2004 Report of the Iowa Legislature

Written by Frank Severino, PCMS Lobbyist

The Legislature approved a 2005 budget of $5 billion. Republicans say it will fund the state’s priorities, including education, public safety and corrections, without raising taxes. The budget relies heavily on one-time funding sources, including drawing nearly $583 million from funds such as the Senior Living Trust and $160 million from cash reserves.

PCMS successfully worked to secure passage of HF 2440, which caps non-economic damages at $250,000. The vote was 53-47 in the House of Representatives and 27-21 in the Senate. A great year for us. However, Governor Vilsack vetoed the bill.

State Actions to Control Health Care Costs:

As forecasters continue to predict double-digit rates of medical inflation and growing state budget deficits, states are aggressively attempting to rein in health care costs by managing patients, the market, and the consumption of benefits. After a period of low growth during the economic boom of the mid 1990’s, Medicaid spending growth reached nine percent in 2001, 13.2 percent in 2002, and was 9.3 percent in 2003.

Medicaid spending now accounts for over 20 percent of total state spending and has become the second-largest item in most state budgets, after elementary and secondary education. When all state health-care expenditures are totaled, including Medicaid, SCHIP, public health, state employee and retiree health plans, and correctional and institutional care, health-care spending represents approximately 30 percent of state budgets.

States attribute the growth in Medicaid spending to growth in Medicaid enrollment because of eligibility and the recent downturn in the economy, higher medical service utilization rates, growing long-term care costs, expansions, and rising prescription drug expenditures. States have used general revenue funds, rainy day funds, tobacco settlement funds, Medicaid trust funds, or transfers from other programs to cover growing Medicaid expenditures and largely have exhausted these temporary fixes.

Forty-one states were projecting shortfalls of state Medicaid funds in 2003, and states took aggressive measures to rein in costs and protect beneficiaries. States have considered or used the following strategies:

· Improving program administration and management. States reduced administrative costs by actively pursuing increases in efficiency, changing purchasing and/or pricing arrangements, and enhancing efforts to minimize fraud and abuse.

· Increasing coordination with private insurance. States changed state laws or sought federal waivers of mandatory insurance benefit requirements to create more affordable insurance products in the small group and individual markets.

· Controlling long-term care costs. States limited the cost of long-term care by purchasing strategies to prevent the need for nursing home care, making it easier or seniors to “age in place,” shifting more care from nursing homes to community based settings, and reducing nursing home care costs.

· Improving care management for high cost and chronically ill patients. States attempted to control health care spending on specific patient groups by providing care management strategies that better engage chronically ill patients in managing their own care and by establishing disease management strategies that allow doctors to better adhere to evidence-based treatment guidelines.

· Promoting disease prevention. States can best limit health care costs by preventing the occurrence of high cost savings by engaging in health promotion activities focusing on good nutrition, increasing physical activity, and preventing or stopping the use of tobacco products.

· Restructuring benefits and eligibility, provider reimbursement levels, and purchasing arrangements. States reduced Medicaid and state employee and retiree health plan costs by increasing cost sharing and reducing provider reimbursement rates or, as a last resort, limiting eligibility and/or eliminating or reducing benefit coverage.

· Managing prescription drug expenditures. States managed pharmaceutical spending by establishing preferred drug lists, prior authorization, and mandatory use of generics, through efforts to consolidate purchasing power internally or by joining multi-state purchasing pools, and by enforcing prescription limits or using other tools.

Whatever package of cost containment measures a state chooses it is important to keep a record of the savings that can be attributed to a particular approach. This gives policymakers the advantage of knowing specifically what saved the state money and whether or not such an approach leads to unintended consequences or expenditures.