Health economics project overview and analysis

Health Care Drivers for increased Medicaid funding: A study in the United States.

The Per capita health care spending has increased to about 2,814 in 1990 to more than $7,000 today. With such increased amounts, it is obvious that everyone in America would not be able to afford such so much. This led to the creation and the need for a program like Medicaid. Medicaid is basically a national health insurance program for people with low income. In the year 2000, about 42.7 million people received Medicaid. (Einhorn 25) This shows that Medicaid itself was a program that was a crucial factor in the medical necessities of a lot of people. The demand for health care is still expected to increase thus making an even larger part of the national economy. (Hall and Jones) Data from the National Health Interview Survey from 1997

About Medicaid

Medicaid was itself established in 1965 originally to assist states to provide medical assistance on their own choice. Thus this program was reserved for families who are either old, disable or blind. It also targeted persons whose income was low and resources weren't sufficient to meet costs of the medical bills. This was the program was initially about. Both Medicaid and Medicare were effective in mid-1966. Even though Medicare was the one that was supported fully by the government, Medicaid however wasn't. Thus, Medicaid and Kerr-Mills basically became an extension of the coverage

Eligibility

The eligibility criteria for Medicaid have always been a controversial topic since long. Currently, there are about 60 million people in the United States that receive Medicaid funded services. First, the boldest criteria's will be mentioned. A major criterion for the Medicaid services is that the person should be in a medical necessity. In other words, general physician checks ups are not necessarily funded by Medicaid. Another big criterion is that the Medicaid is the last resort for the patients who require assistance in paying their bills. Thus, they will only be eligible if other financial sources or routes will not pay for the medical bills. The participants should have freedom of choice of the provider and the services that are usually there, they are available statewide.

The Medicaid and the CHIP program cover children, pregnant women, seniors, parents and individuals with disabilities. The government requires certain criteria for an individual to be available to attain Medicaid care. It should be seen that the States set the individual eligibility criteria concerning what the federal poverty level for that region is. A lot of states have increased their coverage thus making more and more people eligible. In 2011, the FPL for a family of four was $22,350 per anum. (Medicaid) This is altered every year thus altering the requirements and the eligibility almost every year.

This topic is of primary concern now because of the reforms that have been carried out in America after the passing of the Affordable Care Act of 2010. The basic aim for this reform is so that more and more people would be insured somehow. This act basically sets a minimum eligibility of 133% of the federal poverty level for all the Americans under the age of 64. This is set to get into effect in 2014 but considering the economic situation of the country, it might be effective before as well.

Even though it appears that Medicaid is quite lenient in providing services, it should be noted that many states have very restrictive Medicaid eligibility requirements. A research carried out in the Brigham and Women's Hospital states that due to restrictive Medicaid Policies, a lot of patients are delaying medical care. (Clark) These are basically states and countries where the individuals need to be far off from the FPL in order to qualify in these programs. Clark states that even though the causes could be many, they are the main reason health care access are hindered in these areas. This is a problem because the patients are delaying the medical care that is quite urgent and is needed. A major way through way the health care access can be enhanced is by increasing the number of primary care providers. (Clark)

Major research question.

It is seen that over the years, the amount of money that the state and the government has to allocate for Medicaid has increased quite a lot. The major research question is what are the main drivers behind increased Medicaid funding in the United States? This research will collectively look at the Medicaid programs in the entire country. It will especially look at the reforms made in the program and why these reforms were necessary. Surely, there had to be some problems or hindrances in the program that caused in to alter its main goals. Furthermore, the statistics from the entire Medicaid history will be looked at. Special emphasis will be given to how Medicaid is planning to evolve subsequent to the passing of the Adorable Care Act of 2010.

The Basics of Medicaid

Before we get into why the need for funding has raised, it should be reviewed how the program actually functions. As mentioned earlier, Medicaid was initially made such that every state functioned on its own. In other words, the state basically chose itself how much it wants to fund or how much it wants to allocate its budge. One thing however is clear that every state has to function under the Medicaid State plan. The federal government basically devices the Medicaid services and states have to argue and basically chose the sort of coverage that they provide. The State also chooses which persons are eligible, the services it will prove, payment levels and providers. It should be noted that the State basically goes on to share the cost of Medicaid with the Federal government share known as FMAP.

Theory

In the research carried out the dependent variable is the change in expenditure or funding of Medicaid. What we are basically looking at is that which factors caused the changes in expenditure. Therefore, these factors would be the independent variable.

Reasons for funds

The most commonly used Medicaid services are prescribed drugs and physician services. (Grannemann and Pauly 7) the hospital out care facilities are used by about 44% of the recipients. This especially goes for those persons who have access to very large care units. About 73% of the Medicaid Payments goes to look after institutions such as hospitals, mental hospitals, nursing homes and intermediate care facilities. (Grannemann and Pauly 8) Nursing home services do not require that much contribution by Medicaid. This is because most of the elderly have some amount of money, thus they are able to pay for themselves. This basically gives an idea of what most of the funds are spent on. However, later we will see that the expenditure of Medicaid is not directly related to the number of cases enrolled alone. Other causes like dynamic policies and economic changes play a crucial role as well.

Problems in Medicaid

In 2010, the average health expenditure in the United States was 2.6trillion in 2010. This was about 8,402 per person or 17.9% of the GDP. (CMS) Out of all this expenditure, Medicaid had provided about 401.3 billion dollars. This is about 15% of all the health care expenditures of the same year. As mentioned before, the eligibility criteria are responsible for the creation of many problems. Since Medicaid is based entirely on blind, disable, age or families who have dependent children. However, many people who are residing below the poverty line, they are not eligible for Medicaid. Thus, a lot of families who are very much deserving and are in need for funded medical care do not receive the benefits of Medicaid.

Data Sources

The data that has been collected has been an amalgamation of newspaper articles and journals on the spending patterns of Medicaid. Furthermore, specific tables and charts have been incorporated from Kaiser foundation web pages and other pages with tabulated expenditures of the program.

Findings

Category

Medicaid & CHIP

Subcategory

Medicaid Spending

Growth in Medicaid Spending, FY90-FY10

Full Title

Average Annual Growth in Medicaid Spending, FY1990 - FY2010

Data Type

Percent

FY 1990-2001

FY 2001-2004

FY 2004-2007

FY2007-2010

Alabama

0.1238

0.0809

0.039655

0.049

Alaska

0.129

0.1524

0.023355

0.082

Arizona

0.1537

0.2277

0.10259

0.123

Arkansas

0.1116

0.1066

0.049142

0.084

California

0.1062

0.0851

0.050631

0.054

Colorado

0.1339

0.0695

0.035946

0.114

Connecticut

0.0941

0.0625

0.028911

0.097

Delaware

0.1513

0.1018

0.076806

0.092

District of

Hampshire

0.1319

0.0958

0.000583

0.046

New Jersey

0.1055

0.0379

0.036914

0.047

New Mexico

0.1573

0.1475

0.058765

0.093

New York

0.0919

0.0911

0.021233

0.055

North Carolina

0.1397

0.098

0.055272

0.035

North Dakota

0.0675

0.0623

0.011742

0.106

Ohio

0.0915

0.1105

0.03725

0.053

Oklahoma

0.1018

0.0723

0.091835

0.069

Oregon

0.1575

-0.0065

0.032613

0.114

Pennsylvania

0.1241

0.0892

0.0392

0.056

Puerto Rico

NA

NA

NA

Residence Unknown

NA

NA

NA

Rhode Island

0.0939

0.1159

0.013021

0.037

South Carolina

0.1238

0.0877

0.01503

0.075

South Dakota

0.0968

0.0648

0.028943

0.082

Tennessee

0.1298

0.0862

0.003154

0.061

Texas

0.1291

0.1159

0.081075

0.097

United States

0.109

0.093808

0.036112

0.068

Utah

0.1071

0.1401

0.035696

0.073

Vermont

0.1326

0.0988

0.040851

0.114

Virgin Islands

NA

NA

NA

Virginia

0.1048

0.0829

0.080009

0.092

Washington

0.1229

0.0669

0.027831

0.068

West Virginia

0.1293

0.0774

0.036499

0.055

Wisconsin

0.0954

0.0357

0.032367

0.097

Wyoming

0.1251

0.1453

0.053867

0.075

Notes

All spending includes state and federal expenditures. Growth figures reflect increases in benefit payments and disproportionate share hospital payments; growth figures do not include administrative costs, accounting adjustments, or costs for the U.S. Territories.

Definitions

Federal Fiscal Year: Unless otherwise noted, years preceded by "FY" on statehealthfacts.org refer to the Federal Fiscal Year, which runs from October 1 through September 30.  for example, FY 2009 refers to the period from October 1, 2008 through September 30, 2009.

Sources

Urban Institute estimates based on data from CMS (Form 64) (as of 12/21/11).

From this entire chart, the entire increase in expenditure of Medicare was the most from the year 1990-2001. For United States, the entire increase was 10.9% in those years. Comparatively, the increase that occurred in the year 2007-2010 was only 6.8%. Even though the magnitude of growth was not the same, more or less Medicaid did have to increase its spending though out these years.

This graph basically gives a general idea of how Medicaid expenditure has grown exponentially ever since it started. Details of its expenditure trends will be discussed more below.

This graph was basically provided by the Washington Post. It shows how states are allotting more of their funds to health care as oppose to spending on education in the long run. As it will be discussed below, spending by Medicaid increased from 2010 to 2012 due to decreased federal funds. Future trends will be emphasized below.

Discussion.

It should be noted that when Medicaid started, it went off in the pattern that most of the state-based programs go on. By 1971, the annual pending had reached about 6.5 billion where as the enrollment was about 16 million people. (Klemm 106) the enrollment growth and the coverage that the program would provide were underestimated to quite an extent. Therefore, this led to a rapid increase in the spending by the program. At that time, the total expenditure was about 52.3. In the period from 1972-176, the entire expenditure was about 17.9%. These expenditures were basically as a result of the amendments that were made to the social security act. The 1972 amendment therefore created the supplemental security income. This federalized the cash assist programs for the disabled and the aged. These amendments also led to most of the beneficiaries of the SSI to attain Medicaid as well. This caused the enrollment in the aged and elderly category to increase about 8% during that year. The time period from late 1970 to 198s was marked by medical inflation. (Klemm 107) This was a result of economy wide inflation and even higher medical costs. The inflation rose to about 8.4% during this time. Even though, there was no relevant expansion of the service, it was seen that other welfare programs were declining. Due to the increasing inflation, the Medicaid enrollment actually dropped by an average of 0.7.

Following this era, in the era of retrenchment, the congress and the federal government offered the option to state for reimbursing Medicaid benefits and for creating their own options. This allowed the states to take a break from the growing expenditures of Medicaid. This occurred mainly because the federal government had cut down the amount it would provide to the state. Thus, in order to help states with the reductions, the federal government offered these propositions. It was during this time that health maintenance organizations and other programs of the community were made. Medicaid started to alter its objective from paying claims to going for managing services and the cost of care as well. Following this era, the cost of Medicaid augmented annually at an average rate of 8% between 1981 and 1984.

Following that era, the congress basically focused on expanding the Medicaid more and more. This expansion went on to make an impact on enrollments from infants to pregnant women and to low income beneficiaries. During this period, there was also the enactment of pieces of legislation that went on to later affect the eligibility, coverage and reimbursement of Medicaid. (Klemm 109)

The time period from 1991 to 1992 was quite heavy on Medicaid. This mainly occurred due to previous mandates, increasing recession and increasing caseloads on the program. Thus, due to the change in policies and amendments, the strain on the program increased to such an extent that the average annual spending increased about 27% during this era. (Klemm 110) Following the explosion of the early nineties, Medicaid had gone to be altered in many reforms for the years ahead. The welfare reform not only occurred in the medical sector but the economy as a whole prospered during these years. This led to a drop of 0.4% per year in Medicaid spending.

Now we would take a jump to the current year and the statistics that Medicaid presents with today. The annual growth in spending on the program has slowed down significantly since the last year as the economy began to improve. (Goodnough) with the Affordable care act, more people will be eligible in 2014 as well. Goodnough feels that a major reason for increased expenditure on part of Medicaid was because of the shifting situation of the economy. When Americans lost their job and health insurance, Medicaid itself had more and more enrollment. This led to increased costs for the program.

However, last year in June, the total spending on Medicaid only augmented by 2%. (Goodnough) This is very less compared to the 10% increase that occurred in 2011. Many attribute this slowdown to not only more enrollment growth but also due to the cost cutting that many states have carried out. Diane Rowland, who is the executive vise president of the Kaiser Family Foundation, stated that the major reason for the decreasing spending is due to the reining in costs.

The major cuts that were made were to reimbursement rates for hospitals and doctors. Also optional benefits like vision, dental and drug coverage was also cut down. (Goodnough) Out of fifty, about fort five states froze reimbursement rates the previous year. Similarly, many cut back on the benefits that it provided to the masses. The previous year, Medicaid spending increased about 27.5% since the extra federal Medicaid fund stopped coming. This in turn did put a lot of pressure on the state which caused it to cut down its cost as well. Thus, we should see that this is more of a viscous cycle that occurs. When the government stops giving funds to the state, the state cuts down some of the benefits and reimburses some of the funds. This in turn decreases the spending of the state and the entire Medicaid program for that matter. Therefore, it should be seen that the Medicaid spending over the years has not only been dependant on the inflow of enrollments but on the legislature and the policies that have been created overtime. Along with the aforementioned factors, it is obvious that the current state of the economy and the way other health programs are going will also have an impact on the spending.

Limitations

The analysis and conclusion that we came up with are subject to a number of limitations. Medicaid as a program has been applied differently in different states in the United States. As mentioned in the discussion, the Reagan administration allowed states to set their own rules for how much they want to cover and their own eligibility criteria. This therefore renders it difficult for us to assess the cost and apply these assessments to the entire Medicaid program. Medicaid program is split into different areas and thus one major conclusion will not be quite accurate. Furthermore, there have been changes in health care technology, drugs and further environment and social changes that have affected the general population as well. In simpler terms, it means that the funding alterations cannot be solely accredited to the policy changes or the changing political ideologies.

Reliability

Scale: ALL VARIABLES

Reliability Statistics

Cronbach's Alpha

Cronbach's Alpha Based on Standardized Items

N of Items

.816

.807

5

Item Statistics

Mean

Std. Deviation

N

Hospitals

2.1744

.54361

Elderly

2.2752

.67303

Children.Funds

2.2093

.60498

Drugs

2.2287

.45931

Cost.of.Med.Aid

2.0853

.34017

Inter-Item Correlation Matrix

Hospitals

Elderly

Children.Funds

Drugs

Cost.of.Med.Aid

Hospitals

1.000

.450

.678

.387

.083

Elderly

.450

1.000

.841

.484

.374

Children.Funds

.678

.841

1.000

.508

.425

Drugs

.387

.484

.508

1.000

.330

Cost.of.Med.Aid

.083

.374

.425

.330

1.000

Summary Item Statistics

Mean

Minimum

Maximum

Range

Maximum / Minimum

Variance

N of Items

Item Means

2.195

2.085

2.275

.190

1.091

.005

5

Item Variances

.288

.116

.453

.337

3.914

.017

5

Item-Total Statistics

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item-Total Correlation

Squared Multiple Correlation

Cronbach's Alpha if Item Deleted

Hospitals

8.7984

2.861

.543

.569

.799

Elderly

8.6977

2.218

.740

.742

.739

Children.Funds

8.7636

2.201

.885

.844

.682

Drugs

8.7442

3.067

.546

.303

.798

Cost.of.Med.Aid

8.8876

3.560

.374

.288

.837

ANOVA with Tukey's Test for Nonadditivity

Sum of Squares

df

Mean Square