March 4, 2010
By Gary D. Wimsett, Jr.*
Florida's Medicaid Problem
Like many states, Florida's chief legislative objective respecting healthcare this year is finding a way to balance the budget in light of Medicaid's increasing costs and a modest 6.6% growth in revenue. In general, Florida is faced with a projected $2.6 billion budget shortfall. To make matters worse, unemployment in the state is at its highest level in three decades. Clearly, this session's focus must necessarily be on finding dollars. To be sure, there are other healthcare-related initiatives1 on the agenda, but they are minor compared with what can be fairly described as a crisis respecting the Florida Medicaid Program.
In Fall 2009, the Select Policy Council on Strategic & Economic Planning began laying the groundwork for the 2010 legislative healthcare agenda. The members were presented with a detailed "Florida Medicaid Program Overview" that highlighted Florida Medicaid's current problematic trends. Estimated spending in Fiscal Year (FY) 2009-2010 for the Florida Medicaid Program is $17.9 billion for 2.6 million people--which represents an 11% increase over the previous year.2 If this increase in costs is left unchecked, it will continue to take over the state's budget--estimates for 2012-2013 show costs exceeding $19 billion.
The federal healthcare debate complicates Florida's policymaking options in several respects. However, a discussion of the federal healthcare reform landscape is beyond this report's scope and, of course, little has been resolved at the federal level. No matter what happens in Washington, it would appear that Florida needs to carefully examine its Medicaid Program and look for ways to trim costs. To do so, the legislature has been hearing from a parade of experts3 and interest groups. For example, in January 2010, the aforementioned Select Policy Council heard from the Florida Association of Health Plans (FAHP) regarding proposed Medicaid policy and fiscal solutions for 2010. According to the FAHP, Florida could realize $200 million in costs savings in FY 2010-2011 and up to $2 billion over the next ten years if certain steps are taken.
FAHP reminded the Select Policy Council that due to rising Medicaid costs and declining state revenue, Medicaid consumes a staggering 26% of the state's budget. FAHP concluded that one major step Florida could stake would be to transition all Medicaid recipients away from fee-for-service to full, risk-bearing managed care plans. The process outlined by FAHP would include:
- Eliminating Medipass and traditional fee-for-service requiring all Medicaid recipients to enroll in managed care plans;
- Creating incentives for geographical expansion of managed care, including modifying provider payment arrangements to ensure a level playing field; and
- Expanding the use of special needs plans, increasing nursing home diversion slots, and implementing a fully integrated long term care model to address the Medicaid budget's most expensive components.
Florida Medicaid: Policy and Fiscal Solutions for 2010
The transition to health maintenance organizations, in and of itself, would ostensibly lead to $111 million in savings over two years. Notably, FAHP cited a University of Florida research study that found that "moving an unmanaged population into a managed care environment can reduce per member per month expenditures by approximately ten percent."4
Of course, these kinds of fundamental changes in the structure and administration of Florida's Medicaid Program will need to be carefully studied and debated, and patient advocacy groups and others will likely oppose these measures in whole or in part. Nevertheless, it would not appear that the more modest, incremental "fixes" advocated by some will be enough to get the Medicaid Program where it needs to be by the end of the session. While efforts to clamp down on Medicaid fraud and abuse are always on the table, for example, gains from these efforts are typically modest.
This legislative session likely will be marked by intense focus on budget shortfalls and cost containment and reduction measures across the board. As Florida's Medicaid Program represents slightly more than one quarter of the state's budget, radical changes to the program seem inevitable. It will be interesting to watch the debate unfold. Florida's elected officials have the burden of knowing that this is more than an academic exercise; in the end, any solution should safeguard Florida's vulnerable citizens who have come to rely on Medicaid-funded healthcare services.
*We would like to thank Gary D. Wimsett, Jr., Esquire (University of Florida College of Medicine, Gainesville, FL), for providing this email alert.
1 Florida Senate staff submitted Interim Reports on (1) Assisted Living Facility Licensure Review (see Interim Report 2010-118); (2) Review of the Regulation of Blood Banks (see Interim report 2010-119); (3) Supplemental Medicaid Payments (see Interim Report 2010-120); (4) Biomedical Research Programs--Performance, Outcomes, and Financial Management (see Interim report 2010-219); (5) Regulation and Insurance Coverage of Clinical Trials.
2 For a breakdown of Medicaid costs per service, See the slide entitled "Medicaid Costs for FY 2010-11 by Service (in millions)" from presentation by Eric Pridgeon, House Healthcare Appropriations Committee.
3 The Florida House of Representatives has retained Pacific Health Group, a healthcare consultancy, for assistance in developing solutions to Florida's looming Medicaid crisis.
4 See Harman, J.S. and R.P. Duncan. An Analysis of Medicaid Expenditures Before and After Implementation of Florida's Reform Pilot Demonstration. Department of Health Services Research, Management and Policy, University of Florida. June 2009.