A Clouded Vision, Part 1: The Stick

With his reelection campaign coming up next year, PA Governor Tom Corbett is apparently no longer able to resist the pressure to accept Medicaid expansion under the Affordable Care Act (ACA). Yesterday he unveiled the bare bones of a plan to expand Medicaid, while claiming that he is not. The plan lacks critical details and leaves many questions unanswered. It has not yet been accepted by the Obama administration, and should they not agree to it, it would fall through. It has, however, been endorsed by two powerful health care lobbies, the Pennsylvania Medical Society and the Hospital and Health System Association of Pennsylvania.

The plan is called “Healthy Pennsylvania,” and is described in official propaganda as “Governor Corbett's vision” for Pennsylvania. Much of the plan is empty rhetoric, referring to health care policies that are already in place, or new initiatives that appear not to be accompanied by any proposed legislation. Some of the new initiatives—such as “reform” of the medical liability system—are not good ideas, but I'll save that argument for another day. Of the four documents the Corbett administration has released, those parts of the plan that refer to Medicaid reform or expansion are described most clearly in this document.

We can think of the plan as having two parts—the carrot and the stick. The stick is “reform” of PA's existing Medicaid program, which Corbett says is too costly. These changes have the effect of reducing Medicaid benefits to healthy adult recipients, and increasing costs for most recipients. The carrot is a flawed version of Medicaid expansion through private insurance, which Corbett insists is not Medicaid expansion at all. (He's right.) He will agree to expand health insurance availability if and only if he gets his way and the feds agree to his “reform” plan.

The Stick

PA's existing Medicaid program is one of the stingiest in the country. Healthy adults only qualify for Medicaid if they earn less than 46% of the Federal Poverty Level (FPL). Children under six are covered up to 133% of FPL, and older children up to 100% of FPL. The aged, blind and disabled are also eligible up to 100% of FPL, but only if they have assets of less than $2000 per individual or $3000 per couple.

Corbett repeatedly refers to PA's Medicaid program as one of the most expensive in the nation. It's true that PA spends 34% more than the national average per enrollee. However, PA has fewer enrollees per capita than most other states. The chart below compares PA's Medicaid recipients to those of the US generally. PA has fewer healthy adults, who are the cheapest to cover, because of its strict eligibility requirements for this group. A higher percentage of its enrollees are seniors and people with disabilities, who require more expensive long-term care. Moreover, only 22% of PA's long-term care budget is spent on community and home-based care. The national average is 40%.

Here is what Corbett is proposing. To avoid confusion, remember that these “reforms” only apply to people who are currently eligible for PA's traditional Medicaid.

1. Changes in benefits. Proposed changes in benefits only apply to healthy adult recipients; benefits for children, seniors and people with disabilities will remain unchanged. Medicaid benefits are to be aligned with the benefits provided by private, commercial insurance available in PA's workplaces. What these benefits will be, of course, depends on what private policies they use as their standard. Will they more closely resemble the corporate executive package or the Wal-Mart package? They don't say. But since the goal of the plan is to save money, it is reasonable to assume that they are planning to reduce benefits below what Medicaid enrollees currently receive.

2. Cost-sharing. Cost-sharing is to be achieved by charging a monthly premium. The premiums begin for people who are above 50% FPL. These minimum premiums are not stated. However, they increase on a sliding scale up to a maximum of $25 per month per individual and $35 per household at 133% of FPL. Although it is not explicitly stated, presumably everyone, including children, seniors and the disabled, will pay these premiums. (Healthy adults are only covered up to 46% of FPL, so there would be no need for this cost-sharing plan if it only applied to healthy adults.) Premiums will be indexed to inflation, so they will go up each year.

3. Copayments. Medicaid copayments, which are not particularly high, are eliminated entirely, with one exception. There is a $10 copayment for “unnecessary” or “inappropriate”—as yet undefined—emergency room use. This latter proposal has long been part of the hospital lobby's wish list.

4. Work search requirements. Healthy adult recipients will be treated just like people who apply for unemployment. All working age, unemployed recipients will be required to engage in a job search through PA JobGateway program. There is a premium reduction—amount unspecified—for people participating in job training and work search.

5. Wellness programs. There is also a premium reduction—amount unspecified—for people who participate in wellness programs. Research has so far not shown wellness programs to result in measurable health improvements.

Corbett says his Medicaid “reform” package will result in “significant cost savings.” Will it actually save money? The monthly premium seems to be the only financially significant part of the package. Most of the rest of the plan only applies to healthy adult recipients, which limits its ability to save money, since so few current enrollees fall into this category.

Please read Part 2 of this post.

You may also be interested in reading:

Tom Corbett to PA's Working Poor: “Drop Dead!” (Part 1) (See all four parts.)

Medicaid Expansion Update