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Medicaid Cuts Could Inflict Pain in Multiple Sectors

Part of the Medicaid proposal would increase cost-sharing fees for beneficiaries whose income is more than 100 percent of the federal poverty level.

Federal health officials have proposed regulatory changes to Medicaid that they say will give states more "flexibility" to customize the program for their residents' needs. However, the changes come with a price tag to which many states object.

The new regulations, which were released at the end of February for a 30-day comment period, after which regulators may implement them at any time, also would reduce federal payments for public hospitals, teaching hospitals, and services for the disabled. Officials with the Centers for Medicare and Medicaid Services (CMS) say the changes would help curtail states' use of creative financing techniques that allowed them to obtain excessive amounts of federal Medicaid money.

"These proposed changes allow states to use modern methods of providing health insurance coverage and encourage families to participate in their own health care decisions," said Kerry Weems, CMS acting administrator, in a written statement.

The half-dozen new Medicaid regulations have drawn bipartisan criticism from governors who said they would shift billions of dollars in costs to the states and require major service reductions. The governors said changes would unilaterally reshape Medicaid and leave the most vulnerable citizens unprotected. The timing of changes also coincides with a slowing of the national economy and substantial drops in state revenues.

Governors of both parties criticized the proposed regulation changes at the National Governors' association 2008 winter meeting in Washington, D.C. Arizona Gov. Janet Napolitano (D) said the regulations would shift an estimated $13 billion in costs for Medicaid to state governments.

The governors have called on Congress to impose a moratorium on implementation of the regulations, which they said would cut federal Medicaid spending by $18.2 billion over the next five years. Congress delayed some of the regulations last year, when the administration first proposed them, but they will take effect unless Congress intervenes again.

CMS officials emphasized that the new regulations would allow states to offer alternative benefit packages called "benchmark" plans, which would provide Medicaid beneficiaries with health coverage that has the same value as private insurance plans offered to other individuals in the same state, such as the standard Blue Cross/Blue Shield preferred provider option offered to federal government employees in a particular state.

States would have the choice of offering additional benefits such as dental coverage. States also would be able to contribute to a beneficiary's employer-sponsored health plan premiums so that the individual could remain insured through the private sector.

The proposed regulations also would allow states to revise existing premiums and cost-sharing plans to bring them closer to those allowed under the State Children's Health Insurance Plan.

The regulatory changes would allow cost-sharing increases, such as deductibles and copayments, for beneficiaries with incomes between 100 percent and 150 percent of the federal poverty level, and beneficiaries with incomes greater than 150 percent of the poverty level could be required to contribute copayments. Those changes would not apply to beneficiaries with incomes below 100 percent of the federal poverty level.

The regulations also would ban the use of federal Medicaid money to help pay for physician education, which has been allowed since the inception of Medicaid more than 40 years ago, despite a lack of formal authorization by Congress. Another regulation would set new limits on Medicaid payments to hospitals and nursing homes operated by states, cities, counties, and other government units.

Medicaid coverage of rehabilitation services for people with disabilities, including serious mental illness, also would be limited under the regulation change.

The Senate passed a bill (S 1200) on February 26 that would delay for one year any Medicaid changes that would affect such rehabilitation services, sometimes described as targeted case management. The house has not yet taken action on the measure.

"Social workers, county supervisors, and health care providers have consistently told me how devastating this new regulation would be for these individuals and their families," said Sen. Norm Coleman (R-Minn.), about the impact on rehabilitation service cuts on elderly, disabled and foster care Medicaid beneficiaries.

Federal officials estimate that the regulatory changes will save the federal government $15 billion over five years.

The National Conference of State Legislatures decried the proposed changes as "regulatory activism."

The federal government and the states share the cost of Medicaid, which provides health insurance to more than 60 million low-income people, including 30 million children.

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