By David Heymsfeld, AAPD Policy Advisor
An extensive survey by the Kaiser Family Foundation’s Medicaid Commission shows that most States plan to reduce the costs of their Medicaid programs next year by reducing Medicaid services and payments to providers .
The pressures for cuts come from the recession which has increased enrollment in Medicaid while decreasing State tax revenues. At the same time, since June 2011, the states are not getting the benefit of the additional federal funding for Medicaid made available by federal stimulus legislation.
The steps taken by the states to reduce the costs of their Medicaid programs include ending dental and vision services, limiting other services, increasing co-payments, increasing the use of managed care,, and lowering payments to doctors, hospitals and other providers.
State Funding Problems
The basic problem for the States is that as a result of unemployment and reduced incomes from the recession, the number of persons eligible for Medicaid increased by 5.5% in 2011 and is expected to increase by an additional 4.1% in 2012. In addition, federal funding for Medicaid will be reduced in 2012 because of the end of a temporary increase in federal funds from stimulus legislation. The States plan to increase their Medicaid funding, but the increases will not offset the reduced federal funding and the costs of increased enrollment.
Overall, total funding (state and federal) for Medicaid will increase by 2.2% in 2012, while total enrollment will increase by 4.1%.
State Reductions in their Programs
The Kaiser report asked State Medicaid directors to evaluate the problems they would face in 2012. After analysis of these responses the report concluded that “Pressure to control costs was identified as the most significant Medicaid issue by program officials for 2012.”
The survey shows that nearly every state will implement at least one new policy to control Medicaid costs in 2011 and 2012. Many of these changes could adversely affect beneficiaries.
The survey indicated that most common cost cutting measure (39 states in 2011, 46 states in 2012) is to freeze or cut the rates paid to Medicaid providers, including physicians, hospitals , nursing homes and medical supply companies. These cuts could cause a decline is service for Medicaid enrollees. Generally Medicaid reimbursement for providers is less than reimbursement under Medicare and commercial insurance. Reductions in Medicaid rates may cause physicians and other providers to refuse to participate in the program.
The federal government has authority to prevent excessive reductions. By law, Medicaid rates must be high enough to maintain adequate provider participation and access to services for enrollees. The federal department of Health and Human Services has recently begun rule making to develop procedures for better federal oversight of reductions in provider rates.
The survey indicated that some States will require higher co-payments for various services, including emergency rooms and prescription drugs.
Reduction or Elimination of Services
The survey indicated that 6 States are eliminating some benefits in 2011, and 7 States will do so in 2012. The services eliminated include dental and vision care. In 2011 and 2012, 18 States are planning to limit benefits for a variety of services, including occupational, speech or physical therapy, personal care services and mental health services. The limits include limits on total dollars and on the number of treatments per year.
The Kaiser report concluded that “Across States, the fiscal pressure has accelerated a trend toward the use of managed care and care management, particularly for duals and for beneficiaries with disabilities or with high-cost, complex needs”.
17 states in 2011 and 24 states in 2012 plan to expand their managed care programs by expanding the areas and populations covered. For 2011, the most common changes will be adding counties to managed care service areas and adding persons with disabilities to managed care. For 2012 the most common changes will be inclusion of persons with disabilities and dual eligibles.
For further information
The survey results make it clear that no two states are making exactly the same changes to reduce their Medicaid costs