Report Title:
Medicaid
Description:
Sets medicaid payments at a level closer to the actual costs of quality care offered by providers. Makes appropriations. (SB2867 HD1)
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THE SENATE |
S.B. NO. |
2867 |
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TWENTY-FIRST LEGISLATURE, 2002 |
S.D. 1 |
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STATE OF HAWAII |
H.D. 1 |
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A BILL FOR AN ACT
relating to medicaid.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that a financial crisis exists in the State's medicaid payment system. The legislature further finds that immediate action is necessary to rescue medicaid providers from financial ruin and to maintain access to essential health care services for the people of Hawaii.
Medicaid was established in 1965 as a jointly-funded federal and state program providing medical assistance to qualified low-income individuals. At the federal level, medicaid is administered by the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), an agency that is part of the United States Department of Health and Human Services. Each state designs and administers its own medicaid program within a broad federal framework and under a state plan approved by the Centers for Medicare and Medicaid Services.
Hawaii's medicaid program is administered by the department of human services. Hawaii's medicaid plan covers the aged, blind, and disabled, using a fee-for-service payment system. Additionally, Hawaii has received a federal waiver to provide medical services through the QUEST program to a population that includes families receiving financial assistance through the temporary assistance for needy families program. The waiver allows Hawaii to contract with health plans to provide a set of medical services for a specific rate per member, per month. This managed care approach enables the State to control its costs by requiring that Hawaii provide services through QUEST at a funding level that is no more than what the cost would be under a fee-for-service system.
Medicaid represents a large proportion of the revenues of a typical health care facility. Long-term care facilities in particular have felt the impact of low medicaid payments because of the high proportion of medicaid patients in these facilities. Nationally, medicaid pays for about seventy per cent of the residents in long-term care facilities, a statistic that reflects the situation in Hawaii. A recent study of thirty-six states by BDO Seidman found that the average medicaid rate did not even cover the actual cost of care. In western states, the shortfall averaged $8.60 per resident per day. Although Hawaii was not one of the states studied, it faces conditions similar to those in many of the states in the study.
The State determines the level of medicaid payments, within federal limitations. The state medicaid plan contains a formula for payments to hospitals and long-term care facilities that includes an inflationary factor, known as the Data Resources Incorporated (DRI) McGraw-Hill inflation factor, as well as a factor for a return on equity.
The department of human services has made efforts to amend the state medicaid plan to provide only one-half of the DRI McGraw-Hill inflation factor, and none for return on equity. The department of human services submitted a proposed medicaid plan amendment to make these reductions to the centers for medicare and medicaid services, but subsequently withdrew it for technical reasons. However, the department of human services is still planning to make the reductions. If implemented, the reductions would result in payments falling further behind levels that are already too low to cover the actual costs of care provided to the aged, blind, and disabled by hospitals and nursing homes.
The financing of health care becomes problematic whenever payments are lower than the actual costs of providing the care. In the past, providers have been able to shift much of the burden of paying for medicaid patients to other sources of revenue. However, the ability to cost shift has become increasingly difficult because of changes in the health care environment. For example, managed care has resulted in substantially reduced payments from private payers. In addition, medicare payments for older Americans have been reduced significantly as a result of the Balanced Budget Act of 1997. These payments have only been partially restored, and only temporarily, as a result of subsequent relief efforts. In recognition of the current structure of the health care environment, equity dictates that medicaid pay its fair share for health care.
The purpose of this Act is to set medicaid payments within limits of appropriations at a level that more fairly compensates providers by bringing payments closer to the actual costs of quality care offered by providers who must survive financially to continue to treat medicaid patients.
SECTION 2. The department of human services shall:
(1) Not implement any medicaid plan amendment to eliminate one-half of the DRI McGraw-Hill inflation component or the return on equity until the Centers for Medicare and Medicaid Services approves a state medicaid plan amendment to implement a program to bring reimbursements to providers closer to the actual cost of care; and
(2) Set, in respective proposals for amendments to the state medicaid plan, concurrent implementation dates for both the elimination of one-half of the DRI McGraw-Hill inflation component and the return on equity, and the program to bring reimbursements to providers closer to the actual costs of care.
SECTION 3. There are appropriated or authorized from the sources of funding indicated below the following sums or so much thereof as may be necessary for fiscal year 2002-2003 to bring reimbursements to providers closer to the actual costs of care for aged, blind, and disabled medicaid recipients:
General funds: $1
Other federal funds: $1
The sums appropriated shall be expended by the department of human services for the purposes of this Act.
SECTION 4. This Act shall take effect upon its approval; provided that section 3 shall take effect on July 1, 2002.