Medicaid Growth. A Report to the Governor and the General Assembly. FY Appropriations Act Proviso 8.29

Transcription

1 Medicaid Growth A Report to the Governor and the General Assembly FY Appropriations Act Proviso 8.29 Submitted by the Department of Health and Human Services December 2002

2 Table of Contents Executive Summary.Page 5 Section I: Background and History Legislative Mandate Page 6 What is Medicaid?.. Page 6 What is Medicare?.. Page 7 Who is Eligible for Medicaid?... Page 7 OBRA and De-linking. Page 8 Eligibility Milestones in the Congress/Federal Government Page 8 Eligibility Milestones in South Carolina Page 13 Significant Reimbursement Changes in the South Carolina Medicaid Program.. Page 16 National Trends in Health Care Page 16 o The Uninsured o The Aging of Our Population o Recent State Budget Deficits o The Olmstead Decision o Children s Health Insurance South Carolina Morbidity and Mortality Rankings in Health Indicators. Page 20 The Evolution of the South Carolina Medicaid Program.. Page 21 o Contradictory Directives to Slowing the Growth of Medicaid o Expansions by the General Assembly The Role of Government In Insuring the Uninsured. Page 31 o Provision of Basic Coverage o Small Group Insurance Market Exodus o What Should South Carolina Do? o What South Carolina Gains Establishing Eligibility Page 32 Poverty Guidelines Page 33 Current Levels and Trends... Page 35 Section II: How Other State Agencies Benefit From Medicaid Revenue Targeted Case-Management Page 38 o Restructuring the Children s Service Delivery System o Importance of Coordinated Care o Duplication of Services o Interagency Case-Management Training o Utilization and Expenditures 2

3 o Preventive and Rehabilitative Services for Primary Care Enhancement Behavioral Health Services... Page 40 o Children in Need of Mental Health Treatment Services o Children in the Child Welfare System Community Mental Health Services. Page 41 Mental Retardation and/or Related Disabilities and Head.. Page 41 and Spinal Cord Injuries and/or related Disabilities Children Served by the Juvenile Justice System. Page 41 Severely Emotionally Disturbed Children Page 41 Alcohol and Drug Treatment Services. Page 42 Services to Children in Residential Settings. Page 42 Intensive Family Services Page 42 Clinical Day Programming.Page 42 Children s Day Treatment: ages 0-6 Page 43 Therapeutic Support Services.. Page 43 Wraparound Services. Page 43 Medically Fragile Services. Page 43 Therapeutic Child Treatment. Page 44 Collaborative Organization of Services for Youths Page 44 Medicaid Waivers Page 44 Cost Settlements. Page 44 Section Three: Current DHHS Cost Savings and Cost Avoidance Strategies Medicaid Eligibility: Managing It vs. Creating Barriers.. Page 46 ס Enhancements of Existing Eligibility Processes o Implementation of Plastic Medicaid Cards ס Medicaid Interactive Voice Response System ס Streamlined and Enhanced Eligibility Determination, Management and Reporting Senior Services.. Page 48 Telecommuting Page 48 Moving Toward Regionalization Page 49 ABC Child Care Program Appeals Requests Page 49 Implementation of Point of Sale and Prospective Drug Utilization Review System. Page 49 Maximization of Federal Medicaid Matching Dollars. Page 51 Change in Crossover Payment Policy. Page 51 Enhancement of Medicaid Fraud and Abuse Detection and Investigation. Page 52 Provider Self-Audit Policy.. Page 52 Expansion of the Health Insurance Premium Payment Program Page 52 Future Revenue Maximization. Page 52 3

4 Section Four: What South Carolina Could Do in the Future Return to Core Benefit Package.. Page 55 Reduce or Eliminate Services or Programs Page 55 ס Child Health Insurance Program ס Aged, Blind and Disabled ס Working Disabled ס Foster Care ס Breast and Cervical Cancer ס Katie Beckett ס Optional State Supplementation ס Hospice ס Community Long Term Care Community-based Services ס Durable Medical Equipment ס Other Reduce Payment to Providers. Page 58 Changes to Medicaid Eligibility Page 58 Gatekeeper Processes in Long Term Care Programs. Page 59 Co-payments, Premiums, and other Cost-sharing Arrangements.. Page 59 Eliminate Outreach Efforts Page 59 Minimization of the Agency s Administrative Budget. Page 59 Expansion of Managed Care. Page 59 Reinstatement of the SC Health Access Plan Page 60 Privatize Services Where there is a Large Enough Market to Support Service Delivery. Page 60 Health Insurance Flexibility and Accountability 1115 waivers.. Page 61 A Total State Medicaid Budget. Page 61 Pursue Changes in Federal Law that Allows for More Flexibility. Page 61 Replicate Strategies Used in Other States Page 62 Economic Growth.. Page 63 Managing Care.. Page 63 Section Five: Conclusion.. Page 64 4

5 Executive Summary Medicaid is a large part of the South Carolina budget and this trend is expected to continue. It provides health care insurance for approximately 800,000 of the state s most vulnerable citizens - children, the elderly, and the disabled. The maze of Medicaid programs and services, with its varying poverty levels and complex federal laws and regulations, can be difficult to navigate. The consequences of being uninsured have a substantial impact on the individual, the health care system and society. The uninsured tend to wait longer to seek treatment, are often sicker when they finally receive care, and frequently seek care in the emergency room - an expensive and inefficient way to get care. Hospitals, businesses, insurers and taxpayers are left to shoulder the costs that these patients are unable to pay. South Carolina faces many challenges in improving the health of its residents. Policymakers have grappled with how to assure that our citizens have access to health care in general, with an emphasis on preventive health care strategies and healthy behaviors. Since one huge indicator of quality of life in this state is health and health improvements, continuous and unrelenting efforts must be exerted to meet the health needs of the people living in South Carolina. The rates of morbidity and mortality in South Carolina, as compared to other states, leave much work to be done. This report was prepared at the request of the South Carolina General Assembly with the purpose of describing methods that can be used to slow the growth of the Medicaid program. Many strategies to save state dollars are currently in place or are underway at the Department of Health and Human Services (DHHS). DHHS has also initiated efforts to avoid unnecessary costs to the program. This report, in part, describes those efforts. Slowing the growth of Medicaid will have an economic impact on providers and recipients. Any decrease in state matching dollars will result in an ensuing decrease in federal revenue to this state, and federal revenues have a dramatic affect on South Carolina s economy. Moreover, if Medicaid is not funded adequately, the costs of the uninsured will simply be shifted to the insured. With South Carolina s very favorable match rate, some would argue that leaving federal dollars on the table is not good public policy. Most states are experiencing de-escalating revenues and a concomitant affect on their Medicaid programs. However, this report is not intended to be an exhaustive evaluation of other states strategies. Additionally, DHHS does not necessarily recommend any specific strategy used by other states, since South Carolina has its own unique political and health care infrastructure. Any deliberate attempt to slow the growth in the Medicaid should be done in concert with the executive branch, the legislative branch, the provider community, and advocates. 5

6 Legislative Mandate SECTION I: BACKGROUND AND HISTORY Proviso 8.29 in the fiscal year Appropriations Act required the South Carolina Department of Health and Human Services (DHHS) to initiate a study with other state agencies that use Medicaid funds to examine ways to slow down the growth in Medicaid expenditures. A report on this study shall be submitted to the Governor, the Chairman of the House Ways and Means Committee and the Chairman of the Senate Finance Committee by the beginning of the 2002 Legislative Session. Input from other agencies was sought and is located in the Appendix. Medicaid costs are influenced by a variety of factors including the size and health care needs of the eligible population, the scope of medical benefits provided, service utilization levels, and the amount of payment provided. The double digit Medicaid increases in the first half of the 1990 s were primarily attributable to: (1) increase in eligibility; (2) inflation in the costs of medical services paid for through the program; and (3) special financing measures to maximize federal funds Other influences include broad social and economic conditions such as increases in the poverty level, unemployment rates, the number of uninsured, the aging of the population, the explosion of new medical technologies, and inflationary trends in the health care system which also place spending pressures on the Medicaid program. Many of these pressures will continue well into the future. Source: Bill Fairgrieve, Medicaid Costs in Michigan, What is Medicaid? Medicaid is a grant-in-aid program in which the federal and state governments share the cost of providing medical care for needy persons who have low income. The program was authorized by Title XIX of the Social Security Act that was signed into law by the President on July 30, Congress has continuously changed the Medicaid Program since the legislation creating it was enacted. South Carolina began participation in the Medicaid Program in July In FY 02, the match rate for administration was 50% state-50% federal, although in some cases, enhanced rates may be available. For Medicaid assistance, the state rate is 30.19% and the federal rate is 30.19%. Because the cost of the Medicaid Program is shared by the state and federal governments, states are given some flexibility in providing coverage to their needy citizens. For this reason, the rules for Medicaid coverage vary from state to state. An individual who is eligible in South Carolina is not necessarily eligible in another state. The Department of Health and Human Services (DHHS) is the single state agency designated for administration of the Medicaid program. This program provides essential supports for over 800,000 recipients, involves services delivered by over 30,000 service providers, and encompasses a budget of approximately $3.7 billion. As the primary steward of the public funds for this program, DHHS is committed to maximizing and effectively managing its resources by working with its stakeholders and partnering with 6

7 providers to contain costs, avoid duplication, and leverage other available sources of funds to address the needs of beneficiaries. DHHS is involved in streamlining eligibility and reporting processes, maintaining a strong network of service providers, providing a strong information and referral network, and reaching out to individuals and families to provide information regarding programs and services. DHHS actively works toward improvements in the quality of care by establishing service outcomes, incentivizing quality improvements, and offering professional development for caregivers. Through the FY strategic planning process, the mission and values were developed for the agency and adopted by agency staff and managers. For more discussion of the strategic planning process, visit the agency s website at The agency s mission is to provide statewide leadership to effectively utilize resources to promote the health and well being of South Carolinians. The agency fulfills its mission by planning, setting policies, pursuing resources, developing programs, building partnerships, providing program oversight, and ensuring fiscal accountability to promote an accessible system of quality health and human services. The agency s values are quality, integrity, customer service, teamwork, professionalism, accountability, communication, knowledge, stewardship and innovation. What is Medicare? Medicare is administered through the Social Security Administration. It is a health insurance program for people age 65 and over or people who have received Social Security disability benefits for twenty-four months. There is no financial eligibility test for Medicare. Medicare is divided into two parts. Part A is called hospital insurance. It pays at least part of such care as hospital services, skilled nursing home care, hospice care, etc. Part B is called medical insurance. It pays at least part of such care as doctor's services, x-ray and other radiation therapy, durable medical equipment, outpatient surgery, certain physical and occupational therapy, ambulance services, dialysis, home health services, etc. A person can be eligible for both Medicaid and Medicare. For a person who has both, Medicaid will pay the monthly Medicare premium and certain services not covered by Medicare. Cost sharing will be paid only for Qualified Medicare Beneficiaries (QMB). Who is Eligible for Medicaid? Individuals must meet financial and categorical requirements to qualify for benefits. States are required to cover certain groups, and are given the option of covering other groups. The groups the states are required to cover are known as mandatory groups. The other groups are known as optional groups. Historically, Medicaid eligibility rules have been closely linked to those of the cash assistance programs such as Family Independence (FI), previously known as Aid to 7

8 Families with Dependent Children (AFDC) or the Supplemental Security Income (SSI) program. However, in recent years, Congress has given states more flexibility in establishing policies for the different coverage groups. At the same time, Congress has added more mandatory coverage groups and placed more requirements on some of the services provided. For a comprehensive overview of Medicaid, visit OBRA 1989 and Delinking In the United States, the entire social welfare system has undergone significant changes in the past two decades. As a result of the Omnibus Reconciliation Act of 1989, welfare reform moved many individuals off welfare and into the workforce; however, Congress retained Medicaid benefits for this new working population as an essential support to help them make the transition from welfare to work. Congress ultimately de-linked Medicaid from welfare assistance by tying eligibility to family income rather than public assistance. With the advent of the national Children's Health Insurance Program (CHIP), children slightly above the federal poverty level became eligible for Medicaid. As a result of all of these changes, in the last decade the percent of Medicaid recipients receiving welfare assistance has declined to only 6%. Those receiving Food Stamps only make up 33%. Because Medicaid has been delinked from welfare to comply with federal rules, it is easier to apply for Medicaid. Once many families were reluctant to apply for welfare. Medicaid no longer has this stigma. Medicaid is now a health insurance program. By providing insurance for children and families, Medicaid helps stabilize the work force for small businesses that cannot afford to provide insurance for their employees. Eligibility Milestones in the Congress/Federal Government Many changes in Medicaid have been produced by the United State Congress and have been implemented by the US Department of Health and Human Services. Activity by the federal government can shape states Medicaid programs Medicaid Program enacted program began Jan. 1, Health Maintenance Organization Amendments enacted. Established federal requirements for Medicaid contracts with HMOs Omnibus Reconciliation Act (OBRA) of 1980 Boren Amendment 1 Excerpted from Discovering Leadership That Matters, Monica Friar, JF Kennedy School of Government, Harvard University, March,

9 Repealed requirement that states follow Medicare principles in reimbursing nursing facilities and ICFs/MR. Substituted language that said payments to nursing homes must be reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities, but not necessarily tied to actual costs. Required that Medicaid pay enough to ensure that poor people have reasonable access to hospital care OBRA 1981: Cost Containment Measures (Reagan Era) 3-year reduction in Federal reimbursements. Reduced eligibility for welfare benefits. Established Freedom of Choice, 1915 (b) waivers: States can require recipients to obtain services from certain providers. Waiver is needed to enroll recipients in HMOs or to use primary care case management systems. Home and Community Based Care, 1915 (c) waivers: Enabled states to provide wide range of home and community-based care (including homemaker, personal care and case management) to elderly, mentally retarded and other chronically ill populations who might otherwise be institutionalized. States must demonstrate that average expenditures for a person receiving waiver services would not exceed expenditures for that person in the absence of a waiver. Expanded Boren Amendment to hospital reimbursements. Repealed requirement that states follow Medicare reasonable cost reimbursements for hospital inpatient services, but required that states take into account the situation of hospitals with disproportionate shares of low-income patients with special needs Tax Equity and Fiscal Responsibility Act of Medicaid/Cost sharing. Allowed states to extend Medicaid eligibility (TEFRA) to certain disabled children living at home who would be eligible for SSI if they were institutionalized. Permitted states to require cost sharing (co-payments, deductibles) for nearly all mandated or optional services provided to both the categorically and medically needy Prospective Payment System phased in over : (adopted with Medicare first). Changed payment methodology to pay hospitals based on Diagnostic Related Groups (DRGs), i.e. System sorts admissions into one of

10 categories then pays hospital a fixed fee for each admission in that category (based on labor costs in region). Prior to DRGs hospital payments were based on costs. 1984: First Provider tax levied in Florida on physicians. DEFRA (Deficit Reduction Act) OBRA 1985 Required coverage of all children born after 9/30/83 meeting state AFDC income and resource standard regardless of family structure. Required coverage of pregnant women if they would qualify for AFDC or AFDC-UP once child was born even if state didn t have AFDC-UP program. Required automatic coverage for 1 year after birth if mother is already receiving Medicaid and remains eligible. Additional coverage for pregnant and postpartum women with income below state AFDC levels. Required coverage for adoptive and foster children. Established optional hospice and case management benefits. HCFA Rule in 1985 States allowed to receive donations from private medical care providers. OBRA 1986 (Switching to optional eligibility based on poverty rate versus AFDC or SSI levels). Established option for states to extend Medicaid coverage to all pregnant women, infants up to age 1, and children up to age 5 with family incomes up to 100 percent of the poverty level. Established option for state to extend Medicaid coverage to all elderly and disabled with incomes up to 100 percent of poverty and meeting SSI asset test. Required states to continue Medicaid coverage for disabled individuals with severe impairments who lose eligibility for SSI as a result of earnings from work. 1986: Provider Taxes and Donations and Intergovernmental Transfer Programs. With OBRA 1981 Medicaid programs were allowed to make Disproportionate Share Hospital (DSH) payments. Congress took limits off those payments. Payments to hospitals and mental health facilities that 10

11 serve disproportionately high level of low-income patients could be higher than Medicare payments. West Virginia one of first to seek permission to use donations from hospitals and to increase payments to hospitals through DSH program. Big growth in hospital inpatient spending in 1990 and continuing through OBRA 1987: Nursing Home Reforms. Nursing home services made mandatory. Specified standards for scope of services to be provided, levels and qualifications of staff, assessment of each resident s functional capacity and sanctions. Options to extend coverage to pregnant women and infants up to 185 percent of the poverty level. Established a new home and community-based waiver authority for persons over : Medicare Catastrophic Cost Act (MCCA) States required to extend eligibility to pregnant women and children with incomes up to 75 percent of poverty by July 1, 1989 and 100 percent of poverty by July 1, Increased the amount of income and assets a non-institutionalized spouse of a Medicaid recipient receiving nursing home services may retain. Imposed a new national transfer of assets policy for institutionalized Medicaid recipients. States required to pay Medicare premiums, deductibles and coinsurance for low-income aged and disabled Medicare beneficiaries. Family Support Act of 1988 Required states to continue Medicaid coverage for 12 months to working poor families who leave cash assistance due to earnings. Required states to provide full Medicaid coverage to all members of twoparent families on AFDC-UP even in months when cash assistance is not being paid. OBRA 1989 Required states to raise Medicaid eligibility for pregnant women and children and infants to 133 percent of poverty. Required states to cover children through age 6 up to 100 percent of poverty, and to pay for all medically necessary services for problems identified during regular Medicaid-covered checkups. 11

12 1990: Supreme Court permits Boren Amendment Lawsuits by Medicaid providers. OBRA 1990 Reduced states abilities to modify hospital and nursing home payment rates. 21 States were being sued for hospital reimbursements. 20 states were being sued for nursing home reimbursements. Taxes imposed by the state solely on hospitals, nursing facilities or ICF/MRs were not a reimbursable Medicaid cost. Required states to phase in coverage of children through age 18 in families at or below 100 percent of poverty. Required continuous coverage of 60 days post-partum for pregnant women and 1 year for infants. Required states to conduct outreach. Authorized programs within Medicaid for home and community-based care for frail or immobile elderly and developmentally disabled. September, 1991 effective FY 1993: Amendments to Medicaid Voluntary Contributions and Provider Specific Taxes. Banned provider donation for most reasons. Required that provider taxes be broad-based taxes across an entire class of providers such as acute care hospitals, nursing homes. Prohibited states from guaranteeing that DSH payments will exceed tax payment for each hospital. Permitted HCFA to set state caps for DSH payments. Repealed provision that provider taxes are not reimbursable Medicaid costs. Allows them to be reimbursed. States using provider taxes included Alabama, Arkansas, Illinois, Indiana, Kentucky, Massachusetts, Maine, Minnesota, Montana, New Hampshire, New Jersey, Nevada, New York, Ohio, South Carolina, Tennessee, Vermont, Washington, Wisconsin. States using voluntary contributions included California, Georgia Michigan, Missouri, North Carolina, Pennsylvania, South Carolina and Utah. States using both Florida, Maryland, and Mississippi 12

13 Eligibility Milestones in South Carolina 1986 Implemented coverage for children up to age 18 at AFDC income and resource limits (Ribicoff). October 1987 Implemented coverage for pregnant women and infants (OCWI). Income limit 100 % of poverty. No resource test. Continuous coverage. November 1987 July 1988 January 1989 Outstationed 11 eligibility workers were placed in seven (7) health districts. Workers were located in prenatal and child health clinics. Two additional outstationed eligibility workers were placed in other prenatal and child health clinics. Healthy Mothers/Healthy Futures Initiative Maternal Care Component. Increased Medicaid reimbursement for maternal care. The increase was tied to a requirement that enhanced services be provided (i.e., health education, follow-up for non-compliant patients, family planning, parenting education and WIC referral.) Expanded coverage to include Qualified Medicare Beneficiaries. March 1989 Added coverage of children to age 2. Healthy Mothers/Healthy Futures Initiative Child Health Component. 1. Increased rates for newborn care when: The infant is referred to WIC. A home visit was scheduled. The home visit is made by trained pediatric nurses. They assess the health status of the infant and mother, the home condition and make referrals for Medicaid, EPSDT, etc. 2. Increased reimbursement for EPSDT screenings for infants (to age 1). 3. Added a separate fee ($80) for the initial exam conducted after an infant is discharged from neonatal intensive care unit. April 1989 Increased Medicaid income eligibility limit for pregnant women and infants to 125 % of poverty (OCWI). 13

14 June 1989 October 1989 Increased income eligibility limit for pregnant women and infants to 185 % of poverty (OCWI). Expanded coverage to include children to age 7 at 100 % of poverty. Expanded coverage to include aged and disabled individuals with income at or below 100% of poverty (ABD). March 1990 April 1990 July 1990 July 1991 October 1991 October 1992 Implemented a medically needy program to cover pregnant women, children and caretaker relatives of children as well as aged, blind and disabled individuals (state legislation). Increased income eligibility limit for children age 1 to 6 to 133% of poverty. Implemented coverage to pay Part A Medicare premiums for the working disabled (QDWI). Expanded coverage to include children to age 8 at 100% of poverty. Expanded coverage to include children to age 9 at 100% of poverty. Expanded coverage to include children to age 10 at 100% of poverty. Eliminated the Medically Needy Program coverage of pregnant women, children and caretaker relatives of children as well as aged, blind and disabled individuals. January 1993 October 1993 October 1994 January 1995 Implemented coverage to pay Part B Medicare premiums for Specified Low Income Medicare Beneficiaries (SLMBs) with income between 100% and 110% of poverty. Expanded coverage to include children to age 11 at 100% of poverty. Expanded coverage to include children to age 12 at 100% of poverty. Expanded coverage to pay Part B Medicare premiums for SLMBs with income between 100% and 120% of poverty. 14

15 Implemented coverage for severely disabled children who meet institutional level of care under the Katie Beckett/TEFRA option (state legislation). October 1995 October 1996 Expanded coverage to include children to age 13 at 100% of poverty. Expanded coverage to include children to age 14 at 100% of poverty. Implemented coverage for children who were terminated from Family Independence (formerly AFDC) due to FI sanctions. August 1997 January 1998 September 1998 October 1998 July 2000 October 2001 Expanded coverage to include children age 1 to 19 at 150% of poverty -Partners for Healthy Children (PHC). Implemented coverage for individuals who are entitled to Medicare Part A, have income of at least 120% FPL, but less than 135% FPL or at least 135% FPL, but less than 175% FPL, resources that do not exceed twice the limit for SSI eligibility, and are not otherwise eligible for Medicaid. (Qualifying Individuals (QI- 1 and 2s). Implemented Section 1931 coverage for families who meet income and resource criteria for FI. Implemented coverage of disabled working individuals with family income of less than 250% of FPL, individual unearned income less than SSI income limit and resources less than $2000 (state legislation). Implemented coverage for children age 18 to 21 who were in foster care on their 18 th birthday and aged out of the foster care system. Implemented coverage to females under age 65 who were screened by DHEC s Best Chance Network and diagnosed with breast and/or cervical cancer. 15

16 Significant Reimbursement Changes in the South Carolina Medicaid Program Over the years, the Medicaid program has experienced significant changes in its reimbursement to providers of Medicaid reimbursed services. Such reimbursement changes were made as a result of changes in the appropriations to the agency, changes in federal or state law or regulation, or internal policy decisions. National Trends in Health Care Health care is a one of the largest sectors of the national economy, accounting for 12% of the Gross Domestic Product. Health policy set at the national level directly impacts how these funds are prioritized and spent. The following is a summary of the major health issues facing the United States and South Carolina. The Uninsured In 2000, 38.4 million Americans, or 16% of the non-elderly population, were uninsured. Low-income persons (those earning less than 200% of the Federal Poverty Level or $27,476 for a family of three) run the highest risk of being uninsured. Four out of five of the uninsured are in working families. South Carolina has a 15.8% rate of uninsured for the general population and 28.1% of the population at or below 200% of the Federal Poverty Level lack health insurance. 2 The consequences of being uninsured has substantial impact on the individual, the health care system and society. The uninsured tend to wait longer to seek treatment and are often sicker when they finally receive care. They frequently seek care in the emergency room, an expensive and inefficient way to get care. Hospitals, businesses, insurers and taxpayers are left to shoulder the costs that these patients are unable to pay. The number of ER visits increased 15% nationally between 1990 and This increase was due partly to the greater numbers of uninsured. The uninsured are four times more likely than people who have health insurance to use the ER as their regular source of care. People without health insurance get sicker and are more likely to die sooner than those who have health insurance. According to research from ACP/ASIM: in a study of more than 28,000 Florida patients, those without insurance were more likely to be diagnosed with skin, colorectal, breast and prostate cancers later, and therefore, more dangerous stages than those with insurance. All these cancers can be detected earlier through regular screening an option usually unavailable to the uninsured; uninsured persons tend to be sicker upon admission to the hospital; the uninsured are significantly more likely than the privately insured to die in the hospital; according to a study of nearly 4,700 breast cancer patients, uninsured 2 Kaiser Commission on Medicaid and the Uninsured, February, American Hospital Association, Trend Watch, March

17 women had a 49% greater chance of dying following diagnosis of cancer than did privately insured women 4. Most disturbingly, a recent (May, 2002) study by the Institute on Medicine states 18,314 persons die each year because they lack preventive services, a timely diagnosis or appropriate care. The study goes on to say: uninsured people with colon or breast cancer face a 50% higher risk of death; uninsured trauma victims are less likely to be admitted to the hospital, receive the full range of needed services and are 37% more likely to die of their injuries; about 25% of adult diabetics without insurance for a year or more went without a checkup for 2 years. That boosts their risk of death, blindness and amputation 5. Families are impacted by the lack of health insurance. Because they lack coverage, families must often choose between paying for medical care and paying basic household expenses. For instance, uninsured children are: less likely to have a regular source of care; less likely to have up-to-date immunizations; less likely to have had a recent physician visit; likely to delay seeking care; and more likely to have untreated vision problems. 6 There is a financial cost to communities and society. Providing charity care to the uninsured means that cost is shifted to insured patients who wind up with higher charges as a result. Taxpayers also pay the cost of caring for the uninsured through federal and state subsidies to hospitals and clinics. Public hospitals, teaching hospitals, academic health centers and non-profit community hospitals the primary providers of care to the uninsured incur heavy operating losses, forcing them to cut back on services to all patients or even close facilities. Care for the uninsured is paid for by everyone, often in inequitable ways. The Aging of Our Population The senior population - persons 65 years or older numbered 35 million in They represented 12.4% of the U.S. population, about one in eight Americans. This group will continue to grow significantly in the future. By 2030 there will be about 70 million seniors comprising 20% of the population 7. South Carolina s older residents show the same trends. Seniors, as a group, out-paced others with a 50% growth rate between 1980 and Overall, persons age 60 and above in South Carolina are anticipated to increase from 637,673 in 2000 to1,291,211 in 2025 for a increase. 9 Although longevity and income have risen, there are still a significant number of low - income seniors who are in poor health. A little over 43% of senior South Carolinians 4 No Health Insurance? Its Enough to Make You Sick. American College of Physicians/American Society of Internal Medicine, USA Today, May 22, Covering the Uninsured.org A Project of the Robert Wood Johnson Foundation. 7 A Profile of Older Americans: 2001, Administration on Aging, U.S. DHHS 8 Mature Adults Count, S.C. DHHS 9 S.C. State Plan on Aging , S.C. DHHS 17

18 have an income of 200% or below of the Federal Poverty Level 10. Although seniors make up roughly 30% of the Medicaid population, almost 70% of the Medicaid expenditures are for seniors. 11 Approximately 80% of nursing home care is paid for by Medicaid. Medicaid is a major investment in the senior citizens of the state, since much of Medicaid is devoted to medical services for seniors. Recent State Budget Deficits State governments are facing their biggest budget crises in eleven years as a weak business climate has lead to huge declines in revenue. The National Conference of State Legislatures (NCSL) estimates states are facing a $27 Billion shortfall this fiscal year. NCSL issued a report in May 2002 showing April, the most crucial month for tax collections, as disappointing. To close the gap, states are taking drastic means to deal with the drop. According to NCSL, 29 states have cut budgets for higher education, 17 states have cut outlays for K-12 grades, 25 states have cut corrections budgets and 22 have cut Medicaid spending. 12 The Olmstead Decision In 1999, two people with disabilities residing in institutions for persons with mental retardation sued the state of Georgia on the grounds that they were capable of independent living in the community. Georgia refused to provide the support services for them to do so. The U.S. Supreme Court ruled that under the Americans With Disabilities Act, Georgia had discriminated against these individuals by confining them to a segregated institution rather than an integrated community-based program. 13 In part, this ruling held that if a person is capable, the state must provide a range of services to enable them to live in the community. The impact of the Olmstead Decision is far ranging. Each state is mandated to write an Olmstead plan and to provide comprehensive services in the community. This may mean the expenditure of millions of additional dollars, especially in Medicaid programs. Olmstead has served to increase Medicaid spending in other states and hastened the creation of flexible service options for the disabled. While Olmstead has been a boon to the disabled community, it will very likely to cost states additional resources. Children s Health Insurance Program In 1996, Congress passed the Balanced Budget Act, containing Title XXI. This Title created the Children s Health Insurance Program (CHIP). Each state has a CHIP program and can choose the level of poverty it wishes to serve, but the program has a comprehensive range of almost unlimited services. 14 South Carolina covers children up 10 S.C. State Plan on Aging , S.C. DHHS 11 S.C. DHHS MMIS report 12 USA Today, May 23, Proceeds of the Disability Advocacy in a Post-Olmstead Environment Conference, June 28-30, Partners for Healthy Children Update, March

19 to age 18 at or below 150% of the Federal Poverty Level. Currently there are over 43,000 children in the South Carolina CHIP program with a cost of over $52 Million in FY This program is a Medicaid expansion and the state must appropriate matching funds to it each year. South Carolina Health Care Trends According to a study by the Centers for Medicare and Medicaid Services (CMS) released in July 2002, per person spending for health services and public and private health plans varied by nearly $2,000 from state to state in From 1991 to 1998, the US average was 4.9% on personal health care spending per capita. The South Carolina average was 6.5%. Data shows that for Medicaid personal health care spending per enrollee in 1991, the state s share was 14.8% in South Carolina. In 1998, the state s share was only 16.6%. According to the report, the states with the fastest growth in health spending over these years were Maine, Mississippi, West Virginia, North Carolina and South Carolina. However, the Older Americans Report, referencing the same study by CMS, points out that South Carolina ranks 42 nd in overall Medicaid spending per enrollee. South Carolina ranks 28 th in Medicare spending per enrollee. 17 Because the trends in health improvements in South Carolina have been so disappointing, health and human services professionals have sought to improve the health and well-being of our citizens through a variety of interventions. Some of these strategies have relied on Medicaid dollars to support health improvement activities. State agencies have used state dollars to leverage federal Medicaid funds in an effort to expand health improvement and public health strategies. Despite those interventions, data continue to show that South Carolina ranks at or near the bottom as compared to other states. 15 DHHS MARS recipient report 16 CMS News, Press Release dated July 9, 2002; later published in the journal Health Affairs 17 Older Americans Report, July 12,

20 South Carolina Rankings Overall Ranking Lifestyle Prevalence of Smoking Motor Vehicle Deaths Violent Crime Risk For Heart Disease High School Graduation Access Unemployment Adequacy of Prenatal Care Lack of Health Insurance Support for Public Health Care Occupational Safety and Disability Occupational Fatalities Limited Activity Days * Disease Heart Disease Cancer Cases Infectious Disease Mortality Total Mortality Infant Mortality Premature Death Source: 20

21 The Evolution of Funding for the South Carolina Medicaid Program The South Carolina Medicaid Program has evolved over the years as a result of policy decisions made by former and current Governors as well as the General Assembly. In some years, provisos in the Appropriations Act have created program expansions without funding to support them. In many instances, when funding was provided, those funds were in non-recurring dollars. Moreover, the Department of Health and Human Services received directives and mandates from the South Carolina General Assembly for many years. Fiscal Year A.6 The income limitation for the Medicaid Program shall continue to be three hundred percent of the SSI single payment maximum. Explanation: This proviso raised the income limit threshold and resulted in eligibility for more individuals. 38A.16 Funds appropriated herein for hospital administrative days and swing beds shall not be reduced in the event the agency cuts programs and the services they provide. Explanation: This proviso protects the administrative day and swing bed programs from any reductions resulting from programmatic cuts. These programs benefit hospitals. 38A.19 To the extent the Finance Commission (now DHHS) can increase Medicaid federal matching funds through changes in reimbursement formulas for other state providers, the Commission, with the permission of the state providers, is authorized to retain these funds in an earmarked account on deposit with the State Treasurer and use these funds to cover unanticipated increases in Medicaid expenditures. The Commission should not hold any other state provider liable for disallowances resulting from these changes. Any funds realized as a result of this proviso shall be reported as part of the following year budget process. Explanation: This proviso required the agency to change reimbursement formulas for state agencies so as to maximize federal matching dollars. Fiscal Year (Medicaid State Plan) Where the Medicaid State Plan is altered to cover services that previously were provided by 100% state funds, the Finance Commission can bill other agencies for the state share of services provided through Medicaid. The Finance Commission (now DHHS) will keep a record of all services affected and submit periodic reports to the House Ways and Means and Senate Finance Committees. 21

22 Explanation: This proviso required the agency to determine which services previously covered by 100% state funds could be altered in order to leverage federal matching funds (Medically Indigent Assistance Fund) The Finance Commission is authorized to expend disproportionate share funds to all eligible hospitals with the condition that all audit exceptions through the receipt and expenditures of these funds are the liability of the hospital receiving the funds. These funds must be used to reimburse the hospital for expenses in providing uncompensated indigent care, however, this requirement does not apply to funds used to reimburse facilities at the Department of Mental Health Explanation: This proviso authorized the agency to increase reimbursement to hospitals providing uncompensated indigent care. Fiscal Year Same as Fiscal Year (GP: TEFRA-Tax Equity and Fiscal Responsibility Act) It is the intent of the General Assembly that the State Medicaid Plan be amended to provide benefits for disabled children as allowed by the Tax Equity and Fiscal Responsibility Act (TEFRA) option. State agencies, including but not limited to, the Office of the Governor the Continuum of Care, the Department of Health and Environmental Control, the Department of Mental Health, the Department of Disabilities and Special Needs, and the Department of Health and Human Services shall collectively review and identify existing state appropriations within their respective budgets that can be used as state match to serve these children. Such funds shall be used effective January 1, 1995 to implement TEFRA option benefits. Explanation: This proviso required DHHS to create a new eligibility category to expand services to disabled children without regard to family income. Fiscal Year (DHHS: Medicaid State Plan) Where the Medicaid State Plan is altered to cover services that previously were provided by 100% state funds, the Department can bill other agencies for the state share of services provided through Medicaid. The Department will keep a record of all services affected and submit periodic reports to the House Ways and Means and Senate Finance Committees. Explanation: Same as (DHHS: Admin. Days/Swing Beds Reduction Prohibition) Funds appropriated herein for hospital administrative days and swing beds shall not be reduced in the event the agency cuts programs and the services they provide. 22

23 Explanation: Same as (DHHS: Reimbursement Formula Changes) To the extent the Department can increase Medicaid federal matching funds through changes in reimbursement formulas for other state providers, the Department, with the permission of the state providers, is authorized to retain these funds in an earmarked account on deposit with the State Treasurer and use these funds to cover unanticipated increases in Medicaid expenditures. The Department should not hold any other state provider liable for disallowances resulting from these changes. Any funds realized as a result of this proviso shall be reported as part of the following year budget process. Explanation: Same as Fiscal Year (DHHS: Reimbursement Formula Changes) To the extent the Department can increase Medicaid federal matching funds through changes in reimbursement formulas for other state providers, the Department, with the permission of the state providers, is authorized to retain these funds in an earmarked account on deposit with the State Treasurer and use these funds to cover unanticipated health and human services expenditures. The Department should not hold any other state provider liable for disallowances resulting from these changes. Any funds realized as a result of this proviso shall be reported as part of the following year budget process. Explanation: Same as (DHHS: Residential Care Optional Supplement) From the appropriation made herein for General Assistance, the Department will supplement the income of individuals who reside in those licensed residential care facilities that have an approved Optional Supplement Request with the Department. Individuals who reside in those residential care facilities with approved Optional Supplement Requests must also qualify as aged, blind or disabled under the definitions of Public Law , U.S. Code, or who would qualify except for income limitations or residence in a residential care facility reclassified as a public institution by the Social Security Administration. For the period of the current fiscal year, the Department will, based on availability of funds, supplement the income of the above defined group up to a maximum of $ per/month and the residential care facilities are authorized to charge a fee of $ per/month for the defined group. Each individual in the defined group is allowed a $33.00 per/month personal needs allowance. The Department will issue the recipient an Optional Supplemental check in an amount that will permit the recipient to comply with the above payments; however, if the federal government grants a cost of living increase to Social Security and Supplemental Security Income recipients, the maximum amount that the facility is permitted to charge is $ The Department shall establish the maximum number of Optional Supplement Requests that can be funded and will develop a waiting list based on present and future applications received from each county. Each facility that participates in the Optional Supplement Program must submit a notarized operating 23

24 cost report. The cost information will include all income and operating costs for the facility. The Department will develop a time schedule for reports to be submitted. Facilities failing to submit costs information and adhere to the time schedule will not be eligible to serve Optional Supplement residents. Information received by the Department will be consolidated and submitted to the Senate Finance Committee and the Ways and Means Committee. The Department shall explore any options for maximizing state matching dollars in the provision of services to residents of licensed community residential care facilities and options for reviewing the quality and adequacy of care and report to the Senate Finance Committee, the Ways and Means Committee and the Governor s Office no later than January 15, All services rendered to a Residential Care Facility resident must be in compliance with state health licensing laws and regulations. Explanation: This proviso moved the OSS Program (state funds only) to DHHS from DSS. The proviso was amended further to require DHHS to explore options for maximizing state dollars by matching the funds, when possible, with federal matching funds. OSS funds had historically never been matched (DHHS: Medical Home for Clients) The Department of Health and Human Services (DHHS) shall establish a program to encourage physicians to establish a medical home for Medicaid clients. This program is intended to provide continuity of care for Medicaid clients, increase access to primary care services for Medicaid clients and ensure increased and continued participation in the Medicaid program by physicians who render primary care services. The DHHS shall have the responsibility to define a medical home and have signed agreements with physicians willing to meet the requirements of providing a medical home. Physicians signing agreements to become medical homes for Medicaid will receive enhanced reimbursement to be defined by DHHS. Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs) must meet the requirements set forth for a medical home in order to continue to receive cost based reimbursement from DHHS. Explanation: This proviso required DHHS to explore ways to create medical homes for clients by increasing reimbursement rates. The net effect was to increase the numbers of recipients and the number of primary care physicians participating in the program. Fiscal Year (DHHS: Prescriptions) From the funds appropriated herein, the Department is directed to increase the prescription/refill limit to four (4) prescriptions/refills per month for each recipient effective January 1, 1999, and to ensure that unlimited prescription/refill coverage is available for children. Explanation: This proviso required DHHS to increase the prescription drug limit to four per month. No additional funds were appropriated in that fiscal year. 24