By David Morgan
WASHINGTON (Reuters) - Three years before Medicaid is due to cover millions of uninsured Americans, state funding cuts may be undermining how much care the government-run health insurance program for the poor will offer new enrollees.
Two dozen states across the country plan to slash at least $4.7 billion from their Medicaid plans following four straight years of budget shortfalls, according to data provided separately by the nonpartisan Center on Budget and Policy Priorities and the consumer advocacy group Families USA.
The cuts would include reductions of up to 15 percent in reimbursement rates for doctors, hospitals and other care providers, higher co-pays for beneficiaries, including children, and the loss of optional benefits such as preventive care and dental and vision services.
Several states hope to restrict eligibility under enhanced Medicaid plans that offer services beyond the basic mandate.
Arizona is leading that charge. It suspended new enrollments for adults without children as part of a $500 million savings package. The freeze bars access for the next three years to an estimated 100,000 people.
As Congress seeks new ways to cut the U.S. deficit ahead of a November deadline, further cuts to the $427 billion Medicaid program also are more likely at the federal level.
Medicaid is funded jointly by federal and state governments but administered by the states with federal oversight.
The growing pressures mean access to healthcare services under Medicaid may be restricted, despite its role in expanding health coverage to 32 million more people under President Barack Obama's healthcare restructuring law.
Medicaid and the Children's Health Insurance Program, which covers children who do not qualify for Medicaid, are due to add 17 million currently uninsured Americans beginning in 2014, when the law requires that most people have health insurance.
The reimbursement cuts may prompt doctors, clinics and hospitals to restrict or eliminate access for Medicaid beneficiaries.
"The provider rate cuts are going to mean that fewer providers will offer Medicaid services by the time we get to 2014, and that's bad. It pulls in the opposite direction of where healthcare reform's trying to go," said Mike Leachman of the Center on Budget and Policy Priorities.
It is difficult to measure the effects cuts are having on the 60 million people who already rely on Medicaid.
However, the volume of state cuts to Medicaid providers this year prompted the Obama administration in May to publish new guidelines for safeguarding federally mandated healthcare access levels while reducing costs.
"We do see a lot of rate cuts," said a senior administration official who spoke on condition of anonymity. "Some of them are going to be more temporary, some of them are going to be more permanent. Some of them are going to hold and some of them may not hold based on access concerns."
"We ought to proceed in a thoughtful way, both we at the federal level and states at the state level," the official said.
The Obama administration is working with more than a dozen states on plans to control costs and eliminate inefficiencies, with a focus on the 28 percent of Medicaid recipients whose chronic ailments generate a huge share of the costs.
Administration officials point out Medicaid's expansion will send a flood of new federal money into state budgets. Washington will pay for more than 90 percent of Medicaid's expansion, with additional funding for primary care physicians and public health centers.
But skeptics question whether those efforts can fully compensate for reductions that could be felt years away.
A fight over California's plan to cut provider payment rates by up to 10 percent will be the subject of oral arguments before the U.S. Supreme Court in the fall, in a case over whether Medicaid providers and beneficiaries can use the courts to block state cuts. A ruling is expected early in 2012.
Expansion of Medicaid is also expected to provide a significant growth opportunity for managed care companies.
Those companies include Medicaid specialists, such as Amerigroup and Centene, as well as large insurers with Medicaid businesses, such as UnitedHealth Group and WellPoint.
But state rate cuts could prompt the insurers to pull out of states if the accounts become money-losers.
Deep cuts have also been imposed in Texas, Florida, Massachusetts and Maryland, and they can carry a double-whammy for Medicaid providers and beneficiaries because federal disbursements are tied to state spending levels.
"You're getting close to the bone," said Dr. Gary Kalkut, chief medical officer at Montefiore Medical Center in the Bronx, the New York City borough that is home to one of the poorest congressional districts in the United States.
"At some point, more cuts will impair the delivery of services," he added. State advocates say governors and legislatures have little choice, given that total state budget shortfalls since 2008 now top $500 billion.
Assistance from the Obama administration's federal stimulus package has nearly dried up after having covered up to one-third of state shortfalls. Medicaid is a prime target for cuts, as it represents 22 percent of state budgets on average, according to Moody's Investors Service.
There are signs that next year will bring new funding gaps, driven by low revenues, rising healthcare costs, growing numbers of Medicaid-eligible residents, balanced-budget requirements and a political aversion to raising taxes.
Matt Salo, executive director at the National Association of Medicaid Directors, warns that healthcare reform could mean hidden costs as well as benefits for states.
He says government efforts to encourage participation in the Medicaid expansion could also bring in an estimated 13 million people who currently qualify for the program but are not enrolled due to challenges, including homelessness.
If they joined Medicaid, Salo says, they would not be covered by federal funding for new enrollees under the health law. Instead, the cost would be covered by federal and state funds under the conventional Medicaid formula.
(Reporting by David Morgan; Editing by Michele Gershberg and Paul Simao)