Governors at the National Governors’ Association meeting have called for an increase in Medicaid funds through an increase in the Federal Medical Assistance Percentage (FMAP) i.e, the “federal match.” The FMAP helps determine the funds distributed to the state for Medicaid services. Previous House and Senate bills related to an increase are currently stuck in committee, but the Governors believe that president-elect Obama will likely include some form of increase for Medicaid in future stimulus legislation.

More information on the requests by the governors is available on http://www.nga.org

A new study questions cost projections for the transition from ICD-9 coding to ICD-10 within the CMS proposed timeframe of October 1, 2011. The ICD-10 Coalition, is seeking an extension of the timeframe due to the complexity of transition and cost estimates for implementation that are potentially higher than expected. The study by Nachimson Advisors for the Coalition estimates costs at $83,290 for a small practice to $2.7 million for a large practice. However, others, including the American Hospital Association support the rule. They contend that if implementation doesn’t occur by 2011, people will continue to buy products that cannot handle ICD-10, making the transition more difficult. The upgrade to ICD-10 is designed to  allow for more accurate coding of mental health and substance use disorders, which will likely have an effect on reimbursements for M/SU diagnoses. Concerns remain, however, about the lack of concordance between ICD and DSM for some diagnoses.

The study is available at: http://nachimsonadvisors.com/Documents/ICD-10%20Impacts%20on%20Providers.pdf

The Centers for Medicare and Medicaid (CMS) Office of the Actuary reported recently that Medicaid costs are expected to rise annually by 7.9 percent from a projected $339 billion in 2008 to $674 billion in 2017. Enrollment is expected to grow at a slower rate, reaching 50 million people in 2008 (up 1.8 percent); increasing at an annual average rate of 1.2 percent to 55.1 million people in 2017. The report also noted that “Medicaid is the largest source of general revenue spending on health care for both the Federal government and the States.” In 2007, Medicaid costs comprised 7 percent of the federal budget in 2007, and are expected to reach 8.4 percent in 2013 according to the study.

The report can be found at: http://www.cms.hhs.gov/ActuarialStudies/03_MedicaidReport.asp

For many individuals and organizations, uncertainty has been the prevalent feeling as the effects of the recent economic downturn are felt across the country. These effects will certainly be discussed for many months (and years) to come; including how the recession will affect mental health and substance use (M/SU) financing. Although it’s difficult to tell for certain, the impacts will likely resonate through the M/SU and healthcare communities for years to come through increased case loads, reduced funding, and difficult state and local fiscal conditions.

With increased economic anxiety about jobs, portfolios, and mortgages comes increased stress on individuals and their families. There is evidence that concerns related to employment have a negative impact on mental and physical health. [1] Based on the downturns in the 1990s and early 2000s,  health and human services agencies and organizations in many states are likely to experience an increased case load, resulting in higher Medicaid and other human service program expenditures.

Unfortunately, while there may be an increased need for behavioral health services, there may not be enough funding to support the increase, which may spur eligibility changes or programming reductions. In Fall 2008, the National Association of State Budget Officers (NASBO) reported that state spending was projected to decrease by 0.1 percent in Fiscal Year 2009 compared with the historical average growth rate of 6.7 percent per year. [2] In the time since the State Budget Officers’ report, states have dramatically altered their projections.  It is anticipated that spending for FY09 will be lower than NASBO originally reported and state budgets will likely contract.  According to recent figures published by the National Governors Association, at least 30 states are currently facing budget shortfalls for FY09, totaling $30 billion. [3]

While the last economic turndown lasted just eight months, ending in November 2001, its effects on state budgets were felt well into fiscal 2004 [4]. During that time, states were able to mitigate the effects of the downturn by drawing on tobacco settlements funds, raising tobacco excise and fuel taxes, and drawing down accumulated reserves. In 2002, NASBO reported that it typically took 12 to 18 months following a recession for states to experience revenue growth. Today it is anticipated that the current economic downturn will be longer and deeper than the 2001 recession and states will have a more difficult time accommodating declines in tax revenues that fund M/SU programs. 25 states are already reporting shortfalls in FY10 of $60 billion. [5]

Non-governmental M/SU funding is also at risk. Many foundations and non-governmental organizations rely on investment income from trusts or endowments to fund projects and services. While some have committed to maintaining funding for programs and services, many others are likely to trim back programs to adjust to current financial conditions. [6]

The good news is that economic downturns are not permanent and this downturn will ultimately come to an end. States are currently lobbying for a stimulus package to ease Medicaid funding through an increase in the “federal match,” fund social programs to prevent budget cuts, and increase infrastructure funding to create new jobs. However, given the long budget cycle in most states and the federal government we should not overlook the need to also deal with longer term planning since renewed funding appropriations will become available after the downturn has subsided and caseloads are back to normal levels.

Although the outlook is not yet known, this downturn may present the M/SU community with an opportunity to discover new and diverse financing approaches for M/SU services, create new partnerships, and consider new possibilities for its mission. Now, more than ever, we will have to collaborate and share ideas across organizations as the fallout from the current economic situation is sorted out.

 

[1] M W Linn, R Sandifer and S Stein, American Journal of Public Health, Vol. 75, Issue 5 502-6

[2] “The Fiscal Survey of States: Spring 2003,” National Governors Association and National Association of State Budget Officers

[3] “State Economic Review, December 2008,” National Governors Association

[4] “The Fiscal Survey of States: Spring 2003,” National Governors Association and National Association of State Budget Officers

[5] “State Economic Review, December 2008,” National Governors Association

[6] Statement from A Message from Risa Lavizzo-Mourey on the Effects of the Global Financial Crisis on the Robert Wood Johnson Foundation, Oct 31, 2008

From the Kaiser Family Foundation:

"President Obama and House Democrats "embrace the creation of a ... 'comparative effectiveness' entity that will do research on drugs and medical devices" -- similar to the National Institute for Health and Clinical ExcellenceAmerican Enterprise Institute, writes in a Wall Street Journal opinion piece. While Obama and House Democrats "claim that they don't want this to morph into a British-style agency that restricts access to medical products based on narrow cost criteria, ... provisions tucked into the fiscal stimulus bill betray their real intentions," according to Gottlieb."

Full story:  http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=5654

This article contextualized United States healthcare by examining the healthcare systems in Canada, the United Kiingdom, Australia, China, and India.  The authors compare private and public expenditures as well as trends in employer-sponsored insurance. 

Munn, J. D., & Wozniak, L. (2007). Single-payer health care systems: the roles and responsibilities of the public and private sectors. Benefits Quarterly, 23(3), 7-16. http://www.iscebs.org/BQinfo/bq32007.asp#1

Authors: Jeffery D. Munn, Lynne Wozniak.