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Medicare Compliance & Reimbursement

Medicaid:

Leavitt Calls For $60 Billion In Medicaid Savings

Published on Thu Jan 13, 2005

But the Bush administration wants to rein in even more, insiders say

The time for major changes in Medicaid is now, Mike Leavitt said Feb. 2 in his maiden speech as Health and Human Services Secretary.

Leavitt said states should have more flexibility in deciding what services they provide to "optional" Medicaid beneficiaries, whom federal law allows but does not require states to cover. However, the former Utah governor also announced a desire to close accounting loopholes that he said would, if left alone, allow states to unfairly shift $40 billion in Medicaid costs to the federal government over ten years.

"We must have an uncomfortable but necessary conversation with our funding partners, the states," Leavitt said.

All told, the Secretary said the federal government could save nearly $60 billion in Medicaid costs over a decade. Ending the reliance of many state Medicaid programs on artificially high "average wholesale prices" could save the feds $14.5 billion, while saving the states $11 billion. An additional $4.5 billion in savings would come from preventing seniors from giving away assets to their children to become eligible for Medicaid. However, many insiders speculate that the administration will actually ask for much bigger savings than detailed by the Secretary.

Leavitt encouraged states to emphasize home and community-based long-term care, rather than institutional care, for seniors and disabled people: HCBS "is less expensive" and allows people to continue to "enjoy family, neighbors, and the comfort of familiar surroundings." In Vermont, where 85 percent of the elderly Medicaid population lives at home, Medicaid spends less than half as much per senior as in New Hampshire, where only 50 percent do, Leavitt said.

Leavitt contrasted what he said were the needs of mandatory and optional beneficiaries. As for the former, he said, "whether it's a lady in a nursing home or a boy in a wheelchair, we have a very special obligation. ... We meet that obligation by providing a comprehensive set of benefits."

"Optional populations, on the other hand, may not need such a comprehensive solution. More of them are healthy people who just need help paying for health insurance." The Secretary asked: "Wouldn't it be better to provide health insurance to more people, rather than comprehensive care to a smaller group? Wouldn't it be better to give Chevies to everyone rather than Cadillacs to a few?"

He cited the State Children's Health Insurance Program as a possible model for optional coverage. SCHIP allows states to choose among several less comprehensive coverage models.

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