A reporter friend once shared with me her handy device for clearing up the perennial confusion between Medicare and Medicaid. "Medicare, because we CARE for our elderly, Medicaid, because we AID the poor."

This little mnemonic is interesting because, while it may reflect the original intent of these two programs, it is now wildly inaccurate.

"Most Misunderstood"

As the May 2005 issue of State Policy Reports issued by Federal Financial Information for the States puts it, "Medicaid is possibly the most misunderstood program in public budgeting." It is publicly perceived as a program for poor women and children; and is often described as bloated, inefficient, and riddled with waste.

In fact, while poor adults and children make up the bulk of the nation's 53 million Medicaid recipients—about 74 percent—they account for only 27 percent of program costs. Most Medicaid dollars flow to elderly and disabled recipients, and go towards long-term care expenses and prescription drugs. Meanwhile, growth in those program costs between 1980 and 2000 has actually been slower than the corresponding growth in health care spending generally, which would seem to indicate a program that is more efficient than the private health sector, rather than less.

Given increasing enrollments driven by a sluggish economy, an aging population, and the shrinking percentage of workers receiving health insurance through their employers, along with spiraling health care costs overall, it's surprising Medicaid hasn't grown even faster.

Still, it is now the largest expense most states face, having outpaced K-12 education a couple of years ago. And that is certainly one key way that Medicaid affects children: by reducing states' capacity to invest in public education, preschool, and other programs that matter to kids.

A Billion Here, a Billion There...

As Health and Human Services Secretary Mike Leavitt assembles his advisory commission, which has a September 1, 2005 deadline for recommending $10 billion in savings during the next five years, various scenarios are being discussed. Here are some of the key areas for savings that are being considered:

• Prescription drugs: various proposals would encourage greater use of generics, reduce the reimbursement rate to pharmacies for drugs, encourage states to group together to buy drugs.
• Long-term care: develop mechanisms that would encourage the elderly to tap into their home equity through reverse mortgages and pay for their own care. Make it harder for individuals to transfer assets to their family members in order to become eligible for Medicaid.
• Cost-sharing: current law does not allow states to charge any co-payments to certain populations, including pregnant women and children; and restricts co-payments when they are allowed to a maximum of $3.
• Coverage: the National Governor's Association would like any reform of Medicaid to give states the ability to tailor coverage packages to fit various populations—offering different benefits to frail elderly than to healthy young families, for instance; or tailoring packages to different regions within a state.

Of these areas, the one of most concern to children's advocates is that of cost-sharing. It's feared that even small co-payments for doctor's visits would discourage parents from seeking care for their children right away. And co-payments for prescriptions for chronic childhood conditions such as asthma could discourage proper use of the medications.

However, there seems to be considerable support both from the states and within Congress for increasing cost-sharing, which is being presented as a way to make Medicaid recipients more invested in the program and more likely to take an active role in trying to stay healthy. House Energy and Commerce Health Subcommittee Chair Nathan Deal (R-Ga.) has said that "personal responsibility" would be the focus of changes to Medicaid including co-payments and perhaps sanctions for using emergency rooms for routine care.

EPSDT

State officials apparently are also hopeful that they will find some relief from rules obligating states to treat children under 21 for all illnesses uncovered during mandatory health screenings.

Under current law, Medicaid-eligible children must receive vision, dental, lead and other health screenings according to a schedule established by the American Academy of Pediatrics and adhered to by most private practitioners. This is known as Early and Periodic Screening, Diagnostic, and Treatment, or EPSDT. States must then cover treatment for any health problems turned up by the screenings, even if those conditions are not otherwise included in a particular state's Medicaid program.

According to a draft National Governor's Association report that was obtained by the press, the states would like the ability to decline to cover some conditions turned up by the screenings.

States have long contended that the requirements of the EPSDT are too stringent; about half the states have been successfully sued for failing to provide needed care under EPSDT. On the other hand, a General Accounting Office concluded in 2001 that while the exact extent of the problem is hard to measure, many children do not receive the required screenings anyway.

Pediatrician Alan Meyers of the Boston Medical Center said any changes to the way Medicaid covers childhood preventive health should be driven by public health considerations, not budgetary constraints. "The main thing I would say would be: what's driving this? Is it expert panels reviewing data to determine what is the best from public health perspective, or is it politicians trying to save money and pinch a few dollars?" said Meyers.

Resources:

• Kaisernetwork.org [1] is closely tracking the Medicaid issue.
• The National Governor's Association [2] has information on how Medicaid costs are affecting states and other aspects of the program.