A Decade of Medicaid in Perspective: What Have Been the Effects on Children?

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PEDIATRICS

Vol.

91 No. 2 February 1993 287

A Decade

of Medicaid

in Perspective:

What

Have

Been

the

Effects

on

Children?

Jenifer

D.C.

Cartland,

MA*;

Margaret

A. McManus,

MAX;

and

Samuel

S. Flint,

PhD*

ABSTRACT. This study of the Medicaid program

ana-lyzes changes in child recipients, costs, and service use

during the 1980s to assess the effects of recent federal

policy shifts and to project future costs for children. Data

presented in this study are from the Health Care Financ-ing Administration’s Medicaid Statistical Report for the

years 1979, 1985, and 1990, three time-points that

demar-cate major federal policy shifts. About half of all recipi-ents added to the Medicaid program during the last de-cade were children; they comprised 14% of the total cost

growth experienced by the program. In addition, the

el-igibility distribution of children receiving Medicaid

shifted markedly over the last decade. In 1979, children receiving cash assistance comprised 90% of total child recipients; by 1990, this figure dropped to 72%. Future expansions to the Medicaid program are projected to cost less than the initial expansions. This is because the early expansions disproportionately served infants, who

re-quire more hospital services than older children. Despite

the major changes in Medicaid eligibility for children

during

the 1980s, only limited cost shifts occurred in expenditures for children. Children continue to consume a small portion of the Medicaid budget. Congress should explore options for guaranteeing that their share of fund-ing for services will be adequate. Moreover, since future

expansions will be far less expensive than those already implemented, accelerating the phase-in process for all poor children may be a more financially feasible policy option than many policymakers anticipate, despite the fiscal hardships facing many states. Pediatrics 1993; 91:287-295; Medicaid, expenditures, eligibility.

ABBREVIATIONS. FPL, federal poverty level; EPSDT, Early and

Periodic Screening, Diagnosis, and Treatment; HFCA, Health Care

Financing Administration; AFDC, Aid to Families With Dependent

Children.

The decade of the 1980s will be remembered by

child

advocates as a period of Medicaid expansion.

Thousands of poor and disabled children were

added

to the

program.1

Preventive

benefits

were

ex-panded

and a review of pediatric reimbursement

rates

was

called

for. Children’s

health

became

a

na-tional

and

state

priority.

Medicaid expansions were introduced following

sharp

reductions

in eligibility

that

occurred

during

the early 19805.2 Startled by the disproportionate

ef-fect

of reductions on children3’4 and urged on by the

efforts

of child

advocates

and

elected

state

and

fed-From the *Amencan Academy of Pediatrics, Elk Grove Village, IL; and

.McManus Health Policy, Inc, Washington, DC.

Received for publication May 28, 1992; accepted Aug 13, 1992.

Reprint requests to g.D.C.C.) Division of Research on Health Policy, Amer-ican Academy of Pediatrics, P0 Box 927, Elk Grove Village, IL 60(109-0927.

Acad-emy of Pediatrics.

eral

officials,

Congress

and

state

governments

to-gether

committed

themselves

to extending

Medicaid

to cover

all poor

children

and

pregnant

women.

During

the last half of the 1980s, Congress adopted

a series

of Medicaid

policy

expansions

that

modified

both

the

financial

and

family

structure

eligibility

re-quirements

phased

in by

the

year

2002.

In

addition,

children

in

two-parent

families,

previously

disqualified

because of their parents’

marital status, can now qualify for Medicaid.

During

this

same

period,

major expansions in

coy-erage of pregnant women also took place. Now states

must

cover

pregnant

women

with

incomes

of 133%

of the

FPL

with

the

option

of extending

coverage

to

185% of the FPL. Detailed summaries of Medicaid program expansions for these and other groups are available elsewhere.1’

In addition to expanding eligibility for Medicaid,

Congress strengthened the program’s mandatory

preventive benefit for children-the Early and

Peri-odic

Screening,

Diagnosis,

and Treatment (EPSDT) program. Briefly, states must now cover all

medi-cally

necessary

screening,

diagnostic,

and

treatment

services, overriding existing state Medicaid benefit packages.6 To strengthen provider participation in Medicaid, Congress also requested that the Secretary

of

the

Department

of Health

and Human Services

and the Physician Payment Review Commission

as-sess

the

adequacy

of

pediatric

and

obstetric

reim-bursement

rates.

Reimbursement

rates

now

should

be set at levels

sufficient

to ensure

that

children

and

pregnant

women

receiving

Medicaid

have

access

to

health services that is comparable with the access enjoyed by those privately insured.7

However, support for the expansions may be in

jeopardy. In 1990, Medicaid consumed 14% of state

revenues-up

from

9%

a decade

earlier-and

the

National Governors’ Association has called for a

“moratorium” on further Medicaid expansions.

Pro-jections

show

that

Medicaid

spending

by

1995

may

represent as much as 17% of state budgets.8 States are faced with pressure to cut back on Medicaid

expen-ditures,9 threatening many of the gains achieved

dur-ing

the

last

decade

as well

as further

Medicaid

pro-gram

enhancements. Specifically, the

likelihood

of a

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288 MEDICAID AND CHILDREN IN THE LAST DECADE

more

rapid

phase-in

of poor

children

is questionable

as are

improvements

in physician

reimbursement.

This

article

provides

new

information

about

the

role that coverage for both children and adults

played

in

the

escalation

of Medicaid

expenditures

during

the

1980s.

The

changes

that

have

occurred

in

the numbers

of recipients

and

amounts

of payments,

and how these changes might affect future Medicaid

spending,

are

explored.

We

provide

detailed

exami-nation

of data

for

three

points

in time,

demarcating

three

major

Medicaid

policy

shifts

during

the

last

decade-1979, 1985, and 1990. With this information,

we

analyze

changes

in

child

recipients,

costs,

and

services over the last decade. In addition, cost pro-jections for dependent children are developed for the years 1995, 2000, and 2005.

METHODS

Data are from the Health Care Financing Administration’s (HCFA) Medicaid Statistical Report (2082 data tape) for federal

fiscal years 1979, 1985, and 1990. Cost and service utilization data

from 49 states and the District of Columbia are included in the national totals. No data are available for Arizona’s unique Med-icaid program.

To emphasize Medicaid policy shifts during the 19806, baseline,

intermediate, and end-point periods are used. The baseline, 1979,

preceded the federal Medicaid cutbacks of the early 1980s; the

intermediate time point, 1985, immediately preceded the

imple-mentation of the Medicaid expansions. The end point, 1990, is the most recent year that data are available from HCFA; hence, data from this year offer the best account of the expansion population available.

Expenditures in the tables and text are presented in constant (“real”) dollars. Constant monetary figures are those that are in-flated to 1990 dollars by using the general consumer price index.

Using the medical portion of the consumer price index would

have greatly reduced the size of the increases but, since Medicaid competes with all programs, not just health programs, for govern-ment funds, the general consumer price index is more appropriate.

Recipient and expenditure growth is presented in annual

com-pound growth rate formulations as is the usual practice with such

data. The annual compound growth rate transforms multiyear

growth figures into an annualized growth rate, which allows for direct comparison of trends that may have great year-to-year vari-ation. Recipients are defined as individuals using at least one paid

Medicaid service. Medicaid eligibles who have not used any

health services will not be examined because they are not included in the 2082 data set.

The analysis first examines changes in program costs by recip-ients’ age and eligibility criteria. Mutually exclusive eligibility categories are as follows:

I. Receiving Cash Assistance. All persons who receive cash

assis-tance from the Aid to Families With Dependent Children

(AFDC) program, the Supplemental Security Income program,

and other cash assistance programs, including adoption and

foster child assistance.

2. Not Receiving Cash Assistance. All persons enrolled in cash

as-sistance programs not funded through a federal match and

persons deemed eligible for Medicaid by the state but not eli-gible for any form of cash assistance (eg, prior to the expan-sions, children from two-parent families, low-income pregnant women, and aliens eligible for emergency assistance were corn-monly covered at the state’s option).

3. Medically Needy. All persons whose costs for medical care ex-ceed their ability to pay, as determined by an income standard generally set higher than the income standard for recipients of cash assistance. Thirty-six states have programs for the medi-cally needy.’

4. Eligible Through Expansions. All pregnant women and children who meet the eligibility requirements defined by the Medicaid

expansion options and mandates enacted since 1984. In

addi-tion, persons qualify under this category if they are blind, dis-abled, or elderly, and their incomes fall below the expanded income level (120% of FPL).

Children cannot be identified directly by age in the eligibility portion of HCFA’s 2082 data-set prior to 1990. The only approach through which spending on children can be examined in reference to their eligibility category is to use as a proxy the data for “de-pendent” infants and children-a group that does not include all the Medicaid recipients younger than 21 years of age. In 1990, the

only year for which such data are available, 13% of children

younger than 21 were not categorized as “dependent.” Approxi-mately half of these children are older adolescents who are

care-takers and pregnant women. The other half are blind or disabled. Since these children who are not dependents cannot be identified

directly in the 1979 and 1985 data sets in regards to their eligibility status, we include them as adults in the first portion of our anal-ysis for all years studied. Unfortunately, some of the most

expen-sive children in Medicaid are not dependent children and are

excluded from the first analysis. Finally, dependent children are not necessarily “AFDC” children, but rather children in

house-holds that qualify for Medicaid for any reason-through the

AFDC, medical needy, or expansion programs.

Since infants comprise a very large proportion of the expansion population (38%) and since older children will be phased into the

program through the year 2002, we next examine how the antici-pated changing age distribution in the expansion group will affect costs. Cost projections are based on the per-recipient cost for de-pendent children in the expansion category through the year 2005.

This projection was determined by estimating the number of

chil-dren to be added to the program each year, the number of children who would lose eligibility each year, and the costs associated with the new age-mix of expansion recipients. It is assumed, for the

purposes of this study, that birth rate, economic conditions, and

public policies affecting health insurance coverage for children remain constant. Although we cannot predict Medicaid spending with this technique, we can meet our more narrow goal of mea-suring the effect of the changing age distribution on costs.

The first two estimates-numbers of children gaining and

los-ing eligibility-are computed using Current Population Survey

data for calendar year 1989. Since a new age cohort is added into the Medicaid program each year, the first estimate is equal to the

number of children in a single age cohort who would be eligible for the program. We estimate that on average 318 000 children will be added each year.

The estimate of the number of children who lose Medicaid

eligibility each year is the sum of two separate estimates. The

income requirements for Medicaid coverage drop twice after in-fancy, resulting in two migrations out of the program. The first drop occurs only in the 23 states that have increased the income eligibility threshold for infants to 185% of the FPL (children who live in the 6 states that raised the income eligibility threshold

above the mandate but not as high as 185% of the FPL are not

represented in this estimate).’#{176} It is estimated that, after their first

birthday, 43 737 children leave the Medicaid program because of

this first drop in the income eligibility threshold. The second mi-gration occurs after the sixth birthday, when the income eligibility

threshold drops from 133% to 100% of the FPL: 70 800 six-year-olds leave the program each year. Thus, 114 537 children lose their eligibility each year.

Finally, because the average age of the expansion population

increases each year (ie, in 1990, the age-mix included infants and children through age 6; in 1995, the age-mix will include infants and children through age 11), the cost of the new recipients to the program carries the per-recipient cost of the oldest cohort of

chil-dren eligible through the expansions ($711 in 1990). Again, no

adjustments were made for medical inflation or utilization changes that may occur over the next 15 years.

The final algorithm is as follows, using for the base the expan-sion population of dependent children only:

recipientsy,ar +1 recipientyea, + (a - b)

costsy,a. +I costsye,. + [c* (a - b)]

cost per recipient.,e,,, + costsyear +I/recipientsyear +i

where a = number of entering recipients (318 000), b = number of exiting recipients (114 473), and c = cost per entering recipient ($711). Employing this method, we project the number of recipi-ents, total costs, and cost per recipient for the expansion popula-tion of children for the years 1995, 2000, and 2005.

The third portion of the analysis addresses changes in utiliza-tion and costs by service. A few points about these data should be made. First, since each person in Medicaid can use many services,

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ARTICLES 289 the sum of the recipients for all services substantially exceeds the

total number of individuals in the program. This is not true, how-ever, for the expenditure data. Since dollars are spent only once, the sum of expenditures for all services is equal to the total cost of the program.

Second, certain elements are unavailable for the service cost

and utilization data. Data for services are unavailable for 1990. Therefore, 1989 data are used for the second portion of the

anal-ysis. Data for costs and utilization of the EPSDT program are

unavailable before 1981, as noted in the tables.

Third, for the purposes of the service analysis, a child is any

recipient under age 21, regardless of the Medicaid eligibility cri-tenon that qualified the individual.

Finally, some services are combined in the tables. “Long-term care,” for example, includes skilled nursing facilities, intermediate care facilities, mental health facilities, inpatient psychiatric care, and home health care. “Hospital care” includes both inpatient and

outpatient services. “Clinic services” includes clinic and rural

health services. “Other care” includes prescription drugs, labora-tory tests, and x-ray services.

The data used for this study have limitations. First, children younger than 21 cannot be identified directly for the first portion of the analysis. This leads to the underrepresentation of some of the most expensive children in Medicaid. Second, we present data only for children who actually use Medicaid services, not for the much broader categories of children who are enrolled in or eligible

for the program. However, since Medicaid costs are driven by

actual service use, this limitation is not serious for our purposes. Finally, the projections assume that certain factors that could sub-stantially influence program costs are held constant, eg, birth rates, public policies related to insurance coverage, and new medical

technologies. Since none of these factors can be predicted, we

cannot include them as variables in our model.

RESULTS

Changes in Recipients and Payments for Children and Adults

In the last decade, the Medicaid program has

grown

to serve

25%

more

children

and

adults-from

20 million in 1979 to 25 million in 1990. Adjusted for inflation, aggregate payments increased by 66% and

per-recipient costs grew by 32%. Table I shows that

real

Medicaid

spending

grew

at an

annual

rate

of

4.7%,

and cost per recipient by 2.6%.

Of the roughly 5 million recipients added to the

Medicaid

program

in the

last

decade,

half

were

chil-dren

and

half

were

adults.

However,

the

expenditure

patterns for adults and children over the last decade were quite different. As shown in Table 1, total

pay-ments

for

adult

recipients

were

more

than

six

times

those

for children,

and

payments

per

recipient

reveal

an

almost

fivefold

difference

in 1990.

Furthermore,

per-recipient costs rose faster for adults than for

chil-dren.

Between

1979

and

1985

reductions

were

made

to the

program

and

per-recipient

spending

grew

by

3.5% per year for adults while declining by I .7% per

year

for

children.

Changes in Child Recipients and Payments by Eligibility Category

The

eligibility

distribution

of Medicaid

child

recip-ients shifted significantly during the past decade

(Fig

1). Substantial

growth

occurred

in the

non-cash

assistance and medically needy recipient categories. Between 1979 and 1990 the non-cash assistance child

recipients

rose

from

4%

to

10%

and

the

medically

needy child group increased from 6% to 11 %, while the proportion of youth eligible for Medicaid as cash

assistance recipients dropped from 90% in 1979 to

72%. Children who were enrolled in Medicaid as a

result of post-1985 expansions accounted for 7% of all child

recipients

in 1990.

The largest increase in the number of dependent child recipients occurred, not surprisingly, in the ex-pansion group, where 810 000 children were brought into the Medicaid program (Table 2). This expansion

group

accounted

for

32%

of the

total

increase

in the

TABLE 1. Medicaid Rec ipients and Expenditures (Adjusted fo r Inflation) by Age and Year: 197 9, 1985, and 1990*

Total Expenditures Recipients Expenditures p er Recipient

Millions of Dollars ACGR, % Thousands ACGR, % $ ACGR, %

All 1979 1985 1990 38 958 44 874 64859 20 072 20 220 25255 1 941 2 219 2568 1979-1985 1985-1990 1979-1990 2.4 7.7 4.7 0.1 4.6 2.1 2.3 3.0 2.6 Dependent childrent 1979 1985 1990 5475 5245 9101 8677 9214 11220 631 569 811 1979-1985 1985-1990 1979-1990 -0.7 11.7 4.7 1.0 4.0 2.4 -1.7 7.3 2.3 Adults 1979 1985 1990 33 483 39 629 55 758 11 395 11 006 14 033 2 938 3 601 3 973 1979-1985 1985-19% 1979-1990 2.9 7.1 4.7 -0.6 5.0 2.0 3.5 2.0 2.8

* ACGR, annual compound growth rate.

tChildren who qualify for Medicaid as dependents, whether they receive cash assistance or not.

This group comprises mostly adults. Approximately 13% of children are included in this category. Please see the “Methods” section for

clarification.

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Fig 1. Composition of Medicaid’s child population: 1979, 1985, and 1990.

U

Cash Assistance

11%

!

No Cash Assistance

10% Medically Needy

Expansion 72%

75%

50%

25%

0%

6% 7%

4% 6%

90% 87%

1979

1985

1990

100% _7%

290 MEDICAID AND CHILDREN IN THE LAST DECADE

TABLE 2. Medicaid Expenditu res and Percent Change for Dependent Children by Eligibility Catego ry and Year: 1979, 1985, and 1990*

Total Expenditures Recipients Expenditures per Recipient

Millions of Dollars ACGR, % Thousands ACGR, %

$

ACGR, %

Receiving cash assistance

1979 4898 7807 627

1985 4350 7970 546

1990 5980 8124 736

1979-1985 -2.0 0.3 -2.3

1985-1990 6.6 0.4 6.2

1979-1990 1.8 0.4 1.5

Not receiving cash assistance

1979 218 374 583

1985 351 572 614

1990 921 1113 827

1979-1985 8.3 7.3 0.9

1985-1990 21.3 14.2 6.1

1979-1990 14.0 10.4 3.2

Medically needy

1979 359 496 724

1985 544 672 810

1990 1230 1173 1049

1979-1985 7.2 5.2 1.9

1985-1990 17.7 11.8 5.3

1979-1990 11.9 8.1 3.4

Eligible through expansions

1979 ... ... ...

1985 ... ... ...

1990 970 810 1198

* ACGR, annual compound growth rate.

number of

dependent

child

recipients

and

27%

of the

increase in dependent child costs (Table 3).

The second

largest

group

of children

that

enrolled

in the last decade were in non-cash assistance

groups,

including

children

in

two-parent

families.

Some

739

000

children were added as non-cash

as-sistance recipients, representing 29% of the increase in the total number of child recipients but only 19%

of the

total

increased

child

costs

(Table

3).

The third largest group of children added in the last decade were enrolled through the programs for

the

medically

needy.

Some

677 000

children

became

eligible

for

Medicaid

under

this

category,

represent-ing 26% of the increase in child recipients and 24% of the increase in child costs between 1979 and 1990 (Table 3).

Finally,

a net

increase

of 317 000 children

enrolled

as part of cash assistance programs during the last

decade

(Table

3). This

increase

accounted

for

13%

of

the overall

growth

in child

Medicaid

recipients

and

30% of the increased child costs. The average cost per child

receiving

cash

assistance

was

only

$736

in 1990,

compared

with

more

than

$1000

for

expansion

and

medically needy children (Table 2). The annual rate

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$1,198

15,036

14,400

$919

12,810

$839

Thousands

$1,300 - 15,000’

$1,200 - 14,000’

13,000’

$1,100

-

12,000-$1,000

-11,000

$900 - 10,000

$0

___._.____.._.__.___.___

9,000

$781

8,000-$700

-

7,000-

$600-$500- i I I I

1990 1995 2000 2005

Fig 2. Projected cost per recipient for children: 1990 to 2005.

Expansion; - - -, nonexpansion.

ARTICLES 291

TABLE 3. Analysis of Increas Category: 1979-1990

e in Recipients and Costs for Dep endent Children by Eligibility

Increased Recipients (Thousands)

% of Increased Recipients

Increased Costs (Millions*)

% of Increased Costs

All eligibility categories 2545 100.0 3626 100.0

Receiving cash assistance

Not receiving cash assistance

Medically needy

Eligible through expansions

317 739 677 810

12.5 29.2 26.2 32.0

1082 703 871 970

29.8 19.4 24.0 26.8

* In 1990 dollars.

of

growth

in per-recipient

costs

for children

receiving

AFDC

was also lower than in any other category

(1.5%). The slower rate of growth over the decade is

mostly

due

to

the

sharp

reduction

in per-recipient

costs during the first half of the decade (-2.3%).

Projected Costs for Expansion Children

Expansion

children

tend

to

be

more

expensive

than other children in the Medicaid

program

because

the expansion group has a disproportionate number of infants. In 1990, 38% of

expansion

children

were

infants

compared

with

10%

of

all

child

recipients,

and infants comprised 33% of the expansion costs

compared

with

20%

of the

costs

for all children

(data

not shown).

As the expansion phase-in continues, the average

age

of children

in the

program

will

increase.

Conse-quently,

the

average

cost

per

expansion

child

will

decrease. Figure 2 demonstrates that as the phase-in

progresses,

the

average

per-recipient

cost

for

these

expansion

children

recedes

from

$1198

in

1990

to

$823 in 2005. Both the cost and the age-mix will

even-tually

parallel

the

costs

and

age-mix

for

dependent

children in other

Furthermore, the

dependent

children

portion

of

Medicaid will experience a 29% cost increase by the

year

2002,

after

which

the

costs

for

this

group

will

stabilize

(Fig

3). When

the

phase-in

is completed,

the

expansions

wifi

have

added

almost

4 million

more

dependent

children

into

the

Medicaid

program,

a

34% increase from 1990.

Changes in Child Recipients and Payments by Service

Unlike

the marked

changes

that

occurred

in

eligi-bility

minor increases in service utilization occurred,

though

patterns

of use

remained

largely

the

same.

Medicaid

payments

for

all

services,

except

dental

care, rose during the 1980s, as shown in Table 4. Overall, a 17% increase in the number of recipients

younger

than

21 years

of age

was

reported

between

1979

and

1989.

Total

payments,

however,

rose

by 65%

but cost

per

child

served

increased

by only

41%.

Table 4 reveals that roughly half of all Medicaid payments for children went for hospital care in 1979, 1985, and 1989. Three of the other major categories of service-long-term care (including skified and inter-mediate care facilities, mental health facilities, and

1

6,000-5,000

... $11,785

#{149}.#{149}‘‘$11,333

... Millions

... $10,217

$9,101

I I I

1990 1995 2000 2005

Fig 3. Projected number of recipients and cost for children: 1990

to 2005. -, Recipients; - - -, expenditures.

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TABLE 4. Medicaid Recipients and Payments for All Children by Service: 1979, 1985, and 1989*

Total Expenditures Recipients Expenditur es per Recipient

Millions of Dollarst ACGR, % Thousands ACGR, % $t ACGR, %

All services

1979 6603 9623 686

1985 8226 10296 799

1989 10 919 11 263 969

1979-1985 3.7 1.1 2.6

1985-1989 7.3 2.3 4.9

1979-1989 5.2 1.6 3.5

Long-term cares

1979 916 117 7829

1985 1572 171 9193

1989 1 710 155 11 032

1979-1985 9.4 6.5 2.7

1985-1989 2.1 -2.4 4.7

1979-1989 6.4 2.9 3.5

Hospital cares

1979 3463 4804 721

1985 4176 5452 766

1989 5701 6451 884

1979-1985 3.2 2.1 1.0

1985-1989 8.1 4.3 3.7

1979-1989 5.1 3.0 2.1

Physician care

1979 981 6491 151

1985 973 7108 137

1989 1299 7933 164

1979-1985 -0.1 1.5 -1.6

1985-1989 7.5 2.8 4.6

1979-1989 2.9 2.0 0.8

Clinic servicesli

1979 190 806 236

1985 251 1 133 222

1989 338 1 184 285

1979-1985 4.8 5.8 -1.0

1985-1989 7.7 1.1 6.4

1979-1989 5.9 3.9 1.9

EPSDT

1981 123 1968 63

1985 96 1 902 50

1989 146 2524 58

1981-1985 -6.0 -0.8 -5.6

1985-1989 11.1 7.3 3.8

1979-1989 2.2 3.2 -1.0

Family-planning services

1979 54 391 138

1985 47 545 86

1989 38 496 77

1979-1985 -2.3 5.7 -7.6

1985-1989 -5.2 -2.3 -2.7

1979-1989 -3.5 2.4 -5.7

Other practitioners’ services

1979 89 1063 84

1985 98 1 285 76

1989 118 1 299 91

1979-1985 1.6 3.2 -1.7

1985-1989 ..8 0.3 4.6

1979-1989 2.9 2.0 0.8

Dental care

1979 392 2627 149

1985 294 2873 102

1989 261 2588 101

* ACGR, annual compound growth rate; EPSDT, Early and Periodic Screening, Diagnosis, and Treatment.

1 In 1989 dollars.

:$:

Long-term care includes skilled nursing facilities, intermediate care facilities, mental health facilities, inpatient psychiatric care for persons younger than age 21, and home health care.

§

Hospital care includes both inpatient and outpatient care.

II

Clinic services include clinic and rural health services.

‘I Other care includes prescription drugs and laboratory and x-ray services.

292 MEDICAID AND CHILDREN IN THE LAST DECADE

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TABLE 4. (Continued)

ARTICLES 293

Total Expenditures Recipients Expenditu res per Recipient

Millions of Dollarst ACGR, % Thousands ACGR, % $t ACGR, %

Dental Care (continued) 1979-1985

1985-1989 1979-1989

-4.7 -2.9 -4.0

1.5 -2.6 -0.2

-6.1 -0.3 -3.8

Other carel 1979 1985 1989

531 721 1309

8371 10131 12572

63 71

104

1979-1985 1985-1989 1979-1989

5.2 16.1

9.4

3.2 5.6

4.2

2.0 10.0

5.1

home

health

care);

physician services; and other care (including drugs, laboratory tests, and

x-rays)-experienced

modest

changes

in

the

proportion

of

payments made during the 1980s.

Excluding

family-planning

services,

the

annual

growth

in cost per recipient for non-institution-based

services

(ie,

physician

services,

EPSDT,

dental

care,

and

other

practitioner services) was minimal or

neg-ative

throughout

the

decade.

As a group,

noninstitu-tional providers contrast markedly with institutional

providers

(ie, hospitals

and

long-term

care

facilities),

whose per-recipient annual growth averaged 2.1%

and

3.5%,

respectively.

While

physician

services

make

up

11 .9% of all of the expenditures

for children,

they

comprise

only

7.3%

of the

growth

in

expendi-tures

during

the

last

decade

(Table

5).

This

same

pattern is mirrored with EPSDT, dental services, and

other

practitioner

services.

Table

5 indicates

which

services

were

responsible for the largest increases in utilization and costs dur-ing the past decade. Since 1979, hospital care has maintained its same share of the total Medicaid bud-get for children. This is not surprising considering

the

age

composition

of the

expansion

group.

Long-term care also was a significant component of the

increase

in costs

for children

(18.4%),

although

most

of this

growth

took

place

in the

first

half

of the

de-cade.

Other

care

comprised

the

largest

portion

of the

increase in utilization (49.1 %) and the third largest

portion

of the

increase

in costs

for

children

(18.0%).

DISCUSSION

Despite

the

major

changes

in Medicaid

eligibility

for children over the last decade, only limited shifts

occurred in expenditures for them. Although data

from HCFA reveal a 25% increase in the number of all Medicaid recipients and a 66% rise in payments

be-tween

1979

and

1990,

children

represented

only

half

the

recipients added in the last decade. Moreover,

Medicaid

expenditures

for

children

during

the

last

decade

accounted

for

only

one

seventh

of the

total

cost

increase.

These

10 years

of Medicaid

experience

again

doc-ument the historical disparity in program expendi-tures for children and adults. HCFA’s data suggest that the discrepancy between spending on children and adults, demonstrated previously for social

wel-fare

programs, persists in Medicaid.1#{176} Clearly, chil-dren do not require the same level of Medicaid fund-ing as adults because the vast majority of them are

healthy

and

require

primarily

ambulatory

care

ser-vices. Still, the issue remains as to whether or not

poor

and

disabled

children

have

an

adequate

share

of Medicaid

resources.

Moreover,

as states

and

HCFA

begin to analyze their increased caseloads to deter-mine what opportunities exist for reducing future

TABLE 5. Analysis of Increase in Recipients and Costs: All Children by Service, 1979-1989

Increase in No. of Persons % of Total Increase Increase in Costs % of Total Increase

Receiving Each Service in Receipt of Services for Each Service of Service Costs

(Thousands) (Millions*)

All services 8564+ 100.0 4326 100.0

Long-term care 38 0.4 794 18.4

Hospital care 1647 19.2 2238 51.9

Physician care 1442 16.8 318 7.3

Clinic services 378 4.4 148 3.4

EPSDT4 556 6.5 23 0.5

Family-planning services 105 1.2 -16 -0.4

Other practitioners’ services 236 2.8 29 0.7

Dental care -39 -0.5 -131 -3.0

Other care 4201 49.1 778 18.0

* In 1989 dollars.

tThis number is the sum of all the values in the column, not the increase in the number of child recipients. Because each recipient uses

many services, the latter number would have resulted in percentages in column 2 which would greatly exceed 100% and which would

be difficult to interpret.

*

EPSDT, Early and Periodic Screening, Diagnosis, and Treatment.

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294 MEDICAID AND CHILDREN IN THE LAST DECADE spending increases, children remain in a vulnerable position because their programs are often caught in the web of intergenerational politics.10 To avoid this conflict, Congress might consider alternative ap-proaches for guaranteeing a basic level of funding for children.

Several options exist to earmark funding for chil-dren; some of these have already been adopted or are under consideration by states and by architects of national health insurance reform proposals. For

ex-ample, Benjamin and associates11 detailed three

mechanisms to ensure intergenerational equity: (1) creating a children’s trust similar to the federal trust funds currently used to finance Medicare and Social Security retirement payments, (2) using state lotteries

as a funding source as is currently done in some

states to finance education, and (3) earmarking tax revenues as is done with the Presidential Election Campaign Fund. As universal and national health insurance proposals are debated, these and other fi-nancing options can provide a means of avoiding the vulnerability that children’s programs have

histori-cally faced when competing against programs for

other

age

groups

for

funding.

The

second

major

finding

provided by our study is

that a significant shift in the eligibility distribution of Medicaid-enrolled children has occurred during the last decade. Only 13% of the children brought into the program entered it through cash assistance pro-grams, primarily AFDC. In fact, of the 2.5 million dependent child recipients brought into the

Medic-aid program between 1979 and 1990, 32% came in as

a result

of

Medicaid

expansions introduced since

1985, 29% entered as non-cash recipients, and 26%

came

through

medically

needy

programs.

Taken

to-gether, these shifts demonstrate that Medicaid is much more likely to serve a child who does not re-ceive cash assistance today than it was in 1979. In addition, children who qualify for Medicaid today

are

more

apt to have serious health problems. Two important implications are suggested.

First, legislation adopted in the latter half of the 1980s to separate Medicaid and welfare has appar-ently succeeded. States will, however, need to con-tinually monitor this eligibility distribution as

pov-erty rates vary, entitlement programs change in

response to macroeconomic conditions, and program expansions slow.

The eligibility distribution of children receiving Medicaid is also important in terms of estimating future program expenditures. Our analysis reveals that the per capita cost for the expansion group was the most expensive, $1198 in 1990, and the cash as-sistance group the least expensive, $736. This cost difference has lead many policymakers to question the durability of the Medicaid expansions in light of states’ current fiscal troubles.

However,

as shown

by our

study,

the

higher

costs

for the expansion group should diminish because infants, who are disproportionately represented, will decline as a percent of the total of this group. We

were

unable

to examine

other

differences

between

the costs for expansion children and other dependent children, such as increased adverse selection that is likely to occur with the expansion group. Still, our

findings show that the costs for future program ex-pansions are likely to be considerably lower because the children included will be older and less expen-sive. We estimate that the cost for future expansion children will drop from a high of $1198 in 1990 to a low of $823 in 2005. Hence, the relative financial burden on the states will diminish with time. This leads us to conclude that accelerating the phase-in

process is a much more manageable policy option

than may be presumed by the federal and state gov-ernments.

The last major finding of our study is that patterns of service use and cost distribution remained largely the same over the last decade. Overall, there was a 17% increase in service use. Long-term care, labora-tory and x-ray services, and prescription drugs pri-marily accounted for this increase. The shift may partially reflect the growing prevalence of chronic illness among children, an inference that is also sup-ported by the increase in the number of medically needy recipients in the Medicaid program.

One major concern is the lack of change that

oc-curred

in preventive and primary care, particularly considering the eligibility composition of children

enrolled

in the

last

10 years.

Per-child

recipient

costs

for physician services grew by only I % each year and

EPSDT costs actually declined by 1 % each year.

While our service trend data extend only to 1989, prior to the EPSDT expansions and pediatric reim-bursement improvements called for in the Omnibus Budget Reconciliation Act of 1989,6 they certainly signal the importance of those legislative actions. These data suggest the need to provide further in-centives to encourage the availability and use of

pre-ventive and primary care services among poor and

disabled children and vigorous implementation of

recent federal legislation.

The findings from this study are particularly tell-ing as states enter a new decade of economic down-turn and as policymakers look for causes and reme-dies for their fiscal hardships. According to the National Conference of State Legislatures, “Increased

demand for entitlement programs is to blame [for

severe budget shortfalls], which is a direct conse-quence of the recession.”9 Medicaid is in jeopardy because it leads the list of entitlement programs with cost overruns: as many as 22 states report that Med-icaid expenditures exceed budgetary projections.

Concrete

evidence

of Medicaid’s

vulnerability

can be

seen in the fact that, for the first time in 6 years, no

federal

legislation

expanding

Medicaid

eligibility

was passed in 1991 .

The

moratorium

that

the

gover-nors called for in 1990, to a large extent, has begun.

The

experience

of children

brought

onto

Medicaid

in the last decade can be very instructive to policy-makers as they consider staying their present course

and modifying or expanding Medicaid coverage in

the future. Clearly, a reduction in Medicaid spending for children is unlikely to provide substantial relief to

current

state fiscal hardships.

ACKNOWLEDGMENTS

This work was supported, in part, by the Maternal and Child

Health Bureau, Department of Health and Human Services, grant

MCJ-067031-01-0. Analyses, interpretations, and conclusions are

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ARTICLES 295

solely those of the authors and do not necessarily reflect the views

of the American Academy of Pediatrics or the funding agency.

We wish to express our appreciation to those who reviewed an

early draft of this article: Harriette Fox, Paul Newacheck, Barbara

Starfield, and the staff of the American Academy of Pediatrics.

REFERENCES

1. General Accounting Office. Medicaid Expansions: Coverage Improves but

State Fiscal Problems Jeopardize Continued Progress. Washington, DC:

Gen-eral Accounting Office; June 25, 1991

2. Cartland J. Medicaid during the Reagan years: federal and state reforms.

Presented at the Annual Meeting of the American Public Health

Asso-ciation; November 1991; Atlanta, GA

3. Budetti 1’, Butler J, McManus P. Federal health program reforms:

impli-cations for child health care. Milbank Mon Fund

Q.

1982;60:155-181 4. General Accounting Office. An Evaluation of the 1981 AFDC Changes:

Final Report. Washington, DC: General Accounting Office; July 2, 1985

5. Chang D, Holohan J.Medicaid Spending in the 1980s: The Access-Cost

Containment Trade-off Revisited. Washington, DC: Urban Institute; 1990

6. Fox HB. 1989 State Legislative Amendments Affecting Access to Care by

Children and Pregnant Women. Washington, DC: Fox Health Policy

Con-sultants; January 12, 1990

7. McManus M, Flint S, Kelly R. The adequacy of physician reimburse-ment for pediatric care under Medicaid. Pediatrics. 1991;87:909-920 8. Kent C, ed. Medicaid under the microscope. Medicine and Health

Per-spectives. 1991;45(27):3-4

9. National Conference of State Legislatures. State fiscal out-look for 1992.

State Legislative Report. 1992;17:3

10. American Academy of Pediatrics. Medicaid State Reports, FY 1990. Elk Grove Village, IL: American Academy of Pediatrics; 1992

11. Benjamin AE, Newacheck PW, Wolfe H. Intergenerational equity and

public spending. Pediatrics. 1991;88:75-83

STUDIES FIND NO DISADVANTAGE IN GROWING UP

IN A GAY HOME

Studies Dispute Long-Held Views

. . . According to a review of new studies in the [December 1992] issue of the journal Child Development, children raised by gay parents are no more likely to have psychological problems than those raised in more conventional circumstan-ces. While they may face teasing or even ridicule, especially in adolescence, the studies show that, over all, there are no psychological disadvantages for children . . . in being raised by homosexuals.

That

conclusion

challenges

a view

long

held

by

some

mental

health

special-ists. .

“What evidence there is suggests there are no particular developmental deficits for children raised by gay or lesbian parents,” said Dr. Michael E. Lamb, chief of the Section on Social and Emotional Development at the National Institute of Child

Health and Human Development. .

Estimates of the number of children being raised by homosexual parents range from 6 million to 14 million, in at least 4 million households. .

Having homosexual parents “does not cause homosexuality or gender confusion

in children,” said Dr. John Money, a specialist in sexual disorders at Johns Hopkins University medical school.

Coleman D. Studies find no disadvantage in growing up in a gay home. The New York Times, December

2, 1992.

Noted by J.F.L., MD

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