Medicaid pay could be cut again when stimulus money runs out

Thirteen states have reduced Medicaid rates for physicians in fiscal 2010, the most since at least 2004.

By — Posted Oct. 12, 2009

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Federal stimulus funding has helped state Medicaid programs avoid drastic reductions in eligibility and physician fees, but program directors already are contemplating such cuts when the additional federal support runs out at the end of next year.

States faced unprecedented financial pressures in fiscal 2009, which ended on June 30 for most states. They experienced a surge in new Medicaid enrollees and a historic decline in tax revenues. States coped by trimming or freezing Medicaid fees and restricting benefits, among other actions, according to a ninth annual survey of state Medicaid directors released Sept. 30 by the Kaiser Family Foundation and Health Management Associates.

Medicaid enrollment grew by 5.4% in fiscal 2009 -- the highest rate in six years -- while total program spending increased by 7.9%, the fastest pace in five years. The enrollment spike was the main reason spending grew, according to report co-author Vernon K. Smith, PhD, principal with Health Management Associates. "As more people lost their jobs and lost their health coverage, more people became eligible."

Meanwhile, state revenues plummeted: Tax collections dropped by 16.6% in the 12 months leading up to June 2009, according to U.S. Census Bureau statistics. This contributed to a 6.3% decline in the state portion of Medicaid spending -- the first in the program's history, Smith said.

But the 2009 Medicaid cuts would have been much worse without the most recent federal stimulus package, Smith said. "Without any doubt, we would have seen widespread cuts to eligibility. Cuts to benefits and provider payment rates would have been much, much more severe." Twenty-nine states said they would have cut Medicaid eligibility had the stimulus act not prohibited them from doing so as a condition of accepting the additional Medicaid funding, the report said. Fourteen states had to reverse enacted cuts to obtain the federal money.

Despite the stimulus, states are far from being on solid financial ground, Smith said. The additional federal Medicaid funding expires on Dec. 31, 2010. State revenues probably would not rebound for a year or two even under an immediate economic recovery, and Medicaid enrollment likely would remain steady for many months to come, he added.

Medicaid directors are worried about conditions when the stimulus funding runs out. For example, Nevada would need to find about $240 million in fiscal 2010 to maintain its existing Medicaid program, said Charles Duarte, administrator of the Division of Health Care Financing and Policy at the Nevada Dept. of Health and Human Services. New York would have to find about $6 billion for its Medicaid program, said Deborah Bachrach, the state's Medicaid director.

Some said Medicaid cuts that were unthinkable a few years ago may be necessary. Duarte said Nevada might reconsider a list of potential cuts he prepared last year that weren't implemented -- including wholesale elimination of eligibility groups, restricted home- and community-based benefits, and reduced hospital and physician Medicaid pay. "This could affect access, but we're at the point where that may be a secondary consideration."

Bachrach said physician Medicaid pay is an obvious target. New York increased payments by more than 50% in recent years in an effort to get them closer to Medicare levels. "That is one of the goals that may be shortchanged as a result of the plummeting resources."

Medicaid pay on the chopping block

Nine states cut physician Medicaid fees in fiscal 2009, and 13 have adopted pay cuts for fiscal 2010 -- the most since the Kaiser Family Foundation and Health Management Associates began tracking doctors' fees in 2004. But the situation could have been -- and still could be -- much worse.

Although legislatures have closed billions in budget gaps, they could face combined deficits of $350 billion in their 2010 and 2011 budgets, according to Robin Rudowitz, principal policy analyst for the Kaiser Commission on Medicaid and the Uninsured.

Also, spending and enrollment projections for 2010 don't add up, Smith said. State budgets predict an average 6.3% growth in Medicaid spending, but enrollment is expected to grow by 6.6%, the report found. State budget shortfalls are likely so large as to prevent states from matching expected enrollment growth with general funds, he said.

Washington state physicians, like those in California and Utah, saw Medicaid fees reduced for 2009 and 2010. "We had some increases the session before, and they took those increases away," said Jennifer Hanscom, spokeswoman for the Washington State Medical Assn.

The report found that some states, such as Maine, managed to boost Medicaid pay for office-based physicians for 2009 and 2010. But Maine's increases came at the expense of hospital-based physicians, said Andrew MacLean, deputy executive vice president of the Maine Medical Assn.

Other states' Medicaid rates essentially are holding steady. South Carolina trimmed Medicaid fees for physicians in 2009 before reversing the cuts for 2010, said Gregory Tarasidis, MD, president-elect of the South Carolina Medical Assn. But continued budget deficits could threaten those fees, he said.

Balking at the expansion price tag

Smith said state Medicaid directors are confident that the program could provide quality coverage to millions more low-income people without health insurance. But they're concerned that Congress will ask states to shoulder too much of the cost.

The House and Senate health system reform bills would expand Medicaid eligibility to any citizen earning 133% or less of the federal poverty level. Seventeen states offer some coverage to childless adults, but it is often very limited.

The House bill would pay for the expansion using only federal funds, but the pending Senate bill would provide less federal support to states that already enacted Medicaid expansions, such as New York. "In essence, we're being penalized for the decisions we've made in past years to invest state dollars to cover people who are very low-income individuals," Bachrach said.

Smith said states probably are waiting to see what Congress does on reform instead of adopting their own health care expansions. "If you go ahead and enact a change now, you will not be rewarded in the future."

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More states cutting Medicaid physician pay

Nine states are increasing Medicaid pay for physicians next year, but 13 are making cuts. This shifts the balance from last fiscal year, when 19 states increased pay and eight cut it.

Cut pay in 2009: Arizona, Delaware, Nevada, Michigan

Cutting pay for 2010: Georgia, Louisiana, Minnesota, North Carolina, Vermont, Wyoming

Cut pay in 2009 and cutting again for 2010: California, Utah, Washington

Increased pay in 2009: Alaska, Connecticut, District of Columbia, Iowa, Illinois, Missouri, Oregon, Pennsylvania, Wisconsin, South Dakota

Increasing pay for 2010: Arkansas, Mississippi, Oklahoma

Increased pay in 2009 and increasing it again for 2010: Maine, Montana, North Dakota, Nebraska, New York

Cut pay in 2009 but increasing it for 2010: South Carolina

Increased pay in 2009 but cutting it for 2010: Colorado, Hawaii, Maryland, Ohio

Note: 2010 figures for Michigan were not available because the state had not adopted a budget at this article's deadline.

Source: Kaiser Family Foundation/Health Management Associates, September (link)

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Some Medicaid pay cuts averted

Many states used extra Medicaid funding from the federal stimulus package to prevent cutting programs as state tax revenues took a historic dive. States had received about $30.4 billion in additional Medicaid funding by Sept. 18, according to Dept. of Health and Human Services. They will have received a total of $87 billion by Dec. 31, 2010.

Use of stimulus Medicaid fundsStates
Closed or reduced general fund shortfalls44
Avoided or reduced rate cuts to health professionals38
Closed or reduced Medicaid budget shortfalls36
Avoided Medicaid benefit cuts36
Helped pay for increasing Medicaid enrollments33
Avoided or restored Medicaid eligibility cuts29

Source: Kaiser Family Foundation/Health Management Associates, September (link)

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