With the opening of state legislative sessions, we are beginning to see how states are proposing to deal with ongoing shortfalls in state revenues coupled with the loss of additional federal financial support for Medicaid from the American Recovery and Reinvestment Act (ARRA). There is no dispute that states will continue to face difficult budget challenges for a while longer until the economy fully recovers. But we also know that the pendulum will swing back to better economic times. In the meantime, state leaders, program administrators and stakeholders must work together to identify smart, alternative ways to reduce costs that don’t take the short-sighted approach of cutting coverage for low-income families struggling to pay their bills and seniors fighting to stay in their homes.
The stability provisions requiring states to hold steady in their coverage levels and enrollment and renewal procedures in Medicaid and CHIP will continue past the expiration of ARRA thanks to the Affordable Care Act (ACA). However, states still have broad flexibility over key areas of their Medicaid programs, from delivery systems to payment rates to the extent to which they offer optional benefits. When using this flexibility, states can make some good or bad choices.
In considering their choices, states should work with stakeholders to take a balanced approach to their budget shortfalls by looking at both revenue and reductions in costs. For example, Colorado Governor Ritter worked with health care providers to enact the Healthcare Affordability Act in 2009 to expand coverage while the state dealt in other ways with its budget crisis. Consider also the effort in Kentucky to rein in Medicaid costs without cutting coverage or provider rates. Governor Beshear has proposed a Medicaid rebalancing plan that builds on savings attained through actions including not paying hospitals for hospital-acquired infections or errors and stepping up efforts to stop waste and detect fraud and abuse. The plan going forward includes adopting better ways to pay providers based on performance and to manage radiology costs.
States also are making progress by focusing on delivering services in ways that are not only more cost-effective but also result in better outcomes. By supporting home- and community-based services that seniors prefer over nursing homes, states can find significant savings and the ACA provides incentives for them to do so. By promoting the management of chronic health conditions, hospitalizations can be prevented and those suffering from asthma, diabetes or heart disease have better quality of life. And by focusing on continuity of coverage and care, states can avoid spikes in hospitalizations and other costs often seen after children experience gaps in coverage.
It’s true that states could see immediate savings by taking away essential services, such as Arizona did in eliminating coverage for transplants, but what’s the long-term human impact of such decisions? South Carolina should stop and consider that before following through on its plan to no longer pay for hospice services that support terminally-ill patients (and their families) during their final days of life.
Other disconcerting proposals are cropping up now that budget sessions are in swing, For example, proposed cuts in California would take vision services away from children in CHIP and end critical daily health support for frail seniors trying to stay in their own homes rather than move to a nursing facility. California also is proposing a 10% cut in reimbursement to doctors and nursing homes, which not only impacts access to services but also perpetuates cost-shifting – the practice of making up the difference between Medicaid payments and the actual cost of services by increasing charges to private insurance. Cost-shifting promotes an endless sequence of escalating insurance rates that results in coverage for fewer people. At some point, we have to stop this vicious cycle.
The actions of states like Colorado and Kentucky prove there are good ways to respond to state budget challenges. Why would we want to choose bad ways of filling these budgets gaps when good solutions exist? And going to the extreme, as Arizona has proposed in seeking a waiver to eliminate coverage for 280,000 adults? Well, you decide if ugly is a strong enough term to describe that plan of action.
