Medicaid Programs Feel Weight of Recession

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Nevada's health insurance program for children no longer provides eye check-ups and glasses. Rhode Island raised the premiums for some families receiving Medicaid. South Carolina's Medicaid program has ended dental X-rays for children under 8 and breast and cervical cancer screenings for women under 40.

As state public health programs reach a crisis point - with surging demand and shrinking state budgets - officials say that only a federal bailout will prevent more and deeper cuts to the state-provided medical care relied on by the lowest-income Americans.

"States are under tremendous stress, and they really need to get the stimulus package passed quickly," said Ann Kohler, director of the National Association of State Medicaid Directors , referring to the almost $900 billion economic stimulus bill before Congress that includes $87 billion through 2011 to help states shore up their struggling Medicaid programs.

The recession is fast-tracking thousands more than expected to Medicaid, a joint federal-state program that provides health coverage to more than 59 million low-income people. Kentucky's Medicaid rolls are increasing by 3,000 a month, or three times as many people as planned. Maryland saw 50,000 new enrollees last year, while Florida signed up 200,000 more people, a 12 percent increase over the previous year.

"Families that have lost their health insurance, the developmentally disabled … the frail elderly - it's really their safety net," Kohler said.

But dwindling revenues already have led at least 20 states and the District of Columbia to make cuts to the program for this fiscal year and the next, according to a report released in January by Families USA , an advocacy group that supports expanding health care. These cuts include dropping people from the rolls, cutting health benefits and lowering the amount paid to health providers who see Medicaid patients.

"These cutbacks are very profound, and I'm sorry to say that unless something is done … more and more states are going to propose and enact cutbacks," said Ron Pollack, Families USA's executive director.

States got much-needed helpcovering their poor on Feb. 4, when President Obama signed a bill, vetoed twice by President Bush, that expands the State Children's Health Insurance Program (SCHIP). The new law is expected to provide health insurance to 4 million more children from low-income families who make too much to qualify for Medicaid, up from 7 million now, at an additional cost of $33 billion.

More relief is expected when Congress passes the economic stimulus package, which would give every state extra money for Medicaid, plus additional dollars for stateswith high unemployment rates. Currently, the federal government pays about 57 percent of Medicaid's approximately $330 billion annual cost. The program is the biggest or second-biggest expense in state budgets.

But when the federal money arrives, it seems certain to come with strings attached, preventing states from dropping people from the rolls.

The federal government requires states to cover certain populations, such as low-income pregnant women, children, parents, people with disabilities, and poor elderly who need long-term care help. But most states have expanded coverage to "optional" populations, such as people in these categories who have incomes above the federal requirement.

So far five states have enacted policies to drop some of the optional patients from the rolls by reducing eligibility, or by creating more onerous policies to enroll or re-confirm eligibility, according to Families USA. For example, South Carolina recently froze admission to its HIV/AIDS program and ended Medicaid coverage for those in their second year off of welfare.

The economic stimulus bills, however, would require that states keep the eligibility standards and application processes they had as of July 1, 2008. That means Arizona, California, Florida, Rhode Island and South Carolina may have to roll back new policies to cut eligibility or tighten enrollment.

The last time states got extra Medicaid help - $10 billion in 2003 at the tail end of the recession that hit after the Sept. 11, 2001, attacks - they also were required to maintain eligibility levels.

If the stimulus money is still not enough to cover Medicaid shortfalls, states will have to resort to other cost-saving methods. Even with the financial bump, "states will have to look at increases in cost-sharing, application fees, limitations of service," said David Parrella, Connecticut's Medicaid director. "All of that will be on the table for states, regardless. The deficits that state governments are looking at are so profound."

At least 14 states and the District of Columbia have already eliminated benefits that are optional under Medicaid because of the downturn. Utah, for example, has cut vision, dental, physical therapy and speech and hearing services, whileVermont's clients no longer can get chiropractic services. 

The District and 13 states have made cuts in payments to medical providers such as doctors and hospitals, and several more are considering such reductions. Doctors say that payments are already inadequate and that further cuts will drive more of them to leave the program.

In December, South Carolina's Medicaid program faced its third round of budget reductions and had to slash 8 percent from its budget to save the state $137 million. In the next few months, the state is scheduled to cut the number of hours of physical therapy it covers, limit the number of mental-health counseling sessions allowed, and freeze hospice care to new enrollees.

"We know that in the long term, cutting or reducing some of these things is not good public policy, but it's what we've been forced to do to avoid going into a deficit. We've had to make a lot of cuts in an extremely short amount of time," said Jeff Stensland, a spokesman for the state Department of Health and Human Services. With federal help, some of the lost services could be restored, he said, depending how much the state receives.

But, Stensland added, "We have to be cautious because any additional funding that we were to receive does have a deadline. Come 2011, these additional funds are going run out, so we have to make sure that if we're going to add services back in, we can continue them in the long term." 

See Related Stories: 
House stimulus plan wins state praise (1/16/2009)
Budget gap could widen to $200 billion (12/15/2008)
Shifting economy keeps states guessing (12/4/2008)
States ask feds for health care help (11/26/2008)
Medicaid rolls, spending up in bleak economy (9/30/2008) 

Tags: Safety Net