Native Americans and Medicaid: Coverage and Financing Issues – Report
Native Americans and Medicaid:Coverage and Financing Issues
Prepared by Andy Schneider and JoAnn Martinez, The Center on Budget and Policy Priorities for The Kaiser Commission on the Future of Medicaid
Table Of Contents
Highlights ii I: Background On Native American Health Care 1 II: Medicaid's Role For Native Americans 4 1. Medicaid as a Source of Health Coverage 4 2. Medicaid as a Source of Revenue for Hospitals and Clinics 6 3. Medicaid and Managed Care 10 4. Medicaid as Medicare Premium Assistance 14 5. Medicaid as a Source of Long-Term Care Coverage 15 III: Policy Issues For Native Ameircans In Managed Care 16 1. Policy Issues 16 2. Conclusion 18 Endnotes 20 Tables 22
There are an estimated 2.3 million Native Americans — American Indians and Alaska Natives — in the U.S. About half of the Native American population lives on or near reservations; the other half resides in other rural areas and in urban areas. The Native American population includes 554 tribes recognized by the federal government as well as other tribes, largely in California, that do not have federal recognition.
Medicaid plays several significant roles for Native Americans. The Medicaid program acts as:
- An insurance program covering physician, hospital, and other basic health care services for eligible Native Americans, especially families with children;
- A source of revenue for Indian Health Services (IHS) and tribally-operated clinics and hospitals;
- A purchaser of managed care products;
- A source of financial assistance for low-income elderly and disabled Native Americans to meet Medicare premium and cost-sharing obligations; and
- A source of coverage for nursing home care and other long-term care services for frail elderly and disabled Native Americans.
All Native Americans that are members of federally recognized tribes are eligible to receive services from the IHS. Because of high rates of poverty among Native Americans, Medicaid is an important publicly funded health program for Native Americans. In 1996, it is estimated that Medicaid covered nearly 40 percent of the Native American population.
Medicaid as a Source of Revenue
Medicaid is an important source of revenue for Native American health facilities. In fiscal year 1997, IHS and tribally operated facilities were projected to receive $184.3 million in Medicaid reimbursements. This amount is equal to about 10 percent of the $1.8 billion appropriated for IHS and tribally-provided health services that year. Medicaid is an open-ended entitlement program. In contrast, the IHS receives funding through the domestic appropriations which are subject to broad caps over the next five years. As a result, Medicaid payments will become an increasingly important source of funding for many IHS, tribal, and urban programs.
The structure of the Medicaid program provides financial incentives for states to encourage beneficiaries to use tribal health facilities. Medicaid is a matching program under which the federal government contributes money to the states to pay for covered services on behalf of Medicaid beneficiaries. The federal government's share of these costs ranges from 50 percent in wealthier states to nearly 80 percent in the poorest states. On average, the federal government pays 57 percent of a state's Medicaid costs. In contrast, the cost of services provided to Medicaid beneficiaries by a hospital, clinic, or other facility of the IHS or by a tribe or tribal organization is matched by the federal government at a 100 percent rate in a Memorandum of Agreement (MOA) between IHS, the Health Care Financing Administration (HCFA), December 19th 1996. Thus, the state is fully reimbursed by the federal government and is not required to contribute any of its own funds toward the cost of care. This provision does not apply to urban Indian programs.
Medicaid and Managed Care
Over the past few years, Medicaid in many states has been shifting from a predominantly fee-for-service program to a program that purchases services from managed care organizations (MCOs) or primary care case management organizations (PCCMs). This shift presents critical policy issues for the IHS, tribal health programs, and urban Indian health programs. Provisions in the Balanced Budget Act of 1997 will accelerate these changes.
- Mandatory Beneficiary Enrollment in Managed Care. Under the Balanced Budget Act, states have the authority to require most Medicaid beneficiaries to enroll in MCOs or PCCMs. States can only require Native Americans in Medicaid to receive services through an MCO or PCCM if the MCO or PCCM is the IHS, a tribally operated program, or an urban Indian health program. States do not have authority to require Medicaid-eligible Native Americans to enroll in MCOs that are not operated by the IHS, a tribe, or an urban Indian organization. States do have the authority to require such enrollment under “section 1115” demonstration waivers or under “section 1915(b)” program waivers. Native Americans, who are eligible for Medicaid, have the choice of enrolling in any participating, Medicaid MCO operating in their area.
- Capitation Payments under Medicaid Managed Care. The December 1996 MOA does not expressly address payments to MCOs. Presumably, the 100 percent federal matching rate is payable to MCOs or PCCMs operated by the IHS or tribes. This interpretation would be consistent with the clear policy for fee-for-service arrangements.
- Strategic Choices for Native American Health Facilities. Managed care dramatically affects the strategic choices available to Native American health facilities.
- IHS facilities can establish their own MCO or PCCM and seek to contract with the state to enroll Indian and non-Indian Medicaid beneficiaries; subcontract with a private MCO or PCCM and provide services to the Indian and non-Indian enrollees of that MCO or PCCM; or continue to be reimbursed by Medicaid on a fee-for-service basis and remain unaffiliated with any Medicaid MCO or PCCM.
- Tribally owned and operated services face similar choices with two important differences. If they are also a Federally Qualified Health Center (FQHC), then they have additional financial protections until 2003. Second, they may be able to assume financial risk, allowing them the option of becoming an MCO.
- Because urban Indian facilities are historically underfunded and do not benefit from the 100 percent matching rate, they face considerably greater challenges in adapting to the managed care environment. Their most viable option is to attempt to subcontract with an MCO or PCCM although there are no guarantees that this approach will be successful.
Native Americans and Medicaid: Coverage And Financing Issues
Traditionally, Native Americans have relied upon the facilities and programs of the Indian Health Service (IHS) for access to health care. Although the IHS remains the primary source of health care delivery and financing for most Indian tribes, public programs such as Medicare and Medicaid are playing a larger and larger role in the financing of care for Native Americans living on or near reservations as well as those in urban areas. Because of the high incidence of poverty among American Indians and Alaska Natives, Medicaid – the federal-state health care program for low-income people – is of particular importance.
Medicaid plays several different roles of significance to Native Americans. Medicaid is an insurance program, offering coverage for physician, hospital, and other basic health care services to eligible Indians, especially families with children. It is a source of revenue for IHS and tribally-operated clinics and hospitals that deliver those basic services. Through its purchase of managed care products, Medicaid is reshaping the health care delivery system for many Native Americans and other underserved low-income populations. Medicaid also assists low-income elderly and disabled Indians who are eligible for Medicare in meeting their premium and cost-sharing obligations. Finally, Medicaid offers coverage for nursing home care and other long-term care services needed by frail elderly and disabled Native Americans.
This Policy Brief provides an overview of Medicaid from the standpoint of Native Americans with an emphasis on Medicaid as an insurance program and a purchaser of managed care. This Brief supplements other Policy Briefs and background materials on Medicaid issued by the Commission.1 It incorporates the changes to Medicaid made by the Balanced Budget Act of 1997.2 This Policy Brief focuses on those federal policies common to all state Medicaid programs and does not review the details of any particular state program. Because Medicaid is administered by states within broad federal guidelines, Medicaid programs vary significantly from state to state with respect to benefits, eligibility, provider payment, and administration. However, the information contained in this Policy Brief is the starting point for understanding the Medicaid program in any particular state.
There are an estimated 2.3 million Native Americans – American Indians and Alaska Natives – in the U.S. About half of the Native American population lives on or near reservations; the other half resides in other rural areas and in urban areas. The Native American population includes 554 tribes recognized by the federal government as well as other tribes, largely in California, that for various reasons do not have federal recognition. The federally recognized tribes vary in size from less than 100 to more than 100,000 members. The economic status of these tribes varies substantially; some are wealthy, but many face conditions of high unemployment and high rates of poverty. Indians in urban areas, who are frequently not enrolled members of federally-recognized tribes, are often unemployed.
The driving force for many of the health status and health coverage problems facing Native Americans as a whole is poverty. Not all Indians are poor, but a very large proportion of them are. U.S. Census data indicate that in 1996, 30.9% of Native Americans as a whole had family incomes below the poverty line, in comparison with 13.8% for the U.S. population as a whole.
The health status of Native Americans is significantly lower than that of the rest of the U.S. population. 3 According to the Indian Health Service (IHS) of the Department of Health and Human Services, the age-adjusted mortality rate for American Indians and Alaska Natives residing in the areas served by the IHS was 594.1 (per 100,000 population) for calendar years 1991-1993, compared to a rate of 504.2 for the entire U.S. population in 1992. ,4 In some IHS areas, the rate is double that of the total U.S. population. For instance, in the South Dakota, North Dakota, Nebraska and Iowa area the rate for calendar years 1991-1993 was 1,045.9.
Although there are significant variations from area to area, Native Americans as a whole have higher rates of death and injury caused by accidents and violence (including suicide and homicide) than the U.S. population generally. For the same 1991-1993 period, the IHS service area population had an accident mortality rate of 83.4 (per 100,000 population), compared with a rate of 29.4 for the entire U.S. population in 1992. Many of these deaths are related to the high incidence of alcohol abuse in a number Indian communities. Native Americans have higher rates of mortality from alcoholism than the U.S. population generally. The alcoholism mortality rate for the IHS service area population was 38.4 (per 100,000 population) over the 1991-1993 period compared to a rate of 6.8 among the entire U.S. population in 1992. Finally, the incidence of diabetes among Native Americans is significantly higher than that among the U.S. population generally. The diabetes mellitus mortality rate for the IHS service area population was 31.7 (per 100,000 population) over the 1991-1993 period, in comparison with the rate of 11.9 among the entire U.S. population in 1992.
The agency responsible for providing or paying for the provision of health services to most American Indians and Alaska Natives is the Indian Health Service (IHS). The IHS estimates its 1996 patient population – i.e., those eligible for health care services provided through or paid by the IHS – at 1.4 million Native Americans, most of whom live on reservations. This represents about three-fifths of the 2.3 million Native Americans in the U.S. Eligibility for IHS care is determined under federal statute and regulation and depends largely (but not exclusively) upon membership in a federally-recognized tribe and residence on or near a reservation. Federal recognition of a tribe is generally predicated on treaty or federal statute or both.
The IHS delivers care directly to Indians who meet IHS eligibility criteria through 40 hospitals, 64 health centers, 5 school health centers, and 50 smaller health stations located in 17 states. The IHS also makes arrangements, through contracts or “compacts,” directly with Indian tribes to deliver care to their own members. Currently tribes operate 9 hospitals, 116 outpatient health centers, 5 school health centers, 56 smaller health stations, and 171 Alaska village clinics under these arrangements. Finally the IHS funds 34 urban Indian programs ranging from outreach and referral programs to outpatient health clinics. Specialized and/or expensive diagnostic and treatment services that the IHS (or tribes) cannot offer directly through their own facilities in a particular area may, subject to the availability of funds, be purchased from non-IHS (or non-tribal) providers on a fee-for-service basis through the “contract health services” (CHS) program. Urban Indian programs do not have access to CHS funds.
In 1997, 57.2 percent of the $1.8 billion appropriated to IHS for services was spent on IHS direct operations, 41.5 percent was spent on tribally-operated hospitals and clinics, and 1.4 percent was spent on urban Indian programs. Of the $1.1 billion appropriated to IHS for direct services, $235 million, or 22 percent, took the form of contract health services purchased from non-IHS providers. The comparable CHS figure for tribal providers was $133.4 million, or 18 percent of the total $750 million in fiscal year 1997 appropriations allocated to tribal providers.
Medicaid as a Source of Health Coverage
In part because of high rates of poverty and unemployment, Native Americans are less likely than other Americans to have employer-sponsored or other types of private health insurance coverage. In addition, Native Americans are less likely to be enrolled in public health insurance programs like Medicare and Medicaid. According to U.S. Census data for 1996, 18.1 percent of Native Americans had no health insurance while 47.7 percent had private insurance, 39 percent were enrolled in Medicaid, 10.1 percent were enrolled in Medicare, and 4.1 percent were covered through the Civilian Health and Medical Programs of the Uniformed Services (CHAMPUS).5 The IHS data base indicates that, as of August 12, 1997, of the 1,784,000 individuals registered as IHS patients, 466,000, or 26 percent, were eligible for Medicaid.6
Nationally, Medicaid is the second largest health insurance program after Medicare. The Congressional Budget Office estimates that in 1998 Medicaid will cover 44 million individuals, half of whom are children. Each of these individuals is entitled to have payment made on his or her behalf for covered services received from participating hospitals, physicians, and other providers. Medicaid benefit packages vary from state to state, but they all include physician services; laboratory and x-ray services; inpatient and outpatient hospital services; early and periodic screening, diagnostic, and treatment (EPSDT) services for children; and services provided by federally qualified health centers (FQHCs).
Individuals who meet Medicaid eligibility standards are entitled to coverage. This applies to Native Americans as it does to other American citizens. Historically, some state and local officials viewed the health coverage of American Indians and Alaska Natives as exclusively a federal responsibility and sought to exclude Native Americans from Medicaid coverage.7 Although Medicaid is administered and financed in part by the states, Native Americans who meet the Medicaid eligibility requirements of the state in which they reside are, as a matter of law,8 entitled to Medicaid coverage.9 This is true whether a Native American lives on or near a reservation or in an urban area, and whether or not a Native American is eligible for IHS services.10
To qualify for Medicaid in any particular state, an individual must be a resident of that state. In addition, regardless of the state in which an individual resides, an individual must meet both categorical eligibility requirements and financial eligibility requirements. Categorical eligibility requirements relate to the age or characteristics of an individual: children, pregnant women, elderly, and disabled are among the categories of individuals that may qualify for Medicaid. Financial eligibility requirements relate to the amount of income or assets an individual is permitted to have (standards), and how those amounts are calculated (methodologies). Individuals who do not meet the categorical requirements – for example, non-elderly adults who are not disabled and do not have children – may not qualify for Medicaid no matter how poor they are. There are exceptions to this general rule. Some states cover poor single adults under “section 1115” demonstration waivers granted by the Secretary of Health and Human Services. 11
States have flexibility within broad federal guidelines to establish eligibility rules for their Medicaid programs, but there are certain groups of individuals that any state receiving federal Medicaid matching funds must cover. For example:
- with respect to children, states must at a minimum cover all infants up to age one (and pregnant women) with family incomes at or below 133 percent of the poverty level ($17,729 per year for a family of three in 1997), all children under age six with family income at or below 133 percent of the federal poverty line, and all children under age 14 with family income below 100 percent of the federal poverty line ($13,330 per year for a family of three in 1997). Many states have elected to set higher Medicaid eligibility thresholds for children under regular Medicaid law or under demonstration waivers.
- with respect to elderly and disabled individuals, states must at a minimum cover those individuals receiving benefits under the Supplemental Security Income (SSI) program. The exception to this rule is that states may use eligibility standards that were in effect in 1972 in determining eligibility for elderly or disabled individuals; 11 states have opted to do so.
Table 1 shows the Medicaid income eligibility thresholds in effect in each state as of October, 1997, for pregnant women, children, and aged and disabled individuals. These data, which were made available by the National Governors' Association, describe the thresholds as a percentage of the federal poverty level.