Medicaid Cuts Are Coming, But Where?

Medicaid makes up a healthy slice of state budgets, but cutting it isn't easy.

Much of the money pays for nursing homes, and it's hard to kick someone out of a nursing home once they've moved in.

And because Medicaid is a joint federal-state program, every dollar of state spending attracts at least one dollar from Washington. So states have to cut $1 million in total spending to yield less than $500,000 in savings for themselves.

Still, with states facing record deficits, virtually every state has cut spending or plans to cut spending this year on Medicaid. That includes 32 states that made cuts when the fiscal year began last summer and have found it necessary to cut yet again.

Among the cuts already made or planned: tighter controls over what prescription drugs will be paid for, reduced payments for doctors and hospitals, eliminating extra benefits such as dental or vision care, and an increase in co-payments required of beneficiaries.

Medicaid provides health insurance for 43 million low-income Americans, including one in five U.S. children. But while most of the beneficiaries are children and their parents, often living on welfare, most of the money goes to care for the disabled and elderly, who are more likely to get sick and more likely to need nursing home care.

The average child in Medicaid cost $1,225 in 1998, the last year for which data are available. The average elderly enrollee cost nearly 10 times that.

Medicaid accounts for about 20 percent of state budgets, and like other health care services, its costs are growing each year.

In 2001, spending grew 10.8 percent — its largest spike since 1993. Last year, experts estimate, spending increased by another 12.8 percent.

Those rises are comparable to rising spending by private health insurance plans, which are coping with increased cost of prescription drugs and more expensive hospital stays.

Medicaid also has attracted more patients in recent years. That's partly because bad economic times make more people eligible for government help, and partly due to expanding state programs to help uninsured children.

And there's only so much Medicaid can cut. Twenty percent of the spending goes to nursing homes, with another 18 percent paying for nursing beds for the mentally retarded and for community-based long-term care aimed at keeping people out of nursing homes. Those costs are tough to reduce, said Diane Rowland, executive director of the Kaiser Commission.

Many of these beneficiaries are elderly who have already spent all their savings and are contributing almost every dollar they receive through fixed incomes to their care.

"What do you do with someone already sitting in a nursing home bed?" Rowland asked. "Once they're institutionalized, it's very difficult to reduce services to them."