Providers nationwide are under strain as state Medicaid programs cut reimbursement rates and benefits during the worst economic recession in decades.
States worry about strain on Medicaid as uninsured numbers rise
In many states, Medicaid rolls are at their highest in history, and states are struggling to keep up with the rapid rise in public healthcare spending as more Americans lose their jobs and employment-based coverage and household incomes slide.
Looking ahead to 2011 and beyond, state Medicaid directors said they worry what will happen when federal stimulus dollars end next year. And they expressed concern about states' ability to pay their share of healthcare reform proposals that seek to expand Medicaid.
The stresses on Medicaid came to the fore last month when the U.S. Census Bureau announced new national figures on the uninsured. Although the number of uninsured rose only slightly to 46.3 million in 2008, Census Bureau officials said that figure would have been much worse if not for enrollment gains in Medicaid and Medicare. Medicaid covered about 42.6 million people in 2008, up 7.6% from
39.6 million in 2007, according to the Census Bureau. Some estimates put the number of people on Medicaid nationwide today at 60 million.
Last week, the Kaiser Family Foundation reported a sharp rise in spending and enrollment in Medicaid across 50 states in fiscal 2009.
Medicaid enrollment grew by an average of 5.4%, the highest rate in six years, surpassing the projected 3.6% increase at the start of the year. And total Medicaid spending growth averaged 7.9% in fiscal 2009, the highest rate in five years, according to the ninth annual 50-state survey.
For fiscal 2010, states estimate Medicaid enrollment will grow by 6.6%, the survey found.
Today, Medicaid accounts for one out of every six dollars spent in healthcare.
“While demand for services rise, it's at a time when states can least afford it,” said Robin Rudowitz, principal policy analyst at the Kaiser Family Foundation, at a news conference in Washington, D.C., last week, where the report was released.
The recession has shown “the challenges for states of maintaining coverage when state revenues drop during times of economic crisis,” said Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of the Kaiser Commission on Medicaid and the Uninsured, at the news conference.
Perhaps nowhere is this truer than in Michigan and Nevada. Both states are experiencing what officials called a perfect storm of widespread job-sector loss, a high number of home foreclosures, declining state revenue and skyrocketing Medicaid rolls. Both states have cut provider reimbursements.
In Nevada, gaming and sales taxes account for two-thirds of state general fund revenue, but both sources of revenue have declined significantly. In Michigan, a loss of manufacturing jobs and the shrinking auto sector translated into the highest unemployment rate in the nation and a collapse of state revenue.
Medicaid enrollment is growing faster in Nevada than any other state. Facing a dire budget situation, Nevada cut hospital reimbursement by 5% last year and eliminated some services, such as nonemergency vision care for adults. Nevada's Medicaid program is projected to be over budget by $240 million when federal stimulus dollars supplementing the program end in December 2010.
“There are going to have to be some very, very difficult choices,” said Charles Duarte, administrator for the healthcare financing and policy division at the Nevada Health and Human Services Department. “We'll have to look at wholesale elimination of eligibility groups and elimination of optional benefits.”
Hospital reimbursement rates will also be up for review, Duarte added.
Medicaid benefit stipulations in Nevada are so stringent that many newly unemployed don't qualify, said Virginia Carr, director of eligibility at 575-bed University Medical Center in Las Vegas, a large county facility. “Medicaid for me is just one step in the process,” Carr said. “We're looking for federal, state and county assistance; we go through the gamut.”
Medicaid accounts for 47% of the hospital's revenue. For fiscal 2010, University Medical Center is projecting a deficit of $72 million.
Nearby 645-bed Sunrise Hospital and Medical Center in Las Vegas has laid off 180 people in the past 15 months and is looking at more cost-cutting measures. “Across the valley, we are seeing more emergency room visits, rising levels of uncompensated care and bad debt,” said Sylvia Young, president and CEO of Sunrise Health. Sunrise operates the only children's hospital in Nevada, and has seen a 12% Medicaid cut to maternity care per diem, and a 24% rate cut for neonatal intensive care. Uncompensated-care costs last year for Sunrise were $110 million.
Nevada also cut a $25 million county indigent and accident fund, which helped supplement trauma care, Young said.
In Michigan, the situation is also bleak. Last week, the state passed an interim 30-day budget just after its constitutionally required deadline of Sept. 30, causing a two-hour government shutdown. Providers were handed an 8% Medicaid rate cut for the next 30 days, but they expect that cut to be continued.
Today, about one in six Michigan residents, or 1.7 million people, are on Medicaid.
If enacted through this fiscal year, the 8% Medicaid rate cut will mean a loss of $135 million in state and federal matching funds, said David Seaman, executive vice president of the Michigan Health & Hospital Association. “We have a terrible financial situation,” Seaman said, adding that hospitals in the state are running an average margin of negative 2.9%. “There's no sense of where the bottom is.”
States were eligible for $87 billion through enhanced federal Medicaid matching funds as part of the American Recovery and Reinvestment Act, through December 2010. To qualify for the funding, states had to maintain eligibility requirements.
But many states, like Michigan and Nevada, had to make cuts to the program anyway. Thirty-three states cut or froze provider rates in fiscal 2009, and 39 said they would cut or freeze rates in fiscal 2010. Forty-four states used the money to close or reduce general funding gaps, according to the Kaiser Family Foundation (See chart, above). For the first time in the history of the Medicaid program, state spending overall dropped in fiscal 2009, by 6.3%, according to the Kaiser Family Foundation.
“It's simply unprecedented,” said Vernon Smith, principal at Health Management Associates, which compiled the survey. In New York state, providers have lost
$2.2 billion in Medicaid revenue since April 2007, said Kenneth Raske, president of the Greater New York Hospital Association. The state is set to start a new round of budget cuts in an upcoming special session and faces a budget deficit of $7 billion through the end of 2010. “The healthcare community has more than been singled out for cuts,” Raske said. “It's time for the state to look elsewhere.” Raske complained that providers didn't see any Medicaid stimulus funds, and that those dollars went into the general fund to fill in other budget holes.
New York's Medicaid costs are up 7.9% this year compared with 1.5% in previous years, said Deborah Bachrach, the state's Medicaid director.
While federal health reform could provide some relief in terms of new subsidies and less charity care, some worry new laws could hamper state Medicaid programs rather than help them.
Three-fourths of state Medicaid directors said they are concerned that Medicaid eligibility expansions, mandated minimum provider rates and new administrative costs could add to state fiscal problems, according to the Kaiser Family Foundation. “The administrative challenges would be enormous,” Bachrach said.
The proposed Senate Finance Committee bill would expand Medicaid eligibility to people earning up to 133% of the federal poverty level, up from a floor of 100%. (The current poverty level is $22,050 for a family of four.) Childless adults could also qualify. The bill would also mandate that everyone carry insurance, and state Medicaid directors said that could drive up Medicaid rolls and costs because some uninsured today qualify for the program but aren't enrolled.
Arizona is already pushing back on such mandates. A ballot initiative sponsored by Republican lawmakers set for the November 2010 election would allow citizens the ability to choose their healthcare without government intervention. A similar measure failed by a razor-thin margin in the state last year.
Peter Fine, president and CEO of Phoenix-based Banner Health, which operates hospitals across the West, said that the fastest-growing financial category has been Medicaid.
By contrast, Fine said, bad debt and charitable care has flattened out as the recession has worn on. Fine speculated that's because people unable to find work have left Arizona.
Meanwhile, the state's economy has not picked up. Some states are doing better. Wyoming, for instance, has weathered the recession well with low unemployment, Fine said. Banner Health operates three hospitals in the Cowboy State.
But in states already struggling, like Arizona, Fine said he “can't fathom” how Arizona's Medicaid program could cope with new federal coverage mandates. “I have no idea how they would ever comply with that,” he said. Fine and others agreed that healthcare reform should happen, despite possible snags. “Anything that can improve access to care,” Sunrise's Young said, “is an absolute positive.”
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.