Medicaid Costs Drive States Deeper into Debt
With rising medical costs and increasing enrollment, Medicaid is "dragging states deep into debt," forcing them to consider the "prospect of paring benefits to millions of poor people or slashing reimbursements to providers, or both," the Los Angeles Times reports. In 2000, Medicaid costs increased 9% and in fiscal 2001, they increased by another 11%. Those hikes concern health officials because historically, Medicaid expenses have "quickly spiral[ed] out of control." For instance, in 1992, spending increased 30%, "largely because of questionable financing mechanisms." Combined, states have a $20 billion Medicaid budget deficit for the current fiscal year. Once the cumulative effects of staggered layoffs are felt, Medicaid's current problems could become much worse, the Times reports. Betsy Imholz, director of Consumer Union's West Coast regional office, said, "In these downturn times, more and more people across the country are going to find themselves losing their employer coverage and needing health insurance. So it's all the more important that it be accessible." According to a recent Urban Institute report, if the unemployment rate rises from 4.5% to 6.5% next year, Medicaid enrollment will increase by 3.2 million to total more than 43 million.
At least eight states have recently called special legislative sessions to deal with Medicaid budget issues, and 28 states are considering cutting their Medicaid budgets. To alter their Medicaid programs, states are allowed by law to reduce payments to doctors and hospitals, quit offering optional dental or pharmacy benefits or tighten income requirements. Cutting provider rates could mean that beneficiaries have an "even harder time finding doctors and getting good care," Charleen Milburn, managing director of government relations for the California Medical Association, said. She added, "If you cut benefits, patients have less access to certain benefits. And if you cut eligibility, that just means more people are uninsured and fall to the county (public health system)." The Times reports that there is a "strong incentive" for states not to cut their Medicaid programs -- for every $1 they cut, they lose $1 to $3.31 in federal matching funds. So, while states cannot afford to keep their "burgeoning" programs, they cannot afford to lose them either, the Times reports. Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said, "It's kind of double jeopardy." Some states have solved the problem by cutting other programs. For example, Michigan officials "tried to leave Medicaid relatively unscathed" when dealing with the state's $540 million budget deficit. Officials made cuts to agriculture programs, service organizations and the arts and also "discontinued support for teenage health centers in some schools," ended subsidized outpatient care at rural hospitals and cut nursing home and hospital rates. Kelly Chesney, spokesperson for the state budget office, said, "These were not easy decisions. In fact, they were gut wrenching in many cases, but they were necessary because Michigan has an obligation to balance their budget. The longer we wait, the amount doesn't get smaller" (Ornstein/Bernstein, Los Angeles Times, 11/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.