Cash-strapped states look to cut from Medicaid (and so it begins)

[link to www.chron.com]

WASHINGTON — States from Rhode Island to California are being forced to curtail Medicaid, the government health insurance program for the poor, as they struggle to cope with the deteriorating economy.

With revenues falling at the same time that more people are losing their jobs and private health coverage, states already have pared their programs and many are looking at deeper cuts for the coming year. Already, 19 states and the District of Columbia have lowered payments to hospitals and nursing homes, eliminated coverage for some treatments and forced some recipients out of the insurance program completely.

Many are halting payments for health-care services not required by the federal government, such as physical therapy, eyeglasses, hearing aids and hospice care. A few states are requiring poor patients to chip in more toward their care.

"It's not a pretty list at all," said Michael Hales, the Medicaid director in Utah.

Medicaid, a central piece of the Great Society safety net created in the 1960s, is the nation's largest source of government health insurance. It covered 50 million Americans last year. The program is a shared responsibility of the federal government and the states, with federal money paying, on average, 57 percent of the bills and states providing the rest.

Federal health officials set minimum rules about who can enroll and what care must be covered, but states are free to add to the basics. Those optional patients and services are what many states are rethinking now.

With the program the largest or second-largest expense in every state's budget, governors and state legislators have been pleading with Congress and the incoming Obama administration for help. Democrats who hold majorities in the House and the Senate are sounding sympathetic for now. They are considering close to $100 billion to increase the share of Medicaid's costs that the federal government would pay during the next two years.

President-elect Barack Obama also is open to extra help for Medicaid as part of a broad strategy to spur the economy. "We are considering a number of proposals ... including helping states meet Medicaid needs, reducing health-care costs, rebuilding our crumbling roads, bridges and schools, and ensuring that more families can stay in their homes," said Nick Shapiro, an Obama transition spokesman.

According to a Washington source who is in close contact with lawmakers, some in Congress also are beginning to entertain the idea of allowing unemployed people who have lost health benefits to sign up for Medicaid, with federal money paying the entire bill.

In the meantime, uncertainty over how much help may come, and when it might arrive, is prompting many states to make the biggest reductions to their Medicaid programs in years — and in some cases, ever.

Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said the pressure on Medicaid programs is particularly acute because the economy has deteriorated so soon after a milder recession early in the decade. States already "have taken the cuts that were making the program more efficient ... Now they are making ... cuts into the core," she said.

Twenty states have cut Medicaid for the current fiscal year, according to a survey this month by Families USA, a liberal consumer health lobby. All but one, plus six others, are drafting deeper reductions for the coming year that they hope to avoid. Florida's Medicaid officials have just handed the governor and legislature a blueprint for a 10 percent reduction; it would eliminate coverage for 7,800 18- and 19-year-olds and 6,800 pregnant women.

Among the states with the gravest financial problems — and pressures on Medicaid — is California. In July, Medi-Cal, as the program there is known, slashed by 10 percent the rates it pays hospitals, nursing homes, speech pathologists and other providers of health care. It tried to lower payments to doctors and dentists, too, but they have sued to block the decreases.

Gov. Arnold Schwarzenegger has asked the state legislature to approve other cuts, including an end to dental care for adults, about 1 million of whom use it now, and a sharp reduction in care for recent immigrants.

At two hospitals run by NorthBay Healthcare, midway between San Francisco and Sacramento, about one patient in five is on Medi-Cal. The rate cuts translate into a $4 million loss this year. In September, the health system closed a rehabilitation program for children that provided physical therapy, speech therapy and other help to about 300 young patients at a time — with 100 more usually on the waiting list.

"It was heart-wrenching to have to go out and announce," said Steve Huddleston, NorthBay's vice president of public affairs.

Rhode Island's approach has been the most far-reaching to date. This week, it announced an agreement with U.S. health officials that would, if the state legislature consents, change the entire financial basis of the program. The state would forfeit its Medicaid entitlement and accept a total of $12 billion in federal money over the next five years. In exchange, Rhode Island would win uncommon freedom from federal rules, allowing it to enroll all its Medicaid patients in managed care, cover less treatment and expand care for elderly patients at home, instead of in more expensive nursing homes.