Florida's changes to Medicaid

This article is a couple of day's old, but it's worth taking a moment to blog about. As reported in the NY Times, Florida has been given the authority by the Bush Administration to make sweeping changes to how it administers Medicaid:

"The Florida program, likely to be a model for many other states, shifts from the traditional Medicaid "defined benefit" plan to a 'defined contribution' plan, under which the state sets a ceiling on spending for each recipient.

The Florida program includes these features, approved Wednesday by the federal government:

¶If a recipient does not choose a private plan, the person will be automatically enrolled in one that the state selects.

¶Medicaid recipients can "opt out" of Medicaid altogether and receive subsidies to help pay the employee's share of the premium for employer-sponsored health insurance. Those beneficiaries will have to pay co-payments and deductibles like other employees in the same plan, even if the charges exceed normal Medicaid limits.

¶The state will deposit money into individual accounts for recipients who enroll in programs to help lose weight, stop smoking and lead healthier lives.

¶Florida and the federal government will establish a pool of money providing up to $1 billion a year to help hospitals and other health care providers who treat large numbers of uninsured people."

As you may know, Medicaid is funded jointly by the states and by the federal government. While President Bush has advocated for such changes at the federal level, as the artice points out, Congress has largely resisted. However, these rules can be waived for the states at the behest of the executive, and states have considerably leeway in structuring how Medicaid will operate for their citizens.

The most significant change is from a "defined benefit" to a "defined contribution" plan. Under the old system, for each beneficiary determined to be eligible for Medicaid, they were entitled to a certain level of benefits for certain different medical services and treatments. There might be individual caps on how much would be paid by Medicaid for each of those services, but overall there was no limit as to how much in services a beneficiary could recieve. Under the new rules though, Florida establishes a "maximum per year benefit" which limits the total amount in services for each beneficiary that the state would be willing to pay for each year.

The other most significant change is that each beneficiary will be enrolled in a private health plan. If the beneficiary fails to choose a private plan of their own, then Florida will choose one for them.

Medicaid is horribly complicated, and I don't pretend to understand all of it's nuances. Not even what research I did to prepare for this post here helps me understand all of the consequences of the changes of these rules. But a few things are obvious. First of all, this effort is about reducing the expense of Medcaid to the state. Switching to a defined contributions standard allows Florida to say each year, in advance, how much will be spent on each indivdual beneficiary. Of course, they didn't do this to reduce administrative costs. They did this so they can reduce the amount being spent on each Medicaid beneficiary without having to reduce Medicaid eligibility and kick people off of the program. I'm sure that the total benefit that a beneficiary may receive each year will be less then the sum total of the services they might have needed as a beneficiary under the old rules. In other words, the level of service, for most of those who the changes effects, will be lower. After they hit that limit, the beneficiaries are on their own as to paying for that medical coverage.

The article highlights the other dramatic change, the switch to private plans for all enrollees:

"Joan C. Alker, a senior researcher at the Health Policy Institute of Georgetown University, said: 'Florida's proposal is one of the most far-reaching and radical proposals we've seen to restructure Medicaid. The federal government and the states now decide which benefits people get. Under the Florida plan, many of those decisions will be made by private health plans, out of public view.'"

You can rest assured that, as Florida cuts the amount they are willing to pay to beneficiaries, so too will private plans cut what services they provide since they don't get paid to provide services the state won't pay for and enrollees themselves cannot afford. Another signficance is that under the old system, Medicaid payments would go directly from the state Medicaid agency to the health care provider. Now, Medicaid payments will go from the state Medicaid agency, to a private health care plan, to a health care provider. And of course, private health care plan providers do not do business for free.

Again, the purpose of all this restructuring is to cut costs to the states. This is not motivated solely by cheapness and mean-spiritedness. As the article points out, Medicaid consumes up to 25% of the state budget in some states, and as health care costs go up, so do the costs to the state. Typically, the GOP solution to this is to simply cut the amount of services the state provides so as to cut costs to the state. That this doesn't alter the cost of health care, or reduce their citizens' need for health care, is of course irrelevant. As you can imagine, it doesn't take too long for people to figure this out, which is why Florida exempted pregnant women and children under the age of 21, so as to avoid the worst of the political consequences of the restructuring.

The problem with all this rigging of the system is that it does nothing about health care costs, and it does nothing to provide health care to those who can't afford it on their own and can't get it through their employer. Other states may attempt to follow this lead, but in the long run it's an unsustainable solution, unless we are willing to tolerate ever more and more people living without health insurance each year.