Blog | Monday, January 31, 2011

QD: News Every Day--Dark days ahead for Medicaid

State governments continue to balance their budgets by gashing Medicaid.

Arizona, which wants to drop coverage for 280,000 Medicaid recipients, is seeking a waiver from the federal requirement that states not reduce Medicaid eligibility. Spending for the program has nearly doubled in the past three years, from 17% of the general fund to 30%.

Tennessee officials are preparing to cap Medicaid use at eight doctor and hospital visits a year. The state has a $1 billion budget shortfall.

Texas, which is considering eliminating Medicaid altogether, is looking to pass a budget that would cut Medicaid reimbursements to long-term care facilities by 33% and hospital payments by 10%.

It's not until 2014 that Medicaid’s reimbursement rate will rise to match Medicare's, possibly enticing doctors to accept it then. So legislators and governors are looking at what they can cut, including payments to physicians now.

Often, the cuts will cause states to lose out on federal matching funds. Tennessee, for example, wants to reduce state spending by $103 million, meaning they'd miss out on $203 million in federal matching funds. In Texas, one health administrator said the state gets $1.50 for every $1 it spends.

And if states cut their Medicaid budgets, the cost of care gets shuffled, but it doesn't disappear. Private insurance rates rise, for example.

The states' budget crises come at a time when Medicaid hospitalizations are rising. Hospital admissions of Medicaid patients jumped by 30% between 1997 and 2008, compared to a 5% growth in privately insured patients, reports the Agency for Healthcare Research and Quality (AHRQ).

AHRQ found that:
--Over the period, a hospital's average cost for a Medicaid patient stay rose 11%, compared to a 34% cost increase for privately insured stays and the 26% increase for uninsured patients, adjusted for inflation.
--In 2008, the average Medicaid patient stay cost a hospital $6,900 and about the same for an uninsured patient, compared to $8,400 for a patient stay covered by private insurance, adjusted for inflation.
--Altogether, Medicaid patient stays cost hospitals about $51 billion, compared to $117 billion for privately insured patient stays and $16 billion for uninsured stays in 2008, adjusted for inflation.
--Medicaid was the primary payer for more than 18% of the nearly 40 million hospital stays in 2008.

But it's not all bad news. Washington state salvaged two programs through a Medicaid waiver that will let the state and federal government share the cost. The waiver, intended originally as a short-term bridge to national health care reform in 2014, will provide about $7.7 million a month in new federal funds, or roughly 40% of the cost of programs funded primarily by state dollars.