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September 2015
In this Issue

  • Medicaid by the Numbers: How Illinois Stacks Up
    ISMS President
    Scott A. Cooper, MD

    Illinois spends a lot on Medicaid. So do many other states, considering the national Medicaid tab is around a half trillion dollars annually. According to the Kaiser Foundation, only six states spend more than Illinois does for public insurance programs offering coverage to financially disadvantaged children, pregnant women, individuals, families and the disabled. However, when you look at the average spending per beneficiary, Illinois ranks near the bottom

    Our state spends almost a third of its annual budget on the Medicaid program. One wonders where those dollars all go.

    Illinois' current fiscal year budget remains a moving target;  Springfield is funding programs through a hodgepodge of appropriation bills and a mix of longstanding and recent court orders mandating certain payments be made. Importantly, there has been no appropriation for the state employees’ group health plan, putting many physicians who treat state employees in a continuing "hold" for non-payment of services.

    Once the dust settles, Medicaid will likely account for roughly $20 billion of FY 2016’s spending.  Of course, many of these dollars flow from Uncle Sam. The feds pay half of the expense for most Medicaid insureds, and the full tab for those recently covered through the Affordable Care Act(Illinois will eventually have to pick up 10% of the expense for ACA insureds). The true flow of federal to state dollars is a little more complicated, but this description works for a brief column!

    Given that spending per capita is so low, it should not surprise you that average reimbursements here fare badly as well. In fact, thirty-eight states have more generous fee schedules.  Illinois reimburses 62 cents on the dollar compared to Medicare fees. There are three northwestern states where Medicaid actually reimburses at a higher level than Medicare—imagine that!

    Despite all these nifty facts and figures, the general public has no real idea of how Medicaid dollars are spent.  For those who are interested, here is a high level view:

    • 68 percent is paid for acute care services, which include inpatient, physician, lab, X-ray, outpatient, clinic, prescription drugs, family planning, dental, vision, other practitioners' care, payments to managed care organizations, and payments to Medicare.
    • 29 percent is allocated for long-term care services, which include nursing facilities, intermediate care facilities for the intellectually disabled, mental health, home health services, and personal care support services.
    • 3 percent is applied as payment to disproportionate share hospitals (DSH) which fulfills federal requirements that state Medicaid programs make DSH payments to qualifying hospitals that serve a large number of Medicaid and uninsured individuals.

    Sixty-eight percent for "acute care" is a fairly large bucket that doesn't really convey much. Drilling down further shows that physician services account for only a small portion of these dollars; the very large remainder of monies goes mostly toward inpatient hospital and outpatient clinic hospital services. Pharmaceutical spending is almost double what is paid for physician services.

    It is also worth noting that most Medicaid dollars are spent on the sickest patients. Seventeen percent of Medicaid patients account for 57 percent of costs. This helps explain Illinois’ recent effort to increase managed care utilization as a means to reduce spending. The amount spent on Medicaid insureds ranges widely based on patient demographics. Average spending per child is just above $2,100. Individuals with disabilities average $15,700.

    A look at these numbers is important because Medicaid is now the insurer for more than 1 in 5 Illinoisans. Enrollment surpassed 3.1 million this year. Over 600 thousand people gained coverage via Medicaid expansion initiated through the Affordable Care Act.

    You can slice, dice and crunch the numbers in many ways, but there are a few clear takeaways. Illinois devotes significant financial resources to the Medicaid program. The program covers many patients, yet physician reimbursements lag compared to most other states. Improving resources devoted to Medicaid is a tall order as long as Illinois’ poor financial health continues to lead the headlines. Given the significant dollars and the lives of affected patients, the financial health of Medicaid warrants close attention.

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