Mich. Senate OKs 8% Medicaid fee cut

A dire state budget situation is leading Michigan lawmakers to consider steep cuts to Medicaid fees for physicians, hospitals and others.

The Michigan Senate on June 25 approved an 8%, $94.9 million cut in fees for doctors, hospitals and other health professionals caring for Medicaid patients. The House included small fee increases for certain primary care services in the version of the fiscal 2010 budget it approved in April. Lawmakers from both chambers are expected to meet in upcoming weeks to work on a compromise on the budget, which takes effect Oct. 1.

The Senate-approved cuts are opposed by the Partnership for Michigan's Health, which includes the Michigan State Medical Society, the Michigan Health & Hospital Assn. and the Michigan Osteopathic Assn. "By further restricting Medicaid funding, the state will add to the barriers that many families already face in obtaining health care," said MSMS President Richard E. Smith, MD. The cuts to state funding also would reduce federal matching funds by an amount that will be more than twice the size of the state reductions, according to society estimates. Medicaid covers about 1.7 million people in Michigan.

But state House and Senate leaders have few good choices, said Steve Angelotti, a fiscal analyst with the nonpartisan Michigan Senate Fiscal Agency. The state is facing a deficit of about $1.6 billion on an overall budget of about $9 billion. That figure is lower when considering the $900 million the state is receiving in Medicaid funding from the recent federal stimulus. But that funding expires at the end of fiscal 2010, and deeper cuts likely would be needed for fiscal 2011. Republicans have a majority in the Senate, while Democrats control the House.

Rep. Gary McDowell, a Democrat who chairs a House Appropriations community health subcommittee, said he would rather not see the cuts to Medicaid and other health services, but state revenues have declined by 36% since last year. "In the long run, we know it's going to cost us a whole lot more."

The Senate-approved budget includes, for discussion purposes, language to allow a tax on physician revenues. This tax could be used to draw additional federal Medicaid matching funds and prevent the fee cuts. The Michigan State Medical Society opposes that plan, according to spokesman David Fox. Medicaid in Michigan pays physicians about 60% of Medicare rates, Angelotti said.

McDowell said the tax would be difficult to administer, and he doesn't like its political chances. "I don't anticipate it happening."