enrollment were instituted, such as shortening enrollment periods or increasing paperwork requirements.[10]

The effects of the slowing of Medicaid enrollment growth can be seen in the latest data on the number of Americans who are uninsured. Because employer-sponsored health insurance coverage continued to erode while Medicaid enrollment grew only slightly, the number of Americans who are uninsured rose to an all-time high in 2005.[11]

Other factors also may have contributed to the slow growth in Medicaid costs in 2006, although the detailed expenditure and enrollment data needed to analyze these factors are not yet available:

In recent years, states implemented a wide array of cost containment initiatives to reduce Medicaid costs per enrollee, such as disease management programs, expanded use of managed care and new drug cost containment policies. [12] Some of these policies may have generated savings that materialized more fully in 2006.

The Federal Medical Assistance Percentage — the federal Medicaid matching rate — fell in 29 states in 2006, while rising in 9 states. This held down federal costs and shifted a slightly higher share of costs to states. The Federal Funds Information for States estimates that this reduced federal outlays by about $0.5 billion in 2006.[13]

Federal expenditures also may have been held down as a consequence of greater federal scrutiny of states’ Medicaid financing mechanisms (e.g., intergovernmental transfers). This may have shifted some costs to states or to health care providers.

It should be noted that the Deficit Reduction Act, enacted in February 2006, had virtually no effect on Medicaid expenditures in 2006, since few of its provisions were in effect during the 2006 fiscal year.

Changes in State Medicaid Expenditures

As with federal Medicaid expenditures, there was no growth in state Medicaid expenditures in 2006, excluding the “clawback” payments that states began making to the federal Medicare program in conjunction with the shift of certain prescription drug costs from Medicaid to Medicare. (The “clawback” payments are not considered Medicaid expenditures.) Considered together with rising revenues in most states, this meant that Medicaid became slightly more affordable in most states.[14] (If the state clawback payments are added to state Medicaid expenditures, combined state expenditures for these purposes rose by 3.3 percent in 2006, as discussed in the box on page 4. This is considerably less than the rate of growth in state revenues; state tax collections in the July 2005 to June 2006 period averaged 8.5 percent higher than in the prior year.[15])

The Treasury data cited above contain information only on federal outlays and not the amounts spent by states, which constitute almost half of total Medicaid expenditures. The preliminary estimates cited here of state Medicaid expenditures and total (i.e., state plus federal) Medicaid expenditures are based on the expenditure estimates that states reported to the federal government in August 2005 and August 2006, one month before the end of each federal fiscal year.[16]

Total Medicaid expenditures were 0.5 percent lower in federal fiscal year 2006 than in 2005, while state-level expenditures in 2006 were 0.1 percent lower, as Figure 4 indicates. Using this data source, federal Medicaid expenditures fell by 0.8 percent in 2006.[17] (One reason for the slight discrepancy between the percentage decline in federal expenditures and the percentage decline in state expenditures is that the federal Medicaid matching rate fell in 29 states in 2006, shifting a small portion of total costs from the federal government to states.)[18]

While Medicare expenditure growth nationally was slightly negative in 2006, the patterns vary by state. Estimated total Medicaid expenditures fell in 22 states in 2006, while rising in 29 states. These variations are due to differences in economic conditions and Medicaid policies across the states.

Projections of Medicaid Growth in 2007

Medicaid expenditures are likely to climb at a slightly faster pace in 2007. Recent projections of Medicaid growth in 2007 issued by the Congressional Budget Office, the Office of Management and Budget, the Kaiser Commission on Medicaid and the Uninsured, and the National Association of State Budget Officers range from 4.2 percent to 7.4 percent growth. These projections center around 5 percent growth in 2007.

Conclusions

Federal and state Medicaid expenditure growth was low in 2006, and growth rates are expected to remain relatively modest in 2007, compared to the growth rates of earlier years. In addition, the severe state budget pressures of 2001–2004 have eased for the time being because of higher state revenues as well as reduced Medicaid growth. Economists have noted that overall health care cost growth has eased at least temporarily.”[19]

At some point, however, health care costs are expected to start rising again at a more rapid rate than the rate at which the economy is growing. There consequently are good reasons to be concerned about projected long-term growth in Medicaid expenditures.

It is important to remember, nonetheless, that the growth rate in Medicaid expenditures has been comparable to — and of late, more moderate than — the growth rates for expenditures for Medicare and private-sector health care coverage. The underlying fiscal and economic problem is not that Medicaid expenditures uniquely will rise a great deal; it is that health care costs in the U.S. health care system as a whole are rising rapidly and are expected to continue doing so indefinitely, and that the U.S. population is aging and older people have higher health care costs than younger people do.

Most Americans expect to receive quality medical care and long-term care and look forward to having access to medical advances that will prolong life and improve health. These medical advances generally add to costs. Addressing the twin phenomena of escalating health care costs and high health care expectations is a problem that cannot be solved primarily through Medicaid. It ultimately will have to be addressed as part of a broader national effort to reform the overall U.S. health care system.[20]

End Notes:

[1] Congressional Budget Office, Monthly Budget Review, October 2006.

[2] We make the expenditures in both years comparable by adding an estimate of how much prescription drugs would have cost the Medicaid program if they had continued to be offered to dual eligibles through Medicaid during all of fiscal year 2006. This estimate is derived from an estimate of the “clawback” payments that state Medicaid programs made to Medicare in calendar year 2006, as reported in Kaiser Commission on Medicaid and the Uninsured, “An Update on the Clawback: Revised Health Spending Data Change State Financial Obligations for the New Medicare Drug Benefit,” March 2006.

[3] Congressional Budget Office, op cit.

[4] Christine Borger, et al. “Health Spending Projections Through 2015, Changes on the Horizon,” Health Affairs, Web Exclusive, Feb. 22, 2006. These are the estimates of the Office of National Health Estimates at CMS.

[5] The adjusted Medicaid and private health insurance growth rates include prescription drugs on a full-year basis, while the Medicare estimate excludes prescription drugs. If full-year drug costs were added to Medicare in both 2005 and 2006, the estimated Medicare growth rate would be slightly higher.

[6] Jack Hadley and John Holahan, “Is Health Care Spending Higher under Medicaid or Private Insurance?” Inquiry, 40 (2003/2004): 323-42. Similar findings were reached by federal researchers; see Edward Miller, Jessica Banthin, and John Moeller, “Covering the Uninsured: Estimates of the Impact on Total Health Expenditures for 2002” Working Paper No. 04407 (Agency for Healthcare Research and Quality, 2004).

[7] Mark Merlis, “Medicaid Reimbursement Policy,” Congressional Research Service, October 2004. V. Smith, et al., “Low Medicaid Spending Growth Amid Rebounding State Revenues: Results from a 50-State Medicaid Budget Survey State Fiscal Years 2006 and 2007,” Kaiser Commission on Medicaid and the Uninsured, Oct. 2006.

[8] Vernon Smith, op cit. John Holahan and Mindy Cohen, “Understanding the Recent Growth in Medicaid Spending and Enrollment Growth from 2000-2004.” Kaiser Commission on Medicaid and the Uninsured, May 2006.

[9] Carmen DeNavas, et al. “Income, Poverty and Health Insurance Coverage in the United States: 2005,” U.S. Census Bureau, August 2006.

[10] Donna Cohen Ross and Laura Cox, “In a Time of Growing Need: State Choices Influence Health Coverage Access for Children and Families,” Kaiser Commission on Medicaid and the Uninsured, Oct. 2005.

[11] Center on Budget and Policy Priorities, “The Number of Uninsured Americans Is at an All-Time High”, August 29, 2006. Paul Fronstin, “Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2006 Current Population Survey.” Employee Benefits Research Institute Issue Brief, Oct. 2006.

[12] Smith, op cit.

[13] Vic Miller, “FY 2006 FMAPs,” Federal Funds Information for States brief, Sept. 28, 2004.

[14] Ibid.

[15] Brian Stenson and Nai-ling Kuo, “State Tax Revenues Show Broad Strength,” State Revenue Report, No. 65, Nelson Rockefeller Institute of Government, Sept. 2006.

[16] These data are contained in the CMS-37 reports.

[17] This is close to the -0.6 percent estimate based on Treasury data, discussed earlier. Different data sources yield slightly different estimates. The Treasury data are more accurate in measuring federal outlays.

[18] Our estimates differ slightly from those recently reported by Vernon Smith and his colleagues, who estimate that total Medicaid expenditures rose by about 2.8 percent in 2006, and by 1.7 percent if the clawback payments are excluded.[18] There are two key reasons for these differences. First, Smith’s estimate measures changes between state fiscal years 2005 and 2006; state fiscal years usually run from July to June. Our estimate, by contrast, measures the changes between federal fiscal years 2005 and 2006; the federal fiscal year runs from October to September. Since the Medicare drug benefit was implemented in January 2006, the shift of certain prescription drug costs for Medicaid to Medicare affects half of state fiscal year 2006, but three-quarters of federal fiscal year 2006. As a result, states spent more for prescription drugs in Medicaid during state fiscal year 2006 than during federal fiscal year 2006. Second, the Smith estimate is based on a survey of state Medicaid directors, while our data come from state financial reports filed with the federal government. Both data sources may contain some incorrect estimates of state expenditures.

[19] Borger, op cit.

[20] Henry Aaron, “Three Health Care Paradoxes,” Signature Health Care Foundation Conference, Oct. 19, 2006