States Rein In Health Costs

By Stephanie Simon

April 24, 2005 12 AM PT

Times Staff Writer

SIKESTON, Mo. —

Hundreds of thousands of poor people across the nation will lose their state-subsidized health insurance in the coming months as legislators scramble to hold down the enormous -- and ever-escalating -- cost of Medicaid.

Here in impoverished southeast Missouri, nurses at a family health clinic stash drug samples for patients they know won’t be able to afford their prescriptions after their coverage is eliminated this summer. Doctors try to comfort waitresses, sales clerks and others who will soon lose coverage for medical, dental and mental healthcare.

“I don’t know what cure to offer them,” Dr. Hameed Khaja said.

Lawmakers say they feel for those who will lose coverage. But they say also that they have no alternative.

Prenatal checkups, care in nursing homes and other health services for the poor and disabled account for more than 25% of total spending in many states. Medicaid is often a state’s single biggest budget item, more expensive even than K-12 education. And the price of services, especially prescription drugs and skilled nursing for the elderly, continues to soar.

The federal government helps pay for Medicaid, but in the coming fiscal year, the federal contribution will drop by more than $1 billion because of changes in the cost-share formula. President Bush has warned of far deeper cuts to come; he aims to reduce federal spending on Medicaid by as much as $40 billion over the next decade.

“It’s frightening a lot of governors,” said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

Every state has frozen or is trying to cut the fees they pay doctors to care for Medicaid patients. More than a dozen states are looking for ways to cut the number of people covered -- or reduce their benefits. Several are proposing restructuring the entire program.

In Tennessee, Gov. Phil Bredesen plans to end coverage for more than 320,000 adults, many of them elderly. In California, Gov. Arnold Schwarzenegger wants to shift more Medicaid recipients into managed care and require some to pay monthly premiums.

Minnesota may stop insuring 27,000 college students and adults without children. Washington state may require senior citizens to pay $3 for each prescription that Medicaid used to provide for free.

South Carolina Gov. Mark Sanford and Florida Gov. Jeb Bush have proposed privatizing Medicaid. Bush wants to give recipients vouchers so they can shop around for their own insurance plans. Sanford wants to set up Medicaid bank accounts; the state would deposit a fixed sum of money for each patient to spend on medical expenses.

In Missouri, where nearly one in five residents is enrolled in Medicaid, Gov. Matt Blunt is poised to sign the most drastic overhaul of all: a bill that would eliminate the program entirely in three years.

Blunt expects that by then, the state will have established an alternative mechanism for helping the poorest of the poor. But the legislation on his desk does not insist on it. It only states that Missouri Medicaid will cease on June 30, 2008.

In the meantime, the bill severely cuts the existing program, ending coverage for an estimated 65,000 to 100,000 people.

Legislators are still working out eligibility details. But under one leading proposal a single mother of two who earns $3,800 a year would be considered too wealthy to qualify for Missouri Medicaid. The woman’s children would still be eligible for free healthcare. But if she gets a better job and starts earning $23,000 a year, they, too, would be bumped off Medicaid -- unless she’s willing to pay as much as 5% of her income in monthly premiums. The state expects many parents at that income level would be unable or unwilling to pay the premiums, forcing about 24,000 children off the Medicaid rolls.

Children who remain on Medicaid would continue to receive full benefits, but under legislation expected to take effect this summer, most adults would get a bare-bones package. The program would no longer pay for their dental care, hearing aids, eyeglasses, wheelchairs, hospital beds or even bedpans.

State Rep. Trent Skaggs, a Democrat from Kansas City, considers the new rules cruel, especially at a time when more than 45 million Americans lack insurance. He worries parents will stop working so their income will drop low enough to qualify their family for free care.

Rather than raise costs for minimum-wage clerks, Skaggs suggests increasing insurance premiums for lawmakers who get health coverage through the state. He recently introduced a measure that would have cost the average politician $115 a month -- the measure failed on a close vote.

“That made a complete mockery of the idea that leaders sacrifice first,” Skaggs said. “Times are tough, but not so tough that we have to sacrifice?”

The Republican lawmakers who have been leading the Medicaid overhaul drive say such criticism distorts their goals.

The cuts are not just about balancing this year’s budget, they say. They’re about steering Medicaid back to its original purpose: to serve as safety net for citizens who are too young, too old, or too ill to help themselves. Turning Medicaid into a welfare program for poor but able-bodied adults risks jacking up the costs so high, they say, that the entire system could go bust -- stranding those who most desperately need the state’s help.

The cost of Missouri Medicaid has doubled in the last six years, to $5 billion. It eats up more than 30% of the state budget. More than 1 million people are enrolled.

“Government is not here to do everything for everybody,” said state Rep. Jodi Stefanick, a Republican representing suburban St. Louis. “We have to draw the line somewhere.”

Medicaid was enacted in 1965 as a joint federal-state program to provide basic care for poor children, pregnant women and people with disabilities. States administer the program and pay 20% to 50% of the total costs. The federal government funds the remainder. (The federal contribution varies from state to state, with the poorest states receiving the largest amounts.)

States can opt out of Medicaid, but since 1982 every state has participated. By law, they must offer specific benefit packages to certain groups, including poor pregnant women and young children. They are also free to go beyond those minimum standards.

Historically, lawmakers have considered it a bargain to go beyond because the federal government pays for so much of the program. So states from California to Maine have expanded Medicaid to cover working parents, lower-middle-class children and elderly citizens struggling to pay for the many services not funded by Medicare.

The result: Medicaid now covers 53 million Americans. The program pays the bills for nearly 60% of all nursing home residents and finances 37% of all births. Because most states have added prescription drug benefits, Medicaid covers the hefty pharmacy bills for many patients with AIDS, many transplant recipients and many senior citizens on dialysis or undergoing chemotherapy.

The program also covers the more mundane medical expenses of low-income working families.

Here in Sikeston, Dianna Dixon, 18, relies on Medicaid because her 30-hour-a-week job at Wal-Mart does not come with insurance. Her mother, Donna Sevic, uses Medicaid, too, now that arthritis has forced her to stop working after years in low-wage restaurant, sales and factory jobs.

Waiting in the Southern Missouri Health Network’s clinic the other day to ask a doctor about Dixon’s headaches, the women said they expected to lose their coverage this summer. Sevic, 50, said the loss would be devastating; she wasn’t sure how she would afford her medications, much less any doctor visits.

“If they take it away from me, I’ll just go downhill,” Sevic said. “I won’t be here much longer. It’s that plain and simple.” Eyes weary, she said she thought she deserved better: “If you get out and try, really try to make a living, the government ought to step in and help you.”

That philosophy still resonates in some states.

In Kansas, Gov. Kathleen Sebelius has proposed raising cigarette taxes to pay for expanding Medicaid to cover more poor working adults.

In Illinois, an expansion is underway. In the last two years, Gov. Rod Blagojevich has added tens of thousands of children to the Medicaid rolls -- and tens of thousands of parents, as well. “I can’t think of anything more important to do,” he said.

“Healthy families are working families,” added Barry Maram, director of the Illinois Department of Public Aid. “This makes all the economic sense in the world.”

The Republicans who dominate the state Legislature in neighboring Missouri offer a different definition of economic sense.

“We’re careening out of control,” said state Sen. Michael Gibbons, who represents suburban St. Louis. “Taxpayers are not an endless supply of money.”

The cutbacks that Gibbons helped craft will save the state $250 million next fiscal year.

They may also cost 73-year-old Mary Bostic her dream of eating something other than soup for supper.

Bostic, a retired garment-factory worker, has been coming to the clinic in Sikeston for months. In the olive-drab dental exam rooms, Dr. Gail Redman has extracted the crumbling stumps of her rotting teeth, one by one.

Bostic’s new top denture plate should be arriving soon. She was expecting to get a bottom plate as well. “I was looking forward to a solid meal,” she said.

But the clinic is booked solid for the next six months; there’s no time to get her the bottom denture before her Medicaid coverage runs out. Without the insurance, Bostic can’t even contemplate paying for a bottom plate; it would cost her $375 at the clinic’s discount rate.

She has trouble understanding why she’s in this fix.

“I’ve worked all my life,” Bostic said. “I’ve paid my taxes. And now, when I get down and out, they don’t want to help me.”

The clinic’s hygienists are starting to call other patients who have been waiting for dentures, to break the news. Their list runs seven pages long.

“It breaks your heart,” Redman said, in tears. “They’ve been waiting so long to get teeth.”

In appropriations conferences this week, Missouri legislators could restore some dental care or other benefits to the Medicaid package. They may also ease up slightly on the eligibility restrictions. But given the state’s budget constraints -- and the majority party’s philosophical stance on Medicaid -- analysts don’t expect a substantial retreat.

That’s as it should be, lawmaker Stefanick said. “Once you put a benefit out there, reining it in is not easy,” she said. “But it is the responsible thing to do.”

(BEGIN TEXT OF INFOBOX)

Major expense

For most states, Medicaid expenses are often the single largest line item on the budget, exceeding K-12 education. States spending the most on Medicaid as a percentage of fiscal 2004 budgets:

Tennessee... 33.3%

Missouri ...30.7

Pennsylvania ...29.5

Maine ...29.0

New York ...28.3

Illinois... 28.1

Vermont ...27.5

New Hampshire... 26.4

Mississippi... 26.3

Rhode Island ...25.5

Who receives Medicaid

* 25 million children