Medical Infrastructure - The Solvency Of Medicaid

Medicaid Enrollment, 1990-2007, and Estimated Federal Share of Medicaid Payments per Enrollee, 1996-2007

The number of people enrolled in Medicaid is expected to increase — as is federal spending per enrollee. Although 51% of Medicaid beneficiaries are children, they are the least costly (per person) to the program; children are least likely to need costly medical intervention. Adults generally require more costly medical care, therefore expenditures for this population are slightly higher. Not surprisingly, the most expensive to insure under Medicaid are the aged and the disabled. Both of these populations may require more costly medical care over a longer period of time (such as nursing home care). Some elderly Medicare beneficiaries are also eligible for Medicaid payments to help with their Medicare premiums and other health related expenses.

Despite the increase in federal Medicaid funding, states have been cutting benefits to their enrollees. Why? Pressure to balance budgets (49 states have legislation mandating a balanced budget). In 2001, states faced a total budget deficit of $40-50 billion ($4.4 billion in total Medicaid deficit alone).³⁴ Medicaid expenditures were the second largest state budget expenditure, next to education (15% of the average state budget in 1999).³⁵

In August 2001, the Congressional Budget Office (CBO) estimated that state revenue would grow by 2.3% in the next fiscal year, but the CBO also estimated that Medicaid expenditures would grow by 9%. "That disparity is unsustainable [even] in a booming economy," according to Matt Salo, chief health lobbyist of the National Governors Association.

In the third quarter of 2001, 31 states experienced declining state and local tax revenue. By February 2002, 24 states were in and 17 states were nearing recession. Unfortunately, when states experience a recession, more people are unemployed and the numbers of those applying for Medicaid and other public assistance increases. At the same time, with fewer people working, tax revenues drop. Faced with mounting deficits in 2002, legislatures in some states cut their Medicaid programs.

In Missouri, eligibility requirements were tightened. This eliminated insurance coverage for 36,000 low-income parents.³⁶ Medicaid services were also cut back substantially. Health services for new mothers were reduced, affecting 160,000 women. Dental services were dropped for low-income adults, affecting 300,000 people. The state also imposed stricter limits on which drugs can be prescribed without prior authorization. These measures reduced expenditures by $360 million.

Montana increased the amount all adult, elderly, and disabled Medicaid beneficiaries must pay when they use medical services (5% of all expenses). This includes prescription drugs and doctor's office visits. The charge for hospital admission is now $200. (In order to be eligible for Medicaid in Montana, a person's income cannot be over $10,032 a year or $836 a month.³⁷) Health care provider reimbursements were reduced by 2.6% also. According to the Center for Budget and Policy Priorities, increasing out-of-pocket costs for those least able to pay will lead to more beneficiaries avoiding or delaying medical care. And, reducing Medicaid reimbursements to providers may lead some to stop accepting Medicaid patients.

Besides the impact on beneficiaries, some criticize these cuts as harmful to the states' economies. For every dollar cut from the state Medicaid program, the state loses $1 to $3 in federal matching money. "For example, by cutting its Medicaid program by $66 million, … South Carolina saved $20 million in state dollars but gave up $46 million in federal matching funds that could have helped the state achieve a faster economic recovery" (Landa). Not to mention the cuts that hospitals have to make when Medicaid money is cut: according to Diane Rowland, executive Director of the Kaiser Commission on Medi caid and the Uninsured, "the largest employer in most [small towns] is the health care system, either the hospital or the community health center…. Many of these centers and hospitals are highly dependent on Medicaid revenue…. In the absence of Medicaid, the patients don't go away, the revenue just goes away, and the jobs go away."

Sources: Committee on the Budget. The United States Senate. "Medicaid." Retrieved September 17, 2002 from http://www.senate.gov/~budget/republican/latest%20data/medicaid.htm. Amy Snow Landa. "Medicaid morass: States are cutting funds to make up for major revenue shortfalls." American Medical News, January 7, 2002. Retrieved September 18, 2002 from http://www.ama-assn.org/sci-pubs/amnews/pick_02/gvsa0107.htm. National Association of State Budget Officers. National Governors Association. Medicaid and Other State Healthcare Issues: The Current Situation, May 2002. Retrieved September 18, 2002 from http://www.nasbo.org/Publications/PDFs/fsmedicaidmay2002.pdf. Leighton Ku, et. al. Center on Budget and Policy Priorities. "State Medicaid Cutbacks and the Federal Role in Providing Fiscal Relief to States," August 2, 2002. Retrieved September 18, 2002 from http://www.cbpp.org/7-12-02health.pdf. Mark M. Zandi. Economy.com."The Outlook for State Tax Revenues," 2002. Retrieved September 18, 2002 from http://www.nga.org/cda/files/TAXREVENUES02.pdf. Matthew Broaddus, et. al. Center on Budget and Policy Priorities. Expanding Family Coverage: States' Medicaid Eligibility Policies for Working Familes in the Year 2000, February 13, 2002. Retrieved September 18, 2002 from http://www.cbpp.org/1-2-02health.pdf. Health Care Financing Administration. U.S. Department of Health and Human Services. Chartbook 2000: A Profile of Medicaid, September 2000. Retrieved September 16, 2002 from http://cms.hhs.gov/charts/medicaid/2Tchartbk.pdf.