No Medicaid for You! Senate Votes Down Subsidy Extension; Doctors and Patients to Suffer

Last Updated Jun 18, 2010 7:35 PM EDT

As the recession sapped the ability of states to fund their Medicaid programs, the feds stepped in with billions of dollars worth of extra subsidies in the stimulus bill last year -- a classic countercyclical move aimed to bolster state healthcare spending just when it was squeezed between falling revenues and rising demand. Now, however, a six-month extension of those Medicaid subsidies is in trouble -- and so are the states and those who depend on them.

The Senate failed to pass a jobs bill that included the subsidies last week, and the House didn't include the Medicaid provision in its version. As a result, deep cuts are expected in many states' Medicaid programs, and patients and healthcare providers will pay the price.

Making matters worse, these cuts will lead to even bigger losses for hospitals and physicians because the federal government matches the states' Medicaid spending two-to-one, on average. That's why Tennessee hospitals recently asked their state to tax them to fill a shortfall in the Medicaid budget -- something that 44 other states already do.

More physicians will probably refuse to take Medicaid patients if the states reduce their reimbursement any further. Already, 40 percent of general internists, 35 percent of family physicians and GPs, 18 percent of pediatricians, and 28 percent of ob/gyns do not accept any Medicaid patients. The question is how well physicians will do in the long run if they refuse to participate in federal programs, which account for roughly half of all U.S. healthcare spending.

At the state level, meanwhile, Florida expects to lose about $1 billion in Medicaid funding if Congress doesn't extend the federal subsidy. While Florida lawmakers did not include the extra Medicaid funds in their 2011 budget, they did say that if the money came through, they'd spend $50 million to prop up the ailing Jackson Memorial Hospital in Miami. They also hope to use some of the money to compensate the state for not cutting nursing home rates.

Kansas will have to cut social services and education to close its budget gap if $130 million in extra Medicaid funds doesn't come through. Already, the state has boosted its sales tax to avoid those cuts. Both of Kansas' Republican Senators, Sam Brownback and Pat Roberts, oppose the Medicaid subsidy extension unless it's offset by spending reductions elsewhere in the federal budget.

Virginia, which anticipated more than $400 million in Medicaid subsidies, has already included a big Medicaid cutback in its 2011 budget. But, to avoid violating federal Medicaid eligibility rules, Gov. Bob McDonnell may shift some money around to reduce the amount of the cut.

Ironically, one of the demands of dissidents at the recent AMA convention was that the association force Medicaid to raise its payments to physicians. As this mess unfolds, doctors may look back upon today as the good old days in Medicaid.

Image supplied courtesy of Frederick Mission of Mercy Related:

Let 'em Eat Cake Approach Won't Rein in Runaway Health Costs Let's Get Real: Medicaid HMOs Are Not Going to Save Big Bucks
  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.