Medicaid Survival

Edition: March 2003 - Vol 11 Number 03
Article#: 1479
Author: Laura Thill

State revenues have been dropping for five straight quarters, and that’s bad news for Medicaid. Although Medicaid provides for approximately 42 million low-income Americans, the program has become a target by many states looking to reduce spending and balance their budget, according to the Kaiser Commission on Medicaid and the Uninsured (The Henry J. Kaiser Family Foundation, “Medicaid Spending Growth: A 50-State Update for Fiscal Year 2003”).

On one hand, few dispute the importance of Medicaid for long-term care facilities or nursing homes. But the money simply isn’t available and one group or another will most certainly feel the heat.

“We have a growing [elderly] population that needs more help,” says Brad Klitsch, vice president of market development at Milwaukee-based Direct Supply Healthcare Equipment. “But the states need more help from the federal government.”

Nursing homes currently are operating at a blended margin of 3 percent, notes Klitsch. “Add to this the Medicare ‘Cliff’ [which resulted in a loss of $25 to $27 per patient day] and the margin will drop to –1.5 percent,” he says.

Kaiser Survey

In a survey of states conducted in December 2002, Kaiser posed five questions:

1. What are your state’s present FY2003 estimates for Medicaid spending and enrollment?

2. Does your state project a shortfall in its FY2003 Medicaid budget? How large is the most recent projection and how does this compare to projections made in June 2002?

3. Is your state making mid-year changes to its Medicaid spending in an effort to reduce the spending growth rate?

4. Is your state seeking means of gaining additional federal financing through “Medicaid Maximization” strategies, such as provider taxes, in FY 2003?

5. What is your state’s Medicaid budget outlook for FY2004?

The responses did not hail a bright outlook for Medicaid. Kaiser reported the following findings:

· States expect Medicaid spending to increase by 9 percent in FY2003, and enrollment is predicted to rise 7.7 percent.

· Forty states report facing a shortfall in their FY2003 Medicaid budgets.

· Forty-nine states report either making plans or already acting to reduce their Medicaid spending growth.

· Many states report trying to increase the federal share of Medicaid funding by drawing down additional federal funds.

· State Medicaid officials already have voiced concerns over the Medicaid budget outlook for FY2004.

Addressing the Problem Head On

The short-term solution to the dismal budget outlook is pretty straightforward, according to Klitsch. “We have to address the problem head on,” he says. “[The government] must contribute more to Medicare.” A longer-term solution may be arrived at through tax hikes, he adds.

Steve Skoronski, owner of Indianapolis-based Associated Medical Products and Medical Systems Corp., is concerned that states will increase spending on home healthcare as a means of encouraging some nursing-home residents to return home. But, this just won’t work, he notes. Many nursing-home patients require round-the-clock care. “These patients won’t have their needs met for the same dollar amount in a home health setting as in a nursing home,” says Skoronski. “A patient can’t get 24-hour access to care at home for $150 a day.” This approach will only help individuals already being cared for at home by family members.

A better solution, explains Skoronski, would be “a push to take patients from the hospital setting and move them to a nursing home for one or two months.” He compares a ventilator-dependent patient whose hospital care costs $2,000 a day with a nursing-home patient receiving the same care for $500 a day. “But it would be hard to get funding here,” Skoronski continues. “This thinking is outside of the box.”

And, in some cases, removing patients from a hospital setting could cost a nursing home more money, according to Klitsch. “If a nursing home is not equipped to provide the same service that the patient is receiving in the hospital at a cheaper rate, this won’t work,” he says.

Nursing Home Reality

“No one wants to end up in a nursing home,” says Skoronski. “But this is a reality. Mental and physical capacities often deteriorate while people are still alive.”

“We are obligated to care for these people, even those who can’t afford at-home, 24-hour care,” Skoronski adds.

Or, as Klitsch reasons, the federal government should allocate the dollars that the states were promised.