News & Events

New York Times: States to cut Medicaid benefits as federal help ends

States to cut Medicaid benefits as federal help ends

Costs expected to rise for other care recipients

By Robert Pear

New York Times / June 16, 2011

WASHINGTON — Faced with a deepening recession two years ago, the Obama administration injected billions of dollars into Medicaid, the nation’s low-income health program. The money runs out at the end of this month, and benefits are being cut for millions of people, even though unemployment has increased.

From New Jersey to California, state officials are bracing for the end to more than $90 billion in federal largesse designated for Medicaid. To hold down costs, states are cutting Medicaid payments to doctors and hospitals, limiting benefits for Medicaid recipients, reducing the scope of covered services, requiring beneficiaries to pay larger co-payments, and expanding the use of managed care.

As a result, costs can be expected to rise in other parts of the health care system. Cuts in Medicaid payments to doctors, for example, make it less likely that they will accept Medicaid patients and more likely that people will turn to hospital emergency rooms for care. Hospitals and other health care providers often try to make up for the loss of Medicaid revenue by increasing charges to other patients, including those with private insurance, specialists say.

Neither the White House nor Congress has tried to extend the extra federal financing for Medicaid, even though the number of beneficiaries is higher now than when Congress approved the aid as part of an economic recovery package in February 2009.

The Congressional Budget Office estimates that federal Medicaid spending will decline in 2012 for only the second time in the 46 years of the program. But states say they will have to spend more on Medicaid as they struggle to make up for the loss of federal money.

State officials say they are resigned to the loss of the extra federal matching payments, given the climate in Congress, where deficit reduction is a paramount goal.

“We all see the reality of what’s going on in Congress,’’ said Mark W. Rupp, director of the Washington, D.C., office of Governor Christine Gregoire of Washington state, a Democrat and chairwoman of the National Governors Association. “It’s more about cutting than spending. Why put a lot of effort into something that did not seem likely to have a positive outcome? It would have been fairly futile.’’

Although Medicaid provides health insurance to 1 in 5 Americans at some point in a year, it is more vulnerable to cuts than Medicare and Social Security, which have broader political support.

“Medicaid is very much on the chopping block,’’ said Senator John D. Rockefeller IV, a West Virginia Democrat and chairman of the Senate Finance Subcommittee on Health Care. “Seniors vote. But if you are poor and disabled, you might not vote, and if you are a child, you do not vote — that’s a lot of Medicaid’s population. They don’t have money to do lobbying.’’

Medicaid is financed jointly by the federal government and the states, with the federal government paying a larger share in such poor states as Mississippi and West Virginia and a smaller share in higher-income states such as New York and Connecticut.

The aid ending next month increased the federal share of Medicaid spending in all states, with additional help for states where unemployment rates had risen sharply. The extra aid was scheduled to expire in December 2010, but Congress extended it for six months at the urging of the White House and state officials.

The additional money pushed the average federal share of Medicaid spending nationwide to 67 percent. It will revert to 57 percent next month. The cutback in federal Medicaid money has pressured states to cut the budget for other programs, including education and social services.

Toby J. Douglas, director of the California Department of Health Care Services, said the federal Medicaid cut was causing “very consequential reductions in health care and other public programs.’’

California is cutting Medicaid payments to doctors and many other providers by 10 percent; has established new co-payments for drugs, doctors’ services, and hospital care; and will limit beneficiaries to seven doctor’s office visits a year unless a doctor certifies a need for more.

With 7.6 million Medicaid beneficiaries — 50 percent more than any other state — California faces bigger problems, but its response has been typical. A survey issued this month by the National Association of State Budget Officers found that 24 states were reducing Medicaid payments to providers, while 20 were limiting benefits in some way.

New York has just imposed a cap on state Medicaid spending, with a separate limit for each sector such as hospitals, nursing homes, and managed care plans. Under a new state law, if it appears that the state share of Medicaid spending will exceed the cap, New York officials must devise and carry out a plan to reduce spending, by modifying benefits, provider payment rates, or other features of the program.

“This is an enormous sea change for Medicaid,’’ said Jeffrey Gordon, a spokesman for the New York State Health Department.

© Copyright 2011 Globe Newspaper Company.