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Medicaid Targeted as States Cut Budgets

Posted Feb 02 2011 7:24pm

213px-an_axe_labelled-2 On January 21, Arizona passed legislation allowing the state to submit a Medicaid-waiver request to cut 280,000 people from the program next year.  When filed, it became the first official request to suspend PPACA’s “maintenance-of-effort” provision.  The mandate requires states to maintain early 2010 Medicaid eligibility levels until the 2014 nationwide expansion of eligibility.  Arizona could lose its entire federal Medicaid contribution, approximately $3 billion, if it fails to meet the maintenance-of-effort provision.

The Associated Press reports that most Arizonans who lose coverage are “non-pregnant, non-disabled, childless adults and also parents with incomes above 50 percent of the federal poverty level.”  According to the Arizona Republic , however:

Though the cuts have been billed as affecting only childless adults, about 30,000 of those who would lose coverage are parents and another 11,000 are children. Brewer’s budget director said they expect to re-qualify the kids under another Medicaid category.

In addition, 5,200 adults with a serious mental illness would be cut from  AHCCCS [Arizona Health Care Cost Containment System, Arizona's Medicaid program], as well as roughly 5,000 people who qualified because of medical bills that resulted from a serious illness or injury.

The Medicaid-waiver and AHCCCS cuts are projected to save $541.5 million next year the single largest line-item reduction towards the $1.1 billion budget gap.

Arizona already reduced Medicaid coverage for transplants on October 1, and mental health services for non-Medicaid patients.  As the NYTimes reported ,

Until recently, Arizona had one of the most generous benefits packages for mental health treatment, largely as a result of the settlement of a 1989 class-action lawsuit and a state law guaranteeing assistance to the mentally ill. But last year, the program began to shrink. The state cut counseling, case management, voluntary hospitalization, brand-name medication and numerous other services for non-Medicaid patients.

Ms. Brewer, a Republican, is also proposing cuts in eligibility for Medicaid, which is the largest insurer of public mental health services.

The vote to approve the Medicaid-waiver request followed party-lines, with Republicans’ outrage directed at “unfunded mandates” and health reform.  The Arizona Republic reports that House Speaker Kirk Adams stated, “if we allow them to, they will have commandeered our budget.  Arizona will not allow a path of government dependency.”  Republicans argue that the eligibility reduction is necessary to avoid cuts to education and core functions of the government.

Democrats rejected the waiver as foolhardy and unconstitutional.  In 2000, Proposition 204 expanded the Arizona Health Care Cost Containment System (AHCCCS) and funded it through tobacco settlement and tobacco-tax proceeds, which have since been depleted.  Democrats argue that changes to the ballot measure require a direct vote by the electorate and will result in court challenges.

Democrats further argue that the cuts will cripple the health-care system, since AHCCCS funding comprises 20% of all Arizona hospital revenue, with some hospitals relying on AHCCCS funding for more than 60% of their budgets.

Arizona is not alone in its budget problems.  Many states are facing continued budget problems and many governors have called upon Congress to repeal PPACA’s “maintenance-of-effort” provision.  However, none have actually requested a Medicaid-waiver to reduce eligibility.

To fix budget deficits, many states are reducing reimbursement rates and cutting non-Medicaid services, particularly mental health services.

  • Washington State made a midyear cut of nearly $19 million for community treatment programs last fall and has proposed an additional $17.4 million cut in reimbursement rates for mental health providers.
  • The Kansas governor has asked the state to cut $10.2 million appropriated for community mental health centers and $5 million in therapies for children with severe disorders.
  • Mississippi has cut $7 million in grants to community agencies, cut spending for mental health benefits and is proposing further 13% cuts.
  • In New York , Erie County Executive Chris Collins has called on the legislature to pass legislation allowing counties to “opt-out” of non-mandated Medicaid services, which is projected to reduce property taxes by 40%.

Meanwhile, Governor Mark Dayton is following through on his campaign promise to expand Medicaid enrollment in Minnesota by 95,000 people by March 1, and although a challenge to the Individual Mandate was successful in a Florida federal court, a second challenge to the Medicaid provisions in PPACA was unsuccessful. The New York Times writes :

In a silver lining for the Obama administration, the judge rejected a second claim that the new law violates state sovereignty by requiring states to pay for a fractional share of a Medicaid expansion that is scheduled for 2014.

Judge Vinson, the first judge to address that question, dismissed the contention that states were being illegally coerced by the federal government. He said they always have the option, however impractical, to withdraw from Medicaid, a joint state and federal insurance program for those with low-incomes.

“The states have little recourse to remaining the very junior partner in this partnership,” the judge wrote.

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