Medicaid Reform: U.S. State Government GuideMaking tough choices |
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Key messages
- Taking top priority (almost one-third) in annual budgets of many states, Medicaid is still suffering from ineffective management tools that are hindering states’ attempts to control costs.
- For sustained health care reform, states need to make critical choices — what should our program be doing; how expensive should it be; should consumers be engaged; etc.— in deciding what kind of program each state administers.
- Assessing current Medicaid outcomes, technology and administration will give enough information and drive commitment to make informed decisions about the program’s strategy and necessary reform.
Background
Medicaid costs have ballooned to nearly one-third of the annual budget in many states, making it the largest line item in many state budgets. The current fiscal path, if left unchanged, will crowd out other state priorities. Medicaid has so far defied states’ attempts to control its costs while maintaining and improving the health outcomes of the citizens it serves. While nearly half of the country’s Medicaid programs have budgets the size of Fortune 500 companies, most Medicaid administrators lack the management tools needed to transform the sea of program data into useful information to inform decision making.
The good news is that across the country state governments are rethinking their Medicaid programs. The federal Deficit Reduction Act of 2005 (DRA) allows for unprecedented flexibility in how states structure and manage their Medicaid programs. States now have greater flexibility to alter benefits, charge patients for services and expand the role of private insurers.
States can overcome the challenges of reforming Medicaid — provided they have the right approach, the right incentives, the right priorities and a commitment to actively managing the transformation process. Lasting reform requires first confronting a set of difficult choices that go to the very heart of what kind of Medicaid program each state wants to have. By fully addressing them, states can focus on a long-term strategy that will take their program in the direction they want it to go without breaking the state’s bank or losing sight of the program’s mandate to serve individuals in need.
Reform strategies
Choice-based reform
Personal health accounts and the ability to choose health benefits packages allows health care to be tailored to the specific health care needs of an individual. Establishing a fixed benefit amount allows the state to control its Medicaid costs, while giving individuals the power to decide how those limited dollars are best spent.
“Connector” model
A “connector” allows individuals to purchase private health insurance coverage at more affordable rates through a state-sponsored exchange.
Tiered benefits
Customized benefits packages allow health care to be targeted to specific populations with different health care needs.
Examples
Redefining core program functions
Under the Florida Choice program, the state’s role has shifted from claims processing to policy and contract management, which has, in turn, shifted the risk of cost control to managed care plans.
Taking advantage of increased federal flexibility
Under Vermont’s global commitment waiver, the federal government gives the state a lump sum payment for each person enrolled in the state’s Medicaid program, leaving the state with greater freedom to manage its program and full responsibility for controlling costs.
Next steps
- Assess the program. An assessment of current Medicaid outcomes, technology and administration will give policy makers and program administrators enough information about the program and the way it is administered to be able to make informed decisions about the program’s strategy and the necessary reforms.
- Ask the tough questions. States must make difficult choices that go to the very heart of what kind of Medicaid program each state wants to have, such as which policy and management levers will be used to reduce, or at a minimum contain, program costs.
- Give managers the information they need. States need to give program managers the management tools they need to turn the immense volume of information that flows through Medicaid and its information systems into meaningful data to inform key decisions.
