Medicaid Package Shelved – Deficit Reduction Act to Blame?

An economic stimulus package that contained up to $37.8 billion in additional Medicaid funding for states has been shelved until January 2009.

Recently, two different versions of the plan were introduced in both the House and the U.S. Senate. The chambers could not reconcile their differences and the measure was shelved by committee until January.

In many important ways, of course, this is not news; that is to say, it is not unexpected. Medicaid funding has been pinched, scrimped and for-shortened over and over again for some time now. The money per-resident day is getting lower and the duration between payments (in most states) is getting longer. LTC facilities feel the choke more acutely, perhaps, because a majority of our residents (nationally) are Medicaid payer source only.

Reading this news today I cannot help but be reminded of the promise of the Deficit Reduction Act. This was a 2006 bill which, among many other things, gave Medicaid a much needed shot in the arm in return for greater Federal oversight on waste and fraud-abuse amongst Medicaid providers. Until the DRA, Medicaid oversight was primarily a state matter, though the majority of Medicaid dollars came from the Federal budget. The bill was sold as a win for all sides: increased revenues from the Federal coffer going to states, better, more efficient apparatus for investigation of abuse, and massive savings from eliminated waste.

With Medicaid payments coming in lower and longer, it begs the question: is the promise of the Deficit Reduction Act a failed one?

The answer is, of course, no.

Two essential items must be understood: 1) The DRA is a five (5) year program. We are in year two (2). The captured savings are necessarily cumulative and cyclic because of the oversight schedules CMS maintains (annual surveys and audits). This means that the DRA needs more time to work effectively. Here at the end of 2008, we have only really reaped the benefit of one and a half annual turn-arounds, not the full five. 2) Though waste and abuse are much more prevalent than is appropriate for the nation’s largest health care outlay, Medicaid is not upside down. Waste/abuse spending is not the majority of Medicaid spending. No Congressional finding has suggested that it is. Even if the DRA worked perfectly from moment one, Medicaid would still need additional funding to meet providers’ needs. The need of recipients simply outstrips Federal and State Medicaid budgets.

I anticipate the many original criticisms of the Deficit Reduction Act will be revived in the first months of the new Administration. (And perhaps rightly so – – this is not the post to argue the point) But, I hope LTC policy makers and industry thinkers do not get distracted by small bore issues; the last thing we need is to shelve needed additions to the budget because an enforcement program has not been allowed to work.