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States Face Hard Choices on Medicaid Cuts
WASHINGTON, Jan. 13 — Medicaid, the insurance program for 44 million low-income people, is in a fiscal crisis, forcing state legislatures convening around the country this month to look for ways to cut benefits and reduce payments to hospitals, nursing homes and pharmacies. The 36-year-old program, which pays for one-third of all births and nearly two-thirds of all nursing home patients, is caught in the financial vise of soaring costs and declining state revenues. Overall Medicaid spending grew by 11 percent last year, and many states report that spending on prescription drugs, which are covered by Medicaid, is rising at an annual rate of more than 20 percent. At the same time, state revenues are declining because of the national recession, and most states, unlike the federal government, must balance their budgets. "I think it's quite serious," said Gov. John Engler of Michigan, a Republican who is chairman of the National Governors Association, noting that Medicaid now represented the fastest-growing item in state budgets. States are struggling to decide which services to trim and which groups should bear the brunt. "These are terrible choices," Mr. Engler said, "extraordinarily difficult." Gov. Howard Dean of Vermont, a Democrat and former chairman of the governors association, agreed, saying that Medicaid was "under enormous pressure everywhere because of the catastrophic increase in health care costs, particularly pharmaceutical costs and hospital costs." The political fallout has already begun. Parents of children with severe illnesses and disabilities held a rally on Wednesday at the Capitol in Little Rock, Ark., to protest new cuts in Medicaid and requirements that families pay some of the costs in the form of co-payments. Ray Hanley, the Medicaid director in Arkansas, said, "We are getting our brains beat out by health care providers and advocates" for patients who rely on the program. C. J. Moorman, the father of a Medicaid patient, a 16-year-old boy with cerebral palsy, said, "They could easily co-pay a family to death." Governors of both parties are putting pressure on the federal government to increase its contribution to Medicaid, which is financed by the federal government and the states. The need is particularly acute in a recession, officials say, because many people turn to Medicaid when they lose their jobs and their health insurance. "The need for Medicaid goes up just when the states' ability to pay for it goes down," said Vernon K. Smith, the former Medicaid director of Michigan, who is now a health policy consultant. The situation in Oklahoma illustrates the hard choices facing many states. The board of the Oklahoma Health Care Authority, the state Medicaid agency, voted on Thursday to adopt stricter income tests for pregnant women, children and the elderly, blind and disabled; to reduce dental services for adults; to reduce payments for prescription drugs; and to delay indefinitely a scheduled increase of 3 percent in payments to hospitals and doctors. The state also decided to eliminate its Medicaid program for people deemed "medically needy" because of very high medical bills. The cuts will affect at least 50,000 of the 461,000 Medicaid recipients in Oklahoma. Under the new policy, for example, Medicaid will no longer cover children 6 to 18 in families with incomes that are 100 percent to 185 percent of the federal poverty level ($14,631 to $27,065 for a family of three). In Indiana, Gov. Frank L. O'Bannon, a Democrat, is trying to cut the state contribution to Medicaid by $251 million, or about 10 percent, over the next two years. State officials made a first round of cuts last fall, reducing payments to hospitals, nursing homes and pharmacies by about 5 percent. The nursing homes and drugstores filed suit to block the cuts. At a forum this month, state officials unveiled a "Medicaid balanced budget plan" with two dozen options for further cuts. Prescription drug spending for Medicaid recipients in Indiana grew 20 percent last year, to $549 million, and state officials estimate that it will rise more than 50 percent in the next two years, to $845 million. To control costs, Indiana officials will develop a list of "preferred drugs" and want to require prior authorization for anyone trying to fill prescriptions for more than four brand-name drugs in a month. In Idaho, Gov. Dirk Kempthorne, a Republican, told the State Legislature on Wednesday: "Prescription drugs are quickly becoming our single largest Medicaid expense. Prescriptions are expected to cost almost 40 percent more this year than they did two years ago." He, too, wants to require prior authorization. But drug companies oppose such requirements, saying they limit patients' access to medicines. Like many governors, Mr. Kempthorne lamented that Medicaid was taking resources that might be used for other programs. If the state does nothing, he said, "we will see Medicaid growth that continues to outpace that of education and economic development." In Maine, Gov. Angus King, an independent, proposed on Tuesday a 5.6 percent cut in Medicaid payments to doctors, with slightly deeper cuts for hospitals and nursing homes. Doctors said some Medicaid patients would inevitably be turned away if the Legislature approved the cuts. Governor Dean of Vermont, a state that takes pride in its health policies, said he was committed to controlling Medicaid costs by reducing benefits, like podiatry or dental coverage, but not the number of people eligible for basic insurance coverage. He said it made no sense to preserve a generous benefit package for fewer and fewer people. In his State of the State address on Tuesday, Mr. Dean declared, "As I have said annually for the past decade, I will not allow any child to be cut from the health care rolls." New York has felt the same fiscal pressures as other states, but with special intensity. The state has lost hundreds of millions in tax revenue as a result of damage done to its economy by the Sept. 11 attacks. Layoffs increased the number of people without health insurance, and many turned to a special temporary program known as disaster-relief Medicaid, which makes benefits available with little screening or paperwork. Gov. George E. Pataki, a Republican, has led the bipartisan effort by governors to persuade Congress to provide billions of dollars in additional aid for Medicaid. In Illinois, Gov. George Ryan, a Republican, announced last month that he was cutting state Medicaid payments to hospitals by $114 million, or 13 percent, to help fill a $500 million gap in the state budget. After an outcry by hospital executives, Mr. Ryan said on Tuesday that he would restore $24 million to hospitals. To help pay for the restorations, Illinois officials said they would reduce Medicaid payments to doctors, dentists, chiropractors and other health care professionals. Ohio's Medicaid director, Barbara Coulter Edwards, said the state had expected to see a net increase of about 43,000 in its Medicaid rolls from July to December. The actual increase, driven by the recession, was 84,000, raising the total number of recipients to 1.4 million. "While our service budget has not been cut, for which we're grateful, we have a real challenge because we're having to serve more people within it," Ms. Edwards said. Advocates for low-income people are already sounding alarms here in Washington, arguing that Congress and the administration must confront the problem or face renewed growth in the number of uninsured. "I think this is going to be a very tough year for low-income and low- wage working families who depend on Medicaid as a lifeline," said Ronald F. Pollack, executive director of Families USA, a consumer advocacy group. In recent years, Medicaid has been an important tool for extending coverage to children and families. In fact, state officials said, their success in adding people to the Medicaid rolls, encouraged by the federal government, is one reason the program is such a burden on states today. Medicaid provides health insurance for one-fifth of all children and is the largest source of federal grants to states, accounting for nearly one-fifth of state budgets. |
