Medicaid Cut To Balance Budgets

States cut Medicaid benefits and increased co-payments in 2003 to slow spending growth in the low-income health insurance program for the first time in seven years, according to a survey released Monday.

Average Medicaid spending growth in the 50 states and the District of Columbia was 9.3 percent, down from 12.8 percent a year ago, said the Kaiser Commission on Medicaid and the Uninsured. Enrollment in the program over the same period increased 7.8 percent.

By comparison, premiums for employer-sponsored private health insurance increased 13.9 percent over the year.

Diane Rowland, the commission's executive director, said the trends portend uninsured parents and children finding themselves shut out of the program and the elderly and disabled seeing their coverage erode.

"Many will get less care and others will lose it altogether," she said.

The commission is an arm of the Henry J. Kaiser Family Foundation, which supports health research. It has conducted the Medicaid survey annually for three years.

All 50 states and the District of Columbia took some cost-containment actions as they grappled with declining revenue and budget deficits, the survey found. All also said they plan to impose more spending constraints next year.

Most often, states froze or reduced payments to physicians, hospitals, nursing homes and other health care providers. Another popular cost-control strategy curbed payments for prescription drugs with preferred drug lists or co-payments. A few states required Medicaid users to buy generic drugs or limited the number of prescriptions that could be filled each month.

Eighteen states responded to the fiscal pressure by reducing benefits, and 20 states plan similar actions next year. Most of the changes involved dropping optional benefits, including some geared toward children. Eliminated coverages included visits to chiropractors, podiatrists, speech therapists and psychologists. Some states imposed limits on hospital stays and annual hospital visits.

Half the states limited eligibility for Medicaid. The changes typically affected few people. Six states tried to drop large numbers of people from the program, but each case they had to delay or cancel the action. About 400,000 people would have lost coverage if the states had carried out their plans, according to the survey.

Seventeen states increased their co-payments, and 21 states plan increases for next year.

The problem promises to get worse in 2005 when states exhaust a $10 billion federal windfall that temporarily increased the federal Medicaid matching rate. The survey found states do not expect their fiscal woes to be over when the federal aid runs out.

The nation's economic downturn pressured Medicaid from two directions.

As people lost their jobs or private health coverage, they became eligible for Medicaid benefits. A slow economy also deprived states of the revenues they needed to keep the program running.

"The biggest source of blame here is the economy," Rowland said. "They really get put under much more pressure from Medicaid when the economy tanks. At the same time, when the economy goes negative, states' revenues drop off."

By Mary Dalrymple