In the news ... 2006 archive

FIGHTING THE DEFICIT REDUCTION ACT:
Strategies for Convincing State Leaders to
Resist New Policies that Harm People on Medicaid

February 2006

Developed by the HIV Medicaid/Medicare Working Group (HMMWG). For more information, contact Robert Greenwald at rgreenwald@taepusa.org or Laura Hanen at lhanen@nastad.org.

Passage of the newly enacted Deficit Reduction Act (DRA) was a sad defeat for those fighting to preserve access to essential health care for people on Medicaid. The Senate narrowly passed the DRA 51-50, with Vice President Dick Cheney flying in to break the tie. In the House the DRA passed 216-214 despite a no vote from every Democrat and 13 Republicans. The provisions in the DRA are expected to reduce federal Medicaid spending by $4.3 billion over the next five years—this isn’t merely a number, it translates into millions of Medicaid beneficiaries losing access to essential life saving medical care and treatment. Yet the battle isn’t over. Attention now must turn to the state officials who will decide whether or not to adopt the harmful policy changes permitted under the DRA. We must all work together to educate our state officials on the importance of preserving Medicaid programs that ensure access to comprehensive health services for all beneficiaries and convince them not to adopt new, restrictive policies permitted by the DRA.

If implemented by states, the DRA will hurt
people on Medicaid in the following ways:

INCREASED PREMIUMS AND
COST SHARING UNDER THE DRA
PRIOR to DRA — Prior to enactment of the DRA, Medicaid law and regulations protected beneficiaries from burdensome cost-sharing. States could not charge most Medicaid beneficiaries premiums or enrollment fees. States could impose only nominal cost-sharing (e.g. $3) for most services, including prescription drugs. Providers generally could not deny services or drugs to beneficiaries who could not meet the co-pays.

NOW with DRA — With enactment of the DRA, states are now permitted to increase co-payments for most adult beneficiaries and deny a service or a prescription drug to a beneficiary who does not have the cash to make the co-payment. For beneficiaries with incomes below the federal poverty level (which is income below $9,804 per year for a single individual) states will be allowed to increase the “nominal” co-payment based upon the medical price index, which generally rises at least twice as fast as income. In other words, even co-payments for individuals below the poverty level will increase dramatically, leaving beneficiaries who need many services and prescriptions having to choose among their medications, or between a doctor’s visit and a prescription. The chart below describes co-pays based on income permitted by the DRA.

INCOME	NEW COST SHARING RULES	OUT OF POCKET LIMIT
Under 100% FPL Less than $816 per month for an individual	Nominal co-pays may be adjusted annually according to the medical price index	Capped at 5 percent Of family income
100 to 150% FPL $816 to $1,225 per month for an individual	Can be charged up to 10% of the cost of a service or prescription	Capped at 5 percent Of family income
Greater than 150% FPL $1,225 per month for an individual	Unlimited premiums Can be charged up to 20% of a service or prescription	Capped at 5 percent Of family income

IMPACT OF DRA/STEPS FOR FIGHTING BACK — We must convince our state leaders not to adopt premium and cost-sharing provisions now allowed under the DRA that Medicaid beneficiaries simply cannot afford. The Congressional Budget Office (CBO) estimates that 80% of the savings that result from the increases in co-payments will come from decreased use of medical services and not from the collection of increased co-pays. Pricing Medicaid beneficiaries out of access to essential health care, services and prescription drugs saves little and costs a lot.

Resisting implementation of the new cost-sharing provisions authorized under the DRA can happen by demonstrating to state leaders the many ways that individuals already must shoulder significant responsibility in paying for their health costs. It is easy to understand that even current cost-sharing rules, that allow $3 per service or prescription, can be unaffordable to an individual with income of $600 per month, who each month takes 15 different prescription drugs and visits 3 medical providers, and must still pay for food and rent.

We must also work to educate state policy makers that cost-sharing is not the best tool for limiting Medicaid spending—it is a blunt tool that can actually increase a state’s health care costs. Denying access to a medically necessary prescription or service over a beneficiary’s inability to make a co-payment can lead to the beneficiary requiring a significantly higher-cost medical intervention or hospital stay.

REDUCED BENEFITS AND
SERVICES UNDER THE DRA
PRIOR TO DRA — Prior to the enactment of the DRA, Medicaid required states to provide certain mandatory services. It also allowed states to receive federal matching funds for providing “optional services” [sic] such as prescription drugs. Strict rules also protected the amount, duration and scope of services provided under Medicaid and ensured that similarly situated groups of beneficiaries received comparable services.

NOW WITH DRA — With enactment of the DRA, states can now choose to offer some groups of beneficiaries more limited benefits. Some beneficiaries could be stuck with barebones benefit packages, simply because their eligibility for Medicaid classifies them in a group that is subject to the DRA’s new rules. According to the CBO, the scaled-back benefits packages permitted under the DRA will reduce per capita health expenditures among affected adult beneficiaries by about one-third, with reductions in services such as dental care, vision care, mental health services, and certain therapies. Congress exempted certain key groups from these barebones benefits packages and this includes people with disabilities and dual eligibles (individuals on both Medicaid and Medicare). Therefore, most, but not all, people with AIDS on Medicaid will likely be protected from these limited benefits packages. Regardless, allowing states to create substandard benefits packages is bad health policy, sets dangerous precedent, and leaves many vulnerable people with increasingly inadequate health care coverage.

IMPACT OF DRA/STEPS FOR FIGHTING BACK — Allowing states to provide more limited benefits will result in increased unmet health care needs. We must convince our state leaders not to adopt benefits and services reductions that undermine effective health care and ultimately result in an increased need for (otherwise preventable) high-cost medical interventions such as hospitalization.

SUMMARY OF PRINCIPLES FOR FIGHTING
STATE IMPLEMENTATION OF THE DRA
• Premiums and cost-sharing reduce access to care and treatment, disproportionately burden the most vulnerable beneficiaries, and do not generate significant savings.

• Access to care through Medicaid helps keep people healthier and more productive. Increased co-pays and cuts in services that reduce access to care result in considerable resources spent on more expensive medical interventions.

• Cutting Medicaid services doesn’t make fiscal sense for states as Medicaid only covers medically necessary services and is cost-effective. Each state dollar spent on Medicaid is matched by at least one federal dollar—helping to pay for medical care, create jobs and spur the state economy.

• Not all proposed cuts save dollars. The impact of cuts and how they will actually result in cost savings needs to be demonstrated before cuts are made.

Another consequence of the DRA: New Proof of Citizenship Requirements: It is too late to fight this one, but we can help Medicaid beneficiaries be prepared for it. Beginning July 1, 2006, Medicaid enrollees will be required to provide a passport or birth certificate in conjunction with another proof of identity to verify their US citizenship. Naturalization papers are acceptable for naturalized citizens. The requirement will be imposed on new applicants as well as current applicants when they reapply. People unable to provide these documents will lose Medicaid coverage.