Congress, states seek ways to curtail Medicaid spending

Washington -- States are showing early signs of economic recovery, but that isn't likely to save financially struggling Medicaid programs from the budget knife, says a new survey by the Kaiser Family Foundation.

Physicians in 31 states can expect payment freezes or cuts next year, the survey found. Other cost-containment efforts are expected to make doctors' lives more difficult.

Although state Medicaid officials are more optimistic than they have been in past years, they remain worried about the program's long-term fiscal sustainability, the Kaiser survey found. Fueling that concern are billions in federal spending growth reductions, health care cost growth, demographic trends and the erosion of private health insurance.

Bills recently passed by committees in the House and Senate outline what steps the federal government will take to curtail Medicaid spending. The House measure would cut expected Medicaid spending growth by nearly $10 billion over five years. But Medicaid would still continue to grow 7% a year at an additional cost of $66 billion over five years, according to Rep. Joe Barton (R, Texas), chair of the House Energy and Commerce Committee.

The measure passed by the Senate Finance Committee also would reduce federal spending growth by more than $10 million over five years but would take some of those savings from Medicare.

Meanwhile, more than half the states also are facing reductions to the share of matching funds they receive from the federal government.

State efforts to control their Medicaid costs in the face of a federal budget slowdown and other factors are expected to result in two states cutting physician pay and in 29 others locking rates.

But other states have good news for physicians. Twenty are planning to increase doctors' rates next year, mainly to encourage more physician participation in response to growing access problems.

Managed care expansion

But physicians could end up facing new worries, such as a shift toward managed care, as states look to trim Medicaid spending.

In just the past few months, six states have begun shifting Medicaid patients to managed care plans in an attempt to save money. Twenty-one states plan to expand Medicaid managed care efforts next year, according to the Kaiser foundation.

In Ohio, private insurers are promising to pay 5% above Medicaid rates. But it's questionable whether the plans will be able to sustain those rates, said Randall Longenecker, MD, an assistant dean at the Ohio State University College of Medicine and an associate program director at Mad River Family Practice in West Liberty.

"The reality is that there is no way that they are going to be able to [provide Medicaid services] for less than the state has," he said.

Ohio physicians are likely to see more denied claims from Medicaid managed care as the companies use tried-and-true strategies to cut their own costs. But the complexity of dealing with multiple insurers will make it difficult to track how much money practices are losing in this deal, Dr. Longenecker said.

"There hasn't been a raise in rates for years, but the state at least was reliable. When you filed a claim, you were paid for your services," he said.

The practice, which is owned by the college, already operates at a 35% loss, and has seen an increase in Medicaid patients now that it is one of only three practices in the area that accepts them.

According to the Kaiser survey of Medicaid directors, every state has plans to implement one or more strategies for cutting their Medicaid spending next year.

All the states have made or are planning changes that could include cutting reimbursement, imposing restrictive formularies or preauthorization requirements on their drug programs, reducing benefits, cutting eligibility, increasing co-pays, and ramping up anti-fraud and abuse efforts, said Donna Cohen Ross, the director of outreach at the Center on Budget and Policy Priorities, a left-leaning think tank in Washington, D.C.

"We saw for the first time last year that states were beginning to unravel some of the progress that they had made on making Medicaid and [the State Children's Health Insurance Program] more accessible to children and families. They were rescinding simplification procedures, freezing enrollment, putting financial barriers in place," she said.

New Mexico is among 14 states that have made changes affecting program eligibility. The state made the seemingly minor change of requiring beneficiaries to reapply every six months instead of every 12. The result is added bureaucratic hassle for families, and many lose coverage.

The change has resulted in a big drop in the number of children with Medicaid coverage coming into Young Children's Health Center, a clinic located in a low-income Albuquerque neighborhood. The practice's Medicaid population went from 85% to 72% during the year, said Medical Director Javier Aceves, MD.

The patients dropped from Medicaid typically don't have other coverage options, said Dr. Aceves, a professor at the University of New Mexico, which owns the clinic. The state's action has hurt these patients' care, he said.

"When they get their first bill, they stop coming. It has affected our ability to deliver preventive care. The next time we see them, they are really sick," he said.

Dr. Aceves gets supplemental funding that keeps the practice afloat. But other physicians in the area have not been so lucky.

"Other practices that see a lot of Medicaid patients are going out of business," he said.