At best, the future of Medicaid is in doubt; at worst, the program is near failure. As noted a 2005 report by the research firm McKinsey & Co., Medicaid costs “are becoming truly unsustainable.” Consider the following:
- Medicaid costs in North Carolina increased 48 percent from FY1999-00 to FY2005-06.
- As of 2006, Medicaid covered 18.1 percent of the state’s population – almost twice the share of those enrolled in 1990.
- For FY2006-07, Medicaid spending consumed 15.9 percent of the General Fund operating budget, up from 8.2 percent just 10 years prior.
- According to the Fiscal Research Division, 56 percent of Medicaid expenditures in 2004 were dedicated to optional services.
Making matters worse are the unseen costs of Medicaid that translate into higher taxes and higher insurance premiums for everyone. According to a 2007 Heritage Foundation report, “Data from the Centers for Disease Control (CDC) show that Medicaid and SCHIP enrollees are twice as likely as the uninsured and four times as likely as those with private insurance to use the emergency department for non-urgent problems.” Moreover, fewer physicians are agreeing to accept Medicaid patients in large part due to Medicaid’s low reimbursement rates. Expanding government programs translates into more providers receiving the relatively lower Medicaid reimbursement rates – a trend that forces providers to seek higher reimbursements from private insurers to make up the difference. The end result is higher premiums for North Carolina’s working families.
Fundamental reform is needed now in order to prevent a long-term fiscal crisis:
Medicaid Patients have Limited Doctor Choices
A 2002 Medicare Payment Advisory Commission (MedPac) survey found that “approximately 40 percent of physicians restricted access for Medicaid patients.” Subsidizing the purchase of private insurance options for Medicaid and NC Health Choice enrollees would resolve this problem and give vulnerable populations access to higher quality care.
Focus on critical needs
While the federal government requires that Medicaid cover certain services, states can also choose from a menu of 38 optional benefits. North Carolina currently covers 33 optional services, which include transportation, dentures, eyeglasses, chiropractors and private duty nursing. Only eight states fund more options for their Medicaid enrollees; neighboring South Carolina covers 25 and Virginia covers 30. North Carolina’s decision to extend coverage to the “medically needy” is a prime example of how optional services are fueling the state’s unsustainable Medicaid costs. This program extends coverage primarily to people with too much income to be eligible for standard Medicaid coverage. Fifteen states (including neighboring South Carolina) do not cover this group at all. By comparison, North Carolina’s spending per “medically needy” enrollee is 70 percent higher than the U.S. average.
Provide More Options for Medicaid enrollees
Following the lead of other Southeast states, North Carolina could implement a premium assistance opt-out program for Medicaid and NC Health Choice enrollees. Such a program would enable North Carolina to use existing Medicaid funds to help low-income families purchase their own health insurance. Florida and South Carolina have already enacted such legislation; a similar proposal in Ohio has also received bipartisan support. As with Florida’s program, enrollees would have the option of using a risk-based subsidy to purchase coverage from a select group of managed care plans. Each plan would include a comprehensive care component underwritten by the insurer and a catastrophic care component underwritten by the state. Unlike the premium assistance plan proposed above, the state would have a much larger role in managing this program.
Help the poorest children first
NC Health Choice (SCHIP) provides health insurance coverage to children from non-Medicaid eligible families who earn up to 200 percent of the federal poverty level (FPL). By comparison, the newly created NC Kids Care program goes even further, including kids from families who earn up to 300 percent FPL ($62,000 for a family of four). Instead of providing health insurance to middle-class children at the expense of lower-income kids, the state should focus on expanding enrollment in NC Health Choice or an alternative premium assistance program for families who earn less than 200 percent FPL. (175,000 children who are currently eligible for Medicaid and NC Health Choice have yet to be enrolled.) At the very least, the state should adhere to federal guidelines that prohibit federal funding for NC Kids Care until NC Health Choice has reached a 95 percent participation rate.
Voters Disappointed in Gov’t Healthcare
A September 2007 Civitas Institute DecisionMaker poll asked voters, “Do you think state government does an excellent, good, only fair or poor job in spending taxpayer dollars on healthcare?” The largest response was “poor,” which received 43 percent of the vote. Conversely, 1 percent replied “excellent.” All told, 77 percent of respondents said the state does a “poor” or “only fair” job of spending taxpayer dollars on healthcare, compared to only 15 percent who replied “good” or “excellent.”
Revise long-term care options to curb costs
Reforming the way North Carolina pays for long-term care will help ensure that the truly needy receive adequate coverage.
- Lower the exemption threshold. Medicaid exempts significant amounts of wealth and assets when calculating eligibility.
- Increase efforts at Medicaid estate recovery.
- Educate citizens about the state income tax credit for the purchase of private long-term care insurance. Reenacted in 2007 (S.L. 2007-0323), this credit amounts to 15 percent of the premium costs of long-term care. The credit may not exceed $350 and applies to married couples earning less than $100,000, or single filers earning less than $60,000. The current credit could be improved by increasing it to 20 percent (as in New York), or increasing the maximum amount allowed to $500 (as in Maryland). Increasing the tax credit would be a more affordable option than paying for future long-term care costs.