Mentally Ill People Could Suffer In Rush to Reform Medicaid

Amended Medicaid programs, such as those approved for West Virginia and kentucky earlier this year (Psychiatric News, September 1), may lead to major gaps in coverage and could obstruct access of Medicaid beneficiaries to health care. Particularly at risk are beneficiaries with serious and persistent mental illness, according to an assessment funded by America's Health Insurance Plans (AHIP).

AHIP is a trade association representing nearly 1,300 insurance companies. It includes among its advocacy positions support for evidence-based medical decisions and opposition to insurance-coverage mandates, including ones for mental health care parity.

The assessment examined changes allowed to Medicaid plans, which are state and federal partnerships, under the Deficit Reduction Act (DRA) signed into law by President Bush in February. That law allows states to apply for changes to their Medicaid plans, including the use of limited-benefit and defined-contribution strategies to trim program costs.

The Medicaid changes could ultimately lead to serious gaps in coverage and care, loss of participating clinicians and insurance plans, and degradation of the overall health of the 58 million Medicaid beneficiaries, according to the study, which is titled “Defined-Contribution Plans and Limited-Benefit Arrangements: Implications for Medicaid Beneficiaries.” The study was conducted by Sarah Rosenbaum, J.D., chair of the Department of Health Policy at George Washington University.

Her report examined the increased state benefit coverage flexibility originally requested by the nation's governors in their 2005 Medicaid policy recommendations. Those changes included limited-benefit arrangements, and Idaho, kentucky, and West Virginia were the first states to redesign their programs to offer health plans with a lower level of benefits than the more comprehensive coverage previously offered.

Florida received permission to institute a defined-contribution approach to coverage, with Oklahoma and South Carolina making similar proposals. Defined-contribution plans allow a state to make a premium payment to participating health benefit plans that are responsible for developing a Medicaid benefit that does not exceed the state's expenditure target. More traditional Medicaid programs are structured to pay for the provision of each health service its beneficiaries incur.

Irvin (Sam) Muszynski, J.D., director of APA's Office of Healthcare Systems and Financing, said the report identifies why critics have been wary of the proposed and approved Medicaid changes. It illustrates why such changes made statewide, without pilot programs, could have unintended consequences.

Selby Jacobs, M.D., chair of APA's Committee on Public Funding for Psychiatric Services, said the report adds to his growing concern about how Medicaid changes may impact low-income disabled adults. That group, which includes many psychiatric patients, is especially vulnerable to state-imposed Medicaid cuts because federal law does not require states to cover important services such as case management and community support services.

“There is certainly cause for concern about how the states will implement these changes to Medicaid,” Jacobs said.

Supporters of the changes to Medicaid maintain that limited benefits and a defined-contribution approach will allow Medicaid to mimic the coverage non-Medicaid populations receive from the commercial market.

Although the redesigned state programs are still too new to have generated definitive coverage and care data, Rosenbaum warned that such shifts could have serious negative consequences, based on the “unique characteristics of the Medicaid population and the role played by traditional Medicaid coverage principles.”

Among the leading concerns of critics of the Medicaid changes is the fact that the DRA allowed states to preempt previous federal legislative provisions known as “statewideness” and “comparability of benefits.” Together, they required states to offer the same coverage to all “categorically needy” recipients statewide. The elimination of these two provisions permits states to vary the level and range of Medicaid coverage based on beneficiary characteristics or geographic location.

“Thus, for example, a state could set more limited coverage standards for persons who at some point in time appear to be in relatively good health, while allowing more generous benefits for adults who already have been identified as having certain chronic physical or mental conditions and disabilities,” Rosenbaum explained.

Both recent approaches to Medicaid changes—limited benefits and defined contributions—elevate the risk of significant coverage gaps, Rosenbaum warned. The so-called benchmark equivalency standard under the DRA offers narrow coverage, and among the benefits and services omitted were prescription drugs, rehabilitation services, diagnostic services, and durable medical equipment.

“Considering the health status of adults enrolled in Medicaid and their higher health costs, use of a benchmark equivalency standard could result in coverage in name but not in impact,” Rosenbaum noted.

She warned that the pressure for such Medicaid plans to squeeze coverage in relation to actual need will be most acutely experienced by children with functional health limitations and elevated health care needs.

States with limited-benefit or defined-contribution approaches to Medicaid, supplemented by the program's Early and Periodic Screening, Diagnostic, and Treatment benefit—Medicaid's coverage requirements for children—may find they can move pediatric health services for children with growth and developmental delays from basic coverage to“ wraparound” status. Under such a status, these services would become “extracontractual,” or outside of the basic mission of the program and therefore more difficult to obtain.

Both limited-benefit and defined-contribution Medicaid programs, Rosenbaum wrote, also could create the risk that health plans will be unable to attract and sustain strong and capable provider networks, which would put beneficiaries' access to high-quality care at risk.

“The challenge facing Medicaid purchasers is to maintain a comprehensive approach to coverage design, while incentivizing participating plans and providers to seek efficiencies in the provision of appropriate health care,” Rosenbaum wrote.

The efficiencies approach ties sound financing to a design that combines basic coverage with supplemental benefits for “high-need populations” and “quality purchasing strategies that promote high performance.”

She noted that this approach takes time but may yield improved quality and healthier outcomes in a more cost-effective manner.

“Defined-Contribution Plans and Limited-Benefit Arrangements: Implications for Medicaid Beneficiaries” is posted at<www.gwumc.edu/sphhs/healthpolicy/chsrp/downloads/Rosenbaum_AHIP_FNL_09132006.pdf>.▪