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Fiscal Crisis Forces Medicaid Cuts
The opposing forces of increasing costs and decreasing revenues has created a fiscal crisis for Medicaid-the insurance program that serves more than 44 million low-income U.S. citizens. Last year, Medicaid spending grew by 11%, primarily due to rising prescription drug and hospital costs. At the same time, states are experiencing declining revenues due to the national recession, and, unlike the federal government, most states must balance their budgets. In order to make up the shortfall between costs and revenues, states are being forced to making difficult choices about ways to cut benefits and reduce payments.
The choices about how to trim costs are so difficult because the Medicaid program serves a population that is already struggling. Medicaid provides health insurance for one-fifth of all children, one-third of all births, and almost two-thirds of all nursing home patients. In addition, the need for Medicaid is highest during a recession because many people turn to the program when they lose their jobs or health insurance. "The need for Medicaid goes up just when the states' ability to pay for it goes down," said Vernon K. Smith, a health policy consultant. "I think this is going to be a very tough year for low-income and low-wage working families who depend on Medicaid as a lifeline," said Ronald Pollack, executive director of the consumer advocacy group Families USA.
Financed by both the federal government and the states, Medicaid is the largest source of federal grants to states. However, the program still accounts for nearly 20% of state budgets. As a result, governors throughout the country are pressuring the federal government to increase its contribution to Medicaid. Governor George Pataki of New York led a bipartisan effort by governors to persuade Congress to provide billions of dollars in additional aid for Medicaid.
Until a solution is found, states throughout the country are making difficult choices about cuts to the program. And, in many cases, the states are facing stiff opposition from consumer groups, drug companies and health-care facilities. In Indiana, state officials reduced payments to hospitals, nursing homes and pharmacies by 5%-a move that prompted nursing homes and drugstores to file suit to stop the cuts. In Idaho, Governor Dirk Kempthorne is trying to establish prior authorization guidelines for prescription drugs-a move opposed by pharmaceutical companies on the grounds that it limits patients' access to medicine. In Vermont, Governor Howard Dean is trying to control costs by reducing benefits like podiatry or dental benefits but not the number of people eligible for basic insurance coverage. In Arkansas, legislative efforts to solve the problem by making new cuts and requiring families to pay some of the costs in the form of co-payments was protested by parents of children with severe illnesses and disabilities. "They could easily co-pay a family to death," said C.J. Moorman, the father of a 16-year-old boy with cerebral palsy who is a Medicaid patient.
From "States Face Hard Choices on Medicaid Cuts," by Robert Pear and Robin Toner, January 14, 2002 New York Times.