Revenue gains across all 50 states have resulted in an eleventh hour reprieve from cuts for most-but not all-Medicaid programs, according to a recent study.
So claims a 120-page report quietly released in September by the Health Policy Tracking Service in Falls Church, Va. State Medicaid Actions-2005: What the States Said, Did and Plan to Do found, contrary to the dour predictions made only months ago about potential Medicaid cuts, that the rosier financial outlook has tempered state lawmakers' desire to scale back the federally aided program-at least for now.
"State finances improved substantially during (fiscal) 2005," according to the report. "Year-end balances were twice as high as expected and overall budget stress eased considerably." Overall revenue increased 6.8% from fiscal 2004, the report showed.
All told, 19 states increased reimbursement rates for providers, while four lowered rates and three stayed at last year's levels. Also, 19 states expanded eligibility criteria to qualify enrollees for benefits, while six states restricted access to medical assistance, the report found. Twenty-nine states expanded potential benefits to Medicaid enrollees, while just five of them decreased benefits. Three did both.
"The pendulum has swung back," said Patrick Johnson, a researcher on the report and senior policy analyst for Medicaid at the Health Policy Tracking Service, which is owned by Thomson West.
In one example, Pennsylvania halved its proposed $500 million in Medicaid cuts after learning in May that it would instead have a surplus of $200 million, according to the report. Proposed limits on monthly prescriptions and hospital admissions were lifted when the final budget was released.
Even those states that put aggressive legislation in place to revamp Medicaid found themselves working with different deadlines and agendas. In Tennessee, a three-phase plan that would have removed 323,000 adults from its TennCare program, as well as implement strict limits on the types of medications enrollees had access to and the frequency to order them, recently was amended so that 97,000 adults could stay in the program.
Of the 29 states that expanded benefits, many did so in services that have traditionally been hit hardest-home and community health, dental services and mental health, the report showed. Colorado reinstated medical assistance for qualified legal immigrants, and Connecticut restored some benefits for parents and needy caretaker relatives with incomes that don't exceed 150% of the federal poverty level, according to the report.
Actions taken in the aftermath of Hurricane Katrina also have improved the Medicaid outlook. Congress has proposed the extension of benefits to the evacuee population, protections for the host states that took them in, loosened residency or income requirements and a waiving of late enrollment penalties.
Despite revenue increases, some states are still struggling with their Medicaid programs. In Ohio, for example, Medicaid officials are still working to add $2.3 billion in cost-containment policies to keep their program afloat. For fiscal 2006 and 2007, nearly all providers will see their reimbursement rates either frozen or cut, said Barbara Edwards, Ohio's Medicaid director.
In addition, some eligibility requirements were toughened. Ohio changed the maximum income level for working parents to 90% of the federal poverty level from 100%. Edwards estimated 25,000 Ohioans would lose their Medicaid eligibility as a result.
"Even when revenues are increasing, because programs have been hit so hard over the past two to four years, there's a lot of ground to make up," Edwards said. In Ohio, she added, the growth rate in Medicaid spending has been double that of revenue growth.
And that jibes with what other states have seen as well, said Lee Dixon, director of the Health Policy Tracking Service. "State revenues, while rosy, are still at 5% to 7%," he said. "Medicaid outstrips those increases."
Policy experts also say that the reprieve is temporary and that Medicaid, which siphons the most from state coffers, is a program that screams for change.
In July, the National Governors Association and the National Association of State Budget Officers jointly released a study claiming that 24 states would have Medicaid budget shortfalls in fiscal 2005, up from 20 in fiscal 2004. Average funding for state Medicaid programs, including both federal and state contributions, is expected to grow 8.8% in fiscal 2005, reaching a total of $329 billion, according to that report.
Leighton Ku, senior fellow at the Center on Budget and Policy Priorities in Washington, a nonpartisan organization that researches how policy issues affect low-income citizens, said the report's findings are technically correct, but skirt some important events on the Medicaid timeline. "It's sort of true and sort of false," Ku said about the report. "This is the broad picture for most states."
Ku said that most states have made deep cuts in their Medicaid programs in past years but, with the improving fiscal outlook, have come to restore some of them and, in some instances, even expand coverage.
But states such as Florida, Mississippi, Missouri and Tennessee, which have each scaled back their Medicaid programs, stand out as outliers to the report. Florida and Missouri, for example, have taken the politically treacherous step of trimming some seniors and disabled adults from the Medicaid rolls, he said.
So while states on average didn't have big cuts, the ones that were made "are some of the deepest ever," Ku said.
Jon Blum, director of the Medicaid practice at Avalere Health, a consulting and research company in Washington, said that he's also skeptical of the report. "I don't agree with the premise," he said. "(States) are still proposing dramatic, innovative changes to Medicaid." But, he said, the revenue increases have put restructuring on "a slower timetable because of the better fiscal picture."
Nina Owcharenko, senior healthcare policy analyst at the Heritage Foundation, a conservative think tank in Washington, said that while states' budgets will see fluctuations from year to year because of the whims of the economy, "It doesn't solve the long-term issues facing Medicaid."
-with Tony Fong