Illinois FINALLY begins implementing common sense Medicaid reforms.

Nearly 7  years after former Indiana governor Mitch Daniels began reforming the formerly bankrupt Indiana Medicaid program by implementing “Healthy Indiana“.  Illinois finally begins moving in the right direction with our Medicaid program. Between now and the fall of 2014, 1.7 million Illinois Medicaid recipients will begin receiving outlines of coverage for their new private health insurance plans.

This is the second positive step Illinois officials have taken to reform our Illinois Medicaid program. The first step begin in 2012 when among other things, Illinois finally implemented a TPA – Third Party Administrator. TPAs perform duties such as routine audits to determine if existing Medicaid recipients are actually eligible for Medicaid based on their income, still living in Illinois or for that matter still breathing. When I say ‘still breathing’ I’m not being facetious. Recent audit results found that our Illinois Medicaid program paid an estimated $12 million for medical services to people listed as deceased! This means that money was robbed from our state’s most vulnerable, leading to real world consequences like this

Examples of Illinois Medicaid waste, fraud and abuse.

Other results of our first audit of Illinois’ Medicaid rolls are shocking indeed. According to the Chicago TribuneOf the first 20,500 recipients screened by an outside contractor, the auditors recommend that 13,709 be removed from the rolls. Yes, that’s two-thirds of the first group screened, flagged as ineligible to receive their current Medicaid benefits. How so? In some cases, the recipients make too much money to qualify. In other cases, they don’t live in Illinois.”

Even more shocking is the recent arrest of the CEO and 5 other Sacred Heart hospital officials for rampant fraud. Not to mention, in 2010 75% of those enrolled on our “All Kids Covered” program were classified as “illegal immigrants”. Add to that, the fact that the “All Kids Covered” program itself was an illegal expansion of our Medicaid program facilitated by currently incarcerated, former Illinois governor Rod Blagoyevich and you can see why our Medicaid program is in desperate need of real reform..

What else needs to be done?

1.) Implement reasonable co pays or access fees to deter overuse of emergency rooms by penalizing non emergency room visits. This will steer Medicaid recipients towards far less expensive doctor’s offices for non emergency cases. Traditional Medicaid does not allow the use of higher co pays to discourage overuse of emergency rooms. Many state Medicaid programs charge a co pay of $5 or less to visit an emergency room. These low co pay do not exist in the private sector for this reason.

2.)  Establish defined PPO or HMO networks for Medicaid recipients to seek non emergency treatment. Traditional Medicaid allows recipients to see any willing provider. This discourages reasonable price controls that the rest of us in the private sector already adhere to in order to control costs.

3.) Implement significantly higher co pays for brand name prescription drugs. This will incentivize recipients to use generic drugs when available. If generic drugs are not medically compatible with the patient then implement the same ‘step therapy’ program that we in the private sector have to follow. This way a patient will at least have to try generic drugs and will need physician approval before using more expensive brand name drugs.

4.) Implement Indiana’s POWER HSA (Health Savings Account) which works in harmony with high deductible coverage. By high deductible I don’t mean the $6,350 high deductible that we in the private sector have to assume with Obamacare’s cheapest “Bronze’ plan. Indiana’s HIP – “Healthy Indiana Plan” subjects members to only a $1,100 deductible. However, the POWER HSA  is used to cover that deductible.

HIP members make means tested monthly payments to their POWER HSA accounts. These payments are based on income and can not be more than 2% of income for members below 100% of the FPL – Federal Poverty Level. Medicaid funds then cover the gap between the HIP member’s payments and the $1,100 deductible. If the HIP member is working, their employer can contribute up to 50% of their employee’s annual HSA contribution. Non profit organizations can contribute up to 75% of a HIP member’s HSA contributions as well.

The key point here is that whatever amount of a HIP member’s POWER HSA account that they do not use they keep and it rolls over to the following year. This reduces their required POWER HSA contributions for the following year. This thereby encourages smarter spending habits by giving Medicaid recipients some ‘skin in the game’.

5.) Preventive care must be incentivized. The HIP program does this by offering state defined routine preventive care tests and exams that the HIP member can utilize. If they do not utilize these services than only their much smaller POWER HSA contributions are rolled over to the following year. If they do utilize these service then the entire POWER HSA balance rolls over to the following year. Including all contributions made on their behalf by either an employer, the taxpayer or a charitable organization. This provides a very big incentive for HIP members to stay healthy. By doing so they also reduce the long term costs of the entire HIP program for all parties involved.

This is not rocket science it is common sense. By implementing proven reforms already adopted by states such as Indiana and Florida, Illinois will not only save taxpayers billions but they can provide better care for those truly in need. Whilst it is good to see Illinois legislators begin to adopt some of these reforms, it is my hope that they adopt the others outlined in this article as well. With the state of Illinois facing more than $20 billion in unpaid Medicaid bills and the cost for our Medicaid program projected to increase by more than 40% by 2017 do we really have any other choice?

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