June 2000

Grant Results

SUMMARY

In 1996, senior state health officials from eight states and from health policy organizations convened to assess the potential impact of budget cuts and structural changes resulting from the shifting of responsibilities for Medicaid from the federal government to the states through the use of block grants.

The conference was co-funded with in-kind support from the Rockefeller Institute, the Rockefeller College of the State University of New York and the Brookings Institution.

Key Results and Findings

  • The conference, "Devolution and Medicaid: A View from the States," took place on May 22–24, 1996, in Washington. Twenty senior state health officials from eight states and from health policy organizations attended. Among the findings:
    • The shift of Medicaid responsibilities to the states may well bring a reduction in payment rates to safety net institutions such as public hospitals and community health centers.
    • Political obstacles and the limits to state administrative capacity make it difficult to apply managed care to the disabled and elderly institutionalized populations, who consume the largest portion of the Medicaid budget.
    • Existing knowledge about state government capabilities and proclivities does not permit precise predictions about the response of the states to greater Medicaid authority.

Funding
The Robert Wood Johnson Foundation (RWJF) supported this project through a grant of $110,675 to the Research Foundation of State University of New York.

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THE PROJECT

In recent years, federal legislation and policy changes have mandated significant budget cuts to states and the shifting of program responsibility for Medicaid from the federal government to the states. Because states have relied heavily on federal money for many years, these reductions were forcing them to consider either alternative sources of funding, or program cutbacks, or both. Medicaid is the largest component of federal aid, accounting for nearly $2 out of every $5 of federal aid provided for states.

At the time of the grant from The Robert Wood Johnson Foundation, the proposed transformation of the Medicaid program presented states with crucial issues of program design and implementation that would affect access to basic health care. States were faced with reevaluating Medicaid's eligibility, scope of services, and service limits; the selection and organization of providers; and the payments to providers. Due to the unprecedented magnitude and rapid pace of changes in Medicaid, states needed to share information about their experiences and lessons as these reforms moved forward.

This project, cofunded with in-kind support from the Rockefeller Institute, the Rockefeller College of the State University of New York, and the Brookings Institution, was part of a more general program at the Rockefeller Institute to study the effects of block grants to the states for other health and social services programs — including welfare, child care, and nutrition — examining impacts and policy changes in 12 states over a four-year period. Its strategy was to convene senior state health officials from the 12 states and various other public health organizations for a conference entitled "Devolution and Medicaid: A View from the States."

The goal was to develop information quickly that would help states assess the potential impact of budget cuts and structural changes in the Medicaid program and help states with Medicaid's redesign. Two products were planned:

  1. a number of papers and bulletins to assist state policymakers and others involved in Medicaid reform
  2. a book describing policy and implementation issues posed by the new Medicaid legislation, with particular attention to variations in state capacity and commitment.

The purpose of this information was not only to understand state responses to national health policy changes but also to offer sensible advice about the dos and don'ts of block grants and best practices for implementation.

Preferring to work with multiple participants from each state in order to ensure different perspectives within the states and at the same time keep the conference small, the project manager included 8 of the 12 states at the meeting. The conference was held May 23–24, 1996, in Washington, D.C. The 20 participants came from Alabama, Colorado, Florida, Michigan, Minnesota, New York, Washington State, and Wisconsin, as well as health policy organizations. (For a complete roster of conference participants, see the Appendix.)

After the conference, the Medicaid block grant (Medigrant) was vetoed by Pres. Bill Clinton in 1997, but comprehensive waivers and the Balanced Budget Act of 1997 substantially augmented state authority for Medicaid. The Rockefeller Institute held off the bulk of its publications until 1998 to take into account the significant provisions on managed care, provider payment, and children's health insurance contained in the Balanced Budget Act. The 1998 Rockefeller Institute Bulletin contained three articles based on the conference, and the institute also issued a State Fiscal Brief in January 1998 titled "Medicaid Spending Growth Slows."

The conference transcript became a primary reference for a book — Medicaid and Devolution: A View from the States — published by the Brookings Institution, which describes the policy and implementation issues posed by the new Medicaid legislation.

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FINDINGS

  • Medicaid devolution poses significant payment rate reductions for safety net institutions — public hospitals, academic medical centers, community health centers, public health clinics, and community-based specialty clinics — and may cause them to have fewer publicly insured patients. To prevent erosion of access for the poor and uninsured, states will need to adopt safety net protection plans.
  • Political obstacles and the limits to state administrative capacity make it difficult to apply managed care to the enrollees who consume the largest portion of the Medicaid budget: the disabled and elderly institutionalized populations. If the barriers to placing these recipients in managed care cannot be surmounted, managed care's ability to produce significant savings for the states will be limited.
  • Existing knowledge about state government capabilities and proclivities does not permit precise predictions about the response of the states to greater Medicaid devolution.
  • The quest for Medicaid devolution should not be construed as a reaction to steady centralization of authority over the program in the national government since the program's inception in 1965. Instead, the image of federalism and Medicaid that emerges from historical analysis is one of ebb and flow — periodic movement toward greater state discretion on some fronts and less on others.
  • States have always enjoyed considerable discretion under Medicaid. If the program has often been a source of fiscal stress for the states, it is less attributable to federal mandates than to choices that states themselves have made.
  • State Medicaid programs vary enormously. Various state programs can be classified using two variables: (1) Medicaid enrollment as a percentage of citizens in poverty and (2) expenditures per enrollee. This approach sheds some light on the degree to which states are committed to the Medicaid program and have the fiscal capacity to support it.
  • Medicaid devolution has provided states with much greater discretion to introduce managed care for Medicaid enrollees. As they pursue managed care, states manifest widely varying degrees of political determination and administrative skill. States tend to underinvest in the management capacity required to realize the potential improvements in quality and access that managed care represents.
  • Devolution needs to be approached cautiously in meeting the health care needs of the elderly and disabled. For instance, while federal regulations of nursing home reimbursement and quality leave much to be desired, repeal of these requirements could open the way for inadequate reimbursement and quality problems in an industry that has been plagued by substandard providers.
  • Debates about Medicaid devolution rest partly on differing assessments of the capacity and likely policy commitments of states. The administrative capacity of the states tends to receive inadequate attention in policy deliberations.
  • Some of the most important issues related to Medicaid devolution have to do with reporting requirements and information systems. State officials have increasingly found the Medicaid management information system to be irrelevant to their needs; they seek greater flexibility. The ability to learn from devolution necessitates that the national government be assertive in its role as central scorekeeper and expand data collection to facilitate comparisons and assessments of performance among states.
  • To achieve a better balance among quality, cost, and access in the Medicaid program, restrained, incremental transfer of power to the states probably makes more sense than a major block grant. This is because federal block grants cede complete discretion to the states in how to use their funds and provide a fixed dollar amount for each state, with no provision for future growth. States would bear the full risk for increases in enrollment — whether due to demographic shifts, recessions, or policy changes — and full risk for increases in medical prices and in payments to doctors, nurses, and other health professionals.

Communications

A 310-page project-based book, Medicaid and Devolution: A View from the States, was published by the Brookings Institution. Some 90 review copies were sent to journals, magazines, and newspapers, and 175 copies were distributed to a mailing list of individuals involved with Medicaid policy. The print run was 4,000. The 1998 Rockefeller Institute Bulletin, containing three articles from the conference, was distributed to 13,000 members of the media, government officials, academicians, policy analysts, foundations, and others. The January 1998 State Fiscal Brief entitled "Medicaid Spending Growth Slows," was sent to 700 media, state, and local government officials, academicians, policy analysts, and financial institutions. An article was also published in Health Affairs. Members of the project team made six related presentations at conferences, along with television appearances. (See the Bibliography for details.)

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AFTER THE GRANT

Members of the project team will use this project as a steppingstone for further work on Medicaid and devolution, including exploration of:

  1. the implications of devolution for various policies
  2. issues of Medicaid and managed care and the efforts to insure children of the working poor and near poor
  3. issues of performance management, data collection, and reporting requirements.

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GRANT DETAILS & CONTACT INFORMATION

Project

Conference to Assess the Impact of Budget Cuts and Structural Changes in Medicaid

Grantee

The Research Foundation of State University of New York (Albany,  NY)

  • Amount: $ 110,675
    Dates: February 1996 to July 1998
    ID#:  026917

Contact

Richard P. Nathan
(518) 443-5831
nathanr@rockinst.org

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APPENDICES


Appendix 1

(Current as of the time of the grant; provided by the grantee organization; not verified by RWJF.)

Participants in ''Devolution and Medicaid: A View from the States'' Conference

Joyce Allen
Bureau of Health Care Financing
Wisconsin Division of Health
Madison, Wis.

Peggy Bartels
Bureau of Health Care Financing
Wisconsin Division of Health
Madison, Wis.

Pris Boroniec
Bureau of Health Care Financing
Wisconsin Division of Health
Madison, Wis.

Rep. Francis Bradley
Minnesota House of Representatives
Minnesota State Legislature
St. Paul, Minn.

Ken Cameron
Medical Assistance Administration
Department of Social and Health Services
Olympia, Wash.

Richard Cody
Division of Health and Long-Term Care
Department of Social Services
Albany, N.Y.

Doug Cook
Agency for Health Care Administration
Tallahassee, Fla.

Gary Crayton
Agency for Health Care Administration
Tallahassee, Fla.

Michael Hanson
State of Florida Legislature
Tallahassee, Fla.

Jeff Harris
National Governors' Association
Washington, D.C.

W. David Helms
Alpha Center
Washington, D.C.

Jane Horvath
National Academy for State Health Policy
Portland, Ore.

Peter Klemperer
New York City Health and Hospital Corporation
New York, N.Y.

Kala Ladenheim
Intergovernmental Health Policy Project
Washington, D.C.

Michael Murphy
Alabama Medicaid Agency
Montgomery, Ala.

Karen Peed
Department of Human Services
St. Paul, Minn.

Rush Russell
Robert Wood Johnson Foundation
Princeton, N.J.

Karen Schimke
Department of Health
Albany, N.Y.

John Walker
State of Michigan Legislature
Lansing, Mich.

Alan Weil
Office of Medical Assistance
Department of Health Care Policy and Financing
Denver, Colo.

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BIBLIOGRAPHY

(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)

Books and Reports

Boyd DJ. "Medicaid Spending Growth Slows." Fiscal Brief. Albany, N.Y.: Center for the Study of the States at the Nelson A. Rockefeller Institute of Government, January 1998. 700 copies sent to key media, state, and local government officials, academicians, policy analysts, and financial institutions.

Thompson FJ and Dilulio JJ Jr. (eds.). Medicaid and Devolution: A View from the States. Washington, D.C.: Brookings Institution, 1998.

Articles

Boyd DJ. "Medicaid: Devolved from the Beginning," Rockefeller Institute Bulletin, 1998: 15–34.

Fossett JW. "States Big Medicaid Winners under Balanced Budget Act." Rockefeller Institute Bulletin, 1998: 15–16.

Sparer M. "Devolution of Power: An Interim Report Card." Health Affairs, 17(3): 7–16, 1998. Abstract available online.

Thompson FJ. "Federalism and the Medicaid Challenge." Rockefeller Institute Bulletin, 1998: 12–14 and 17–24.

Sponsored Conferences

"Devolution and Medicaid: A View from the States," May 22–24, 1996, Washington, D.C. Attended by 20 people, from 14 organizations. Six presentations:

  • Jim Tallon, moderator, "American Federalism and the New Medicaid: General Issues."
  • Josh Wiener, moderator, "The Challenge of Long-Term Care."
  • James Fossett, moderator, "Reorganizing the Medicaid Delivery System: The Challenge of Managed Care."
  • Michael Sparer, moderator, "The Devolution of Medicaid: Implications for Essential Community Providers."
  • Frank Thompson, "Concluding Observations and Overview."

Presentations and Testimony

Frank J. Thompson, "State Medicaid Programs in an Era of Devolution," at the Annual Meeting of the American Political Science Association, San Francisco, Calif., September 1996.

Frank J. Thompson, "Devolution and the States: Challenges for Public Management," at the Annual Meeting of the Association for Public Policy Analysis and Management, Pittsburgh, Pa., November 1996.

Frank J. Thompson, "Technical Assistance to State Medicaid Programs," at the Annual Meeting of the Conference on the Links between Public Universities and State Capitals, Boston, Mass., April 1998.

James Fossett, "Medicaid Managed Care and Local Governments," expert panel member for Mathematica, Inc., Washington, D.C., June 1998.

James Fossett, "Medicaid Managed Care and Mental Health," at the conference "Medicaid Managed Care: Issues and Trends" of the Institute of Government and Public Affairs, Chicago, Ill., June 1998.

James Fossett, "Medicaid Managed Care in New York," at the conference "The New Health Care System" of Empire State Reports, Albany, N.Y., June 1998.

Radio Coverage

"Q & A," Medicaid developments in New York State, WMHQ/WMHT, October 27, 1997.

"Q & A," Implications of Medicaid devolution, WMHQ/WMHT, October 29, 1997.

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Report prepared by: Robert Crum
Reviewed by: Susan G. Parker
Reviewed by: Molly McKaughan
Program Officer: Rush Russell

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