Government

States get a little Medicaid help, but picture still bleak

The outlook is bright for physicians in Oklahoma for now, but other states could face further payment cuts.

By Joel B. Finkelstein — Posted Jan. 26, 2004

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Washington -- Bucking the national trend, Oklahoma Medicaid plans to increase rates for physicians, but the change is likely to be short-lived unless states are given more help with their program costs this year.

Oklahoma was able to increase rates for primary care physicians with the help of its share of $10 billion in enhanced federal Medicaid matching funds. The increased match, enacted by Congress last year, is being applied to claims filed between April 2003 and June 2004.

The state's primary care physicians now will get paid 90% of the Medicare rate for many services. But many specialists, such as emergency department physicians and pediatricians, were left out of the mix.

The Oklahoma State Medical Assn.'s enthusiasm for the increase was tempered by the exclusion of some specialties, said Jimmy Durant, director of state legislative affairs. Ultimately, the goal is to bring Medicaid up to Medicare rates, he added.

Even with the temporary federal funding increase, most states are finding it difficult to reverse cuts they have implemented over the past few years. Some are still prepared to enact rate reductions that were planned before the increased match legislation was proposed.

Based on cuts last year and those planned for this year, an estimated 1.2 million to 1.6 million Americans will be dropped from the Medicaid rolls, according to a Center on Budget and Policy Priorities analysis.

"The ripple effects of these cuts will be felt across the states," said Leighton Ku, a senior fellow at the center. "Most of the people who lose public coverage will become uninsured."

Outlook elsewhere

With the help of the temporarily enhanced match, lawmakers in some states have been able to hold the line on Medicaid funding for now. For example, lawmakers in Michigan staved off cuts this year, after reducing funding by $500 million since 1998.

An independent analysis showing that Medicaid paid out $950 million less than Medicare would have for the same procedures helped physicians convince the governor to hold the line, said Hassan Amirikia, MD, president of the Michigan State Medical Society. The society also took the information to the public and conducted a survey, which showed that 80% of respondents were against proposed cuts.

"Medicaid is still underpaid," he said. "But at least there were no more cuts."

Some states are faring worse. Having already implemented draconian cuts to the program, they are still seeking additional reductions to shore up budget deficits.

For example, Tennessee Medicaid is in trouble. A recent report showed that the program, known as TennCare, would need to undergo drastic changes lest it continue to consume an increasing proportion of the state's budget.

According to a report ordered by Gov. Phil Bredesen, the program will consume virtually all new state revenue by 2008. The cost of TennCare would jump from 24% of the state budget to 36%.

On average, Medicaid makes up 20% of states' budgets. As a result, the program has been an unavoidable target for states with budget gaps. When states decide to make cuts, they basically have three options: Trim eligibility, services or reimbursement.

More often than not, states are finding it necessary to cut one, two or all three of these areas to make ends meet. Payment reductions are often the most tempting because they do not directly touch Medicaid enrollees. But reimbursement cuts can lead to access problems.

Physicians in several states have filed lawsuits over just that issue. Low reimbursement can force doctors' offices to stop taking Medicaid patients or limit how many of them the doctor sees in a month. These patients often have a hard time finding physicians who will accept Medicaid or have very long waits for appointments.

Little help from Medicare reform

Governors hoping for help with their Medicaid costs through reform of Medicare got something of a surprise with legislation passed at the end of last year. While it will bring the cost of prescription drugs for dual-eligible seniors into the Medicare program, it also will require states to hand over most of their resulting savings to the federal government.

Economists have voiced concern that states might end up paying more to the federal government than their potential savings. The amount of money to be turned back to the federal government will be estimated based on what states spent on drugs for dual-eligibles in 2003, even though those costs have the potential to go down because many states have implemented pharmacy benefit management programs and other cost controls.

"There's no guarantee that states won't be net losers," said Henry J. Aaron, senior fellow at the Brookings Institution in Washington, D.C. "As a result, that would create great pressures in the long term ... for further Medicaid cuts to low-income children and families, as well as seniors."

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