The Next Steps on Utah Medicaid Reform
October 26, 2015
By Representative Robert Spendlove
Members of the House Republican Caucus met recently to review the latest proposal from the Governor and Legislative Leadership in the House and Senate to expand Medicaid to low income individuals in our state. While I commend the “Group of Six” for their work on developing the plan, ultimately I decided that I could not vote for the proposal. There are several reasons why I voted against it. The primary reason is I could not support a plan that was inconsistent with my values and objectives and I felt it shifted the balance of power too much toward the federal government over state government. However, I remain committed to finding a long term solution to Medicaid that truly reforms the system and represents the Utah way.
Overview of the Proposal
The latest proposal was called “Utah Access Plus”. It was very similar to the “Healthy Utah” proposal that was proposed during the 2015 Legislative Session, in that it extended coverage to those earning up to 138 percent of poverty through a subsidy for participants to purchase insurance on the private market through existing health insurance exchanges. There were a number of good components of the plan, including a requirement that people with employer based health insurance must stay on their existing plans. Also, for those whose incomes are above the poverty level there were a few measures to encourage healthy behaviors and mitigate negative impacts of people moving in and out of insurance on a continual basis.
However, the critical component of the Utah Access Plus proposal was the funding mechanism for the plan. One of the sticking points of Healthy Utah was there was no proposal of how to cover the $78 million annual cost that the State of Utah must pay to expand Medicaid. The Utah Access Plus plan proposed to cover the approximately $28 million of costs through existing funds available to the Department of Health. The remaining $50 million would be covered via a tax on the medical community in the state. Those who were proposing this plan argued that the $500 million of extra federal dollars that will come to Utah as a result of expanding Medicaid will essentially pass through the state and will flow to those in the medical community. Therefore, they proposed a “claw back” provision to bring back $50 million of revenue from the medical community. They argued that the net benefit would still be $450 million and thus the medical community would be better off.
My Concerns about the Proposal
When the plan was released to the public we experienced the problem of unintended consequences that often occurs in public policy proposals.
Unacceptable level of federal intrusion – My top concern about the Utah Access Plus proposal was the extent of federal intrusion into what is supposed to be a state program. I am a strong believer in federalism and that states are closer to the people they serve and thus better able to address the needs of their citizens than the federal government. The federal government too often imposes a “one-size-fits-all” model to programs, and Medicaid is no exception.
For instance, in Utah, the “coverage gap” of those who lack health insurance is comprised entirely of people living below the poverty line. These approximately 45,000 people were denied coverage due to a fundamental flaw in the way the Affordable Care Act was designed. In other words, a faulty design of the ACA is the reason the coverage gap exists. I am willing to find ways to help those in the coverage gap. They need our help. One of the fundamental jobs of government is to provide a safety net to those in need during times of extreme hardship. Those people in the coverage gap definitely need this helping hand.
However, the federal government has stated on several occasions that they are not willing to let us just cover the gap and help these 45,000 people in need. Instead, they insist that we must cover an additional 80,000 people who earn over the poverty level and already have access to subsidized health insurance through the federal exchange that covers their needs. There is NO POLICY ARGUMENT why the state should expand Medicaid beyond 100 percent of the federal poverty level. The only argument is that it is what the federal government is demanding and if we want their money we have to give in to their demands.
Cost Shift – One of the main objectives of the Utah Access Plus proposal was to shift the cost, and the responsibility of paying for the Medicaid expansion to those who directly benefitted from expansion. This clawback provision is a method often used as a way to mitigate the impacts of bringing in new revenue sources. If the proponents of Utah Access Plus had the choice, they would have narrowly tailored the proposal to apply only to those who directly benefit from Medicaid expansion.
However, the federal government again specifically prohibited Utah from narrowly tailoring the tax to those who directly benefit. Instead, they insisted that any tax must be applied broadly to the entire group of those in the medical community. Therefore, those who have virtually no benefit from expansion would still bear the additional costs of expanding Medicaid. This includes pediatricians, retired physicians, and those who provide community service at free health clinics, to name a few.
Uncontrollable Risk – As one of the best managed states in the country, we in Utah pride ourselves on being fiscally responsible. However, the federal government refused to allow us to design a program that was fiscally responsible, and one that mitigated risk and controlled costs. They specifically said that we could not include enrollment caps, spending caps, or any type of budgetary limits in our Medicaid expansion proposal.
The Utah Access Plus proposal tried to address this issue by shifting the risk of cost overruns to the medical community through the proposed tax. Unfortunately, this risk was more than those in the medical community were willing to assume. This is the reason the Utah Hospital Association chose not to endorse the Utah Access Plus proposal.
Again, this shows the fundamental difference between the federal government and the Utah state government. Where the federal government is able and willing to deficit spend and operate on borrowed money, the State of Utah must operate on a balanced budget. If enrollment goes above projections it is seen as a positive to the federal government. At the state level, enrollment above expectations causes cost overruns and must be mitigated through more tax increases or through diverting money from other parts of the budget. In Utah, where 56% of state funds go towards education, the only place where we could find additional revenue for Medicaid in the state budget is by taking money away from our school children. To me this is not acceptable.
While I did not support the Utah Access Plus proposal that was presented to the Legislature, I remain committed to finding a solution that will reform our Medicaid system and make it more responsive to the needs of the people of our state. In fact, I am currently working on a bill for the 2016 legislative session that I feel will represent the Utah model for Medicaid reform.
The Utah Model – The first principle of the bill is that we as a state must define our goals and objectives, rather than letting the federal government define them for us. However, I recognize that Medicaid has been designed in a way that states must get funding from the federal government to operate. Ideally, I would support a block grant from the federal government with no strings attached. However, under the circumstances, I understand that we must operate within the current bounds of federal law. Therefore, my bill is contingent on the federal government granting the State of Utah the enhanced match rate of 90/10 federal to state cost sharing. This cost mechanism is consistent with what the federal government is currently offering to any state that expands Medicaid.
Cover the Gap – Second, my bill proposes to COMPLETELY FILL THE COVERAGE GAP, by expanding Medicaid up to 100 percent of the federal poverty level. Since the entire coverage gap is comprised of people earning less than the federal poverty level, there is no reason to expand beyond that level.
Control Costs – Third, my bill proposes to put recipients on traditional Medicaid, using a managed care model to control costs and realign incentives. One of the main causes of large cost increases in healthcare is the fact that there is an incentive to increase the number of services offered to a patient. This is called a “fee for service” model of care. My proposal is to expand the model of reimbursing based on the quality rather than the quantity of care a patient receives. It is something Utah helped pioneer a few years ago and it is an area where we should focus our efforts going forward.
Mitigate Risk – Fourth, my bill will include the ability to mitigate budgetary risk. This is done through enrollment caps, spending caps, and cost controls, such as more strictly enforcing reimbursement criteria. For instance, one good part of the Access Plus plan was that the state would not reimburse emergency rooms for non emergency expenses and it would not reimburse emergency transportation costs for non emergency uses.
Another idea Utah has been working on for many years is developing a prioritized list of services for those on Medicaid. Once the state reaches its budget limit it then ceases to reimburse for services beyond the preset limit determined. This is a method already in use in Oregon but the federal government has so far not allowed Utah to develop a similar model.
Include a Work Requirement – Fifth, the Utah Model of Medicaid reform should include a work requirement for those who receive coverage. Keep in mind that those currently in the Medicaid coverage gap are those who do not have disabilities. By definition, they are those who can work and should be working.
In the early 1990s, President Bill Clinton, working with a Republican Congress, was able to pass a fundamental restructuring of the US welfare system. At the time, welfare was on the verge of total collapse. Part of that welfare reform was a work requirement to qualify. It was a critical component to the success of the proposal because it helped people move through the transitionary period of needing government assistance. It is extremely important that Medicaid also help move people through the period of needing government assistance. It is not fair to them nor to society to use the power of government to discourage work through the public policies that are set.
I understand that what I am proposing as the Utah Model of Medicaid reform is not consistent with the expressed desires of the current Administration in Washington. However, we’ve spent too much time trying to design a reform model that they will approve. Instead of letting the federal government drive our public policy development process, we should develop our own process, working with our circumstances in mind. When our counterparts at the federal level are ready to work with us I am more than willing to work with them. However, they must recognize the vital role that states play in developing and implementing policy and they must stop viewing states as merely subcontractors who implement their policies without question.
Utah is a very unique state. Where others struggle, we get things done. Where others give up, we continue to work. I am confident that working together we can all find a solution to this generational issue. The people of Utah deserve not just any solution, but the right solution.