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Public Welfare secretary discusses department's challenges, goals

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Gary D. Alexander is no stranger to momentous Medicaid decisions.

Appointed secretary of public welfare by Gov. Tom Corbett in 2011, Alexander came from Rhode Island, where he served as secretary of Health and Human Services.

In Rhode Island, Alexander engineered the state's landmark Global Consumer Choice Compact Medicaid Waiver and instituted "work first" changes in the cash assistance program, resulting in a 30 percent reduction of the state's welfare population in his last two years there.

Alexander also served as policy director for Rhode Island's lieutenant governor and as a health care budget analyst for the Massachusetts Senate Committee on Ways and Means. He received his bachelor's degree in political science from Northeastern University and his law degree from Suffolk University School of Law, both in Boston.

As secretary of public welfare, Alexander oversees a department that provides services and support to more than 2.1 million low-income, elderly and disabled Pennsylvanians. He recently talked with the Business Journal about the challenges his department faces and his goals for the department.

Q: What are the biggest challenges facing your department right now?

A: The biggest challenges are preserving the core programs that we have to sustain individuals, get them into jobs and on the road to independence. The fact that the department is growing by about 8 percent year over year and general revenue in the state is growing at under 2 percent poses a great challenge to us. The governor's clearly had a message of holding the line on taxes.

Welfare assistance is growing at an unsustainable rate, nearly 100 percent a decade. To be able to hold the line on that is a huge challenge, to ensure that the individuals we serve are taken care of, but in a way that doesn't breed dependence but independence, whether they're disabled or able-bodied. Medicaid tells us clearly in the law that we are to furnish services so individuals and families can achieve independence or achieve self-care.

We've been challenged by the Legislature to eliminate as much fraud, waste and abuse as possible. In July, the department was awarded the national 2012 Innovation Award by the Council of State Governments. That recognition stems from our laserlike effort to really, from top to bottom, eliminate fraud, waste and abuse across the board so we are truly serving truly eligible individuals, not encumbering businesses who want to work in our environment with red tape and bureaucracy. We're trying to balance all that. That's been our major challenge.

In the final analysis, there is a lot of fraud, waste and abuse, and we want to make sure we are doing our best to eradicate it.

Medicaid makes up 80 percent of our department. Medicaid is the largest means-tested welfare program in the country. It drives a lot of what we do because of the federal-state component of it, whereas a program like food stamps, although very large, is paid for by the federal government.

Have you seen the editorial in The Washington Post by Robert Samuelson, calling for the federal government to take over Medicaid and let the states take over education?

Rather than taking it over, I would like them to give us greater flexibility to run the program. The closer you are to the people you serve, the better you are able to serve them. We've seen that in Pennsylvania with our block grant program. Instead of giving the money to counties in pieces for housing, welfare and a myriad of different human services funds, we block-granted it back to the counties, because they should have the flexibility to use it as effectively as possible.

I believe if we had that flexibility from Washington without all that red tape, we could run Medicaid more efficiently and cover more people. Currently, as it is one size fits all, it's very difficult for any state to try and expand. All these programs, whether it's food, health care, housing, they don't necessarily comport to one another, they contradict one another, they have different citizenship rules. If they gave us greater flexibility and let up on the red tape rules and regulations, I think we would be able to better manage the program at the state level, making sure that we spend money in the right place, at the right time, in the right setting — to go back to the definition of Medicaid, to ensure that individuals attain independence.

The big questions of the summer are when Pennsylvania will make its decision about expanding Medicaid and what that decision will be. What can you tell us about that?

Expanding Medicaid is not an easy decision. Any time we spend government money of that magnitude, we have to approach it with great trepidation, because it's taxpayer dollars.

If you look at the Massachusetts experience, it's a decent-sized state, with the same type of health care system as Pennsylvania, maybe more advanced because of the universities that they have. The idea behind health care reform is that if you provide individuals with health care access, uncompensated care will go down. I think the Massachusetts experience has taught us the opposite — that with the advent of greater access to care, charity care and emergency room utilization have still gone up significantly.

The reason why that's troublesome or a challenge is that we give a vast amount of money to the hospitals for uncompensated care. The health law cuts that significantly. Let's say we expand Medicaid and the charity care doesn't go down. Where do the hospitals go for that money? They're going to have to come back to the state for those hundreds of millions of dollars, which we don't have. We would have to raise taxes, so it would create a tremendous burden on the state.

We're approaching this with great care and caution. We don't want to be in a situation where we're running to the finish line and then never make it. It's not just that the government is paying 100 percent of the cost at first. A lot of the individuals who are already eligible for Medicaid but not taking it will come out of the woodwork to apply for Medicaid, and we're not going to get any money for that. That will be substantial for Pennsylvania.

Then there are the medical technology costs. Any time you implement a new system, you always have issues. There will be tens of millions of dollars in IT costs.

Finally, the personnel costs. We do not want to grow government. The whole point is to have a smaller and leaner and more responsive government — that's what Tom Corbett is all about. We're down well over 500 employees through attrition. We've been very effective on that, holding the line on hiring. If we have to add 800,000 more people to Medicaid, I'd have to go back to the Legislature and the government and say, "We have to add more staff."

I'm concerned that expanding Medicaid is not sustainable without huge costs to Pennsylvania and the taxpayers. The expansion would put one of every four Pennsylvanians on Medicaid. Right now, we have one out of five. Right now, we have two workers working a full-time job for every one person on the public welfare system. Going back 10 years, it was 3.2 to 3.3 to 1.

In 1966, when President Johnson signed it into law, nationally we had 18 full-time workers for every one person on Medicaid. Today we have about 2.5 workers for every one person on Medicaid in this country.

If you look at that type of burden on taxpayers, other than the individual taxpayer, who is that burden going to be borne by? The business community. The only way to grow jobs is to reduce the tax burden. Taxing individuals does not grow employment. It never has and it never will. We have a lot of businesses in Pennsylvania, and by really reducing the tax burden in Pennsylvania, we could have more jobs.

The health care law really doesn't make health care more affordable — it subsidizes it with tax dollars. I believe that individuals should have health insurance. We all want to see that. We just want to see it happen with private dollars. That won't happen until we have a system that operates more transparently.

If the doctor says to you, "You need a colonoscopy," what would you do? They're going to tell you where to go, and you're going to go down and get your colonoscopy and pay your premium or whatever you have with your health plan. If you ask the doctor, "How much did all of that cost?" the doctor won't know.

We are paying different prices for the same service. At one hospital, a colonoscopy will cost about $3,000. At a hospital right down the street, same quality, same setting, same doctor, it's $1,500. Right next door, maybe a block down the road, at the surgery center, it costs $800 and the quality is better and the morbidity rates are better. If your doctor could say, "If you go down to the surgery center, it'll be cheaper down there," you'd start to be engaged with your health care and think twice about what it costs. Once we start to get our minds around the cost drivers like that, we'll start to make better health decisions.

What we're doing is backwards. We're giving people an access card but not getting to the root of the problem. Government can help create an environment for innovation, but it has to get out of the way. There needs to be competition for that business, which is relatively simple to do. If we start to do that, the costs wll come down and people will be able to afford health insurance, which is now astronomical.

I think we are really mistaken and headed down the wrong path by doing health reform this way. Setting up an independent advisory panel is not health reform. Health reform is creating an environment where people can shop and be responsible. It absolutely can happen. We have to go under the basic premise that every individual has the freedom to make choices. That is what our nation was founded on. We have a welfare system that has never worked. It has created greater dependency.

Before coming to Pennsylvania, you engineered a major change in Rhode Island's Medicaid program. What concepts from that waiver have you been able to incorporate here, and which concepts are you hoping to implement in the future?

Pennsylvania has over a dozen Medicaid waivers. The very fact that you have a waiver means that there's something wrong with the original program. Each Medicaid waiver that we operate has a distinct population. They all have different rules, regulations, service definitions, etc. There is no continuity of care, no holistic approach to Medicaid.

Pennsylvania is a different state from Rhode Island. There isn't a cookie-cutter approach. I believe each state should have its own approach to health care and Medicaid. Competitive contracting, which is something that the private sector now has used for years, the government, especially the welfare system, has never really used. Medicaid has something called "any willing provider," which means if you have the credentials, you can become a provider. In Rhode Island, we successfully deployed selective and competitive contracting. We're trying to do that in Pennsylvania.

There are two or three other components that we're working on in Pennsylvania. One of them is long-term care reform, to ensure that individuals are living in the least-restrictive environments. It's better for the individual and cheaper for the state. Another step is to ensure that each individual has a medical home. That's necessary.

The last part of the Medicaid waiver in Rhode Island was integrity of the system. We've completely enhanced that. Here in Pennsylvania, we've done it as an enterprisewide system, and it has achieved tremendous results. I'm very proud of the staff. It's really a national model; we're receiving calls from other states asking us how to do it.

Pennsylvania's system is so large and growing at such an unsustainable rate, we really have to get our arms around who's truly eligible, who's truly providing quality care. It's hard to reform the system when you have problems like that. You need to really clean it up and have some semblance of order and then have some real, statewide systematic reform.

We're operating more than a dozen Medicaid waivers that don't comport. At the end of the day, wouldn't it be more transparent if you had one Medicaid program that had one report every year that ... you could pick up and look at? That's where we're headed, but that's going to take time. Whether that looks like what Rhode Island did, that remains to be seen. Some of the principles in Rhode Island do apply everywhere. I believe that states should have that freedom to manage their own systems.

During your tenure, you've implemented some measures that some have lauded as fiscal responsibility and others have decried as abandoning vulnerable citizens. You've said that your first priority is eradicating waste, fraud and abuse. What do you see as the state's social responsibility, and what balance are you trying to strike between that and its fiscal responsibility?

Clearly we have a responsibility to the poor, to the truly disabled, to the elderly. I think 2.2 million Pennsylvanians are on our program now. If Obamacare is implemented, it will be well over 3 million. We have to right-size the programs to protect taxpayers. Our responsibility is to make sure that the plans and our safety net are available to the neediest persons.

At the end of the day, if you're eligible for the programs, we certainly want to have those eligible to you, but we can't turn a blind eye to those who are not eligible. I've seen far too many times across the country administrators turn a blind eye and allow people who are not eligible to be on means-tested welfare programs, which hurts those who are truly eligible.

For anybody to say that the idea that this is hurting people in any way, shape or form, they should look at how we continue to provide the core safety program. Just in this budget alone, we had a waiting list for intellectually disabled individuals in our program, so we decided to invest money to start to eradicate this waiting list. Those are our most vulnerable citizens, those who cannot take care of themselves. Those who can work can get out there and get a job.

I don't want to see the neediest individuals on a waiting list while others who could work and get out there are not. Our goal is really to eradicate that waiting list.

View Alexander’s Medicaid presentation from an event at the American Enterprise Institute

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