Medicaid Ax Is Falling as Recession Saps States

By STEPHANIE SIMON

March 5, 2002 12 AM PT

TIMES STAFF WRITER

BELLEVILLE, Ill. —

Across the nation, state governments spend nearly as much money on health insurance for the poor as they do on public schools--more than on welfare, prisons and roads combined. And the tab keeps rising, fast.

Their budgets squeezed tight by recession, lawmakers in state after state have had enough. They are moving to cut some people off Medicaid insurance and to trim benefits for those who remain.

Federal law requires states to provide basic health coverage for poor kids, pregnant women and the most desperately needy disabled adults. But most legislatures have expanded Medicaid far beyond those core groups, reaching to cover low-income working families and people with extraordinary medical bills, such as AIDS patients or transplant recipients.

Some states, California among them, still are looking to broaden Medicaid’s reach. But many others are frantic to scale back a program that eats up close to 20% of state spending. At their annual meeting last week, the nation’s governors were unanimous in declaring Medicaid’s cost the most urgent crisis they face. Just how grave the problem is became clear Friday, when Mississippi’s Medicaid program went broke. Lawmakers there were unable to come up with the money to pay for medical care for the poor.

Patients “are calling me asking, are they going to be able to see their doctor? Are they going to get their prescriptions filled? Unfortunately, the only answer to those questions is, ‘I hope so.’ There is no guarantee,” said Rica Lewis-Payton, director of Mississippi Medicaid.

Added Dennis Braddock, who directs Washington state’s program: “There needs to be a total rethinking of Medicaid and who it’s intended to serve.”

The rethinking has begun.

In Vermont, low-income senior citizens soon may have to buy dentures on their own or go without. In North Carolina, Medicaid no longer will cover infant circumcision. In Washington, 150,000 children may lose health insurance altogether. And in Utah, families with annual incomes as low as $7,500 will have to pay a few dollars for each doctor’s visit, up to $500 a year.

In Florida, disabled construction worker Oliver Hill Sr. faces the prospect of trying to pay for his own eyeglasses for the first time since he went on Medicaid. The 59-year-old knows he won’t be able to do it. With the special lenses he needs to shield his glare-sensitive eyes, glasses cost more than $200. “By the end of the month, I don’t even have enough for a $2 co-pay for my doctor,” he said.

In Illinois, Republican Gov. George Ryan is taking a different tack: Instead of cutting benefits, he has told medical providers that the state will pay them less for treating the indigent.

The prospect does not so much enrage nursing home owner Steven Wolf as it leaves him speechless. Already, he says, he is losing more than $20 a day on each of the 115 or so Medicaid patients at his Calvin Johnson Care Center--a worn but cheery nursing home in Belleville, a blue-collar suburb of St. Louis.

The medical staff and the housekeepers, the liver lunches and the scrambled eggs on request, the balloon volleyball games, the pet therapy, the concerts of patriotic music--it all costs him close to $107 per patient per day. Medicaid pays him $86. And the governor has proposed slashing that by nearly 9%.

“I don’t think it’s possible,” Wolf said.

His words echo in state after state, as advocates for low-income patients look at proposed cuts with horror.

Missouri Gov. Bob Holden, a Democrat, wants to eliminate in-home services for 9,000 disabled residents who need help bathing and eating but who prefer to live on their own rather than in an institution.

Florida Gov. Jeb Bush, a Republican, wants adults with catastrophic illnesses to pay their own medical bills until they have sunk into extreme poverty. His plan would leave a single adult with less than $180 a month for rent, food and other living expenses.

“It’s just impossible,” concludes Anne Swerlick, an attorney at Florida Legal Services, which works on behalf of low-income people.

But state lawmakers and Medicaid administrators throw the same phrase right back at their critics. It’s not possible, they say, for Medicaid to do so much for so many. Not if there is to be money left over to improve schools and fix highways and protect children from abuse, to lower taxes and build parks. Not in this economy.

Look at the numbers in Illinois: When planning for this year’s budget began, state analysts expected $900 million in revenue growth. Then came Sept. 11. Tourism plunged; the economy tanked. The new growth estimate: $250 million.

To cover the gap, Ryan has proposed cutting 3,800 state jobs, closing two prisons and cutting a variety of services. Medicaid was hit especially hard. In an emergency measure last fall, Ryan cut the fees hospitals collect for treating Medicaid patients by 13%. His new budget proposes another 13% cut in hospital fees--plus deep reductions for other health-care providers.

Those providers are putting up a fight, arguing that nursing homes and hospitals will close if Medicaid fees fall too low. Budget director George Hovanec counters that there are few alternatives. To squeeze the same savings from other programs, Illinois would have to close 10 prisons or kick out half the children receiving subsidized day care.

It’s the same story elsewhere.

Medicaid covers 40 million Americans. It pays for 1 in 3 births and for nearly two-thirds of nursing home patients. It’s the single biggest budget item for many states--and thus an easy target for cuts.

“Generally speaking, when large reductions are needed, you do what Willie Sutton said was his reason for robbing banks: You go where the money is,” said Glen Rosselli, undersecretary of the California Department of Health and Human Services.

Medicaid is vulnerable as well because so much of the program is discretionary. Nearly two-thirds of all Medicaid spending is for benefits defined by the federal government as “optional”--that is, outside the mandated package of health insurance for the indigent.

Expanding Medicaid to cover optional groups, such as children of the working poor, or optional services, such as hospice care, proved politically popular in many states when times were flush. The expansions also seemed good fiscal policy: The federal government helps pay for Medicaid, so for every dollar a state put into the program, Washington would send it up to $3.31 in matching funds.

But the extra services proved more costly than most states had gambled. One optional goody in particular, prescription drug coverage, has sent Medicaid bills soaring. This year alone, the benefit is expected to cost $25 billion--50% more than in 2000. Many states are moving to trim those costs by requiring Medicaid patients to use generic drugs, by limiting the number of medications the program will pay for or by imposing modest co-payments of a few dollars per prescription.

Yet some lawmakers say such tinkering is not enough to save Medicaid.

They want the federal government to take over a bigger share of the costs, especially for the elderly. (The federal insurance program for senior citizens, Medicare, does not now cover long nursing-home stays or prescription drugs--though changes are being debated--so much of that burden has fallen to Medicaid.) States also are demanding more flexibility.

The Bush administration is making bolder experimentation possible through a waiver program that lets states design new Medicaid packages--including, for the first time, offering different benefit packages for different populations--as long as the revisions don’t cost the federal Treasury any extra money.

California, Arizona and Michigan are using their waivers to expand Medicaid so that both children and parents in low-income households have coverage.

California, for instance, hopes to insure up to 300,000 more people, at an estimated cost of about $200 million over the next two years. Gov. Gray Davis has proposed trimming costs elsewhere in the Medicaid program by charging patients up to $5 for services and cutting the fees paid to health-care providers to save the state $78 million.

“Even in difficult fiscal times, when many revenue streams are drying up, the governor remains committed to the safety net,” Rosselli said.

But some states are using their waivers to trim that safety net.

The most far-reaching--and, to critics, most troubling--reforms are taking place in Utah.

Armed with a waiver granted just last month, Utah plans to eliminate some benefits it now offers Medicaid patients, including vision, dental and home health care. It will charge co-payments for other services.

At the same time, Utah will expand Medicaid to insure more low-income adults--provided they can pay a $50 annual enrollment fee plus up to $1,000 a year in co-pays. They will receive a stripped-down package that covers primary care and prescriptions, but not hospitalization or visits to specialists.

Proponents see such adjustments as vital to rein in a program that has grown out of control. They argue that it’s better to give more people basic coverage than to give luxury benefits to just a few. They say they have to prioritize, funding primary care for children over hearing aids for seniors because they don’t have the money for both.

Critics retort that the reforms are untenable.

Adding enrollment fees and co-payments ignores “decades of research that shows that co-payments make a big difference in utilization rates,” argued Leighton Ku, an analyst for the liberal Center for Budget and Policy Priorities in Washington, D.C. “With premiums, a fairly large number of people will drop off the program.”

Yet some of the very people who will have to pay the new premiums say they understand that Medicaid cannot be all for everyone.

Take the Horton family of White Hall, Ark. Their oldest child, 11-year-old Caitlyn, has cerebral palsy. No private insurance company will cover the astronomical bills for her care. The Hortons earn too much to qualify for regular Medicaid coverage. But Arkansas is one of 20 states that extends Medicaid to severely disabled children, even in wealthy families.

Medicaid has sent Caitlyn to physical therapy twice a week for years. She has learned how to communicate using a special device. “She can say when she’s happy, when she’s sad, when she’s hungry, when she’s thirsty,” her mother, Tina Horton, reports with delight. “Before it was just mama’s intuition that told me.”

Caitlyn’s progress has cost the state $22,000 a year just for the therapy. Add in medical bills for her and the 3,350 other kids on the program, and the state’s tab comes to $30 million a year. Now Arkansas is asking families to shoulder some of those costs. The Hortons estimate that they will be billed about $400 a month.

Paying that will require sacrifices, of course. Yet Tina Horton does not begrudge them. “We can cut back. For years we haven’t had to pay anything for the services, so I can’t complain.”

She can worry, though. And she does, a good deal. If, in some future fiscal crisis, Arkansas cuts Caitlyn off Medicaid altogether, how would she pay for the therapy that has given her daughter a voice? The question haunts, because she has no answer.

“What will the situation be next year? That’s what scares me,” she said.

In Florida, Hill voices a similar fear. If the state stops paying for eyeglasses now, what could be cut off next? “When you’re able to work, you pay into the system, hoping it will be there if you’re ever very poor. Then when you actually need it, they change the rules. You fall through the cracks.”

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Big Spenders for Medicaid

Medicaid accounts for nearly 20% of total state spending. These states devote an even bigger share of their budgets to Medicaid:

* New York: 34.5%

* Tennessee: 28.7%

* Pennsylvania: 27.9%

* Connecticut: 26.2%

* Rhode Island: 25.8%

* Maine: 24.8%

* Kentucky: 24.3%

* New Hampshire: 24.2%

* Vermont: 23.5%