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Medicaid Faces a Troubling Diagnosis

Posted on: Monday, 1 August 2005, 03:01 CDT

Medicaid, Pennsylvania's health insurance safety net for the poor, might need a safety net of its own to make ends meet in the years ahead.

The state program faces skyrocketing medical expenses, a reduction in federal aid and increasing number of people who need assistance. To cope with the dilemma, Gov. Ed Rendell has proposed limiting services, capping reimbursements to hospitals and other providers and imposing extra charges on Medicaid recipients.

Critics blast the measures as unfair to the population that depends on Medicaid. They also say the rules work against the hospitals and nursing homes that provide care.

"The idea of limiting doctor visits, that's going to be a huge area where people are going to be harmed," said Ilene Shane, chief executive officer of Pennsylvania Protection and Advocacy, a statewide group representing people with disabilities.

The state proposal calls for limiting outpatient visits to 18 a year and inpatient hospital stays to two a year. In addition, the state would add co-pays or raise fees for numerous services, including laboratory tests and prescriptions for brand-name drugs.

Shane argued that the state measures would boost health-care costs for businesses by forcing hospitals to deliver more free care. Hospitals would pass the costs to others in the system.

"Small businesses are going to be spending more for health care in a year because of this," Shane said. "I don't think that's much of a leap at all."

Although the reforms may be unpopular, they are necessary to fill a $600 million budget gap, said David Feinberg, deputy secretary for medical assistance in the Pennsylvania Department of Public Welfare.

Pennsylvania expects Medicaid rolls to swell by 100,000 people over the next year, to 1.8 million. Overall, the program costs the state more than $15 billion a year, with slightly more than half the money coming from the federal government (see sidebar).

"I am hopeful they are very shortterm fixes because many of the things we are doing we don't want to do," Feinberg said. "If we had alternatives, we wouldn't do them. But, given the situation we are in, we really didn't have much of a choice."

In the long term, better economic conditions could mean more people in jobs where employers offer health care and thus fewer people on medical assistance, Feinberg said. But he said he wasn't optimistic.

The situation could get worse. The U.S. Congress agreed to cut $10 billion in Medicaid funding over the next five years.

The federal government shoulders at least half the cost of state Medicaid programs using a formula based on a state's average income compared with the income of the nation as a whole.

Congress also approved the creation of a bipartisan commission that would craft comprehensive reforms.

Those reforms could include giving states more flexibility in the way they run their Medicaid programs, said Victoria Wachino, health policy director for the Center on Budget and Policy Priorities in Washington, D.C.

"If you look at the level of concern just among the governors, I think there's a strong impetus for reform in this case," she said.

If Congress had kept Medicaid funding, at current levels, the problem in Pennsylvania would have been manageable, said David Gates, managing attorney in the Harrisburg office of the Pennsylvania Health Law Project. The group advocates for better access to health care on behalf of low-income people.

With federal cuts now looming, the state won't be able to manage Medicaid on its own, Gates said. In the short term, however, the state needs to examine alternatives to limiting services and raising co-pays, he said.

The alternatives could include new revenue sources, Gates said. For example, a special tax on smokeless tobacco - in addition to the 6 percent state sales tax - could raise $75 million a year, he said.

Another alternative is more aggressive pursuit of Medicare funding in cases when people are eligible for both Medicaid and Medicare, the federal program for the elderly and people with disabilities. Gates was unsure how much that would save the state.

"I think were going to have to have a quilt of various proposals which together can help solve this problem," Gates said. A state commission should be appointed to consider long-term changes, he added.

In the long term, state lawmakers should consider a so-called "fair share" bill similar to legislation that was approved this spring by the Maryland Legislature, Gates said.

The bill would levy fees on companies with more than 10,000 workers who don't spend at least 8 percent of their payroll on employee health insurance. In Maryland, only Wal-Mart Stores Inc. would have to pay. The bill's supporters argue that workers for companies with inadequate health insurance fall back on the state for coverage, costing taxpayers money. But Maryland Gov. Robert L. Ehrlich Jr. has said he would veto the measure because it is unfriendly to business.

Whatever the solution, Pennsylvania can only do so much to address

Medicaid on its own, according to G. Terry Madonna, director of the

Center for Politics and Public Affairs at Franklin & Marshall College

in Lancaster.

Medicaid's troubles are a symptom of the deeper crisis nationwide

caused by rising medical costs, an aging population and growing ranks

of uninsured people, Madonna said. As bad as it might seem, however,

the crisis isn't yet big enough to spur political action on a national

scale, he added.

"We understand the forces that are producing it," Madonna said.

"What we don't have is a consensus on how to fix it. And at the

moment, we don't have a willingness on the part of Congress and the

president to fix it. And it can't be fixed at the state level."

Copyright Journal Publications Inc. Jun 10, 2005

Source: Central Penn Business Journal

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