Medicaid “Reform” and Mental Health

Leighton Ku

Senior Fellow

Email ku@cbpp.org

Presentation at NAMI

Conference, June 2005www.cbpp.org

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Medicaid as a Safety Net

• Before Medicaid enacted in 1965, poor people usually uninsured and relied on charity care.

• Today Medicaid serves as a safety net:

– For those with disabilities who are largely excluded by private health insurance

– For low-income elderly who need help for gaps left by Medicare

– For low-income families and children who can’t afford insurance, even if they are working in low-wage jobs.

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Mental Health Getting Smaller Fraction of Nation’s Overall Health Expenditures…

6.7%6.2%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1991 2001

% national health expenditures for mental health

Source: T. Mark, et al. Health Affairs, Mar 2005

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Medicaid Has Financed a Growing Share of Mental Health Services

19% 27%

38%36%

43% 37%

0%

50%

100%

1991 2001

Private

Other Public

Medicaid

Source: T. Mark, et al. Health Affairs, Mar 2005

% of total mental health expenditures by source of payment

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Almost Half of Medicaid Costs Are for Those with Disabilities

Enrollment Expenditures

Aged

Disabled

Children

Adults

10%

16%

48%

26%

26%

44%

18%

11%

Medicaid Enrollment and Expenditures, FY 2004

Source: CBO estimates

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Medicaid and the Federal Budget

• Congressional budget resolution assigns Senate Finance and House Energy & Commerce Committees about $10 billion in cuts assumed to come from Medicaid over next five years. Policies to make cuts to be determined by this fall.

• Budget cuts federal taxes by $100 billion ($70 billion reconciled) mostly for high income people and increases the deficit.

• Medicaid and other cuts will pay for tax cuts for wealthy people, not for deficit reduction.

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How Will $10 Billion Be Cut?

• Congress will decide in September.

• New HHS Medicaid Commission will make recommendations for $10 billion cut by Sept. 2005 and longer term recommendations for redesigning Medicaid by Dec. 2006.

• National Governors Association has made interim recommendations.

8

Principles to Protect Medicaid

• Health coverage and long-term care coverage must continue to be guaranteed for those who qualify for Medicaid.

• Financing should continue to be fully shared between the federal government and the states without caps.

• Benefits and cost-sharing should reflect the health needs and economic circumstances of the people served by Medicaid.

9

Concepts Likely to Be Discussed

• Find some savings outside of Medicaid

• Reduce amount paid for prescription drugs

• Limit eligibility for nursing homes (limit asset transfers)

• Increase cost-sharing or premiums

• Bare bones benefits or vary benefits for different groups

• Tax credits or health savings accounts

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Higher Cost-sharing May Be Harmful

• Higher copayments, especially for those with chronic health problem lead to less health care use and poorer health.

• Out-of-pocket medical expenses for Medicaid recipients already rising twice as fast as their incomes.

• Non-disabled Medicaid beneficiaries already spend over 3 times more of their incomes for medical expenses than privately insured. Disabled spend 8 times more.

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“Flexibility” to Restructure Medicaid

• Some propose “restructuring Medicaid” thru federal legislation or federal waivers

• Could cap federal Medicaid funds

• Could give states more flexibility to cut

• One theme is making Medicaid benefits more like private insurance, which could limit access to mental health services

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Medicaid Cuts at State Levels

• Eligibility reductions

– Reductions in poverty-related eligibility for aged and disabled.

• Higher copayments and premiums

• Restrict or eliminate “optional” benefits, e.g. prescription drugs, psychologist or therapist care, dental, home health services, case management services

• Restrictions on access to range of medications

13

Other State Medicaid Issues

• Expansion of managed care for those with disabilities, including those with severe mental illness or emotional disturbances

– Coordination of mental, physical and long-term care often an issue in managed care

– Could limit treatment options

• Restrictions in definitions of “medical necessity”

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Potential Consequence of Medicaid Cuts

• Increase number of people without access to mental health services or medications.

• Increase strain on other state and local mental health service programs

• Decrease access to newer or more effective treatments

• Mental health problems could worsen, increasing number who are homeless or incarcerated or who require institutionalization

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What You Can Do

• Help federal and state policy makers understand important role Medicaid plays in lives of those with mental illness and their families

• Point out personal and public consequences of higher cost-sharing or benefit reductions, which can have implications beyond Medicaid budget

• Maintain support for Medicaid’s entitlement status