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While Medicaid Enrollment Rates Increase, States Face Financial Pressure to Decrease State Medicaid Spending

Posted Feb 24 2010 12:00am

cms-mbp_medicare_cardLast week, the Kaiser Family Foundation released a report indicating a large jump in state Medicaid enrollment from June 2008 to June 2009.  The report said that the 7.5 percent increase was the greatest one-year jump in enrollment rates ever, with over 3 million people joining the public health program funded jointly by the federal government and individual state governments.  The reason for the increase  is thought to be that because more people became unemployed due to the economic crash, more individuals turned to Medicaid for health coverage.  However, because the economic downturn meant less revenue entering into state budgets, state Medicaid programs have not been able to keep up with the rise in new enrollees.

During a convening of state governors at the White House this week, state officials will likely raise the issue of Medicaid spending. The issue is pressing in light of the impending funding cut when stimulus money from the American Recovery and Reinvestment Act of 2009 will expire in December of this year.  The governors will likely ask that the stimulus funding be continued until states can somehow make up for their large current budget deficits.  In addition to asking for more money, the governors will also likely discuss the feasibility of health care reform efforts.  With both House and Senate versions of health care reform proposing increases to state Medicaid programs to ensure the coverage of more uninsured individuals, the state governors would, understandably, like to know where the money for such expansion would come from.

The National Association of State Medicaid Directors estimates that states’ budgets will fall  short  $140 billion in the next fiscal year.  This means even less money for the likely further increase in Medicaid enrollment to come this year, as Medicaid enrollment generally lags behind unemployment.  To account for the deficit, many states are planning to reduce their Medicaid programs. USA Today finds that three categories of such reductions exist:

States that accepted stimulus money to expand their Medicaid programs in 2009 are restricted from any such cuts that would affect low-income enrollment.  However, if the stimulus funding is not extended, some states are planning on heightening eligibility requirements.  For other states, while decreasing hospital and doctor reimbursement seems like the worst possible option– given that many doctors have already stopped accepting  Medicaid patients due to what they deem to be an insufficient rate of reimbursement– many states’ officials find that the only other viable option they have is raising taxes.  Many state leaders refuse to increase taxes in fear of the political backlash come November.

Realizing the need for health care reform to help manage the burden of paying for health care, state governors have stated a desire to be part of the health care reform conversation.  Many have already expressed their dislike for individual mandates, which they believe will drive more individuals to state Medicaid programs.  For the most part, however, the governors want reform and they want it now, finding that they simply can’t afford to wait another year.

It is also worth noting that an underlying issue from these new numbers is whether the Medicaid program is actually a good prototype for expanding health care coverage.  Drew Altman, President and CEO of Kaiser , put in perspective Kaiser’s report as well as the concerns of public spending that were sparked by the Centers for Medicare and Medicaid Services’ projections for 2009-2019 – which forecast that public spending on health care will surpass private spending.  He noted that while spending in public health insurance programs would increase, the cost-benefit would be better, since per capita costs on health care were lower in government-run programs than in private insurance programs.  According to Altman, such numbers did not undermine health reform efforts, but instead denoted “the need to control health care costs in the public and the private sectors alike.”

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