States mull Medicaid cuts, dropout possibilities

"Huge budget shortfalls are prompting a handful of states to begin discussing a once-unthinkable scenario: dropping out of the Medicaid insurance program for the poor,"  The Wall Street Journal reports. Officials in several states, including Washington, Texas, and South Carolina, have publicly pitched the idea. Medicaid, whose enrollment totaled 62 million nationwide in 2007, is one of the biggest items on state budgets, "and states complain they don't have enough flexibility to pare it" without losing the matching funds provided by the federal government, which cover 57 percent of the cost of the program on average. "Some states, in particular those led by Republicans, are calculating whether they'd be better off giving up the federal funding and replacing Medicaid with a narrower program of their own." For instance, Texas Gov. Rick Perry has suggested that his state leave Medicaid "in favor of a state-run system unburdened by federal mandates." Washington's Medicaid director Doug Porter said he had discussed the state dropping out of Medicaid with a citizen advisory committee, as Washington faces a multibillion dollar shortfall over the next two years. Indiana Gov. Mitch Daniels proposed that Republican governors "band together to create a multistate insurance pool for the uninsured" (Adamy and King Jr., 11/22).

ABC News: The new health care law extends eligibility for Medicaid to Americans whose incomes are up to 133 percent of the federal poverty level, a move that has "aroused rebellion from states" already dealing with budget crises. "Medicaid has been particularly hard hit by the budget crisis and the weak economy. Spending on Medicaid rose an average of 8.8 percent this year, the highest rate of growth in eight years. … Faced with a budget deficit of more than $1 billion, Arizona's majority Republican legislature has slowly been cutting Medicaid benefits. At the same time, the newly elected president of the Arizona State Senate, Russell Pearce, has said he would reject federal grants, even though it means the state would lose about $7 billion in federal help." Meanwhile, "Minnesota Gov. Tim Pawlenty signed an executive order in August forbidding state agencies to apply for grants under the new health care law" (Khan, 11/22).

The Palm Beach Post: "One proposal by Republican lawmakers to help reduce the $20 billion" that Florida expects to pay for Medicaid in the coming year involves "limiting lawsuits against doctors to entice more of them into the program." But "[w]hether this would actually help lower costs or even lure more doctors into the program is unclear." Under the proposal, doctors who treat Medicaid patients would be offered "sovereign immunity," entitling them "to the same $100,000 damages cap for each adverse incident as government entities are." Doctors often perceive Medicaid patients "to be a greater risk of malpractice lawsuits" because they are more likely to need complex or emergency treatments. But opponents to the proposal say that Medicaid reimbursement levels are a greater factor in determining physician participation in the program (Kam, 11/21).

Bloomberg: Last week, state leaders at the the Republican Governors Association and the National Governors Association discussed the prospect of cutting public services to plug gaping budget deficits. "Governors have little room to maneuver around the largest spending items — primary and secondary education, Medicaid and prisons," said former Illinois governor Jim Edgar. "States have filled more than $425 billion in funding gaps since fiscal 2009; the combined imbalance is likely to reach $140 billion in the next budget year" (Jones, Dopp and Mildenberg, 11/22).

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This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.