Medicaid Feeling the Effects of the States’ Fiscal Crisis

Medicaid cuts imposed by every statehouse have slowed the growth in spending on the health-care program for the poor and disabled for the first time in six years, a panel announced Monday.

The Kaiser Commission on Medicaid and the Uninsured, a health-care think tank, released three reports showing how the states’ fiscal crisis is limiting health coverage for the poor. In addition, the reports’ authors and local health officials warned that pressures on Medicaid, the largest health insurance program in the country, reflected fundamental weaknesses in the nation’s health-care system.

“The crisis in Medicaid is simply a mirror for what’s going on in health care throughout the country,” said Robert Day, director of the Kansas Medicaid program. “It will soon be a large crisis for the private sector.”

The $216-billion Medicaid program covers nursing-home and other medical care for almost 51 million people. About 12 million Medicaid patients are elderly or disabled, with 6 million of them Medicare beneficiaries whose long-term care and medications are paid for by the states rather than the federal government.

The commission’s survey of 50 states and the District of Columbia found that all had implemented or planned policy changes designed to control Medicaid spending, just as they had in the last fiscal year.

Forty-nine states have frozen or reduced Medicaid payments to doctors, hospitals or nursing homes this fiscal year, and 44 jurisdictions have taken steps to control prescription-drug costs. Other common cost-containment steps include limiting Medicaid eligibility, cutting the medical services covered by Medicaid and imposing or increasing patient co-payments.

Such cuts reduced the average growth in Medicaid spending from 12.8% in 2002 to 9.3% in the 2003 fiscal year, which for most states ended June 30. That was the first decline in Medicaid spending growth since 1996, the Kaiser Commission reported.

But because of the aging of the U.S. population, and a parallel increase in the proportion of Americans who are disabled, it will become increasingly difficult for states to find additional Medicaid savings, the experts said.

Long-term care and other medical services for the elderly and disabled accounted for almost 60% of the growth in Medicaid spending over the last two years, the reports found.

Complicating the budget picture for states is the federal government’s growing unwillingness -- aside from Congress’ recent vote for an additional $20 billion over two years -- to increase its share of Medicaid spending. “It is hard to see how the federal government can give much relief, given the deficits we see,” said John Holahan, director of health-policy research at the Urban Institute.

While elected officials blame ballooning Medicaid costs for their budget woes, a far bigger culprit is the dramatic drop in state tax revenues. The states’ fiscal crisis is “driven by a sharp and sudden falloff in tax revenue,” said Donald J. Boyd, director of fiscal studies at the Nelson A. Rockefeller Institute of Government. While state tax revenues fell 3.5% in the recession of 1991, for example, they plunged 7.4% in 2002, Boyd said.

Many health-care providers, meanwhile, are beginning to see short- and long-term effects of Medicaid cuts.

California, for example, will cut its already low Medi-Cal payments to doctors, pharmacies and managed-care plans by 5% on Jan. 1. This will make it increasingly difficult for patients to find doctors who will treat them, said Dr. Susan Fleischman, medical director of the Venice Family Clinic.

And requiring Medi-Cal patients to recertify their eligibility for the program twice a year instead of once is designed to “get people off the rolls because they don’t return the form,” she said.