Recent Changes in Health Policy for Low-Income People in Florida
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Posted to Web: April 01, 2002
Permanent Link: http://www.urban.org/url.cfm?ID=310473
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Note: This report is available in its entirety in the Portable Document Format (PDF).
About the Series
This state update is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.
Recent Changes in Health Policy for Low-Income People received special funding from the Robert Wood Johnson Foundation as part of the Urban Institute's Assessing the New Federalism project. The project received additional financial support from The Annie E. Casey Foundation, the W. K. Kellogg Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.
This state update was prepared for the Assessing the New Federalism project. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute, its board, its sponsors, or other authors in the series.
Overview
Through the early and mid-1990s, the state of Florida could be described as an innovator in health policy. Under the creative leadership of both executive and legislative branch officials, Florida proposed and/or implemented a wide array of initiatives, including expanding health insurance coverage through the Florida Health Security Act, implementing managed competition in the small group insurance market through the Community Health Purchasing Alliances, increasing health coverage of low-income children through the Title XXI-supported KidCare program,reducing infant mortality through the Healthy Start program, and improving efficiency and cost management in the Medicaid health system through the aggressive expansion of Medicaid managed care. Many of these efforts were viewed as "models" and were emulated by other states.
In more recent years, important and sometimes subtle shifts in this role have occurred. With the passing of the gubernatorial reins from Democrat Lawton Chiles to Republican Jeb Bush, and with Republican majorities elected to both houses of the legislature in 1998, Florida for the first time in recent history saw the complete political alignment of its executive and legislative branches within the Republican party. This development, along with a slowing economy, have helped create an environment that is more fiscally conservative, that embraces a less expansionary view of the role of state government, and that sees solutions to health policy challenges involving the cooperative partnering of state and local governments and the private sector. Within this philosophical construct, innovations continue to emerge in the state as it works to better serve vulnerable populations.
This report assesses changes and continuities in the past five years, building on an earlier baseline study.1 In brief, our case study revealed that budget shortfalls emerged in Florida in the past year, fueled by a combination of dramatic growth in Medicaid spending due to increases in enrollment, home- and community-based program funding and health care costs (in particular, prescription drugs), and declines in general revenue funds due in part to the recent implementation of large tax cuts. Interestingly, however, despite facing an estimated Medicaid shortfall of $1.5 billion, state officials were able to avoid implementing significant program cuts as a way of reconciling the budget shortfalls during the regular 2001 legislative session.2 Instead, the state adopted policies that sought to control spending growth rates and find more efficiencies in current operations. Principal among the state's strategies was the adoption of a new Medicaid prescription drug formulary that would allow Florida to restrict beneficiaries' use of prescription drugs to medicines for which it has successfully negotiated the receipt of "supplemental manufacturer rebates"—that is, rebates that go beyond the federally mandated discounts Florida currently receives from manufacturers.3
The catastrophic events of September 11, 2001, however, precipitated a significant downturn in the state's economy that created huge unexpected deficits in the state's fiscal year (FY) 2002 budget. As a result, the governor was forced to convene two special sessions of the legislature late in 2001 where they enacted several cost-cutting measures, including reductions in Medicaid eligibility and services for adults. It remains to be seen whether the cost efficiencies the state has invested in will prevent future cuts to Medicaid and other health care programs in the event of a prolonged economic slump.
Problems of uninsurance continued to loom large, fueled by historically low rates of employer-sponsored health insurance and very low Medicaid income eligibility levels for adults. But by the end of the regular 2001 session, policymakers had no plans to pursue public coverage expansions through such avenues as Section 1931 Medicaid expansions or State Children's Health Insurance Program (SCHIP) "family coverage" waivers. Rather, the state promoted expanded private sector coverage through such strategies as the creation of the Small Health Alliance (to replace the defunct Community Health Employer Purchasing Alliances and permit group pooling/purchasing by small employers). There have also been proposals to create bare-bones policies that would increase the affordability of insurance for low-income populations, but state officials admit that the potential for these proposals to significantly decrease the uninsurance rate is limited. The recent Medicaid program cutbacks and the persistence of weak economic conditions will likely aggravate the state's problem with uninsurance.
Acute care systems—primarily managed care organizations and hospitals—have weathered turbulent times. In the managed care sector, intense competition, coupled with tighter regulations in the aftermath of quality-of-care scandals, have caused numerous plans to leave the state entirely and other plans to stop participating in Medicaid. Yet many policymakers describe the managed care market as "healthier" in light of these developments, with financially sound plans and better state oversight more firmly in place. At the same time, recent years have seen the development of an alternative Medicaid managed care model (the Provider Service Network) that is built around provider groups that traditionally serve low-income and vulnerable populations.
As with the health maintenance organization (HMO) industry, the hospital sector has experienced financial difficulty in the past few years. Significant reductions in Medicare reimbursement mandated by the Balanced Budget Act of 1997, coupled with steady increases in the provision of uncompensated care, have weakened the financial position of hospitals. More recently, however, hospitals' financial circumstances have improved, partly due to the numerous mergers and acquisitions that have strengthened their market position when negotiating payment arrangements with insurers. Additionally, while Florida had a relatively small disproportionate share hospital (DSH) program throughout the 1990s, state plans call for increasing the state's drawdown of federal matching dollars through Upper Payment Limit (UPL) initiatives, an effort that could potentially bolster hospital operations.
A full-blown crisis has emerged within Florida's long-term care system, one that threatens to further undermine the quality of the nursing home system. A complex set of interrelated factors have "domino-ed" to create this situation: chronic staffing shortages led to an erosion in quality of care, which in turn led to lawsuits that resulted in extremely large awards for complainants and skyrocketing liability insurance rates for the industry. The situation will be further compounded in the long term by the lack of home- and community-based alternatives to nursing home care in a state that already has a very high proportion of older people, one that is projected to increase in the future.
In contrast to the state of home- and community-based services programs for the elderly, the state has made tremendous strides in its efforts to implement community-based alternatives for younger Floridians with developmental disabilities. Governor Bush has surprised many with his efforts to focus resources on this population and, using the U.S. Supreme Court's Olmstead decision (which provided a limited right to home- and community-based services) as leverage, his administration has successfully argued with federal officials for the approval of pending Medicaid waivers and state plan amendments to expand long-term care alternatives in community settings.
Finally, the state's response to budget shortfalls has put a strain on the relationship between state and local governments. Last year, $89 million in local taxes and state graduate medical education funds were used to leverage $135 million in federal matching funds through the UPL program—all of which were directed back to local hospitals. The legislature passed legislation for FY 2002 that calls for almost tripling the local contribution, but the legislature has required that some of the local monies raised for the UPL program be channeled into state general revenue accounts, a move that could threaten local participation in the program. In addition, the opposition of Governor Bush to a bill that would waive the local match requirement for participation in the state's SCHIP program was also a source of tension between state and local governments.
To better understand how states have responded to both federal constraints and state flexibility during the last half decade, this study of Florida, along with 12 separate studies of other states, examines state priority setting and program operations in health policy affecting the low-income population.4 Five major sets of issues are addressed in this set of reports. First, how have the political and fiscal circumstances of the state changed over the last several years? Second, has the state expanded public or private health insurance coverage, through Medicaid, SCHIP, Medicaid research and demonstration waivers, or state-funded programs? Third, how have Medicaid managed care and other acute care issues changed? For example, has access been affected by managed care plan withdrawals from Medicaid or backlash against plans by providers or beneficiaries? How are states coping with federal DSH cuts? Fourth, how are states responding to pressures to expand home- and community-based services for disabled persons, their new freedom to set reimbursement rates, and the labor shortage? Fifth, what other issues were prominent?
Information for this report came from in-person interviews on site in late March 2001, sometimes supplemented by telephone and written responses. Interviewees included state officials, provider associations, and other knowledgeable observers. Secondary sources included publicly available documents, newspaper articles, and Web sites. Interviewees were given the opportunity to comment on a draft, and policy changes were tracked through the end of the December 2001 special session that was called to address unanticipated budget deficits.
Notes from this section of the report
1. The prior study's site visit interviews occurred in February 1997. See Lipson, Debra J., Steven Norton, and Lisa Dubay. 1997. Health Policy for Low-Income People in Florida. Washington, D.C.: The Urban Institute. Assessing the New Federalism State Reports.
2. Florida's regular legislative session usually takes place between March and May.
3. There are some limitations on the extent to which Florida can restrict beneficiaries' use of drugs to those medicines on the preferred drug list. These limitations are discussed later in the report.
4. The other 12 states are Alabama, California, Colorado, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, Texas, Washington, and Wisconsin. The 13 states studied were selected to present a balanced view of state activity and its impact on low-income families. See Kondratas, Anna, Alan Weil, and Naomi Goldstein. 1998. "Assessing the New Federalism: An Introduction." Health Affairs 17(3): 17-24.
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.