States Get More Flexibility To Cut Medicaid Programs

Congress's approval in February of cuts of about $6.9 billion from Medicaid will require implementation by all 50 states. Mental health advocates hope to use state legislation to minimize the impact of those cuts.

The National Mental Health Association (NMHA) said the groundswell of opposition mounted by mental health advocates can have a long-term impact by focusing on state restructuring of Medicaid through benefit-reductions and greater cost-sharing.

“Advocates are well positioned to remind state legislators of the depth and breadth of opposition to such cuts and of the potential electoral consequences of taking that step,” according to an NMHA statement.“ Advocates can take pride in the intensity of the fight and the dividends those efforts can have in preventing full implementation of Medicaid cuts at the state level.”

Rachel Klein, deputy direct of Health Policy at Families USA, told attendees at that group's recent annual meeting that advocates have an opportunity to impact the cuts at the state level because some cuts are mandatory while others are optional.

States may increase copayments substantially and impose new premiums on many beneficiaries, including some children. The Congressional Budget Office (CBO) estimates these copayment and premium increases would reduce Medicaid expenditures by $1.9 billion over five years and $9.9 billion over 10 years.

Nearly 80 percent of the savings from increases in copayments is expected to come from decreased use of medical services, rather than from collection of increased copayments, according to the CBO.

For the first time, states may allow providers to deny needed services to beneficiaries who cannot make the higher copayments. Previously, Medicaid beneficiaries who could not make required copayments remained financially responsible to the provider but were not denied the needed service or prescription drug.

Another new option for states is joining as one of 10 demonstration states to offer Health Opportunity Accounts. The program offers Medicaid recipients the option of choosing coverage similar to health savings accounts. Klein said the option has dubious benefits because participants first have to pay the deductible before their benefits are activated, which can be up to 110 percent of the $2,500 adult account.

The law also funds a program to allow Medicaid coverage for disabled children whose families are not eligible for the program and is projected to cost $1.4 billion over five years.

In describing his state's implementation of a program to insure all of the children in Illinois, Gov. Rod Blagojevich (D) said the challenge was to find cost savings in Medicaid. Some funding came from the use of primary care case managers to better manage chronic illnesses. He also cautioned legislators to not lose sight of the individual in their effort to save money.

“Budgeting is not just about making revenue match spending. It is a moral process,” Blagojevich said.

Further information about the Medicaid cuts are available through the Center on Budget and Policy Priorities at<www.cbpp.org/1-29-06health.htm>.▪