3 views on whether Medicaid should become the sacrificial lambBlog added by Paul Wilson on September 28, 2011
Paul Wilson

Paul Wilson

Denver, CO

Joined: May 30, 2007

My Company

As states struggle with serious budget shortfalls and the federal government continues to mull strategies to whittle down our ever-increasing national debt, one cost-cutting option that comes up time and again is Medicaid.

President Obama's recently released deficit reduction proposal includes a $248 billion cut to Medicare and a reduction of $72 billion to Medicaid over the next decade. These cuts are part of an overall strategy to reduce the national deficit by more than $3 trillion over the next 10 years.

In addition, the Centers for Medicare & Medicaid Services last month enacted a unilateral reduction in LTC reimbursements from Medicare and Medicaid of 11.1 percent for next year.

These factors, combined with the additional strain that the boomers will place on Medicare, Medicaid and long term care facilities across the country, has created an environment that seems tenuous, at best.

So, are Medicaid cuts the best solution to our money woes? And what will the repercussions be? If you disagree with the strategy, what do you suggest? Please share your comments below. Here are the thoughts of three industry professionals:
    We're in a new reality. Boomers are hesitant to embrace this fact, but it's true.

    Our society and our attitudes have changed and as investment professionals, our planning for our clients needs to change as well. This is often the most difficult part, because it requires a shift in the client's thinking as well.

    We're moving toward an increased emphasis and need for personal accountability. Many boomers will be left unready to face some very really needs come retirement (or even during retirement). As such, clients and planners alike need to emphasize personal accountability in investment and insurance needs.

    At this point, the writing's on the wall. Why leave all of your planning up to somebody else? Wouldn't you rather have a solution that's independent of government changes? Regardless of what the government decides to do, you need to have your ducks in a row to ensure preparedness.

    Brett Anderson, St. Croix Advisors
    Death by a thousand cuts is taking place because it really is more acceptable to affluent politicians than really addressing the issue. Medicaid will be hardest hit because the states are not able to print money and sooner or later federal bailouts just won't be forthcoming. We won't have to wait for boomers to reach their 80s because states are already broke and are facing choices like paying for nursing home residents or schools and police.

    Long term care facilities already receive far less from Medicaid than the cost of providing care. The good news is that they make it up on volume as the number of Medicaid beneficiaries reaches record highs and is only expected to grow. At the present trend, it's easy to predict that you'll have government-supported facilities and private-pay facilities for those who have the ability to cover costs or access to insurance coverage to pay. And trust me, you won't find many (if any) former elected officials in the government-paid facilities.
    Jesse Slome, American Association for Long-Term Care Insurance

    If nothing else, the President’s deficit reduction proposal forces us to evaluate our national priorities. There’s no denying the significant economic drag incurred by our big-3 entitlements; however, recouping just over $7B per year from Medicaid efficiencies (through more than a dozen scattered initiatives) might seem punishingly small when compared against the $1T realized through a drawn-down overseas military or the $1.5T in net new revenue proposed in tax reforms. Regardless of the disparity between where the savings are achieved, the ironic thing about the President’s deficit reduction plan is that 10 years from now the U.S. is projected to hold a still greater national debt, both in absolute dollars and as a percentage of GDP.

    The so-called “age wave” which powers much of our retirement discussions, has not overtaken us by surprise — the 10,000 baby boomers turning 65 each day have been studied for decades. But have they studied their own future long term care needs? Study after repetitious study says they have not. And for this reason, Medicaid has become the nation’s de facto “long term care insurance company”, the backstop which touches 80 percent of all nursing home patient days. As a country, we have to decide whether it’s our vision for Medicaid that it provide universal health care for all, or remain a safety net for our neediest. It seems doubtful it can fulfill both missions, yet it’s this very conflict which is tearing the program apart from within. At the same time as the Affordable Care Act is preparing to add another 17 million insureds onto the state Medicaid rolls, 24 states are preparing to cut $4.7B from their Medicaid budgets (reducing both the provider reimbursement rates and services which new beneficiaries will receive). Although the federal government has pledged to pay the states’ increased cost of the new enrollees, the fact that the President’s deficit reduction plan depends upon $320 billion in entitlement cuts reveals how tenuous such promises can be.

    For their part, LTC providers are desperate for — and dependent upon — Medicaid dollars, even while acknowledging its miserable rates are below the cost of providing care. Such a system all but guarantees low quality, problems of access, and nursing home bias. Occasionally a state or advocacy group will advance the notion that three beneficiaries can be care for at home (in the setting they prefer) instead of a nursing facility. Unfortunately, this notion has been debunked owing to a theory known as the “woodwork effect”, and we find that people emerge to take advantage of care sooner and more aggressively than otherwise, only to eventually end up in the very same nursing facility as before. This coincides with more recent studies which have concluded that rising US health care costs are driven primarily by volume. It is the sheer quantity of services we utilize (not the inflationary price of them, or cost to insure them, or administrative burden), simply our demand to use more. Any strategy to reduce Medicare and Medicaid liabilities should incorporate this lesson if we hope to cure the disease, and not just another symptom.”

    Steve Forman, Long Term Care Associates, Inc.

    Now it's your turn. Please share your thoughts using the comment section below.
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions
Post Blog