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Can States Stretch The Medicaid Dollar Without Passing The Buck? Lessons From Utah
In 2002, Utah became the first state to reduce benefits and increase cost sharing for existing Medicaid beneficiaries, to finance a primary care benefit expansion for previously ineligible, low-income adults. Through a 2004 survey of beneficiaries, we found that expansion enrollees were predominantly poor and that most suffered from chronic conditions or disabilities, or both. Parents whose coverage was reduced to finance the expansion were extremely poor, were in poor health, and faced major financial challenges. Findings suggest that a coverage expansion approach that relies on savings from reducing coverage for current beneficiaries and solely covers primary care has important limitations.
AS POLICY MAKERS look to the future of Medicaid in an era of growing government deficits, there is increased discussion at the federal and state levels about restructuring the program. The recently enacted Deficit Reduction Act of 2005 gives states new authority to limit benefits and impose costs on beneficiaries. These changes expand upon the administration’s efforts to give states increased discretion over program changes.1 Governors have also been calling for increased ability to limit program costs by restructuring benefits and cost sharing.2 In some states, Medicaid restructuring has already begun through waivers.3 In 2002 Utah became the first state to use a new waiver approach, under which the state financed an expansion in primary care coverage, called the Primary Care Network (PCN), with "savings" obtained from benefit reductions and cost-sharing increases for parents already covered by Medicaid. Utah’s program represents one approach taken by a state to stretch its Medicaid dollars through increased program flexibility. Utah’s experience could prove instructive for understanding the direction of state waivers and national reforms. Therefore, based on a 2004 survey of PCN enrollees and parents for whom benefits were cut and cost sharing rose, we provide information about those affected by the Utah waiver, their access to and use of health care, and their financial situations. Background on Utah. Utah financed an expansion in primary care coverage for low-income adults by limiting benefits and raising cost sharing for very poor parents receiving Temporary Assistance for Needy Families (TANF) (with incomes below 54 percent of the federal poverty level, or $8,964 per year for a family of three in 2006), parents who recently left TANF because of employment, and parents with high medical expenses who "spent down" to qualify for Medicaid. They became subject to copayments, including $6 per nonurgent use of the emergency room (ER), $3 per outpatient office visit, and $2 per prescription drug. They also lost coverage for nonemergency transportation and most dental services and faced new benefit limits, including utilization review for seven or more prescription drugs per month, a mental health care limit of thirty inpatient and thirty outpatient days per year, an annual $30 vision benefit limit and vision care limited to one exam per year without coverage for eyeglasses, and a limit of sixteen visits per year for physical and occupational therapy combined. The state calls this reduced benefit package "Non-Traditional Medicaid." These reductions offset the costs of a coverage expansion to uninsured parents and other adults with incomes below 150 percent of poverty ($24,900 per year for a family of three in 2006) who were not previously eligible for Medicaid.4 These people became eligible for the new PCN program offering only primary care coverage, with no coverage for hospital (other than ER), specialty, or mental health care. In light of the PCN’s limited benefits, the state made an informal agreement with hospitals to provide a set amount of charity care to PCN enrollees, initially $10 million a year across the hospitals. Additionally, PCN enrollees can seek assistance from case managers at the Utah Department of Health to try to connect with specialists willing to provide free care. If these enrollees receive hospital or specialty care and are unable to secure this donated care, they are liable for the cost of their care.5 To enroll in the PCN, enrollees must pay an annual enrollment fee, initially $50 for all eligible people. Enrollees also pay $5–$30 copayments and up to 10 percent coinsurance for some services. The state later reduced the enrollment fee to $15 per year for adults receiving General Assistance.6 One year later it reduced the fee to $25 for all others with incomes below 50 percent of poverty.7 The state implemented the PCN in July 2002 and began enrolling people on a first-come, first-served basis. After sixteen months, the state reached its enrollment cap of 19,000 adults and closed enrollment.8 In subsequent months, enrollment fell below 15,000, reflecting attrition.9 Since then, the state has held several brief open enrollment periods, and, as of 28 May 2005, the program had 18,088 enrollees, providing primary care coverage to about 16 percent of Utah’s roughly 116,000 uninsured adults with incomes below 150 percent of poverty.10
To obtain the data for this analysis, we surveyed 267 PCN enrollees and 370 parents covered by Non-Traditional Medicaid via computer-assisted telephone interviews between 24 March and 29 May 2004. The sample, including contact information and basic demographic characteristics, was provided by the Utah Department of Health, which drew a representative, random sample of 2,250 enrollees (1,125 cases for each program) directly from its program enrollment files of adults ages 21–64 who were continuously enrolled for at least six months as of 31 December 2003.11 Respondents were screened to verify their enrollment status. The overall response rate across the sample was 45 percent, with a cooperation rate of 75 percent among all respondents.12 We compared demographic characteristics of those contacted (including both respondents and those screened out because of ineligibility at the time of the interview) with the remainder of our sample. This comparison indicated no significant (p < .01) nonresponse bias on key indicators including age, race (percentage white), sex, income, and employment. This paper includes weighted point estimates and bivariate analyses. We calculated a series of weighted chi-squares to detect differences between PCN and Non-Traditional Medicaid enrollees using standard SAS, version 8.0. Analyses relating to experiences over the previous twelve months were limited to respondents with at least twelve months of enrollment in their respective programs.13 The survey instrument was developed by researchers at the Kaiser Commission on Medicaid and the Uninsured and NORC to collect information on enrollees’ demographics, health status, access, utilization, and financial situations. The findings presented here are cross-sectional and do not demonstrate access or utilization changes over time. Also, the findings are representative of the experiences of adults enrolled in these two programs in Utah and cannot necessarily be generalized to other states.
Demographics, health status, and private coverage. PCN adults were primarily poor (67 percent), and nearly six in ten were parents with dependent children. PCN enrollees represented a broad mix of ages, with more than half over age forty (Exhibit 1  ). More than a third reported being in fair or poor health, almost two-thirds said that they suffered from chronic or ongoing health conditions, and nearly a third reported a disability or a condition that regularly prevented them from engaging in normal activities.
More than half of PCN enrollees reported that they were employed at least part time. However, the overwhelming majority said that they were not offered health insurance through an employer (theirs or their spouse’s).
Most of the Non-Traditional Medicaid enrollees were very poor parents receiving TANF. These parents were a relatively young group; more than 80 percent were age forty or younger (Exhibit 1 More than half of the Non-Traditional Medicaid enrollees reported being employed at least part time. However, nearly three in four said that they did not have an offer of health insurance, as above. Affordability of the PCN enrollment fee. Nearly one in five PCN enrollees described the enrollment fee as being somewhat or very unaffordable, and a quarter received help to pay the fee. Almost half said that paying the fee disrupted their monthly budget (data not shown).
Use of care.
Consistent with the high prevalence of health conditions reported on the survey, respondents from both groups reported using a wide range of health care services (Exhibit 2
More than nine in ten parents covered by Non-Traditional Medicaid said that they had visited a physician in the past year, and almost half reported an ER visit. Four in ten said that they visited a dentist, nearly one in three reported an eye exam, 30 percent reported a visit to a mental health professional, and one in five said that they were admitted to the hospital. It appears that most of the surveyed enrollees in both groups used or needed services beyond the scope of their coverage (76 percent of PCN enrollees and 67 percent of "nontraditional" enrollees; data not shown).
Access to care.
Most of the respondents in both groups had a usual source of care, including a regular doctor or health professional (Exhibit 3
Medical expenses and financial experiences. Among PCN enrollees, more than four in ten said that medical expenses had had a major impact on their family, and a similar number reported medical expenses in excess of $250 during the past twelve months (Exhibit 4 ). Nearly a third had been contacted by a collection agency in the past year for unpaid medical bills. Many also reported problems paying for basic needs, especially those who experienced difficulty paying for medical expenses. Reflecting these financial challenges, many reported difficult financial experiences, with more than half turning to family or friends for financial help and nearly a quarter missing a rent or mortgage payment. Enrollees also reported job loss, housing arrangement adjustments, giving up their vehicle, having a utility or service turned off, and being evicted.
Compared with PCN enrollees, fewer Non-Traditional Medicaid parents reported that medical bills had had a major impact on their family or medical expenses in excess of $250 during the past twelve months. Many of these enrollees reported problems paying for basic needs, however. Many also reported difficult financial experiences in the previous twelve months.
Utah’s experience shows strong demand and a high level of need for health insurance among low-income uninsured adults. Although many enrollees were working at least part time, the vast majority did not have access to employer coverage. As such, the PCN filled an important void. However, the need for coverage exceeded what the program’s financing could support. The limited financing gleaned from the Non-Traditional Medicaid reductions for parents resulted in an enrollment cap that constrained the reach of the PCN expansion. In the past, other states have funded broader Medicaid expansions by drawing on larger sources of funds, such as managed care savings or unspent disproportionate-share hospital (DSH) funds. Such larger financing sources appear necessary for larger expansions with broader coverage. The low-income adults who enrolled in Utah’s PCN were not primarily young and healthy adults; rather, they included many with major health care needs. In fact, PCN enrollees appeared to be older and sicker than the eligible population of uninsured adults with incomes below 150 percent of poverty in Utah.14 Although the PCN enrollees appeared to be benefiting from their coverage, their major health care needs and limited resources raise concerns that a package covering solely primary care falls short of providing adequate insurance. More than three-quarters of enrollees said they needed health services that were beyond the scope of their coverage. Further, compared with the Non-Traditional Medicaid enrollees, who have broader coverage and more limited cost sharing, they were more likely to report missing or postponing getting needed medical care because of cost or lack of coverage. When compared with national survey findings for adults with incomes below 150 percent of poverty, PCN enrollees’ reports of missing or delaying care were much higher than national rates for adults covered by Medicaid (36 percent versus 12 percent) and were closer to national rates for uninsured adults with incomes below 150 percent of poverty (29 percent).15 UTAH'S EXPERIENCE PROVIDES a cautionary note on the adoption of strategies in other states that limit the scope of coverage to either expand coverage within existing resources or reduce spending. Providing previously uninsured people with limited benefits likely improves their access to covered services but leaves them with uncovered health needs and access problems. A number of states have made Medicaid reductions recently through slimmer benefits or greater cost sharing.16 These measures reduce per person Medicaid costs to the state, but other research has shown that they can translate into greater unmet need or economic instability among covered people and increase strains on providers.17 Officials need to be realistic about the potential for achieving Medicaid cost savings without harming enrollees, who are poorer and sicker than the privately insured population and often need broad benefits and cost protections.18 Recent analysis indicates that Medicaid is already an efficient program when compared with private coverage.19 Efforts to stretch the Medicaid dollar should guard against the unintended consequence of passing the buck to beneficiaries, who are among society’s most vulnerable citizens.
Samantha Artiga (sartiga{at}kff.org) is a senior policy analyst at the Kaiser Commission on Medicaid and the Uninsured in Washington, D.C. David Rousseau is director of statehealthfacts.org and a principal policy analyst at the commission. Barbara Lyons is a vice president of KFF and deputy director of the commission. Stephen Smith is senior survey director at NORC in Chicago, Illinois. Daniel Gaylin is senior vice president, Health Survey, Program and Policy Research, at NORC in Washington, D.C. The authors thank Michael Deily, Michael Hales, Wu Xu, Norman Thurstan, and Mike Martin of the Utah Department of Health and Chad Westover, former director of the Primary Care Network. Without their support and cooperation, the 2004 Utah Medicaid survey would not have been possible. They also thank Angela Jaszczak, Janella Chapline, and Lidan Luo of NORC for their help in preparing and analyzing the survey results; Cindy Mann of Georgetown University for her guidance and expertise; Judi Hilman of Utah Issues for sharing her extensive state program knowledge; and Diane Rowland of the Kaiser Commission on Medicaid and the Uninsured for her support and many helpful comments.
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