January 14, 2003 -- All States Except Alabama Intend To or Have Cut Medicaid


The incrementalists like California Blue Shield's Bruce Bokaken, or
Robert Wood Johnson foundation, who say they can achieve universal
health care by expanding enrollment in Medicaid or CHIP programs have
got to be joking.

From the Kaiser Daily Health Policy Report, January 14,2003

All States Except Alabama Intend To or Have Cut Medicaid Spending This
Fiscal Year, Study Says


In response to "soaring costs and plunging revenues," every state
except Alabama in fiscal year 2003 plans to or has cut benefits,
restricted eligibility, increased co-payments, dropped beneficiaries or
reduced payments to providers under their Medicaid programs, according
to a new survey, the Los Angeles Times reports (Shogren, Los Angeles
Times, 1/14). In a report for the Kaiser Commission on Medicaid and
the Uninsured, researchers from Health Management Associates surveyed
all 50 states in December 2002 -- halfway into most states' 2003
fiscal year -- as a follow up to an earlier survey conducted in June
2002. Thirteen states in the beginning of fiscal year 2003 made plans
to implement cost-containment measures. Thirty-two states planned to
make Medicaid cuts at the beginning of the fiscal year and now say
they plan to take further action to contain Medicaid costs in FY 2003.
In addition, five states that had previously implemented no
cost-containment measures said they now plan to do so. Based on the
two surveys, every state except Alabama is implementing some kind of
cost-containment options in their Medicaid programs in FY 2003 (Kaiser
Commission on Medicaid and the Uninsured release, 1/14). Kaiser
Commission Executive Director Diane Rowland said, "Halfway through the
fiscal year, states are even more pressed than they thought they would
be, and many are taking additional action to cut Medicaid spending."
Medicaid cuts are a "tempting target" for states working to balance
their budgets, the Los Angeles Times reports. The program accounts for
15% of a state's budget on average, and its costs are increasing
rapidly (Los Angeles Times, 1/14). Medicaid costs are expected to
increase 9% in FY 2003, a rate twice as fast as state legislatures
assumed when drafting states' budgets, according to the survey
(Meckler, AP/Atlanta Journal-Constitution, 1/14).

Specific Cuts

Vernon Smith, formerly the director of Michigan's Medicaid program and
a report author, said, "State Medicaid directors describe the
situation as bleak, grim and difficult. They expect further cuts in
Medicaid benefits, eligibility and provider rates, even though they
are aware of the adverse effects" (Pear, New York Times, 1/14).
According to the report, in FY 2003, 45 states are implementing
controls on prescription drugs, 37 states are reducing Medicaid
provider payments, 27 states are restricting or cutting eligibility,
25 states are reducing benefits and 17 states are increasing
beneficiary co-payments (KCMU release, 1/13). For example, Washington
has cut hearing, dental and vision benefits for adult Medicaid
beneficiaries and the state has stopped making special payments to
hospitals for charity care. In addition, the state cut 60,000 of the
120,000 childless adults enrolled in the state's Basic Health Plan.
Douglas Porter, Washington state's Medicaid director, said, "You
reduce the benefit package before you cut people off the program.
Before we kick anybody of insurance, we try to make what we're
offering more affordable" (New York Times, 1/14). "Unless Medicaid
spending growth suddenly and unexpectedly abates, or unless state
revenue collections rebound, Medicaid is destined to be in a
precarious position," the study concludes (Smith et al., "Medicaid
Spending Growth: A 50 State Update for FY 2003," January 2003). The
survey is available online.

Additional Research

The Kaiser Commission on Medicaid and the Uninsured released two
additional studies on Jan. 13, which are detailed below:

"The State Fiscal Crisis and Medicaid: Will Health Programs Be Major
Budget Targets?": John Holahan, director of the Urban Institute's
Health Policy Research Center; Joshua Wiener, an Urban Institute
principal research associate; and colleagues examine how seven
states -- California, Colorado, Florida, Michigan, Mississippi, New
Jersey and Washington -- have made funding decisions for Medicaid and
CHIP programs in response to "mounting budget pressures." They find
that until now states largely solved their financial problems by using
one-time budgetary tactics, such as shifting revenue and using tobacco
and rainy day funds, and by attempting to maximize federal matching
funds through the use of the upper payment limit, commonly known as
the Medicaid loophole. However, the ability to continue to use such
sources has largely been expended (Holahan et al., "The State Fiscal
Crisis and Medicaid: Will Health Programs Be Major Budget Targets,"
January 2003). The report is available online. Cases studies from the
report are available at online.

"The North Carolina Health Choice Enrollment Freeze of 2001: Health
Risks and Financial Hardships for Working Families": Pam Silberman,
Joan Walsh and colleagues at the University of North Carolina-Chapel
Hill's Cecil G. Sheps Center for Health Services Research examine the
effect of North Carolina's decision to halt enrollment in the state's
CHIP program, called North Carolina Health Choice for Children. During
the enrollment freeze, children determined eligible for coverage were
placed on a waiting list for as little as four weeks to as long as
more than one year. Based on focus groups, researchers found that
nearly all children on the waiting lists required medical and/or
dental care, families had trouble obtaining prescription drugs for
their children and almost all parents experienced financial hardship
in obtaining care for their children (Silberman et al., "The North
Carolina Health Choice Enrollment Freeze of 2001: Health Risks and
Financial Hardships for Working Families," January 2003). The report
is available online



Multimedia Coverage

NPR's "Morning Edition" on Jan. 14 included interviews with California
Gov. Gray Davis (D) and Colorado Gov. Bill Owens (R) about their
states' budget deficits. Davis discussed his proposed cuts to state
programs, including changes to eligibility rules for Medi-Cal, the
state's Medicaid program (Edwards, "Morning Edition," NPR, 1/14