Solutions to Medicaid Crisis Could Penalize Mentally Ill

As federal legislators near a self-imposed time limit to reduce the Medicaid budget by $10 billion over the next five years, little consensus has emerged over where to cut the program.

Different approaches to the task have been advocated by House and Senate leaders and the Bush administration. The most recent recommendations, offered last month by the president's Medicaid Commission, included several that would have an enormous impact on beneficiaries with severe mental illness. Among its recommendations with regard to prescription drugs were the adoption of higher copayments, the use of prior authorization, and therapeutic substitution.

The Medicaid Commission was created earlier this year as part of the federal government's efforts to control future Medicaid spending. Its members were appointed by Department of Health and Human Services Secretary Michael Leavitt. The commission's recommendations, many based on suggestions from the National Governors Association (Psychiatric News, July 15), will be forwarded to Congress as part of the Medicaid budget process this fall.

APA and 15 other national mental health advocacy organizations that belong to the Campaign for Mental Health Reform (CMHR) are urging restraint among congressional leaders considering the Medicaid cuts.

Among the wide variety of cuts under consideration, the CMHR is greatly concerned about Bush administration proposals to reduce costs by narrowing the definitions of rehabilitation services and targeted case management (TCM) services qualifying for Medicaid reimbursement. CMHR is also lobbying against a proposal to lower the reimbursement rate for TCM.

“Rehabilitation services and TCM are core elements of our public mental health system,” said Charles Konigsberg, executive director of CMHR, in a letter sent August 23 to Sen. Gordon Smith (R-Ore.).“ Rehabilitation services enable states to provide a range of comprehensive community-based services to people with mental illness in a coordinated and effective manner.”

Many states use TCM services to increase Medicaid beneficiaries' access to non-Medicaid services, including food stamps, energy assistance, emergency housing, and legal services.

Deep federal funding cuts could cause many people with serious mental illnesses to lose access to life-saving health care, said Konigsberg.

The 40-year-old Medicaid program pays over half of the care delivered through local community mental health centers, and it helps fund much of the use of psychotropic medication, according to the National Governors Association (NGA). Medicaid will soon account for two-thirds of all public mental health care spending.

Even as Medicaid takes on a greater share of public mental health spending, it is also likely to consume an ever-increasing portion of state budgets. Although the program is funded jointly by the federal and state governments, Medicaid accounts for an average of 22 percent of each state's budget and is the single largest expenditure item for states, according to the NGA.

The commission offered other cost-saving proposals that also concern APA, including use of drug formularies and increased beneficiary copayments. Formularies may limit access to drugs that may have higher costs, while increased copays transfer more of the cost of care from the state to the patient.

The time and effort to move patients with severe and persistent mental illness from one medication to another is considerable, even in the most successful “transfers,” said Lizbet Boroughs, deputy director of APA's Department of Government Relations. When the transfer to another medication is unsuccessful, patients may deteriorate or experience other acute problems, which could lead to greater medical expenses.

“So if [states] save $150 a year on this patient, is it worth it when you look at the risks of $8,000 in hospitalization?” Boroughs said.

States have wide latitude under the current system to decide whether to exempt psychotropic drugs from cost-control measures limiting medication access. While most states have exempted psychotropic drugs, others have used their authority aggressively.

Most of the proposals to cut the Medicaid budget would continue to let the states decide whether to include psychotropic drugs in their cost-control efforts. Other groups involved in the debate argue that Medicaid's current cost-sharing rules, with a maximum copayment of $3 per drug, do not encourage cost-effective utilization.

“States should be able to increase copays on nonpreferred drugs beyond nominal amounts when a preferred drug is available, to encourage beneficiaries to fill the least-costly effective prescription for treatment,” said Raymond Scheppach, NGA executive director, in testimony presented to the Medicaid Commission at its August 17 hearing. “Such copays must be enforceable to be meaningful.”

One of APA's concerns about increased copayments focuses on low-income families who need medical care. Even small increases in copayments add up quickly when more than one child in the same family requires multiple visits to health care professionals, which can lead families to delay medical treatment.

“Problems get bigger when families delay going to the doctor,” Boroughs said.

She said the results of increased Medicaid copayments were seen in a July/August study of the Oregon Medicaid program's adoption of wide-ranging benefit reductions and increased cost-sharing requirements for many of its members beginning in 2003. The study, published in the journal Health Affairs, found that within months of Oregon's making these changes, 44 percent of the beneficiaries who reported leaving the program did so because of the increased premiums and copays.

Another area of concern is that legislators might consider cutting services under the optional Medicaid benefits that states can offer their residents. One such service is the home- and community-based waiver that allows the redirection of Medicaid monies from funding hospitalization of children with mental health problems to outpatient treatment in the child's community.

“For these mandatory beneficiaries, most of the mental illness treatment and support services they receive are deemed `optional,'” said Andrew Sperling, director of legislative advocacy at the National Alliance for the Mentally Ill (NAMI), about coverage of prescription drugs, intensive case management, and assertive community treatment. “While federal policy may deem these services to be optional, NAMI can assure you that for these disabled and vulnerable Medicaid recipients, medication and intensive case management are not optional for their most basic health care needs.”

Other approaches under consideration for tightening Medicaid's belt are stricter controls on asset transfers by which families may transfer wealth from an individual so the individual may qualify for Medicaid, reducing state responsibility for recipients who qualify for both Medicare and Medicaid, allowing states to implement waivers without approval from the Department of Health and Human Services, and cutting states' ability to reap higher federal reimbursements through intergovernmental transfers.

The Medicaid Commission will continue work on another set of recommendations to ensure the long-term sustainability of Medicaid, due to HHS Secretary Leavitt by the end of 2006. These recommendations will address projected escalation in the program's costs as demographic pressures from the retirement of the babyboom generation pose an even-greater threat to Medicaid than its current fiscal woes, according to commissioners. Considerations expected to be included in the long-term review are ways to expand coverage to more Americans while remaining fiscally responsible, provide long-term care to those who need it, and improve quality of care, choice, and beneficiary satisfaction.

The options considered by the Medicaid Commission are posted at<www.cms.hhs.gov/faca/mc/summary_of_options081705.pdf>. The NGA's report, “Medicaid in 2005: Principles and Proposals for Reform,” is posted at<www.nga.org/Files/pdf/0502MEDICAID.pdf>. The Oregon Medicaid study is posted at<www.ocpp.org/fedbudget/healthaffORcostsharing.pdf>.▪