Medicaid is Failing, and Nothing Short of Health-Care Reform Can Fix It

Health-care reform may be stalled in Congress, but you need only look to the overburdened Medicaid program to find evidence of the continued toll the current economic crisis is taking on Americans' ability to afford and access medical care.


At the same time that states are experiencing huge budget deficits, more and more of their residents are unemployed; more and more are joining the ranks of the uninsured and clamoring for Medicaid benefits. The result: Even with emergency federal infusions of funding, state safety nets are being stretched dangerously thin.

On December 1, for example, Tennessee closed enrollment in CoverKids, the state program that provides health coverage to uninsured lower-income children. Despite Gov. Phil Bredesen's promise in 2006 to provide health benefits for "every kid in Tennessee," this year coverage is frozen at 49,000 children; leaving Tennessee's other 150,000 uninsured kids without benefits.

According to Michele Johnson, an attorney with the Tennessee Justice Center, "Tennessee is the last state in the nation that can afford to neglect the health of its children. Infant mortality in Tennessee is worse than in many developing countries, and the rate of infant deaths in Memphis is the worst of any city in America…A state this unhealthy for kids should be striving hard to improve children's health coverage. Instead, Tennessee has just become an island of neglect, in terms of the health of its children."

Tennessee is not alone in limiting health coverage for some of its most vulnerable citizens. In Arizona, Gov. Jan Brewer, struggling with a $1.4 billion deficit this fiscal year (and a projected shortfall of $3.2 billion in fiscal 2011), ordered the state to stop enrolling children in KidsCare, that state's CHIP program that provides coverage for 47,000 children. Brewer has also introduced a ballot measure that would roll back a 10-year-old expansion of Arizona's Medicaid program, resulting in 310,500 -- more than 4 percent of all Arizonans -- losing their coverage.

Meanwhile, Medicaid in Arizona has seen enrollment increase 18 percent from a year ago, while facing the prospect of more than $200 million in cuts for the next fiscal year.

A report by Families USA states that in the current economic climate, more than 1 million people are at risk of completely losing health coverage in Medicaid and CHIP because of cuts that have been enacted or are under consideration in just eight states -- including Arizona, California and Florida. Some 39 states are planning to cut or freeze provider reimbursement rates in 2010 and 15 states have announced benefit cuts and increased cost-sharing; actions that ultimately reduce access to care. According to Kathleen Sebelius, Health and Human Services Secretary, "Every state in the country is looking at a huge gap."

According to the National Association of State Medicaid Directors, states will face a $140 billion budget shortfall in FY 2011. Meanwhile, the group also found that total Medicaid spending increased by an average of 7.9 percent in 2009 as more people became eligible for coverage.

This year, an infusion of $87 billion from the federal government's American Recovery and Reinvestment Act prevented some of the most draconian cuts in state Medicaid programs. This funding is scheduled to expire at various points this year and early in 2011, but the White House announced today that President Obama's budget will include a $25 billion extension of the Medicaid funding program -- giving the states another six months to help keep their programs solvent.

That's good news for the short term. This emergency life-line for Medicaid faces little opposition, even from states like Arkansas, North Carolina and Utah whose legislators fought hard against the program's expansion under health care reform. (Ironically, those same states -- with highest numbers of uninsured and lowest projected cost of Medicaid expansion -- stand to gain the most from reform.)

According to the Wall Street Journal , "Some states were so confident Congress would pass a health bill that they included the extra Medicaid funds in their state budgets." Without this stop-gap measure, they'd be scrambling to find ways to make up for the shortfall." From WSJ:

California Gov. Arnold Schwarzenegger called the health bill a "trough of bribes, deals and loopholes" in his Jan. 6 State of the State address. Two days later, he included a $1.2 billion increase in federal funding for the state's version of Medicaid, called Medi-Cal, in his budget proposal for the 2010-11 fiscal year. That figure was based on funding in the House bill.

Faced with a glum economic outlook, states of both the red and blue variety increasingly see bolstering Medicaid as an important issue. With the nation's unemployment rate at 10 percent, more Americans have lost their employer-provided insurance coverage. As insurance premiums continue to increase, more small businesses will drop coverage for their employees. These newly jobless, along with people who have pre-existing medical conditions, the chronically ill, and of course, old people who have maxed out their savings paying for long-term care, will desperately need coverage. In the absence of health reform, their only option is to apply for existing Medicaid benefits.

Of course, the House and Senate versions of health-care reform would do far more to help permanently shore up Medicaid finances, as well as expand coverage to 15 million of the nation's uninsured -- including childless adults who aren't eligible for benefits in most states. Under the House bill, individuals with incomes up to 150 percent of the federal poverty level, or $16,245, would be eligible for Medicaid. Under the Senate bill, eligibility would reach 133 percent of poverty, or $14,404 for individuals.

Medicaid expansion is an important feature of health care reform -- despite the need to rejigger some financing mechanisms to be fairer to states like New York that already provide generous benefits to residents. (And we need to get rid of the Nebraska pay-off that secured Senator Ben Nelson's vote on the Senate bill.)

Depending on short-term financial fixes is only a stop-gap measure. Without reform, Medicaid will remain a deeply inequitable and financially unstable program. In past years, for example, individual states have responded to budget concerns by increasing cost-sharing fees, instituting more frequent re-enrollment procedures or requiring new identification documents -- all with the ultimate goal of reducing their Medicaid rolls. States vary significantly in how much their Medicaid programs pay providers and in optional benefits like dental care, mental health services and smoking cessation programs.

These inequities are harshest in coverage of low-income parents. Some 34 states limit Medicaid eligibility to less than 100 percent of the government's official poverty line; and 17 of these states limit eligibility to less than 50 percent of poverty line. More than half of all states do not provide coverage for childless adults, no matter their income levels. Of the states that do, most provide coverage that is far more limited than standard Medicaid benefits.

For working parents, the inequities are equally stark, according to the New York Times:

Existing Medicaid coverage varies widely. Arkansas, for example, extends Medicaid to working parents who earn up to 17 percent of the federal poverty level, and Alabama offers coverage for those making up to 24 percent of that level. Minnesota covers working parents making up to 215 percent of the federal poverty level, and New York, up to 150 percent. New York also covers childless adults up to 65 making up to 100 percent of the federal poverty level.

In the end, the $25 billion that the administration wants to provide for Medicaid will help staunch the bleeding in state programs for a short while. But as Jocelyn Guyer, co-director of Georgetown University's Center for Children and Families writes on her center's blog, "If reform fails, we not only lose a valuable chance to stabilize and strengthen these programs, but face the prospect of states cutting back on Medicaid when fiscal relief runs out at the end of this year. We could see more states try to solve their state fiscal problems, in part, by putting uninsured children on waiting lists for coverage, as already has occurred in Tennessee and Arizona."

This short-term fix, although welcome, does not make for intelligent health policy. It might prevent some vulnerable Americans from losing their benefits today. But it won't make a dent in covering the 46 million Americans who continue to remain uninsured. And it is certainly no substitute for comprehensive health reform.

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