Pennsylvania Medical Assistance: Time to Restructure
Good day. I am William W. Lander, MD, the immediate past president of the Pennsylvania Medical Society and a practicing family physician from Bryn Mawr. I want to begin by thanking those of you here today for allowing the Pennsylvania Medical Society to provide input regarding Pennsylvania’s Medical Assistance program.
It’s estimated that our Commonwealth’s Medicaid program costs $14 billion to run, including $5 billion in state funds, while covering 1.85 million Pennsylvanians. Between 1990 and 2005, the budget for this program jumped 180 percent.
The Medicaid program in Pennsylvania, as in most states, is increasing in its scope and cost, thus consuming more and more of the Commonwealth’s revenue. National estimates suggest that if left untouched, by 2020, Medical Assistance will consume 80 to 100 percent of all states’ revenues. That’s only 15 years away.
Currently, today’s program can be categorized as a “defined benefits plan” in which everyone is entitled to every benefit.
It is clear that after 40 years of tinkering, piecemeal reforms to reign in costs have not worked. Previous cost-containment strategies implemented by Pennsylvania’s Medicaid program have failed because they did not slow the rising costs and utilization of services. These strategies failed to address the structural deficiencies inherent in a defined benefit program.
Mandated managed care initiated in the mid-’90s had a minor slowing effect on utilization; however, profits and administrative costs related to the operation of Medicaid managed care plans continued to increase and take funds away from patient care. Prior authorization of services and prescriptions was only partially successful, and unfortunately targeted the sicker, more vulnerable Medicaid population. Reimbursement cuts and freezes have also been used to contain costs; however, these ultimately place significant strain on the patient-doctor relationship.
True Medicaid reform will require a comprehensive restructuring of the entire system, not just a few elements. Every aspect of the program must be on the table and open for discussion including eligibility, benefits, utilization, cost, coinsurance, and deductibles.
Similarly, all stakeholders must play a role in restructuring the system. That includes health care providers, insurers, consumers, and governmental groups and offices, such as the Department of Public Welfare, the Governor’s Office, and the General Assembly. No group should be left out.
The Pennsylvania Medical Society believes there are both short-term and long-term solutions to keep Medicaid solvent. Although the Medical Society is offering some short-term suggestions for cost savings, they will do nothing more than provide a very limited stopgap funding solution. They will not fix the structural problems I alluded to a moment ago.
The Pennsylvania Medical Society suggests the following:
For short-term solutions
- Eliminate optional benefits, tier the benefit packages specific to various populations served by Medicaid, or require higher co-pays and deductibles for those benefits.
- Establish a clinically sound preferred drug list (PDL) for both fee-for-service and mandated managed care plans.
- Relax non-treatment-related requirements, such as prior authorizations.
- Minimize or freeze special payments.
- Create incentives for reduced utilization and disease management.
- Expand co-pays and deductibles for all services, determined by ability to pay.
- Reduce managed care organization profit margins.
- Privatize various functions performed by the state and expanding current employer “buy-in” programs.
- Focus on improving health outcomes rather than adhering to an arbitrary list of benefit mandates.
- Slow the growth of Medicaid long-term care expenses through tax credits and deductions, and access to home and community-based care.
For long-term solutions
- Move from a “defined benefits” approach to a “defined contribution” consumer directed approach.
- Identify target populations, assess their needs, and design basic benefit packages and catastrophic coverage. Design an interim benefit package based on individual or class need, allowing covered recipients choices of how benefits are utilized.
- Explore privatization of Medicaid with the Department of Public Welfare, paying a defined premium to organizations like the Pennsylvania Blue Cross/Blue Shield plans.
We envision a Medicaid program that looks more like the consumer directed health care models being employed in the commercial insurance world, such as that used by federal employers, Congress, and their staffs, known as the Federal Employees Health Benefits Program. Under the defined contribution program, Medicaid eligibles would be enrolled and informed of their choices by an independent broker. The federal and state government would provide tax credits to purchase long-term care and catastrophic acute care.
Conclusion
Around the country, rising Medicaid costs have emerged as a priority issue. They’re an issue facing every state and can’t be ignored or forgotten. If left unaddressed, the patient-doctor relationship will suffer along with the citizens of the Commonwealth who rely on state funding for education, corrections, agriculture, etc. I’m sure no one in this room wants that to happen.
Some states have started testing ideas through pilot projects. The majority of ideas being tested tend to move away from the traditional defined benefits plan to a market-based defined contribution consumer choice approach.
The Pennsylvania Medical Society offers its active support and leadership in reforming the current Medicaid system.
Thank you for the opportunity to provide input on this important issue.
Last Updated: 10/12/2007