States Make Cuts To Medicaid, Other Health Coverage Programs To Address Budget Gaps

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Health Insurance / Medical Insurance
Article Date: 30 Oct 2008 - 7:00 PDT

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The economic downturn is leading many states to cut back on health coverage programs such as Medicaid, USA Today reports. According to USA Today, Medicaid "is a target " for cuts because in most states it represents the second-largest portion of their budget. On average, Medicaid accounts for 17% of state budgets, USA Today reports.

Elizabeth McNichol of the Center on Budget and Policy Priorities said state budget deficits through the rest of the year and into fiscal year 2010 could reach $100 billion. Some states already have cut health programs, including Hawaii, which suspended its program to cover all uninsured children; California, which cut its Medicaid reimbursements to providers; and Massachusetts, which cut $293 million from its Medicaid budget. In addition, South Carolina Gov. Mark Sanford (R) has until Thursday to decide whether to sign a state budget that would reduce health care spending by $160 million, including an 8.1% cut to Medicaid.

McNichol said, "Health care gets hit hard when states have to cut back." Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of the Foundation's Commission on Medicaid and the Uninsured, said, "When the economy goes down, states have increased pressure (from more uninsured), yet have to curtail plans to broaden coverage" (Appleby, USA Today, 10/29). A recent study prepared for KCMU projected that a one percentage point rise in unemployment leads to an additional one million people enrolled in Medicaid (Kaiser Daily Health Policy Report, 4/29).

Stimulus for Medicaid
In related news, the leaders of several organizations representing state and local governments on Monday sent a letter to congressional lawmakers urging them to pass a new stimulus package that includes a temporary increase in Medicaid funding, CQ HealthBeat reports. The letter was signed by National Governors Association Chair Gov. Ed Rendell (D-Pa.), National Conference of State Legislatures President Joe Hackney, Council of State Governments President Gov. Jodi Rell (R-Conn.), National Association of Counties President Don Stapley, National League of Cities President Cynthia McCollum and International City/County Management Association President David Limardi.

The leaders wrote, "Recent surveys indicate as many as 27 states face shortfalls of about $26 billion -- numbers that could double over the next few months as revenues continue to decline," adding, "Providing federal funds directly to state and local governments allows them to reduce cuts and continue services." The letter does not suggest a size for the relief package but notes that in the last recession Congress passed a $10 billion block grant to states and allocated another $10 billion to temporarily raise Federal Medical Assistance Percentages, fixing the amount of Medicaid funding paid by the federal government. However, CQ HealthBeat reports that the "amount of any relief package in the upcoming stimulus package likely would fall well short of projected state budget shortfalls." CBPP Deputy Director Iris Lav at a recent House Budget Committee hearing testified that state budget deficits in FY 2010 "are likely to be in the $100 billion range." Lav proposed that $50 billion of a new economic stimulus package go to states and that two-thirds of that money be used to temporarily increase federal Medicaid payments. The House Ways and Means Committee is expected to hold a hearing on economic stimulus legislation Wednesday and the Joint Economic Committee is scheduled to hold a hearing on Thursday (Reichard, CQ HealthBeat, 10/28).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

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