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Massachusetts health care — wonky, with a healthy dose of reality

Gravity's Rainbow: Medicaid Spending FALLS

Gravity's Rainbow: Medicaid Spending FALLS

November 27, 2006

Man bites dog! Water runs uphill! Medicaid spending declines! I vote for #3 as the least plausible -- but that's what's happening, according to the Bureau of Economic Analysis, as reported in USA Today. Here are some snippets:

Medicaid spending has declined unexpectedly this year, the first drop since the health program for the poor was created in 1965. The historic reversal will free up billions of dollars in state budgets. Medicaid has been the fastest-growing expense for states over the past 10 years.

Medicaid spending fell 1.4% in the first nine months of the year compared with the same period a year ago, according to the Bureau of Economic Analysis. The drop was even greater — an unprecedented a 5.4% decline — after adjusting for the rate of health care inflation. The spending has been reduced by cost-controlling efforts and a shift of some prescription-drug expenses to Medicare, the federal health program for the elderly. ...

Medicaid provides health care to 56 million poor Americans. The federal government sets broad rules for the program and pays 57% of the expense. States run the program and pay 43% of the cost. The program is on track to spend $300 billion in federal and state money in 2006, the Bureau of Economic Analysis reports.

Some Medicaid savings are the result of shifting costs to the federal government's Medicare program. The new Medicare prescription-drug benefit pays most pharmaceutical costs for 6 million elderly poor who used to have their bills paid by Medicaid. Under the new drug plan, states reimburse Medicare for some money saved, but not all. This complicated cost shifting between the two programs makes it impossible to know precisely how much Medicaid cost cutting is simply shifting expenses to the federal program. A USA TODAY analysis estimates that Medicaid spending would have been about flat — or down 4% after adjusting for inflation — without the new federal drug benefit.

Substantial Medicaid savings resulted from many small cost-containment policies adopted in recent years. The changes include shifting the elderly from nursing homes to less-costly home health care, cracking down on fraud, refining the management of high-cost patients (such as those with AIDS or hemophilia) and cutting some payments to hospitals and doctors. "This is a unique event. No doubt about it. And there are lot of reasons for it," said Vic Miller, senior fellow at the Federal Funds Information for States, a research group sponsored by states.

Hmmm. Not all such happy news, we suspect. No mention of gigantic eligibility cuts in Tennessee and Missouri, nor of benefit retrenchments in other states. No indication if this indicates real savings or cost shifting to private insurance premiums via lower provider reimbursements.

Nonetheless, change the rhetoric, at least for now. Medicaid the budget buster is taking a holiday.