Mississippi’s $89 million Medicaid problem: Legislators baffled

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Larrison Campbell

Sen. Hob Bryan, D-Amory, left, and Sen. Brice Wiggins, R-Pascagoula, at the Medicaid Committee meeting in the Capitol Thursday.

An air of frustration hung in room 216 on Thursday afternoon at the Capitol. After more than an hour of debate, the Senate Medicaid Committee had approved two bills. One revised the requirements for the agency’s executive director. Another purported to root out beneficiary and provider fraud.

But neither addressed the elephant in the room: the growing chasm between how much the state wants to spend on Medicaid and what running the program actually costs.

After the meeting, the committee’s chairman, Sen. Brice Wiggins, R-Pascagoula, sighed and shook his head when asked if the Legislature knew how to address the problem.

“I think they don’t have a good handle because (Medicaid’s) so complicated. And we’re dealing with a group of people that’s not a natural constituency for anybody here. But we have a duty to take care of the least fortunate,” Wiggins said. “These are not the issues that get splashed across the TV screens. And Medicaid touches a lot of people, and a lot of agencies. It involves a lot of dollars, and it’s a web of government employees and regulations.”

In short, Mississippi has a Medicaid problem.

In the past decade, the budget has ballooned to nearly a billion dollars, even as the number of recipients has fallen. Now, after an appropriations shortfall and three rounds of state-wide budget cuts, the agency is facing a $89 million deficit. With only three percent of the budget directed to administrative costs, the agency could terminate every state employee and still not close the gap.

So how did this problem arise? It depends on whom you ask. Around the Capitol in the last week alone, medical inflation, poor management, expensive contracts and fraud –both beneficiary and provider — have been thrown about as reasons for rising costs.

For Wiggins and many of his Republican colleagues, one answer is clear: Medicaid spending needs to come down. But the federal and state guidelines that govern the agency make trimming it from year-to-year nearly impossible.

Although cutting beneficiaries seems like the quickest way to cut costs, the reality is more complex. Since March 2015, the number of state Medicaid enrollees has dropped from a high of 796,000 to 760,000 this past January. But during this same time period, Medicaid spending increased, rising from $1.01 billion to a projected $1.03 billion for fiscal year 2018.

This is because some patients are more expensive than others, and Medicaid’s enrollment requirements are based on income, not illness, according to executive director Dr. David Dzielak. The only real way to reduce enrollees is to have more people in the state employed, according to Dzielak.

Rogelio V. Solis, AP

State Medicaid Executive Director David Dzielak 

“Our expenditures are tracking with medical inflation. If everyone got super healthy we’d save a little money, but really the bigger issue is if the economy of the state does a little bit better,” Dzielak said in a legislative budget hearing in October. “One in four (Mississippians) receive benefits – that’s higher than other states.”

The other option for reducing costs is cutting the number of services — and the amount Medicaid reimburses providers for these services. But under Mississippi code, Medicaid cannot cut services or provider payments until they have a deficit.

“The Legislature passed a law that says, ‘This is the program you’re going to have, and this is what that program will cost the public,'” said Sen. Hob Bryan, D-Amory, the vice-chair of the Medicaid committee. “The problem they have with (Dr. Dzielak) is he’s not a magician. He can’t wave his wand and say, ‘This is going to cost less.'”

All that leaves the Legislature with precious few alternatives for cutting legitimate costs, hence the push for House Bill 1090, one of the two bills the Senate committee approved Thursday.

The bill would authorize Medicaid and the Department of Human Services to contract with a third party vendor to vet the eligibility of new beneficiaries and weed out people who were trying to qualify for services with both agencies. It also authorizes the vendors to detect provider fraud, such as doctors who bill for services not provided.

A fiscal note attached to the bill includes an estimate from outside consulting firm The Stephens Group that estimates the increased vetting could save the state nearly $30 million a yeara significant number, if not enough to close the current $88 million gap. But even the bill’s supporters expressed skepticism that the reduction would be that dramatic.

Gil Ford Photography

Sen. Terry Burton, R-Newton

“I’m going to have to do a little bit of cautioning on this so-called fiscal note here. When you see words like ‘TSG is estimating,’ (or) ‘we believe,’ when we use words like ‘we’re assuming,’ (and) ‘we’re determining by assumption the total savings of Medicaid,'” Burton said, reading from the Stephens Group’s report.

“These are not hard numbers because nobody can get hard numbers on this,” Burton said. “I don’t want anyone here to think these are hard numbers or we’re going to save about $29 million in Medicaid. Because some third-party vendor is going to get a real sweetheart deal on this (vetting program). They charge a fee every time that card is swiped. So I think the assumptions, and the estimates, all these things that are included in this fiscal note are tremendously, tremendously overestimated.”

On the flip side, many Democrats in the Legislature say that Medicaid’s biggest problem is that it’s not big enough.

Bryan, who posed the lone vote against the Medicaid fraud bill, argued that the state agency has one of the fastest returns on investment. Every dollar the state spends is matched by the federal government at a ratio of nearly three-to-one.

“The Medicaid program is an extraordinarily good buy for the state,” Bryan said. “Theoretically our match is 25 percent. Then you have the economic effect of putting money into the state economy, because these are all in-state expenses. So all-in-all it costs the state about 10 cents to provide a dollar of Medicaid.”

Complicating matters is that no one knows what’s going to happen to the state Medicaid program if the Affordable Care Act is repealed by Congress. One idea often trumpeted by Republicans is Medicaid block grants.

The difference is that in Medicaid, as currently run, coverage is guaranteed for everyone who is eligible and the federal government covers a certain percent of the costs without caps. A block grant would curb this open-ended approach and provide states with annual lump sums. In return, states would have more autonomy over their Medicaid programs, allowing them to cut benefits and eligibility as they see fit. But they would also be responsible for covering costs beyond their federal allotment.

The second bill passed by the Senate committee Thursday also faced criticisms from Democrats. House Bill 1092 deletes the requirement that the agency’s head must have a medical degree or doctorate. Although not ostensibly a money-saving tactic, several Republican senators advocated for the legislation by stressing the benefits of having a “managerial type” run the agency.

“The Division of Medicaid is more like an insurance company. It’s more like a Blue Cross. It’s not so much like dealing with the hands-on medical stuff. It’s about administration,” Burton said. “… So I have no problem with someone with good managerial experience being paid to manage this insurance company known as Medicaid.”

Bryan, however, bristled at the idea of the legislation, suggesting that House Bill 1092 was just another example of the Legislature looking for solutions to problems they didn’t fully understand.

“It’s a difficult system that we have and rather than grappling with the problems, which are difficult, there’s a tendency to say, ‘Well, if we had a better Medicaid director, things like this wouldn’t happen.’ Which is kind of like saying, ‘if we have better accountants two plus two would equal five,'” Bryan said.