Medicaid – Why did we undermine the Safety Net?

PPACA regulations and rules have created significant issues and unintended consequences for many families throughout the Country.  With some States having opted to expand Medicaid, while others did not expand Medicaid, the Medicaid administrators in each State were placed in situations in which regulations and rules became confusing, contradictory and even impossible to apply, leading to many work-around solutions and a patchwork of unmanageable exclusions.  These exclusions became problematic and created issues for people, especially when they filed their tax returns, with many ending up having to pay back Subsidies and CSRs they received in the ‘prior’ year!

Before getting to other items, we absolutely and positively need to implement an “Asset Test” for Medicaid; so we don’t keep enrolling Millionaires in Medicaid!  Under PPACA, you can own an expensive home, expensive car, and having millions of dollars in the bank; and as long as you don’t have enough reported income or taxable income, after write-offs and deductions, you are Medicaid eligible!!!

Therefore, Medicaid items to be addressed are as follows: 1) Allow families to stay together on the same plan, meaning allowing voluntary “opt-out” of Medicaid instead of forced Medicaid enrollment of children; and 2) A mandatory asset test for enrollees, not allowing the independently wealthy to still qualify for Medicaid, as they do today, under PPACA.  Previously, Medicaid “had” an asset test that PPACA removed, as PPACA only looks at “income”; therefore, if someone has no income, maybe due to investment losses or business deductions, owns a $50,000 car or $250,000 home, or has a Trust pay all their expenses, that individual or family is eligible for Medicaid, under PPACA rules, if a State has expanded Medicaid.

Medicaid is supposed to be a “Safety Net”; let’s start treating it that way, again!  Medicaid enrollment skyrockets in Recessions; and plummets in Recovery’s, meaning there is less need for the Safety Net when the economy is good and unemployment is low!  That’s the way it’s supposed to work…  Instead, we force people with not enough taxable income onto Medicaid, even if they have assets, unless they want to be altruistic and pay “full” price for their health insurance, being that they would not be eligible for a Subsidy due to having income below the Subsidy eligibility level.

PPACA has an unconscionable and completely nonsensical “all-or-nothing” policy for Medicaid eligibility!  Under PPACA rules and regulations, if any one person in a household is eligible for Medicaid, they “have” to enroll in Medicaid or pay full price for a health plan, due to PPACA designating them as Subsidy-ineligible!

The “all-or-nothing” policy is especially harmful to families, an unintended consequence, as families are forced to be split up between Individual commercial health plans and Medicaid.  The splitting of the family up into different programs, without giving them any options to stay on the same plan, regularly leads to parents having to pay a lot more for their health plans and their cost-of-care, as pro-rated Subsidies for parents-only are greatly reduced; and parents may even lose their CSR eligibility.

There needs to be serious consideration given to creating an “opt-out” policy for Medicaid! 

An unintended consequence of the “all-or-nothing’ policy is that if someone should have been on Medicaid, enrolled in an Exchange plan with a Subsidy, for even just one month in the “prior” year, the person has to pay back the Subsidy at Tax time, as they should have been on Medicaid all year.  It’s impossible for people to predict future income or retro-actively adjust their income.

If a person buys a plan on an Exchange, and it turns out the person was eligible for Medicaid all year, the person will have to pay back the Subsidy and/or CSR; since they should have been in Medicaid all year.

In the future, when considering Medicaid cost-sharing policies, serious consideration should be given to NOT charging people for their Medicaid plan, which deters enrollment and increases administrative costs, as it does not reduce needed medical care.

Medicaid Cost-Sharing should focus on Services, accessing care at the lowest cost points, and keeping health maintenance medications affordable; and not on creating significant and costly administrative headaches around collecting a few dollars each month in health plan payments, just to maintain the Medicaid health plan. 

Medicaid Funding 

The reality around Medicaid funding is that the program is so large; and has so many parts to it, that it needs to be viewed as three (3) distinct “funding” programs.

This is a way to view Medicaid funding:

  • CHIP (Children’s Health Insurance Program for children under age 18).  This program should be funded on it’s own; and funding should be adjusted based on need, families financial status. or for children being cared for by a non-parent.
  • Age 65+ and Disabled should be funded as it’s own program, as this group does not tend to fluctuate with the economy.  This is generally a financially predictable group and stable group for which to provide funding.  This group helps disabled individuals while they transition to Medicare; and supports Medicare-Medicaid dual eligible people, primarily 65+ Seniors, who get help paying for expenses not covered by Medicare (80%), through Medicaid, the Deductibles and Co-payments (20%).
  • Non-Disabled Adults, Age 18 to Age 64, are the population that changes as the Economy and Unemployment changes.  It is the hardest to predict funding for in a budget, increasing in a Recession, decreasing in a Recovery.  This is the group that needs the most management; incentives to get back to work in a Recovery to get on an Employer health plan; and assistance paying for health insurance if they don’t have an Employer health plan.

An Alternative for Funding Medicaid  –  Return to Capitation/Flat Funding Directly to Care Providers

When looking at the long-term approach, many Think Tanks foresee an eventuality where funding for providing localized healthcare is sent directly to the local health care providers, meaning hospital and provider networks.  For example, the long-term view has been that a localized healthcare system would be provided flat funding to service all the people that live in their service area.  Basically, a return to Capitation, the original health insurance program from the 1930’s; however, the government would provide the hospital system with a predetermined amount of funds, based on the population they serve in their local community.

Therefore, why not provide lump sums directly to healthcare system networks?  The federal government would provide the funding for the “care” component; and the State governments would provide additional funding to cover the administration (compliance, services, etc.), approximately a 20%-to-30% match, as well as oversee the healthcare provider from a Regulatory perspective.   If there are issues, the bureaucrats can argue with each other over changes that must be made that usually take years to resolve; but the Providers can continue to provide care while the disputes get worked out behind the scenes.

Note that this would be for the Medicaid population only.  It is important to remember, Medicaid only pays approximately 20% of what a Commercial health plan pays for services.   If the State wants to outsource the administration of the program to a health insurance company, that falls on the State to pay for it.  However, one should keep in mind that even Employers are now starting to go direct-contract with healthcare systems; and insurance companies are being absorbed into the healthcare systems; therefore, it is only a matter of time before we return to some form of Capitation, or performance-based Capitation, even for other health care programs.

 

Medicare 

The main issues with Medicare and PPACA, from a health plan purchasing perspective, are administrative issues around the household definition about who qualifies for financials assistance.  When a person applies for a health plan on an Exchange, if one person is on Medicare, it becomes extremely difficult to determine if the other person can qualify for a Subsidy or Medicaid, as the eligibility calculation becomes very confusing, as to what counts as income.

Under the current Subsidy system, the Exchanges carve-out the Medicare eligible Individual and pro-rate the Subsidy for the non-Medicare enrolled Individual, or family members.  However, due to how household income is calculated, the payback of assistance has become a significant issue, forcing many people to opt-out of accessing Subsidies, due having to pay back $1,000’s and $10,000’s in Subsidies at tax filing time, for those 60+ years old.

A Tax Credit program would be a much simpler system, which would make accessing assistance much easier for age 55+ individuals.  A Tax Credit program should decrease the growing number of older uninsured adults, due to the Subsidy and CSR payback issues, and the actual cost of an Individual health plan.

There should be consideration given to modify the rules and regulations that determine how income is pro-rated to calculate what income is included in the calculation, noting that Social Security income, even non-taxable Social Security income, impacts this calculation, as it is included as adjusted gross income, as is money distributed from a taxable Retirement Account.