ISSUE IN-DEPTH: PAYING FOR MEDICAID IN GEORGIA: HMO levy a wise alternative

Thousands of Georgians have lost their jobs in recent months, and thousands more have taken a financial beating because of the uncertain economy. With almost one in five Georgians already owing more than $1,000 in medical debts, now is not the time to cut medical benefits or deny state-subsidized health care to poor and working-class Georgians.

Yet, because of Gov. Sonny Perdue’s demand for across-the-board spending reductions, the state agency that administers Georgia’s Medicaid and PeachCare for Kids programs faces exactly that prospect. There are few ways to cut the more than $100 million that Perdue is demanding except by further tightening eligibility for those programs. Those cuts would come on top of reductions of more than 20 percent in both Medicaid and PeachCare enrollment over the past three years.

Fortunately, the Department of Community Health has put forth a politically tricky but wise alternative: levy a 3 percent surcharge on premiums paid to all health maintenance organizations that write insurance policies in Georgia. The money generated from the fee should be enough to adequately cover the nearly 1 million Georgians who need the two programs to stay healthy.

Under current law, the three managed-care companies that administer Medicaid and PeachCare for the state already pay a 5.5 percent fee as part of their contracts. The Department of Community Health proposal would reduce that to 3 percent, but impose that same fee on all HMOs in the state, even though most don’t cover Medicaid or PeachCare patients. (Georgia is one of about 20 states that already tax HMOs to support the government programs. The concept is not unlike fees that have been levied for years on hospitals, nursing homes and even ambulance services.)

Make no mistake —- the expanded surcharge on HMO premiums would not be cure-all for Medicaid financing in Georgia. It would simply get the state through the current budget crisis without tossing overboard many low-income women and children already covered. A more comprehensive financing approach will be needed, both in Washington and in Georgia.

That may come when a new administration takes over in January. The antipathy for Medicaid and children’s health plans from the Bush administration over the past eight years has been palpable. The White House has fought state expansions of children’s health insurance plans and enacted administrative rules aimed at providing fewer federal dollars to the states for Medicaid.

At the state level, neither PeachCare nor Medicaid has received the support it deserves from Perdue or the Legislature. In the 2007 session, House Speaker Glenn Richardson tried to reduce eligibility for PeachCare for thousands of working-class Georgia families. A year earlier, the state moved those covered by Medicaid and PeachCare to for-profit health maintenance organizations for coverage.

Moreover, Georgia responded to renewed federal demands to check income and eligibility standards for applicants by drafting rules that are considered among the most restrictive in the country. The administrative burden imposed by new demands, which include a yearly check on income for all those already enrolled, resulted in fewer applications and lower enrollment.

More significantly, it also resulted in delayed health care and financial turmoil for some families who depend on the program, physicians and advocates say. A recent story in The Atlanta Journal-Constitution documented how the parents of a Dalton family had to sell their wedding bands to cover the $1,500 costs of diabetes care for one of their children because of months of delays in approving their application for Medicaid. Unfortunately, their case is not all that rare.

With unemployment rising steadily and more Georgia companies dropping insurance coverage for their workers, the state cannot afford to shortchange either Medicaid or PeachCare even further through unwise budget cuts. Nor can it continue to impose burdensome new eligibility rules without increasing the number of caseworkers and administrative staff to promptly handle the thousands of new applicants who will be coming to the programs for help in the months to come.

Dr. Rhonda Medows, commissioner of the department, characterizes the fee as “civic rent” the insurance companies should be willing to pay to do business in the state. Those companies’ profits benefit greatly by having the state pick up most of the tab for those who can’t afford private plans. Furthermore, Congress has demanded that any state fee on HMOs be levied on all HMOs in a state, not just those who run Medicaid and children’s health insurance plans. That requirement takes effect in October 2009.

Not unexpectedly, the Medows proposal is generating tough opposition from health insurance trade groups. They claim that the fee, which the state describes as “nominal,” will have to be passed on to employers, who will in turn cancel the benefit for workers. They’re counting on the Legislature to halt the plan in its tracks.

However, unless someone finds a better plan quickly, the alternatives are much worse.

—- Mike King, for the editorial board (mking@ajc.com)

CHECK OUR SOURCES

Georgia Association of Health Plans www.georgiahealthplans.org

Georgia Department of Community Health dch.georgia.gov/02/dch/home/0,2467,31446711,00.html

Health Affairs content.healthaffairs.org/index.dtl

The Kaiser Family Foundation www.kff.org/medicaid/7815.cfm

Note: Access to Health Affairs journal articles by subscription only