Setting the Record Straight: Maryland's Medicaid Program is not Spiraling out of Control

There are many misconceptions floating about in cyberspace about Maryland’s Medicaid program. The worst one is that spending for this program is spiraling out of control. Projections released last month by the Center for Medicare and Medicaid Services (CMS), the federal Medicaid agency, recently announced that Medicaid cost projections have decreased below last year's projections. Maryland is one of the states highlighted that is expected to have lower Medicaid expenditures for fiscal year 2006 than in its previous fiscal year. These declines can be attributed to states (Maryland included) and the federal government taking aggressive measures to control spending. In Maryland, these measures include limiting hospital stays, decreasing provider payments, and limiting health care access for legal immigrants.

Another misconception about Maryland’s Medicaid program is that it is generous in its eligibility criteria. At 39% of the federal poverty limit (FPL), Maryland’s eligibility for working parents is among the lowest in the country, ranking 40th in the nation when compared to other states. Barring disability, single adults without dependent children do not even qualify for Medicaid.

Of all Medicaid enrollees, 60% of those receiving assistance are children of low-income families; yet, data from the Maryland Health Care Commission indicate that approximately 90,000 Medicaid-eligible children remain uninsured. One can surmise from these data that there is still a persistent need among low-income families for health insurance coverage. It is a fact that Maryland’s Children’s Health Program (MCHP) is among the most generous in the country. It covers children with family incomes of $2,766 – $4,150 per month. However, these families do pay monthly premiums to participate in that program.

In sum, Maryland and the rest of the nation have a health care crisis, not a Medicaid crisis. Health care costs are escalating for all of us. Governments (both state and federal) should be doing more, not less, to ensure health care coverage for people who cannot afford it. Medicaid must continue to cover life-saving services for people with serious health needs, like children with chronic diseases and seniors who need critical care. This country must address the rising costs of health care; however, the solution cannot include further cuts to Medicaid.

Joanna Shoffner

U.S. Senate Rejects Costly Estate Tax Repeal but May Yet Cut It

On June 8th, Senate leaders failed to secure enough votes to join the House and permanently repeal the estate tax, as President Bush has proposed. As it stands now, the federal estate tax is set to phase out completely then be reinstated in 2011 with a $1 million exemption ($2 million per couple) and a 55 percent tax rate. That's because the 2001 tax cut bill needed to get around congressional budget rules.

Repeal would cost almost $1 trillion over a decade, and Senate alternatives that would reduce the tax would cost several hundreds of billions of dollars over the same period. Very few estates in Maryland and nationwide must pay this tax, but cutting it would substantially reduce revenue and hurt charitable giving.

Read our tax brief then tell us what you think about this tax.

Stephen Elmore

Give Us an Earful (Eyeful?) . . . about the Upcoming Election

We know, we know. The Maryland Policy Blog has been dormant for too long, but it's back! And we want to know what you think. We really do.

It's not as though there has been nothing to write about the past six months: state revenue growth, budget increases trying to make up for lost time, unmet health care needs, and on the horizon, a projected return to state budget deficits. And we have been writing about those things--just not on the blog. You see, we have been temporarily understaffed and, um, overtaxed. (Did I say that?) The former and initial director of the Institute, the renowned Steve Hill, left for another professional opportunity in 2005. In January, I joined Joanna Shoffner, the associate director, as the Institute's new director, and things are humming along again.

So, here goes. We'd like to know your answer to this question:

What do you consider to be the most important issue for candidates for governor, delegate, and senator to address during the upcoming Maryland election?

Maybe your top issue right now is the same as a lot of other people's: electricity rate or gas price increases. But maybe it's something else. Let's hear it.

Stephen Elmore

The FY 2006 Federal Budget:
Poor and Vulnerable are Slighted but College Financial Aid Also Shafted

As the budget reconciliation draws closer so do large spending cuts in assistance programs. Citing pressures to pay for rebuilding the Gulf region in the wake of the devastation from Hurricane's Katrina and Rita, House committees have been instructed to cut $50 billion, over the span of 5 years, from domestic programs within their jurisdiction. House Republicans are considering making deep cuts in "entitlement" programs (i.e., Medicaid, Food Stamps, and the Earned Income Tax Credit). Individuals of limited means (read: poor or otherwise vulnerable) disproportionately benefit from these programs.

The $50 billion figure is up from the original instruction, made in April of this year, to cut domestic (non-security) programs by $35 billion.1 The programs currently under scrutiny provide states with money that is used for benefits and services to poor and low-income families, the elderly and individuals with disabilities. The rationale for this additional $15 billion in cuts can be most simply explained as "robbing Peter to pay Paul," or taking from one group of individuals in need to pay for assistance for another group, also in need.

Aside from simple altruism, what's good for the goose is (at least in theory) good for the gander, meaning that all income levels should share in sacrifices made in the name of offsetting the costs for Gulf rebuilding efforts. Current proposals do not reflect this principle, as the majority of cuts under consideration are from programs that serve individuals and families with low incomes. To date, the House does not plan to roll back any of the tax credits passed in 2001 -- from which more affluent families disproportionately benefit -- and are considering $70 million in additional tax cuts.

And in case readers are tempted to dismiss the significance of these cuts, because they disproportionately impact the poor: The Education and Workforce Committee has been instructed to cut $12.7 (or more) in from programs that provide financial aid for students in college, graduate, and professional schools. As tuition rates have increased by approximately 35 percent in Maryland, financial aid is critical to many students (from families not considered poor) who desire to further their education in an effort to compete in today's job market.

Where will these savings come from? 2

Energy & Commerce Committee -- $14.7 billion with $10 billion from the Medicaid program and the remaining from other areas within the committee's jurisdiction

Ways & Means Committee -- $8-9 billion in cuts that could come from EITC, Supplemental Security Income, Temporary Assistance to Needy Families (TANF), child care funding, Child Support Enforcement and Foster care, adoption services and other supports

Agriculture Committee--$4-5 billion in cuts, likely to come from Food Stamps and other nutrition programs

Education and Workforce Committee-- $12.7 (or more) in from programs that provide financial aid for students in college, graduate, and professional schools

1 "Impact of Additional Entitlement Cuts: A State-by-State Analysis", Sharon Parrott and Arloc Sherman, Center on Budget & Policy Priorities, October 2005.

2 " Larger Reconciliation Cuts in the House Would Put Low Income Programs at Greater Risk", James Horney, Rober Greenstein, and Sharon Parrot, Center on Budget & Policy Priorities, October 2005.

Health Services for Low-Income Legal Immigrants: Scrimping Now will Cost Us All Later

As mentioned in a previous post, 78% of funding has been cut for an important Medicaid "add-on" program for legal immigrants-Marylanders who have been in the country less than five years and hold green cards. As reported in the news, this money is used to provide prenatal care to pregnant women and preventive care to their existing children through the Maryland Children's Health Insurance Program (newborns would be covered by Medicaid).

In FY 2005, the program's funding was approximately $7 million, and all of it was cut from the Governors FY2006 budget. However, the state's swelling budget surplus prompted the Ehrlich Administration to restore $1.5 million to the program.

What about the remaining $5.5 million? As with all policy choices, there will be both immediate and long-term implications for reducing the access to health care. These impacts are as follows:

• Increases in Maryland's uninsured population. As of July 1st, approximately 3,000 Marylanders-children under the age of 19 years-lost their health insurance coverage. Further, no new mothers are being accepted into the program, which means (assuming constant enrollment trends) approximately 1,000 newly pregnant women will lose access to health insurance.
  
  
• Declines in access to prenatal care. Disallowing prenatal care for pregnant mothers will likely worsen the health outcomes of their newborn children. It is estimated that every dollar of prenatal care results in savings of $3.33 for postnatal care and $4.63 in illness costs over the life of the child.1 The health care costs associated with prenatal care are lower than the costs of treating the outcomes from not getting the care. 2
  
  
• Increases in uncompensated care for Maryland's health care providers. The health needs of newly pregnant women and children will not dissipate because the funding for health services has been reduced. One of the more likely outcomes of this policy change is a marked increase in uncompensated care for hospitals physicians and other health care providers. In turn, these health care providers will pass on the costs of un-reimbursed care to Marylanders through higher prices and increased insurance premiums.

Certainly, the short run costs of restoring the program are much more cost effective than the consequences of not doing so, when calculating the financial and human cost incurred of the immediate increase in Maryland's uninsured population, the health consequences of the decline in access to prenatal care, and the potential increase in uncompensated care for Maryland's health care providers.

1. National Committee for Quality Assurance, "The State of Health Care Quality 2004: Prenatal and Postpartum Care (Timeliness of Prenatal Car e, Checkups After Delivery)", Available from www.ncqa.org.

2. R.D. Gorsky & J.P. Colby, Jr., "The Cost Effectiveness of Prenatal Care in Reducing Low birth Weight in New Hampshire, Health Services Research, Vol. 24(5), p. 583-98, December 1989.

What would YOU do with $1 billion?

In the past few days, reports from the Ehrlich Administration indicate that Maryland had a $1 billion surplus for FY 2005, meaning that the state took in $1 billion more than what it spent. This is great news considering that a couple of years ago budget forecasts indicated that Maryland would be almost that same amount in the red!

Reducing spending [to be read cutting public services], a booming housing market, closing corporate tax loopholes (thanks, Steve), and a stronger state economy have (at least for the moment) opened the floodgates, and the cash is rolling in.

ONE positive result of this cash windfall is that the Governor has restored funding to public services that were either cut in part or completely in his FY 2006 budget proposal. Again, great news!

Just a few examples of restored funding include…

• Health Care for Legal Immigrants: $1.5 million in funding for health care for pregnant legal immigrants.

• Temporary Cash Assistance (TCA): $1.34 million in TCA benefits. TCA provides cash benefits to needy, unemployed, under-employed or part-time workers and their families who meet certain criteria.

• Adult Day Care Program: $880,000 for a rate adjustment for Adult Day Care. The Maryland Medicaid program covers medical day care services for elderly and disabled individuals who require the level of care provided by nursing homes.

A SECOND result of this unexpected cash has been increasing murmurs of tax cuts. If affordable, tax cuts are not inherently bad. In fact, tax cuts sound great--I mean every one loves a lil’ break in their taxes.

But let’s not get too far ahead of ourselves. As anyone who has ever balanced a checkbook knows, when you receive a big (and unexpected) check from Grandma, you don’t just spend it. You look at what you need, what you want, and what you anticipate down the road. Right?

In other words, despite this influx of unexpected money into the state’s treasury, Maryland is still facing a significant structural deficit. Down the road, say in FY 2007 and FY 2008, Maryland will experience a significant gap between revenues and the costs of running the government. The existence of this “structural deficit” is being overshadowed by the presence of this “extra” money.

So to answer my own question (and to briefly revisit Grandma), I would spend some of the $1 billion on a few needs, a couple of wants, and put the rest away for a rainy day. The rains will definitely come. For a family, the rains can be in the form of needing new tires or illness. For Maryland, the rains could be in the form of a $1 billion structural deficit in the next two years or federal Medicaid cuts.

So here is my wish list for Maryland….

• Fully fund the immigrant health program
• Restore funding to Medicaid providers
• Open the child care waiting list further
• Strengthen adult education in Maryland
• SAVE, SAVE, SAVE

NOW that I have shared my wish list for Maryland, what’s yours?

How We Treat Maryland State Employees

I found a spreadsheet with recent Maryland state employee cost of living adjustments as I was cleaning out my office.

FY 2003: No Employee Cost of Living Adjustments
FY 2004: No Employee Cost of Living Adjustments
FY 2005: $752 (average of 1.6% Cost of Living Adjustment)
FY 2006: 1.5% Cost of Living Adjustment

For FY 2006, the state also transferred an estimated $68 million in prescription drug costs back to state employees. So state employees got a teeny pay raise this year, but ended up paying more for their health care.

Also, in FY 2004 through 2006, the state eliminated performance bonuses.

At the same time, the state workforce has been shrinking. From FY 2002 to the current FY 2006, approximately 1,000 positions have been eliminated from both the Department of Human Resources and the Department of Health and Mental Hygiene. About one out of every eight positions in those agencies have been eliminated.

The Departments of Labor Licensing and Regulation, Natural Resources, and Housing and Community Development have sustained even greater job losses.

It’s OUR state, and there is something that we need to own up to: we haven’t been attentive to the well-being of our workforce.

Did you know how small the cost of living adjustments for state employees have been the last four years? Is it fair to require our state workers to bear such a disproportionate share of the burden of solving our state’s budget woes?

For more information on recent state budget choices, click here.