States Nearing End of Medicaid Boost

Published June 30, 2011

| Reuters

As healthcare costs for the poor soar across the United States, perhaps no state will feel the loss of federal stimulus money more than Florida.

America's fourth-most-populous state, Florida is second only to Texas in the percentage of residents without health insurance and its struggles are emblematic of problems afflicting many states.

Florida's economy has been hit hard in recent years and was one of the states hurt the most by the housing bust. For 25 straight months, the state's unemployment rate has been above 10 percent, creating an ever larger pool of people turning to Medicaid.

But now the $100 billion of stimulus money that boosted funding for the Medicaid health insurance program nationwide will run out at the end of June.

The Medicaid boost was one of several tax and spending measures in the $830 billion stimulus package passed in 2009 that helped state and local governments make it through the recent recession. The federal program partially reimburses states for healthcare provided for the poor and others who cannot pay their bills.

Even though state tax revenues have steadily improved in recent quarters, they are still not back to pre-recession levels and the end of stimulus programs like the Medicaid boost will leave many states without a key source of funds.

Florida's drop in Medicaid funds will hit the same time the state cuts its own medical funding program.

``We could see an additional 20 to 25 percent uninsured right off the bat,'' Andrew Behrman, chief executive of the Florida Association of Community Health Care Centers trade group, whose members have 1 million patients on their rolls, said about Florida's reforms.

OBAMACARE TOO

Florida, like many other states, will also feel the Medicaid pinch under the healthcare law President Barack Obama championed.

The federal government will cover 100 percent of people who enroll in Medicaid under the law starting in 2014, but, according to a March report from Republican congressional leaders, Florida's related costs for the program will spike by $12.9 billion through 2023. Texas and California's costs will grow more.

``The end of this increase in federal matching funds means that an increase in the state share of Medicaid in all states comes at a time when states are still experiencing fiscal stress related to the economic downturn,'' according to a June report by the Kaiser Family Foundation.

On top of all that, hospitals and clinics in Florida face a $1 billion rollback in state payments starting in July.

These developments add up to one massive bill for Florida. Since 2000, the state's Medicaid costs have shot to $21 billion from $9 billion and now account for a third of state spending.

Florida's governor, Republican and Tea Party-favorite Rick Scott, has moved to fight off Medicaid's growing expense.

In May he signed laws meant to place the state's three million Medicaid patients into private-sector for-profit health plans such as Health Maintenance Organizations and medical networks. Federal regulators must still approve the shift.

GROWING INTEREST IN OVERHAULING MEDICAID

Fifteen state governments have moved to overhaul their Medicaid programs and 43 have recently made Medicaid cuts.

One of America's two big government-paid healthcare programs -- with Medicare being the other, Medicaid accounted for 22 percent of state governments' spending in fiscal 2010 ending a year ago.

In 2009, 3.69 million people in the U.S. joined Medicaid rolls in the sharpest annual rise in 40 years, according to the Kaiser Family Foundation, and Medicaid spending nearly doubled that year as well.

Managed care has been tried by other states with mixed results, according to healthcare economist Vivian Ho of Rice University in Houston.
``With too many competitors, you can lose economies of scale,'' Ho said. ``HMOs are not evil but they are economic engines like the rest of us. If you reduce resources, that may result in lower care for patients.''

HMOs may also ``cherry pick,'' choosing patients unlikely to require pricey treatments and leaving to government-run hospitals people requiring long hospitalizations, Ho said. HMOs may also skimp on preventive care, she said.

``For low-income populations, the current system works better,'' she said. ``It is a vulnerable population. There is too much cream skimming.''

FLORIDA ON THE BRINK OF MAJOR CHANGE

Florida's 15 safety-net hospitals that treat large numbers of uninsured and poor Floridians will scramble for patients so overhead costs can be spread more effectively, according to Frank Nask, CEO of the North Broward Hospital District.

``We know there will be more uncompensated care,'' said Laura Goodhue, executive director of Florida CHAIN, a patients advocacy group. ``If hospitals do not get paid for care, there will be price shifts, and everyone's rates will go up.''

Florida's plan builds on a five-county Medicaid experiment with managed care and would create 11 administrative districts with an eye to creating competitors for the $21 billon the states spends each year on Medicaid services, such as maternity care for about half of Florida's newborns.

Critics say using Florida's Medicaid experiment in Broward and other counties as a template for state-wide reform is premature, since the effects on costs are not yet tabulated.

The North Broward Hospital District, among the five biggest U.S. public health systems, gets 20 percent of its revenue from Medicaid and expects to roughly break even from the pilot project that began in 2006, its CEO Nask said.

A study and survey by University of Florida researchers reported in January that patients using mental health services in the managed-care pilot were roughly as satisfied as those in a control group. But cost savings were not apparent.

A study for Florida's Republican legislators, who predict the switch to managed-care for Medicaid patients will save $1.1 billion in the first year, concluded that a managed-care program in Texas had saved $123 million over two years.

NEW YORK OBSTACLES

Some of New York's experiences demonstrate the kinds of obstacles states face as they look to the private sector for a hand. New York state, which has one of the nation's most generous Medicaid programs, has for years battled high costs by switching patients to managed care and hunting for fraud.

There are economic risks in cutting Medicaid spending, state comptroller, Thomas DiNapoli said. Though Wall Street is the state's main economic engine, hospitals throughout the state give its economy a nearly $108 billion boost every year, the Healthcare Association of New York State said in December.

New York Governor Andrew Cuomo used healthcare cuts to help close a $10 billion budget deficit. But the $2.2 billion the state cut from New York City means the city loses an equal amount of matching federal aid, the state comptroller said, which doubles the loss to $4.4 billion.

Mayor Michael Bloomberg, though bent on closing his city's multibillion-dollar deficit, wants to boost Medicaid spending by 28 percent in the new budget to a total of just over $6 billion from the previous year, the state comptroller said.

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