The new report from our partners at the Georgetown University Health Policy Institute’s Center for Children and Families (CCF) (click here for the executive summary) provides strong evidence that the uninsured rate for children decreased in the midst of the worst recession in decades because Medicaid and the Children’s Health Insurance Program (CHIP) were in place to prevent children from failing through the cracks.

CCF found that private insurance coverage of children eroded during this period—dropping by 4.5 percent. This is no surprise, since the recession cost millions of families their jobs and their employer-sponsored insurance (ESI). But public insurance coverage of children increased by 5.8 percent during this same time, filling the gap left by declining ESI. This is simple, hard evidence that public coverage programs are irreplaceable sources of coverage that protect children’s access to care when the economy falters.

Ironically—maybe only in the Alanis Morissette meaning of the word—it’s during these hard economic times, when Medicaid and CHIP are most needed as a safety net, that their funding is most at risk. As policy makers scramble to fill state budget gaps, they too often turn to harmful Medicaid and CHIP cuts such as reductions in provider payments, restrictions on covered services, and increased premiums and co-payments. The findings in the report emphasize why it’s essential that policy makers turn instead to the dozens of delivery and payment system reform options that can achieve savings in Medicaid and CHIP without undermining—and often by actually strengthening—these programs. (See our Medicaid Report Card for ideas on how your state can save money in Medicaid.)

The report also highlights the importance of the maintenance of effort requirement in the Affordable Care Act, which prohibits state policymakers from cutting eligibility for children on Medicaid and CHIP until 2019. The heartening findings in the CCF report would simply not have been possible had states been permitted to slash eligibility in these programs.

The full report includes state-specific data on children’s insurance rates, so check it out and see how your state did (only one state, Minnesota, had a statistically significant increase in uninsured children). With our economic woes likely to continue for some time, this report should renew our commitment to protecting Medicaid and CHIP. The health of our children depends on it.

—Katherine Howitt, Senior Policy Analyst
and Patrick M. Tigue, Senior Policy Analyst

What’s this all about? Mostly, it’s about shaking up the status quo in the way we pay for health care services. Today, most health care is paid for on a fee-for-service basis. Under this system, doctors, hospitals and clinics are paid “a-la-carte” for care, meaning that they get paid for each individual service they provide — a lab test, an office visit, an MRI – without regard to whether the patient’s health improves. This system gives providers full decision making power, along with the financial incentive to order whatever services they choose regardless of efficacy or expense. The incentive also tends to undervalue lower-paying services such as primary care and important patient supports such as care coordination, home visits, and 24/7 access .

The new initiative seeks to change the status quo by paying providers a fee for all the services a patient receives over the course of an “episode” of care, for example, a hip replacement, rather than paying each provider separately for every service related to the episode (e.g. inpatient stay, lab tests, post-discharge services). The Innovation Center spelled out four models it wants to test. These models vary in terms of episode length, services in the bundle and payment type.

The idea of bundling payments gained traction during the health reform debate primarily based on the experience at Geisinger Health System, a health system out of Pennsylvania (and where it should be noted, the head of The Innovation Center used to work). Years ago, Geisinger launched an episode-based care model for its heart bypass patients. Under this program – called “ProvenCare” – the health system calculated the total cost for all of the preoperative, post-operative and rehabilitation services associated with bypass surgery and paid providers this price. It also created new systems to ensure that doctors were following best clinical practices for the surgery. As a result of implementing this program, there was a 21 percent reduction in all complications from the surgery, a 25 percent reduction in surgical site infections and a 44 percent decrease in hospital readmissions. Geisinger has since expanded this program to other episodes of care such as hip replacement surgery, cataract surgery, obesity surgery, prenatal care for babies and mothers, and heart catheterization.

While the results of this new initiative are still a few years away, bundling payments clearly represents a step toward better care at lower cost. If done well, it will improve the quality of care by encouraging coordination and the use of care management services, such as transition planning, home visits or social service supports. However, if done without strong measures of transparency and accountability for improved quality, it could be a failed experiment. Advocates have a unique role to play in ensuring that the voices of patients and their families are represented in shaping this program, especially in making sure the right quality measures are used.

Given the current pressures in Washington and in the states to reduce health care costs, we hope this bundling program results in lower costs and better care, making it a true bundle of joy.

– Renée Markus Hodin, Project Director

Putting the debate in context
There was a real concern about the nation’s pediatric workforce in the late 1990s after the American Board of Pediatrics noted that the number of pediatric residents had seen a decline of more than 13 percent, and the Pediatric Education Task Force concluded that the lack of adequate federal funding for graduate medical education at independent children’s hospitals was a significant threat to maintaining an adequate number of pediatricians going forward.

To address this issue, Congress created CHGME 1999 so that independent children’s hospitals could receive federal support to train resident pediatricians and pediatric specialists similar to the support provided to adult hospitals through the Graduate Medical Education Program (GME) through Medicare. Prior to the enactment of CHGME, independent children’s hospitals were receiving only half of a percent of the federal funding provided to adult hospitals for GME as well as unstable and varying support from Medicaid.

And CHGME has worked exactly as Congress intended by increasing the number of pediatric residents and pediatric resident specialists training at independent children’s hospitals, meeting pediatric workforce development needs in geographic regions across the country, and ensuring that even children living in states without independent children’s hospitals have some access to well-trained pediatricians and pediatric specialists.

Success begets success
Given CHGME’s track record of success, advocates must remain vigilant to ensure that the program is reauthorized before it expires at the end of September. This becomes even more important given the shortage of pediatric specialists in many areas of the countrydespite the impressive progress made as a result of CHGME. Advocates can play an important role in the coming weeks by weighing in with their Congressional delegation.

For more information on CHGME, check out the new paper from our New England Alliance for Children’s Health program that outlines in greater detail the past success of CHGME, makes the case for why it is still needed, and offers some ideas about how to improve the program.

Training for docs for grown-ups needs help too…
It’s also worth noting that, unlike CHGME, the GME Program (aimed at training physicians who serve adults) receives a majority of its funding from Medicare to train medical residents. Currently, GME does not produce enough primary care providers to meet the country’s needs. Primary care is critical to fixing the health care system, and GME is one untapped tool for primary care workforce expansion, as outlined in another new paper we recently released. More can be done to redesign GME so that it is more nimble in its response to regional and national workforce needs. Policy makers have an opportunity to develop a framework of accountability that preserves our tradition of excellent medical education while tying it directly to the needs of consumers.

—Eva Marie Stahl, Policy Analyst
—Patrick M. Tigue, Senior Policy Analyst

You may ask yourself, well, how did I get here?
Back in April, along with a spirited defense of the role for government in the economy, the President laid out a comprehensive approach to debt reduction. The deal he outlined included cuts in military spending, and tax increases. It also included a fix for the Medicare physician payment formula to end the annual ritual of finding funding for a temporary rate patch. Although one can question whether it is either fair or logical to use cuts in Medicaid to partially pay for an increase in Medicare physician payments, as the administration proposed, at least there was some overall balance to the approach. The concern is that as the negotiations continue, the same scope of Medicare and Medicaid cuts would remain on the table without the other elements of the deal.

Equally concerning is the composition of the proposed cuts. Although definitive information about the negotiations is hard to come by, the health care proposals identified in the media are mostly a combination of missed opportunities and bad ideas.

Let’s take a look at each category:

Missed Opportunities

Graduate Medical Education
One proposal on the table is to reduce federal funding for graduate medical education. Instead of focusing on reducing GME funding, a better approach would be to make better use of existing funding by redirecting funding to increase the supply of primary care physicians as outlined here.

Medicare Bad Debt
Another proposal is to eliminate funding for Medicare bad debt. This is another missed opportunity. A reduction in bad debt should contain an explicit exclusion that free care given pursuant to a financial assistance policy would still be reimbursed, giving hospitals an incentive to actually qualify people for financial assistance. This would not only help Medicare beneficiaries, but also low-income underinsured people who often have a hard time obtaining financial assistance.

Bad ideas

The main bad ideas on the table are variations on the theme of shifting costs onto Medicare and Medicaid beneficiaries, including blended rate (combining regular federal Medicaid match, CHIP match and enhanced match for new eligibles under the ACA into a single rate); eliminating or curtailing states’ use of provider taxes; and increases in Medicare cost sharing, all of which will shift costs onto state Medicaid programs and result in cuts in rates or benefits.

A better way
In a plan presented to the Senate Democratic caucus, Budget Chair Kent Conrad outlined a better approach that relies more on progressive taxes and less on health care cuts.

Nor does Conrad’s proposal exhaust the opportunities. In a future post we will look at some of the policy options that could generate federal health care savings that improve quality, efficiency and the underlying health of the public without hurting Medicare and Medicaid beneficiaries.

– Michael Miller, Policy Director

Together, we sent a response to the letter that Senator Hatch and Congressman Upton wrote to Governors last month. Their letter attacked Medicaid, falsely claiming that it provides poor quality care, lamenting its enrollment growth over the past decade, and blaming it for federal and state budget crises. Our letter sets the record straight:

• Medicaid provides high-quality care that is uniquely suited to meet the needs of the vulnerable Americans it serves. Medicaid is certainly not perfect, and there is always room to improve care. But studies consistently show that Medicaid beneficiaries get care that is equal to – and sometimes better than – the care they would get in private coverage. Just yesterday a new study was released documenting the positive impact Medicaid has on its vulnerable beneficiaries’ health and financial security.

• Medicaid plays an essential role in reducing the number of uninsured. Of the 46 million low-income children and parents that rely on Medicaid, the majority are in working families without access to private coverage. Policies that scale back on Medicaid eligibility for this population – like those promoted by Senator Hatch – would drive up the ranks of the uninsured, leaving vulnerable Americans without access to the health care they need.

• Medicaid is markedly more cost-effective than private coverage. If the low-income children and parents on Medicaid were insured instead on the private market, national health care expenditures would be significantly higher.

We felt particularly compelled to respond because Hatch and Upton’s letter perpetuates a larger anti-Medicaid narrative that would:

• Reduce the deficit on the backs of those with least political clout. Responding to their mandate from the tea-party, Republican Congressional leaders are insisting on trillions of dollars in spending cuts in exchange for their votes to lift the debt-ceiling (a vote Congress must take in early August to avoid going into default on our nation’s debt). It’s nearly impossible to achieve that level of savings without making devastating cuts in the “big three” entitlements that take up 40 percent of the federal budget: Social Security, Medicare, and Medicaid. But Social Security and Medicare are fiercely guarded by a well-organized political constituency – seniors – which makes cuts in those programs politically unpalatable. That leaves Medicaid, which serves a much more vulnerable and less politically empowered population, as the sacrificial lamb.

• Undermine the Affordable Care Act. The attacks against Medicaid also play into a second tea-party-driven agenda to repeal the Affordable Care Act (ACA.) Since Congressional Republicans don’t have the votes for repeal, they’re trying the next-best approach: weakening the law’s foundations. Medicaid accounts for nearly half of the coverage gains expected under national health reform, so inflicting dramatic cuts on the program would jeopardize the ACA before its even been implemented.

But Medicaid is not a political chit. It’s a lifeline for millions. It provides long-term care to our nations’ seniors, enables people with disabilities to get the care they need to live independently and helps low-income children see the doctor when they’re sick.

The 118 consumer, faith-based and provider organizations from across the country who signed onto our letter know the value of Medicaid in their communities and why it’s worth protecting. And polls show that the overwhelming majority of the American public does too. Is Congress listening?

-Katherine Howitt, Policy Analyst

To conduct the study, research staff posed as parents and called specialty practices in Illinois to schedule appointments for their children. The two major findings from the study were:

• – More than 66 percent of callers who said they had a child on Medicaid or CHIP were denied an appointment, compared to only 11 percent of callers who said they had a child on private insurance.
• – The average wait time to see a specialist who accepted both public and private insurance was 22 days longer for Medicaid and CHIP children than for children with private insurance.

This study’s findings are consistent with the United States Department of Health and Human Services’ (HHS) 2010 literature review on access to care for Medicaid and CHIP children. HHS succinctly summarized its findings this way: “. . . access could be improved substantially for specialty care services (e.g., dental, mental health).” Reasons cited in the NEJM article for providers’ decisions not to treat patients covered by Medicaid and CHIP include: disparities in insurance reimbursement rates, delays in payment, and cumbersome payment procedures.

Access to specialty care for children on Medicaid and CHIP is clearly an issue that needs to be addressed. This begs the question of what effect current Congressional proposals to turn Medicaid into a block grant program, cap federal expenditures, or allow states to cut Medicaid and CHIP eligibility through repealing the Affordable Care Act’s maintenance of effort requirements (MOE) would have. The short answer is that all of these proposals would make this problem even worse. Block granting or a spending cap would result in reductions in Medicaid and CHIP spending, which would inevitably lead to provider rate cuts. Repealing the MOE provisions would result in reductions in overall coverage levels—leading to more uninsured children. Either way, these proposals would result in even less access to specialty care (not to mention to other essential health services as well).

Overall, Medicaid and CHIP serve our country’s children immensely well by providing cost-effective coverage for children that improves health outcomes and protects low-income families from financial ruin. For example, Medicaid and CHIP children actually fare very well when it comes to access to primary care. According to HHS, “Considerable evidence indicates that children enrolled in Medicaid/CHIP have much better access to primary care services than uninsured children and comparable access relative to privately insured children.”

In areas like access to specialty care, where further progress needs to be made, the answer is not to undermine these programs by reducing our investment in them. Instead, we need to implement innovative policy proposals that create savings in Medicaid by improving the health care delivery system, and that can be used to address outstanding issues like access to specialty care as well as for deficit reduction. And it’s up to all of us to make sure that members of Congress understand that we need thoughtful solutions to our nation’s problems, not mindless cuts.

—Patrick M. Tigue, Children’s Health Care Coordinator
New England Alliance for Children’s Health

First and foremost, the proposed Medicaid and CHIP cuts and program changes currently being debated (such as eliminating the maintenance of effort (MOE) requirement that protects eligibility standards or converting Medicaid funding into a block grant) would undoubtedly result in children losing coverage. The Congressional Budget Office estimates that repealing the MOE requirement would result in half of all states eliminating their CHIP programs and 1.7 million children losing access to CHIP by 2016.

A second and somewhat lesser-known challenge for keeping kids covered will be dealing with “complex coverage situations” when the Affordable Care Act (ACA) is fully implemented in 2014. “Complex coverage situations” are scenarios in which children are not covered by the same insurance program as their parent(s) or do not live in the same household as at least one parent. These circumstances can make finding, enrolling in, and retaining health coverage for children complicated and confusing – especially in 2014 when millions more people qualify for Medicaid, state insurance Exchanges officially roll-out, and parents are held newly accountable for obtaining coverage for their children.

According to a recent Urban Institute report, almost 42 million children fall under at least one of these “complex coverage” categories:

• – 20.7 million children are eligible for different insurance programs than other family members (either because a parent’s employer-sponsored insurance does not cover dependents or because children qualify for Medicaid or CHIP and their parents do not)
• – 27.7 million children live apart from at least one of their parents
• – 6.5 million children fall into both categories

Many questions about how specific situations will be handed in 2014 remain unanswered. For example, if a parent has employer-sponsored coverage for herself but needs to buy a child-only policy in the Exchange, will her contributions to the employer policy be considered in determining the amount deemed affordable for the child-only policy? And will a parent who claims a child on his tax forms be penalized for not covering this child if a medical support order (a form of child support provided as health insurance under a parent’s policy) deems a different guardian responsible?

Policymakers must begin working now to answer these questions and ensure that children in complex coverage situations benefit from the ACA. Subsidy determination processes must be clarified, outreach and enrollment strategies for children who qualify for different programs than their parents must be developed and implemented, and medical support orders must be made more consistent with the ACA’s coverage requirements. Failure to resolve these issues now may mean future coverage losses for some children—something none of us want to see.

—Maia Fedyszyn, Program Associate
New England Alliance for Children’s Health

“The State Flexibility Act” Cuts Costs by Cutting Care
The State Flexibility Act repeals a provision in the Affordable Care Act (ACA) that prohibits states from cutting Medicaid eligibility for most adults until 2014 and for children until 2019. Eradicating this protection, known as the Maintenance of Effort (MOE) requirement, would jeopardize access to care for millions of vulnerable Americans. It would:

• • allow states to cut long-term care for thousands of seniors suffering from Alzheimer’s, Parkinson’s, and other chronic conditions.
• • put Americans with disabilities – such as multiple sclerosis, AIDS, and severe mental illness – at risk for losing access to services that allow them live independently.
• • mean millions of children throughout the country could lose their health coverage and no longer be able to see a doctor when they got sick or injured.

States Already Have Flexibility to Cut Costs by Improving Care
If Senator Hatch and Congressman Gingrey are truly interested in promoting “state flexibility”, they should work with states to fully utilize the tremendous flexibility states already have in designing payment and delivery systems. As we have pointed out time and time again, there are countless ways states could reduce their Medicaid costs by improving care for beneficiaries, and no state has taken full advantage of that flexibility.

For example, as we discussed in our recent policy brief, states currently have the authority to move from a payment system that reimburses providers for more services, toward one that pays for better health outcomes. Maryland recently began tying hospitals’ payment levels to their rates of preventable complications like hospital-acquired infections, so that hospitals that did a better job at preventing these life-threatening complications would get more money, and hospitals with higher rates of infections and other complications would get a bit less. Infection rates – and the costs associated with those infections – dropped dramatically in Maryland as a result of this innovative payment reform. Despite this success, few states have followed Maryland’s lead.

Another state option, created by the ACA, provides states with additional federal matching dollars to set up health homes for Medicaid beneficiaries with chronic physical or mental illnesses. Health homes have been shown to save money by better coordinating the complex care of high-risk beneficiaries and helping them avoid costly ER visits, hospital readmissions, and duplicated tests and procedures. About half the states are exploring the option, though so far only a few have made a commitment to move forward.

These are just two examples illustrating how states can reduce Medicaid spending by better serving the needs of their beneficiaries (for more ideas, check out these resources developed by Community Catalyst’s Integrated Care Advocacy Project). Until states have taken full advantage of opportunities like these, there is no excuse for proposals like the State Flexibility Act that could undermine care for millions of seniors, people with disabilities and low-income children.

— Katherine Howitt, Policy Analyst

From a health care point of view, cap proposals that establish an arbitrary ceiling on federal health spending as a specific percentage of GDP are just as bad as specific proposals for Medicaid block grants or Medicare vouchers. Block grants and vouchers become the inevitable mechanism to enforce a cap, shifting costs onto states, providers and beneficiaries. A cap is also a bad idea because it undermines the “countercyclical” effect of federal health spending. Public health spending rises during an economic slowdown as more people qualify for Medicaid (and in the future for ACA tax credits). This natural increase in public health care spending during tough times stabilizes the health care system and the economy. A cap would interfere and make the health and economic consequences of recession much worse.

Battle for hearts and minds—untangling the polls
As the debate unfolds over the future of federal health programs, there are questions about where the public stands. For example, a recent Kaiser poll seems to indicate that the public is very malleable on the issue of Medicare changes. But what results really show is that it is possible to mislead the public with incomplete information. A NPR analysis of the Kaiser polling found the devil is in the details, or how polling questions are framed. Pollsters gave supporters of a voucher program an anti-voucher talking point and were able to move most of them to opposition. Those who opposed vouchers also moved to pro-voucher in response to a pro-voucher point, though not as much. But here’s the rub – the anti-voucher point did not go far enough. It did not point out that the amount of savings from health care cuts was essentially equal to cost of tax cuts for wealthy Americans, and they didn’t offer alternative debt reduction plans for people to choose from. IF people understand the plan, they overwhelmingly oppose it. The question is not whether the public supports Medicare cuts (they don’t). It’s how effective the disinformation campaign will be in fooling the public and how strong the defense of health programs will be.

With that defense in mind, it’s encouraging to see organizations such as AARP getting into the fray. The reaction at town hall meetings from the recent Congressional recess is also encouraging. And public pushback seems to be having an effect. Even Tea Party darling Rep. Michele Bachmann (R-Minnesota) has waffled on her position, and Republicans seem to be losing their appetite for a showdown over Medicare.

– Michael Miller, Policy Director

Takeaway #1: The president gets the big picture right on key health care issues. Before the president’s speech, we laid out three key issues health advocates should be listening for. Between his speech and accompanying documents, it’s clear that the president is in a resoundingly good place on all three issues:

1. The president explicitly rejected proposals to turn Medicare into a voucher program and to convert Medicaid into a block grant. These approaches, the backbones of the 2012 Congressional Republican budget, do nothing to tackle the underlying drivers of health care costs. Instead, they shift these costs onto those who can least afford them: seniors, people with disabilities, and low-income families.

2. The president also understands the harm imposed by federal spending caps. While this is less clear from his remarks, follow up with White House officials makes it clear that the administration understands that a global cap is just a back door to turning Medicaid into a block grant and Medicare into a voucher.

3. He articulated an alternative, far more rational approach to cost containment, which builds on foundation of the Affordable Care Act. The president identified key approaches to build on the cost-containment structure laid out in the ACA. For example, he suggests strengthening the mandate of an independent commission of doctors, nurses, medical experts and consumers, created by the ACA, to weed out wasteful spending in Medicare without reducing benefits or increasing seniors’ costs. He also proposes using Medicare’s purchasing power to negotiate lower prescription drug prices for America’s seniors. And he recommends changing the way we reimburse for health care services, moving us away from a system that pays providers for more services and towards one that pays providers for better health outcomes.

(For more on the ACA’s approach to cost containment and how it can be enhanced going forward, see our one page graphic and issue brief.)

Of course there are still many details of the president’s proposal to be filled in, and there are some concerns about specific elements such as the overall size of the proposed Medicaid cut and new limits on states’ ability to tax health care providers to fund Medicaid. But it’s also important to put the President’s proposal in context, which brings us to…

Takeaway #2: The president’s approach presents a stark contrast to the one endorsed by Congressional Republicans. This contrast is most obvious in two key areas:

1. Reducing costs vs. shifting costs. As we laid out above, the president’s approach looks to reduce health care costs primarily by tackling their underlying causes.

Congressional Republicans, on the other hand, treat rising health care expenditures like a game of “hot potato”: they merely toss these costs onto states, seniors, people with disabilities, health care providers, and other vulnerable families. First, they turn Medicaid into a block-grant program that, by design, would not keep up with rising health care costs. This would impose crippling burden on states, leading to rollbacks in health care coverage for millions of nursing home residents, people with disabilities and low-income children and families. It is no exaggeration to say that some would die as a result.

Second, they end Medicare as we know it and replace it with a voucher that seniors would use to buy coverage on the private market. These vouchers, like the block grants above, are designed not to keep up with rising health care costs, leaving seniors to pay an ever-increasing share of their health care costs. According to the nonpartisan Congressional Budget Office, under this plan the average senior would shoulder $6,000 more in annual out-of-pocket costs by 2022.

2. Bank accounts of millionaires vs. health security for seniors, people with disabilities and low-income children. Unlike President Obama, the Congressional Republicans would extend Bush-era tax cuts for the wealthiest Americans. Under this plan, the average person earning at least a million dollars a year would receive an average tax cut of $125,000 per year. Through severe cuts to Medicaid and Medicare outlined above, Congressional Republicans essentially force America’s most vulnerable citizens to finance these tax cuts for its wealthiest citizens.

These contrasting budget proposals offer us a clear choice: We can maintain and improve health security for American families, or we can have tax cuts for the wealthiest people and corporations. We can’t have both and still reduce the deficit. The American people have already indicated their policy preference—for example, three quarters think Medicaid funding should either be kept the same or increased, and 70 percent would prefer shielding the program from cuts to using it for deficit reduction.

The president is clearly listening. Is Congress?

– Katherine Howitt, Policy Analyst and
Michael Miller, Policy Director