HHS Secretary Leavitt Remarks on Medicaid
>From the Department of Health and Human Services:
REMARKS BY:
Mike Leavitt, Secretary of Health and Human Services
"Medicaid: A Time to Act"
Thank you, Dan. Good afternoon.
There is a time in the life of every problem when it is big
enough to see but small enough to solve. For Medicaid, that
window of opportunity is upon us. The time to act is now.
Medicaid is the spirit of American compassion in action.
Through Medicaid, Americans help 46 million of our fellow
citizens. This includes people with disabilities, the
neediest of our elderly, and low-income families.
Until just over a year ago, I was this nation's longest-
serving Governor. I was responsible for making Medicaid
work in my state. And I know from experience that Medicaid
is not meeting its potential. It is rigidly inflexible and
inefficient. And, worst of all, it is not financially
sustainable.
Over the past ten years, Medicaid spending doubled. And
this year, for the first time ever, states spent more on
Medicaid than they spent on education.
To illustrate this point, this morning I did a web search
on the word Medicaid. Let me tell you what I found.
In Tennessee, budget pressures are displacing thousands of
people from Tennessee's health program for the poor,
Tenncare.
The deputy director of Ohio's Medicaid program summarized
the situation by asking: "What's a word bigger than
catastrophe?"
An Alabama paper discussed the legislative session that
opens Tuesday by noting that one problem "looms over all
the others: the funding crisis facing the state's Medicaid
program."
In Ohio, a state legislator observed: "The question is
going to end up being where do you cut and who is it going
to hurt the most."
These state officials are worried. Low-income families are
worried. And advocates are worried. They all want to solve
this problem. But rigid rules are holding them back.
We need to have a serious discussion on Medicaid. And I
want to open this discussion today by defining what success
would look like and offering a general strategy to achieve
that success.
Success to me has three components. First, keep faith with
the commitment this nation has made to provide access to
acute and long-term care services to people with low
incomes, disabilities, the elderly, and children.
Second, create enough flexibility in Medicaid that states
are able to continue serving optional groups and expand the
number of people they serve.
Third, assure the financial sustainability of Medicaid by
returning integrity to the funding partnership.
Today I want to offer thoughts in three areas: three myths,
three changes, and three opportunities.
First, the three myths:
Myth one: Some have predicted that reform would break our
commitment to our neediest and most vulnerable citizens:
our mandatory populations, such as people with disabilities
and children in low-income families or foster care. This is
not true. These mandatory populations must continue to
receive the comprehensive coverage that they receive now-
including Early Periodic Screening Diagnosis and Treatment.
Myth two: Some are concerned that we will propose a block
grant system, like the one that was discussed in 1995. NOT
so. There will be no block grant system for Medicaid.
Myth three: Some expect that there will be a cut in
available resources. NO again. While we must never stop
looking for ways to make Medicaid efficient and to slow its
growth, Medicaid will continue to be one of the fastest
growing items in the Federal budget, growing at an average
rate that exceeds 7% per year. Over the next ten years,
American taxpayers will spend nearly $5 trillion on
Medicaid.
Those are the three myths. Now, I would like to suggest
three changes to Medicaid. We've got to remove the
vulnerabilities that threaten Medicaid's viability.
Change one: We must find every inefficiency, because waste
means covering fewer people. We must stop overpaying for
prescription drugs. Pharmacies and Medicare buy drugs
wholesale for a low price. But under Medicaid, state
governments usually pay a much higher price. We must change
the law so that states pay the same low rate. This will
save the federal government $15 billion over the next ten
years. It will save state governments $11 billion.
Change two: Medicaid must not become an inheritance
protection plan. Right now, many older Americans take
advantage of Medicaid loopholes to become eligible for
Medicaid by giving away assets to their children. There is
a whole industry that actually helps people shift costs to
the taxpayer. There are ways families can preserve assets
without shifting the costs of long-term care to Medicaid.
We must close these loopholes and focus Medicaid's
resources on helping those who really need it. Doing so
will save $4.5 billion during the next decade.
And finally, Change three: We must have an uncomfortable,
but necessary, conversation with our funding partners, the
states.
As a former Governor, I understand the pressure state
budgets face, particularly given the lack of flexibility in
the current Medicaid law. However, state officials have
resorted to a variety of loopholes and accounting gimmicks
that shift the costs they claim to pay to the taxpayers of
other states. If we don't close these loopholes, we project
that over the next ten years they will shift $40 billion
through various means.
Let me illustrate with an analogy. I live on a cul de sac
that has three houses. There's the Federal house, the
States house, and the Jones house.
The Jones daughter has a chronic disease, and needs $1000
worth of treatment every month. The Joneses have no health
insurance but the little girl will die without treatment.
I go to my other neighbor, Mr. States, and propose that we
get together to help the Joneses.
I tell Mr. States, "You know the Joneses best. Why don't
you work things out with them? I'm willing to pick up two
thirds of the cost, if you will pay one third and make
arrangements with the Joneses.
This works well for a while. Mrs. Jones's doctor sends the
invoice directly to Mr. States every month. Mr. States pays
the invoice, and then walks over to my house to collect my
payment of 2/3.
A few years pass and my friend, Mr. States, starts to run
short of money. Things are tight for all of us.
But Mr. States is really feeling the pinch. He goes to Mrs.
Jones' doctor and says, "Listen, I'm having some trouble
coming up with my share of the money. Here's an idea that's
good for both of us."
Mr. States then talks to the doctor and suggests that he
raise his price to $1500, but offer a "special Mr. States
discount coupon" of $300.
When Mr. States drops by my house to get my money, he says,
"Mr. Federal, I have some bad news; the doctor has raised
his prices and the Jones's health care has now gone up from
$1,000 to $1,500. I'm here to collect your share...let's
see, 67% of $1500 is...yes, $1000.
I take his word for it and give him $1000.
Now, let's think about this. At the beginning, Mr. States
was paying $333 for his one third. I assume with the price
increase he's paying $500.
But I haven't accounted for the "special Mr. States
discount coupon." Mr. States is now paying $200 instead of
$333. I'm paying $1000 instead of $667. And together, we're
paying $1200 instead of $1000.
Eventually, I discover what Mr. States has done. Now, I
really like Mr. States. I really want to help the Jones
daughter. But I don't feel particularly good about this
arrangement. It's time for me to have an awkward
conversation with Mr. States. I want to restore a
straightforward, transparent, and effective system.
This analogy tells one general story of an accounting
gimmick. But the Medicaid reality tells at least seven
variations on this theme. A majority of states have
employed one or more of these practices to maximize their
reimbursement. With apologies to my friend Stephen Covey, I
call them the Seven Harmful Habits of Highly Desperate
States.
Let me give you some examples of these Harmful Habits.
One harmful habit is double dipping, just like the story I
told. States overpay providers, get the overpayment
returned to them, and spend the same dollars a second time.
It's a shell game that makes no one healthier. We need to
ensure that states meet commitments with real dollars.
Another harmful habit is inflated overhead. States are
shifting costs to the federal treasury for
"administration." This accounting gimmick encourages
wasteful spending and bloated bureaucracy.
I won't list all seven, but you get the idea.
I want to stress that I sympathize with the state officials
who face these pressures. I know why they act this way.
I've been a governor, and I've struggled to make Utah's
Medicaid system balance its budget and meet its
commitments. This isn't about blame; it's a simple
statement that it has to stop.
We must stop harmful habits that are needlessly driving up
costs. We must stop overpaying for drugs. We must stop
rewarding higher spending and start rewarding better
performance. And we must start ensuring that Medicaid is
saved for those truly in need. If we make these changes, we
can make Medicaid an economically sustainable program that
will provide essential health coverage for more Americans
and better long-term care choices for seniors and the
disabled.
Those are the three changes. Now let's talk about
opportunities. We are looking at many ideas to improve
Medicaid coverage. Let me talk about three of them.
First, we can ensure that seniors and people with
disabilities get long-term care where they want it. The
President's New Freedom Initiative points us in the right
direction. Home care and community care can allow many
Americans with disabilities to continue to live at home,
where they can enjoy family, neighbors, and the comfort of
familiar surroundings. Medicaid should not force these
people to live in institutions. Just as importantly, we can
serve more people.
Look at Vermont and New Hampshire. Vermont has a highly
developed home and community based health care system. New
Hampshire continues to rely on institutional care. In
Vermont, 85% of Medicaid population over 65 still live at
home. In New Hampshire, only half can live at home. And
Vermont spends less than half as much per elderly person on
Medicaid as New Hampshire, freeing up money that can serve
more people.
Let me repeat that. Providing the care that lets people
live at home if they want is less expensive than providing
nursing home care. It frees up resources that can help
other people. And obviously, many people are happier living
at home.
Second, we can expand access to more children. We will
discuss this further in the next few weeks. But the
principles will be the same. We can provide access to more
needy people by providing common sense flexibility.
Third, improving coverage of optional populations. Whether
it's a lady in a nursing home or a boy in a wheelchair, we
have a very special obligation to our neighbors who are
elderly, low-income, or have disabilities. We meet that
obligation by providing a comprehensive package of benefits
and services. Mandatory populations need the help. They
must receive the help.
The optional populations, on the other hand, may not need
such a comprehensive solution. Most of them are healthy
people who just need help paying for health insurance.
We've already proven a way to provide that help. The State
Children's Health Insurance Program, S-CHIP has allowed 5.8
million children in low-income families who don't qualify
for Medicaid to have health insurance.
One of the key reasons S-CHIP has been such a resounding
success is that it allows states to ask the question, "What
is quality basic health coverage?" And each state can
choose from five answers: the health benefits state
employees get, the benefits federal employees get, the best
private health plan in their state, Medicaid, or some
hybrid of private and government plans. Fewer than 20
states and territories chose the straight Medicaid option.
A majority chose some other combination. It costs states
less, on average, to provide health insurance than to
provide comprehensive care.
Wouldn't it be better to provide health insurance to more
people, rather than comprehensive care to a smaller group?
Wouldn't it be better to give Chevies to everyone rather
than Cadillacs to a few?
I am already working with governors and other state
officials to strengthen and modernize Medicaid. And I look
forward to working with them, with members of Congress, and
with all of you in the health care community to ensure that
every family in America has the power to make wise, well-
informed decisions to sustain and improve their health.
We can be a nation of healthier Americans. A nation where
health insurance is within the reach of every American. A
nation where seniors and people with disabilities get long
term care where they want it.
We can transform our health care system so informed
consumers own their own health records, own their health
savings, and own their own health insurance. Ownership
engages consumers, and engaged consumers get better
results.
We can be a nation where families embrace the power of
prevention and wellness-where fewer people get sick because
they take action to stay healthy.
We can be a nation where American workers have a
comparative advantage in the global economy because they
are healthy and productive and because, through the power
of technology, our health care system produces fewer
mistakes, lower costs, and better health.
We can do all of this in a way that makes our economy and
our health care sustainable, compassionate, and
competitive. Let's get to work.
Thank you.
Last revised: February 1, 2005
http://www.hhs.gov/news/speech/2005/050201.html
