Ohio Governor John Kasich has taken on a daunting challenge within the first few months of his tenure: a major reform of the state’s Medicaid system.
More than 2.1 million Ohioans, or about one in five, are currently on Medicaid. With nearly $1 in every $3 the state spends going toward the program, Medicaid is the single most expensive item in the state’s budget and is growing larger every year, paying for two out of every five births in the state.
In 2011 the program cost the state’s taxpayers $18 billion. In coming years the situation will worsen, after federal stimulus money stops in June, leaving Ohio’s taxpayers on the hook for an additional $20 billion over the next two years to keep the program solvent.
Long-Term Imbalance
Greg R. Lawson, a policy analyst with the Buckeye Institute, an Ohio-based think tank, says Ohio’s Medicaid problem was a long time in the making.
“A long-term lack of balance about how things are utilized and paid for certainly helped us get to this point,” Lawson said. “Demographics played a role as well, as younger people are moving out of the Midwest. Since the elderly tend to use this program more, and there are fewer young people to pay for it, the imbalance grew.”
In part, Lawson says, Ohio’s predicament was worsened by former Governor Ted Strickland, a Democrat, who made it easier to get on Medicaid.
“Former Gov. George Voinovich described the state’s Medicaid program as the Pac-Man of the budget: it will keep growing until it gobbles everything. This program has a voracious appetite and is clearly not sustainable the way it is currently structured,” explains Lawson.
Medicaid Program ‘Usustainable’
Lawson says the state’s spending trajectory is impossible to sustain. Without reform, the program faces an $8 billion budget deficit.
“If Medicaid keeps on its current path it will crowd out funding for everything. With the added costs of ObamaCare, which we don’t even know how much we’re going to pay. This is going to take a growing problem and put it on steroids. There’s no question that Medicaid, school funding, and the Dept. of Rehabilitation and Corrections are the three largest budget items, but Medicaid is destined to eclipse everything very soon,” he says.
“The takeaway from all of this is that Ohio’s Medicaid program, as it’s currently implemented, is unsustainable.” says Lawson.
Restructuring System
Despite the gloomy outlook, Kasich, a Republican, has a plan to tackle the problem. If his budget passes, Kasich would transform the state health plan, targeting those who receive the most money from the program—hospitals, managed care providers and nursing homes, according to Eric Poklar, director of communications for the governor’s Office of Health Transformation.
“We’re trying to purchase the types of services that the people want. For example, seniors want to receive services in their community or at home. Gov. Kasich’s plan funds more programs for home and community-based services,” says Poklar.
Kasich’s plan would coordinate services now provided by a patchwork of local providers, eliminating the duplication, combining departments, and creating “health homes” as an alternative to nursing facilities to increase the use of preventive services for people with chronic conditions.
And Kasich would alter reimbursement rates for hospitals, nursing homes, and managed-care insurance companies, creating payment mechanisms designed to reward quality of care over volume while reducing payments for services provided to Medicaid enrollees.
In designing the reforms, Poklar claims the governor started with the view that Ohio hasn’t seen rewards for its high spending on health care.
“We were 42nd in the nation in health care outcomes although we spent the 13th highest amount on health care of any of the states. That doesn’t make a lot of sense,” he explains.
Cutting Providers’ Fees
According to Kasich, it’s imperative that the entire system be restructured. Gayle Channing Tenenbaum, co-chair of Advocates for Ohio’s Future, was relieved to hear cuts to close the $8 billion budget gap did not seem to fall on the state’s poor and vulnerable.
“By preserving Medicaid services—including vision and dental—the governor is ensuring that a health-care safety net will be in place for Medicaid-eligible Ohioans,” she said.
Under his plan, Ohio’s poor who would continue receiving dental, vision, and other medical services at current levels. However, hospitals, nursing homes, and managed care providers, including doctors, would see their Medicaid reimbursement rates cut by nearly $1.1 billion over the next two years. Nursing homes lose 7 percent from the current budget.
“There will be reductions to providers and to physicians, but not so much as to jeopardize their ability to treat Medicaid recipients. We’re going to practice outcome-based medicine across the board,” Kasich said in a press conference announcing the plan.
Redirecting Medicaid
The governor’s plan for Medicaid is not perfect, but if it’s implemented in its entirety, it will redirect Medicaid on a sustainable path, says Lawson.
“Gov. Kasich’s plan is a very complex piece of legislation. If the legislators begin tampering with it, then it may not be as effective as he envisioned it. You can’t build a house if you pull the foundation out from under it,” says Lawson.
“We have a schizophrenic attitude about Medicaid: As more elderly and disabled folks sign up for the program, the costs grow, and there is all the more need for reform,” he added
Kenneth Artz ([email protected]) writes from Dallas, Texas.
Artz has more than 20 years’ experience in nonprofit organizations, publishing, newspaper reporting, and public policy advocacy.
