Washington, DC, United States (KaiserHealth) - The end of federal stimulus spending is going to mean nothing but pain for state Medicaid programs in fiscal 2012.
State Medicaid spending is projected to grow by an average of 29 percent in the budget year that began July 1, the biggest increase in the history of the federal-state health insurance program for the poor and disabled, according to a report released Thursday.
The recession drove up Medicaid enrollment sharply, but the federal government stepped in with extra funds beyond its usual share to help states cover the costs. Now, states are scrambling to make up for the end of billions of dollars in federal stimulus funding that helped sustain the program from March 2009 through June 2011. The huge jump in their Medicaid costs should prove temporary, assuming that the economy continues to improve. Typically, state Medicaid spending rises 5 percent to 10 percent annually.
Both the 2009 economic stimulus law, which provided an additional $87 billion in federal funding for Medicaid, and the 2010 federal health overhaul prohibited states from tightening eligibility requirements. So states have had to look elsewhere for cuts to make up for the loss of the extra federal funds.
"On a bad day a Medicaid director can feel like a Sherpa climbing Mount Everest," said Valerie Harr, New Jersey's Medicaid director.
To counter the cost surge in Medicaid, which covers 60 million people and typically accounts for a quarter of state budgets, nearly every state is either reducing benefits, cutting fees to doctors and hospitals, or both, according to the report by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured. (KHN is an editorially independent program of the foundation).
"This is a huge challenge for states, particularly with the demands on their already limited administrative resources," said Robin Rudowitz, associate director of Kaiser's commission.
Diane Rowland, executive vice president of the foundation and the commission's executive director, said the combination of two recessions since 2001 "and a decade of constrained spending has left no cushion, and many of the latest cuts will hit at the core of the Medicaid program."
Although states are bearing a bigger share of the Medicaid burden this year than they have in the recent past, overall Medicaid spending (state and federal dollars) is projected to grow by only 2.2 percent, the lowest amount since 2006, the Kaiser report said. That is because the stimulus funding ended, and program costs are stabilizing as the national economy shows tentative signs of recovery and enrollment growth slows.
To get through the current budgetary crunch, here's some of what states are doing to control costs, according to the 11th consecutive Kaiser survey of state Medicaid directors:
Eighteen states in both fiscal 2011 and 2012 reported eliminating, reducing or restricting benefits. The most common were cuts to dental, therapies, medical supplies and durable medical equipment, and personal care services.
Five states in fiscal 2011 and- states in fiscal 2012 increased co-payments or imposed new ones on recipients. In contrast, only one state did so in 2010. Most copayment changes were for pharmacy and emergency room visits.
Thirty-nine states lowered provider payment rates in fiscal 2011, and 46 states plans to do so this year.
Seventeen states in fiscal 2011 and 24 states in fiscal 2012 added to the number of Medicaid recipients who are covered by private managed care companies.
Although Medicaid enrollment growth has slowed this year, an estimated 16 million more people will be covered under the program starting in 2014 as a result of the 2010 Affordable Care Act. A new study by Harvard School of Public Health researchers published in the journal Health Affairs suggests that figure could actually range from a low of 8.5 million to a high of 22.4 million.
The federal government will pick up 100 percent of costs for these newly eligible recipients initially, decreasing to 90 percent in 2020.
The 26 states challenging the constitutionality of the federal health law in Florida v. HHS have argued that the Medicaid expansion places an unfair burden on them.
Today, the federal government pays on average 56 percent of Medicaid costs, though its share is higher in the poorest states.
Enrollment in Medicaid has grown rapidly since 2006 as the economy unraveled and millions of people lost their jobs and their health benefits. But the pace slowed in fiscal 2011, when enrollment rose 5.5 percent; states project a 4.1 percent enrollment increase in 2012, the report said.
Darin Gordon, Tennessee's Medicaid director and vice president of the National Association of Medicaid Directors, said tax revenues are up in his state but not enough to keep up with rising Medicaid costs. "Things are not in an ideal state, as the state is still trying to climb out of a hole, but we are seeing some modest revenue growth," he said.
He said when federal stimulus money went away, the state took money it had diverted to other state programs the past two years and allotted it to Medicaid.
While the financial picture is brightening, Gordon worries the congressional super committee will suggest major cuts in Medicaid. "Medicaid is very much on the table," he said.
Jordan Rau contributed to this article.
- Provided by Kaiser Health News.
October 28, 2011, 12:24 AM EDT
By Alex Wayne
Oct. 28 (Bloomberg) — State efforts to cut Medicaid benefits and payments the health program makes to hospitals and doctors may not offset the loss of $100 million in federal aid and added costs of treating patients in a flagging economy.
State Medicaid spending will rise 29 percent this year as governors confront an enrollment surge of unemployed people, according to an annual survey of Medicaid officials from the Kaiser Family Foundation in Menlo Park, California.
“Unemployment remains high with increasing numbers of poor and uninsured keeping pressure on state budgets and Medicaid programs to meet growing needs,” said Diane Rowland, the foundation’s executive vice president.
The loss of $100 billion in U.S. funds authorized by the 2009 economic stimulus law is intensifying the squeeze, forcing states to raid budgets for transportation, corrections and other purposes to pay for Medicaid, said Matt Salo, executive director of the National Association of Medicaid Directors in Washington, in a telephone interview.
“In any given state, literally every dollar of new revenue that’s coming in is all going to Medicaid,” Salo said.
The foundation’s estimate of a 29 percent increase in state spending is based on projections provided by state Medicaid officials. The survey released yesterday didn’t ask how much states expect to spend in dollar figures.
Medicaid is a joint state-federal program. States and the U.S. government were expected to spend about $442 billion combined on the health plan in 2011, according to the Centers for Medicare and Medicaid Services, with the federal government paying about 61 percent of the total.
Benefit Cuts
Under the 2010 health-care overhaul, which will expand Medicaid beginning in 2014, states are prohibited from cutting enrollment by reducing eligibility or making it harder for people to sign up. Governors have responded by cutting benefits and payments to providers instead.
California has eliminated 10 medically necessary benefits including dental care for adults and adult day-health centers, an alternative to nursing homes, said Anthony Wright, executive director of the Sacramento-based Health Access California, a statewide consumer advocacy group. This year’s budget included $709 million of provider cuts and new limits on visits to doctors and clinics.
“Though these reductions were difficult, they were necessary,” said Anthony Cava, a spokesman for the California Department of Health Care Services, which oversees the state Medicaid program, called Medi-Cal.
Weighing Options
Florida is awaiting U.S. approval to expand enrollment in managed-care plans in the state to control spending after Medicaid costs grew 42 percent in the five years to fiscal 2011. The state projects program spending will rise another 18 percent by 2015.
Arizona raised Medicaid beneficiaries’ co-payments and froze enrollment in its program for childless adults and low- income children. The state is the only one Kaiser surveyed that expects see a decline in enrollment due to the cuts. Arizona anticipates 100,000 people will be dropped from its Medicaid rolls by July for a savings of $190 million, said Monica Coury, a spokeswoman.
The enrollment freeze is being challenged in state court, since voters approved an expansion of Medicaid that has been essentially undone by the governor and Legislature. Arizona drew national attention in 2010 for eliminating coverage for some organ transplants. That coverage was restored earlier this year.
Freezing Payments
“We’ve never disputed that there was an impact from these cuts — that is true in every state that is facing Medicaid pressure,” said Matthew Benson, a spokesman for Arizona Governor Jan Brewer, a Republican. “The bottom line is that we need to have a Medicaid program that we can afford.”
Forty-six states plan to freeze or reduce payments to hospitals or other health providers this year, Kaiser said. Thirteen states have eliminated at least one benefit in the last two years, such as dental care, and “almost all states have been making substantial changes in Medicaid pharmacy programs,” the group said, such as requiring state approval for prescriptions that aren’t on a “preferred drug list.”
“Many of the latest cuts will hit at the core of the Medicaid program,” Rowland said.
Most of the projected 29 percent increase in state spending “is really just to keep people on the program,” said Joy Johnson Wilson, health policy director for the National Conference of State Legislatures in Washington. “We knew it was a big hole, because the economy hasn’t improved that much — not enough to get people into jobs and off of Medicaid.”
Fourteen states increased co-payments for Medicaid beneficiaries this year, and 24 expanded enrollment in managed- care plans run by companies including UnitedHealth Group Inc. and Centene Corp. About two-thirds of the nation’s 54 million Medicaid patients were enrolled in some kind of managed care plan in October 2010, the foundation said.
–With assistance from Christopher Palmeri in Los Angeles, Amanda J. Crawford in Phoenix and Simone Baribeau in Miami. Editors: Adriel Bettelheim, Andrew Pollack
To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net
To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net
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