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Medicaid Economics 101 Everyone is painfully aware of the looming deficit in the state budget for the next biennium. State lawmakers are looking for ways to cut at least $10 billion from the projected biennial budget. The Texas healthcare system, in particular, is suffocating under the weight of proposed budget cuts. The House, for example, has recommended eliminating coverage for nearly 300,000 low-income patients by cutting care for pregnant women, acutely ill adults, care for disabled and frail elderly, and children currently receiving care under CHIP. These cuts are in addition to elimination of Medicaid GME funding, without which many residency programs no longer will be able to operate, cutting provider rates by 5 percent, reducing mental health coverage for children, cutting prescription drug coverage for patients with HIV or AIDS, and closing a state school and hospital. The TMA House of Delegates in April passed a resolution requesting Medicaid expenditures be increased. Here's why: The bottom line is Medicaid is intended to be countercyclical, increasing during economic downturns to cover the swelling ranks of the medically uninsured while stimulating local economies. To understand this, you have to know a little about how the Medicaid program works. Introduced in Texas in 1967 to support health care for the poor, Medicaid has been expanded to pay for medical and hospital care, prescription drugs, and nursing home care for the poor, elderly, disabled, children, and pregnant women. In 1999, CHIP extended affordable healthcare coverage to children in families below twice the federal poverty level (about $36,000 for a family of four). All decisions on how many people are covered, copayment rates, the size of reimbursement rates—that is, how much Texas spends on Medicaid and CHIP—are made by the state. The kicker is that for every dollar Texas pays into its Medicaid program, the federal government contributes about $1.50, and for every state dollar in CHIP, the feds contribute about $2.30. Of the total $58.8 billion spent on these two programs in 2002 in Texas, $23.2 billion was contributed by the state from general revenues, and a whopping $35.6 billion came from the federal government. A just-released economic analysis—commissioned by TMA and the Texas Hospital Association—found that just the federal contribution to Texas Medicaid and CHIP last year generated $18.7 billion additional in gross state product, $13 billion in personal income for Texans, $4.9 billion in retail sales here, $.9 billion in state tax revenue and 300,644 permanent jobs. The study, conducted by the Perryman Group, said the programs jointly contribute 4.3 percent of the state's total economic activity, 2.5 percent of income, and 3 percent of permanent jobs. Bottom line, every net $1 spent by the state brings a net $2.01 from the feds and generates $11.95 of economic activity in the state economy. In Dallas County alone, Medicaid and CHIP contribute $5.5 billion in expenditures, $1.9 billion in personal income, $593 million in retail sales, and 42,800 jobs (See www.texmed.org/perryman for more information). Now you get the picture. Medicaid and CHIP not only are a vital safety net for the disadvantaged but also a potent stimulus to the state economy. Increasing state expenditures on these programs, would fuel the state economy. Why is it, then, that Texas ranks among the lowest states in per capita Medicaid spending? First, Texas, by and large, meets only the federal minimum requirements for Medicaid eligibility, leaving millions of low-income Texans without healthcare coverage. Other states expanded Medicaid coverage over the last decade to decrease the number of uninsured. Texas also has kept Medicaid provider reimbursement rates low. For physicians, rates are half of commercial fees and two thirds of Medicare. Low Medicaid reimbursement discourages physicians from participating, leaving many patients no choice but to use public clinics and hospital emergency rooms for care. The cumulative impact of Texas' Medicaid policies is that $88 million of the care for the poor and disabled is shifted to local taxpayers. Without the federal match, we must shoulder higher county property taxes for the increasing volume in our public hospitals, and higher health insurance premiums to offset losses on uninsured visits to private hospitals' emergency departments. When the House was considering that 33 percent cut in Medicaid
spending, other fiscally astute states were licking their chops.
Reasonable heads prevailed and the cut was dropped to 5 percent,
but this is still devastating to Dallas County. It's time to
call our legislators and show them the economic sense in the
TMA position: Come up with the revenue sources to increase state
Medicaid spending sharply, lower the eligibility criteria and
copayments, and correct the discouraging reimbursement rates
for hospitals and physicians. It's sound economics.
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Medical Society. |
