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Published: Monday, 11/5/2001

Ill economy endangers low-income health aid

BY RACHEL SMOLKIN
BLADE WASHINGTON BUREAU

WASHINGTON - Cash-strapped states struggling with limp economies are considering Medicaid cuts at a time when more low-income families are likely to rely on the government health-insurance program.

The most drastic options under consideration would drop thousands of people from Medicaid. Other possible cuts would eliminate coverage for eyeglasses or dentures for adult Medicaid patients. Still others would require Medicaid patients to use cheaper drugs whenever possible.

Medicaid, run jointly by the states and federal government, provides health insurance to more than 40 million Americans, including low-income families and children, the elderly, and people with disabilities.

The cuts would jeopardize health care for some of the nation's most vulnerable residents and make it more difficult for laid-off workers to secure health insurance for their families. As workers lose their jobs and incomes decline during tight economic times, more people depend on Medicaid.

“What we know from prior recessions is that more people become unemployed, lose private health insurance, and are in greater need of Medicaid services,'' said Leighton Ku, senior health policy fellow at the Center on Budget and Policy Priorities, a think tank that advocates for low-income people.

If Medicaid is unavailable, people are “going to have a hard time going to the doctor or the hospital or getting prescription drugs,'' he said. “People who have lost their jobs and have chronic disease problems, like diabetes, asthma, or heart conditions, can have very serious problems if they don't have health insurance.''

Even before Sept. 11, many states had mounting budget shortfalls. After the terrorist attacks stymied travel and tourism and soured consumer confidence, the budget outlook in many states deteriorated even further.

“After September 11, the world has changed,'' Mr. Ku said. “People are only now beginning to get a grasp of how much the world has changed and how far off their budget estimates are.''

States are looking at various options for saving money, including tapping into “rainy day'' reserve funds or requiring across-the-board cuts at state agencies.

Most states would prefer to avoid cutting Medicaid, not only because the cuts could harm health coverage for the neediest families, but because states lose federal money when they trim their Medicaid budgets. For every dollar states cut, they lose between $1 and $3 in federal money.

But Medicaid remains a prime target for budget hawks because it comprises about 15 percent of most state budgets. And as state revenues constrict, Medicaid costs continue to grow, fueled by soaring drug prices and rising enrollment.

Many states are considering some cuts to Medicaid this year and predict further cuts next year. A survey of 20 states by the nonpartisan Kaiser Commission on Medicaid and the Uninsured found that governors have directed Medicaid officials in more than half the states surveyed to prepare cost-saving proposals.

Tennessee's governor has recommended dropping 180,000 people from the state's expanded Medicaid program and substantially reducing benefits for many who remain covered.

The Florida Legislature has considered proposals that would drop tens of thousands of Medicaid patients, including many pregnant women, and eliminate services such as dental and vision care for low-income adults.

Although a special session of the Legislature appears poised to adopt less dramatic changes, patient advocates say the fight over coverage merely has been postponed until the regular session in January and that the situation remains critical.

“It's unconscionable to be terminating all health care for the state's most vulnerable citizens,'' said Miriam Harmatz, staff attorney at Florida Legal Services, a nonprofit group representing low-income residents on issues such as health care.

“If someone can't see, they can't work, and they can't drive,'' she said. “If they can't get their dentures, they're going to become malnourished. It's not like it's a luxury.''

Some states are encouraging the use of cheaper generic drugs for Medicaid patients or requiring physicians to seek state approval before prescribing new, more expensive medicines. Other states are trimming payments to physicians, a move that could prompt doctors to stop accepting Medicaid patients.

South Carolina has begun a series of cuts in Medicaid payments to physicians, pharmacists, nursing homes, and dentists. The first cut took effect Oct. 20 and broader cuts are likely to take effect Dec. 1.

Physicians expect to lose up to $10 million over six months from the cuts, said Ron Fitzwater, chief operating officer at the South Carolina Medical Association.

“It's going to be a burden for the patients if their physician drops out of the Medicaid system,'' Mr. Fitzwater said. “It's difficult for some folks in rural areas to find a physician. If they can't, their care will be delivered at the most expensive place - the emergency room.''

States also are seeking to reduce costly and dangerous incidents of fraud that drive up Medicaid costs.

“When you're looking for money and times are tough, you really do look under every rock,'' said Greg Vadner, director of the Missouri Division of Medical Services. “States are getting into more aggressive reviews of the pharmacy world to make sure there is not fraud going on with people getting the wrong drug.''

Mr. Vadner cited the Kansas City, Mo., case in which pharmacist Robert Courtney is charged with diluting chemotherapy medicine for cancer patients.

In some states, Medicaid could become the victim of across-the-board agency cuts ordered by governors.

Washington state, reeling from layoffs by the high-tech industry and by Boeing, is facing a $1 billion shortfall. Gov. Gary Locke has instructed some of the largest state agencies to propose ways to slash spending by 15 percent next year.

Dennis Braddock, secretary of Washington's Department of Social and Health Services, said he sees no way to avoid cutting Medicaid because it takes up nearly half his agency budget.

Without Medicaid cuts, “I would have to wipe out programs for foster children or things like that,'' Mr. Braddock said. He is reviewing possible cuts in mental health and disabilities services.

Washington is more generous than most states in offering Medicaid to families with slightly higher incomes, but some of those families could lose their coverage.

“There are very few cuts we can make that won't adversely impact vulnerable populations,'' said Mr. Braddock, adding that the cuts are “demoralizing'' for employees who have spent their careers trying to expand health services.

Even states such as Pennsylvania and Ohio, which are not proposing Medicaid cuts, do not rule them out if their economies worsen.

Ohio Gov. Bob Taft, facing a $1.5 billion shortfall, has ordered 6 percent cuts in most state agencies. He wants to tap into the state's rainy-day fund, borrow money from the tobacco settlement, and close some business tax loopholes. He may close a state mental hospital. But he is trying to avoid trimming Medicaid.

“Those are cuts the governor would prefer not to do at this point,'' said Taft spokeswoman Mary Anne Sharkey. “That would hurt the working poor.''

Ohio expanded Medicaid eligibility as part of welfare reform to assist people attempting to leave welfare and find jobs. Ms. Sharkey said cuts to Medicaid would undermine the state's success in reducing its welfare rolls and ultimately would cost more in emergency room care.

Pennsylvania is not considering Medicaid cuts, but state officials said the option must be reserved if the economy deteriorates.

“We always have the option of rolling some areas back, but that's not an attractive option,'' said Tim Reeves, a spokesman for Gov. Mark Schweiker.

In Michigan, Gov. John Engler has asked state agencies to propose across-the-board cuts of up to 10 percent.

“We're still looking at all the options,'' said Geralyn Lasher, spokeswoman for the Michigan Department of Community Health, which oversees Medicaid. “We're still considering everything. We all have to live within the budget.'' She said no specifics are available at this time.

Many states and health-care analysts are hoping the federal government will provide additional dollars to bolster Medicaid.

One proposal by Democratic Sens. Edward Kennedy of Massachusetts and Max Baucus of Montana would give states additional money to expand Medicaid temporarily for some laid-off workers, including adults without children generally not covered by Medicaid.

“This is really a time when the federal government could help states out,'' the Center on Budget and Policy Priorities' Mr. Ku said. “States are contemplating deep cuts, and the federal government has the ability to reduce the need for that.''



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