Weekly Newsletter: October 20, 2008

Hawaii Program “Crowded Out” by Rising Costs

Late last week, state officials in Hawaii announced a rapid end to a child universal health care program that had only been established earlier this year. The program, dubbed Keiki Care, was intended to provide coverage to children from families above the Medicaid eligibility threshold—which in Hawaii stands at 300% of the federal poverty level, or more than $73,000 for a family of four.

Despite a six-month waiting period incorporated into the program at the Governor’s insistence, state officials found that families were dropping private coverage in order to obtain health insurance through the government program, which featured co-pay levels—$7 per physician visit—lower than many private plans. As one official noted, “People who were already able to afford health care began to stop paying for it so they could get it for free.”

Some conservatives may not be surprised by this development, and note that Hawaii’s experience should give policy-makers looking to expand public programs significant pause. Not only does expanding access to public programs for families making over $75,000 increase government spending, but below-market co-payment levels will only encourage individuals to over-consume health care, exacerbating the acceleration of health care costs plaguing the current system. At a time when the federal government faces Medicare obligations alone of nearly $86 trillion, conservatives may believe that the failed Hawaii experiment should remind lawmakers why the Democrat leadership’s call expand the SCHIP program to families making more than $80,000 per year will be neither cheap nor sustainable.

Read the Associated Press story here.

Medicaid Fraud Will Not Be Addressed by Bailout

Last month, the New York Times highlighted the case of Staten Island University Hospital, an institution with a history of questionable billing practices—and now one of the largest fraud settlements against a single hospital. This week the hospital agreed to return nearly $90 million to respond to claims of overbilling government programs as a result of two whistle-blower lawsuits and actions by federal prosecutors. The lawsuits and charges alleged among other things that the hospital deliberately inflated bed and patient counts in order to obtain reimbursements from Medicare and Medicaid, and come after the hospital had reached two previous settlements—one in 1999 resulting in $45 million in Medicaid
repayments, and another in 2005 resulting in $76.5 returned to Medicaid—with state authorities regarding fraudulent billing activity.

Many conservatives may not be surprised by these repeated instances of fraud and graft within the program, given that a former New York state Medicaid investigator estimated that 40% of all Medicaid payments were fraudulent or questionable in nature. However, this episode may only strengthen conservative concerns that a proposed “temporary” increase in federal Medicaid matching funds (HR 5268) would do nothing to combat this fraud and abuse before spending additional federal dollars. Indeed, given that a single hospital has settled more than $200 million in fraud claims, some conservatives may wonder whether, if the Medicaid program had appropriate anti-fraud efforts in place, an additional $10-15 billion “bailout” for states would even be needed at all.

Also on Medicaid, last week the Centers for Medicare and Medicaid Services released the first annual Medicaid actuarial report, which included long-term projections for Medicaid spending. According to the report, Medicaid spending is scheduled to double in the next nine years, reaching nearly $674 billion in both state and federal spending by 2017 and consuming a rising share of both national GDP and the federal budget. Many conservatives may view these figures as further evidence of the need for comprehensive entitlement reform to slow the skyrocketing growth in health costs, and believe that a temporary bailout would be counter-productive to the program’s long-term stability.

Read the article here. The CMS 2008 Actuarial Report on Medicaid is available here.

The RSC has prepared a one-pager highlighting the need for comprehensive Medicaid reform based on examples from several states; the document can be found here.

Medicare Forces People to Accept Costly Benefits

Earlier this month, several individuals filed a ground-breaking lawsuit against the Department of Health and Human Services and the Social Security Administration. The suit would force both agencies to develop a process to allow individuals to renounce their eligibility for Medicare Part A, which governs hospital care. Under current regulations, while Part B (outpatient and physician care) and Part D (prescription drug coverage) are optional programs, individuals cannot waive participation in Medicare Part A once they apply for Social Security benefits. The plaintiffs’ proposed remedy echoes legislation (H.R. 7148) recently introduced by RSC Member Sam Johnson, which would grant individuals an explicit right to opt-out of Medicare should they choose to provide for their health care without relying on public funding.

Many conservatives may question the absurdity of the government’s position—spending taxpayer dollars to defend itself against individuals who want to forfeit their right to Medicare benefits, which would only save taxpayers money. At a time when Medicare faces unfunded obligations totaling $86 trillion, many conservatives may believe that the government’s time and money would be much better spent finding solutions to America’s entitlement obligations, rather than forcing individuals to accept benefits they don’t want—and costing taxpayers billions in the process.