July 20, 2005

HHS Appoints Members To Medicaid Reform Commission
U.S. Department of Health and Human Services Secretary Michael Leavitt named 13 voting members and 15 nonvoting members to a federal Medicaid commission that will recommend short- and long-term reforms to the program. The panel was created by Congress during its negotiations for the fiscal year 2006 federal budget.

The commission must submit two reports to Congress. The first report is due Sept. 1 and will recommend ways to reduce Medicaid’s spending growth by $10 billion throughout the next five years. The second report, due Dec. 31, 2006, will include recommendations for stabilizing Medicaid for the future. Leavitt said this report will focus specifically on “how to expand coverage to more Americans while still being fiscally responsible; ways to provide long-term care to those who need it; a review of eligibility, benefits design and delivery; and improved quality of care, choice and beneficiary satisfaction.”

Don Sundquist, the former Republican governor of Tennessee and former congressional member, was appointed as the panel’s chair. Angus King, a former independent governor of Maine, was named vice chair. The 15 nonvoting members will provide advice to the voting members.

Leavitt left two positions on the commission vacant for governors. The commission also may include several members of Congress, who will be appointed by party leaders.

SCHIP Will Face Future Budget Shortfalls Unless Legislators Act
According to a report by the Congressional Research Service, federal funds for the State Children’s Health Insurance Program likely will fall short of states’ needs in coming fiscal years as more states expand enrollment. Although federal SCHIP funds will total $4.1 billion in fiscal year 2006, the projected demand for funds will be $5 billion to $6 billion, according to the report. In addition, in FY 2007, Congress is expected to appropriate $5 billion, but the projected demand for federal funds will be
$5.4 billion to $6.8 billion.

According to the report, six to 14 states are expected to use their entire federal SCHIP budget in FY 2006 while 12 to 20 states are expected to use their entire allotment in FY 2007. States must use their entire federal SCHIP budget within three years after it is distributed or return any unused funds to the federal government. So far, a redistribution of unused federal SCHIP funds to states that have exhausted their federal share has prevented widespread shortfalls.

“Although the SCHIP program has been successful in covering millions of uninsured children and has therefore been politically popular, some states are poised to exhaust their federal funds as early as next fiscal year,” according to the report. “If Congress decides to prevent these shortfalls, legislative action will be needed.”

Sen. Edward Kennedy, D-Mass., plans to introduce a bill that would allocate an additional $1 billion to the program. He said the money had previously been allocated to SCHIP but unused funds reverted to the U.S. Treasury Department on Sept. 30, 2004.

Survey Finds Medicaid Continues To Dominate States’ Spending
Although overall state budget pressures have subsided, Medicaid spending continued to squeeze state budgets in fiscal year 2005, according to the “Fiscal Survey of States: June 2005” report from the National Governors Association and the National Association of State Budget Officers.

In 2005, Medicaid spending is estimated to account for $329 billion in federal and state spending, according to the report. Both associations estimated overall Medicaid growth continued to rise from 8.7 percent in FY 2004 to 8.8 percent in 2005.

Despite overall improvements in state budgets, 20 states reported Medicaid shortfalls in FY 2004, and 24 states were expected to experience shortfalls in FY 2005, researchers said. These Medicaid shortfalls for FY 2004 ranged from 0.2 percent to 11 percent of program costs, averaging 3.7 percent. The combined amount of shortfalls in FY 2004 and FY 2005 totaled more than $5.8 billion. For state FY 2006, Medicaid spending is expected to increase by 4.9 percent in the governors’ budgets, with state funding increasing by 6.9 percent and federal funding increasing by 3.7 percent.

Researchers attribute rising Medicaid enrollment and drug costs as major elements in Medicaid spending. Medicaid enrollment increased 4.1 percent in FY 2004, 4.2 percent in FY 2005 and 3.9 percent in FY 2006. The participation of children and families in Medicaid is driving enrollment growth, but the cost of caring for the disabled and the elderly contributes to most of the spending increase.

Overall, the NGA and the National Association of State Budget Officers found the revenue picture for most states improved dramatically in FY 2005, with revenues exceeding original budget projections in 42 states while three others were on target. States will face additional Medicaid budget pressures from the new costs associated with the implementation of the new Medicare prescription drug program and the costs of providing long-term care coverage for low-income seniors, researchers said.

The report is available online at www.nga.org/Files/pdf/FSS0506.pdf.

U.S. Spends More On Health Care, Receives Same Type Of Services
The United States spends more on health care per capita than other industrialized nations but does not receive more services, according to a study published in the July/August issue of Health Affairs. The study found the following.

The nations examined spent a median of $2,193 per capita on health care.

The United States spent $5,267 per capita for prescription drugs, hospital stays and physician visits in 2002, compared with $3,446 per capita for Switzerland, the next highest spender.

Health care spending accounted for 14.6 percent of the U.S. gross domestic product in 2002, a time when only two other nations — Switzerland and Germany — spent more than
10 percent of their GDP on health care.

The United States has 2.9 hospital beds per 1,000 residents, compared with a median of 3.7 beds per 1,000 residents among the other nations examined.

The United States had 2.4 physicians per 1,000 residents in 2001, compared with a median of 3.1 physicians per 1,000 residents among the other nations examined in 2002.

The United States had 7.9 nurses per 1,000 residents in the United States in 2001, compared with a median of 8.9 nurses per 1,000 residents among the other nations examined in 2002.

The United States has 12.8 C.T. scanners per one million U.S. residents, compared with a median of 13.3 scanners per one million residents among the other nations examined.

The United States appears to have more MRI machines per capita than many of the other nations examined. However, the machines are used only 10 hours daily in the United States, compared with a median of 18 hours daily in other nations.

The average medical malpractice payment, which included both settlements and judgments, was $265,103 in the United States in 2001, compared with $309,417 in Canada and $411,171 in Britain.

The report is available online at www.healthaffairs.org.

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