1. Medicaid “Reform” and Mental Health Leighton Ku Senior Fellow Email ku@cbpp.org Presentation at NAMI Conference, June 2005 www.cbpp.org

2. 2 Medicaid as a Safety Net Before Medicaid enacted in 1965, poor people usually uninsured and relied on charity care. Today Medicaid serves as a safety net: –For those with disabilities who are largely excluded by private health insurance –For low-income elderly who need help for gaps left by Medicare –For low-income families and children who can’t afford insurance, even if they are working in low-wage jobs.

3. 3 Mental Health Getting Smaller Fraction of Nation’s Overall Health Expenditures… % national health expenditures for mental health Source: T. Mark, et al. Health Affairs, Mar 2005

4. 4 Medicaid Has Financed a Growing Share of Mental Health Services Source: T. Mark, et al. Health Affairs, Mar 2005 % of total mental health expenditures by source of payment

5. 5 Almost Half of Medicaid Costs Are for Those with Disabilities Aged Disabled Children Adults 10% 16% 48% 26% 44% 18% 11% Medicaid Enrollment and Expenditures, FY 2004 Source: CBO estimates

6. 6 Medicaid and the Federal Budget Congressional budget resolution assigns Senate Finance and House Energy & Commerce Committees about $10 billion in cuts assumed to come from Medicaid over next five years. Policies to make cuts to be determined by this fall. Budget cuts federal taxes by $100 billion ($70 billion reconciled) mostly for high income people and increases the deficit. Medicaid and other cuts will pay for tax cuts for wealthy people, not for deficit reduction.

7. 7 How Will $10 Billion Be Cut? Congress will decide in September. New HHS Medicaid Commission will make recommendations for $10 billion cut by Sept. 2005 and longer term recommendations for redesigning Medicaid by Dec. 2006. National Governors Association has made interim recommendations.

8. 8 Principles to Protect Medicaid Health coverage and long-term care coverage must continue to be guaranteed for those who qualify for Medicaid. Financing should continue to be fully shared between the federal government and the states without caps. Benefits and cost-sharing should reflect the health needs and economic circumstances of the people served by Medicaid.

9. 9 Concepts Likely to Be Discussed Find some savings outside of Medicaid Reduce amount paid for prescription drugs Limit eligibility for nursing homes (limit asset transfers) Increase cost-sharing or premiums Bare bones benefits or vary benefits for different groups Tax credits or health savings accounts

10. 10 Higher Cost-sharing May Be Harmful Higher copayments, especially for those with chronic health problem lead to less health care use and poorer health. Out-of-pocket medical expenses for Medicaid recipients already rising twice as fast as their incomes. Non-disabled Medicaid beneficiaries already spend over 3 times more of their incomes for medical expenses than privately insured. Disabled spend 8 times more.

11. 11 “Flexibility” to Restructure Medicaid Some propose “restructuring Medicaid” thru federal legislation or federal waivers Could cap federal Medicaid funds Could give states more flexibility to cut One theme is making Medicaid benefits more like private insurance, which could limit access to mental health services

12. 12 Medicaid Cuts at State Levels Eligibility reductions –Reductions in poverty-related eligibility for aged and disabled. Higher copayments and premiums Restrict or eliminate “optional” benefits, e.g. prescription drugs, psychologist or therapist care, dental, home health services, case management services Restrictions on access to range of medications

13. 13 Other State Medicaid Issues Expansion of managed care for those with disabilities, including those with severe mental illness or emotional disturbances –Coordination of mental, physical and long- term care often an issue in managed care –Could limit treatment options Restrictions in definitions of “medical necessity”

14. 14 Potential Consequence of Medicaid Cuts Increase number of people without access to mental health services or medications. Increase strain on other state and local mental health service programs Decrease access to newer or more effective treatments Mental health problems could worsen, increasing number who are homeless or incarcerated or who require institutionalization

15. 15 What You Can Do Help federal and state policy makers understand important role Medicaid plays in lives of those with mental illness and their families Point out personal and public consequences of higher cost-sharing or benefit reductions, which can have implications beyond Medicaid budget Maintain support for Medicaid’s entitlement status