Medicaid expenses projected to dip — for now

DOVER — Two years after increasing $70 million in one year, Delaware’s Medicaid costs are projected to drop a small amount.

The state is expected to spend about $754 million on approximately 229,000 Medicaid recipients in the fiscal year starting July 1, $6 million less than in the current year.

Officials from the Division of Medicaid and Medical Assistance appeared before the Joint Finance Committee Wednesday to detail budget needs and answer questions from lawmakers. The division is allocated $770 million in total General Fund dollars in the governor’s recommended budget, with all but 2 percent of that going to Delawareans on Medicaid.

Medicaid is given to low-income individuals. Unlike Medicare, standards vary by state.

Delaware expanded its Medicaid program through the federal Affordable Care Act, changing the requirements and adding about 10,000 recipients in the process. It also began receiving more money for some people already getting Medicaid.

An increase in the federal share means Delaware should be paying less for Medicaid next fiscal year, even though there will probably be more recipients. The share is determined by the state’s average income level relative to the national mean, and the fact Delaware will get more funding means its per capita income has not grown as much as the entire country’s.

While legislators were pleased Wednesday to hear costs are likely to drop slightly, several said the state needs to do more to limit expenditures and combat fraud, waste and abuse.

In an attempt to reduce spending and get better care, Delaware has increasingly shifted to a valued-based health care system in recent years, with officials focusing on paying for quality of care rather than quantity.

Those efforts are far from finished, however, and some lawmakers expressed concerns the state is ponying up hundreds of millions in unnecessary spending.

Department of Health and Social Services officials agreed there is more to be done, although they resisted characterizing a specific dollar amount as being superfluous.

Contrary to public opinion, much of the unneeded spending is not due to people attempting to rip off the government but is instead a result of the design of the health care system, officials said.

“Our system has incentivized them to practice in a way that is centered on volume,” Division of Medicaid and Medical Assistance Director Steve Groff told JFC. “They get paid when they provide a service.”

Technology can help prevent some fraud, waste and abuse, while plans to continue working to move away from a fee-for-service model could reduce the number of procedures the state ends up paying for through Medicaid, as well as state employee health care.

Another issue is that many Medicaid recipients — and state workers whose care is paid for by Delaware government — have “no skin in the game,” as Sen. Dave Lawson, R-Marydel, put it. As such, there is no real deterrent to prevent them from seeking more expensive options, such as the emergency room when a walk-in clinic would do the job just as well and cost the state less.

Delaware could also do more to incentivize people to be take better care of themselves, officials said.

“We’re not necessarily paying for them to be healthy, and that’s where we have to go,” DHSS Secretary Kara Odom Walker said.

While Washington D.C. prohibits states from directly penalizing Medicaid recipients for unhealthy behavior, Delaware can do other things, such as raising copays for certain drugs or procedures, Mr. Groff said.

Some uncertainty clouds everything Delaware does with Medicaid, however. Should Congress repeal or make major changes to the Affordable Care Act, Delaware would likely be forced to generate more revenue elsewhere or essentially kick thousands of people off Medicaid.

Unfortunately for state officials, that’s largely out of their control.

“There’s no crystal ball at this point. We just need to watch these trends,” Mr. Groff said.

Staff writer Matt Bittle can be reached at 741-8250 or mbittle@newszap.com. Follow @MatthewCBittle on Twitter.

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