(please note most links below are pdfs)

On Friday, Community Catalyst sent a letter to Secretary Sebelius, outlining eight policies states could implement to cut Medicaid costs. We were inspired to weigh in by a series of letters between the Secretary and Republican Governors that contrasted two very different approaches to reducing Medicaid expenditures.

Cutting Coverage vs. Cutting Waste
Republican Governors wrote a letter to Congress and the Administration in January, asking them to lift the Maintenance of Effort (MOE) requirement – the provision in the Affordable Care Act (ACA) that prevents most states from reducing Medicaid eligibility between now and 2014. The basic premise of their letter was that states need to cut low-income children, parents, seniors, and/or people with disabilities off coverage in order to “responsibly manage [their] state budgets.” We anticipate Republican Governors will reiterate this argument at the Energy and Commerce hearing Tuesday about the impact of the ACA on Medicaid.

Secretary Sebelius responded with a letter explaining why that basic premise simply isn’t true (see our blog and summary of her letter.) She outlined dozens of ways states can trim costs in their Medicaid programs without eliminating coverage for vulnerable families. By tackling the inefficiencies in our fragmented health care delivery system, many of the policies she suggested not only cut costs but they also have the potential to improve care for beneficiaries in the process. Sebelius also made it clear that her department remains open to suggestions of additional policies states can pursue to accomplish those dual goals.

When Secretary Sebelius Calls, We Answer
We took the Secretary up on that challenge. Our letter to the Secretary highlights eight additional policies states can pursue to lower Medicaid costs and maintain or improve care. More details about these options can be found in the text of our letter, but here are the highlights:

• Recalibrate provider payment rates, shifting dollars from inpatient care to outpatient care, to give providers an incentive to treat patients in the lowest-cost settings.
• Rebalance long-term care dollars away from institutions and towards home- and community-based settings by taking advantage of more funding opportunities created by the ACA to help states front the cost of this readjustment.
• Better integrate care for those who are eligible for both Medicaid and Medicare by expanding existing programs such as the Program for All-Inclusive Care for the Elderly (PACE) and fully-integrated Special Needs Plans (SNPs) that provide a comprehensive and patient-centered model of care.
• Reduce preventable hospital readmissions and complications by tying hospitals’ payment levels to their preventable complication and readmission rates.
• Increase the use of generic drugs by making it easier for pharmacists to substitute equivalent generics when the patient was prescribed a brand name drug.
• Improve evidence-based drug selection and purchasing by expanding utilization management and the use of state Preferred Drug Lists (PDLs) created by an evidence-based evaluation of available therapies. It’s important to include measures to protect access and quality, especially when applied to classes of drugs or medical conditions that have traditionally been excluded from PDLs (such as mental health, HIV/AIDS and cancer).
• Improve prescriber education by creating an “academic detailing” program that provides prescribers with up-to-date information about the effectiveness of different medications and alternative treatments, serving as an unbiased alternative to pharmaceutical industry promotion.
• Combat off-label drug promotion and inappropriate prescribing by requiring that physicians inform their Medicaid beneficiary patients whenever the physician prescribes a drug for an unapproved use, and that the patient consents to the treatment.

A Better Path to Savings
These policies — coupled with the consumer-friendly options offered in Sebelius’ letter — offer a clear alternative to cutting low-income children, parents, seniors and people with disabilities off Medicaid; they illustrate why Congress does not need to lift the Maintenance of Effort requirement for states to make their Medicaid programs more efficient.

They also offer clear alternatives to some of the more harmful cost-cutting tools that states already have at their disposal: imposing higher cost-sharing and eliminating or restricting “optional” benefits such as prescription drugs. Those tools just shift costs onto vulnerable beneficiaries, and risk harming their health. And research suggests they result in fewer savings than states might assume: when patients delay or forgo certain services because of cost-sharing or benefit restrictions, their illnesses can worsen and eventually require more expensive care, canceling out some of the state’s savings.

Our letter lays out a better path — one that not only saves money but also can improve the lives of vulnerable Americans. If Governors are serious about fiscal responsibility, they should jump at these opportunities to cut waste and improve the sustainability of the Medicaid program.

-Katherine Howitt, Policy Analyst