Benefits-link cited as mire for Medicaid

Disability costs now 51% of state’s program growth

— Physically and mentally disabled Arkansans receiving federal disability benefits drove the state’s ballooning Medicaid costs over the past five years.

Arkansans up to age 64 who receive federal disability payments automatically qualify for Medicaid and are a high-cost, fast-growing segment of the state’s $5 billion program, according to Arkansas Department of Human Services numbers.

Since the beginning of 2007, the state’s monthly Medicaid rolls have grown by about 6 percent, and the number of working-age disabled people who qualify for Medicaid has grown at a rate more than three times that.

Over the same period, costs related to disabled people, the majority of whom get Medicaid because they have qualified to get federal Supplemental Security Income, or SSI, have accounted for 51 percent of growth in Medicaid spending, according to the Department of Human Services.

Since 2007, care for the state’s disabled has made up more than $500 million of the $985 million increase in Medicaid spending.

“It’s the new normal,” said Andy Allison, state Medicaid director.

Behind the numbers are glimpses of hardship in some of the state’s poorest counties. An Arkansas Democrat-Gazette analysis shows that poor counties that have lost jobs and population have the highest rates of SSI claims.

State Medicaid officials are frustrated by the trend, but they have little control over it.

The federal Social Security Administration decides who gets SSI. And state and federal officials agree that once someone starts receiving SSI benefits, he rarely gives them up, creating a permanent bulge in the Medicaid rolls.

“Quite frankly, that’s a problem,” said Arthur Boutiette, the director of the state’s Department for Social Security Administration Disability Determination.

The 2007-09 recession worsened the trend, researchers say. While SSI claims have grown the most in the state’s most populous areas where there have also been population increases, census figures illuminate a troubling shift in less-populated areas.

As jobs have disappeared in rural counties dependent on backbreaking work in timber and poultry, and residents have moved out, SSI claims there have soared.

The newspaper’s analysis found that a third of all Arkansas counties saw declines in population and gains in SSI eligibility. In those 25 counties, the figures suggest that dwindling populations are becoming increasingly more dependent on government assistance.

Pike and Howard counties have some of the highest rates of SSI growth among counties losing population. In those two counties, it’s the timber industry that’s been hit hard by the housing-bubble bust and sluggish recovery in home building.

“They’re just worn out,” said Dr. Matthew Hulsey, a family medicine doctor in Glenwood for 20 years who has seen plenty of timber workers apply for SSI. “Back pain, joints, arthritis. That’s really, really hard work.”

A typical disability applicant in Pike County looks something like this, says Hulsey: “Late 50s, no other education, have done pretty much manual work - traditionally, those were the guys where they would come in, get hurt and gradually couldn’t do it anymore.”

Many, if not most, SSI recipients would work if they could still get medical care for their disability, economists say.

And Medicaid expansion as allowed under the federal Affordable Care Act would cover most of the group outright and stem the flow of SSI recipients into the program. The expansion would add Arkansans who earn up to 138 percent of the poverty level.

Having Medicaid coverage extended to up to 250,000 Arkansans between ages 19 and 64 who earn up to $15,415 would give coveted health coverage to a population that now increasingly seeks Medicaid through SSI, said Allison and other researchers.

Why hasn’t Allison made this argument to lawmakers who are wrestling with the question of Medicaid expansion?

It’s a difficult, wonky pitch to make, he said.

Yet he made just that argument while speaking to a group of Medicaid providers last fall in Little Rock. Expansion, he told them, would weaken the “perverse incentive” for people to choose SSI instead of work.

But Gov. Mike Beebe’s administration has not pushed the idea in its public case for expansion.

Research shows that current SSI recipients are unlikely to give up a lifetime federal benefit. And further complicating the political calculus, the working poor who might seek such benefits in the future don’t think of themselves as disabled.

“There is no natural constituency,” Allison said. “You’re talking about a category that literally hasn’t self identified yet.”

SSI’s origins lie in the early 1970s with President Richard Nixon’s attempt to establish a “guaranteed income” for the nation’s poor. That idea failed, but SSI payments - which now are about $710 per individual per month - were born.

Far more valuable are the Medicaid benefits, experts say, and the linkage between SSI and Medicaid payments has created what Allison calls the “perverse incentive” not to work.

“A really important question for the nation and for states is has this become our long-term unemployment insurance program?” said Mary Daly, an economist with the Federal Reserve Bank in San Francisco, who co-wrote a book on growth in federal disability payments.

Turning off the faucet of SSI-linked Medicaid costs by giving states the power to determine eligibility instead of the federal government has percolated among academics and Medicaid officials for years. Daly advocates such a solution.

Right now, there’s a federal-state interplay that doesn’t make a lot of sense in terms of incentives, Daly said.

States have an interest in getting poorer residents qualified for SSI because the federal government pays for it. The states then aren’t paying for establishing an income stream for a population that otherwise wouldn’t have one, she said.

But what helps states in policy toward the poor, hurts them, too, Daly said, because the poor residents “now qualify for Medicaid, which states are on the hook for.”

These mixed incentives, Daly and her co-author Richard Burkhauser have advocated, could be solved by turning SSI over to the states.

Neither she nor Allison thinks Washington, D.C., is likely to turn over that power to the states anytime soon.

“I’ll believe the federal government is serious about deficit controls when they finally acknowledge the policy challenges we face in services for the disabled,” Allison said.

In Nashville, Mayor Billy Ray Jones, can tick off the hundreds of job losses over the past several years that have hurt his Howard County town of 4,627.

SSI claims in Howard County and neighboring Pike County have climbed by 19 percent since the beginning of the past recession. In recent years, the closure of Bean Lumber Co. in Glenwood cost hundreds of jobs.

“The logging industry has lost the biggest chunk of jobs. I know of several people in the last few years who were farming or were into logging, and either had some kind of injury in the past where when the economy gets down like it is, they had to do something to get by,” Jones said.

He said he was surprised by the increase in people reliant on SSI but that it’s almost certainly tied to job losses.

“Either we’ve got some folks with handicaps or we’ve got some good folks who are filling out the paperwork,” he said.

Sometimes, few other options exist for people.

“I know people who lost their job because it went away. There’s not another one, so they go ahead and apply for disability,” said state Sen. Larry Teague, a Nashville Democrat.

“In rural Arkansas, people work their butts off. Some bodies can’t hold up to 50 years of that.”

Arkansas timber workers have been squeezed for years,said Larry J. Boccarossa, executive director of the Arkansas Timber Producers Association.

A collapsed wood market because of the housing bust in 2006 is the principal factor, he said. “It’s been on the decline since before the recession hit” in late 2007.

A 2010 University of Arkansas at Monticello study showed that more then half of the state’s logging companies had temporarily laid off workers, and more than a third had made permanent work-force reductions.

No easy solution exists for SSI-driven Medicaid woes, particularly looking forward, Allison said.

Between January 2007 and December 2012, there was a 52 percent increase in children with disabilities who qualified for SSI and Medicaid.

The increase in kids receiving SSI is a “major public policy concern,” Daly said, noting that two-thirds of children in the program stay on SSI after they become adults.

“If you imagine kids get on when they’re children, then they stay on until they’re 18 and then they move onto the adult program, they really are resigned to a life of low income,” she said.

But Allison said allowing the state to decide who gets the federal benefits while providing state-based incentives to encourage work offers hope, although that would require more state workers and state dollars to evaluate claims.

“I see a lot of promise in that idea,” he said.

Front Section, Pages 1 on 02/03/2013

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