States Make Deep Cuts to Health

Although states are facing their worst fiscal crisis since the Great Depression, 14 found the dollars this year to increase health coverage for about 250,000 children.

That’s one of the few bright spots for health within state budgets in a year in which all but a handful of states faced shortfalls and were forced to shrink taxpayer-financed programs.

The 14 states – Alabama, Arkansas, Colorado, Indiana, Iowa, Kansas, Montana, Nebraska, North Dakota, Oklahoma, Oregon, Rhode Island, Washington and West Virginia – took advantage of an additional $33 million that Congress appropriated when it reauthorized the Children’s Health Insurance Program (CHIP) in February. At the same time, President Obama rescinded a Bush administration directive that had hampered states’ ability to expand coverage for children whose families earned too much to qualify for Medicaid but too little to buy their own health insurance.

“It is reassuring that states recognize the value of providing health care to children, perhaps especially during an economic downturn,” said Jennifer Tolbert, a policy analyst at the Kaiser Commission on Medicaid and the Uninsured .

States have an incentive to invest more state dollars in CHIP because they only pay 30 cents of every dollar spent in the program; the federal government picks up the rest. By comparison, states pay an average of 43 cents of every dollar spent on Medicaid, another joint federal-state venture that covers low-income people.

Aside from the CHIP expansion, though, record-low revenues forced many states to make cuts to their departments of health and to roll back policies and programs set up to keep people healthy and covered just as more people began needing those programs. Since spring 2008, at least 21 states have cut health programs, according to the Center for Budget and Policy Priorities , a group that advocates for policies that benefit the poor.

The budget deficit problem in California was so dire that on July 17, the state froze enrollment to its CHIP program, Healthy Families . Less than two weeks later, the waiting list already had 33,146 children. The program is being cut $178.6 million – a 44 percent reduction from the previous enacted budget. The health cuts fall most heavily on areas such as mental health, public health, and providers who serve people on Medicaid, which provides medical coverage to 60 million people.

Before Congress passed the stimulus package in February, states’ Medicaid programs were in danger of huge cuts, including removing thousands of people from the program. An infusion of $87 billion from the stimulus helped avert that doomsday scenario, especially because one condition of accepting the money was that states couldn’t change eligibility to cut the rolls.

Some states, like Alaska and North Dakota, were able to increase Medicaid benefits.

But the recession has caused at least 15 states to make some sort of cut to Medicaid during the 2010 and 2011 fiscal years, according to Families USA , a health-care advocacy group.

“We’re still seeing that states are having to make some very tough choices,” said Rachel Klein, Families USA’s deputy director of health policy. “In this recession, we saw states turning to Medicaid (for cuts) much more quickly than they had in the last recession.”

Medicaid costs, expected to rise as more Americans lose their jobs and employer-provided health care, are a major financial worry for states. Already struggling to pay for their share of Medicaid – which is every state’s largest or second-largest expenditure, making it a ripe target for cuts – governors recently protested congressional proposals for universal health care that would have vastly expanded the program to cover more uninsured and relied on states eventually to pick up the tab.

This year at least eight states cut benefits that are optional under Medicaid. For example:

• California, Michigan and Utah ended adult dental coverage, while Connecticut is still considering it. California is also cutting back in-home adult care.
• New York is limiting drug therapy and requiring doctors to use cheaper drugs.
• Colorado and Washington made cuts to aid for people with disabilities.
• Nebraska limited mental health and substance-abuse therapy.
• Minnesota set up stricter criteria for getting in-home help from a personal care assistant.

At least five states are forcing Medicaid patients to pay more for their care, and well over a dozen are cutting how much doctors are reimbursed for treating Medicaid patients, a move that could cause more physicians to stop seeing such patients. One year after Hawaii began paying its Medicaid doctors higher payments, the state is pulling back this year.

Some states also have rolled back coverage in state-financed health insuranceprograms for people who don’t qualify for Medicaid, either because they earn too much money or do not have children. (Medicaid doesn’t routinely cover childless adults, though states can make exceptions.)

In Massachusetts – a state in the middle of an ambitious universal health care experiment – lawmakers initially passed a budget that would have saved $130 million by removing 30,000 legal immigrants from Commonwealth Care , the state health plan, but they later restored $40 million to cover immigrants, who instead will see reduced benefits. Washington state also cut 40,000 people from its Basic Health Plan for the poor who don’t haveMedicaid coverage.

Still, there were some expansions for adults. Wisconsin moved forward this year with a previously enacted expansion of its BadgerCare Plus Medicaid program to childless adults.

Connecticut lawmakers overrode a veto on July 20 by Gov. M. Jodi Rell (R) to set up a plan by 2012 that would cover all the state’s uninsured residents, but lawmakers didn’t set aside any money yet for the expansion.

New Hampshire will allow adults up to age 25 to buy into its CHIP program if they pay the full cost themselves. More New Yorkers and Ohioans likely will get coverage because of new state requirements for insurance companies, such as limiting how much they can charge people with chronic diseases and allowing parents to add children up to age 28 or 29 on their employer-sponsored insurance plans.

But while Ohio moved to expand coverage by private insurers, the state also drastically cut areas of their taxpayer-financed health system, including from mental health, substance abuse and nursing homes. Ohio’s two-year budget cuts about $184 million from nursing homes, 3 percent from Medicaid providers, and $98 million from mental health, meaning counties will have to slash services like peer counseling and addiction prevention. This comes after mental health suffered midyear cuts of $175 million in the last biennium budget, moves that closed two mental health hospitals.

“These cuts are going to be devastating to local community care,” said Jim Mauro, the executive director of the National Alliance on Mental Illness of Ohio . He said the state will lose providers, waiting lists will get even longer, and mentally ill people leaving state hospitals or jails won’t be able to find service. “We’re going to pay for all this. You cannot escape the cost of people with serious mental illnesses.”

Mental health was a common target of budget cuts. California, Connecticut, Georgia, Illinois, Michigan, New York, South Carolina and Tennessee also made significant cuts to mental health, said Mike Fitzgerald, the executive director of the National Alliance on Mental Illness .

“We have a fragmented mental health system where already half the people with serious mental illnesses in this country can’t find the basic services they need. That’s being further eroded because of the budget challenges that state legislatures and governors are experiencing,” Fitzgerald said.

States’ public health programs, which provide preventative care to the low-income and monitor diseases,are also taking a hit – just as the U.S. is scrambling to plan for what could be a resurgence of swine flu later this year. The first day that swine flu cases were announced in the U.S. was the same day Washington state’s King County learned the Legislature was slashing $14.4 million from its public health budget.

Those cuts translate into lost public health services:

• New York cut more than $8 million from a program that last year offered free cancer screenings to 80,000 uninsured and underinsured.
• Hawaii deleted $3 million from a program that combats child abuse in at-risk families.
• California’s budget allocates $3 million for the state’s four poison control centers, half of what they received last year. But the system’s representatives say the money may not be enough to keep them operating past September; if it closes, California would be the only state without a poison control program.

Washington state’s Department of Health received 4 percent less in the budget than in the previous biennium. Cuts were made to a variety of programs, including childhood vaccination and HIV early intervention. The tobacco prevention program was cut by 40 percent. “These cuts were made neither lightly nor easily,” health department spokesman Gordon MacCracken said.