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Medicaid turns 50 mired in controversy

Jayne O'Donnell and Laura Ungar
USA TODAY
Timmy Parks, 54, of Clairfield, Tenn., suffers from heart disease and needs surgery he can't afford. Late last year, he lost his arm in a drilling accident and incurred $23,000 in bills from the amputation that he can't pay. He's been poor and uninsured for years, but hasn't been able to get on Medicaid because Tennessee hasn't expanded the program.

Tennessee farmer Timmy Parks lives without a prosthetic for his amputated arm and endures chest pain so excruciating he sometimes doesn't want to eat — all because he has no insurance and no way to pay for health care. Yet if he lived less than five miles away, in Kentucky, he'd qualify for Medicaid, the government program designed to help the poor.

As Medicaid turns 50 years old this month, it's racked with cost over-runs, bitter politics and never-ending controversies that have left millions of people around the country like Parks without health care coverage they desperately need, unable to afford everything from open heart surgery to prescriptions to prevent life-threatening seizures.

More than 70 million Americans still are benefiting from the program to some degree. And millions more began to qualify for coverage in the 29 states that expanded Medicaid since the passage of the Affordable Care Act in 2010. But 19 states have refused to extend benefits to the poorest of the poor, citing lean budgets and competing, high-cost priorities; one is awaiting federal approval; and two states are still deciding what to do. A new report from the Department of Health and Human Services says the numbers regulators used to persuade states to expand Medicaid greatly underestimated how much newly enrolled recipients would cost — and that it would be about seven years before the states' per-patient costs would level off or decrease.

USA TODAY reporters examined the experiences of nine states, interviewed more than two dozen impoverished Americans and talked to dozens of health care experts, state officials and community leaders from across the nation — finding that a law meant to erase inequities has actually deepened them. And many issues contribute to the confusion and the political infighting:

Costs are spiraling out of control. Medicaid consumed nearly a quarter of state spending even before the ACA, rivaling spending on schools and transportation. And states soon will have to shoulder 10% of the cost of expanding the program. That might force states to further slash how much doctors get reimbursed, and rock-bottom pay has already led many physicians to cap how many Medicaid patients they'll see.

Patients in some places get limited health coverage — or none at all. Some opponents of Medicaid expansion say the poor still manage to find care — especially if they are seriously ill. But while some get help at free or low-cost clinics and emergency rooms, USA TODAY found that many uninsured Americans with potentially deadly illnesses can't pay for even inexpensive care and are completely shut out from pricey specialists, tests and medications. In states that haven't expanded their programs, 3.7 million people aren't eligible for traditional Medicaid and make too little to be eligible for subsidized insurance on the Obamacare exchanges. Even if extremely poor, they don't qualify for any government health insurance plan whatsoever.

Political entrenchment has increased. In states like Tennessee and Virginia, politicians aren't budging on their refusal to expand the program. Right after the Supreme Court upheld subsidies for insurance plans on the federal health care exchange late last month, President Obama brought the fight back to getting states to sign on as originally envisioned. He accused the holdout states of not covering millions of people for "political reasons." But those who question the wisdom of Medicaid expansion cite everything from its high cost to the way it operates.


"It is a huge expense for states and it doesn't always function very well because of the way it is financed and administered by both state and federal governments," says Caroline Brown, a partner in the law firm Covington & Burling, which represents more than a dozen state Medicaid agencies. "I always thought when health reform came, Medicaid would go away, not get bigger."

The human toll is clear in rural towns like impoverished Clairfield, Tenn., located at the crest of a winding road up an Appalachian foothill. It's less than a five-minute walk from the border of Kentucky, which, unlike Tennessee, has expanded Medicaid.

Timmy Parks is a fourth-generation farmer and has lived in Clairfield all his life, in the house where he grew up. He got the last of four stents in his heart 13 years ago but hasn't had them checked since because he can't afford it. He also hasn't gotten recommended surgery for blocked arteries.

Things got even worse for Parks late last year, when he was helping a friend drill a hole and hit a rock, twisting his arm. He suffered a heart attack on the way to the hospital and was transferred to another, where doctors amputated his arm above the elbow. He wants a prosthetic but is already facing $90,000 in medical bills he can't pay. Parks has sold off most of the animals on his 12-acre farm and borrows heart pills from his brother because he can't pay for his own.

A couple of miles away lives Charlie Pittman, a 50-year-old former strip miner and truck driver who survived a heart attack and 10 strokes and mini-strokes but now can't afford the medicines he's been prescribed to prevent more problems. And Julie Johnson, a former hospital phlebotomist and brain tumor survivor with severe diabetes, hepatitis C, epilepsy and blood clots. At 45, she lives with her 67-year-old mother, who came out of retirement to work as a teacher so she could pay the family's bills. But there's still not enough money to cover Johnson's care, so she forgoes her $700-a-month seizure medication.

Charlie Pittman, 50, of Clairfield, Tenn., has a bad back, had a heart attack four years ago and since then has had 10 strokes or mini-strokes. He's also had five surgeries on his leg. He was on Social Security disability for 22 months but has gone three years without insurance and can't afford the medications that he needs.

Johnson has thought about moving to Kentucky for the insurance but says "there'd be no way to come up with the money" to relocate.

Daniel Yoder, a family doctor at a community health center in Clairfield, says half of his patients are from Kentucky, half from Tennessee, so he sees firsthand how health care varies state to state. He sees more foot ulcers and kidney problems from advanced diabetes in his Tennessee patients — costly on both human and financial terms.

Yearly diabetes care costs about $1,000 to $2,000, he says, and amputations due to diabetes often exceed $20,000 and are done in emergency rooms for free, adding to hospitals' uncompensated care costs. When people who are uninsured put off care for chronic conditions, many experts say, everyone pays through higher medical bills and insurance premiums.

Mark Wilson, director of civic learning initiatives at Auburn University in Alabama, was in Clairfield recently leading a group of student volunteers. He says expanding Medicaid is a moral imperative that helps all of society. If Tennessee and other states did so, 5,200 deaths would be avoided every year because people would have better access to care, concludes a report from the Council of Economic Advisors.

"These are some hardworking people here," Wilson says. "They may live way off the beaten path, but they're still citizens of this country. To function as a society, we have to think of ourselves in community terms. When poor people move forward, then everyone moves forward."

President Obama visited Tennessee early this month as part of a campaign to get more states to expand Medicaid. Republican Gov. Bill Haslam rejected the Obamacare model of expansion, instead proposing an alternative called Insure Tennessee, which included financial incentives and disincentives to encourage healthy behaviors. Tennessee's hospitals committed to cover the state's cost to implement the plan so it wouldn't further burden the strapped state budget. But after a conservative group backed by the billionaire Koch Brothers waged an aggressive campaign against Haslam's plan, a state senate committee blocked it from going forward.

Across the border in Kentucky, the expansion of Medicaid has brought coverage to more than 300,000 low-income residents, including Robert Otto, a 38-year-old community college student with severe back problems who used to go to the ER for care and spent much of his time in bed. Now, he's going to the doctor regularly and working toward an associate's degree in psychology.

State leaders in Kentucky — which had the largest increase in Medicaid enrollment of any state last year at 76% — cite research saying the expansion has lured 40,000 jobs to the state and brought $506 million more in Medicaid payments to local hospitals, reducing the need for charity care that patients like Otto once relied on.

But there have been drawbacks as well. Some doctors won't accept new Medicaid patients, so finding a physician can be tough. And the Kentucky Hospital Association argues that the state's hospitals are losing money because Medicaid reimburses them only at 82% of the actual cost of treating patients. So although they're bringing in $506 million more, it costs $617 million to care for those patients, the association says.

Opponents of expanding Medicaid say the government program is too flawed to solve many health care problems.

Avik Roy, a health care adviser to Mitt Romney during his 2012 presidential bid, believes the poor deserve the same insurance plans offered by the state and federal exchanges that everyone else can get.

"There was such an emphasis on the issue of coverage, but not any emphasis on what happens when people get coverage," says Roy, a senior fellow with the free-market Manhattan Institute. "Coverage doesn't mean they get care when they need it."

There are at least 10 studies in medical journals showing that Medicaid patients fare better than those who are uninsured. But there are just as many studies showing they do the same or even worse.

Researchers say that's because patients often can't get in quickly — if at all — to see doctors who accept Medicaid. A Kaiser Family Foundation report in June found that only half of primary care doctors accept Medicaid, the same percentage as before the ACA. Notoriously low reimbursement rates are a key factor along with a persistent shortage of primary care physicians in some of the states that have expanded their Medicaid programs.

California, where Medi-Cal covers more than 12 million people, needs about 30% more primary care doctors to meet demand, another Kaiser report shows. And only 54% of doctors in California are accepting new patients with Medi-Cal, which pays as little as $16 for a doctor visit.

The federal Department of Health and Human Services has approved dozens of grants to states that are testing ways to improve the quality of care in their Medicaid programs.

Robert Bloxom is a Virginia state delegate and owner of an oyster business and auto parts store.The Republican says time has shown that Medicaid expansion was a very risky proposition for many states. Virginia is one of the states where the Medicaid program was not expanded under ACA.

Keeping costs under control at the state level is another struggle. Health care costs of newly-eligible Medicaid recipients last year were 19% higher than those already in Medicaid, the HHS actuary's report out last week estimated. Previous HHS reports had estimated they would be 1% lower. The report predicted costs covered by states will be the same or lower than previously predicted by the 2022 fiscal year.

In Rhode Island, an expansion state, newly elected Gov. Gina Raimondo proposed cutting more than $90 million from the state's $2.7 billion Medicaid spending in the next fiscal year to help narrow a $190 million budget deficit. A May report from her Reinventing Medicaid working group proposed changes including 5% cuts to hospitals and 3% to nursing homes, but agreed to lower both to 2.5%.

Virginia Burke, CEO of the Rhode Island Health Care Association, says the cuts hit nursing homes harder than hospitals as about 65% of residents are on Medicaid.

"Rate cuts are not really an innovative idea, nor are they reform," says Burke.

In non-expansion state Virginia, Republican State Rep. Rob Bloxom says time has shown that Medicaid expansion was a very risky proposition for many states. "It's the cost overruns that aren't being talked about," Bloxom said in an interview at his auto parts store on Virginia's Eastern Shore. Bloxom's overwhelming victory last year was called a referendum on expanding the program.

Bloxom's office is just about 10 miles from the border of Maryland, where the poorest residents can get free health care thanks to former Democratic governor Martin O'Malley. But soon after Republican Gov. Larry Hogan took office in January, he proposed cutting some pregnant women from Medicaid and lowering reimbursements for doctors to keep costs down.The budget approved by the Democratic-controlled Legislature put the money for doctors and pregnant women back in, but Hogan waited weeks until he reluctantly agreed to release the money for Medicaid.

About 75% of the nearly 500,000 people who signed up for insurance on Maryland's health care exchange for 2015 are part of the state's Medicaid expansion.

"Cutting reimbursements to doctors at this time of huge influx made no sense," says Matthew Celentano, spokesman for the non-profit Maryland Healthcare for All. "If you can't find a doctor, it's not health care."

At a June 22 press conference where he announced he had "very advanced and very aggressive" lymphoma, Hogan further surprised health care advocates when he called health coverage "critically important."

In response to a question, he said: "I would hate to be someone without access to health care, without access to insurance to get the kind of news I got last week."

Medicaid was signed into law on July 30, 1965, by former president Lyndon Johnson, who proclaimed that day that American tradition "directs us never to ignore or spurn those who suffer untended in a land that is bursting with abundance."

Like today, states could opt in or out of the program. Participating states could receive federal funds as long as they covered eligible groups and offered specific benefits — and they could expand their programs over time.

More than half of the states signed up immediately. Within two years, 37 states had signed on, with all but two joining by the four-year mark.

The program grew substantially over the years and covers the elderly, blind and disabled, poor pregnant women and infants and, with the Children's Health Insurance Program in 1997, children from low-income families. Many states chose to expand Medicaid beyond the minimums — and costs began to rise. Programs traditionally only state-funded were added, such as school-based health services and special programs for children with HIV/AIDs.

A consulting industry of sorts developed to help states with "revenue maximization" tactics to get as much as possible from the federal government for their Medicaid programs.

Vaughn Adams, who suffers from respiratory problems, is a Maryland Medicaid recipient. He is curren  tly living with his sister after his illness forced him to give up preaching.

Each change brought more rules, and dealing with Medicaid today is like playing a "three-level chess game with all the federal requirements," says David Brinkley, secretary of the Maryland Department of Budget and Management.

But each change, including the Obamacare expansion, also brought more grateful customers.

Without the law, Vaughn Adams of Salisbury, Md., wouldn't be able to get the care he's getting for two lung diseases, which forced him to give up preaching. He was laid off over a year ago from a job as a parents' assistant at a school and became eligible soon after.

"If it had not been for Medicaid, the costs would have drowned me," he says. "When you're talking about lung diseases, you're not talking about one test. You're talking about test after test after test."

Six of the 29 states (including Washington, DC) that have expanded Medicaid have done so through hard-won waivers. Montana would become the 30th if HHS approves its plan. With most state legislatures out of session for the year and the 2016 election nearing, few expect to see many more states expand Medicaid. That's in large part due to how politically entrenched the positions have become.

In Utah, however, the six top elected state officials have given themselves until the end of this month to come up with a compromise that will cover more of the state's poor. They're in talks with Obama administration health officials, who went along with a Medicaid plan option that would charge participants a $50 fee if they used emergency rooms but would offer lower premiums. The federal negotiators won't allow the state to refuse Medicaid to "able-bodied people who ... don't look for work because they don't want to," says David Patton, executive director of the Utah Department of Health. "If we could get past that hurdle, it would be a lot more acceptable to the people in the state," he says. "I have seen the people who need (Medicaid) — like single mothers with cancer."

In Republican-led Indiana, a federal waiver has opened the door for an alternative Medicaid expansion, called Healthy Indiana Plan 2.0, after months of delays and wrangling. Shortly after the state first submitted its application last June, the federal government handed it back because the state hadn't sought input from a band of Indians in the state. The federal Centers for Medicare and Medicaid Services ultimately rejected some of what Indiana leaders wanted, such as a work requirement and a cap on enrollment.

What emerged was a compromise that injects a heavy dose of personal responsibility into the Medicaid equation, says John Wernert, secretary of the Indiana Family and Social Services Administration. Under the plan, the state puts money into a health savings account that helps pay for insurance deductibles, with a small monthly contribution from each member. A separate state program encourages employment.

Reimbursement for health care providers is the same as they get through Medicare and much higher than traditional Medicaid. Wernert says 1,000 new providers signed up to accept it within the first hundred days. And the program won't raise taxes on residents when states begin kicking in their share; it's funded with a combination of tobacco tax money and a hospital assessment fee.

"We believe it is a model that would be workable in many states," he says. "Lots of states are trying new ideas and waivers."

In Georgia, State Rep. Terry England, a farm equipment business owner and Republican who chairs the budget committee, says a more flexible version of Medicaid expansion than Indiana's might have passed the state's Republican-controlled Legislature far earlier in the process.

"What if you take part of what Indiana is doing, a little bit of Arkansas, a little bit of Utah and added some creative other stuff and did an improvement?" he asks. "Is there a snowball's chance of getting CMS to sign off on your version of the experiment?"

When England talks about how poor people generally manage to get health care, they could be talking about Deborah Figueroa of Savannah, Ga. The former mortgage loan processor was diagnosed with multiple sclerosis five years ago and has been getting some of her prescription drugs free from the local Medbank Foundation, but she has to pay for the rest and all of her doctor appointments out of pocket. She can't afford to get the MRI her neurologist recommends to see if the disease has worsened.

Deborah Figueroa lives in Savannah, Ga., where the state did not expand Medicaid coverage. She was diagnosed with multiple sclerosis five years ago and couldn't afford her medication for the first several months until she found the free Medbank Foundation. She still has to pay out of pocket for other medications and all of her doctor visits and is awaiting approval to be on Social Security disability.

"This angers me because I worked for many years and paid my taxes and now that I need proper medical help, I can't get it," say Figueroa, a divorced mother of three girls.

Kip Piper, a former state and federal Medicaid official, says there's "absolutely no question" more states would have expanded Medicaid if the administration had been flexible on work requirements, premiums for Medicaid recipients and possible changes to the more generous benefits Medicaid allows than those buying insurance on the exchanges.

"It was a classic case where some were letting the perfect be the enemy of the good," says Piper.

But CMS Deputy Administrator Vikki Wachino says the agency has "worked actively with states with leaders of all political persuasions … to try to come up with a solution to expansion that works for that state and that meets the needs of low-income people."

When they are considering state waivers from Medicaid's rules, Wachino says, CMS looks at whether states' alternatives meet Medicaid's objectives of "access to quality health coverage." CMS has approved plans that encourage people to look for work, but don't condition their access to health care on whether they do so.

There are new signs of growing accord in some places. Republican Gov. Rick Scott of Florida recently announced that he dropped a lawsuit against the federal government over Medicaid expansion after reaching an agreement with the Obama administration about federal hospital funds.

Still, the battles over how to best care for the nation's sick and poor are far from over.

"There's very little about the Medicaid program that hasn't been an issue at some point," said Robin Rudowitz: an associate director of the Kaiser Commission on Medicaid and the Uninsured at a recent event celebrating Medicaid's anniversary. "How much flexibility states should have will probably be on the agenda for the next 50 years."

This story is part of an occasional series on Medicaid expansion and is supported by a fellowship from the Association of Health Care Journalists and the Commonwealth Fund.

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