States Still Struggling To Control Medicaid Costs

For the first time in seven years, states have slowed the growth of spending on Medicaid the state-federal health care program for the poor and disabled. But program eligibility and benefits are still at risk of being cut, health policy experts said.

Controlling Medicaid expenditures “is going to be a challenge for states for a number of years. I don’t think we are by any means out of the woods,” Victoria Wachino, associate director of the Kaiser Commission on Medicaid and the Uninsured (KCMU), told Stateline.org.

The growth rate has declined about 3 percent, from a 12.8 percent increase in fiscal 2002 to 9.3 percent in fiscal 2003, which ended in June for most states, according to a new survey conducted by KCMU, a research arm of the Washington, D.C.-based Henry J. Kaiser Family Foundation.

The sluggish economy and rising unemployment have led to a rise in Medicaid enrollment, KCMU said. State efforts to control costs have been successful, but not without cost to beneficiaries and providers alike. “We’ve increased co-pays, we’ve cut services, we’ve cut eligibility, we’ve implemented pharmacy prior authorization. We’ve done all that. And if you look around the country you’d see a pretty comparable mix of things,” Connecticut Medicaid Director David Parrella told Stateline.org.

All 50 states and the District of Columbia implemented measures to control the cost of Medicaid during fiscal 2003 and all are planning additional action for fiscal 2004, the report said.

Parrella, who chairs the National Association of State Medicaid Directors, said states are attempting to curb costs by restricting eligibility and benefits rather than making sweeping cuts.

The slowed growth can be attributed in large part to states’ ingenuity, Trudi Matthews, chief health policy analyst at The Council of State Governments said.

“There have been some eligibility cutbacks around the margins, but for the most part states have really been very courageous in trying to find new ways to do business and to stretch their dollars as far as they could,” Matthews said.

According to the Kaiser survey, in fiscal 2004:

• 49 states are planning to reduce or freeze rates on payments to Medicaid providers, such as physicians and inpatient hospital rates.
• 44 states will likely attempt to reduce prescription drug prices through preferred drug lists, PDLs.20 states are planning to reduce benefits to Medicaid patients including restricting or eliminating dental coverage, vision coverage, doctor visits and home care.
• And 18 states plan to change income standards for Medicaid eligibility and long-term care.

The survey also said the $20 billion Congress provided states under the Bush tax cut plan — $10 billion of which was allocated specifically for Medicaid — was “critical” to preventing additional cuts.

Minnesota, for example, put off cutting several hundred pregnant women from the Medicaid rolls until July 2004 because of the infusion of federal cash, state Medicaid Director Mary Kennedy said.

“We delayed a number of cuts we would have otherwise made,” Kennedy told Stateline.org.

But officials in Minnesota and other states are concerned about what will happen next year if that federal aid is gone and state fiscal conditions do not improve.

“States can’t forever continue to plug these gaps by clamping down on payments. Everybody realizes that those have to be short term things,” CSG’s Matthews said.