Some Good News Amid Medicaid Troubles

Across the country this spring, state lawmakers confronted with mounting Medicaid bills scrounged for ways to curb the costs of the joint federal-state program.

Some slashed benefits for the poor, elderly and disabled patients. Others reduced the number of people eligible for coverage. And still others took less drastic measures, such as limiting the types of medicine the program pays for or imposing higher co-payments for participants

But even as they try to rein in costs, a handful of states are also expanding the reach of the health insurance initiative. Iowa, Illinois and Colorado, for example, all approved measures that would allow more low- and middle-income residents to qualify for coverage. And improved state budget revenues helped New Jersey and Texas restore previous cuts.

Molly O'Malley, a senior policy analyst for the Kaiser Commission on Medicaid and the Uninsured described the spring legislative activity as a "mixed bag." But that's better than the situation in the last few years, when budget troubles forced almost every state to curb Medicaid costs, she said.

The rapidly rising cost of health care has pushed Medicaid expenses skyward in recent years and likely will continue do so. Meanwhile, more people who've lost their jobs or settled for ones that don't provide health insurance have had to rely on Medicaid and its affiliated programs.

Of any state, Tennessee imposed the most drastic cuts to its Medicaid services this year. There, Gov. Phil Bredesen, a Democrat, led an effort to cut 190,000 people from the TennCare rolls. Bredesen argued that the program, which had been one of the most generous in the country, endangered the state government's solvency.

Maryland Gov. Robert L. Ehrlich, a Republican, began denying health benefits to legal immigrants. The Legislature reacted by setting aside $1.5 million to provide coverage for pregnant women who are legal immigrants. Democratic leaders also held hearings on the effectiveness of the cuts.

In Missouri , GOP legislators and Republican Gov. Matt Blunt approved measures that will scale back benefits and eliminate benefits for 100,000 residents.

"The Missouri budget was under stress like most state budgets," explained Brian Kinkade, the director of budget and finance for Missouri's Department of Social Services. "Medicaid was a financial burden that the state could not afford."

Although coverage for children will remain largely the same, the Missouri Legislature reduced assistance for their parents. Now, in order to qualify for help with their health insurance, parents can earn no more than would make them eligible to receive Temporary Assistance for Needy Families, or roughly 22 percent of the federal poverty level. Before the cuts, Missouri extended benefits to families at 75 percent or less of the poverty level. (The 2005 poverty level is $19,350 for a family of four in the contiguous U.S. ).

Lawmakers in Jefferson City also decided to stop paying for most vision and dental benefits. Missouri no longer will pick up the tab for much equipment used in rehabilitation, such as walkers, canes and wheelchair batteries.

Amy Blouin, executive director of the Missouri Budget Project, which opposes the Medicaid cuts, said Republicans wrongly blamed Medicaid for the state's budget woes. She contends that the state easily could have paid for the program if legislators hadn't passed numerous tax cuts during sunnier economic times.

In some states, spending pressures have been exacerbated by a shift in federal policy that cut off a source of funding on which states had come to rely. Last year, the U.S. Department of Health and Human Services started objecting to the practice of recycling money from the federal government to get even more funding from the feds through matching grants.

The agency has reached agreements with Georgia and Iowa to abandon those schemes in exchange for more flexibility on how they can spend federal money. HHS has sent Congress a proposal that would prohibit the use of those "intergovernmental transfers" to recoup federal money.

HHS Secretary Mike Leavitt struck a deal with New York Gov. George E. Pataki to make changes in the Empire State's Medicaid program, which, with a price tag of roughly $45 billion a year, is the country's largest.

The agreement boosted federal support by $1.5 billion, imposed higher prescription drug co-payments for Medicaid recipients and started a state takeover of all Medicaid programs from local governments there.

Iowa legislators agreed to a plan hammered out by Leavitt and Gov. Thomas J. Vilsack, a Democrat. The Hawkeye State expanded coverage to residents making up to twice the poverty level. Participants in the new "Iowacare" will have to pay a monthly premium of up to $75, depending on their salary.

Meanwhile, Iowa officials agreed to stop recycling federal dollars to get more national money; in exchange, HHS helped pay for programs previously supported solely by local and state sources.

Other states found ways to expand health coverage, too.

Colorado lawmakers used some of the proceeds of a tobacco tax approved by voters last year to fund an expansion of Medicaid and other health initiatives. The state now will cover pregnant women and children living at less than twice the poverty level, instead of the previous threshold of 185 percent of the poverty level. The state also restored Medicaid benefits for legal immigrants.

In Illinois , Democrat Gov. Rod R. Blagojevich plans to add 56,000 people to the state's FamilyCare program, a move made possible by a decision by Democratic lawmakers to skimp on the state's pension bills this year and next.

But the cost of providing health insurance -- and the pressure that puts on both state and federal budgets -- means lawmakers likely will grapple with Medicaid for the foreseeable future.

For example, even after trimming back coverage this year, Missouri also formed a commission to enact even further-reaching reforms by 2008. Lawmakers in several other states, including Kansas and Nebraska, established similar panels.

Florida Gov. Jeb Bush (R) plans to ask the federal government for permission to use private health accounts instead of blanket coverage, which would allow Medicaid recipients to use the money to pay for medical costs or buy their own insurance. South Carolina proposed a similar initiative but withdrew its most controversial elements in mid-August, after national and local groups criticized it.

The federal government, too, likely will take action. A panel appointed by Leavitt is scheduled to report to Congress by the beginning of September its recommendations for cutting $10 billion from the program.