Cutbacks Imperil Health Coverage for States' Poor

By ROBIN TONER and ROBERT PEAR
New York Times
April 28, 2003

WASHINGTON, April 27 — Millions of low-income Americans face the loss of health insurance or sharp cuts in benefits, like coverage for prescription drugs and dental care, under proposals now moving through state legislatures around the country.

State officials and health policy experts say the cuts will increase the number of uninsured, threaten recent progress in covering children and impose severe strains on hospitals, doctors and nursing homes.

But those officials, confronting a third straight year of fiscal crisis, say they have no choice but to rein in Medicaid, the fast-growing program that provides health insurance for 50 million people.

Many state officials are pleading for federal help as they face an array of painful trade-offs, often pitting the needs of impoverished elderly people for prescription drugs and long-term care against those of low-income families seeking basic health coverage.

The issue is already roiling state legislatures. Almost every state has made or is planning cuts in benefits, eligibility or payments to health care providers, according to the National Conference of State Legislatures.

The Center on Budget and Policy Priorities, a liberal research and advocacy group, estimated last month that as many as 1.7 million Americans could lose coverage altogether under proposals advanced by governors or adopted by state legislative committees this year.

Many more who keep their coverage may see it curtailed. Several large states, including California, Florida and Ohio, are considering proposals to eliminate dental and vision coverage for adults. Mississippi and Oklahoma have reduced the number of prescriptions they will pay for. Other states, among them Kentucky and Massachusetts, are moving to tighten eligibility or admissions criteria for long-term care services.

In response to the turmoil in the states, moderate Republicans on Capitol Hill have joined Democrats in seeking legislation that would provide additional federal aid for Medicaid, which is financed by the federal government and the states.

"You can't have cuts of the magnitude the states are undertaking without it ultimately harming health care for some of the most vulnerable low-income citizens in this country," said Senator Susan Collins, Republican of Maine, a chief sponsor of the legislation. Another sponsor, Senator John D. Rockefeller IV, Democrat of West Virginia, said, "You don't go down without a fight on this thing."

The Bush administration has opposed such legislation. Administration officials and many House Republicans say Medicaid, created in 1965 as a pillar of the Johnson administration's Great Society agenda, is unsustainable in its current form. Despite recent efforts to slow its growth, the cost of Medicaid has increased 25 percent in two years and more than 50 percent since 1997, and enrollment is rising at the fastest pace in a decade.

Rather than simply pouring more money into the program, administration officials say they want to revamp it by giving states expanded power to run it.

Short-term financing relief "does not solve the fundamental problem," said Bill Pierce, a spokesman for Health and Human Services Secretary Tommy G. Thompson. "That's why the secretary put forward the proposal he did. It changes the funding mechanism and gives them greater opportunity to craft benefits that are more flexible benefits."

Critics say the administration proposal is an effort to limit federal responsibility for the program by converting part of it into a block grant.

As Congress returns for a volatile debate over tax cuts and budget priorities, many lawmakers and health care advocates say the strains on Medicaid will loom large. The program, which now costs more than $250 billion a year in federal and state money, is the fundamental health safety net for low-income and disabled Americans.

Medicaid insures one-fifth of all children in the United States and helps pay for two-thirds of all nursing home residents, many of them from middle-class families whose assets have been depleted by nursing home costs, which average more than $50,000 a year.

But Medicaid has ripple effects that touch many more Americans. "Medicaid is, in many ways, a foundation for the health care system," said Dr. Herbert Pardes, president of New York-Presbyterian Hospital. "To cut Medicaid is to hit the entire health care system."

States are now engaged in a sort of triage.

Senator John B. Breaux, Democrat of Louisiana, said that in his state, where legislators face the prospect of cutting Medicaid's projected budget by one-third, "they're saying: `What can you do to help? Because if you don't, we'll have to cut the two most vulnerable areas, education and health care.' "

Signaling the political fight to come in Congress as President Bush pushes for a tax cut of $550 billion over 10 years, Mr. Breaux, an influential member of the Senate Finance Committee, said, "The problems we're facing now make you wonder why we're contemplating a tax cut of this size."

Even a state like Massachusetts, which has prided itself on expanding health coverage, recently dropped 36,000 long-term unemployed people from the basic health insurance rolls. State officials say Massachusetts may eliminate a prescription drug program that covers 80,000 elderly unless the federal government provides some help, and is considering a variety of other cuts and restrictions.

"None of these decisions has been easy or fun," said Douglas S. Brown, acting commissioner of the Massachusetts Division of Medical Assistance. "We're trying to spread the pain as broadly as we can, and preserve the core as much as we can, until better times come."

In Texas, Mr. Bush's home state, the House of Representatives has passed a bill that would set stricter eligibility criteria for Medicaid and the Children's Health Insurance Program. As a result, state officials said, 240,000 children and 17,000 pregnant women would lose coverage.

Other proposed cuts have touched off passionate debate in Texas. People with H.I.V. said at meetings of the state Board of Health this year that limits on lifesaving prescription drugs would amount to "mass murder" or a "death sentence." The Texas health commissioner, Dr. Eduardo Sanchez, echoed those concerns, saying "people would die" if the state cut treatments for AIDS and other chronic illnesses.

Christopher J. Durovich, president of Children's Medical Center in Dallas, said: "The cuts mean that more kids will seek primary care in our emergency room, which is already overburdened. We would try to offset those cuts and the burden of uncompensated care by seeking higher reimbursement from commercial insurers."

Gov. Rick Perry of Texas, a Republican opposed to new taxes, said state officials should not be swayed by "horror stories" or "doomsday scenarios." Gene Acuña, a spokesman for the governor, said Mr. Perry was confident that "the neediest in the state will have their needs addressed" in the budget process.

Tennessee has removed 208,000 people, including 55,000 children, from its expanded Medicaid program, known as TennCare, in the last six months.

In Connecticut, a state law passed this year eliminates Medicaid benefits for 23,000 adults and 7,000 children. Oklahoma eliminated its "medically needy" program, which provided Medicaid coverage for 8,300 people with catastrophic medical expenses.

Indiana expects that 36,000 children will lose coverage under new rules requiring them to re-establish their eligibility every few months. Colorado recently adopted a law terminating Medicaid benefits for about 3,500 legal immigrants who have not become citizens.

Officials in other states say they are committed to preserving gains made in providing health insurance to children. But that means the states have to look elsewhere for savings.

"We didn't propose to drop dental and vision coverage for adults because we think they're not important health services," said Barbara Coulter Edwards, Medicaid director for Gov. Bob Taft of Ohio, a Republican. "They're critically important. But to preserve the coverage for kids, we had to do it."

State officials say many of the easier cuts were made last year, when they reduced payments to health care providers and tried to protect beneficiaries.

But the cuts to doctors and other providers carry consequences, too. "I love my Medicaid patients," Dr. Charles P. Anderson, a family doctor in San Marcos, Tex., said. "I've been taking care of some of them for almost 20 years. But if these cuts take effect, we would systematically and gradually reduce the number of our Medicaid patients."

State officials worry that doctors and dentists will become less willing to treat Medicaid patients if payments are frozen or reduced.

Melanie Bella, Indiana's Medicaid director, said: "The State Legislature wants us to cut reimbursement, but we run the risk of driving providers out of the program. We have not given physicians a rate increase since 1994."

Georgia reduced Medicaid payments to nursing homes in February. Fred A. Watson, president of the Georgia Nursing Home Association, said the cuts reduced the average daily payment for a nursing home resident to $92.50 from $98.50.

"Some nursing homes have dropped liability insurance, reduced staff training and cut back the number of employees," Mr. Watson said.

Caught between soaring medical costs and declining revenues, states say they face their most severe fiscal problems in decades. Some of those problems result from the recent economic downturn. Some result from policy choices made in the boom days of the late 1990's, when states expanded Medicaid and other health programs to cover working families with modest incomes.

"Medicaid enrollment is growing now at its fastest pace since 1992," said Vernon K. Smith, a former Michigan Medicaid director who tracks Medicaid trends across the country. "Most of the enrollment growth is among families and children, but most of the cost growth is among the elderly and the disabled, who account for 70 percent of Medicaid costs.

"That is the challenge for policy makers now," Mr. Smith said. "Any cut in Medicaid is likely to have a disproportionate impact on the elderly and disabled."