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Archive for Sunday, April 28, 2002

States grapple with costs of Medicaid programs

Recession, budget troubles hitting services for poor, elderly

April 28, 2002

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— It's becoming harder and more expensive for poor people to get health coverage under the government's Medicaid program that now serves 44 million Americans.

That's because prescription drug prices and other medical costs are skyrocketing just as state and federal revenues are falling because of recent tax rate cuts and the recession. The gap between what the program now covers and what states can afford is $40 billion.

Many states are cutting insured health services, increasing patient co-payments and cutting reimbursements for prescription drugs. Florida, Illinois, Iowa and Minnesota are considering cutting payments to doctors and hospitals that treat Medicaid patients. Utah and Oregon have imposed enrollment fees.

The full range of Medicaid cuts isn't clear yet. Some state cuts won't take effect until fiscal year 2003. Other states may impose new cuts if their financial situation worsens. With Medicaid rolls swelling because of a recent surge in unemployment, the pressure to make additional cuts is growing in many states.

Sharing the cost

Medicaid is the main public health insurance plan for the poor. It's paid for by federal and state tax dollars; states largely decide how to spend the money.

Nationwide, Medicaid pays 48 percent of all nursing home costs; nearly 17 percent of all health care costs and 17 percent of hospital and prescription drug costs. Medicaid also covers more than half the nation's AIDS patients and 20 percent of all children.

In the 1990s, when the economy was strong, Congress expanded Medicaid to cover more children and more of the working poor. Today, Medicaid is the second largest expense after education in most state budgets. And it's growing at nearly 10 percent a year, according to the National Conference of State Legislatures.

State Medicaid cuts hit deeper than the dollar amounts suggest because state Medicaid spending is matched with federal dollars. For example, in Iowa, Kansas and North Carolina, every dollar the state spends on Medicaid draws about $1.50 in federal matching funds, said Cindy Mann, senior fellow at the Kaiser Commission on Medicaid and the Uninsured, a Washington-based research group.

That means for every $1 million in Medicaid spending that those states cut, they lose another $1.5 million in federal matching funds. So cutting $1 million from the state budget translates into a $2.5 million loss in actual services.

Dropping coverages

Beginning in July, Arizona will no longer pay for kidney dialysis, chemotherapy and other chronic illness treatments for certain immigrants. Massachusetts has dropped dental coverage for adult Medicaid enrollees and might eliminate 1,200 hospital beds for the mentally ill. Mississippi may cut funding for 13,000 nursing home residents. Missouri might eliminate home health services for nearly 10,000 adults. Minnesota may cancel plans to cover uninsured women with cervical and breast cancer.

State lawmakers and state Medicaid officials who determine the cuts say they have no choice, given falling revenues. Portions of Arizona's immigrant care, for example, wouldn't be on the chopping block if state tax revenues weren't down nearly 6 percent from fiscal year 2001.

"Our state is mirroring what is going on with the federal government," said Frank Lopez, a spokesman for Arizona's Medicaid program. "All that extra money that we were getting when the economy was great has gone south."

The net effect is "considerably worse coverage than in the past," said Ron Pollack, president of Families USA, a health consumer advocacy group. "What they really have is a Swiss cheese policy with more holes than cheese."

Trying to cope

South Carolina lawmakers are considering raising the cigarette tax from 7 cents to 29 cents per pack to provide additional Medicaid funds. Lawmakers in Vermont, North Carolina, Wisconsin and Nebraska are mulling similar increases.

"In South Carolina, every penny that the tax goes up on cigarettes, it brings in $4 million," Schmidt said. With the added leverage of federal matching funds, "we could resuscitate this program."

But in an election year, Schmidt knows any tax increase is a tough sell.

"It's going to be rough going. Support is very thin," he said.

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