17 March 2011

Medicaid debate, by the numbers

By Dennis Smith

With baseball spring training and all of the various basketball tournaments, March surely must be a sport statistician's favorite month. However, statistics also need context. A baseball player with a lifetime batting average of .330 is likely headed for the Hall of Fame. A basketball player with a free-throw percentage of .330 is headed for the bench.

Numbers certainly cannot tell us everything we need to know about a subject, but they are useful in forming a common understanding. To reach the necessary decisions about critical programs like Medicaid, it is vital to understand how our funding requests fit into the state's budget.

Under Gov. Scott Walker's proposed budget, the Department of Health Services stands out as one of the few agencies that will receive a substantial increase in state funding. Over the next year, General Purpose Revenue (GPR), which accounts for the majority of state revenues and taxes, are estimated to increase by $447.6 million. Walker requests an increase of $513 million in GPR appropriations for DHS. In other words, Walker's budget dedicates the entire amount - and then some - to DHS. Over the next two years, our department will see a 23% increase in GPR, while all other agencies combined see a 1% increase.

Once incorporated into the DHS budget, about 86% of this new revenue will go toward Medicaid programs such as BadgerCare, FamilyCare and SeniorCare. In other words, nearly all new general revenue collected by the state over the next two years will go to Medicaid. Yet, we still have a $500 million budget gap that must be closed.

With this unprecedented investment and budget challenge comes a greater than ever responsibility to make Medicaid more cost-effective. We need to look at each of our Medicaid programs and redesign them in ways that are fair, focused and based upon what works. We can do so by better aligning Medicare and Medicaid, making BadgerCare coverage more comparable with private policies and increasing the use of self-directed care among long-term care patients.

A Medicaid redesign should include an additional dimension of personal responsibility. A recent study in Milwaukee found that 356 Medicaid patients in Milwaukee accounted for 11,383 unnecessary emergency room visits - that is more than 31 visits per member. Adding incentives for proper utilization of the health care system and improving efforts to coordinate care should help alleviate this problem. We also can add modest increases in cost-sharing to the program while maintaining affordability for working families.

We need to focus on those who use the greatest share of resources and design solutions that will provide them with high-quality care in the most appropriate setting. Most of the Medicaid costs are concentrated on a small group of people. While nearly 75% of individuals who are on Medicaid incur costs of less than $2,500 and account for 14% of spending, just 5% of the Medicaid population incurred costs greater than $20,000 and account for 58% of total costs.

Another significant opportunity to save money can be found in Medicaid long-term care. Wisconsin has rebalanced its long-term care system so more money is spent on community-based care than institutional care, but there is still room for improvement. Even more savings can be realized if more people self-direct their long-term services and supports, giving them more choices and better access to the services they need.
Federal officials have advised states that we can simply drop certain eligibility groups and optional benefits. That is not the path we want to take. Over the coming weeks, we will ask citizens across Wisconsin for their ideas to help us meet this challenge. The numbers clearly tell us that doing nothing is not a viable option.

Dennis Smith is secretary of the Wisconsin Department of Health Services.


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