Pressure on Medicaid

Aging baby boomers have pushed up Connecticut’s median age, which means that more and more people are, and will be, tapping into Medicaid for long-term care. Over the next 20 years the number of Connecticut residents age 65 and older is expected to increase by more than 300,000, rising to nearly 23% of our state’s population. [click to enlarge image, left]

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We can’t do much to change our demographics, but there are ways to help control Medicaid spending. Last year, the Connecticut Institute for the 21st Century released a report on long-term healthcare reform. In it they said that making some changes to how the state does long-term healthcare now could save the state nearly a billion dollars annually.

This can be accomplished, said the Institute, primarily by rebalancing our long-term care equation to deemphasize institutional care and increase the use of quality home-based care—an option that is not only preferable (most people prefer to stay in their homes as they age) but also less expensive.

In fact, the average cost of home- and community-based care is about half the cost of institutional care. (In 2009, 53% of Medicaid long-term clients in Connecticut were receiving community-based care at a total cost of $886 million. The other 47% received traditional care at a tab of more than $1.6 billion.)

If Connecticut were to rebalance the equation to 75% home- and community-based care by 2025, says the Institute, it would produce $900 million in annual savings to the state. This would also achieve three big public policy goals: cutting state spending, improving customer satisfaction, and upgrading the delivery of state services. But there would have to be a dedicated change in approach.

Connecticut’s “Money Follows the Person” initiative—designed to promote personal independence and save money—has had some early success. According to the Institute’s 2011 report, average monthly client costs decreased from $2,651 for institutional care to $963 for home- and community-based care.23

Best Practices

Rhode Island: Medicaid is the single biggest driver of government spending in most states. For ideas on significant Medicaid reform, one would best look to Rhode Island. The Ocean State has capped Medicaid spending to $12 billion over five years in a block-grant-like fashion. In exchange for capping spending, the federal government allowed Rhode Island to make changes to the program without
federal approval or with expedited approval.

The changes, which are projected to save Rhode Island anywhere from $100 million to $146 million, include increased home care, an overhaul of payment systems, the creation of specialty population-specific benefit packages, expansion of managed-care networks, and increased competition in goods and services contracts.

Rhode Island’s success has inspired New Jersey, Minnesota, and Mississippi to seek similar block-grant-like waivers.

Oregon: The state is using an innovative approach to promote better health, better care, and lower costs for state residents who receive healthcare coverage under the Oregon Health Plan (Medicaid). The state has implemented coordinated care organizations, or CCOs, which are local community-based networks of all types of healthcare providers (physical healthcare, addictions and mental health, and sometimes dental care providers) who have agreed to work together.

CCOs are:

  • Flexible to support new models of care that are patient-centered and team-focused and that reduce health disparities
  • Better able to coordinate services and focus on prevention, chronic illness management, and person-centered care
  • Accountable for health outcomes of the population they serve and governed by a partnership among healthcare providers, community members, and stakeholders in the health systems that have financial responsibility and risk
  • Performance-based: Oregon has committed to meeting key quality measurements for improved health for OHP clients while reducing the growth in spending by two percentage points per member over the next two years. Projected out, this would achieve some $11 billion in total state and federal savings over the next 10 years.

Illinois: Taking an aggressive approach to Medicaid reform, the state is eliminating ineligible recipients from the program (100,000-300,000 people who either make too much money or live out of state), which is estimated to save the state hundreds of millions.

Also saving hundreds of millions are the push to switch 85% of Medicaid recipients into managed care and limits on prescriptions to five per month. Numerous program cuts also contribute to the savings, and a 6% across-the-board reduction in provider payments would save $500 million.

These changes add up to over $2.5 billion in potential savings for Illinois. Many other states have implemented or are attempting to implement similar reforms to Medicaid.