WASHINGTON, April 14 (UPI) -- At both the state and federal levels, battles over Medicaid budget cuts have erupted, sending a message this huge healthcare entitlement program for the poorest of the poor is America's biggest domestic crisis today -- not Social Security.
President Bush originally proposed $45 billion in net savings over 10 years from Medicaid -- mainly by reducing expenditures on prescription drugs and closing loopholes in the law that allow states to maximize their federal match money. The Senate initially wrote such Medicaid cuts into its budget plan, but Republicans joined Democrats and voted them out. Still, the House budget version includes some $20 billion in cuts over five years, even though opposition is mounting -- from Republicans and Democrats.
This week, 44 House Republicans sent a letter to Rep. Jim Nussle, R-Iowa, chairman of the House Committee on the Budget, as well as to House Republican leadership that outlined their concerns the cuts would negatively affect Medicaid beneficiaries without implementing true program reform.
"Therefore, we strongly urge you to remove these reductions and the reconciliation instructions targeted at Medicaid and, in their place, include a $1.5 million reserve fund for the creation of a bipartisan Medicaid Commission in the final conference agreement for the (fiscal year 2006) Budget," the GOP members wrote. "As detailed in H.R. 985, a commission would serve as a credible forum for an honest, open discussion and the development of comprehensive recommendations on how we can reform the Medicaid program."
Meanwhile, state legislatures in New York, West Virginia, South Carolina, North Carolina, Missouri, New Hampshire and elsewhere all are in the midst of their own Medicaid financing battles. Unlike Congress, lawmakers in all but a few states carry the additional burden of having to balance each state budget. Many of the states are trying to preserve as wide and deep a coverage blanket as they can, but in Tennessee this week a federal appeals court ruled the state could drop 323,000 non-mandatory adult beneficiaries from its Medicaid program to save $8 billion.
In almost all states, Medicaid expenditures now exceed those for education, which Gov. Mark Warner, D-Va., Thursday called "a recipe for disaster."
The positions of the nation's governors and of lawmakers in both houses of Congress are moving closer together, calling for a complete overhaul of the program that now serves 53 million Americans and costs more than $300 billion a year in combined state and federal payments.
Warner, chairman of the National Governors Association, told a Kaiser Foundation briefing there is bipartisan support among the governors for revamping the structure of the 40-year-program -- not for just making spending cuts.
"Medicaid, as it is currently structured, over the long-haul, cannot work," Warner said, and added the problem involves increased cost-shifting from the federal government and from businesses that stop offering health insurance as an employee benefit -- leaving low-income workers without a way to pay for healthcare.
"We are on the road to a meltdown ... the Medicaid system as we're currently grappling with it .. is going to bankrupt all the states," Warner said.
Medicaid restructuring has to include a broader range of proposals and ensure the program also provides quality of care for beneficiaries. Governors support ideas such as:
--Allowing states to form purchasing pools to get better buying power.
--Looking at the pricing of prescription drugs.
--Issuing tax tax credits to help people buy health coverage and to help employers offer it,
--Ramping up the information technology capability of the entire healthcare system.
--Implementing incentives for people to purchase long-term care insurance so they don't dump their assets to become poor enough to qualify for Medicaid when they go to a nursing home.
"We start with the premise that the policy ought to drive the numbers rather than the numbers drive the policy," Warner said.
MAINE PBM LAW MOVES CLOSER TO IMPLEMENTATION
A federal judge has ruled against the Pharmaceutical Care Management Association in its efforts to stop implementation of Maine's Unfair Prescription Drug Practices Act, the first law in the country that imposes fiduciary duties on pharmacy benefit management companies, which administer prescription drug plans covering 200 million Americans.
The Maine law requires PBMs to report financial information and conflicts of interest, disclose all savings from special pricing deals, and inform health plans of cost differentials when a more-expensive drug is switched for a cheaper medication. All of these are things PBMs view as proprietary information.
U.S. Magistrate Margaret Kravchuk in Maine earlier recommended the full U.S. District Court there lift an junction won by the PCMA and allow the law to be enforced. Federal Judge D. Brock Hornby this week upheld Kravchuk's decision.
"We are immediately appealing this to the 1st Circuit (Court of Appeals) in Boston, Mark Merritt, PCMA president, told reporters. "We're concerned the PBMs' incentive to generate savings for consumers is going to be undermined."
Hornby's decision and the PCMA's appeal open up the issue of whether the injunction should remain in effect until after the appeal is heard. PCMA said it would ask for an executive injunction maintaining the stay.
As for the likelihood of the PCMA winning on appeal, David Balto, an attorney and a former Federal Trade Commission policy director, told UPI's Health Biz, "This is a terrific decision for consumers. The Maine legislation is really narrowly constructed ... it isn't something that is overly broad."
Sharon Treat, executive director of the National Legislative Association on Prescription Drug Prices, who sponsored the Maine legislation while serving in the Maine Senate, told Health Biz a key issue in the Kravchuk decision was the ruling that such laws are not pre-empted by the Employee Retirement Income Security Act. ERISA governs employee benefit plans, which in turn contract with PBMs to negotiate discounts with pharmaceutical companies for prescription drugs.
"This is the first time anyone has tried to lay out whether this (type of legislation) is affected by ERISA or not," Treat said. "We have seen the FTC take an aggressive stance trying to stop states (from enacting legislation), saying they cannot draft legislation because of ERISA pre-emption."
At least 11 other states are considering legislation similar to what Maine has passed, Treat said.
Merritt said the Maine law will not help consumers because it will mean PBMS will not be able to strike the best price deals.
"Let the competitive marketplace work," he said. "PBMs have a central role in managing drug trends downward."
Treat said the Maine law has the potential of saving millions of dollars by preventing conflicts of interest and requiring disclosure when drugs are switched.
Merritt said the law would cost state consumers $1.7 billion over the next decade. He noted a number of states have rejected such laws.
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